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EXHIBIT 4.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (hereinafter called this "Agreement") is made as
of the ___ day of __________, 1997, by and between Sterling Financial Services
of Florida - I, Inc., a Florida corporation, located (hereinafter called
"Debtor") and Xxxxxxx X. Xxxxxx, as Trustee (the "Trustee") on behalf of those
persons listed on Schedule A (hereinafter collectively called "Secured Party").
WITNESSETH:
In consideration of the covenants and conditions stated in this
Agreement, the parties agree as follows:
1. Indebtedness Secured.
This Agreement and the Security Interest secure the payment of certain
Notes issued and executed by Debtor, pursuant to the Indenture of Trust (the
"Indenture") dated _________, 1997, by and between Debtor and the Trustee, and
made payable to the holders of such Notes in the aggregate principal sum of up
to $9,900,000 (hereinafter collectively called the "Note"), together with all
other indebtedness of every kind or nature owing by Debtor to Secured Party,
whether now existing or hereafter incurred, direct or indirect, absolute or
contingent, and whether the indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter reincurred, and
including any sums advanced and any costs and expenses incurred by Secured Party
pursuant to this Agreement, the Note or any other note or evidence of
indebtedness (all of such is herein sometimes referred to as the
"Indebtedness").
2. Security Interest.
For value received, Debtor hereby grants to Secured Party a security
interest (the "Security Interest") in and to all of the following: : The Assets
or Replacement Assets (as defined in the Registration Statement referred to
below) acquired with funds obtained from the repayment, sale or refinancing of
the Assets, including all rights to receive payments thereunder and security
interests in and instruments of title, whether now owned or hereafter acquired,,
all funds in the following bank account: Xxxxxxx Bank - Account #1408067369; all
proceeds of the offering pursuant to the Registration Statement of Corporation
declared effective by the Securities and Exchange Commission on _______________,
1997 (the "Registration Statement"); and in all products thereof and all cash
and non-cash proceeds of any of the foregoing, in any form, including, without
limitation, proceeds of insurance policies from the loss thereof, assignments or
other documents and instruments located in a separate, segregated, locked file
cabinet marked "Cabinet A - Sterling Financial Services of Florida - I, Inc. -
Notes" in the possession, custody and control of the Trustee as described herein
and in the Indenture of Trust (all of the foregoing hereinafter called the
"Collateral"); provided, however, that the security interest granted hereunder
is subject to the conditions and limitations set forth in the Registration
Statement and the Security Agreement.
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The Collateral may be released to Debtor upon receipt of an affidavit
signed and sworn to by a duly authorized officer of Debtor that (a) Debtor has
received or anticipates receiving within five (5) business days payment in full
from the obligor under the Contract or payment of at least the Minimum Sale
Amount by the Purchaser of the Contracts if there is a sale of a block of
Contracts as described in the Registration Statement, (b) Debtor needs the
Collateral for repossession or other similar purpose after default on a
Contract, or (c) any administrative event for which release for mailing to the
State is required under statute, rule, regulation or practice such as change in
name of a borrower due to marriage or divorce, change of address, or notation of
a subordinate lien. Upon a release of the Collateral pursuant to (c) above,
Debtor or its Agent shall promptly return Collateral to the Trustee upon receipt
of the reissued Collateral after the changes have been made by the appropriate
state agency. In addition, amount up to one year's aggregate interest payment on
all outstanding Notes at the close of the offering pursuant to the Registration
Statement (maximum of $1,039,500) shall be released to Debtor upon written
request to pay interest due on the Notes.
3. Representation and Warranties of Debtor.
Debtor represents and warrants and, so long as any portion of the
Indebtedness remains unpaid, shall be deemed continuously to represent and
warrant that:
3.1. Debtor is the owner of the Collateral free and clear of all
security interests or other encumbrances and claims of any kind or nature in
favor of any third persons, and Secured Party has a first, perfected security
interest in all of the Collateral;
3.2. Debtor is authorized to enter into this Agreement and into
the transactions contemplated hereby and evidenced by the Note;
3.3. The Collateral is used or bought for use solely in business
operations.
