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SECURITY AGREEMENT

Security Agreement

SECURITY AGREEMENT | Document Parties: PENN OCTANE CORP | MV PIPELINE COMPANY | RIO VISTA ECO LLC | RIO VISTA GO LLC | Rio Vista Penny LLC | TCW Asset Management Company You are currently viewing:
This Security Agreement involves

PENN OCTANE CORP | MV PIPELINE COMPANY | RIO VISTA ECO LLC | RIO VISTA GO LLC | Rio Vista Penny LLC | TCW Asset Management Company

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Title: SECURITY AGREEMENT
Governing Law: New York     Date: 4/15/2008
Industry: Oil and Gas Operations     Sector: Energy

SECURITY AGREEMENT, Parties: penn octane corp , mv pipeline company , rio vista eco llc , rio vista go llc , rio vista penny llc , tcw asset management company
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Exhibit 10.71
SECURITY AGREEMENT
dated as of November 19, 2007
of
Rio Vista Penny LLC, each other Grantor listed on the signature pages hereof and each other
Grantor that otherwise may become a party hereto
in favor of
TCW Asset Management Company, as Administrative Agent
[Security Agreement]

 


 
TABLE OF CONTENTS
         
    Page  
       
ARTICLE I Definitions and References
    1  
Section 1.1. Definitions in Note Purchase Agreement
    1  
Section 1.2. Definitions in the UCC, etc.
    1  
Section 1.3. Definitions in this Agreement
    2  
Section 1.4. Rules of Construction; References and Titles
    3  
 
ARTICLE II Security Interest
    4  
Section 2.1. Grant of Security Interest
    4  
Section 2.2. Secured Obligations Secured
    5  
 
ARTICLE III Representations and Warranties
    6  
Section 3.1. Representations and Warranties
    6  
 
ARTICLE IV Covenants
    9  
Section 4.1. General Covenants Applicable to Collateral
    9  
Section 4.2. Covenants for Specified Types of Collateral
    10  
 
ARTICLE V Voting and Distribution Rights in Respect Of Pledged Equity
    12  
Section 5.1. Voting Rights
    12  
Section 5.2. Dividend Rights While No Event of Default Exists
    12  
Section 5.3. Actions by Secured Party
    13  
Section 5.4. Rights While an Event of Default Exists
    13  
 
ARTICLE VI Remedies, Powers and Authorizations
    13  
Section 6.1. Normal Provisions Concerning the Collateral
    13  
Section 6.2. Event of Default Remedies
    15  
Section 6.3. Application of Proceeds
    17  
Section 6.4. Deficiency
    18  
Section 6.5. Private Sales of Investment Property and Other Pledged Equity
    18  
Section 6.6. Indemnity and Expenses
    19  
Section 6.7. Non-Judicial Remedies
    19  
Section 6.8. Limitation on Duty of the Secured Party in Respect of Collateral
    19  
Section 6.9. Appointment of Other Agents
    20  
 
ARTICLE VII Miscellaneous
    20  
Section 7.1. Notices
    20  

 

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    Page  
       
Section 7.2. Amendments and Waivers
    20  
Section 7.3. Additional Grantors
    20  
Section 7.4. Preservation of Rights
    21  
Section 7.5. Severability
    21  
Section 7.6. Survival
    21  
Section 7.7. Binding Effect and Assignment
    21  
Section 7.8. Release of Collateral; Termination
    21  
Section 7.9. Limitation on Interest
    22  
Section 7.10. Governing Law
    22  
Section 7.11. Final Agreement
    22  
Section 7.12. Counterparts; Facsimile
    22  
Section 7.13. Acceptance by the Secured Party
    22  
Section 7.14. Jurisdiction, Etc.
    23  
Section 7.15. Restatement
    23  
     
Schedules
   
Schedule 1
  Address for Notices and Jurisdiction of Organization
Schedule 2
  Scheduled Collateral
 
   
Exhibits
   
Exhibit A
  Form of Grantor Accession Agreement

 

