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EXHIBIT 10.16
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made this 5th
day of October, 1995, by FALCONITE, INC., an Illinois corporation ("Borrower"),
in favor of CITIZENS BANK & TRUST COMPANY OF PADUCAH ("Secured Party").
WITNESSETH:
WHEREAS, Borrower and Secured Party are herewith entering into
that certain Revolving Credit and Term Loan Agreement dated the date hereof (as
the same may from time to time be amended, modified, extended or renewed, the
"Loan Agreement"; all capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings ascribed to them in the Loan
Agreement); and
WHEREAS, as a condition precedent to Secured Party entering
into the Loan Agreement, Secured Party has required that Borrower execute and
deliver this Agreement to Secured Party; and
WHEREAS, in order to induce Secured Party to enter into the
Loan Agreement, Borrower has agreed to execute and deliver this Agreement to
Secured Party;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower hereby covenants and agrees with Secured Party as
follows:
1. Defined Terms. Unless the context otherwise requires, the
following terms as used in this Agreement shall have the following meanings:
"Account Debtor" shall have the meaning assigned to such term
in Section 5(d) hereof.
"Accounts" shall have the meaning assigned to such term in the
UCC.
"Agreement" shall have the meaning assigned to such term in
the preamble hereof.
"Books and Records" shall have the meaning assigned to such
term in Section 2(j) hereof.
"Borrower" shall have the meaning assigned to such term in the
preamble hereof.
"Chattel Paper" shall have the meaning assigned to such term
in the UCC.
"Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
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"Equipment" shall have the meaning assigned to such term in
the UCC.
"Event of Default" shall have the meaning assigned to such
term in Section 7 hereof.
"Fixtures" shall have the meaning assigned to such term in the
UCC.
"General Intangibles" shall have the meaning assigned to such
term in the UCC.
"Goods" shall have the meaning assigned to such term in the
UCC.
"Instruments" shall have the meaning assigned to such term in
the UCC.
"Inventory" shall have the meaning assigned to such term in
the UCC.
"Lease" and "Leases" shall have the respective meanings
assigned to such terms in Section 4(a) hereof.
"Lease Payments" shall have the meaning assigned to such term
in Section 4(a) hereof.
"Loan Agreement" shall have the meaning assigned to such term
in the preamble hereof.
"Loan Documents" shall have the meaning assigned to such term
in the Loan Agreement.
"Secured Party" shall have the meaning assigned to such term
in the preamble hereof.
"UCC" shall mean the Uniform Commercial Code in effect in the
Commonwealth of Kentucky, as amended, except as the Uniform Commercial Code of
other states shall govern lien perfection in those states.
2. Grant of Security Interest. For value received,
Borrower hereby sells, assigns, transfers, conveys and mortgages to Secured
Party, and grants Secured Party a continuing security interest in, all assets
of Borrower, including, without limitation, those assets and properties of
Borrower of the types described below, wherever located, however arising or
created, and whether now owned or existing or hereafter arising, created or
acquired (collectively, the "Collateral"):
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(a) all Accounts, including, without limitation (and
regardless of whether the same fall within the
definition of Accounts), all accounts, lease
payments, rental payments, lease rights, contract
rights and other forms of obligation and other rights
to the payment of money, and all goods whose sale,
lease, rental or other disposition by Borrower have
given rise to Accounts and have been returned to or
repossessed or stopped in transit by Borrower;
(b) all Chattel Paper, including, without limitation (and
regardless of whether the same fall within the
definition of Chattel Paper), all leases, rental
agreements, installment sale agreements, conditional
sale agreements and other chattel paper relating to
or arising out of the sale, rental, lease or other
disposition of any of the assets and properties of
Borrower;
(c) all Equipment, including, without limitation (and
regardless of whether the same fall within the
definition of Equipment), all equipment, machinery,
motor vehicles, trucks, tractors, trailers,
furniture, appliances, furnishings, tools, dies, jigs
and other tangible personal property;
(d) all Fixtures;
(e) all Inventory, including, without limitation (and
regardless of whether the same fall within the
definition of Inventory), all goods held for sale or
lease or furnished or to be furnished under contracts
of service, raw materials, work in process, finished
goods, supplies, goods, incidentals, office supplies
and packaging and shipping materials as well as all
returns of such Inventory;
(f) all Goods;
(g) all Instruments;
(h) all General Intangibles, including, without
limitation (and regardless of whether the same fall
within the definition of General Intangibles), all
contract rights, choses in action, causes of action,
corporate and other business records, inventions,
designs, patents, patent applications, trademarks,
trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, tax refunds,
rights to tax refunds, claims under
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guaranties, security interests or other
security held or granted to secure payment of
contracts by Account Debtors, all rights to
indemnification and all other intangible property of
every kind and nature;
(i) all Instruments, documents, Chattel Paper, Goods,
moneys, securities, drafts and other property of
Borrower now in the possession of and/or at any time
and from time to time hereafter delivered to Secured
Party or its agents, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and
all of Borrower's deposits (general or special),
balances, sums, proceeds and credits with, and any of
its claims against, Secured Party, at any time
existing, together with the increases and profits
received therefrom and the proceeds thereof,
including insurance payable because of loss or damage
thereto and all "deposit accounts", as such term is
defined in the UCC;
(j) all books, records, files, computer programs, data
processing records, computer software, documents and
other information, property or general intangibles,