4. Covenants of Debtor.
Debtor covenants that so long as any Indebtedness remains unpaid,
Debtor:
4.1. Will defend the Collateral against the claims and demands of
all other parties, except purchasers of inventory in the ordinary course of
business;
4.2. Will keep the Collateral free and clear from all security
interests, liens and other encumbrances and claims of any kind or nature in
favor of any third persons, except the Security Interest; and Debtor will not
pledge the Collateral as security for any debts or obligations other than the
Notes;
4.3. Will not sell, pledge, transfer, assign, deliver, or otherwise
dispose of any Collateral or any interest therein, except that until the
occurrence of an Event of Default (as
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defined in paragraph 7.1 of this Agreement) it may deal with the
Collateral, including taking any aforementioned action as described in the this
Agreement or the Registration Statement;
4.4. Will keep in accordance with generally accepted accounting
principles, consistently applied, accurate and complete records concerning the
Collateral; will xxxx such records and, upon request of the Secured Party made
from time to time, the Collateral to give notice of the Security Interest; and
will, upon request made from time to time, permit the Secured Party or its
agents to inspect the Collateral and the Debtor's records concerning the
Collateral and to audit and make abstracts of such records or any of the
Debtor's books, ledgers, reports, correspondence and other records;
4.5. Upon demand will deliver to the Trustee for the Secured Party any
instruments, documents of title and chattel paper representing or relating to
the Collateral or any part thereof, and all schedules, invoices, shipping, or
delivery receipts, together with the endorsement or assignment described in the
Registration Statement and all other documents representing or relating to
purchases or other acquisitions or sales described in the Registration Statement
or other dispositions of the Collateral and the proceeds thereof and any and all
other schedules, documents, and statements in accordance with the terms of that
certain Indenture of Trust between the Debtor and Trustee on behalf of the
Secured Party of even date herewith;
4.6. Will notify the Secured Party in writing at least thirty (30) days
in advance of any change in the Debtor's address specified on the first page of
this Agreement, of any change in the location or of any additional locations at
which the Collateral is kept, of any change in the address at which records
concerning the Collateral are kept and of any change in the location of the
Debtor's residence, chief executive office or principal place of business;
4.7. Will make any amendment, alteration, modification or cancellation
of or substitution for or credits, adjustments or allowances on any
Collateral only as described in the Registration Statement or as otherwise
permitted herein;
4.8. Will execute and deliver to the Secured Party such financing
statements and other documents requested by the Secured Party and take such
other action as described in the Registration Statement and subject to the
limitations set forth herein, to perfect, protect or continue the perfection of
the Security Interest and effect the purposes of this Agreement;
4.9. Will pay or cause to be paid when due all taxes, assessments and
other charges of every kind and nature which may be levied or assessed
upon or against the transaction contemplated hereby or the Collateral;
4.10. Will deliver the Collateral to the Trustee if required pursuant
to that certain Indenture of Trust between Debtor and Trustee on behalf
of the Secured Party of even date herewith;
4.11. Will not commingle the Collateral constituting cash with funds
of any person or entity other than Debtor;
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4.12. Upon an Event of Default, will deliver any Collateral in
the form of funds in Debtor's bank account to the Trustee and will
surrender control of said accounts to the Trustee; and
4.13. Will keep all funds which constitute the Collateral in the
following separate, segregated Bank Account - Xxxxxxx Bank - Account
#1408067369, and will not commingle any other funds with funds in said account.
5. Verification of Collateral.
Secured Party shall have the right to verify the existence and value of
the Collateral in any manner and through any medium which Secured Party may
consider appropriate, and Debtor shall furnish such assistance and information
and perform such acts as Secured Party may require in connection therewith.
6. Future Advances.
It is agreed that any additional loans or advances by the Secured Party
secured hereby to or for the benefit of Debtor, whether such loans or advances
are obligatory or are made at the option of Secured Party or otherwise, at any
time within twenty (20) years from the date of this Agreement, with interest
thereon at the rate agreed upon at the time of each such loan or advance, shall
be equally secured with and have the same priority as the original indebtedness
and be subject to all of the terms and provisions of this Agreement, whether or
not such additional loan or advance is evidenced by the Note or any other
promissory note of Debtor and whether or not identified by a recital that it is
secured by this Agreement; provided, however, that Debtor hereby understands and
agrees that this future advance provision does not in any way obligate Secured
Party or any other person to make any additional loans or advances to Debtor.
