EXHIBIT 10.5
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SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement") dated as of October 21, 1999,
between ALPHANET HOSPITALITY SYSTEMS, INC., a Delaware corporation (the
"Company"), and APPEL INVESTMENTS INC., as Agent for itself and the other
Lenders (collectively "Lender").
The Loan Agreement, dated as of October 21, 1999 (as the same may be
amended, supplemented or otherwise modified and in effect from time to time, the
"Loan Agreement") among the Company and the lenders from time to time party
hereto (each, a "Lender" and, collectively, the "Lenders"), and APPEL
INVESTMENTS INC., as Agent (the "Agent"), provides, subject to the terms and
conditions thereof, for the extension of credit to the Company.
To induce the Lenders to extend credit, and to secure the Company's
obligations under the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Agent hereby agree as follows:
SECTION 1. Definitions and Interpretation.
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1.01 Definitions. Terms defined in the Loan Agreement are used herein
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as defined therein. In addition, as used herein:
"Accounts" shall have the ascribed thereto in Section 3(d) hereof.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Copyright Collateral" shall mean, collectively, all Copyrights,
whether now owned or hereafter acquired by the Company, including each Copyright
identified in Annex 2 hereto.
"Copyrights" shall mean all copyrights, copyright registrations
and applications for copyright registrations, including all renewals and
extensions thereof, the right to recover for all past, present and future
infringements thereof, and all other rights of any kind whatsoever accruing
thereunder or pertaining thereto.
"Documents" shall have the meaning ascribed thereto in Section
3(j) hereof.
"Equipment" shall have the meaning ascribed thereto in Section
3(h) hereof.
"Instruments" shall have the meaning ascribed thereto in Section
3(e) hereof. "Intellectual Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together with
(a) all inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements granted
to or by the Company with respect to any of the foregoing, in each case whether
now or hereafter owned or used including the licenses or other agreements with
respect to the Copyright Collateral, the Patent Collateral or the Trademark
Collateral, listed in Annex 5 hereto; (c) all information,
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customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software and
programs; (d) all field repair data, sales data and other information relating
to sales or service of products now or hereafter manufactured; (e) all
accounting information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer programs
used for the compilation or printout of such information, knowledge, records or
data; and (f) all licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by the Company.
"Inventory" shall have the meaning ascribed thereto in Section
3(f) hereof.
"Investment Property" shall have the meaning ascribed thereto
in Section 3(1) hereof.
"Issuers" shall mean, collectively, the respective entities
identified on Annex 1 hereto under the caption "Issuer."
"Motor Vehicles" shall mean motor vehicles, tractors, trailers
and other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patent Collateral" shall mean, collectively, all Patents,
whether now owned or hereafter acquired by the Company, including each Patent
identified in Annex 3 hereto.
"Patents" shall mean all patents and patent applications,
including the inventions and improvements described and claimed therein together
with the reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, all income, royalties, damages and payments now
or hereafter due and/or payable under and with respect thereto, including
damages and payments for past or future infringements thereof, the right to sue
for past, present and future infringements thereof, and all rights corresponding
thereto throughout the world.
"Pledged Stock" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) any and
all present and future Secured Obligations of the Company to the Lenders under
the Loan Agreement, the Note and the other Loan Documents, including the
principal of and interest on the Loan made pursuant to the Loan Agreement and
all other amounts from time to time owing to any Lender by the Company under the
Loan Documents, and (b) any and all present and future obligations of the
Borrower to the Agent hereunder, in each case whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, which may arise under, out of, or in connection with, the Loan
Agreement, the other Loan Documents or any other document made, delivered or
given in connection herewith or therewith, whether on account of principal,
interest, fees, indemnities, costs, expenses or otherwise (including all fees
and disbursements of counsel to any Lender that are required to be paid by the
Company under the Loan Agreement or any other Loan Document).
