EXHIBIT B
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), is made and entered into as of this 30th
day of September, 1993, by and among EVEREST & JENNINGS INTERNATIONAL LTD., a
Delaware corporation ("E&J Ltd."), EVEREST & JENNINGS, INC., a California corporation
("E&J Inc.," and together with E&J Ltd., the "Borrowers"), and BIL (FAR EAST HOLDINGS)
LTD, a Hong Kong corporation (the "Lender").
RECITALS
A. The Borrowers are the makers of that certain Revolving Promissory Note of even date
herewith (the "Revolving Promissory Note") in the principal amount of the lesser of $12,465,687
or the aggregate unpaid principal amount of all amounts from time to time outstanding
thereunder, as described in Section 2.1 of that certain Debt Conversion Agreement dated as of
September 30, 1993, among the Lender, the Borrowers and The Jennings Investment Co. (as at
any time amended, supplemented or modified, the "Debt Conversion Agreement"). Capitalized
terms not otherwise defined in this Agreement shall have the meanings specified in the Debt
Conversion Agreement.
B. The Borrowers are the makers of that certain Convertible Promissory Note Common Stock of
even date herewith (the "Convertible Promissory Note - Common Stock") in the principal
amount of the lesser of $55,000,000 or the aggregate unpaid principal balance of all amounts
from time to time outstanding thereunder, as described in Section 3.1 of the Debt Conversion
Agreement.
C. The Borrowers also are the makers of that*certain Convertible Promissory NotePreferred
Stock of even date herewith (the "Convertible Promissory Note-Preferred Stock," and together
with the Revolving Promissory Note and the Convertible Promissory Note-Common Stock, the
"New BEL Notes") in the principal amount of $20,000,000, as described in Section 3.1 of the
Debt Conversion Agreement.
D. The Borrowers have agreed to indemnify and hold BEL harmless in connection with that
certain "Indemnification Obligation" as defined in Section 2. of the Debt Conversion Agreement.
E. It is a condition precedent to the Lender's loans evidenced by the New BIL Notes and to BIL
undertaking the Indemnification Obligation that the Borrowers shall have executed and delivered
this Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and
agreements contained in this Agreement, the parties agree as follows:
1. COLLATERAL
The Borrowers and the Lender agree that when used herein "Collateral" means all right, title and
interest of the Borrowers in and to all real or personal property whether now owned or hereafter
acquired by the Borrowers and wherever located, including, but not limited to:
(i) all inventory of the Borrowers, including inventory or goods in transit, or
returned goods, wherever located, which are held for sale or lease or are to be furnished
under contracts of service, or which are raw materials, work in progress or material used
or consumed in the Borrowers' businesses, or finished goods and supplies customarily
classified as inventory including all such property the sale or other disposition of which
has given rise to accounts (collectively, the "Inventory");
(ii) all sales literature and catalogs, inventions, designs, artwork, copyrights,
registrations, licenses, franchises, trademarks, trade names, trade secrets, patents, patent
applications, customer lists, price lists, purchasing and supplier records, and other
proprietary rights in connection with the Inventory, and distributor and license
agreements;
(iii) all equipment, including all machinery, equipment, motor vehicles, fixtures
(whether or not attached to real property) and furniture used or acquired for use in any of
the businesses of the Borrowers, together with any and all substitutions, replacements and
accessions thereto and parts therefor (collectively, the "Equipment");
(iv) all accounts, instruments, investment securities, chattel paper, contract rights,
licenses, approvals, notes, drafts, acceptances and documents, general intangibles
(including, without limitation, chooses in action, tax refunds, and insurance proceeds)
now existing or hereafter created, whether or not specifically assigned to the Lender
hereunder, together with all guaranties and securities therefor and all right, title and
interest of the Borrowers in the goods or other property secured or represented which
gave or shall give rise thereto, including all of the Borrowers' rights to payment for goods
sold or leased, or to be sold or to be leased, or for services rendered or to be rendered, or
all of the Borrowers' rights as an unpaid vendor or lienor, such as stoppage in transit,
