1
EXHIBIT 4.12
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of June 7, 1996 (this
"Agreement") between Protection One Alarm Monitoring, Inc., a Delaware
corporation ("Borrower"), and Heller Financial, Inc., a Delaware corporation, as
agent ("Agent") for the benefit of all Lenders.
W I T N E S S E T H :
WHEREAS, Borrower, Agent and Lenders are parties to an Amended and
Restated Credit Agreement dated as of June 7, 1996 (as the same may be amended
and in effect from time to time, the "Credit Agreement"), providing for
extensions of credit to be made to Borrower by Lenders; and
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Lender Letters of Credit that Borrower shall have granted the
security interests contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and to issue Lender Letters of Credit, Borrower hereby
agrees with Agent for its benefit and the benefit of Lenders as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Terms defined in the Credit Agreement and
not otherwise defined herein have the respective meanings provided for in the
Credit Agreement. The following terms, as used herein, have the meanings set
forth below:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Borrower including, without limitation, all of
the following now owned or hereafter created or acquired by Borrower: (a)
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to Borrower arising from the sale, lease or
exchange of goods or other property and/or the performance of services; (b)
Borrower's rights in, to and under all purchase orders for goods, services or
other property; (c) Borrower's rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed goods and
unpaid sellers' rights of rescission, replevin, reclamation and rights to
stoppage in transit); (d) monies due to or to become due to Borrower under all
contracts for the sale, lease or exchange of goods or other property and/or the
performance of services (whether or not yet earned by performance on the part of
Borrower); (e) uncertificated securities; and (f) Proceeds of any of the
foregoing and all collateral security and guaranties of any kind given by any
Person with respect to any of the foregoing.
"Collateral" has the meaning assigned to that term in Section 2.
"Copyright License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any Copyright including, without
limitation, the agreements described in Schedule 1 of the Copyright Security
Agreement.
"Copyrights" means collectively all of the following: (a) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations and copyright applications now owned or hereafter
created or acquired by Borrower, including, without limitation, those listed on
Schedule B to the Intellectual Property Security Agreement; (b) all renewals of
any of the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future infringements of
any of the foregoing; (e) all rights corresponding to any of the foregoing
throughout the world; and (f) all goodwill associated with and symbolized by any
of the foregoing.
"Depository Account" has the meaning assigned to such term in Section
7.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods now owned or hereafter
acquired by Borrower.
2
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower including, without limitation, all machinery,
motor vehicles, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof and all additions and accessions thereto and replacements
therefor.
"Existing Security Agreement" means the Security Agreement dated
November 3, 1993 between Borrower and Agent, as heretofore amended, modified and
supplemented from time to time.
"Fixtures" means all of the following now owned or hereafter acquired
by Borrower: plant fixtures; business fixtures; other fixtures and storage
office facilities, wherever located; and all additions and accessions thereto
and replacements therefor.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by Borrower including, without
limitation, all right, title and interest of Borrower in and to: (a) all
agreements, leases, licenses and contracts to which Borrower is or may become a
party; (b) all obligations or indebtedness owing to Borrower (other than
Accounts) from whatever source arising; (c) all tax refunds; (d) Intellectual
Property; and (e) all trade secrets and other confidential information relating
to the business of Borrower including by way of illustration and not limitation:
systems and techniques for the analysis, diagnosis and correction of
malfunctions of products used by Borrower's customers; the names and addresses
of, and credit and other business information concerning, Borrower's past,
present or future customers; the prices which Borrower obtains for its services
or at which it sells merchandise; estimating and cost procedures; profit
margins; policies and procedures pertaining to the sale and design of equipment,
components, devices and services furnished by Borrower; information concerning
suppliers of Borrower; and information concerning the manner of operation,
business plans, pledges, projections, and all other information of any kind or
character, whether or not reduced to writing, with respect to the conduct by
Borrower of its business not generally known by the public.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (each as defined in the UCC) including, but not limited to, promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by Borrower.