7. Default.
7.1. Events of Default. Subject to the following limitations, an
Event of Default occurs if:
a. the Debtor receives written notice from a Secured Party
of a default in the payment of interest on any Note when the same
becomes due and payable and the default continues for a period of 30 days after
receipt of such notice;
b. the Debtor receives written notice from a Secured Party
of a default in the payment of the principal of any Note when the same
becomes due and payable at maturity or otherwise after receipt of such notice;
c. the Debtor fails to comply with any of its other
agreements in the Notes, this Agreement or the Indenture of Trust and
the default continues for the period and after the notice specified below;
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d. the Debtor pursuant to or within the meaning of any
Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief
against it in any involuntary case,
(3) consents to the appointment of a Receiver of it
or for any substantial part of its property,
(4) makes a general assignment for the benefit of
its creditors, or
(5) fails generally to pay its debts as they become
due; or
e. a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Debtor in an
involuntary case,
(2) appoints a Receiver of the Debtor or for any
substantial part of its property, or
(3) orders the liquidation of the Debtor, and the
order or decree remains unstayed and in effect for 90 days.
The term "Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under any
Bankruptcy Law.
A default under section (c) is not an Event of Default until the
Secured Party holding at least a majority in principal amount of the
Notes notifies the Debtor of the default and the Debtor does not cure the
default within 90 days after receipt of the notice. The notice must specify the
default, demand that it be remedied, and state that the notice is a "Notice of
Default."
7.2. Rights and Remedies Upon Default. If an Event of Default occurs and is
continuing either: (a) the Trustee, by written notice to the Debtor or (b) the
Secured Party holding at least 25% in principal amount of the Notes, by written
notice to the Debtor and the Trustee, may declare the principal of and accrued
interest on all the Notes to be due and payable immediately. After a declaration
such principal and interest shall be due and payable immediately. An
acceleration and its consequences shall be rescinded if all existing Events of
Default have been cured or waived prior to the entry of a judgment against the
Debtor and if the rescission would not conflict with any judgment or decree.
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Subject to the provisions of the preceding paragraph, if an Event of
Default occurs and is continuing, the Secured Party may pursue any available
remedy by proceeding at law or in equity to collect the payment of principal and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Agreement.
Subject to the foregoing, the Secured Party holding a majority in
principal amount of the Notes by notice to the Secured Party may waive an
existing Default or Event of Default and its consequences. When a Default or
Event of Default is waived, it is cured and stops continuing and no rights and
remedies thereon may continue to be enforced.
Notwithstanding anything to the contrary in this Agreement, Secured
Party is required to proceed against and liquidate all Collateral before looking
to any other assets of the Debtor.
7.3. Notice. Debtor agrees that any notice by Secured Party of the sale,
lease or other disposition of the Collateral or any other intended
action hereunder, whether required by the Uniform Commercial Code or otherwise,
shall constitute reasonable notice to Debtor if the notice is mailed by regular
or certified mail, postage prepaid, at least ten (10) days before the date of
any public sale, lease or other disposition of the Collateral, or the time after
which any private sale, lease or other disposition of the Collateral is to take
place, to Debtor's address as specified in this Agreement or to any other
address which Debtor has notified Secured Party in writing as the address to
which notices shall be given to Debtor.
7.4. Costs. Debtor shall pay all costs and expenses incurred by Secured
Party in enforcing this Agreement, realizing upon any Collateral and
collecting any Indebtedness. Costs and expenses will include but not be limited
to all reasonable attorneys' and paralegals' fees and expenses.
7.5. Deficiency. In the event that the proceeds of the Collateral are
insufficient to satisfy the entire unpaid Indebtedness, Debtor will be
responsible for the deficiency and shall pay the same upon demand. Secured Party
will account to Debtor for any proceeds of the Collateral in excess of the
Indebtedness and the costs and expenses referred to in Section 7.4.
8. Miscellaneous.
8.1. Perfection of Security Interest. Debtor authorizes Secured Party
at Debtor's expense to file any financing statement or statements
relating to the Collateral (with or without Debtor's signature thereon), and to
take any other action deemed necessary or appropriate by Secured Party to
perfect and to continue perfection of the Security Interest. Debtor hereby
irrevocably appoints Secured Party as its attorney-in-fact to execute financing
statements in Debtor's name and to perform all other acts which Secured Party
deems necessary or appropriate to perfect and protect the Security Interest.
Such appointment is binding and coupled with an interest. Upon request of
Secured Party before or after the occurrence of an Event of Default, Debtor
agrees to give Secured Party possession of any Collateral, possession of which
is, in Secured Party's opinion, necessary or desirable to perfect or continue
perfection or priority of the Security Interest. A photocopy of
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this Agreement is sufficient as a financing statement and may be filed as such
if Secured Party so elects.
8.2. Continuing Agreement. This Agreement is a continuing agreement with
respect to the subject matter hereof and shall remain in full force and effect
until all of the Indebtedness now or hereafter contracted for or created or
existing and any extensions or renewals of the Indebtedness together with all
interest thereon has been paid in full.
