EXHIBIT 10.23
GENERAL SUBORDINATED SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of May 18, 2004, between STEELBANK, INC.,
with offices at 0000 Xxxxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 (the
"Debtor"), and XXXXXX XXXXXX & CO., LLC, with offices at 00 Xxxxx Xxxxxx, Xxx
Xxxx, XX 00000 as representative of the Note Holders (the "Secured Party
Representative");
W I T N E S S E T H:
WHEREAS, the Debtor is a subsidiary of Tarpon Industries, Inc. a Michigan
corporation ("Tarpon"); and
WHEREAS, Tarpon and certain investors (the "Note Holders") are parties to
8.0% promissory notes issued by the Tarpon in the aggregate principal amount
of up to $2,000,000 (herein, as at any time amended, extended, restated, renewed
or modified, the "Notes"); and
WHEREAS, it is a condition to the willingness of the Note Holders to
accept the Notes and make the loan evidenced thereby that Debtor execute a
guaranty of even date guaranteeing Tarpon's performance under the Notes; and
WHEREAS, Debtor's performance under the guarantee is secured by a lien on
Debtor's assets, subordinate only to the liens of Debtor's senior lenders; and
WHEREAS, Debtor enter into this Agreement and grants to the Secured Party
Representative the security interest provided for herein for the benefit of
the Note Holders;
NOW, THEREFORE, FOR VALUE RECEIVED, IT IS AGREED:
Section 1. Terms. Unless otherwise defined herein, capitalized terms used
in this Agreement shall have the meaning specified therefor in the Guaranty. As
used herein the following terms shall have the meanings specified and shall
include in the singular number the plural and in the plural number the singular:
"Assigned Agreements" shall mean all contracts and agreements of the
Debtor.
"Collateral" means all of the Debtor's right, title and interest in and
under or arising out of each and all of the following:
All personal property and fixtures of the Debtor of any type or
description, wherever located and now existing or hereafter arising or
acquired, including but not limited to the following:
(i) all of the Debtor's goods including, without limitation:
(A) all inventory, including without limitation, equipment
held for lease, whether raw materials, in process or finished, all
material or equipment usable in processing the same and all
documents of title covering any inventory (all of the foregoing,
"Inventory"), including without limitation that located at the
locations listed on Schedule 1 annexed hereto;
(B) all equipment (the "Equipment") employed in connection
with the Debtor's business, together with all present and future
additions, attachments and accessions thereto and all substitutions
therefor and replacements thereof, including without limitation
that located at the locations listed on Schedule 1 annexed hereto;
(ii) all of the Debtor's present and future accounts, accounts
receivable, general intangibles, contracts and contract rights (herein
sometimes referred to as "Receivables"), including but not limited to the
Debtor's rights (including rights to payment) under all Assigned
Agreements, together with
(A) all claims, rights, powers or privileges and remedies of
the Debtor relating thereto or arising in connection therewith
including, without limitation, all rights of the Debtor to make
determinations, to exercise any election (including, but not limited
to, election of remedies) or option or to give or receive any
notice, consent, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of
the foregoing or any property which is the subject of the Assigned
Agreements, to enforce or execute any checks, or other instruments
or orders, to file any claims and to take any action which (in the
reasonable opinion of the Secured Party Representative) may be
necessary or advisable in connection with any of the foregoing,
(B) all liens, security, guaranties, endorsements, warranties
and indemnities and all insurance and claims for insurance relating
thereto or arising in connection therewith,
(C) all rights to property forming the subject matter of the
Receivables including, without limitation, rights to stoppage in
transit and rights to returned or repossessed property,
(D) all writings relating thereto or arising in connection
therewith including without limitation, all notes, contracts,
security agreements, guaranties, chattel paper and other evidence of
indebtedness or security, all powers-of-attorney, all books,
records, ledger cards and invoices, all credit information, reports
or memoranda and all evidence of filings or registrations relating
thereto,
(E) all catalogs, computer and automatic machinery software
and programs, and the like pertaining to operations by the Debtor
in, on or about any of its plants or warehouses, all sales data and
other information relating to sales or service of products now or
hereafter manufactured on or about any of its plants, and all
accounting information pertaining to operations in, on or about any
of its plants, and all media in which or on which any of the
information or knowledge or data is stored or contained, and all
computer programs used for the compilation or printout of such
information, knowledge, records or data, and
(F) all accounts, contract rights, general intangibles and
other property rights of any nature whatsoever arising out of or in
connection
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with the foregoing, including without limitation, payments due
and to become due, whether as repayments, reimbursements,
contractual obligations, indemnities, damages or otherwise;
(iii) patents, patent applications, copyrights and
intellectual property of all description;
(iv) all other personal property of the Debtor of any nature
whatsoever, including, without limitation, all accounts, bank
accounts, deposits, credit balances, contract rights, inventory,
general intangibles, goods, equipment, instruments, chattel paper,
machinery, furniture, furnishings, fixtures, tools, supplies,
appliances, plans and drawings, together with all customer and
supplier lists and records of the business, and all property from
time to time described in any financing statement (UCC-1) signed by
the Debtor naming the Secured Party Representative as secured party;
and
(v) all additions, accessions, replacements, substitutions or
improvements and all products and proceeds including, without
limitation, proceeds of insurance, of any and all of the Collateral
described in clauses (i) through (iii) above.
