Security Agreement
and Assignment for Equipment Lease
THIS AGREEMENT
(the “
Agreement ”) is entered into the 14th __ day of
__ August _____________ 2009 between ACC CAPITAL CORPORATION
, a Utah corporation
(“ ACC ”) and BROADCAST INTERNATIONAL,
INC., a Utah
corporation (“ Broadcast ”). Each capitalized term
that is used in this Agreement shall have the meaning for the term
that is set forth on the page indicated in the index that is
attached at the end of this Agreement.
Recitals:
A.
Equipment
Lease. On or
about the date of this Agreement, ACC and Broadcast have entered
into Master Lease Agreement no. BC0709, equipment schedule no. 1
dated 29 July 2009 and accompanying lease documents (collectively
the " Equipment Lease ") covering certain telecommunications
equipment (the " Equipment ") manufactured by Broadcast,
whereby Broadcast is obligated to make to ACC monthly payments (the
" Monthly Lease Payments ") and, if applicable, an early
buyout payment (the " Early Buyout Payment' ). The Monthly
Lease Payments, the Early Buyout Payment and all other payments due
to ACC under the Equipment Lease shall be referred to herein as the
" Equipment Lease Payments ."
B.
SOW
. Broadcast provides
certain services to Bank of America, N.A., a national banking
association (" BANA ") under General Services Agreement
(#CW88358) dated 22 October 2008 (the " Master Agreement ").
On or about 31 July 2009, Broadcast and BANA entered into a
Statement of Work (the " SOW ") under the Master Agreement,
whereby: (1) Broadcast will install and service the Equipment at
various BANA sites; (2) BANA agrees to make monthly payments (the "
BANA Monthly Payments ") to Broadcast through a lock-box
bank account, as more particularly set forth on Exhibit _ A
__ hereto (the " Bank Account ") ; and (3) upon termination
of the SOW prior to its scheduled term or a cessation of BANA
Monthly Payments, BANA is required to purchase the Equipment from
Broadcast by paying Broadcast a " Termination Fee " that is
described in the SOW. The BANA Monthly Payments, the Termination
Fee, rights under the Bank Account and all other payments due to
Broadcast under the SOW shall be referred to herein as the "
BANA Payments ."
C.
Funding for
Equipment .
As a condition of entering into the Equipment Lease and obtaining
funding to purchase the Equipment from Broadcast's manufacturing
division for lease to Broadcast, ACC requires that Broadcast
collateralize its obligations to ACC under the Equipment Lease by
assigning to ACC the BANA Payments and certain other rights of
Broadcast under the SOW. To provide the funding, ACC will be
obtaining financing, directly or indirectly, from another party or
parties, including Hitachi Capital America Corp. (collectively the
“ Assignee ”), and in connection therewith ACC
will be assigning to Assignee ACC's rights under the Equipment
Lease and this Agreement and in the Equipment.
Agreement:
NOW, THEREFORE
, for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
Article 1
Closing
1.1
Documents. Two business days (the “
Closing Date ”) after ACC gives Broadcast written
notice of closing, Broadcast shall execute and deliver the
following documents to ACC, each in a form that is prepared by ACC
and that is reasonably acceptable to Broadcast: (a) a notice of
assignment (the “ Assignment Notice ”), pursuant
to which: (i) BANA is notified of Broadcast’s assignment to
ACC of Broadcast's rights under the SOW, including the BANA
Payments; (ii) Broadcast requests BANA to pay the BANA Payments to
ACC (or to Assignee, if so directed by ACC); and (iii) BANA
acknowledges the assignment in writing; (b) a certificate from
Broadcast confirming the incumbency and authorization of the
officers who execute the Equipment Lease and this Agreement; (c)
certificates from secretaries or assistant secretaries of BANA or
other evidence confirming the incumbency and authorization of the
officers who executed the SOW; and (d) an original of the
SOW.