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"Stock Collateral" shall mean, collectively, the Collateral
described in clauses (a) through (c) of Section 3 hereof and the proceeds of and
to any such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and other
papers.
"Trademark Collateral" shall mean, collectively, all
Trademarks, whether now owned or hereafter acquired by the Company, including
each Trademark identified in Annex 4 hereto. Notwithstanding the foregoing, the
Trademark Collateral does not and shall not include any Trademark that would be
rendered invalid, abandoned, void or unenforceable by reason of its being
included as part of the Trademark Collateral.
"Trademarks" shall mean all trade names, trademarks and
service marks, logos, trademark and service mark registrations, and applications
for trademark and service mark registrations, including all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark.
1.02 Interpretation. In this Agreement, unless otherwise indicated, the
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singular includes the plural and plural the singular; words importing any gender
include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions now or hereinafter
consolidating, amending or replacing the statute or regulation referred to;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to sections (or subdivisions of sections), exhibits, annexes or
schedules are to this Agreement; references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments, extensions and
other modifications to such instruments (without, however, limiting any
prohibition on any such amendments, extensions or modifications by the terms of
this Agreement); and references to Persons include their respective successors
and permitted assigns and, in the case of any Governmental Authority, Persons
succeeding to their respective functions and capacities.
SECTION 2. Representations and Warranties. The Company represents and
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warrants to the Lender that:
(a) The Company is the sole beneficial owner of the Collateral
in which it purports to grant a security interest pursuant to Section 3 hereof
and no Lien exists or will exist upon such Collateral at any time (and no right
or option to acquire the same exists in favor of any other Person), except for
Liens permitted under Section 6.03 of the Loan Agreement and except for the
pledge and security interest in favor of the Lender created or provided for
herein, which pledge and security interest, to the best of the Company's
knowledge, constitute a first priority perfected pledge and security interest in
and to all of such Collateral, subject only to the security interest in favor of
Prime described on Exhibit I to the Loan Agreement.
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(b) The Pledged Stock represented by the certificates
identified in Annex 1 hereto is, and all other Pledged Stock in which the
Company shall hereafter grant a security interest pursuant to Section 3 hereof
will be, duly authorized, validly existing, fully paid and non-assessable, and
none of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter, by-laws or other organization document of
the respective Issuer of such Pledged Stock, upon the transfer of such Pledged
Stock (except for any such restriction contained herein or in the Loan
Agreement).
(c) The Pledged Stock represented by the certificates
identified in Annex 1 hereto constitutes all of the issued and outstanding
shares of capital stock of any class of the Issuers beneficially owned by the
Company on the date hereof (whether or not registered in the name of the
Company) and said Annex 1 correctly identifies, as at the date hereof, the
respective Issuers of such Pledged Stock, the respective class and par value of
the shares comprising such Pledged Stock and the respective number of shares
(and registered owners thereof) represented by each such certificate.
(d) Annexes 2. 3 and 4 hereto, respectively, set forth a
complete and correct list of all Copyrights, Patents and Trademarks owned by the
Company on the date hereof; except pursuant to licenses and other user
agreements entered into by the Company in the ordinary course of business, that
are listed in Annex 5 hereto; the Company owns and possesses the right to use,
and has done nothing to authorize or enable any other Person to use, any
Copyright, Patent or Trademark listed in said Annexes 2. 3 and 4 and all
registrations listed in said Annexes 2. 3 and 4 are valid and in full force and
effect; and except as may be set forth in said Annex 5, the Company owns and
possesses the right to use all Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of
all licenses and other user agreements included in the Intellectual Property on
the date hereof.
(f) To the Company's knowledge, (i) except as set forth in
Annex 5 hereto, there is no violation by others of any right of the Company with
respect to any Copyright, Patent or Trademark listed in Annexes 2. 3 and 4
hereto, respectively, and (ii) the Company is not infringing in any respect upon
any Copyright, Patent or Trademark of any other Person; and no proceedings have
been instituted or are pending against the Company or, to the Company's
knowledge, threatened, and no claim against the Company has been received by the
Company, alleging any such violation, except as may be set forth in said Annex
5.