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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “ Agreement ”) is made as of November 19, 2007, by Rio Vista Penny LLC and each other Grantor listed on the signature pages hereof and that may become parties hereto pursuant to Section 7.3 in favor of TCW Asset Management Company, as administrative agent under the Note Purchase Agreement described below (the “ Secured Party ”), for the benefit of the Beneficiaries.
RECITALS
A. Company, the Secured Party, and certain holders (collectively, the “ Holders ”) are parties to that certain Note Purchase Agreement dated as of November 19, 2007 (as heretofore or hereafter amended, supplemented or restated from time to time, the “ Note Purchase Agreement ”).
B. Pursuant to the Note Purchase Agreement, the Holders have agreed to make senior secured term loans to Company.
C. In order to induce the Beneficiaries to extend such credit, each Grantor has agreed to grant to the Secured Party, for the benefit of the Beneficiaries, a security interest in the Collateral.
NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and sufficiency of which the parties acknowledge, each Grantor agrees as follows:
ARTICLE I
Definitions and References
Section 1.1. Definitions in Note Purchase Agreement. Capitalized terms used herein and not otherwise defined have the respective meanings specified in the Note Purchase Agreement.
Section 1.2. Definitions in the UCC, etc. The following terms have the meanings specified in the UCC:
(a) Account.
(b) Chattel Paper.
(c) Commercial Tort Claim.
(d) Deposit Account.
(e) Document.
(f) Electronic Chattel Paper
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(g) Equipment.
(h) General Intangible.
(i) Instrument.
(j) Inventory.
(k) Investment Property.
(l) Letter of Credit Right.
(m) Payment Intangible.
(n) Proceeds.
(o) Securities Account.
(p) Security.
(q) Uncertificated Security.
Other terms used in this Agreement that are defined in the UCC and not otherwise defined herein or in the Note Purchase Agreement have the meanings specified in the UCC, unless the context otherwise requires.
Section 1.3. Definitions in this Agreement . The following terms have the following meanings:
“Beneficiaries ” means the Secured Party, the Holders, and any other Person to which any Secured Obligation is owed.
Collateral ” means, with respect to any Grantor, all property described in Section 2.1 in which such Grantor has any right, title or interest. References to Collateral herein with respect to a Grantor are intended to refer to Collateral in which such Grantor has any right, title or interest and not to Collateral in which any other Grantor has any right, title or interest.
Grantor ” means each Person granting a security interest in any Collateral pursuant to this Agreement. References to “Grantor” in this Agreement are intended to refer to each such Person as if such Person were the only grantor pursuant to this Agreement, except:
(a) that references to “any Grantor” are meant to refer to each Person that is a Grantor,
(b) that references to “the Grantors” are meant to refer to collectively to all Persons that are Grantors and
(c) as otherwise may be specifically set forth herein.
[Security Agreement]

 

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Holders ” has the meaning specified in Recital A.
Note Purchase Agreement ” has the meaning specified in Recital A.
Pledged Debt ” means all Investment Property and General Intangibles constituting or pertaining to Indebtedness owing by any Person to Grantor.
Pledged Equity ” means all Investment Property and General Intangibles constituting or pertaining to Equity in Persons.
Secured Obligations ” means all Obligations of all Restricted Persons now or hereafter arising under the Note Documents.
Secured Party ” has the meaning specified in the preamble.
Securities Act ” means the Securities Act of 1933.
UCC ” means the Uniform Commercial Code in effect in the State of New York from time to time; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
Section 1.4. Rules of Construction; References and Titles . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise:
(a) Any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).
(b) Unless otherwise specified, any reference herein to any Person shall be construed to include such Person’s successors and assigns.
(c) The words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof.
(d) All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.
(e) Any reference to any Law herein shall, unless otherwise specified, refer to such law as amended, modified or supplemented from time to time.
[Security Agreement]

 

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(f) The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(g) Except as specified otherwise, references to any document, instrument, or agreement shall include:
(i) all exhibits, schedules, and other attachments thereto, and
(ii) all documents, instruments, or agreements issued or executed in replacement thereof.
(h) A title appearing at the beginning of any subdivision is for convenience only, does not constitute any part of such subdivision and shall be disregarded in construing the language contained in such subdivision.
(i) The phrases “this Section” and “this subsection” and similar phrases refer only to the section or subsection hereof in which such phrases occur.
(j) The word “or” is not exclusive, and the word “including” (in all of its grammatical variations) means “including without limitation”.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest . As collateral security for the payment and performance of all Secured Obligations, Grantor pledges, collaterally assigns and grants to the Secured Party for the benefit of the Beneficiaries a continuing security interest in all right, title and interest of Grantor in and to all of the following property, whether now owned or existing or hereafter acquired or arising, regardless of where located and howsoever Grantor’s interests therein arise, whether by ownership, security interest, claim or otherwise:
(a) Accounts.
(b) All Equity listed on Schedule 2, whether constituting General Intangibles or Investment Property.
(c) General Intangibles, including all Payment Intangibles.
(d) Documents.
(e) Instruments.
(f) Inventory.
(g) Equipment, including, all parts thereof, all accessions thereto, and all replacements therefor.
[Security Agreement]