1.2
Equipment
Purchase. On
the Closing Date, ACC shall pay to Broadcast, as the seller of the
Equipment, the amount of $4,113,090.00 (the " Equipment Purchase
Price "). Broadcast shall transfer title to the Equipment to
ACC by bill of sale with warranties: (a) that Broadcast owns the
Equipment; (b) that the Equipment is free and clear of security
interests, liens and encumbrances; and (c) of merchantability and
other warranties typically given by Broadcast to its customers. ACC
may withhold from the Equipment Purchase Price (and reimburse to
ACC) any Lease Expenses incurred by ACC (but not reimbursed by
Broadcast) as of the Closing Date and a reasonable reserve to cover
Lease Expenses that might be incurred on or after the Closing Date.
Broadcast agrees that any such deduction shall not affect the
transfer of title to the Equipment to ACC and payment of the
amounts contemplated hereby, less any deduction, shall constitute
payment, in full, of the purchase price for the
Equipment.
Article 2
Payments
As described in section
3.4, BANA shall pay the BANA Payments directly to ACC (or to
Assignee, if so directed by Assignee) through the Bank Account,
which shall be applied as set forth in section 3.6. Except to
the extent BANA may prepay the BANA payments pursuant to the terms
of the SOW, Broadcast may not prepay the Monthly Lease Payments
without ACC’s advance written consent.
Article 3
Security Interest
3.1.
Granting
Clause .
Broadcast hereby grants to ACC a first priority security interest
(“ Security Interest ”) in, and agrees that ACC
has and shall continue to have a Security Interest in, all of
Broadcast’s right, title and interest in the following
collateral (collectively the “ Collateral ”),
whether now owned or held or hereafter acquired and wherever
located, together with: (a) any and all substitutions,
replacements, additions, attachments, accessions and proceeds to,
for, arising out of and of the same; (b) all accounts, contract
rights, general intangibles, payment intangibles, instruments,
monies, payments and all other rights arising out of a sale, lease
or other disposition of the same; (c) all proceeds (including
insurance proceeds) from the sale or other disposition of the same;
(d) all records relating to the same, whether in the form of a
writing, electronic media or otherwise; and (e) any other property
to which Broadcast becomes entitled by reason of Broadcast’s
ownership of the same (in the following paragraph the term
secured party shall refer to ACC and its assignees):
Security Agreement and
Assignment
2
ACC Capital--Broadcast
International
All rights of Broadcast
International, Inc. ("Broadcast") under or arising out of a
Statement of Work (the "SOW") that: (i) is dated 31 July 2009, (ii)
is signed by Broadcast and Bank of America, N.A. ("BANA"), (iii) is
issued under General
Services Agreement (#CW88358) dated 22 October 2008 between BANA
and Broadcast and (iv) covers telecommunications equipment
(the "Equipment"), whether the same are characterized as accounts,
general intangibles, payment intangibles, contract rights,
receivables, instruments, chattel paper or otherwise, and
including, but not limited to: (a) Broadcast’s rights to
receive monthly payments from BANA under the SOW, any "Termination
Fee" payable under the SOW (as proceeds from Broadcast's sale of
the Equipment to BANA pursuant to the SOW) and all other payments
that are now or hereafter due from BANA to Broadcast under the SOW;
and (b) all amendments, replacements, modifications, supplements
and/or substitutes to or of the SOW, whether or not authorized by
secured party or its assignee ; provided, however, that the
foregoing provisions shall not be construed in any way to
constitute authorization by secured party or its assignee to
Broadcast to make any such modifications.
3.2.
Obligations
Secured .
Broadcast grants the Security Interest to secure the following
obligations (the “ Obligations ”), which
Broadcast hereby undertakes to perform in favor of ACC:
3.2.1.
Lease
Obligations. To pay ACC all Equipment Lease
Payments in full and to satisfy all of Broadcast's other
obligations to ACC under the Equipment Lease. For the avoidance of
doubt, the Early Buyout Payment shall become due and payable under
the Equipment Lease immediately upon the occurrence of an Event of
Default hereunder or if BANA is obligated to pay the Termination
Fee under the SOW for any reason, without the necessity of any
notice being given to Broadcast.