(g) The Company does not own any Trademarks registered in the
United States of America to which the last sentence of the definition of
Trademark Collateral applies.
(h) Any goods now or hereafter produced by the Company or any
of its Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as amended.
(i) Annex 6 hereto sets forth a complete and correct list of
all Investment Property in which the Company has any interest on the date
hereof.
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(j) The place of business of the Company or, if the Company
has more than one place of business, the chief executive office of the Company
is located at the address set forth below the name of the Company on the
signature pages to this Agreement. All Collateral evidenced by a share
certificate, a promissory note, chattel paper or any other document has been
delivered to the Lender in its original form (with any necessary endorsement or
assignment).
SECTION 3. Collateral. The Company hereby pledges and grants to the
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Agent for the benefit of the Lenders a security interest in all of the Company's
right, title and interest in the following property, whether now owned by the
Company or hereafter acquired and whether now existing or hereafter coming into
existence and wherever located (all being collectively referred to herein as
"Collateral") as collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations:
(a) all capital stock of the Issuers represented by the
certificates identified in Annex 1 hereto and all other capital stock of
whatever class of the Issuers, now or hereafter owned by the Company, in each
case together with the certificates evidencing the same (collectively, the
"Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or return
of capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the Pledged Stock
or otherwise received in exchange therefor, and any subscription warrants,
rights or options issued to the holders of, or otherwise in respect of, the
Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Loan Agreement, in the
event of any consolidation or merger in which an Issuer is not the surviving
entity, all capital stock of the successor entity (unless such successor entity
is the Company itself) formed by or resulting from such consolidation or merger
(the Pledged Stock, together with all other certificates, shares, securities,
properties or moneys as may from time to time be pledged hereunder pursuant to
clause (a) or (b) above and this clause (c) being herein collectively called the
"Stock Collateral");
(d) all accounts and general intangibles (each as defined in
the UCC) of the Company constituting any right to the payment of money,
including all moneys due and to become due to the Company in respect of any
loans or advances or for inventory or equipment or other goods sold or leased or
for services rendered, all moneys due and to become due to the Company under any
guarantee (including a letter of credit) of the purchase price of Inventory or
Equipment sold by the Company and all tax refunds (such accounts, general
intangibles and moneys due and to become due being herein called collectively
"Accounts");
(e) all instruments, chattel paper or letters of credit (each
as defined in the UCC) of the Company evidencing, representing, arising from or
existing in respect of, relating to, securing or otherwise supporting the
payment of, any of the Accounts, including promissory notes, drafts, bills of
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exchange and trade acceptances (herein collectively called "Instruments");
(f) all inventory (as defined in the UCC) of the Company, all
goods obtained by the Company in exchange for such inventory, and any products
made or processed from such inventory including all substances, if any,
commingled therewith or added thereto (herein collectively called "Inventory");
(g) all Intellectual Property and all other accounts or
general intangibles (each as defined in the UCC) not constituting Intellectual
Property or Accounts, including all agreements, contracts and leases of personal
property now or hereafter in effect between the Company and any other party or
parties relating to the business or operations of the Company or its Affiliates;
(h) subject to purchase money interests, all equipment (as
defined in the UCC) of the Company, including all Motor Vehicles (herein
collectively called "Equipment");
(i) subject to purchase money interests and the transfer of
equipment to customers of the Company in accordance with the Company's ordinary
course of business as presently conducted, each contract and other agreement of
the Company relating to the sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the UCC) or other
receipts of the Company covering, evidencing or representing Inventory or
Equipment (herein collectively called "Documents");
(k) all rights, claims and benefits of the Company against any
Person arising out of, relating to or in connection with Inventory or Equipment
purchased by the Company, including any such rights, claims or benefits against
any Person storing or transporting such Inventory or Equipment;
