Exhibit 10.22
SUBORDINATE SECURITY AGREEMENT
THIS SUBORDINATE SECURITY AGREEMENT ("AGREEMENT") is made this 22nd day of
October, 1998, by and between MASONRY SUPPLY, INC., a Texas corporation
("SECURED PARTY"), and MSI/EAGLE SUPPLY, INC., a Delaware corporation ("DEBTOR")
RECITALS
A. Pursuant to that certain Asset Purchase Agreement dated October 22,
1998 ("PURCHASE AGREEMENT"), Debtor has acquired from Secured Party certain
assets for a purchase price payable in part in cash with the remainder payable
by delivery of a certain Secured Non-Negotiable Promissory Note of even date
herewith in the original principal amount of Two Million Forty-Five Thousand
Nine Hundred Seventy-Two and No/100 Dollars ($2,045,972.00) (together with any
and all amendments, modifications, extensions, renewals and replacements
thereof, the "NOTE").
B. Pursuant to the Purchase Agreement, Debtor has agreed to secure the
payment of the Note by the assets acquired by Debtor from Secured Party pursuant
to the Purchase Agreement, as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Debtor and Secured Party agree as
follows:
AGREEMENT
1. SECURITY.
(a) For the purposes of securing payment of the Note, Debtor hereby
grants, transfers, assigns and gives to Secured Party a subordinate
security interest in all of the inventory, accounts and accounts receivable
of Debtor, whether existing now or in the future, and all proceeds thereof
("COLLATERAL").
(b) Secured Party hereby agrees that the security interest of Secured
Party in the Collateral created hereby and the indebtedness and other
obligations of Debtor to Secured Party evidenced by the Note and Purchase
Agreement are and shall remain subject and inferior to (i) the security
interests of Senior Lender (as defined below) and any successors and
assigns of Senior Lender in the Collateral created by the Senior Credit and
Security Agreement (as defined below) and any and all modifications,
amendments, replacements, renewals and substitutions thereof, and any and
all present and future indebtedness of Debtor to Senior Lender and any
successors and assigns of Senior Lender secured by the Senior Credit and
Security Agreement and any and all modifications, amendments, replacements,
renewals and substitutions thereof, and (ii) any and all other security
interests of Senior Lender and any other financial institution or
institutional lender, and any and all other present and future indebtedness
of Debtor to Senior Lender or any other
financial institution or institutional lender (Senior Lender and any such
other financial institution or institutional lender are hereinafter
collectively called "SECURED PARTY") Further, Secured Party hereby waives
and relieves Senior Lender and any other Senior Party from any and all
obligations of marshalling in connection with the realization thereby
against the Collateral or any other security for the indebtedness or other
obligations owed by Debtor to Senior Lender or any other Senior Party; and
Secured Party hereby agrees that the aforesaid subordination of lien and
indebtedness shall continue and shall not be impaired notwithstanding any
modification or amendment of the Senior Credit and Security Agreement and
all related instruments, documents and agreements, or any other instrument,
document or agreement evidencing any other security interests of Senior
Lender or any other Senior Party or any other indebtedness of Debtor to
Senior Lender or any other Senior Party, any release or impairment of the
Collateral by Senior Lender or any other Senior Party or any release of any
guarantor or other obligor for the indebtedness of Debtor to Senior Lender
or to any other Senior Party. This paragraph may be relied upon by Senior
Lender and any successors and assigns of Senior Lender and by any other
Senior Party and may not be amended in any manner without the express
written consent of Senior Lender and any successors and assigns of Senior
Lender and by any other Senior Party. Further, Secured Party hereby agrees
to enter into any subordination agreement required to further effect the
foregoing as may be reasonably requested by Senior Lender and any
successors or assigns of Senior Lender and by any other Senior Party.
2. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and warrants
to Secured Party as follows:
(a) Debtor has the full right and power to transfer, assign and grant
a security interest in the Collateral to Secured Party in the manner and
pursuant to the terms set forth in this Agreement, subject to a first
priority security interest in the Collateral in favor of Fleet Capital
Corporation ("SENIOR LENDER") created pursuant to that certain Loan and
Security Agreement dated October 22, 1998, by and between Senior Lender and
Debtor, as amended from time to time ("SENIOR CREDIT AND SECURITY
AGREEMENT").