"Instrument" shall have the meaning specified in Article 3 of the Uniform
Commercial Code, as in effect from time to time in the State of New York and
shall also include any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which is
in the ordinary course of business transferred by delivery with any necessary
endorsement or assignment.
"Lien" means any mortgage, pledge, hypothecation, assignment, security
interest, deposit arrangement, encumbrance (including any easement, right of
way, zoning restriction and the like), lien (statutory or other) or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with generally accepted accounting
principles shall have been set aside on its books;
(b) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books;
(c) Liens (other than Liens arising under the Employee Retirement
Income Security Act of 1974, as amended, or Section 412(n) of the Internal
Revenue Code of 1986, as amended) incurred in the ordinary course of
business in connection with
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workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(d) judgment Liens in existence less than 60 days after the entry
thereof or with respect to which execution has been stayed;
(e) ground leases in respect of real property on which facilities
owned or leased by the Debtor or any of its subsidiaries are located;
(f) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Debtor and
its subsidiaries taken as a whole;
(g) any interest or title of a lessor secured by a lessor's interest
under any lease of real property on which facilities owned or leased by
the Debtor or any of its subsidiaries are located;
(h) a Lien ("Purchase Lien") on any asset securing indebtedness
(including capitalized lease obligations) incurred or assumed for the
purpose of financing the purchase price (including capitalized lease
payments in the nature thereof) of such asset, provided that such Purchase
Lien attaches only to the asset acquired with the proceeds of such
indebtedness and attaches concurrently with or within ten (10) days
following the acquisition thereof (but not including the matters referred
to in (j) below).
(i) the existing Liens ("Existing Liens") described on Schedule 2
annexed hereto.
(j) liens (the "Acquisition Liens") related to future acquisition
that have been approved, prior to such acquisitions, but the Secured Party
Representative.
"Person" means any natural person, corporation, firm, association,
partnership, joint venture, limited liability company, joint-stock company,
trust, unincorporated organization, government, governmental agency or
subdivision, or any other entity, whether acting in an individual, fiduciary
or other capacity.
"Receivables" has the meaning specified therefor in clause (ii) of the
definition of Collateral.
"Secured Obligations" means all obligations of the Debtor, whether for
fees, expenses or otherwise, now existing or hereafter arising under this
Agreement and the Guaranty.
"Senior Indebtedness" shall mean all obligations and liabilities of and
any renewal, extension, refunding, amendment or modification of any such
indebtedness of Debtor, Debtor to Greenfield Commercial Credit (Canada), Inc.,
whether direct or indirect, absolute or contingent, joint or several, secured or
unsecured, due or to become due, no existing or later arising and whatever the
amount and however evidenced.
Section 2. Security Interests. As security for the payment and performance
of all Secured Obligations the Debtor does hereby grant and assign to the
Secured Party Representative
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for the benefit of the Note Holders, a continuing perfected security interest in
all of the Collateral, whether now existing or hereafter arising or acquired
and wherever located, subject to the priority, if any, of Existing Liens and
pari passu with any Purchase Liens and Acquisition Lien.
Section 3. Subordination. The security interest granted in this Agreement
is expressly subordinated to the security interest(s) granted to any holder of
Senior Indebtedness (as defined above) in accordance with the terms of the
Subordination Agreement among Secured party Representative and Greenfield
Commercial Credit (Canada), Inc. dated May 17, 2004.
Section 4. General Representations, Warranties and Covenants. The Debtor
represents, warrants and covenants, which representations, warranties and
covenants shall survive execution and delivery of this Agreement, as follows:
(a) This Agreement is made with full recourse to the Debtor and
pursuant to and upon all the warranties, representations, covenants, and
agreements on the part of the Debtor contained herein, in the Guaranty and
otherwise made in writing in connection herewith or therewith.
(b) Except for the security interest of the Secured Party
Representative therein, the Debtor is, and as to Collateral acquired
from time to time after the date hereof the Debtor will be, the owner of
all the Collateral free from any lien, security interest, encumbrance or
other right, title or interest of any Person (other than Permitted Liens)
and the Debtor shall defend the Collateral against all claims and demands
of all Persons at any time claiming the same or any interest therein
adverse to the Secured Party Representative.
(c) There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) now on file
or registered in any public office covering any interest of any kind in
the Collateral, or intended to cover any such interest, which has not been
terminated or released by the secured party named therein and so long as
the Guaranty remains outstanding or any of the Secured Obligations of the
Debtor remain unpaid, the Debtor will not execute and there will not be on
file in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except (i) financing statements
filed or to be filed in respect of and covering the security interest of
the Secured Party Representative hereby granted and provided for and (ii)
with respect to Permitted Liens.