(l) all investment property (as defined in the UCC) of the
Company, including without limitation the investment property listed on Annex 6
(herein collectively called "Investment Property");
(m) all deposit accounts (as defined in the UCC) and letter of
credit rights (as may be defined in the UCC) of the Company;
(n) all licenses and other agreements, whether now or
hereafter granted to the Company, including each of the licenses and other
agreements listed on Annex 5 hereto, to the extent the security interest therein
granted or purported to be granted by the Company under this Agreement may be
validly granted (herein collectively called "Licenses"); and
(o) all other tangible and intangible personal property and
fixtures of the Company, including all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements of
and to any of the property of the Company described in the preceding clauses of
this Section 3 (including (i) any proceeds of the Licenses, whether or not a
security interest in such Licenses granted or purported to be granted by the
Company under this Agreement may be validly granted and (ii) any proceeds of
insurance thereon and all causes of action, claims and warranties now or
hereafter held by the Company in respect of any of the items listed above) and,
to the extent related to any property described in said clauses or such
proceeds, products and accessions, all books, correspondence, credit files,
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records, invoices and other papers, including all tapes, cards, computer runs
and other papers and documents in the possession or under the control of the
Company or any computer bureau or service company from time to time acting for
the Company.
SECTION 4. Proceeds of Accounts.
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4.01 Proceeds of Accounts. Upon the occurrence and during the
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continuance of an Event of Default, if so requested by the Lender, the Company
shall instruct all account debtors and other Persons obligated in respect of all
Accounts to make all payments in respect of the Accounts directly to the Agent.
In addition to the foregoing, the Company agrees that if the proceeds of any
Collateral hereunder (including the payments made in respect of Accounts) shall
be received by it, the Company shall, as promptly as possible after requested to
do so by the Lender upon the occurrence and during the continuance of an Event
of Default, deliver such proceeds to the Lender in original form received
together with any necessary endorsement. Until so delivered to the Agent, all
such proceeds shall be held in trust by the Company for and as the property of
the Lenders and shall not be commingled with any other funds or property of the
Company. Without limiting the foregoing, the Company shall enter into a
"lock-box" agreement for the deposit and disbursement of funds received by the
Company.
SECTION 5. Further Assurances; Remedies. In furtherance of the grant
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of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with the Lender as follows:
5.01 Delivery and Other Perfection. The Company shall:
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(a) if any of the shares, securities, moneys or property
required to be pledged by the Company under clauses (a), (b) and (c) of Section
3 hereof are received by the Company, forthwith either (x) transfer and deliver
to the Agent such shares or securities so received by the Company (together with
the certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by the Agent, pursuant to the terms of this Agreement,
as part of the Collateral or (y) take such other action as the Agent shall deem
necessary or appropriate to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and (c);
(b) deliver and pledge to the Agent any and all Instruments,
endorsed and/or accompanied by such instruments of assignment and transfer in
such form and substance as the Agent may request; provided, that so long as no
Event of Default shall have occurred and be continuing, the Company may retain
for collection in the ordinary course any Instruments received by the Company in
the ordinary course of business and the Agent shall, promptly upon request of
the Company, make appropriate arrangements for making any Instrument pledged by
the Company available to the Company for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed appropriate
by the Agent, against trust receipt or like document);
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(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the judgment of the Agent) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to enable
the Lenders to exercise and enforce their rights hereunder with respect to such
pledge and security interest, including causing any or all of the Stock
Collateral to be transferred of record into the name of the Agent or its nominee
(and the Agent agrees that if any Stock Collateral is transferred into its name
or the name of its nominee, the Agent will thereafter promptly give to the