(b) Debtor is not a party to any contract, agreement, note or other
instrument under the terms of which the execution or performance by Debtor
of this Agreement will be a default. Neither the execution nor performance
of this Agreement by Debtor will result in a violation of any statute,
order, writ, injunction, judgment or decree of any court or governmental
authority applicable to Debtor.
3. COVENANTS. Debtor covenants and agrees that so long as any portion of
the indebtedness and obligations secured hereby remains unpaid, Debtor shall:
(a) Join with Secured Party in executing one or more financing
statements pursuant to the Uniform Commercial Code of the State of Texas,
and any other jurisdiction as required by law, in form and substance
satisfactory to Secured Party. Debtor hereby authorizes Secured Party to
file financing statements, continuation statements or other appropriate
filings signed only by Secured Party in all places where necessary to
protect or continue Secured Party's subordinate security interest in the
Collateral in all jurisdictions
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where such authorization is permitted by law.
(b) Make full and timely payment of the Note secured hereby when due.
(c) Give Secured Party all information it may reasonably request with
respect to the Collateral. All information furnished to Secured Party by
Debtor shall be complete and accurate in all material respects.
4. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:
(a) Failure of Debtor to pay any and all sums due pursuant to the
Note and the continuance of such failure after the passage of any
applicable period of grace or cure provided therein.
(b) Failure of Debtor to perform any and all of the covenants,
agreements and provisions contained in this Agreement within thirty (30)
days following written notice from Secured Party to Debtor of such failure
in performance.
5. REMEDIES. Upon the occurrence of any Event of Default, Secured Party
shall have the following rights and remedies:
(a) To declare immediately due and payable, at its option and without
demand or notice of any kind, the Note and reduce the same to judgment.
(b) To exercise any one or more of the rights and remedies given a
secured party under any and all laws governing this Agreement.
(c) To require Debtor to assemble the Collateral at Debtor's expense
and make it available to Secured Party at a place to be designated by
Secured Party, which is reasonably convenient to both parties. Subject to
the rights of any Senior Party, Secured Party shall have the right to take
immediate possession of the Collateral and may enter any of the premises of
Debtor, with or without force or process of law, and to keep and store the
same on the premises until sold. Secured Party shall have the right to bid
on its own behalf at any public sale of the Collateral and/or, to the
extent permitted by applicable law, at any private sale. Out of the
proceeds of any such sale, Secured Party shall retain an amount equal to
all costs and charges, including reasonable attorneys' fees and costs
(including, without limitation, reasonable attorneys' fees and costs
incurred in any litigation, bankruptcy, mediation or arbitration
proceedings, and any appeals therefrom) and reasonable costs and charges
for pursuing, reclaiming, seeking to reclaim, taking, keeping, removing,
storing, advertising such Collateral for sale and selling the Collateral
and all other reasonable charges and expenses in connection therewith. Any
balance of such proceeds shall be applied upon the indebtedness and
obligations secured hereby and, in the event of deficiency, Debtor shall
remain liable to Secured Party.
(d) The rights and remedies of Secured Party provided under this
Agreement
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are cumulative and are in addition to any rights and remedies which it may
otherwise have under law, and the rights and remedies of Secured Party
hereunder or otherwise provided at law are cumulative and none is
exclusive.
6. MISCELLANEOUS.
(a) This Agreement shall not obligate Secured Party to perform or
discharge any of Debtor's obligations, duties or liabilities under or with
respect to the Collateral assigned hereby. Should Secured Party incur any
such liability, loss or damage, the amounts thereof, including reasonable
attorneys' fees and costs (including, but not limited to, any reasonable
attorneys' fees and costs incurred in any litigation, bankruptcy, mediation
or arbitration proceedings, and any appeals therefrom) shall be secured
hereby, and Debtor shall reimburse Secured Party for such amounts.
(b) This Agreement shall be governed by, and construed in accordance
with, the law of the State of New York without application of its
principles regarding the conflict of laws.
(c) This Agreement shall be binding upon Debtor and its successors
and assigns and shall inure to the benefit of Secured Party and its
successors and assigns.
IN WITNESS WHEREOF, Secured Party and Debtor have duly executed this
Agreement on the date set forth above.
SECURED PARTY:
MASONRY SUPPLY, INC.,
a Texas corporation
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
President
DEBTOR:
MSI/EAGLE SUPPLY, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
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