SECURITY AGREEMENT
This Security Agreement (this "Agreement"), dated as of July 25, 2003, is
between Xxxxxx Financial Corporation, a Delaware corporation (together with all
of its subsidiaries, the "Debtor") and Dr. Xxxxx Xxxxx, an individual residing
in the State of New York (the "Secured Party").
WHEREAS, the Secured Party has contemporaneously herewith loaned the Debtor
the aggregate principal sum of $165,000.00; and
WHEREAS, as evidence of such loan, the Debtor and Secured Party have
contemporaneously herewith executed and delivered a Loan Agreement (the "Loan
Agreement"), and the Debtor has contemporaneously herewith executed and
delivered a Promissory Note in favor of the Secured Party in the aggregate
principal amount of $165,000.00 (the "Promissory Note"); and
WHEREAS, as a condition precedent to the making of such loan, the Secured
Party has required that the Debtor execute and deliver this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants of the Debtor and
Secured Party set forth herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINED TERMS
1.1. Accounts. As used herein, the term "Accounts" shall mean any and all
rights of Debtor to payment for goods sold or leased or for services rendered
which are not evidenced by an Instrument (as hereinafter defined) or Chattel
Paper (as hereinafter defined), whether or not such rights have been earned by
performance, all guaranties and security therefore and all Debtor's interests
and rights in and to any and all good giving rise thereto.
1.2. Account Debtor. As used herein, the term "Account Debtor" shall mean
that party (other than Debtor) which is obligated on or under any Account,
Chattel Paper or General Intangible (as hereinafter defined).
1.3. Chattel Paper. As used herein, the term "Chattel Paper" shall mean a
writing or writings evidencing both a monetary obligation and a security
interest in, or a lease or consignment of, specific goods. When a transaction is
evidenced both by a security agreement or a lease and by an Instrument (as
hereinafter defined) or a series of Instruments, the group of writings taken
together constitutes Chattel Paper.
1.4. Documents. As used herein, the term "Documents" shall mean any and all
documents of title.
1.5. Equipment. As used herein, the term "Equipment" shall mean any and all
tangible personal property and fixtures of Debtor (other than Inventory, Chattel
Paper, Documents, Instruments and money) including, without limitation,
communications systems, computer systems, computer hardware and software,
heating ventilation, air conditioning and other utility installations,
furnishings, furniture, fixtures and other goods used or brought for use
primarily in business, together with any and all accessions, accessories, parts
and appurtenances thereto.
1.6. Event of Default. As used herein, the term "Event of Default" shall
have the meaning as set forth under the Note.
1.7. General Intangibles. As used herein, the term "General Intangibles"
shall mean any and all personal property (including, without limitation, things
in action) other than Inventory, Equipment, Accounts, Chattel Paper, Documents,
Instruments and money, including, without limitation, contract rights, corporate
or other business records (including, without limitation, customer lists,
correspondence, advertising materials, computer programs, printout and other
computer materials, and records), inventions, designs, patents, patent
applications, service marks, trademarks, trademark applications, trade names,
trade secrets, registrations, copyrights, licenses, permits, franchises,
warranties, rights and claims against third parties, rights to indemnification,
leasehold and subleasehold interest in personal property, plans, specifications,
drawings, appraisals, reports, security interests and security held by or
granted to Debtor, tax refunds, tax refund claims, royalty and product rights,
rights to the retrieval from third parties of electronically processed and
recorded data pertaining to any Collateral, and goodwill, whether or not
associated with any of the foregoing.
1.8. Instrument. As used herein, the term "Instrument" shall mean any and
all negotiable instruments, certificated securities and all other writings which
evidence a right to the payment of money and is of a type which is in the
ordinary course of business transferred by delivery with any necessary
endorsement or assignment, including, without limitation, drafts, checks,
certificates of deposit, notes, bills of exchange and uncertificated securities.
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1.9. Inventory. As used herein, the term "Inventory" shall mean any and all
goods owned or held by or for the account of Debtor for sale or lease or for
furnishing under a contract of service, all raw materials, work in process or
materials incorporated in or consumed in the production of any of the foregoing,
and supplies, in each case wherever the same shall be located, whether in
transit, on consignment, or otherwise, and all property the sale or lease of
which has given rise to Accounts, Chattel Paper or Instruments where such
property has been returned to Debtor or repossessed by such Debtor or stopped in
transit or is to be used or consumed in Debtor's business.