 

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(h) Deposit Accounts, including all Deposit Accounts listed on Schedule 2.
(i) Investment Property, and all dividends, distributions, return of capital, interest, distributions, value, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any investment property and all subscription warrants, rights or options issued thereon or with respect thereto, including Pledged Debt.
(j) Commercial Tort Claims that are listed opposite Grantor’s name on Schedule 2, as in effect on the date hereof or as hereafter modified pursuant to Section 4.2.
(k) Letter of Credit Rights.
(1) Chattel Paper.
(m) Books and records (including customer lists, marketing information, credit files, price lists, operating records, vendor and supplier price lists, land and title records, geological and geophysical records and data, reserve engineering records and data, computer software, computer hardware, computer disks and tapes and other storage media, printouts and other materials and records) pertaining to any Collateral or to any oil, gas or mineral properties and interests.
(n) Money and property of any kind from time to time in the possession or under the control of any Beneficiary.
(o) Proceeds of the foregoing.
Notwithstanding the foregoing, this Section 2.1 does not grant a security interest in any property to the extent that such grant is prohibited under any agreement relating to such property and the violation of such prohibition would cause Grantor to lose its interest in or rights with respect to such property, except to the extent that Part 5 of Article 9 of the UCC would render such prohibition ineffective.
Section 2.2. Secured Obligations Secured .
(a) The security interest created hereby in the Collateral secures the payment and performance of all Secured Obligations.
(b) Without limiting the generality of the foregoing, this Agreement secures, as to Grantor, the payment of all amounts that constitute part of the Secured Obligations and would be owed by any Restricted Person to any Beneficiary under the Note Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Restricted Person.
(c) Notwithstanding any other provision of this Agreement, with respect to any Grantor, the liability of such Grantor hereunder and under each other Note Document to which it is a party shall be limited to the maximum liability that such Grantor may incur without rendering this Agreement and such other Note Documents subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provision of any applicable state or federal law. This subsection (c) shall not apply to Company, or Rio Vista ECO LLC.
[Security Agreement]

 

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ARTICLE III
Representations and Warranties
Section 3.1. Representations and Warranties . Grantor represents and warrants to the Beneficiaries as follows:
(a) If Grantor is not Company, each representation and warranty made by Company with respect to Grantor in any other Note Document is correct.
(b) Grantor has and will have at all times the right, power and authority to grant to the Secured Party as provided herein a security interest in the Collateral, free and clear of any Lien. This Agreement creates a valid and binding security interest in favor of the Secured Party in the Collateral, securing the Secured Obligations.
(c) None of the Collateral in which Grantor has granted a security interest that constitutes goods:
(i) is covered by any Document, except for Documents that are subject hereto and have been delivered to the Secured Party;
(ii) is subject to any landlord’s lien or similar Lien, except for Permitted Liens; or
(iii) is in the possession of any Person other than Grantor or the Secured Party, except for Collateral being transported in the ordinary course of business and Collateral subject to a joint operating agreement that is in the possession of the operator under the agreement.
(d) With respect to Pledged Equity:
(i) All units and other securities constituting Pledged Equity have been duly authorized and validly issued, are fully paid and non-assessable, and were not issued in violation of the preemptive rights of any Person or of any agreement by which Grantor or any issuer of Pledged Equity is bound.
(ii) The Pledged Equity listed on Schedule 2 constitutes all equity interests owned by Grantor in its Subsidiaries. All endorsements, deliveries, notifications, and other actions required by Section 4.2(d)(i) and (ii) have been taken with respect to such Pledged Equity and all other Pledged Equity.
(iii) All documentary, stamp or other taxes or fees owing in connection with the issuance, transfer or pledge of any Pledged Equity (or rights in respect thereof) have been paid.
[Security Agreement]

 