at any time evidencing, describing or pertaining to,
and all containers and packages for, the property
described or referred to in Subsections (a) through
(i) above (collectively, the "Books and Records");
(k) all accessories, attachments and other additions to,
substitutes and replacements for, and improvements
of, such property described or referred to in
Subsections (a) through (i) above, together with all
tools, parts and appurtenances now or at any time
used in connection therewith; and
(l) all products and proceeds (as defined in the UCC) of
any of the property described above in any form, and
all proceeds of such proceeds, including, without
limitation, all cash and credit balances, all
payments under any indemnity, warranty or guaranty
with respect to any of such property, all awards for
taking by eminent domain, all proceeds of fire or
other insurance, including any refunds of unearned
premiums in connection with any cancellation,
adjustment or termination of any insurance policy,
all proceeds obtained as a result of any legal action
or proceeding with respect to any of such property,
and claims by Borrower
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against third parties for loss or damage to, or
destruction of, any of such property;
to secure the payment of all of the present and future Obligations of Borrower.
3. Representations and Covenants of Borrower. Borrower
hereby represents and warrants to Secured Party, and covenants and agrees with
Secured Party, that:
(a) Borrower is and will remain a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois;
(b) Borrower has full corporate power and authority to
borrow money and obtain letters of credit from Secured Party and to grant to
Secured Party the security interest in the property hereby stated to be
granted;
(c) the officer(s) of Borrower executing this Agreement
have been duly elected and qualified and have been duly authorized and
empowered to execute, deliver and perform the terms of this Agreement on behalf
of Borrower;
(d) the execution, delivery and performance of this
Agreement by Borrower do not and will not violate any of the terms or
provisions of the Articles of Incorporation or By-Laws of Borrower;
(e) the execution, delivery and performance of this
Agreement by Borrower do not and will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to Borrower or the terms of any indenture,
agreement, document, instrument or undertaking to which Borrower is a party or
by which it is bound;
(f) Borrower's chief executive office and principal place
of business and the location of the only office where it keeps its Books and
Records is that given at the end of this Agreement and all other places of
business of Borrower are listed on Exhibit A attached hereto and incorporated
herein by reference; and Borrower's registered office in the Commonwealth of
Kentucky is located at 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000;
(g) unless otherwise consented to in writing by Secured
Party, all of the Collateral (other than Inventory which is in the possession
of a lessee under a Lease) (i) is and will be kept solely at Borrower's
principal place of business or at one of the other locations of Borrower listed
on Exhibit A attached hereto and incorporated herein by reference (if mobile
equipment or equipment of a type normally used in more than one location,
remaining there
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when not in use), (ii) will not be attached or affixed in any manner to or
become a part of any real estate or other personal property apart from other
items of the Collateral and (iii) is in the exclusive possession and control of
Borrower;
(h) Borrower is, or, as to Collateral acquired after the
date hereof, will be, the sole and absolute owner of the Collateral, free and
clear of any and all liens, claims, security interests and encumbrances of any
kind or nature whatsoever other than the security interest granted hereby and
other Permitted Liens, and Borrower will defend the Collateral against all
claims and demands of all persons at any time claiming the same or any interest
therein;
(i) no financing statement (other than any filed on
behalf of Secured Party or any filed with respect to Permitted Liens) covering
any of the Collateral is or will be on file in any public office at any time
during the term of this Agreement;
(j) Borrower will not, without the prior written consent
of Secured Party, sell, transfer, lease or otherwise dispose of or offer to
dispose of any of the Collateral or any interest therein (other than Leases
entered into by Borrower in the ordinary course of its business and sales of
Inventory by Borrower in the ordinary course of its business);
(k) Borrower will at all times keep the Collateral
consisting of Inventory or Equipment or cause the Collateral consisting of
Inventory or Equipment to be kept in first class order and repair, excepting
any loss, damage or destruction which is fully covered by proceeds of
insurance, and will not use the Collateral or permit the Collateral to be used
in violation of any law, rule, regulation, ordinance or insurance policy;
(l) Borrower will pay promptly when due all taxes and
assessments on the Collateral or for its use or operation or upon this
Agreement or any of the Borrower's Obligations or with respect to the
perfection of any security interest or other lien hereunder (except as
otherwise provided by law);
(m) Borrower will at all times keep all of the Collateral
of an insurable nature insured or cause all of the Collateral of an insurable
nature to be insured against loss, damage, theft and other risks, in such
amounts, with such companies and under policies in such form, all as shall be
satisfactory to Secured Party. Such policies of insurance shall contain an
endorsement acceptable to Secured Party naming Secured Party as loss payee as
its interests may appear. Such endorsement, or an independent instrument
furnished to Secured Party, shall provide that the insurance companies will
give Secured Party at least thirty (30) days written notice before any such
policy or policies of insurance shall be amended or cancelled and that no act
or
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default of Borrower, any lessee under any Lease or any other person shall
affect the right of Secured Party to recover under such policy or policies of
insurance in the event of any loss of or damage to any of the Collateral.