1.10. Obligations. As used herein, the term "Obligations" shall mean any
and all of a Debtor's liabilities, obligations and indebtedness to the Secured
Party under the Loan Agreement, this Agreement and the Promissory Note.
1.11. Terms Defined in Uniform Commercial Code. All other terms used in
this Agreement which are not specifically defined herein or the definitions of
which are not incorporated herein by reference shall have the meanings assigned
to such terms in the Uniform Commercial Code in effect in the State of New York
(the "UCC") to the extent such other terms are defined therein.
1.12. Singular/Plural; Headings. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular,
references to the singular include the plural and "or" has the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereunder"
and other similar terms contained in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. The headings in
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation hereof in any respect.
Any and all references to sections, subsections and exhibits relate to this
Agreement unless otherwise provided.
1.15. Tenancy Interests. As used herein, the term "Tenancy Interests"
means, to the extent not included in "General Intangibles", all of Debtors
right, title and interest in and to its leases of real property where the Debtor
is the tenant.
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ARTICLE II
COLLATERAL
2.1. Collateral. As security for the payment and performance of all of the
Obligations, Debtor hereby mortgages, pledges and assigns to the Secured Party,
and hereby creates in and grants to the Secured Party, a continuing security
interest in and to all of Debtor's right, title and interest in and to all
personal property (tangible and intangible) and fixtures of whatever kind and
wherever located, whether now owned or hereafter created or acquired
(collectively, the "Collateral"), including, without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Inventory;
(h) all Investment Securities;
(i) all Tenancy Interests (to the extent permitted by the
applicable landlords); and
(j) all increases in, additions and accessions to, substitutions
for, and replacements, proceeds and products of, any of
the foregoing.
ARTICLE III
DEBTOR'S USE OF COLLATERAL
3.1. Processing and Sales. So long as an Event of Default shall not have
occurred and be continuing, each Debtor may use, sell, lease or otherwise deal
in its Collateral free of restriction or limitation, except for those
limitations and restrictions expressly provided herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Debtor hereby represents, warrants and agrees as follows:
4.1. Chief Executive Offices. Debtor's chief executive office and principal
place of business are located at the address set forth in Exhibit A hereto. The
Inventory and Equipment are located at the locations set forth in Exhibit B
hereto. If any change in any such locations occurs, Debtor shall notify the
Secured Party thereof in writing.
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4.2. Ownership of Collateral. Except for any liens arising under that
certain North Carolina Deed of Trust, dated July 3, 2002 (the "Mortgage
Facility"), between Xxxxx Color Laboratories, Inc. and Branch Banking & Trust
Company (Mortgagee"), Debtor lawfully owns its Collateral free and clear of any
and all liens, security interests, claims, charges, encumbrances, taxes and
assessments whatsoever, except for interests of lessors of leased Equipment used
by Debtor in its operations and Debtor shall defend the title to its Collateral
against any and all third parties and against all claims and demands whatsoever.
ARTICLE V
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as this Agreement remains in
effect:
5.1. Possession. Debtor shall retain possession of its Collateral and shall
not sell, exchange, assign, loan, deliver, lease, mortgage or otherwise dispose
of same without the prior written consent of the Secured Party, except as
otherwise required under the terms of the Mortgage Facility or in the ordinary
course of business consistent with the past practice of Debtor.
5.2. Liens. Except as otherwise required under the terms of the Mortgage
Facility, Debtor shall keep its Collateral free and clear of any and all liens,
charges, encumbrances, taxes and assessments.
5.3. Taxes. Debtor shall pay, when due, any and all taxes, assessments and
license fees relating to its Collateral.
5.4. Repairs. Debtor shall maintain its Collateral in good repair and
working order at Debtor's cost and expense, normal wear and tear excepted.
Debtor shall promptly notify the Secured Party of any material damage to any of
the Collateral.
5.5. Insurance. Debtor shall keep its Collateral insured against loss by
fire, theft and other casualties in amounts reasonably acceptable to the Secured
Party. Upon the request of the Secured Party, Debtor shall cause the Secured
Party to be named as a loss payee on all policies providing such insurance and
shall furnish the Secured Party with a certificate of insurance as evidence
thereof and a copy of such policies. Upon the request of the Secured Party,
Debtor shall cause to be added to any such insurance policy a clause requiring
the Secured Party to be notified by the applicable insurance company of any
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cancellation or lapse of any such policy at least ten days in advance of any
such cancellation or lapse.
