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Security Agreement And Assignment For Equipment Lease

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Title: Security Agreement and Assignment for Equipment Lease
Date: 8/28/2009
Industry: Semiconductors     Sector: Technology

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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.





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 ."



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 ."



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.




NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:







Article 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.


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


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


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


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.


Obligations Secured . Broadcast grants the Security Interest to secure the following obligations (the “ Obligations ”), which Broadcast hereby undertakes to perform in favor of ACC:


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.


Agreement Obligations. To satisfy all obligations of Broadcast under this Agreement.


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.


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 ").


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.


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.


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


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.


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:


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.


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.


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).


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:


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


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.


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.


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.



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


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 Collateral (for whatever reason), including, without limitation, the Termination Fee, in trust for ACC and shall not commingle the proceeds with any other funds; provided, however, that this requirement shall not constitute ACC’s consent to any sale or other disposition and shall not modify the requirement that the Termination Fee be paid directly to ACC as contemplated by the SOW and the Assignment Notice. If Broadcast receives any proceeds with respect to the SOW, then Broadcast shall remit the proceeds to ACC immediately. Broadcast shall not further encumber, or grant a security interest in, any of the Collateral. Unless ACC gives its prior written consent, Broadcast shall keep the Collateral free from all liens (whether voluntary or involuntary), claims, demands, encumbrances and security interests whatsoever other than those evidenced by this Agreement; this includes security


Security Agreement and Assignment


ACC Capital--Broadcast International




interests even if junior in priority to the Security Interest. Any security interests consented to by ACC shall be junior and subordinate to the Security Interest, and all right, title and interest of Broadcast in and to the Collateral and any payments with respect thereto remaining to be paid are and shall be expressly subject and subordinate to all of the right, security, title and interest of ACC therein. Without ACC’s prior written consent and without limiting the foregoing, Broadcast shall not authorize any financing statements to be filed and shall not execute any other instruments or security agreements covering or burdening the Collateral in favor of anyone other than ACC. Without limiting the generality of the foregoing, on or before the Closing Date, Broadcast shall obtain releases of any security interests that encumber the Collateral or the Equipment and that are in favor of Broadcast's current other lenders, and Broadcast shall cause Uniform Commercial Code financing statement amendments to be filed with the Utah Division of Corporations and Commercial Code, whereby any s

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