Borrower hereby directs all insurers under such policies of insurance to pay
all proceeds payable thereunder directly to Secured Party as its interest may
appear. So long as no Event of Default under this Agreement and no event which
with the passage of time or the giving of notice or both would constitute an
Event of Default under this Agreement has occurred and is continuing, all
insurance proceeds received by Secured Party on account of any loss of or
damage to any of the Collateral involving a total claim of less than
$25,000.00, after deducting therefrom the reasonable charges and expenses paid
or incurred in connection with the collection and disbursement of said
proceeds, may, at the option of Borrower, either be used and applied for the
sole purpose of paying the cost of repair, restoration or replacement of the
Collateral damaged or destroyed, or be applied to the payment of the Borrower's
Obligations in such order and manner as Secured Party may elect. All insurance
proceeds received by Secured Party on account of any loss of or damage to any
of the Collateral involving a total claim in an amount equal to or in excess of
$25,000.00, after deducting therefrom the reasonable charges and expenses paid
or incurred in connection with the collection and disbursement of said
proceeds, shall be applied to the payment of the Borrower's Obligations in such
order and manner as Secured Party may elect unless otherwise consented to in
writing by Secured Party. If any Event of Default under this Agreement or any
event which with the passage of time or the giving of notice or both would
constitute an Event of Default under this Agreement has occurred and is
continuing, all insurance proceeds received or held by Secured Party on account
of any loss of or damage to any of the Collateral, after deducting therefrom
the reasonable charges and expenses paid or incurred in connection with the
collection and disbursement of said proceeds, shall be applied to the payment
of the Borrower's Obligations in such order and manner as Secured Party may
elect unless otherwise consented to in writing by Secured Party. Borrower
irrevocably makes, constitutes and appoints Secured Party (and all officers,
employees or agents designated by Secured Party) as Borrower's true and lawful
attorney (and agent-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of Borrower on any
check, draft, instrument or other item of payment of the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. In the event Borrower at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium in whole or in part relating
thereto, then Secured Party, without waiving or releasing any obligation or
default by Borrower hereunder, may at any time or times thereafter (but shall
be under no obligation to do so) obtain and maintain such policies of insurance
and pay such premium and take any other action with respect thereto which
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Secured Party deems advisable. All sums so disbursed by Secured Party,
including, without limitation, reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be part of the Borrower's
Obligations, payable by Borrower to Secured Party on demand;
(n) Borrower will permit Secured Party to examine,
inspect and/or audit the Collateral or any part thereof, wherever located, at
any reasonable time or times;
(o) Borrower will not (i) change the location of its
principal place of business and chief executive office, (ii) change the
location of any of its other places of business, (iii) establish any additional
places of business, (iv) change its registered office in the Commonwealth of
Kentucky, (v) change the location of any of its Books and Records, unless (A)
such office or location is located within the continental United States of
America and (B) Borrower gives Secured Party thirty (30) days prior written
notice of the same, and, prior to making any such change or establishing any
such new location, Borrower agrees to execute or obtain any and all additional
Uniform Commercial Code financing statements, mortgagee waivers, bailee
waivers, landlord waivers, warehousemen waivers and other documents or notices
as may be required by Secured Party;
(p) as of the date of this Agreement, none of the
Collateral (including, without limitation, none of the Collateral which is in
the possession of a lessee under a Lease) is situated at any location other
than (A) Borrower's principal place of business, (B) one of the other locations
of Borrower listed on Exhibit A attached hereto and incorporated herein by
reference or (C) one of the jurisdictions listed on Exhibit B attached hereto
and incorporated herein by reference; provided, however, that it shall not be a
breach of this representation and warranty if (1) the aggregate fair market
value of all of the Collateral not so located does not exceed the sum of
$200,000.00 and (2) Borrower does not now have notice or actual knowledge that
any of the Collateral is not so located. Borrower will, within five (5) days
after the date thereof, notify Secured Party in writing of any Collateral
(including, without limitation, any Collateral which is in the possession of a
lessee under a Lease) which is or becomes located at any location other than
(A) Borrower's principal place of business, (B) one of the other locations of
Borrower listed on Exhibit A attached hereto and incorporated herein by
reference or (C) one of the jurisdictions listed on Exhibit B attached hereto
and incorporated herein by reference; provided, however, that Borrower's
failure to comply with the provisions of this sentence shall not constitute an
Event of Default under this Agreement if (1) the aggregate fair market value of
all Collateral so located and with respect to which Borrower has not timely
given Secured Party the required notice does not exceed the sum of $200,000.00
and (2) Borrower gives Secured Party the required notice within
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five (5) days after Borrower obtains notice or actual knowledge of any
Collateral being so located;
(q) if any Event of Default under this Agreement or any
event which with the passage of time or the giving of notice or both would
constitute an Event of Default under this Agreement has occurred and is
continuing, if requested by Secured Party, Borrower will immediately (i)
conspicuously xxxx each original of each Lease with the following legend "THIS