replevin, reclamation and resale (collectively, the "Receivables");
(v) all moneys, securities and other property, tangible or intangible, of any kind,
or any interest therein, now or hereafter pledged, mortgaged, transferred or assigned to
the Lender or otherwise in the possession or control of the Lender for safekeeping or for
any other purpose for the account or benefit of the Borrowers, whatever the source of the
funds, or of any credit of the Borrowers with the Lender, whether now existing or
hereafter established (all remittances and property being deemed to be in the possession
of the Lender as soon as the same may be put in transit to it by mail or carrier);
(vi) all other deposit accounts of the Borrowers;
(vii) all ledger sheets, books, records and documents concerning any of the
foregoing, including all computer records, programs, storage media and computer
software useful or required in connection with any of the foregoing;
(viii) all proceeds and products and accessions of and to all of the foregoing in
any form whatever, including, but not limited to, money, goods, insurance proceeds and
other tangible or intangible property received from the sale or other disposition of the
foregoing;
(ix) all insurance policies heretofore or hereafter placed by the Borrowers on any
or all of the above-described Collateral and the proceeds of any such insurance; and
(x) all interests of the Borrowers as lessees in leases of personal property.
2. SECURITY INTEREST
The Borrowers grant to the Lender a security interest in the Collateral to secure the payment and
performance of (i) the Borrowers' obligations under the New BIL Notes, (ii) the Borrowers'
Indemnification Obligation, and (iii) the Borrowers' obligations hereunder (collectively, the
"Obligations"). Nothing in this Agreement shall be deemed to constitute an assumption or
acceptance by the Lender of any of the obligations of the Borrowers under any of the Collateral
or contract or agreement for the purchase, sale, lease or other disposition of the Collateral and the
Borrowers hereby specifically confirm and acknowledge that, notwithstanding the above grant of
security interest and assignment, they remain liable for any obligations they may have under or
in respect of any of the Collateral and agree to indemnify the Lender and hold the Lender
harmless against any such liability or obligation. Concurrently herewith, the Borrowers have
delivered to the Lender all currently existing instruments owned by the Borrowers in pledge
hereunder as part of the Collateral, and will promptly deliver to the Lender the originals of all
instruments owned by the Borrowers and received by the Borrowers subsequent to the date of
this Agreement.
3. FURTHER ASSURANCES
It is the true, clear and express intention of the Borrowers that the continuing grant of the
security interests provided for in this Agreement remain as security for payment and
performance of the Obligations, whether or not existing or hereinafter incurred by future
advances or otherwise, and whether or not contemplated by the parties at the time of the granting
of this security interest. The notice of the continuing grant of this security interest therefore shall
not be required to be stated on the face of any document representing any such Obligation, nor
otherwise identify it as being secured hereby. Any such Obligation shall be deemed to have been
made pursuant to Section 9-204 of the Uniform Commercial Code as in effect in the relevant
jurisdictions.
4. MUTUAL AGREEMENTS
(a) This Agreement shall be binding upon the parties hereto and their respective
successors and assigns, and shall inure to the benefit of the parties hereto and the
successors and assigns of the Lender, provided that the Borrowers may not assign its
rights and obligations hereunder without the prior written consent of the Lender.
(b) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which taken together shall constitute
but one and the same instrument.
(c) This secured transaction and this Agreement shall be construed in accordance
with and governed by the laws of the State of Missouri in force at the date of this
Agreement, without reference to the choice of law principles thereof. In the event that
any provision of this Agreement is held by a court of competent jurisdiction to be invalid
or unenforceable, or to violate any applicable law, it shall be deemed null and void to the
extent thereof, without affecting the balance of this Agreement.
(d) Any waivers of rights hereunder by the Borrowers shall be valid only to
the extent allowed by applicable law.