"Intellectual Property" shall mean collectively all of the following:
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses.
"Intellectual Property Security Agreement" means the Amended and
Restated Continuing Security Interest and Conditional Assignment of Patents,
Trademarks, Copyrights and Licenses executed and delivered by Borrower to Agent,
substantially in the form of Exhibit A, as such agreement may hereafter be
amended, supplemented or otherwise modified from time to time.
"Inventory" means all "inventory" (as defined in the UCC), now owned or
hereafter acquired by Borrower, wherever located including, without limitation,
finished goods, raw materials, work in process and other materials and supplies
(including packaging and shipping materials) used or consumed in the manufacture
or production thereof and goods which are returned to or repossessed by
Borrower.
"Patent License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any invention on which a Patent
is in existence including, without limitation, the agreements described in
Schedule D of the Intellectual Property Security Agreement.
"Patents" means collectively all of the following: (a) all patents and
patent applications now owned or hereafter created or acquired by Borrower
including, without limitation, those listed on Schedule A of the Intellectual
Property Security Agreement and the inventions and improvements described and
claimed therein, and patentable inventions; (b) the reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing; (c) all income, royalties, damages or payments now and hereafter due
and/or payable under any of the foregoing with respect to any of the foregoing,
including, without limitation, damages of payments for past or future
infringements of any of the foregoing; (d) the right to sue for past, present
and future infringements of any of the foregoing; (e) all rights corresponding
to any of the foregoing throughout the world; and (f) all goodwill associated
with any of the foregoing.
"Proceeds" means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims of Borrower against third
parties for loss of, damage to or destruction of,
2
3
or for proceeds payable under, or unearned premiums with respect to, policies of
insurance with respect to any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing or
hereafter arising.
"Secured Obligations" has the meaning assigned to that term in Section
3.
"Security Interests" means the security interests granted pursuant to
Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"Trademark License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any Trademark, including,
without limitation, the agreements described in Schedule D to the Intellectual
Property Security Agreement.
"Trademarks" means collectively all of the following now owned or
hereafter created or acquired by Borrower: (a) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other business identifiers, prints and labels on
which any of the foregoing have appeared or appear, all registrations and
recordings thereof, and all applications in connection therewith including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof,
including, without limitation, those described in Schedule C of the Intellectual
Property Security Agreement; (b) all reissues, extensions or renewals thereof;
(c) all income, royalties, damages and payments now or hereafter due and/or
payable under any of the foregoing or with respect to any of the foregoing
including damages or payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future infringements of
any of the foregoing; (e) all rights corresponding to any of the foregoing
throughout the world; and (f) all goodwill associated with and symbolized by any
of the foregoing.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of Illinois, provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non- perfection of the
Security Interest in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy.
1.2 Other Definition Provisions. References to "Subsections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. All references to statutes and related regulations shall
include (unless otherwise specifically provided herein) any amendments of same
and any successor statutes and regulations.
1.3 Effect of Restatement. This Agreement amends, restates and
supersedes the Existing Security Agreement; provided, that (i) the liens and
security interests in favor of Agent for the benefit of Lenders securing payment
of the Secured Obligations are in all respects continuing and in full force and
effect with respect to all Secured Obligations and (ii) all references in the
other Loan Documents to the Existing Security Agreement shall be deemed to refer
without further amendment to this Agreement.
SECTION 2. Grant of Security Interests
In order to secure the payment and performance of the Secured
Obligations in accordance with the terms thereof, Borrower hereby grants to
Agent for the benefit of Lenders a continuing security interest in and to all
right, title and interest of Borrower in the following property, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all being collectively referred to as the "Collateral"):
(A) Accounts;
(B) Inventory;
(C) General Intangibles;
3
4
(D) Documents;
(E) Instruments;
(F) Equipment;
(G) Fixtures;
(H) All deposit accounts of Borrower maintained with any bank
or financial institution;
(I) All Depository Accounts, all cash deposited therein from
time to time and other monies and property of Borrower in the
possession or under the control of Agent or any Lender;
(J) All books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing
software that at any time evidence or contain information
relating to any of the property described in subparts (A) -
(I) above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and
(K) Proceeds of all or any of the property described in
subparts (A) - (J) above.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Borrower shall have the exclusive, non-transferable right and
license to use the Intellectual Property and the exclusive right to grant to
other Persons licenses and sublicenses with respect to Intellectual Property.