LEASE HAS BEEN ASSIGNED BY FALCONITE, INC. TO CITIZENS BANK & TRUST COMPANY OF
PADUCAH, PURSUANT TO A SECURITY AGREEMENT DATED OCTOBER 5, 1995" and deliver a
copy of each Lease (as so marked) to Secured Party and/or (ii) deliver
possession of all originals of each of the Leases to Secured Party, as
requested by Secured Party;
(r) if any Event of Default under this Agreement or any
event which with the passage of time or the giving of notice or both would
constitute an Event of Default under this Agreement has occurred and is
continuing, if requested by Secured Party, Borrower will immediately assign to
Secured Party (pursuant to Uniform Commercial Code assignments in recordable
form) all Uniform Commercial Code financing statements relating to Inventory
which is subject to a Lease and which have been signed by the lessee(s), as
debtor(s), in favor of Borrower, as secured party;
(s) if any of the Accounts is evidenced by a promissory
note or other Instrument, Borrower will, unless Secured Party otherwise agrees
in writing, endorse such promissory note or other Instrument "Pay to the order
of Citizens Bank & Trust Company of Paducah" and deliver the original(s) of
such promissory note or other Instrument to Secured Party;
(t) Borrower will from time to time, at its own expense,
execute, deliver and file such Uniform Commercial Code financing and
continuation statements and such amendments thereto and such other agreements,
documents and instruments and do such other acts and things as may be necessary
or as Secured Party may from time to time request, to establish and maintain a
valid and perfected first priority security interest in the Collateral in favor
of Secured Party (subject only to Permitted Liens) to secure the payment of the
Borrower's Obligations, including, without limitation, the execution and filing
of applications for certificates of title naming Secured Party as first
lienholder and the delivery of the originals of such certificates of title to
Secured Party. Borrower hereby authorizes Secured Party to file one or more
Uniform Commercial Code financing or continuation statements or amendments
thereto relating to all or any part of the Collateral without the signature of
Borrower where permitted by law; provided, however, that nothing in this
Agreement shall relieve Borrower of its obligation to file all necessary
Uniform Commercial Code financing and continuation statements and amendments
thereto in order to
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perfect and protect the security interest granted to Secured Party under this
Agreement;
(u) Borrower will reimburse Secured Party upon demand for
(A) all costs and expenses incident to perfecting, maintaining or terminating
the security interest granted hereby, including filing and recording fees, fees
for obtaining and transferring certificates of title and all taxes and legal
and other out-of-pocket fees and expenses paid or incurred by Secured Party in
connection with any of the foregoing and (B) all costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses, incurred by
Secured Party in seeking to collect or enforce any rights under this Agreement
or incurred by Secured Party in seeking to collect or enforce any of the
Borrower's Obligations;
(v) Borrower does not now and will not any time during
the term of this Agreement conduct business under any fictitious business name
or trade name;
(w) Borrower will from time to time, as Secured Party may
request, prepare and deliver to Secured Party at Borrower's expense (i)
schedules identifying each Account and each Lease and (ii) such additional
schedules, certificates, test verifications and reports respecting the
Collateral, the Leases and the proceeds thereof as Secured Party may request.
Any such schedule, certificate or report shall be executed by a duly authorized
officer of Borrower and shall be in such form and detail as Secured Party may
specify. Any such schedule identifying any Account shall be accompanied (if
Secured Party so requests) by the originals or true and correct copies (as
Secured Party requests) of the invoice and other documents evidencing such
Account and evidence of shipment or performance;
(x) based on the locations of Borrower's offices and
places of business and the location of the Collateral (including, without
limitation, any Collateral which is in the possession of a lessee under a
Lease), Exhibit C attached hereto and incorporated herein by reference sets
forth a complete list of all of the offices where Uniform Commercial Code
financing statements must be filed in order to perfect the Secured Party's
security interest in the Collateral to the extent such security interest can be
perfected by the filing of Uniform Commercial Code financing statements under
the Uniform Commercial Codes of the applicable states;
(y) as of the date hereof, the fair market value of all of the
Collateral located in the State of Tennessee does not exceed Seven Percent
(7.0%) of the total fair market value of all of the Collateral. Borrower will
not, without the prior written consent of Secured Party (which consent shall
not be unreasonably withheld) permit the fair market value of all of the
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Collateral located in the State of Tennessee to at any time exceed Seven
Percent (7.0%) of the total fair market value of all of the Collateral;
(z) there has been no change in the name of Debtor, or
the name under which Debtor conducts its business, within the five (5) years
preceding the date of execution of this Agreement. Borrower will give Secured
Party thirty (30) days' advance written notice prior to changing its name and,
prior to making any such change, Borrower agrees to execute and/or obtain any
and all additional financing statements and other documents or notices as may
be required by Secured Party; and
(aa) Borrower will not use the Collateral illegally and,
whenever any of the Collateral includes obligations of third parties to
Borrower, such Collateral shall conform to the requirements of all applicable
federal and state consumer credit and/or leasing laws and other applicable laws
and Borrower shall hold Secured Party harmless and indemnify Secured Party for
any costs, losses or expenses incurred by Secured Party, including, without
limitation, attorneys' fees and expenses, arising from any illegality in
connection with the Collateral.