5.6. Change of Location. Debtor shall give at least 30 days' prior written
notice to the Secured Party of the opening of a new place of business where any
of its Collateral or books or records relating thereto are to be located, of any
change in the location of any of the Inventory or Equipment (other than goods in
transit) from that listed in Exhibit B hereto, and of any change in the location
of its chief executive office and principal place of business from that set
forth in Exhibit A hereto.
5.7. Inspection and Verification of Books, Records and Collateral. The
Secured Party or any third party designated by its shall have the right, but
shall not have the obligation, at any reasonable time, without hindrance or
delay, at the Secured Party's expense: (a) to inspect, audit and examine such
books, records and accounts of Debtor relating to the Collateral and to make
copies thereof and extracts therefrom: (b) to make such verification concerning
the Collateral as it may consider reasonable under the circumstances; and (c) to
discuss the business, properties, operations, prospects and condition (financial
or otherwise) of Debtor and its subsidiaries, if any, with its officers.
5.8. Safekeeping of Equipment and Inventory. The Secured Party shall not be
responsible for: (i) the safekeeping of the Equipment, Inventory or other
Collateral; (ii) any loss or damage to the Equipment, Inventory or other
Collateral; (iii) any diminution in the value of the Equipment, Inventory or
other Collateral; or (iv) any act or default of any repairman, bailee or other
person or entity ("Person") with respect to the Equipment, Inventory or other
Collateral. Any and all risks of loss, damage, destruction or diminution in
value of the Equipment, Inventory or other Collateral shall be borne solely by
Debtor.
5.9. Maintenance of Security Interests. Subject to the rights of Mortgagee
under the Mortgage Facility, Debtor shall do any and all acts and things, and
will execute and deliver, all instruments (including without limitation, an
assignment of Tenancy Interests, an assignment of trademarks, any mortgages,
pledges, assignments, security agreements, financing statements, continuation
statements and other similar items) reasonably requested by the Secured Party to
establish, perfect, maintain and continue the perfection and priority of the
security interest of the Secured Party in the Collateral. Debtor authorizes
Secured Party to file financing statements describing the Collateral.
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ARTICLE VI
REMEDIES
6.1. Rights and Remedies Generally.
(a) Upon the occurrence of an Event of Default, and subject to the terms of
the Loan Agreement and the Note, the Secured Party shall be entitled to
exercise, in addition to any and all rights and remedies contained in this
Agreement and any and all other agreements with Debtor, any and all of the
rights and remedies available to a secured party under the UCC or applicable
law, including, without limitation:
(i) without notice, demand or legal process, to enter upon any premises of
Debtor and take possession of any of the Collateral and the books and records of
Debtor constituting Collateral or relating to the Collateral;
(ii) require Debtor to assemble, at such Debtor's expense, any and all of
the Inventory and Equipment at reasonably convenient location(s) designated by
the Secured party, including the premises of Debtor, and to make the same
available to the Secured Party and reasonably cooperate in all material respects
in connection with the Secured Party's rights hereunder; and
(iii) to sell, lease, transfer, endorse, assign or deliver the whole or any
part of the Collateral at any public or private sale. Upon consummation of any
such sale, the Secured Party shall have the right to assign, transfer, endorse
and deliver to the purchaser or purchasers thereof the Collateral or any portion
thereof so sold. Each such purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of Debtor.
(b) Debtor hereby irrevocably appoints the Secured Party as its
attorney-in-fact (which appointment shall be irrevocable and deemed coupled with
an interest), with full authority in the place and stead of Debtor and in the
name of Debtor or otherwise, from time to time after an Event of Default has
occurred, to take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to:
(i) obtain and adjust insurance required to be paid to the Secured Party
pursuant to this Agreement;
(ii) ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;
(iii) receive, endorse, and collect any drafts or other Instruments,
Documents and Chattel Paper in connection with clause (a) or (b) of this
Paragraph 6.1(b);
(iv) prepare, execute and file appropriate UCC financing statements; and
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(v) file any claims or take any action or institute any proceedings which
the Secured Party may deem necessary or desirable for the collection of any of
the Collateral or the assignment or other transfer of the Collateral in
connection with the exercise of the Secured Party's remedies under this
Agreement.
Notwithstanding the foregoing, such appointment (other than the appointment
in clause (iv) of this Paragraph 6.1(b)) shall be effective only upon an Event
of Default and then only if and to the extent necessary to permit the Secured
Party the practical realization of rights and remedies granted under this
Agreement.