Notwithstanding the foregoing, the term "Collateral" shall not include
the monies (and any investment contracts and life insurance policies purchased
therewith and any other proceeds thereof) deposited with the Protection-I Trust
and the Protection-II Trust, each dated September 24, 1993, in accordance with
the Ion Acquisition Documents to defease the promissory notes issued by
Monitoring to Ion Leasing Inc. under the Ion Acquisition Documents.
SECTION 3. Security for Obligations
This Agreement secures the payment and performance of the Obligations
and all obligations of Borrower now or hereafter existing under this Agreement
and all renewals, extensions, restructurings and refinancings of any of the
above (all such debts, obligations and liabilities of Borrower being
collectively called the "Secured Obligations").
SECTION 4. Borrower Remains Liable
Anything herein to the contrary notwithstanding: (a) Borrower shall
remain liable under the contracts and agreements included in the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed; (b)
the exercise by Agent of any of the rights hereunder shall not release Borrower
from any of its duties or obligations under the contracts and agreements
included in the Collateral; and (c) Agent shall not have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Agent be obligated to perform any of the
obligations or duties of Borrower thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties
Borrower represents and warrants as follows:
5.1 Binding Obligation. This Agreement is the legally valid and binding
obligation of Borrower, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditor's rights generally.
5.2 Location of Equipment and Inventory. All of the Equipment and
Inventory is located at the places specified on Schedule I.
4
5
5.3 Ownership of Collateral; Bailees. Except for matters disclosed on
Schedule II, other Permitted Encumbrances and the Security Interests, Borrower
owns the Collateral free and clear of any Lien. No effective financing statement
or other form of lien notice covering all or any part of the Collateral is on
file in any recording office, except for those in favor of Agent and as
disclosed on Schedule II. Except as disclosed on Schedule II, none of the
Collateral is in the possession of any bailee, warehouseman, agent or processor.
5.4 Office Locations; FEIN; Fictitious Names. The chief place of
business, the chief executive office and the office where Borrower keeps its
books and records are located at the places specified on Schedule I. Borrower's
federal employee identification number is specified in Schedule I. Borrower does
not do business nor has Borrower done business during the past five years under
any trade-name or fictitious business name except as disclosed on Schedule III.
5.5 Perfection. This Agreement creates a valid, perfected and, except
for the Permitted Encumbrances, first priority security interest in the
Collateral, securing the payment of the Secured Obligations, and all filings and
other actions necessary or desirable to perfect and protect such security
interest have been duly taken.
5.6 Governmental Authorizations; Consents. No authorization, approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body or consent of any other Person (including without limitation
any Licensor of Intellectual Property or party to any Assigned Agreement) is
required either (a) for the grant by Borrower of the security interest granted
hereby or for the execution, delivery or performance of this Agreement by
Borrower or (b) for the perfection of or the exercise by Agent of its rights and
remedies hereunder (except as may have been taken by or at the direction of
Borrower or Agent).
5.7 Accounts. Each Account constitutes the legally valid and binding
obligation of the customer obligated to pay the same. The amount represented by
Borrower to Agent as owing by each customer is the correct amount actually and
unconditionally owing, except for normal cash discounts and allowances where
applicable. No customer has any defense, set-off, claim or counterclaim against
Borrower that can be asserted against Agent, whether in any proceeding to
enforce Agent's rights in the Collateral or otherwise except defenses, set-offs,
claims or counterclaims that are not, in the aggregate, material to the value of
the Accounts. None of the Accounts is evidenced by a promissory note or other
instrument other than a check.