4. Assignment of Leases. (a) Borrower hereby assigns,
transfers and sets over unto Secured Party all of Borrower's now owned and/or
hereafter acquired right, title and interest in, to and under any and all
present and future leases agreements and rental agreements under which Borrower
is the lessor (hereinafter individually referred to as a "Lease" and
collectively referred to as the "Leases"). From and after the occurrence of
any Event of Default under this Agreement, (i) Secured Party shall have the
immediate and exclusive right to (A) notify the lessee(s) under the Leases that
the Leases have been assigned to Secured Party and to receive and collect all
rents and other sums payable to or receivable by Borrower from the lessee(s)
under or pursuant to the provisions of the Leases, whether as rent, late fees,
interest, casualty payments, indemnity payments, liquidated or unliquidated
damages or otherwise (such moneys being hereinafter collectively referred to as
the "Lease Payments") and (B) receive possession of the Inventory subject to
the Leases upon the expiration, termination or cancellation of the Leases and
(ii) Secured Party shall have the immediate and exclusive right to make all
agreements, grant all waivers, give all notices, consents and releases, take
all actions upon the occurrence of any default or event of default under any of
the Leases and to do any and all other acts and things whatsoever which
Borrower is or may become entitled to do under the Leases, including, without
limitation, the right, power, privilege and authority to (A) enforce payment of
any and all sums of money payable under or with respect to the Leases, (B)
enforce the due and prompt performance by any Person obligated to Borrower of
each and every term, provision, covenant and condition contained in the Leases,
(C) institute any suit, action
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or other proceeding at law or in equity to enforce the Leases and (D) enforce
any right or remedy which Borrower has or may have or be entitled to under the
provisions of the Leases.
(b) This Agreement shall not transfer to or impose upon
Secured Party or subject Secured Party to any of the obligations, duties,
warranties, covenants, undertakings or liabilities of Borrower to any person
under the terms of any of the Leases, and this Agreement shall not affect,
modify, relieve or release Borrower from any of its obligations, duties,
warranties, covenants, undertakings and/or liabilities under the terms of any
of the Leases, it being understood that, notwithstanding this Agreement, all of
such obligations, duties, warranties, covenants, undertakings and liabilities
of Borrower under or with respect to the Leases shall be and remain enforceable
by the parties thereto against, and only against, Borrower and not against
Secured Party, it being further understood that this Agreement is executed as
security for the Borrower's Obligations, and that Secured Party has not assumed
and shall not be deemed to have assumed any of the Leases or any obligation,
duty or liability of Borrower thereunder.
(c) Borrower agrees that this assignment is irrevocable,
and Borrower will not, while this assignment is in effect, assign any of the
present or future rentals or other payments, revenues or income under any of
the Leases to any other Person; and any such assignment inconsistent herewith
shall be void. Borrower covenants and agrees to perform all of its obligations
and duties under the Leases and to pay all expenses of collecting all sums due
Borrower under the Leases whether incurred by Borrower or Secured Party.
(d) The costs of collection and enforcement of the
Leases, including, without limitation, attorneys' fees and expenses, shall be
borne solely by Borrower whether the same are incurred by Secured Party or by
Borrower. Borrower will keep and maintain at its expense satisfactory and
complete records of the Leases, including, without limitation, a record of all
payments received, all credits granted thereon and all other dealings
therewith.
5. Collection, Preservation and Disposition of
Collateral.
(a) So long as no Event of Default under this Agreement
and no event which with the passage of time or the giving of notice or both
would constitute an Event of Default under this Agreement has occurred and is
continuing, Borrower may have possession of the Equipment and use the same in
any lawful manner not inconsistent with this Agreement or any policy of
insurance covering any of the Equipment.
(b) So long as no Event of Default under this Agreement
and no event which with the passage of time or the giving of notice
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or both would constitute an Event of Default under this Agreement has occurred
and is continuing, Borrower may, in the ordinary course of its business, at its
own expense, sell, lease or furnish under contracts for service any of the
Inventory normally held by Borrower for such purpose, and use and consume, in
the ordinary course of its business, any raw materials, work in process or
materials normally held by Borrower for such purpose.