(e) This Agreement shall be given its plain and simple meaning consistent with
performance thereof by the parties and applicable law. The Borrowers consent to the
personal jurisdiction of the state or federal courts located in the State of Missouri.
(f) The titles of the several paragraphs shall not be considered a part of this
Agreement so as to otherwise alter such meaning.
(g) No party hereto shall be deemed to have waived any of its rights under or
upon the Obligations or Collateral presently existing or created hereunder unless such
waiver is in writing and signed by the party making such waiver.
(h) Any notices or demands in writing to be given hereunder shall be given in
accordance with Section 14.1 of the Debt Conversion Agreement and at the addresses
specified therein for the Borrowers and the Lender.
(i) Whenever in this Agreement the context so requires, the singular shall
include the plural and the plural the singular.
(j) The security interest of the Lender pursuant to this Agreement will terminate
upon payment in full by the Borrowers or satisfaction, conversion, forgiveness or
discharge of the Obligations as set forth herein, but if thereafter the Lender shall pay any
such sums over to any other person for any reason whatsoever including bankruptcy, the
Lien of this Agreement shall automatically be reinstated.
(k) This Agreement shall take effect immediately upon execution by the
Borrowers, but this Agreement may, at the option of the Lender, be executed by the
Lender if execution by the Lender is required by the laws of any jurisdiction to create,
perfect, preserve, validate or otherwise protect any security interest granted pursuant
hereto or to enable the Lender to exercise or enforce their rights hereunder with respect to
any such security interest.(l) The Lender shall have no duty of care with respect to the Collateral, except to
exercise reasonable care with respect to the Collateral in the Lender's custody, but shall
be deemed to have exercised reasonable care if either such property is accorded treatment
substantially equal to that which the Lender accords its own property, or if the Lender
takes such action with respect to the Collateral as the Borrowers shall request in writing,
but neither failure to comply with any such request nor any omission to do any such act
requested by the Borrowers shall be deemed a failure to exercise reasonable care, nor
shall the Lender's failure to take steps to preserve rights against any parties or property be
deemed a failure to have exercised reasonable care with respect to Collateral in the
Lender's custody.
(m) This Agreement shall not be amended or modified unless such amendment or
modification shall be in writing and executed by the Borrowers and the Lender.
(n) If after receipt of any payment of all or any part of the Obligations, the Lender
for any reason is required to surrender such payment to any person, because such
payment is invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, or a diversion of trust funds, or for any other reason, then the Obligations
or any part thereof intended to be satisfied and the Lender's lien on the Collateral with
respect thereto evidenced by this Agreement shall be revived and continue and this
Agreement shall continue in full force and effect as if such payment had not been
received by the Lender, and the Borrowers shall be liable to pay the Lender the amount of
such payment surrendered. The provisions of this Section 4(n) shall survive the
termination of this Agreement, and shall remain effective notwithstanding any contrary
action which may have been taken by the Borrowers in reliance upon such payment.
5. WARRANTEES BY THE BORROWERS
The Borrowers hereby warrant and represent the following: (a) the Borrowers' principal places of business and the addresses at which the
Borrowers keep all of their records which are controlling for the general accounting
purposes of the Borrowers are only the locations described on Schedule hereto;
(b) the Borrowers will maintain Equipment only at the locations described on
Schedule 11 hereto;
(c) the Borrowers will maintain Inventory only at the locations described on
Schedule III hereto; and
(d) this Agreement constitutes the legally valid and binding obligation of the
Borrowers enforceable in accordance with its terms, subject to and limited by the effect
of bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement,
moratorium or other laws affecting or relating to the rights of creditors generally.