Company copies of any notices and communications received by it with respect to
the Stock Collateral pledged by the Company hereunder), provided that notices to
account debtors in respect of any Accounts or Instruments shall be subject to
the provisions of clause (i) below;
(d) without limiting the obligations of the Company under
Section 5.04(c) hereof, upon the acquisition after the date hereof by the
Company of any Equipment covered by a certificate of title or ownership, cause
the Agent to be listed as the lienholder on such certificate of title and within
90 days of the acquisition thereof deliver evidence of the same to the Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such manner as
the Agent may reasonably require in order to reflect the security interests
granted by this Agreement;
(f) furnish to the Agent from time to time (but, unless an
Event of Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark Collateral, as the Agent may
reasonably request, all in reasonable detail;
(g) promptly upon request of the Agent, following receipt by
the Agent of any statements, schedules or reports pursuant to clause (f) above,
modify this Agreement by amending Annexes 2, 3 and/or 4 hereto, as the case may
be, to include any Copyright, Patent or Trademark that becomes part of the
Collateral under this Agreement;
(h) permit representatives of the Lenders, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of the Lenders to be present at the Company's place of business
to receive copies of all communications and remittances relating to the
Collateral, and forward copies of any notices or communications received by the
Company with respect to the Collateral, all in such manner as the Lenders may
require; and
(i) upon the occurrence and during the continuance of any
Event of Default, upon request of the Agent, promptly notify (and the Company
hereby authorizes the Agent so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the Agent
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent.
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5.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 6.03 of the Loan Agreement, without the prior written
consent of the Agent, the Company shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction any
financing statement or like instrument with respect to the Collateral in which
the Agent is not named as the sole secured party.
5.03 Preservation of Rights. The Lenders shall not be required to take
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steps necessary to preserve any rights against prior parties to any of the
Collateral.
5.04 Special Provisions Relating to Certain Collateral.
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(a) Stock Collateral.
(i) The Company will cause the Stock Collateral to constitute
at all times 100% of the total number of shares of each class of Capital Stock
of each Issuer.
(ii)So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Loan Agreement,
the other Loan Documents or any other instrument or agreement referred to herein
or therein; provided, that the Company agrees that it will not vote the Stock
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Loan Agreement, the other Loan Documents or any such other instrument or
agreement; and the Agent shall execute and deliver to the Company or cause to be
executed and delivered to the Company all such proxies,powers of attorney,
dividend and other orders, and all such instruments, without recourse, as the
Company may reasonably request for the purpose of enabling the Company to
exercise the rights and powers that it is entitled to exercise pursuant to this
Section 5.04(a)(ii).
(iii)Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(iv) If any Event of Default shall have occurred, then so
long as such Event of Default shall continue, and whether or not the Lenders
exercises any available right to declare any Secured Obligation due and payable
or seeks or pursues any other relief or remedy available to them under
applicable law or under this Agreement, the Loan Agreement, the other Loan
Documents or any other agreement relating to such Secured Obligation, all
dividends and other distributions on the Stock Collateral shall be paid directly
to the Agent and retained by it as part of the Stock Collateral, subject to the
terms of this Agreement, and, if the Agent shall so request in writing, the
Company agrees to execute and deliver to the Agent appropriate additional
dividend, distribution and other orders and documents to that end.
(b) Intellectual Property.
(i)For the purpose of enabling the Agent to exercise rights
and remedies under Section 5.05 hereof at such time as the Agent shall be
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lawfully entitled to exercise such rights and remedies, and for no other
purpose, the Company hereby grants to the Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to the Company) to use, assign, license or sublicense any of
the Intellectual Property now owned or hereafter acquired by the Company,
wherever the same may be located, 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 programs used for the compilation or printout thereof.