(d) The chief executive office and chief place of business of the
Debtor is located at the address of the Debtor listed on the signature
page hereof, and the Debtor will not move its chief executive office and
chief place of business except to such new location as the Debtor may
establish in accordance with the last sentence of this Section 4(d). The
originals of all Assigned Agreements and all documents (as well as all
duplicates thereof) evidencing all Receivables and all other contract
rights or accounts and other property of the Debtor and the only original
books of account and records of the Debtor relating thereto are, and will
continue to be, kept at such chief executive office or at such new
location as the Debtor may establish in accordance with the last sentence
of this Section 4(d). The Debtor shall establish no such new location
until (i) it shall have given to the Secured Party Representative not less
than 30 days' prior written notice of its intention to do so, clearly
describing such new location and providing such other in-
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formation in connection therewith as the Secured Party Representative may
reasonably request, and (ii) with respect to such new location, it shall
have taken such action, satisfactory to the Secured Party Representative
(including, without limitation, all action required by Section 8 hereof),
to maintain the security interest of the Secured Party Representative in
the Receivables intended to be granted at all times fully perfected and in
full force and effect.
(e) Debtor has no Collateral located outside of the Province of
Ontario on the date hereof.
(f) The name of the Debtor is as set forth on the signature page
hereto and the Debtor shall not change such name, conduct its business in
any other name or take title to the Collateral in any other name while
this Agreement remains in effect without the consent of the Secured
Party Representative. The Debtor has never had any name, or conducted
business under any name in any jurisdiction, other than its name set forth
on the signature page hereto, during the past six years other than as set
forth in Schedule 3 annexed hereto.
(g) At the Debtor's own expense, the Debtor will: (i) keep the
Collateral fully insured at all times with financially sound and
responsible insurance carriers against loss or damage by fire and other
risks, casualties and contingencies and in such manner and to the same
extent that like properties are customarily so insured by other entities
engaged in the same or similar businesses similarly situated and keep
adequate insurance at all times against liability on account of damage to
persons and properties and under all applicable workers' compensation
laws, by insurers and in reasonable amounts approved by the Secured Party
Representative, for the benefit of the Debtor and the Secured Party
Representative, (ii) upon request by the Secured Party Representative,
promptly deliver the insurance policies or certificates thereof to the
Secured Party Representative, and (iii) keep the Collateral in good
condition at all times (normal wear and tear excepted) and maintain same
in accordance with all manufacturer's specifications and requirements.
Upon any failure of the Debtor to comply with its obligations pursuant to
this Section 4(g), the Secured Party Representative may at its option, and
without affecting any of its other rights or remedies provided herein or
as a secured party under the Uniform Commercial Code, procure the
insurance protection it deems necessary and/or cause repairs or
modifications to be made to the Collateral and the cost of either or both
of which shall be a lien against the Collateral added to the amount of the
indebtedness secured hereby and payable on demand with interest at a rate
per annum equal to 15%.
(h) Subject to the rights of the holders of the Senior Indebtedness,
the Debtor hereby assigns to the Secured Party Representative all of
Debtor's right, title and interest in and to any and all monies which may
become due and payable with respect to the Collateral under any policy
insuring the Collateral (except proceeds relating to tangible personal
property which are applied to restoration or replacement), including
return of unearned premium, and shall cause any such insurance company
to make payment directly to the Secured Party Representative for
application to amounts outstanding under the Note in accordance with the
terms of the Note and, to the extent not provided therein, in such order
as the Secured Party Representative shall determine.
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(i) The Debtor will not use the Collateral in violation of any
statute or ordinance or applicable insurance policy and will promptly
pay all taxes and assessments levied against the Collateral.
(j) The Debtor will not sell, transfer, change the registration, if
any, dispose of, attempt to dispose of, substantially modify or abandon
the Collateral or any part thereof other than sales of Inventory in the
ordinary course of business and the disposition of obsolete or worn-out
Equipment in the ordinary course of business.
(k) The Debtor will not assert against the Secured Party
Representative or the Note Holders any claim or defense which the Debtor
may have against any seller of the Collateral or any part thereof or
against any other Person with respect to the Collateral or any part
thereof.
(l) The Debtor will indemnify and hold the Secured Party
Representative and the Note Holders harmless from and against any loss,
liability, damage, costs and expenses whatsoever arising from the
Debtor's use, operation, ownership or possession of the Collateral or any
part thereof.
(m) The Debtor will maintain the confidentiality of all customer
lists and not sell or otherwise dispose of such lists except that the
Debtor shall deliver copies thereof to the Secured Party Representative
upon its request, which may be made at any time and from time to time
after an Event of Default.
(n) The Debtor will not enter into any agreement that is
inconsistent with the Debtor's obligations under this Agreement, without
the prior written consent of the Secured Party Representative.