5.8 Intellectual Property. The Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks and Trademark Licenses listed on the respective
schedules to the Intellectual Property Security Agreement constitute all of the
Intellectual Property owned by Borrower.
5.9 Accurate Information. All information heretofore, herein or
hereafter supplied to Agent by or on behalf of Borrower with respect to the
Collateral is and will be accurate and complete in all material respects.
5.10 Credit Agreement Warranties. Each representation and warranty set
forth in Section 4 of the Credit Agreement is true and correct in all material
respects and such representations and warranties are hereby incorporated herein
by this reference with the same effect as though set forth in their entirety
herein.
SECTION 6. Further Assurances; Covenants
6.1 Other Documents and Actions. Borrower will, from time to time, at
its expense, promptly execute and deliver all further instruments and documents
and take all further action that may be necessary or desirable, or that Agent
may request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, Borrower will: (a) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as Agent may
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby; (b) at any reasonable time, upon demand by Agent
exhibit the Collateral to allow inspection of the Collateral by Agent or persons
designated by Agent; and (c) upon Agent's request, appear in and defend any
action or proceeding that may affect Borrower's title to or Agent's security
interest in the Collateral.
6.2 Agent Authorized. Borrower hereby authorizes Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of Borrower where
permitted by law.
5
6
6.3 Corporate or Name Change. Borrower will notify Agent promptly in
writing prior to any change in Borrower's name, identity or corporate structure.
6.4 Business Locations. Borrower will keep the Collateral at the
locations specified on Schedule I. Borrower will give Agent thirty (30) days
prior written notice of any change in Borrower's chief place of business or of
any new location of business or any new location for any of the Collateral. With
respect to any new location (which in any event shall be within the continental
United States), Borrower will execute such documents and take such actions as
Agent deems necessary to perfect and protect the Security Interests.
6.5 Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall, upon the request of Agent, notify such warehouseman, bailee,
agent or processor of the Security Interests created hereby and shall instruct
such Person to hold all such Collateral for Agent's account subject to Agent's
instructions.
6.6 Instruments. Borrower will deliver and pledge to Agent all
Instruments duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Agent.
Borrower will mark conspicuously all chattel paper with a legend, in form and
substance satisfactory to Agent, indicating that such chattel paper is subject
to the Security Interests. Without limiting the generality of the foregoing
Borrower will mark conspicuously all subscriber agreements and alarm system
purchase agreements (whether or not constituting chattel paper) with the legend
referred to in the proceeding sentence.
6.7 Certificates of Title. Upon Agent's request, Borrower shall
promptly deliver to Agent any and all certificates of title, applications for
title or similar evidence of ownership of all Equipment and shall cause Agent to
be named as lienholder on any such certificate of title or other evidence of
ownership. Borrower shall promptly inform Agent of any additions to or deletions
from the Equipment and shall not permit any such items to become fixtures to
real estate other than real estate described in the Mortgages.
6.8 Account Covenants. Except as otherwise provided in this subsection
6.8, Borrower shall continue to collect, at its own expense, all amounts due or
to become due Borrower under the Accounts. In connection with such collections,
Borrower may take (and, at Agent's direction, shall take) such action as
Borrower or Agent may deem necessary or advisable to enforce collection of the
Accounts; provided, that Agent shall have the right at any time after the
occurrence of a Default or an Event of Default to: (a) notify the customers or
obligors under any Accounts of the assignment of such Accounts to Agent (on
behalf of Lenders) and to direct such customers or obligors to make payment of
all amounts due or to become due directly to Agent; (b) enforce collection of
any such Accounts; and (c) adjust, settle or compromise the amount or payment of
such Accounts. After the occurrence of an Event of Default (i) all amounts and
proceeds (including Instruments) received by Borrower with respect to the
Accounts shall be received in trust for the benefit of Agent (on behalf of
Lenders), shall be segregated from other funds of Borrower and shall be
forthwith paid over to Agent in the same form as so received (with any necessary
endorsement) to be applied in accordance with Section 13 and (ii) Borrower shall
not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any customer or obligor thereof, or allow any credit or
discount thereon without the prior consent of Agent.