(ii)Notwithstanding anything contained herein to the contrary,
but subject to the provisions of Section 6 of the Loan Agreement that limit the
right of the Company to dispose of its property, so long as no Event of Default
shall have occurred and be continuing, the Company will be permitted to exploit,
use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Company. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing the Agent shall from time to time,
upon the request of the Company, execute and deliver any instruments,
certificates or other documents, in the form so requested, that the Company
shall have certified is appropriate (in its judgment) to allow it to take any
action permitted above (including relinquishment of the license provided
pursuant to clause (i) immediately above as to any specific Intellectual
Property). Further, upon the payment in full of all of the Secured Obligations
and cancellation or termination of the Commitments or earlier expiration of this
Agreement or release of the Collateral, the Agent shall grant back to the
Company the license granted pursuant to clause (i) immediately above. The
exercise of rights and remedies under Section 5.05 hereof by the Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by the Company in accordance with the first sentence of this clause
(ii).
(c) Motor Vehicles. At any time after the occurrence and during
the continuance of an Event of Default, the Company shall, upon the request of
the Agent, deliver to the Agent originals of the certificates of title or
ownership for the Motor Vehicles owned by it with the Agent listed as lienholder
and take such other action as the Agent shall deem appropriate to perfect the
security interest created hereunder in all such Motor Vehicles.
5.05 Events of Default, Etc. During the period during which an Event
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of Default shall have occurred and be continuing:
(a) the Company shall, at the request of the Agent, assemble
the Collateral owned by it at such place or places, reasonably convenient to
both the Agent and the Company, designated in the Agent's request;
(b) the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend the time
of payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Collateral;
(c) the Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the UCC (whether or not the
UCC is in effect in the jurisdiction where the rights and remedies are asserted)
and such additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and remedies
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hereunder may be asserted, including the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Agent were the sole and absolute owner
thereof (and the Company agrees to take all such action as may be appropriate to
give effect to such right);
(d) the Agent in its discretion may, in its name or in the
name of the Company or otherwise, demand, sue for, collect or receive any money
or property at any time payable or receivable on account of or in exchange for
any of the Collateral, but shall be under no obligation to do so; and
(e) the Agent may, upon five business days' prior written
notice to the Company of the time and place, sell, lease, assign or otherwise
dispose of all or any part of the Collateral, at such place or places as the
Agent deems best, and for cash or for credit or for future delivery (without
thereby assuming any credit risk), at public or private sale, without demand of
performance or notice of intention to effect any such disposition or of the time
or place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any Lender or anyone else may
be-the purchaser, lessee, assignee or recipient of any or all of the Collateral
so disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Company, any such demand, notice and right or equity being
hereby expressly waived and released. In the event of any sale, assignment, or
other disposition of any of the Trademark Collateral, the goodwill connected
with and symbolized by the Trademark Collateral subject to such disposition
shall be included, and the Company shall supply to the Agent or its designee,
for inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under
this Section 5.05, including by virtue of the exercise of the license granted to
the Agent in Section 5.04(b) hereof, shall be applied in accordance with Section
5.09 hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Company
acknowledges that any such private sales may be at prices and on terms less
favorable to the Agent than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Agent shall have no obligation to engage in public sales and
no obligation to delay the sale of any Collateral for the period of time
necessary to permit the respective Issuer or issuer thereof to register it for
public sale.
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5.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Company shall remain liable for any
deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written notice to
--------
the Agent, the Company shall not (i) maintain any of its books and records with
respect to the Collateral at any office or maintain its principal place of
business at any place, or permit any Inventory or Equipment to be located
anywhere, other than at the address, indicated beneath the signature of the
Company to the Loan Agreement or (ii) change its name, or the name under which
it does business, from the name shown on the signature pages hereto.