Section 5. Special Provisions Concerning Assigned Agreements. The Debtor
represents, warrants and agrees as follows:
(a) The Assigned Agreements constitute the legal, valid and binding
obligations of the Debtor and, to the best of its knowledge, the other
parties thereto, enforceable in accordance with their respective terms.
(b) The Debtor will faithfully abide by, perform and discharge each
and every material obligation, covenant and agreement to be performed by
the Debtor under the Assigned Agreements.
(c) At the request of the Secured Party Representative, and at the
sole cost and expense of the Debtor, the Debtor will enforce or secure the
performance of each and every material obligation, covenant, condition and
agreement contained in the Assigned Agreements to be performed by the
other parties thereto.
(d) The Debtor will not modify, amend or agree to vary any of the
Assigned Agreements in any material respect other than in the ordinary
course of business, or otherwise act or fail to act in a manner likely
(directly or indirectly) to entitle any party thereto to claim that the
Debtor is in default under the terms thereof.
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(e) The Debtor will not terminate or permit the termination of any
Assigned Agreement, except in accordance with its terms, other than in the
ordinary course of business.
(f) Without the prior written consent of the Secured Party
Representative, the Debtor will not, other than in the ordinary course of
business, waive or in any manner release or discharge any party to any
Assigned Agreement from any of the material obligations, covenants,
conditions and agreements to be performed by it under such Assigned
Agreement including, without limitation, the obligation to make all
payments in the manner and at the time and places specified.
(g) Subject to the rights of the holder of the Secured Indebtedness,
if the Secured Party Representative so requests after the occurrence of an
Event of Default and unless and until it is cured, the Debtor will hold
any payments received by it which are assigned and set over to the Secured
Party Representative by this Agreement for and on behalf of the Secured
Party Representative and turn them promptly over to the Secured Party
Representative forthwith in the same form in which they are received
(together with any necessary endorsement) for application to amounts
outstanding under the Note in accordance with the terms of the Note and,
to the extent not provided therein, in such order as the Secured Party
Representative shall determine.
(h) The Debtor will appear in and defend every action or proceeding
arising under, growing out of or in any manner connected with the Assigned
Agreements or the obligations, duties or liabilities of the Debtor and any
assignee thereunder.
(i) Should the Debtor fail to make any payment or to do any act as
herein provided after 15 day's notice by the Secured Party Representative,
the Secured Party Representative may (but without obligation on the
Secured Party Representative's part to do so and without notice to or
demand on the Debtor and without releasing the Debtor from any obligation
hereunder) make or do the same in such manner and to such extent as the
Secured Party Representative may deem reasonably necessary to protect the
security interests provided hereby, including specifically, without
limiting the general powers, the right to appear in and defend any action
or proceeding purporting to affect the security interests provided hereby
and the Debtor, and the Secured Party Representative may also perform and
discharge each and every obligation, covenant and agreement of the Debtor
contained in any Assigned Agreement and, in exercising any such powers,
pay necessary costs and expenses, employ counsel and incur and pay
reasonable attorneys' fees.
(j) Upon the request of the Secured Party Representative, the Debtor
will send to the Secured Party Representative copies of all notices,
documents and other papers furnished or received by it with respect to any
of the Assigned Agreements.
Section 6. Special Provisions Concerning Receivables.
(a) As of the time when each Receivable arises, the Debtor shall be
deemed to have warranted as to each such Receivable that such Receivable
and all papers and documents relating thereto are genuine and in all
respects what they purport to be, and that all papers and documents
relating thereto:
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(i) will be signed by the account debtor named therein (or
such account debtor's duly authorized agent) or otherwise be binding
on the account debtor;
(ii) will represent the genuine, legal, valid and binding
obligation of the account debtor evidencing indebtedness unpaid and
owed by such account debtor arising out of the performance of labor
or services or the sale and delivery of merchandise or both;
(iii) to the extent evidenced by writings, will be the only
original writings evidencing and embodying such obligation of the
account debtor named therein; and
(iv) will be in compliance and will conform with all
applicable federal, state and local laws (including applicable usury
laws) and applicable laws of any relevant foreign jurisdiction.
(b) The Debtor will keep and maintain at the Debtor's own cost and
expense satisfactory and complete records of the Receivables, including,
but not limited to, records of all payments received, all credits granted
thereon, all merchandise returned and all other dealings therewith, and
the Debtor will make the same available to the Secured Party
Representative, at the Debtor's own cost and expense, at any and all
reasonable times upon notice from the Secured Party Representative. The
Debtor shall, at the Debtor's own cost and expense, deliver the
Receivables (including, without limitation, all documents evidencing the
Receivables) and such books and records to the Secured Party
Representative or to its representatives upon its demand at any time after
the occurrence of an Event of Default unless and until it is cured and, if
prior to the Maturity Date, Acceleration. If the Secured Party
Representative shall so request, the Debtor shall legend, in form and
manner satisfactory to the Secured Party Representative, the Receivables
and other books, records and documents of the Debtor evidencing or
pertaining to the Receivables with an appropriate reference to the fact
that the Receivables have been assigned to the Secured Party
Representative and that the Secured Party Representative has a security
interest therein.