6.9 Intellectual Property Covenants. Borrower shall concurrently
herewith deliver to Agent the Intellectual Property Security Agreement and all
other documents, instruments and other items as may be necessary for Agent to
file such agreement with the United States Copyright Office, United States
Patent and Trademark Office and any similar domestic or foreign office,
department or agency. If, before the Secured Obligations are paid in full,
Borrower obtains any new Intellectual Property or rights thereto or becomes
entitled to the benefit of any Intellectual Property not listed on the
respective schedules to each security agreement, Borrower shall give to Agent
prompt written notice thereof, and shall amend the respective security agreement
to include any such new Intellectual Property. Borrower shall: (a) prosecute
diligently any copyright, patent, trademark or license application at any time
pending; (b) make application on all new copyrights, patents and trademarks as
reasonably deemed appropriate by Borrower; (c) preserve and maintain all rights
in the Intellectual Property; and (d) use its best efforts to obtain any
consents, waivers or agreements necessary to enable Agent to exercise its
remedies with respect to the Intellectual Property. Borrower shall not abandon
any right to file a copyright, patent or trademark application nor shall
Borrower abandon any pending copyright, patent or trademark application, or
Copyright, Copyright License, Patent, Patent License, Trademark or Trademark
License without the prior written consent of Agent. Borrower represents and
warrants to Agent that the execution, delivery and performance of this Agreement
by Borrower will not violate or cause a default under any of the Intellectual
Property or any agreement in connection therewith.
6
7
6.10 Equipment Covenants. Borrower shall cause the Equipment to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and shall promptly make or cause to be made all repairs, replacements,
and other improvements in connection therewith that are necessary or desirable
to such end.
6.11 Insurance. Borrower shall maintain insurance with respect to the
Collateral in accordance with the terms of the Credit Agreement.
6.12 Taxes and Claims. Borrower will pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims against, the Collateral (including claims for labor, materials
and supplies), except to the extent the validity thereof is being contested in
good faith.
6.13 Collateral Description. Borrower will furnish to Agent, from time
to time, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Agent may
reasonably request, all in reasonable detail.
6.14 Use of Collateral. Borrower will not use or permit any Collateral
to be used unlawfully or in violation of any provision of this Agreement or any
applicable statue, regulation or ordinance or any policy of insurance covering
any of the Collateral.
6.15 Records of Collateral. Borrower shall keep full and accurate books
and records relating to the Collateral and shall stamp or otherwise mark such
books and records in such manner as Agent may reasonably request indicating that
the Collateral is subject to the Security Interests.
6.16 Other Information. Borrower will, promptly upon request, provide
to Agent all information and evidence it may reasonably request concerning the
Collateral, and in particular the Accounts, to enable Agent to enforce the
provisions of this Agreement.
SECTION 7. Bank Accounts; Collection of Accounts and Payments
On or prior to the Closing Date, the Agent and Borrower shall enter
into a bank agency agreement ("Bank Agency Agreement") substantially in the form
of Exhibit B hereto with each financial institution with which the Borrower
maintains from time to time any deposit accounts (general or special) (a
"Depository Account"), except for petty cash accounts with an aggregate balance
in all such accounts not exceeding $100,000 at any time. Pursuant to the Bank
Agency Agreements and pursuant hereto, Borrower grants and shall grant to the
Agent, for the benefit of the Lenders, a continuing lien upon, and security
interest in, all such accounts and all funds at any time paid, deposited,
credited or held in such accounts (whether for collection, provisionally or
otherwise) or otherwise in the possession of such financial institutions, and
each such financial institution shall act as the Agent's agent in connection
therewith. Following the Closing Date, Borrower shall not establish any deposit
account (except for the above-described petty cash accounts) with any financial
institution unless prior thereto the Agent and Borrower shall have entered into
a Bank Agency Agreement with such financial institution and Borrower shall have
notified Agent of the establishment of such account. The Bank Agency Agreement
dated as of November 3, 1993 among Borrower, Agent and First Interstate Bank of
Oregon, N.A. shall be deemed a Bank Agency Agreement hereunder.