8.3. Right to Proceeds. Secured Party may demand, collect, and xxx for
all proceeds of the Collateral (either in Debtor's or Secured Party's name at
the latter's option) with the right to enforce, compromise, settle, or satisfy
any claim. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to endorse, by writing or stamp, Debtor's name on all checks,
commercial paper, and other instruments pertaining to the proceeds. Such
appointment is binding and coupled with an interest. Debtor also authorizes
Secured Party to collect and apply against the Indebtedness any refund of
insurance premiums or any insurance proceeds payable on account of the loss of
or damage to any of the Collateral and hereby irrevocably appoints Secured Party
as Debtor's attorney-in-fact to endorse, by writing or stamp, any check or draft
representing such proceeds or refund. Such appointment is binding and coupled
with an interest. Before or after an Event of Default Secured Party may notify
any party obligated to pay proceeds of the Collateral of the existence of the
Security Interest and may also direct them to pay all such proceeds to Secured
Party.
8.4. Property in Secured Party's Possession. As further security for the
repayment of the Indebtedness, Debtor grants to Secured Party a security
interest in all property of Debtor which is or may hereafter be in Secured
Party's possession in any capacity, including all monies owed or to be owed by
Secured Party to Debtor; and with respect to all of such property, Secured Party
shall have the same rights as it has with respect to the Collateral.
8.5. Set-Off. Without limiting any other right of Secured Party,
whenever Secured Party has the right to declare any Indebtedness to be
immediately due and payable, Secured Party may set off against the Indebtedness
all monies then owed to Debtor by Secured Party in any capacity whether due or
not.
8.6. Failure to Perform; Reimbursement. Upon Debtor's failure to perform
any of its duties hereunder, Secured Party may, but it shall not be obligated
to, perform any of such duties and Debtor shall forthwith upon demand reimburse
Secured Party for any expense incurred by Secured Party in doing so with
interest thereof at a rate equal to the lesser of eighteen percent (18%) per
annum or the maximum rate permitted by applicable law.
8.7. Non-Waiver. No delay or omission by Secured Party in exercising any
right or remedy hereunder or with respect to any Indebtedness shall operate as a
waiver of that or any other right or remedy, and no single or partial exercise
of any right or remedy shall preclude Secured Party from any other or future
exercise of the right or remedy or the exercise of any other right or remedy.
Secured Party may agree to a cure of any default by Debtor in any reasonable
manner without waiving any other prior or subsequent default by Debtor.
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8.8. Third Parties. Secured Party shall have no obligation to take, and
Debtor shall have the sole responsibility for taking, any steps to preserve
rights against all prior parties to any document of title, general intangible,
instrument or chattel paper in Secured Party's possession as Collateral or
proceeds of the Collateral.
8.9. Waiver of Notice of Dishonor and Protest, etc. Debtor waives
dishonor, protest, presentment, demand for payment, notice of dishonor and
notice of protest of any instrument at any time held by Secured Party with
respect of which Debtor is in any way liable and waives notice of any other
action by Secured Party.
8.10. Assignments. Debtor's rights and obligations under this Agreement
are not assignable in whole or in part by operation of law or otherwise. Secured
Party may assign its rights and obligations under this Agreement, in whole or in
part, without notice to or consent of Debtor and all of such rights shall be
enforceable by Secured Party's successors and assigns.
8.11. Definitions; Multiple Parties; Section Headings. The term "person"
when referred to herein shall mean an individual, partnership, corporation or
any other legal entity. If more than one Debtor executes this Agreement, the
term "Debtor" includes each of the Debtors as well as all of them, and their
obligations under this Agreement shall be joint and several. Whenever the
context so requires, the neuter gender includes the feminine and masculine and
the singular number includes the plural. Unless otherwise defined herein or the
context requires otherwise, terms used herein shall have the same meaning as
defined in the Uniform Commercial Code as enacted by the State of Florida.
Section headings are used herein for convenience only and do not alter or limit
the meaning of the language contained in each section.
8.12. Amendment; Waiver. This Agreement may not be modified or
amended nor shall any provision of it be waived except by a written
instrument signed by Debtor and by Secured Party.
8.13. Choice of Law; Waiver of Jury Trial. This Agreement has been
delivered in the State of Florida and shall be interpreted, and the rights and
liabilities of the parties hereto determined, in accordance with the internal
laws (as opposed to the conflicts of law provisions) of the State of Florida.