6. DUTIES AND OBLIGATIONS OF THE BORROWERS (a) The Borrowers shall defend at their own cost their respective title to the
Collateral and this Agreement as a lien upon the Collateral. The assertion by anyone of
any such claim with respect to any material portion of the Collateral shall not constitute a
default hereunder if such claim is diligently, adequately and successfully contested by the
Borrowers or is settled or discharged by the Borrowers with reasonable diligence. In the
event of failure by the Borrowers to diligently defend or contest any such claim, the
Lender may contest, settle or discharge any such claim, and the Borrowers shall pay to
the Lender within two days of demand, the costs and expenses, including reasonable
attorneys' fees, thereof.
(b) All out-of-pocket advances, charges, costs and expenses, including reasonable
attorneys' fees, paid by the Lender in exercising any right, power or remedy conferred by
this Agreement, including but not limited to that due to bankruptcy or insolvency, or in
the enforcement thereof, shall become a part of the Obligations secured hereunder and
shall be paid to the Lender by the Borrowers within two days of the Lender's demand.
(c) Each Borrower shall provide the Lender with copies of all agreements between
such Borrower and any warehouse at which Collateral may, from time to time, be kept
and all leases or similar agreements between such Borrower and any person, whether
such Borrower is lessor or lessee thereunder.
(d) The Borrowers hereby agree to:
(i) execute financing statements and any other documents necessary to
perfect the security interest granted hereunder whenever the Lender deems
advisable;
(ii) execute such assignments of specific contracts and use such reasonable
efforts to obtain consents or estoppel certificates reasonably satisfactory to the
Lender from other parties to all contracts in which the Borrowers grant the Lender
a security interest under this Agreement as the Lender may from time to time
reasonably require;
(iii) after the occurrence of an "Event of Default" (as defined in Section 7
below), deliver all Receivables to the Lender if so requested, at the time, place
and manner specified in the Lender's request;
(iv) do, make, execute and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Lender may reasonably require to
completely vest in and assure to the Lender its rights hereunder in and to the
Collateral and the proceeds thereof; and(v) within 10 days' of the occurrence thereof, give notice to the Lender of
any change in the places specified on Schedules I, II or III attached hereto.
(e) The Borrowers agree that the Lender is authorized to:
(i) file financing statements or amendments thereto without the
signature of either Borrower with respect to any of the Collateral;
(ii) file a carbon, photographic, photostatic, or other reproduction or copy
of this Agreement or of a financing statement as a financing statement; and
(iii) notify any obligor on any note or other instrument assigned to the
Lender and any other partners of any partnership or joint venture in which either
Borrower is a partner of the existence of the Lender's security interests.
(f) The Borrowers will promptly notify the Lender of any attachment or other
legal process levied against any part of the Collateral and any information received by the
Borrowers relative to the Collateral, including the Receivables, the account debtors or
other persons obligated in connection therewith, which may in any way materially and
adversely affect the value of the Collateral as a whole or the rights and remedies of the
Lender in respect thereto.
(g) The Borrowers will, on or before the date hereof and thereafter from time to
time, at the Lender's request, deliver to the Lender all evidence of ownership of any of the
Equipment (including, without limitation, certificates of title and applications for title). In
addition, the Borrowers, at the Lender's expense, shall take all steps reasonably necessary
to perfect the Lender's security interests in all Equipment for which certificates of title
have been issued or may be issued.
(h) Except for Inventory in the ordinary course of business, the Borrowers and the
Bank), the Borrowers hereby agree not to remove or permit the removal of the Collateral,
other than motor vehicles, from the premises where it is now located, nor of any motor
vehicle from the State of Missouri, nor to change the address where any motor vehicle is
regularly garaged, without the prior written consent of the Lender, which consent shall
not be unreasonably withheld.