(c) The Secured Party shall give the Debtor at least ten days' written
notice (which the Debtor agrees is reasonable notification within meaning of the
applicable sections of the UCC) of the Secured Party's intention to attempt to
make any such public or private sale of Collateral. Such notice, in the case of
public sale, shall state the time and place for such sale (which may be on the
premises of Debtor). Any public sale of any of the Collateral shall be held at
such time or times within ordinary business hours and at such place or places as
the Secured Party may fix and so state in the notice of such sale. At any such
sale, the Collateral or any portion thereof may be sold in its entirety or in
separate parcels, as determined by the Secured Party (in its sole discretion).
The Secured Party may, without any notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. As an
alternative to exercising the power of sale herein conferred upon it, the
Secured Party may proceed by action at law or in equity to foreclose the
security interest created under this Agreement and sell the Collateral or any
portion thereof pursuant to judgment or decree of a court or courts having
competent jurisdiction.
6.2. Disposition of Collateral. The net proceeds realized by the Secured
Party upon any sale or other disposition, after deduction for any and all actual
and reasonable expenses incurred in connection with the retaking, holding,
preparing for sale or selling of the Collateral (including, without limitation,
reasonable attorneys' fees and disbursements) shall be applied toward
satisfaction of the Obligations. The Secured party shall pay to Debtor any
surplus realized upon such sale or other disposition. Debtor shall remain liable
for any deficiency. The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency shall not affect the
Secured Party's security interest in the Collateral. Debtor agrees that the
Secured Party shall not be under any obligation whatsoever at any time to
collect, attempt to collect, protect or enforce its Collateral or any security
therefor (which Debtor agrees to do at its own expense), but the Secured Party
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may do so in its sole discretion at any time after the occurrence and during the
continuation of an Event of Default and at such times the Secured Party shall
have the right to take any steps by judicial process or otherwise to enforce the
Collateral or any security therefor.
6.3. Waiver of Notice. Debtor waives any and all rights to notice of any
kind prior to the exercise by the Secured Party of its rights to take possession
of the Collateral without judicial process.
ARTICLE VII
MISCELLANEOUS
7.1. Secondary Security Interest; Senior Indebtedness. Notwithstanding
anything to the contrary contained in this Agreement, the Note and the Loan
Agreement, the security interest granted to the Secured Party in the Collateral
shall remain secondary in all respects, regardless of the date of perfection, to
any security interest (a) granted to Mortgagee under the Mortgage Facility and
(b) to be granted to the holders of Senior Indebtedness (as such term is defined
in the Note). In addition, notwithstanding to the contrary contained in this
Agreement, the Note and the Loan Agreement, the security interest granted to the
Secured Party in the Collateral shall be subordinated and junior in the right of
collection to all Senior Indebtedness as set forth in the Note.
7.2. Law. This Agreement is governed by the internal laws of the State of
New York, without giving effect to any laws or principles that would apply the
laws of any other jurisdiction. Each party to this Agreement irrevocably
consents to the non-exclusive jurisdiction of the state and federal courts
located in Nassau County, New York.
7.3. Waivers, Amendments; Assignments. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the parties. This Agreement and all
obligations of the Debtor hereunder shall be binding upon the successors and
assigns of the Debtor, and shall, together with the rights and remedies of the
Secured party hereunder, inure to the benefit of the Secured Party and its
successors and assigns. The rights, benefits, duties and obligations of (a) the
Debtor under this Agreement may not be assigned by Debtor without the Secured
Party's prior written consent and (b) the Secured Party under this Agreement may
be assigned without the consent of the Debtor.
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7.4. Notices. All notices and other communications called for or required
by this Security Agreement shall be in writing to the respective parties and
given as provided in Section 5.6 of the Loan Agreement.
7.5. Entire Agreement. This Agreement constitutes the entire agreement
between the parties regarding the subject matter contained herein and supersedes
all prior and contemporaneous undertakings and agreements of the parties,
whether written or oral, with respect to the subject matter herein.
IN WITNESS WHEREOF, the parties have executed or caused to be executed this
Security Agreement as of the date first above written.
Xxxxxx Financial Corporation
By: /s/ Xxxxxxxx Xxxxx
-------------------------
Xxxxxxxx Xxxxx, President
/s/ Xxxxx Xxxxx
------------------------
Dr. Xxxxx Xxxxx
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EXHIBIT A
Chief Executive Office and Principal Place of Business
Chief Executive Office: 000 Xxx Xxxxxxx Xxxx - Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Principal Place of Business: 000 Xxx Xxxxxxx Xxxx - Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
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EXHIBIT B
Locations of Inventory and Equipment
000 Xxx Xxxxxxx Xxxx - Xxxxxx Xxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
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