5.08 Private Sale. The Lenders and the Agent shall incur no liability
-------------
as a result of the sale of the Collateral, or any part thereof, at any private
sale pursuant to Section 5.05 hereof conducted in a commercially reasonable
manner. The Company hereby waives any claims against the Lenders arising by
reason of the fact that the price at which the Collateral may have been sold at
such a private sale was less than the price that might have been obtained at a
public sale or was less than the aggregate amount of the Secured Obligations,
even if the Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
------------------------
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Agent under Section
4 hereof or this Section 5, shall be applied by the Agent:
First, to the payment of the costs and expenses of such
-----
collection, sale or other realization, including reasonable out-of-pocket costs
and expenses of the Lenders and the fees and expenses of their agents and
counsel, and all expenses incurred and advances made by the Lenders in
connection therewith;
Next, to the payment in full of the Secured Obligations; and
----
Finally, to the payment to the Company, or its successors or
-------
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 5, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions in
kind of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Company or any issuer of or obligor on
any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted by
----------------
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this Agreement to the Lenders while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments that the Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, the Agent shall be entitled under this
Agreement upon the occurrence and continuation of any Event of Default (i) to
ask, demand, collect, sue for, recover, receive and give receipt and discharge
for amounts due and to become due under and in respect of all or any part of the
Collateral; (ii) to receive, endorse and collect any drafts, instruments,
documents and chattel paper in connection with clause (i) above; (iii) to file
any claims or take any action or proceeding that the Agent may deem necessary or
advisable for the collection of all or any part of the Collateral; (iv) to
execute any financing statements with respect to all or any part of the
Collateral, and (v) to execute, in connection with any sale or disposition of
the Collateral under Section 5, any endorsements, assignments, bills of sale or
other instruments of conveyance or transfer with respect to all or any part of
the Collateral. The Company hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
this Section 5.10.
5.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, the Company shall (i) file such financing statements
and other documents in such offices as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement, (ii) cause the Agent
to be listed as the lienholder on all certificates of title or ownership
relating to Motor Vehicles owned by the Company and (iii) deliver to the Agent
all certificates identified in Annex 1 hereto, accompanied by undated stock
powers duly executed in blank.
5.12 Termination. When all Secured Obligations shall have been paid in
-----------
full, this Agreement shall terminate, and the Agent shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the Company and to be
released and canceled all licenses and rights referred to in Section 5.04(b)
hereof. The Agent shall also execute and deliver to the Company upon such
termination such UCC termination statements, certificates for terminating the
Liens on the motor vehicles and such other documentation as shall be reasonably
requested by the Company to effect the termination and release of the Liens on
the Collateral.
5.13 Further Assurances. The Company agrees that, from time to time
-------------------
upon the written request of the Agent, the Company will execute and deliver such
further documents and do such other acts and things as the Lenders may
reasonably request in order fully to effect the purposes of this Agreement.
SECTION 6. Miscellaneous.
-------------
6.01 No Waiver. No failure on the part of the Agent to exercise, and no
---------
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course of dealing with respect to, and no delay in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent of any right, power or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
6.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telexed, telecopied or delivered to the intended
recipient at its address for notices specified pursuant to Section 10.03 of the
Loan Agreement and shall be deemed to have been given at the times specified in
said Section 10.03.
6.03 Expenses. The Company agrees to reimburse the Lenders for all
--------
costs and expenses of the Lenders (including the fees and expenses of legal
counsel) in connection with (i) any Event of Default and any enforcement or
collection proceeding resulting therefrom, including all manner of participation
in or other involvement with (w) performance by the Lenders of any obligations
of the Company in respect of the Collateral that the Company has failed or
refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, or any actual or attempted sale, or any
exchange, enforcement, collection, compromise or settlement in respect of any of
the Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Lenders in respect thereof, by litigation or otherwise,
including expenses of insurance, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated) and
(ii) the enforcement of this Section 6.03, and all such costs and expenses shall
be Secured Obligations entitled to the benefits of the collateral security
provided pursuant to Section 3 hereof.
6.04 Amendments, Etc. The terms of this Agreement may be waived,
----------
altered or amended only by an instrument in writing duly executed by the Company
and the Agent. Any such amendment or waiver shall be binding upon the Lenders
and the Company.