7. EVENTS OF DEFAULT
The occurrence of and continuance of any one or more of the following events shall constitute an
"Event of Default" hereunder:
(i) the Borrowers fail to observe, perform or comply with any covenant,
agreement or term contained in this Agreement and, if subject to remedy, the same is not
remedied within 30 days after written notice from the Lender; provided, however, that
such 30-day period shall be extended for an additional 30 days so long as within such
initial 30-day period the Borrowers have commenced to cure and are proceeding with due
diligence to cure such failure; or(ii) the Borrowers fail to observe, perform or comply with the Indemnification
Obligation, and the same is not remedied within 30 days after written notice from the
Lender; provided, however, that such 30-day period shall be extended for an additional
30 days so long as within such initial 30-day period the Borrowers have commenced to
cure and are proceeding with due diligence to cure such failure; or
(iii) an "Event of Default" occurs under and as defined in any of the New BIL
Notes, and the same is not remedied within the applicable period of grace (if any)
provided therein.
8. ADDITIONAL RIGHTS OF THE LENDER AFTER AN EVENT OF DEFAULT
Upon the occurrence and continuance of an Event of Default hereunder, the Lender may, without
notice to the Borrowers (except as otherwise indicated), take or cause to occur any or all of the
following:
(a) The Lender may declare the Obligations secured hereby with respect to which
such Event of Default has occurred (the "Defaulted Obligations") to be immediately due
and payable insofar as not already accelerated, notwithstanding any time or credit
allowed under any instruments evidencing such Defaulted Obligations.
(b) The Lender may proceed to enforce payment of the same and exercise any or
all of the rights and remedies afforded to the Lender by applicable law or otherwise
possessed by the Lender.
(c) The Lender may set off the Defaulted Obligations against any funds of
either Borrower in the possession of the Lender whatever the source of funds.
(d) The Lender may to the fullest extent permitted by applicable law (i) sell the
Collateral or any interest therein at public or private sale for cash or upon credit and for
immediate or future delivery and for such price and on such terms as the Lender shall
deem appropriate, and negotiate, endorse, assign, transfer and deliver to the purchaser or
purchasers thereof (which may be the Lender) the Collateral so sold, each purchaser at
any sale to hold the property sold absolutely, free from any claim or right on the part of
the Borrowers (and the Borrowers hereby waive, to the extent permitted by applicable
law, all rights of redemption, stay and/or appraisal. which the Borrowers now have or
may at any time in the future have) and/or (d) obtain specific performance by the
Borrowers of any covenant or undertaking of the Borrowers herein, and/or (iii) without
notice to the Borrowers, proceed by suit or suits at law or in equity to foreclose this
Agreement and sell the Collateral or any portion thereof pursuant to judgment or decree
of a court or courts having jurisdiction.
(e) Without regard to the adequacy of the security for the Defaulted Obligations
by virtue of this Agreement or any other col-lateral or to the solvency of the Borrowers,
the Lender may institute legal proceedings for the appointment of a receiver or receivers
with respect to any or all of the Collateral. pending foreclosure hereunder or for the sale
of any or all of the Collateral under the order of a court of competent jurisdiction or under
other legal process.
(f) Either personally, or by means of a court-appointed receiver, the Lender may
take possession of all or any of the Collateral and exclude therefrom the Borrowers and
all others claiming under the Borrowers. In the event the Lender demands or attempts to
take possession of, the Collateral in the exercise of any rights under this Agreement, the
Borrowers promise and agree promptly to turn over and deliver complete possession
thereof to the Lender.
(g) Without notice to or demand upon the Borrowers, the Lender may make such
payments and do such acts as the Lender may deem necessary to protect its security
interest in the Collateral, including, without limitation, paying, purchasing, contesting or
compromising any encumbrance, charge or Hen which is prior to or superior to the
security interest granted hereunder, and in exercising any such powers or authority to pay
all expenses incurred in connection therewith.
(h) The Lender may require the Borrowers to deliver to the Lender within two
days after the Lender's request, a list of all accounts which are included in or are proceeds
of Collateral.