3.2.2.
Agreement
Obligations. To satisfy all obligations of
Broadcast under this Agreement.
3.2.3.
Advances,
etc. To
repay to ACC all amounts advanced by ACC on behalf of Broadcast
including, without limitation, advances: (a) described in section
6.2; (b) for payments to prior secured parties or lienors; and (c)
for taxes, levies, insurance, rent, repairs to or maintenance of
any of the Collateral; provided, however, that ACC shall not have
any obligation to make the advances.
3.2.4.
Lease
Expenses. To
reimburse ACC, on demand, for all of ACC’s expenses and costs
in connection with the Equipment Lease and the SOW (the “
Lease Expenses ”), including all filing fees and the
reasonable fees and expenses of ACC’s counsel, in connection
with the preparation, administration, amendment, modification or
enforcement of the Equipment Lease, the Master Agreement, the SOW,
this Agreement and related documents (collectively the " Key
Documents ").
3.2.5.
Extensions,
etc. Any
extensions, renewals or modifications of, or additional advances
under, this Agreement or the Equipment Lease regardless of the
extent of or the subject matter of any such extension, renewal,
modification or additional advance.
3.2.6.
Future
Advances. Any and all future advances by ACC
to Broadcast under other instruments and agreements that recite
that they are secured by this Agreement.
3.3.
Further
Actions .
Broadcast authorizes ACC to file one or more financing statements,
supplements and amendments thereto and continuation statements
covering the Collateral. Broadcast shall
Security Agreement and
Assignment
3
ACC Capital--Broadcast
International
execute and deliver to
ACC any other instruments or documents that ACC may from time to
time reasonably require to preserve, protect, perfect, extend
and/or enforce the Security Interest or its priority. Broadcast
shall pay all costs of filing the statements or instruments. So
long as any material Event of Default is outstanding, ACC shall
automatically be constituted as Broadcast’s attorney-in-fact
for the purpose of protecting, perfecting, extending or enforcing
the Security Interest. Broadcast hereby consents to ACC’s
actions as such attorney-in-fact and hereby authorizes ACC to
execute and deliver in Broadcast’s name such instruments as
may be reasonably required to protect, perfect, extend or enforce
the Security Interest. Broadcast shall defend ACC’s rights in
the Collateral against the claims and demands of any other
parties.
3.4.
Assignment of
Payments .
In addition to, but not in replacement of, the foregoing provisions
of this article, Broadcast hereby assigns to ACC the right to
receive the BANA Payments, subject to the following terms and
conditions:
3.4.1.
BANA
Payments .
Until the Equipment Lease is paid in full, all BANA Payments,
including the Termination Fee, shall be paid by BANA directly to
ACC (or to Assignee, if so directed by Assignee) through the Bank
Account as contemplated by the SOW. ACC shall apply Monthly BANA
Payments received from BANA toward the Monthly Lease Payments and
shall apply the Termination Fee toward the Early Buyout Payment,
all pursuant to and subject to section 3.6.
3.4.2.
Remittance of Excess
Payments .
Once all of the Obligations that are then currently due have been
satisfied in full and so long as no material Event of Default is
then outstanding, ACC or Assignee shall remit to Broadcast the
remaining balance of any BANA Payments that have been paid into the
Bank Account to or for the benefit of ACC or Assignee, including,
but not limited to, the balance of any Termination Fee. ACC or
Assignee shall make each such required remittance within 20 days
after receiving the BANA Payments.
3.4.3
Bank
Account. The
parties shall take all actions necessary to transfer control of the
Bank Account to Assignee.
In illustration of the
foregoing, the parties contemplate that: (a) the BANA Monthly
Payments payable to the Bank Account shall be at least $186,214.00
per month (derived by multiplying 1,981 BANA sites by ($80.00 +
$14.00)); and (b) so long as no Event of Default is outstanding:
(i) initially ACC shall retain $150,791.73 of the BANA Monthly
Payment to apply against the Monthly Lease Payments pursuant to and
subject to section 3.6; and (ii) ACC shall remit the balance of the
BANA Monthly Payment (i.e., initially at least $35,494.27) to
Broadcast from the Bank Account pursuant to section 3.4.2 (if an
Event of Default is outstanding, then BANA Payments shall be
applied against the Obligations as described in sections 3.4.1 and
3.6).