6.05 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the respective successors and assigns of the Company and
the Lender; provided, however, that the Company shall not assign or transfer its
rights hereunder without the prior written consent of the Agent. Any attempted
assignment or transfer by the Company in violation of this Section 6.05 shall be
null and void.
6.06 Captions. The captions and section headings appearing herein are
--------
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
6.07 Counterparts. This Agreement may be executed in any number of
------------
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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.
6.08 Incorporation of Certain Sections of the Loan Agreement. Sections
--------------------------------------------------------
11.08 and 11.16 through 11.21 of the Loan Agreement are incorporated herein by
this reference.
6.09 Governmental Approvals. Any provision contained herein to the
-----------------------
contrary notwithstanding, the Agent will not take any action pursuant to this
Agreement that would constitute or result in any assignment of any License or
any transfer of control of any Federal Communications Commission ("FCC")
license, either de facto or de jure, if such assignment of license or transfer
of control would require under then existing law (including the Communications
Act of 1934, as amended, and published rules and policies of the FCC) the prior
approval of the FCC or any other Governmental Authority without first obtaining
such prior approval. The Company agrees to take any action that the Agent may
reasonably request in order to obtain from the FCC or any other Governmental
Authority such approval as may be necessary to enable the Lenders to exercise
and enjoy the full rights and benefits granted to the Lenders by this Agreement
and each other agreement, instrument and document delivered to the Lenders in
connection herewith, including specifically, at the expense of the Company, the
use of the Company's best efforts to assist in obtaining approval of the FCC or
any other Governmental Authority for any action or transaction contemplated by
this Agreement for which such approval is or shall be required by law, and
specifically, without limitation, upon request, to prepare, sign and file with
the FCC or such other Governmental Authority, as the case may be, the assignor's
or transferor's portion of any application or applications for consent to the
assignment of any license or transfer of control necessary or appropriate under
the FCC's rules and regulations and under any other rule or regulation of any
other Governmental Authority for approval of any sale or sales of any of the
Collateral by or on behalf of the Lenders or any assumption by the Lenders of
voting rights relating thereto effected in accordance with the terms of this
Agreement.
6.10 Agent, Lenders and Attorneys-in-Fact. The Agent may employ agents
------------------------------------
and attorneys-in-fact in connection herewith and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
it in good faith.
6.11 Severability. If any provision hereof is invalid and unenforceable
------------
in any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Lenders in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Loan Agreement to be duty executed and delivered as of the date first
above written.
BORROWER: ALPHANET HOSPITALITY SYSTEMS, INC.
Alpha Hospitality Systems, Inc.
275 North Franklin Turnpike By: /s/ Mark Holzberg
Suite 230 ------------------------
Ramsey, New Jersey 07446 Its: President
Attention: Mr. Mark Holzberg
President
Telecopier No.: (201) 327-7896 By: /s/ MeeMee Tan
------------------------
Its: Secretary
AGENT: APPEL INVESTMENTS INC.
------------------------
------------------------
________________________ By: /s/ Kim Yeow Tan
Telecopier No.: _____________ Its: ____________________________
110
<PAGE>
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
10th Floor
Los Angeles, California 90067
Attention: Robert E. Braun, Esq.
Telecopier No.: (310) 203-0567
AHS FUNDING LLC
By: /s/ Jenny Jechart
--------------------------
Its: Manager
111
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ANNEXES
Annex 1 Pledged Stock
Annex 2 Copyrights
Annex 3 Patents
Annex 4 Trademarks
Annex 5 Licenses and Agreements
Annex 6 Investment Property
112
<PAGE>
Annex 1
PLEDGED STOCK
Registered Par
Owner Issuer Class Value Shares
----- ------ ----- ----- ------
None
113
<PAGE>
Annex 2
Copyrights
None
114
<PAGE>
Annex 3
Patents
Notes
115
<PAGE>
Annex 4
Trademarks
116
<PAGE>
Annex 5
Licenses and Agreements
117
<PAGE>
Annex 6
Investment Property
118