(i) The Lender may (i) collect any and all amounts due to the Borrowers from
account debtors, (ii) notify account debtors that the accounts have been assigned to the
Lender and that the Lender has a security interest therein, and (iii) direct such account
debtors to make all payments due from them to the Borrowers upon the accounts, directly
to the Lender.
(j) The Lender may choose to accept the Collateral after giving notice of such
proposal to the Borrowers and to any other person with a security interest in such
Collateral, and such acceptance shall discharge the Defaulted Obligations of the
Borrowers, provided neither of the Borrowers, nor any other person with a security
interest in such Collateral, object in writing to such proposal within 30 days from receipt
of such notice.
(k) The Lender may use, in connection with any assembly or disposition of the
Collateral, any trademark, trade name, trade style, copyright, patent right or technical
process used or utilized by the Borrowers.
(1) The Lender may require the Borrowers to assemble the Collateral, taking all
necessary or appropriate action to preserve and keep it in good condition and make such
available to the Lender at a place and time convenient to all parties, all at the expense of
the Borrowers.(m) The Lender may, without removal from the Borrowers' premises, render any
or all of the Collateral unusable, and may dispose of the Collateral on the premises of the
Borrowers. In the event the Lender seeks to take possession of any or all of the Collateral
by court process, the Borrowers waive any bonds and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such possession,
and waive any demand for possession prior to the commencement of any suit or action to
recover with respect thereto.
The Borrowers promptly shall deliver to the Lender, upon receipt, all proceeds from the sale of
Collateral received by the Borrowers, including proceeds of accounts referred to hereinabove, in
the exact form in which they are received. Without precluding any other method of sale, the sale
of Collateral shall have been made in a commercially reasonable manner if conducted in
conformity with reasonable commercial practices disposing of similar property, but in any event
the Lender may sell on such terms as it may choose, without assuming any credit risk and
without any obligation to advertise or give notice of any kind except as required by applicable
law; the Collateral need not be present at any public or private sale or in view of the purchaser or
purchasers and title shall pass upon such sale wherever the Collateral or any part thereof is
located with like effect as though all the Collateral were present and in the possession of the
person conducting the sale and were physically delivered to the purchaser or purchasers. Except
as limited by applicable law, the Lender may bid for and purchase at any public or private sale
the Collateral offered for sale or any part thereof. In the event that notice is necessary under
applicable law, written notice mailed to the Borrowers at the address provided in Section 14.1 of
the Debt Conversion Agreement, given ten days prior to the date of any private or public sale or
any other disposition of the Collateral will be made shall constitute notice, but notice given in
any other reasonable manner or at any other time shall be sufficient. The Borrowers shall take
such actions as the Lender shall request to evidence the Lender's rights hereunder, or to assign or
endorse proceeds to the Lender.
9. APPLICATION OF PROCEEDS (a) The proceeds of any sale, lease or other disposition of the Collateral shall be
applied in the following order: (i) to the repayment of the reasonable out-of-pocket costs
and expenses of retaking, holding and preparing for the sale and the selling of the
Collateral (including legal expenses and attorneys' fees) and the discharge of all
assessments, encumbrances, charges or Hens, if any, on the Collateral prior to the lien
hereof (except any taxes, assessments, encumbrances, charges or liens subject to which
such sale shall have been made); (ii) to the payment of the whole amount then due and
unpaid of the Defaulted Obligations of the Borrowers to the Lender; (iii) to the payment
of all other amounts (including principal and interest) with respect to the Defaulted
Obligations then secured hereunder; and (iv) the surplus, if any, shall be paid to the
Borrowers or to whomsoever may be lawfully entitled to receive the same, or as a court
of competent jurisdiction may direct.
(b) If the proceeds from the sale of the Collateral are not sufficient to satisfy the
Defaulted Obligations of the Borrowers to the Lender, the Lender may proceed against
the Borrowers for any deficiency.