SECTION 8. Agent Appointed Attorney-in-Fact
Borrower hereby irrevocably appoints Agent as Borrower's
attorney-in-fact, with full authority in the place and stead of Borrower and in
the name of Borrower, Agent or otherwise, from time to time following the
occurrence and during the continuance of an Event of Default in Agent's
discretion to take any action and to execute any instrument that Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:
(a) to obtain and adjust insurance required to be paid to
Agent;
(b) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
7
8
(c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses
(a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens, levied or placed upon
or threatened against the Collateral, the legality or validity thereof
and the amounts necessary to discharge the same to be determined by
Agent in its sole discretion, and such payments made by Agent to become
obligations of Borrower to Agent, due and payable immediately without
demand;
(f) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, assignments,
verifications and notices in connection with Accounts and other
documents (including without limitation financing statements,
continuation statements and other documents necessary or advisable to
perfect the Security Interests) relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though Agent were the absolute owner thereof for all
purposes, and to do, at Agent's option and Borrower's expense, at any
time or from time to time, all acts and things that Agent deems
necessary to protect, preserve or realize upon the Collateral.
Borrower hereby ratifies and approves all acts of Agent made or taken pursuant
to this Section 8. Neither Agent nor any person designated by Agent shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law. This power, being coupled with an interest, is irrevocable so long as
this Agreement shall remain in force.
SECTION 9. Transfers and Other Liens
Except as otherwise permitted by the Credit Agreement, Borrower shall
not:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, except that Borrower may sell Inventory in the ordinary
course of business.
(b) Create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the
Collateral to secure indebtedness of any Person except for the security
interest created by this Agreement or permitted under the Credit
Agreement.
SECTION 10. Remedies
If any Event of Default shall have occurred and be continuing, Agent
may exercise in respect of the Collateral, in addition to all 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 (whether or not the UCC
applies to the affected Collateral) and also may: (a) require Borrower to, and
Borrower hereby agrees that it will, at its expense and upon request of Agent
forthwith, assemble all or part of the Collateral as directed by Agent and make
it available to Agent at a place to be designated by Agent which is reasonably
convenient to both parties; (b) withdraw all cash in the Depository Accounts and
apply such monies in payment of the Secured Obligations in the manner provided
in Section 13; (c) without notice or demand or legal process, enter upon any
premises of Borrower and take possession of the Collateral; and (d) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Agent's offices or
elsewhere, at such time or times, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as Agent may deem
commercially reasonable. Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten days notice to Borrower of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. At any sale of the Collateral, if
permitted by law, Agent may bid (which bid may be, in whole or in part, in the
form of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of Agent (on behalf of Lenders). Agent shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further
8
9
notice, be made at the time and place to which it was so adjourned. To the
extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted.
SECTION 11. License of Intellectual Property
Borrower hereby assigns, transfers and conveys to Agent, effective upon
the occurrence of any Event of Default hereunder, the nonexclusive right and
license to use all Intellectual Property owned or used by Borrower together with
any goodwill associated therewith, all to the extent necessary to enable Agent
to realize on the Collateral and any successor or assign to enjoy the benefits
of the Collateral. This right and license shall inure to the benefit of all
successors, assigns and transferees of Agent and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to Borrower by Agent.
SECTION 12. Limitation on Duty of Agent with Respect to Collateral
Beyond the safe custody thereof, Agent shall have no duty with respect
to any Collateral in its possession or control (or in the possession or control
of any agent or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining
thereto. Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property. Agent shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by Agent in good faith.