Debtor and Secured Party hereby waive any right to a trial by jury in any action
to enforce or defend any matter arising from or related to (i) this Agreement;
(ii) any Note; or (iii) any documents or agreements evidencing or relating to
this Agreement or any Note. Debtor agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
Nothing in this paragraph shall affect or impair Secured Party's right to serve
legal process in any manner permitted by law, or Secured Party's right to bring
any action or proceeding against Debtor, or the property of Debtor, in the
courts of any other jurisdiction.
8.14. Expenses. Debtor shall pay all costs and expenses relating to
this Agreement and the Indebtedness, including but not limited to,
filing and recording fees, documentary stamps
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including, without limitation, Florida documentary stamps in the amount of
$_____________, intangible tax
(if any), and Secured Party's attorney's fees and expenses.
8.15. Notice. Except as otherwise provided herein, any notice required
hereunder shall be in writing and shall be deemed to have been validly served,
given or delivered upon deposit in the United States certified or registered
mails, with proper postage prepaid, addressed to the party to be notified.
8.16. Severability. If any provision of this Agreement is prohibited by,
or is unlawful or unenforceable under, any applicable law of any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such prohibition without invalidating the remaining provisions hereof; provided,
however, that any such prohibition in any jurisdiction shall not invalidate such
provision in any other jurisdiction.
8.17. Reliance by Secured Party. All covenants, agreements,
representations and warranties made herein by Debtor shall,
notwithstanding any investigation by Secured Party, be deemed to be material to
and to have been relied upon by Secured Party.
8.18. Entire Agreement. This Agreement, the Note and the other
instruments, agreements and documents contemplated hereby contain the entire
agreement between Secured Party and Debtor with respect to the subject matter
hereof and supersedes and cancels any prior understanding and agreement between
Secured Party and Debtor with respect thereto.
8.19. Binding Effect. Subject to the provisions of paragraph 8.10,
this Agreement shall be binding upon the heirs, personal representatives,
successors and assigns of Debtor and shall inure to the benefit
of the successors and assigns of Secured Party.
8.20. Time. Time is of the essence in this Agreement.
8.21. Attorney's Fees. The parties hereby agree that in the event any of
the terms and conditions contained in this Agreement, including the
indemnification provisions contained herein, must be enforced by reason of any
past, existing or future delinquency of payment, of failure of observance or of
performance by any of the parties hereto, in each such instance, the defaulting
party shall be liable for reasonable collection and/or legal fees, trial and
appellate levels, any expenses and legal fees incurred, including time spent in
supervision of paralegal work and paralegal time, and any other expenses and
costs incurred in connection with the enforcement of any available remedy.
8.22. Capacity. The Secured Party is entering into this Agreement
solely in its capacity as Trustee under the Indenture and shall be
entitled to the privileges, immunities and protections afforded it thereunder in
any actions taken by it as Secured Party hereunder.
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IN WITNESS WHEREOF, the parties have signed this agreement as of the day
and year first above written.
STERLING FINANCIAL SERVICES
OF FLORIDA - I, INC.
a Florida corporation
By:_______________________________
Xxxxxxx X. Xxxxxx President
_______________________________
Xxxxxxx X. Xxxxxx, Trustee
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COLLATERAL ASSIGNMENT
Sterling Financial Services of Florida - I, Inc., a Florida corporation
("Assignor") hereby collaterally assigns to Xxxxxxx X. Xxxxxx, as Trustee
("Assignee"), the collateral as set forth in the Security Agreement between
Assignor and Assignee of even date herewith (the "Collateral"). This Collateral
Assignment shall become absolute upon the occurrence of an Event of Default as
defined in the Security Agreement, in which event Assignee shall become the
owner of the Collateral and shall be entitled to exercise all of the remedies
provided in the Security Agreement with respect to such Collateral.
This Collateral Assignment shall be governed and construed in accordance
with the laws of the State of Florida and the provisions of the Security
Agreement, which is incorporated herein.
As used herein, all capitalized terms shall have the same meaning as in
the Assignor's Prospectus dated __________, 1997.
IN WITNESS WHEREOF, the Assignor has placed its hand and seal this _____
day of _________________, 199__.
STERLING FINANCIAL
SERVICES OF FLORIDA - I, INC.
a Florida corporation
By:__________________________________
Xxxxxxx X. Xxxxxx, President
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SCHEDULE A
COLLECTIVE LIST OF PERSONS
CONSTITUTING THE SECURED PARTY
A-1