(c) Except in the ordinary course of business prior to an Event of
Default and, if prior to the Maturity Date, Acceleration, the Debtor will
not rescind or cancel any indebtedness evidenced by any Receivable or
modify any material term thereof or make any adjustment with respect
thereto, or extend or renew the same, or compromise or settle any dispute,
claim, suit or legal proceeding relating thereto, or sell any Receivable
or interest therein, without the prior written consent of the Secured
Party Representative, except that the Debtor may grant discounts in
connection with the prepayment of any Receivable in an amount which is
customary in the line of business in which the Debtor is engaged and
consistent with the Debtor's past practices.
(d) The Debtor will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables and will do nothing
to impair the rights of the Secured Party Representative in the
Receivables.
(e) The Debtor shall endeavor to collect or cause to be collected
from the account debtor named in each Receivable, as and when due
(including, without limita-
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tion, Receivables which are delinquent, such Receivables to be collected
in accordance with generally accepted lawful collection procedures) any
and all amounts owing under or on account of such Receivable, and credit
forthwith (on a daily basis) upon receipt thereof all such amounts as are
so collected to the outstanding balance of such Receivable. The costs and
expenses (including reasonable attorney's fees) of collection, whether
incurred by the Debtor or the Secured Party Representative, shall be borne
by the Debtor.
(f) If any of the Receivables becomes evidenced by an Instrument
(other than a check received in payment of a Receivable and deposited in
the ordinary course of business), the Debtor will notify the Secured Party
Representative thereof, and, upon request by the Secured Party
Representative, promptly deliver such Instrument to the Secured Party
Representative appropriately endorsed to the order of the Secured Party
Representative as further security for the satisfaction in full of the
Secured Obligations.
(g) Upon request of the Secured Party Representative, at any time
when an Event of Default and, if prior to the Maturity Date, Acceleration
shall exist, the Debtor shall promptly notify (in manner, form and
substance satisfactory to the Secured Party Representative) all Persons
who are at any time obligated under any Receivable that the Secured Party
Representative possesses a security interest in such Receivable and that
all payments in respect thereof are to be made to such account as the
Secured Party Representative directs.
Section 7. Special Provisions Concerning Equipment. The Debtor will do
nothing to impair the rights of the Secured Party Representative in the
Equipment. The Debtor shall cause the Equipment to at all times constitute and
remain personal property. The Debtor will at all times keep all Equipment
insured with financially responsible insurance companies in favor of the Secured
Party Representative, at the expense of the Debtor, against such perils and in
such amounts as are customary for Persons in the same general line of business
as the Debtor and operating in similar geographic locations and markets. If the
Debtor shall fail to insure the Equipment to the Secured Party Representative's
satisfaction, or if the Debtor shall fail so to endorse and deposit all policies
or certificates with respect thereto, the Secured Party Representative shall
have the right (but shall be under no obligation) to procure such insurance and
the Debtor agrees to reimburse the Secured Party Representative for all costs
and expenses of procuring such insurance, together with interest at a rate per
annum equal to 15%. The Secured Party Representative may apply any proceeds of
such insurance when received by it pursuant to the terms of this Section 7 or
Section 4(h) hereof toward the payment of any of the Secured Obligations,
whether or not the same shall then be due. The Debtor retains all liability and
responsibility in connection with the Equipment and the liability of the
Debtor to pay the Secured Obligations shall in no way be affected or diminished
by reason of the fact that such Equipment may be lost, destroyed, stolen,
damaged or for any reason whatsoever unavailable to the Debtor.
Section 8. Financing Statements; Documentary Stamp Taxes.
(a) The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Secured Party Representative
from time to time such lists, descriptions and designations of Inventory,
warehouse receipts, bills of lading, documents of title, vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates,
reports and other assurances or instruments and take such further steps
relating to the Collateral and
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other property or rights covered by the security interest hereby granted,
which the Secured Party Representative deems appropriate or advisable to
perfect, preserve or protect its security interest in the Collateral. The
Debtor hereby constitutes the Secured Party Representative its
attorney-in-fact to execute and file in the name and on behalf of the
Debtor such additional financing statements and other documents as the
Secured Party Representative may request, such acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an interest,
is irrevocable until the Secured Obligations are paid in full. Further, to
the extent permitted by applicable law, the Debtor authorizes the Secured
Party Representative to file any such financing statements and other
documents without the signature of the Debtor or to execute the same on
behalf of the Debtor. The Debtor will pay all applicable filing fees and
related expenses in connection with any such financing statements.
(b) The Debtor agrees to procure, pay for, affix to any and all
documents and cancel any documentary tax stamps required by and in
accordance with, applicable law and the Debtor will indemnify and hold the
Secured Party Representative harmless against any liability (including
interest and penalties) in respect of such documentary stamp taxes.