SECTION 13. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Depository Accounts shall be applied: first,
to all fees, costs and expenses incurred by Agent or any Lender with respect to
the Credit Agreement, the other Loan Documents or the Collateral including,
without limitation, those described in subsection 10.1 of the Credit Agreement
and in Section 14 hereof; second, to all fees due and owing to Agent or any
Lender; third, to accrued and unpaid interest on the Obligations (including any
interest which but for the provisions of the Bankruptcy Code, would have accrued
on such amounts); fourth, to the principal amounts of the Obligations
outstanding; and fifth, to any other indebtedness or obligations of Borrower
owing to Agent or any Lender.
SECTION 14. Expenses
Borrower shall pay all insurance expenses and all expenses of
protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, all costs, fees and expenses of perfecting and
maintaining the Security Interests, and any and all excise, property, sales and
use taxes imposed by any state, federal or local authority on any of the
Collateral, or with respect to periodic appraisals and inspections of the
Collateral, or with respect to the sale or other disposition thereof. If
Borrower fails promptly to pay any portion of the above expenses when due or to
perform any other obligation of Borrower under this Agreement, Agent or any
other Lender may, at its option, but shall not be required to, pay or perform
the same and charge Borrower's account for all costs and expenses incurred
therefor, and Borrower agrees to reimburse Agent or such Lender therefor on
demand. All sums so paid or incurred by Agent or any other Lender for any of the
foregoing, any and all other sums for which Borrower may become liable hereunder
and all costs and expenses (including attorneys' fees, legal expenses and court
costs) incurred by Agent or any other Lender in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement shall
be payable on demand, shall constitute Obligations, shall bear interest until
paid at the highest rate provided in the Credit Agreement and shall be secured
by the Collateral.
SECTION 15. Termination of Security Interests; Release of Collateral
Upon payment in full of all Secured Obligations and the termination of
all Commitments, the Security Interests shall terminate and all rights to the
Collateral shall revert to Borrower. Upon such termination of the Security
Interests or release of any Collateral, Agent will, at the expense of Borrower,
execute and deliver to
9
10
Borrower such documents as Borrower shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
SECTION 16. Notices
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the notice provision of the Credit
Agreement.
SECTION 17. Waivers, Non-Exclusive Remedies
No failure on the part of Agent to exercise, and no delay in exercising
and no course of dealing with respect to, any right under the Credit Agreement
or this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise by Agent of any right under the Credit Agreement or this
Agreement preclude any other or further exercise thereof or the exercise of any
other right. The rights in this Agreement and the Credit Agreement are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 18. Successors and Assigns
This Agreement is for the benefit of Agent and Lenders and their
successors and assigns, and in the event of an assignment of all or any of the
Secured Obligations, the rights hereunder, to the extent applicable to the
Secured Obligations so assigned, may be transferred with such Secured
Obligations. This Agreement shall be binding on Borrower and its successors and
assigns.
SECTION 19. Changes in Writing
No amendment, modification, termination or waiver of any provision of
this Agreement or consent to any departure by Borrower therefrom, shall in any
event be effective without the written concurrence of Agent and Borrower.
SECTION 20. Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 21. Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of Agent or any Lender in the exercise
of any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or any other right, power or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 22. Headings
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 23. Counterparts
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the day first above written.
PROTECTION ONE ALARM HELLER FINANCIAL, INC.
MONITORING, INC.
10
11
By: JOHN W. HESSE By: TIMOTHY CANON
------------------------ ----------------------------
Title: Executive Vice President Title: Vice President
11
12
LIST OF SCHEDULES
Schedule I - Locations of Equipment, Inventory, Books and Records, Chief
Executive Office, Other Locations; FEIN
Schedule II - Other Liens, Security Interests and Financing Statements;
Bailees
Schedule III - Trade-names and Fictitious Names (Present and Past Five Years)