(c) Borrower covenants and agrees to, at its own expense,
use its best efforts to collect, as and when due, all amounts due with respect
to Accounts and Lease Payments.
(d) So long as no Event of Default under this Agreement
and no event which with the passage of time or the giving of notice or both
would constitute an Event of Default under this Agreement has occurred and is
continuing, Borrower may grant, in the ordinary course of business, to any
party obligated on any Account or any Lease Payment (an "Account Debtor"), any
rebate, refund or allowance to which such party may be lawfully entitled, and
may accept, in connection therewith, the return of goods, the sale or lease of
which shall have given rise to such Account or Lease Payment. From and after
the occurrence of any Event of Default under this Agreement, Secured Party may
notify any Account Debtor to make payment to Secured Party (or to a lock box or
bank account controlled by Secured Party) of all amounts due or to become due
under any Account or Lease Payment and enforce collection of any of the
Accounts and/or Lease Payments by suit or otherwise and surrender, release or
exchange all or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby, all without releasing Borrower from any of its
obligations to Secured Party. Upon request of Secured Party (which request may
be made only after the occurrence of an Event of Default under this Agreement),
Borrower will, at its own expense, notify each Account Debtor to make payment
to Secured Party (or to a lock box or bank account controlled by Secured Party,
as directed by Secured Party) of any amounts due or to become due under all
Accounts and Lease Payments.
(e) Borrower covenants and agrees to forthwith upon
receipt deposit into Borrower's Operating Account at Secured Party in precisely
the form received all cash, checks, drafts, chattel paper and other instruments
or writings for the payment of money (properly endorsed, where required) which
may be received by Borrower at any time in full or partial payment or otherwise
as proceeds of any of the Collateral (including, without limitation, all
collections of Accounts and/or Lease Payments).
6. Additional Actions by Secured Party. Secured Party,
at its option, may from time to time perform any agreement of Borrower
hereunder which Borrower shall fail to perform and take any other action which
Secured Party deems necessary for the
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14
maintenance or preservation of any of the Collateral or its interest therein
(including, without limitation, the discharge of taxes or liens of any kind
against the Collateral or the procurement of insurance or the payment of
warehousing charges, landlord's bills or other charges), and Borrower agrees to
forthwith reimburse Secured Party for all costs and expenses incurred by
Secured Party in connection with the foregoing, together with interest thereon
at a rate per annum equal to the lesser of Two Percent (2%) over and above the
Prime Rate (as defined in the Loan Agreement) (which interest rate shall
fluctuate as and when said Prime Rate shall change) or the highest rate allowed
by law from the date incurred until reimbursed by Borrower. Secured Party may
for the foregoing purposes act in its own name or that of Borrower and may also
so act for the purposes of adjusting, settling or cancelling any policy of
insurance on the Collateral or endorsing any draft received in connection
therewith, in payment of a loss or otherwise, for all of which purposes
Borrower hereby grants to Secured Party its power of attorney, irrevocable
during the term of this Agreement.
7. Defaults. The occurrence of any of the following
events or conditions shall constitute an "Event of Default" hereunder: (a)
non-payment of any principal of, interest on or other amount with respect to
any of the Borrower's Obligations as and when the same shall become due and
payable, whether by reason of demand, maturity, acceleration or otherwise; (b)
default by Borrower in the due performance or observance of any of the terms,
provisions, covenants or agreements contained in Sections 3(g), 3(h), 3(i),
3(j), 3(m), 3(n), 3(o), 3(p), 3(q), 3(r), 3(t), 3(v), 3(w), 3(z), 3(aa) or 4(c)
of this Agreement; (c) default by Borrower in the due performance or observance
of any of the other terms, provisions, covenants or agreements contained in
this Agreement and any such default shall remain unremedied for ten (10) days
after the earlier of (i) written notice of default is given to Borrower by
Secured Party or (ii) an officer of Borrower obtaining knowledge of such
default; (d) any representation or warranty made by Borrower in this Agreement
shall prove to be untrue or incorrect in any material respect; or (e) any
"Event of Default" (as defined therein) shall occur under or within the meaning
of the Loan Agreement.