Section 9. Special Provisions Concerning Remedies and Sale. In addition to
any rights and remedies now or hereafter granted under applicable law and not by
way of limitation of any such rights and remedies, upon the occurrence of an
Event of Default the Secured Party Representative shall have all of the rights
and remedies of a secured party under the Uniform Commercial Code as enacted in
any applicable jurisdiction in addition to the rights and remedies provided
herein, in the Note and in any other agreement executed in connection with the
Note whereby the Debtor has granted any Lien to the Secured Party
Representative. Without in any way limiting the foregoing, upon the giving of
notice to the Debtor of Secured Party Representative's intent to pursue any one
or all of the following or any other remedies:
(a) Upon the occurrence of an Event of Default, and unless and until
it is cured, the Secured Party Representative shall have all of the rights
and remedies of a secured party under the Uniform Commercial Code as
enacted in any applicable jurisdiction in addition to the rights and
remedies provided herein, in the Note and any other document whereby the
Debtor has granted any Lien to the Secured Party Representative. The
Secured Party Representative shall have the right, without further notice
to, or assent by, the Debtor, in the name of the Debtor or in the name of
the Secured Party Representative or otherwise:
(i) to ask for, demand, collect, receive, compound and give
acquittance for the Receivables or any part thereof;
(ii) to extend the time of payment of, compromise or settle
for cash, credit or otherwise, and upon any terms and conditions,
any of the Receivables;
(iii) to endorse the name of the Debtor on any checks, drafts
or other orders or instruments for the payment of moneys payable to
the Debtor which shall be issued in respect of any Receivable;
(iv) to file any claims, commence, maintain or discontinue any
actions, suits or other proceedings deemed by the Secured Party
Representative necessary
11
or advisable for the purpose of collecting or enforcing payment of
any Receivable;
(v) to make test verifications of the Receivables or any
portion thereof;
(vi) to notify any or all account debtors under any or all of
the Receivables to make payment thereof directly to the Secured
Party Representative for the account of the Secured Party
Representative and to require the Debtor to forthwith give similar
notice to the account debtors;
(vii) to require the Debtor forthwith to account for and
transmit to the Secured Party Representative in the same form as
received all proceeds (other than physical property) of collection
of Receivables received by the Debtor and, until so transmitted, to
hold the same in trust for the Secured Party Representative and not
commingle such proceeds with any other funds of the Debtor;
(viii) to take possession of any or all of the Collateral and,
for that purpose, to enter, with the aid and assistance of any
Person or Persons and with or without legal process, any premises
where the Collateral, or any part thereof, are, or may be, placed or
assembled, and to remove any of such Collateral;
(ix) to execute any instrument and do all other things
necessary and proper to protect and preserve and realize upon the
Collateral and the other rights contemplated hereby;
(x) upon notice to such effect, to require the Debtor to
deliver, at the Debtor's expense, any or all Collateral to the
Secured Party Representative at a place designated by the Secured
Party Representative; and
(xi) without obligation to resort to other security, at any
time and from time to time, to sell, re-sell, assign and deliver all
or any of the Collateral, in one or more parcels at the same or
different times, and all right, title and interest, claim and demand
therein and right of redemption thereof, at public or private sale,
for cash, upon credit or for future delivery, and at such price or
prices and on such terms as the Secured Party Representative may
determine, with the amounts realized from any such sale to be
applied to the Secured Obligations in the manner determined by the
Secured Party Representative.
The Debtor hereby agrees that all of the foregoing may be effected without
demand, advertisement or notice (except as otherwise provided herein or as
may be required by law), all of which (except as otherwise provided) are
hereby expressly waived, to the extent permitted by law. The Secured Party
Representative shall not be obligated to do any of the acts hereinabove
authorized, but in the event that the Secured Party Representative elects
to do any such act, the Secured Party Representative shall not be
responsible to the Debtor except for its gross negligence or willful
misconduct.
(b) The Secured Party Representative may take legal proceedings for
the appointment of a receiver or receivers (to which the Secured Party
Representative shall be entitled as a matter of right) to take possession
of the Collateral pending the sale thereof pursuant either to the powers
of sale granted by this Agreement or to a judgment,
12
order or decree made in any judicial proceeding for the foreclosure or
involving the enforcement of this Agreement. If, after the exercise of any
or all of such rights and remedies, any of the Secured Obligations shall
remain unpaid, the Debtor shall remain liable for any deficiency. After
the indefeasible payment in full of the Secured Obligations, any proceeds
of the Collateral received or held by the Secured Party Representative
shall be turned over to the Debtor and the Collateral shall be promptly
reassigned to the Debtor by the Secured Party Representative without
recourse to the Secured Party Representative and without any
representations, warranties or agreements of any kind.