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(iv) No restriction or condition exists with respect to the transfer, voting or capital of any Pledged Equity.
(v) Except as disclosed on Schedule 2, no Grantor or issuer of Pledged Equity has any outstanding subscription agreement, option, warrant or convertible security outstanding or any other right outstanding pursuant to which any Person would be entitled to have issued to it units of ownership interest in any issuer of Pledged Equity.
(vi) Grantor has taken or concurrently herewith is taking all actions necessary to perfect the Secured Party’s security interest in Pledged Equity, including any registration, filing or notice that may be necessary or advisable under Article 8 of the Uniform Commercial Code as in effect in the jurisdiction in which any issuer of such Pledged Equity was organized, and no other Person has any such registration, filing or notice in effect.
(vii) Schedule 2 correctly and completely reflects all Pledged Equity owned by Grantor as of the date hereof, and Schedule 2 accurately sets forth the percentage of each class or series of Equity issued by the issuer of such Pledged Equity that is held by Grantor.
(viii) Schedule 2 sets forth all agreements, including all operating, management, voting and shareholder agreements to which Grantor is a party or by which it is bound and that relate to Pledged Equity and a correct and complete copy of each such Agreement has been delivered to counsel for the Secured Party.
(ix) No issuer of Pledged Equity has made any call for capital that has not been fully paid by Grantor and each other holder of Equity of such issuer.
(x) Neither Grantor nor any other holder of equity issued by any issuer of Pledged Equity is in default under any agreement relating to Pledged Equity.
(xi) Neither the execution, delivery or performance of this Agreement nor the exercise of any right or remedy of the Secured Party hereunder will cause a default under any agreement in respect of Pledged Equity or otherwise adversely affect or diminish any Pledged Equity.
(xii) Grantor’s rights under any agreement in respect of Pledged Equity are enforceable in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights.
(e) To the full extent requested by the Secured Party, Grantor has delivered to the Secured Party all Instruments and other writings evidencing Pledged Debt in existence on the date hereof, in suitable form for transfer by delivery with any necessary endorsement or accompanied by fully executed instruments of transfer or assignment in blank.
(f) Grantor has no Deposit Account as of the date hereof other than those listed on Schedule 2.
[Security Agreement]

 