10. POWERS OF THE LENDER
The Borrowers hereby irrevocably appoint the Lender the true and lawful attorney of the
Borrowers (with full power of substitution) in the name, place and stead of, and at the expense
of, the Borrowers in connection with the enforcement of their rights and remedies provided for
under this Agreement:
(a) to give any necessary receipts or acquittances for amounts collected or
received hereunder;
(b) to make all necessary transfers of all or any part of the Collateral in
connection with any sale, lease or other disposition made pursuant hereto;
(c) to execute and deliver for value all necessary or appropriate bills of sale,
assignments or other instruments in connection with any such sale, lease or other
disposition;
(d) to ask for, demand, sue for, collect, receive, receipt and give acquittance for
any and all moneys due or to become due upon or by virtue of any thereof;
(e) to receive, take, endorse, assign and deliver all checks, notes, drafts, orders
and other negotiable and non-negotiable instruments for the payment of money and
chattel paper taken or received by it in connection therewith;
(f) to settle, compromise, compound, prosecute or defend any action, claim or
proceeding with respect thereto;
(g) to sell, transfer, assign, pledge, endorse or otherwise deal in or with the
same or the proceeds thereof; and
(h) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto.
The Borrowers hereby ratify and confirm all that their said attorney (or any substitute) shall
lawfully do hereunder and pursuant hereto; provided that the Lender shall not exercise any such
rights unless and until an Event of Default hereunder has occurred.
Nevertheless, if so requested by the Lender or a purchaser or lessor, the Borrowers shall ratify
and confirm any sale, lease or other disposition or other action by executing and delivering to the
Lender or such purchaser or lessor all proper bills of sale, assignments, releases, leases and other
instruments as may be designated in any such request. the Lender shall not have any obligation
whatsoever to exercise any of the powers herein conferred upon it or to make any demand or any
inquiry as to the nature or sufficiency of any payment received by it, or to present or file any
claim or notice or take any other action whatsoever with respect to any of the Collateral or
moneys due or to become due in respect thereof. To the fullest extent permitted by applicable
law, no action lawfully taken by the Lender or omitted to be taken by it pursuant to this Section I
and not inconsistent with the Debt Conversion Agreement shall give rise to any defense,
counterclaim or offset in favor of the Borrowers or affect any of the Obligations. The Lender
shall not be bound to take any steps necessary to preserve rights in any promissory note, other
instrument or chattel paper against prior parties.11. RIGHTS OF THE BORROWERS
Unless an Event of Default hereunder has occurred and is continuing, the Borrowers may use the
Collateral in any manner not inconsistent with the terms of insurance thereon, this Agreement or
the Debt Conversion Agreement.
12. WAIVERS AND AUTHORIZATIONS OF THE BORROWERS (a) The Borrowers hereby agree that any and all of the Lender's rights with
respect to the security interest hereunder shall continue unimpaired, and the Borrowers
shall be and remain obligated in accordance with the terms hereof, notwithstanding the
release or substitution of any Collateral at any time, or of any rights or interests therein,
or the exercise of any remedies by the Lender, or any delay, extension of time, renewal,
compromise or other indulgence granted by the Lender in reference to any of the
obligations, or any note, draft, bill or exchange or other instrument given in connection
therewith. ne Borrowers hereby waive all notice of any such delay, extension, release,
substitution, renewal, compromise or other indulgence, and hereby consenting to be
bound thereby as My and effectually as if the Borrowers had expressly agreed thereto in
advance.
(b) The Borrowers further agree that all rights and remedies given to the Lender
are cumulative and not exclusive of any rights or remedies otherwise provided by
applicable law.
(c) The Borrowers also agree that any single or partial exercise of any right or
remedy shall not preclude the further exercise thereof or the exercise of any other right or
remedy.
(d) The Borrowers waive any right to require the Lender to:(i) proceed against any person;
(ii) proceed against or exhaust any Collateral or other security, or to
proceed against the Collateral prior to proceeding against other security, or to
proceed against other security prior to proceeding against the Collateral;
(iii) exercise rights with respect to other security interests in the Collateral
or other assets of the Borrowers prior to proceeding against the Collateral under
this Agreement; and
(iv) pursue any other remedy in the Lender's power.