(c) Upon any sale of any of the Collateral, whether made under the
power of sale hereby given or under judgment, order or decree in any
judicial proceeding for the foreclosure or involving the enforcement of
this Agreement:
(i) the Secured Party Representative may, to the extent
permitted by law, bid for and purchase the property being sold, and
upon compliance with the terms of sale may hold, retain and possess
and dispose of such property in its own absolute right without
further accountability, and may, in paying the purchase money
therefor, deliver any Note or claims for interest thereon and any
other instruments evidencing the Secured Obligations or agree to the
satisfaction of all or a portion of the Secured Obligations in lieu
of cash in payment of the amount which shall be payable thereon, and
the Note and such instruments, in case the amounts so payable
thereon shall be less than the amount due thereon, shall be returned
to the Secured Party Representative after being appropriately
stamped to show partial payment;
(ii) the Secured Party Representative may make and deliver to
the purchaser or purchasers a good and sufficient deed, xxxx of sale
and instrument of assignment and transfer of the property sold;
(iii) the Secured Party Representative is hereby irrevocably
appointed the true and lawful attorney-in-fact of the Debtor in its
name and stead, to make all necessary deeds, bills of sale and
instruments of assignment and transfer of the property thus sold and
for such other purposes as are necessary or desirable to effectuate
the provisions (including, without limitation, this Section 9) of
this Agreement, and for that purpose it may execute and deliver all
necessary deeds, bills of sale and instruments of assignment and
transfer, and may substitute one or more Persons with like power,
the Debtor hereby ratifying and confirming all that its said
attorney, or such substitute or substitutes, shall lawfully do by
virtue hereof; but if so requested by the Secured Party
Representative or by any purchaser, the Debtor shall ratify and
confirm any such sale or transfer by executing and delivering to the
Secured Party Representative or to such purchaser all property,
deeds, bills of sale, instruments or assignment and transfer and
releases as may be designated in any such request;
(iv) all right, title, interest, claim and demand whatsoever,
either at law or in equity or otherwise, of the Debtor of, in and to
the property so sold shall be divested; such sale shall be a
perpetual bar both at law and in equity against the Debtor, its
successors and assigns, and against any and all Persons claiming or
13
who may claim the property sold or any part thereof from, through or
under the Debtor, its successors or assigns;
(v) the receipt of the Secured Party Representative or of the
officer thereof making such sale shall be a sufficient discharge to
the purchaser or purchasers at such sale for his or their purchase
money, and such purchaser or purchasers, and his or their assigns or
personal representatives, shall not, after paying such purchase
money and receiving such receipt of the Secured Party Representative
or of such officer therefor, be obliged to see to the application of
such purchase money or be in any way answerable for any loss,
misapplication or non-application thereof; and
(vi) to the extent that it may lawfully do so, and subject to
any legal requirement that the Secured Party Representative act in a
commercially reasonable manner, the Debtor agrees that it will not
at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any appraisement, valuation,
stay, extension or redemption laws, or any law permitting it to
direct the order in which the Collateral or any part thereof shall
be sold, now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance or enforcement of this
Agreement, the Note or any other agreement executed in connection
with the Note whereby the Debtor has granted any Lien to the Secured
Party Representative, and the Debtor hereby expressly waives all
benefit or advantage of any such laws and covenants that it will not
hinder, delay or impede the execution of any power granted or
delegated to the Secured Party Representative in this Agreement, but
will suffer and permit the execution of every such power as though
no such laws were in force. In the event of any sale of Collateral
pursuant to this Section, the Secured Party Representative shall,
at least 10 days before such sale, give the Debtor written,
telecopied or telex notice of its intention to sell.
Section 10. Application of Moneys.
(a) Except as otherwise provided herein or in the Note or Guaranty,
all moneys which the Secured Party Representative shall receive, in
accordance with the provisions hereof, shall be applied (to the extent
thereof) in the following manner: First, to the payment of all costs and
expenses reasonably incurred in connection with the administration and
enforcement of, or the preservation of any rights under, this Agreement or
any of the reasonable expenses and disbursements of the Secured Party
Representative (including, without limitation, the reasonable fees and
disbursements of its counsel and agents); Second, to the payment of all
Secured Obligations arising out of the Note in accordance with the terms
of the Note and, if not therein provided, in such order as the Secured
Party Representative may determine; and Third, to the payment of all other
Secured Obligations in such order as the Secured Party Representative may
determine.
(b) If after applying any amounts which the Secured Party
Representative has received in respect of the Collateral any of the
Secured Obligations remain unpaid, the Debtor shall continue to be liable
for any deficiency, together with interest.
Section 11. Fees and Expenses, etc. Any and all fees, costs and expenses
of whatever kind or nature, including but not limited to the reasonable
attorneys' fees and legal expenses
14
incurred by the Secured Party Representative in connection with this Agreement,
the filing or recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, counsel
fees, maintenance fees, fees and other costs relating to the encumbrances or
otherwise protecting, maintaining, preserving the Collateral, or in defending or
prosecuting any actions or proceedings arising out of or related to the
Collateral, shall be borne and paid by the Debtor on written demand by the
Secured Party Representative setting forth in reasonable detail the nature of
such expenses and until so paid shall be added to the principal amount of the
Secured Obligations and shall bear interest at a rate per annum equal to 15%. In
addition, the Debtor will pay, and indemnify and hold the Secured Party
Representative harmless from and against, any and all liabilities, obligations,
losses, damages penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the Collateral,
including (without limitation) claims of patent or trademark infringement and
any claim of unfair competition or anti-trust violation.