8. Remedies. Upon the occurrence of any Event of
Default: (a) notwithstanding any provision contained in the Loan Agreement or
any of the other Loan Documents to the contrary, Secured Party may, at its
option, declare that the obligation of Secured Party to make Loans under the
Loan Agreement and/or to issue Letters of Credit under the Loan Agreement have
terminated, whereupon such obligations of Secured Party shall be immediately
and forthwith terminated, and Secured Party may, at its option, declare the
entire outstanding principal balance of and all accrued and unpaid interest on
the Notes and all of the other Loans under the Loan Agreement and all of the
other Borrower's Obligations to
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15
be forthwith due and payable, whereupon all of the unpaid principal balance of
and all accrued and unpaid interest on the Notes and all of the other Loans
under the Loan Agreement and all such other Borrower's Obligations shall become
and be immediately due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by
Borrower; (b) whether or not any or all of the Borrower's Obligations are
declared to be forthwith due and payable, Secured Party shall have the right to
take immediate possession of the Collateral covered hereby, and, for that
purpose may pursue the same wherever said Collateral may be found, and may
enter upon any of the premises of Borrower with or without force or process of
law, wherever said Collateral may be or may be supposed to be, and search for
the same, and, if found, take possession of and remove and sell and dispose of
said Collateral, or any part thereof; (c) Secured Party may, at its option,
notify any lessee under any Lease and any Account Debtor with respect to any
Account to make all payments of rent and other amounts under the Leases and the
Accounts directly to Secured Party and demand, collect, receipt for, settle,
compromise, adjust, xxx for, foreclose and realize on the Leases and the
Accounts and all amounts due under the Leases and the Accounts as Secured Party
may determine; (d) Secured Party may, at its option, exercise such of the other
rights and remedies accruing to a secured party under the Uniform Commercial
Code of the relevant state or states and any other applicable law upon default
by a debtor as Secured Party may elect; and (e) Secured Party may, at its
option, enter, with or without process of law and without breach of the peace,
any premises where the Books and Records of Borrower are or may be located, and
without charge or liability on the part of Secured Party therefor seize and
remove said Books and Records from said premises or remain upon said premises
and use the same for the purpose of collecting, preparing and disposing of the
Collateral and/or for the purpose of identifying and locating any of the
Collateral. Borrower shall, upon Secured Party's request, assemble the
Collateral and make the Collateral available to Secured Party at any place
designated by Secured Party which is reasonably convenient to Borrower.
9. Foreclosure. Foreclosure on the Collateral covered
hereby may be had at public or private sale or sales, disposing of such portion
or portions of the Collateral at each such sale, for cash or on credit, on such
terms, at such place or places, and with or without the Collateral being
present at such sale, all as Secured Party in its sole and absolute discretion
shall determine from time to time. In the case of public sale, notice thereof
shall be deemed and held to be adequate and reasonable if such notice shall
appear three (3) times in a newspaper published in the City or County wherein
the sale is to be held, the first such publication being at least ten (10) days
before such sale and the last such publication being not more than three (3)
days before such sale. In the case of a private sale, notice thereof shall be
deemed and held to be adequate and reasonable if such notice shall
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16
be mailed to Borrower at its last known address at least ten (10) days before
such sale. The enumeration of these methods of notice shall not be deemed or
construed to render unreasonable any other method of notice which would
otherwise be reasonable under the circumstances.
10. Application of Proceeds and Deficiency. Secured
Party may apply the net proceeds of any sale, lease or other disposition of any
of the Collateral or of any other collection of the proceeds of any of the
Collateral, after deducting all costs and expenses of every kind incurred
therein or incidental to the retaking, holding, preparing for sale, selling,
leasing or the like of the Collateral on Borrower's premises, or elsewhere, or
in any way related to Secured Party's rights hereunder (including, without
limitation, attorneys' fees and expenses, court costs, bonds and other legal
expenses, insurance, security guard and alarm expenses incurred in connection
with the holding of the Collateral, advertisements of sale of the Collateral,
and rental and utilities expense on the premises or elsewhere in connection
with storage and sale of the Collateral) to the payment, in whole or in part,
of the Borrower's Obligations, whether due or not due, absolute or contingent,
and only after payment by Secured Party of any other amounts required by any
existing or future provision of law (including Section 9-504(1)(c) of the
Uniform Commercial Code or any comparable statutory provision of any
jurisdiction in which any of the Collateral may at the time be located) need
Secured Party account to Borrower for the surplus, if any. The proceeds of any
sale(s), lease(s) or other disposition(s) of any of the Collateral and/or of
any collection(s) of any of the Collateral shall be applied by Secured Party to
the payment or prepayment of the Borrower's Obligations in such order and
manner as Secured Party may elect; and any surplus remaining after the payment
of all of the Borrower's Obligations in full shall be paid to Borrower or to
whomsoever may be lawfully entitled thereto. Borrower shall remain liable to
Secured Party for the payment of any deficiency, with interest.
11. Secured Party's Care of Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if it takes such action for
that purpose as Borrower requests in writing, but failure of the Secured Party
to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and no failure of Secured Party to preserve or
protect any rights with respect to such Collateral against prior parties, or to
do any act with respect to the preservation of such Collateral not so requested
by Borrower, shall be deemed a failure to exercise reasonable care in the
custody or preservation of such Collateral.