The Borrowers also waive any defense arising by reason of any disability or other
defense of the Borrowers or any other person, except for defenses of the Borrowers
arising out of a breach by the Lender of this Agreement, the Debt Conversion Agreement
or any document relating thereto. Until all Obligations shall have been paid in full, the
Borrowers shall have no right of subrogation and waive any right to enforce any remedy
which the Lender now has or may hereafter have against the Borrowers or against any
other person and waive any benefit of and any right to participate in any Collateral or
security whatsoever now or hereafter held by the Lender.
(e) The Borrowers further authorize the Lender without notice or demand and
without affecting their liability hereunder or on the Obligations, from time to time to:
(i) after the occurrence of an Event of Default hereunder, accelerate or
otherwise change the time for payment of the Obligations or any part thereof;
(ii) take and hold security from third parties, for the payment of the
Obligations or any part thereof, and exchange, enforce, waive and release the
Collateral herein described or any part thereof or any such other security;
(iii) after the occurrence of an Event of Default hereunder, apply the
Collateral or other security and direct the order or manner of sale thereof as the
Lender in its discretion may determine; and
(iv) release or substitute the Borrowers, or any accommodation party or
any other parties to the Obligations or any part thereof.
(f) The Lender shall not be deemed to have waived any of its rights hereunder or
under any other agreement, instrument or paper signed by the Borrowers unless such
waiver is in writing and signed by the Lender. No delay or omission on the part the
Lender in exercising any right shall operate as a waiver thereof or of any other right. A
waiver upon any one occasion shall not be construed as a bar or a waiver of any right or
remedy on any future occasion. All of the rights and remedies of the Lender, whether
evidenced hereby or by any other agreement, instrument or paper, shall be cumulative
and may be exercised singly or concurrently.
(g) The Borrowers hereby irrevocably consent to the jurisdiction of any federal or
state court within the State of Missouri having proper venue, and also consent to service
of process by any means authorized by federal or Missouri law in connection with any
proceeding arising out of or relating to this agreement.
13. LIABILITY
The liability of the Borrowers hereunder shall be unlimited.
14. INTERPRETATION AND EFFECT(a) To the extent the provisions of this Agreement are inconsistent with the
provisions of the Debt Conversion Agreement, the provisions of the Debt Conversion
Agreement shall be controlling.
(b) The execution, delivery and effectiveness of this Agreement shall not, except
as expressly provided herein, operate as a waiver of any right, power or remedy of the
Lender under any of the New BIL Notes or constitute a waiver of any provision thereof.
15. EXPENSES
The Borrowers shall pay all out-of-pocket expenses reasonably incurred by the Lender (including
fees and disbursements of the Lender's counsel) in connection with the interpretation,
amendment and enforcement of the New BIL Notes and this Agreement, any Event of Default
hereunder and proceedings resulting therefrom, including bankruptcy and judicial or nonjudicial
foreclosure proceedings. If final judgment is entered by a court of competent jurisdiction in any
action in respect of this Agreement, the party prevailing therein shall be entitled to have its
reasonable fees and costs, including, without limitation, the fees and costs of its attorneys, paid
by the party not prevailing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
EVEREST & JENNINGS INTERNATIONAL
LTD., a Delaware corporation
By:
Its:
EVEREST & JENNINGS INC., a California corporation
By:
Its:
"Borrowers"
BIL (FAR EAST HOLDINGS) LIMITED, a Hong Kong corporation
By:
Its:
“Lender"
SCHEDULE I
LOCATIONS OF PRINCIPAL PLACES OF BUSINESS
SCHEDULE II
LOCATIONS OF EQUIPMENT
SCHEDULE III
LOCATIONS OF INVENTORY