3.5.
Exercise of Rights
under SOW .
Until the Obligations have been satisfied in full, Broadcast
assigns to ACC, and ACC may exercise, any or all of
Broadcast’s rights under the SOW, which exercise may be
either in lieu of or in conjunction with, Broadcast, as directed by
ACC from time to time, including, without limitation, taking the
following actions:
3.5.1.
Collateral
Assignment Rights . ACC may exercise all of
Broadcast’s rights under the "Statement of Work Termination"
section of the SOW (the " SOW Assignment Section "), either
in Broadcast’s name or in ACC’s name.
3.5.2
.
Account
Collateral. As to that portion of the
Collateral that consists of accounts, receivables, payment
intangibles, instruments, contract rights or chattel paper
(collectively the “ Account
Security Agreement and
Assignment
4
ACC Capital--Broadcast
International
Collateral
”), Broadcast
irrevocably appoints ACC as Broadcast’s agent and
attorney-in-fact to collect, enforce, compromise, release and
generally exercise all of Broadcast’s rights and remedies in
respect of the Account Collateral or any proceeds thereof, and to
indorse any checks or other items of payments in respect of the
Account Collateral that come into ACC’s possession or control
(including any payments made to the Bank Account), in any case
either in the name of Broadcast or in the name of ACC (these rights
are effective immediately as to the BANA Payments and shall be
effective as to all other Account Collateral so long as any
material Event of Default is outstanding). ACC shall have the right
to substitute Assignee as attorney-in-fact pursuant to the
foregoing appointment.
3.5.3.
Authorization.
ACC may deal directly
with BANA to enforce the foregoing rights, and Broadcast waives any
claims or defenses of interference with Broadcast’s
contractual relationship with BANA in connection
therewith.
Notwithstanding the
foregoing, nothing contained in this Agreement shall obligate ACC
to perform any of Broadcast’s obligations under the
SOW.
3.6
Application of
Payments. ACC
shall apply any BANA Payments that it receives toward satisfaction
of Broadcast's obligations under the Equipment Lease in the
following order of priority: (a) first to the repayment of any
Lease Expenses; (b) next to any advances made by ACC pursuant to
section 6.2 or otherwise; (c) next to Monthly Lease Payments then
due; and (d) finally to the Early Buyout Payment, if it is then
due.
3.7
Transfer of
Equipment. If
ACC receives the Termination Fee from BANA, then ACC shall transfer
the Equipment to Broadcast as described more fully in the Equipment
Lease, thereby enabling Broadcast immediately to transfer the
Equipment to BANA pursuant to the SOW.
Article 4
Broadcast’s Covenants, Representations and
Warranties
4.1.
SOW
. Broadcast shall comply
with and perform all of its obligations under the SOW, including,
but not limited to, submitting any necessary invoices to BANA for
all BANA Payments that are due (in each invoice that Broadcast
submits to BANA for a BANA Payment, Broadcast shall indicate that
remittance is to be made to ACC, or to Assignee, if ACC so directs,
through the Bank Account). ACC, or Assignee, as the case may be,
shall be entitled to receive and/or collect BANA Payments whether
or not an invoice has been submitted therefor. Broadcast shall not
modify, amend, waive, replace or substitute any provisions of the
SOW, including the SOW Assignment Section, or exercise or fail to
exercise any material consent rights thereunder without ACC’s
prior written consent. Broadcast shall not terminate or cancel the
SOW without ACC's prior written consent.
4.2 .
No Sale or
Encumbrance . Without ACC’s prior written
consent, Broadcast shall not sell, lease, offer to sell or lease,
transfer or otherwise dispose of the Collateral. Broadcast shall
hold all proceeds from any disposition of the