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(g) Grantor has no Securities Account as of the date hereof.
(h) Grantor is the beneficiary of no Letter of Credit Right as of the date hereof other than those listed on Schedule 2.
(i) Grantor is not aware of any Commercial Tort Claim that it may have other than those listed on Schedule 2.
(j) Grantor is an entity of the type specified on Schedule 1 (or Schedule 1 to any security agreement supplement delivered by it pursuant to Section 7.3) opposite its name and is organized under the laws of the jurisdiction specified in such Schedule opposite its name, which is Grantor’s location pursuant to the UCC. Grantor has not conducted business under any name except the name in which it has executed this Agreement, which is the exact name that appears in Grantor’s Organizational Documents. Grantor’s organizational identification number, if any, is set forth in Schedule 1.
(k) Grantor has good and marketable title to the Collateral, free and clear of all Liens, except for the security interest created by this Agreement and any Permitted Liens. No effective financing statement or other registration or instrument similar in effect covering any Collateral is on file in any recording office except any that have been filed in favor of the Secured Party relating to this Agreement.
(1) There is no condition precedent to the effectiveness of this Agreement that has not been satisfied or waived.
(m) Grantor, if other than Company, has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Note Document to which it is or is to be a party, and Grantor, if other than Company, has established adequate means of obtaining from each other Restricted Person on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of each other Restricted Person.
(n) The direct or indirect value of the consideration received and to be received by Grantor in connection herewith is reasonably worth at least as much as the liability of Grantor hereunder and under each other Note Document to which Grantor is a party, and the incurrence of such liability in return for such consideration may reasonably be expected to benefit Grantor, directly or indirectly. Grantor is not “insolvent” on the date hereof (that is, the sum of Grantor’s absolute and contingent liabilities, including its Obligations hereunder and under each other Note Document to which Grantor is a party, does not exceed the fair market value of Grantor’s assets). Grantor’s capital is adequate for the businesses in which Grantor is engaged and intends to be engaged. Grantor has not incurred (whether hereby or otherwise), nor does Grantor intend to incur or believe that it will incur, debts that will be beyond its ability to pay as such debts mature.
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All balance sheets, earning statements, financial data and other information concerning Grantor that have been furnished to Agent and each Holder to induce it to accept this Agreement (or otherwise furnished to Agent and each Holder in connection with the transactions contemplated hereby or associated herewith) fairly represent the financial condition of Grantor as of the dates and the results of Grantor’s operations for the periods for which the same are furnished. None of such balance sheets, earnings and cash flow statements, financial data and other information contains any untrue statement of a material fact or omits to state any material fact that is necessary to make any statements contained therein not misleading.
ARTICLE IV
Covenants
Section 4.1. General Covenants Applicable to Collateral . Grantor will at all times perform and observe the covenants contained in the Note Purchase Agreement that are applicable to Grantor (whether made by Grantor or made by Company with respect to Grantor) for so long as any Secured Obligation is outstanding. In addition, Grantor will, so long as this Agreement shall be in effect, perform and observe the following:
(a) Without limitation of any other covenant herein, Grantor shall not cause or permit any change in its name, identity or organizational structure, or any change to its jurisdiction of organization, unless Grantor shall have first:
(i) notified the Secured Party of such change at least 30 days prior to the effective date of such change (or such shorter notice as the Secured Party may approve),
(ii) taken all action requested by the Secured Party (under the following subsection (b) or otherwise) for the purpose of further confirming and protecting the Secured Party’s security interest and rights under this Agreement and the perfection and priority thereof, and
(iii) if requested by the Secured Party, provided to the Secured Party a legal opinion to the Secured Party’s satisfaction confirming that such change shall not adversely affect the Secured Party’s security interest and rights under this Agreement or the perfection or priority of such security interest.
In any notice delivered pursuant to this subsection, Grantor will expressly state that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purposes of continuing perfection of the Secured Party’s security interest in the Collateral.
(b) Grantor will, at its expense and as from time to time requested by the Secured Party, promptly execute and deliver all further instruments, agreements, filings and registrations, and take all further action, in order:
(i) to confirm and validate this Agreement and the Secured Party’s rights and remedies hereunder;
(ii) to correct any error or omission in the description herein of the Secured Obligations or the Collateral or in any other provision hereof;
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(iii) to perfect, register and protect the security interest and rights created or purported to be created hereby or to maintain or upgrade in rank the priority of such security interests and rights;
(iv) to enable the Secured Party to exercise and enforce its rights and remedies hereunder; or
(v) otherwise to give the Secured Party the full benefits of the rights and remedies described in or granted under this Agreement.
In connection with the foregoing, Grantor will, whenever requested by the Secured Party:
(A) execute and file any financing statement, continuation statement or other filing or registration relating to the Secured Party’s security interest and rights hereunder, and any amendment thereto,
(B) mark its books and records relating to any Collateral to reflect that such Collateral is subject to this Agreement and the security interests hereunder, and
(C) whenever requested by Secured Party from time to time, Grantor will obtain from any account debtor or other obligor in respect of any property included in the Collateral an acknowledgment by such account debtor or obligor that such property is subject to this Agreement.
(c) Grantor shall not take any action that would, or fail to take any action if such failure would, impair the enforceability, perfection or priority of the Secured Party’s security interest in any Collateral.
Section 4.2. Covenants for Specified Types of Collateral . For so long as any Secured Obligation is outstanding:
(a) Grantor will, promptly upon request by the Secured Party, deliver to the Secured Party all Documents and Instruments included in the Collateral. All such Documents and Instruments shall be held by or on behalf of the Secured Party pursuant hereto and shall be delivered in suitable form for transfer by delivery with any necessary endorsement or shall be accompanied by fully executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party.
(b) If at any time there exists Collateral in which a security interest may be perfected by a notation on the certificate of title or similar evidence of ownership of such Collateral, Grantor will, promptly upon request by the Secured Party, deliver to the Secured Party all certificates of title and similar evidences of ownership, all applications therefor, and all other documents that are necessary or appropriate in order to register the Secured Party’s security interest in such Collateral on such certificate of title or other evidence of ownership or in otherwise perfecting the Secured Party’s security interest in such Collateral.
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(c) For each Deposit Account that Grantor at any time maintains, Grantor will, pursuant to an agreement in form and substance satisfactory to the Secured Party, at the Secured Party’s option, cause the depository bank that maintains such Deposit Account to agree to comply at any time with instructions from the Secured Party to such depository bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of Grantor, or take such other action as the Secured Party may approve in order to perfect the Secured Party’s security interest in such Deposit Account. This subsection shall not apply to any Deposit Account:
(i) for which the Secured Party is the depository bank, or
(ii) that is specially and exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of Grantor’s salaried employees.
(d) (i) If Grantor shall at any time hold or acquire any certificated security, Grantor will forthwith endorse, assign, and deliver the same to the Secured Party, accompanied by such instruments of transfer or assignment duly executed in

 
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