Section 12. Miscellaneous.
(a) All notices, communications and distributions hereunder shall be
in writing (including telecopied communication) and telecopied, personally
delivered or delivered by Federal Express or other reputable overnight
courier service, if to the Debtor addressed to it at its address set forth
opposite its signature below, if to the Secured Party Representative,
addressed to it at its address set forth opposite its signature below, or
as to either party at such other address as shall be designated by such
party in a written notice to such other party complying as to delivery
with the terms of this Section. All such notices and other communications
shall be effective (i) if telecopied, upon receipt by the addressee, (ii)
if personally delivered, upon such delivery and (iii) if delivered by
overnight courier service, on the business day following delivery thereof
to such courier service in time for next-business-day delivery.
(b) No delay on the part of the Secured Party Representative in
exercising any of its rights, remedies, powers and privileges hereunder or
partial or single exercise thereof, shall constitute a waiver thereof.
None of the terms and conditions of this Agreement may be changed, waived,
modified or varied in any manner whatsoever unless in writing duly signed
by the Debtor and the Secured Party Representative. No notice to or demand
on the Debtor in any case shall entitle the Debtor to any other or further
notice or demand in similar or other circumstances or constitute a waiver
of any of the rights of the Secured Party Representative to any other or
further action in any circumstances without notice or demand.
(c) The obligations of the Debtor hereunder shall remain in full
force and effect without regard to, and shall not be impaired by, (i) any
bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Debtor; (ii) any exercise or
non-exercise, or any waiver of, any right, remedy, power or privilege
under or in respect of the Note, this Agreement or any other agreement
executed in connection with the Note whereby the Debtor has granted any
Lien to the Secured Party Representative or any other agreement executed
in connection with any of the foregoing, the Secured Obligations or any
security for any of the Secured Obligations; or (iii) any amendment to or
modification of any of the foregoing; whether or not the Debtor shall have
notice or knowledge of any of the foregoing. The rights and remedies of
the Secured Party Representative herein provided are cumulative and not
exclusive of any rights or remedies which the Secured Party Representative
would otherwise have.
15
(d) This Agreement shall be binding upon the Debtor and its
successors and assigns and shall inure to the benefit of the Secured Party
Representative and its successors and assigns, except that the Debtor may
not transfer or assign any of its obligations, rights or interest
hereunder without the prior written consent of the Secured Party
Representative and any such purported assignment by the Debtor shall be
void. All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement.
(e) If Debtor has, forms or acquires any subsidiary, such subsidiary
shall thereupon guaranty the Secured Obligations and enter into a security
agreement with the Secured Party Representative substantially identical to
this Agreement, all in form and substance satisfactory to the Secured
Party Representative.
(f) The descriptive headings of the several sections of this
Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
(g) Any provision of this Agreement, which is prohibited or
unenforceable in any jurisdiction, shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(h) All rights, remedies and powers provided by this Agreement may
be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and the provisions hereof are
intended to be subject to all applicable mandatory provisions of law that
may be controlling and to be limited to the extent necessary so that they
will not render this Agreement invalid, unenforceable in whole or in part
or not entitled to be recorded, registered or filed under the provisions
of any applicable law.
(i) This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the
laws of the State of New York except to the extent that matters of title,
or creation, perfection and priority of the security interests created
hereby, or procedural issues of foreclosure are required to be governed by
the laws of the state in which the Collateral, or part thereof, is
located. EACH PARTY HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION BASED ON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTE OR ANY FINANCING
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF ANY SUCH PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE SECURED PARTY'S ENTERING INTO THIS AGREEMENT.
(j) It is expressly agreed, anything herein, in the Note or in any
other agreement or instrument executed in connection with the Note to
the contrary notwithstanding, that the Debtor shall remain liable to
perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Secured Party Representative shall not have any
obligations or liabilities with respect to any Collateral by reason of or
arising out of this Agreement, nor shall the Secured Party Representative
be required or obligated in any
16
manner to perform or fulfill any of the obligations of the Debtor under or
pursuant to any or in respect of any Collateral.
(k) This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
Addresses STEELBANK, INC.
as Debtor
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx By: /s/ Xxxxx Xxxxxx
Canada, L4W 1G6 ---------------------------
Name: Xxxxx Xxxxxx
Title: President
(without personal liability
whatsoever)
XXXXXX XXXXXX & CO., LLC
as Secured Party Representative
00 Xxxxx Xxxxxx
12th Floor By: ______________________________
Xxx Xxxx, XX 00000 Name: Xxxxxxx X. Xxxxx
Title: Member
17