12. Amendments; Waivers; Remedies Cumulative. No delay
on the part of Secured Party in the exercise of any right hereunder shall
operate as a waiver thereof and no single or partial exercise
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17
by Secured Party of any right shall preclude other or further exercise thereof
or the exercise of any other right. Each and every right granted to Secured
Party hereunder, under the Loan Agreement and under the other Loan Documents,
or at law or in equity, shall be deemed cumulative and may be exercised from
time to time. Secured Party shall not by any act, delay, omission or otherwise
be deemed to have waived any of its rights or remedies hereunder and no waiver
whatsoever shall be valid unless in writing and signed by Secured Party, and
then only to the extent therein set forth. A waiver by Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which Secured Party would otherwise have on any future
occasion. This Agreement may not be amended except by a writing duly signed by
Borrower and Secured Party. The headings of the paragraphs hereof shall not be
considered in the construction or interpretation of this Agreement.
13. Durable Power of Attorney. Borrower hereby makes,
constitutes and appoints Secured Party the true and lawful agent and
attorney-in-fact of Borrower with full power of substitution (a) if an Event of
Default has occurred, to receive, open and dispose of all mail addressed to
Borrower relating to the Collateral, (b) if an Event of Default has occurred,
to notify and direct the United States Post Office authorities by notice given
in the name of Borrower and to sign on behalf of Borrower, to change the
address for delivery of all mail addressed to Borrower relating to the
Collateral to an address to be designated by Secured Party, and to cause such
mail to be delivered to such designated address where Secured Party may open
all such mail and remove therefrom any notes, checks, acceptances, drafts,
money orders or other instruments included in the Collateral in which Secured
Party has a security interest under the terms of this Agreement, with full
power to endorse the name of Borrower upon any such notes, checks, acceptances,
drafts, money orders, instruments or other documents relating to the Collateral
or security of any kind and to effect the deposit and collection thereof, and
Secured Party shall have the further right and power to endorse the name of
Borrower on any documents relating to the Collateral, (c) to sign the name of
Borrower to drafts against its lessees or other debtors, to notices to such
lessees or other debtors, to assignments and notices of assignments, financing
statements or other public records or notices and all other instruments and
documents, (d) to do any and all things necessary and take such actions in the
name and on behalf of Borrower to carry out the intent of this Agreement,
including, without limitation, the grant of the security interest granted under
this Agreement and to perfect and protect the security interest granted to
Secured Party in respect to the Collateral and Secured Party's rights created
under this Agreement. Borrower agrees that neither Secured Party nor any of
its agents, designees or attorneys-in-fact will be liable for any acts of
commission or omission (other than for acts of commission or omission which
constitute gross negligence or willful misconduct as
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18
determined by a court of competent jurisdiction in a final, nonappealable
order), or for any error of judgment or mistake of fact or law in respect to
the exercise of the power of attorney granted under this Section. The power of
attorney granted under this Section shall be irrevocable during the term of
this Agreement.
14. Notices. All notices provided for in this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally or when deposited in the United States mail, registered or certified
mail, return receipt requested and postage prepaid, addressed as follows, or to
such other address as may hereafter be designated in writing by the respective
parties hereto: if to Secured Party to 000 Xxxxxxxx, Xxxxxxx, Xxxxxxxx 00000,
Attention: Commercial Lending Department, and if to Borrower, to the address of
the principal place of business of Borrower listed at the end of this
Agreement.
15. Applicable Law and Severability. It is the intention
of the parties hereto that this Agreement is entered into pursuant to the
provisions of the UCC. Any applicable provisions of the UCC, not specifically
included herein, shall be deemed a part of this Agreement in the same manner as
if set forth herein at length; and any provisions of this Agreement that might
in any manner be in conflict with any provision of the UCC shall be deemed to
be modified so as not to be inconsistent with the UCC. In all respects this
Agreement and all transactions, assignments and transfers hereunder, and all
the rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the Commonwealth of
Kentucky (without reference to conflict of law principles). To the extent any
provision of this Agreement is not enforceable under applicable law, such
provision shall be deemed null and void and shall have no effect on the
remaining portions of this Agreement.
16. Successors and Assigns; Other Borrower's Obligations;
Duration of Security Interest. This Agreement shall be binding upon and inure
to the benefit of Borrower and Secured Party and their respective successors
and assigns; provided, however, that Borrower may not assign any of its rights
or delegate any of its obligations under this Agreement. This Agreement shall
continue in full force and effect and the security interest granted hereby and
all of the representations, warranties, covenants and agreements of Borrower
hereunder and all of the terms, conditions and provisions hereof relating
thereto shall continue to be fully operative until such time as (a) Borrower
shall have paid or caused to be paid, or otherwise discharged, all of the
Borrower's Obligations, (b) no Letters of Credit shall be outstanding and (c)
there shall be no remaining commitment or obligation of Secured Party to
advance funds or make loans to Borrower or to issue letters of credit for the
account of Borrower under the Loan Agreement or any of the other Loan
Documents. Borrower expressly
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19
agrees that to the extent a payment or payments to Secured Party, or any part
thereof, are subsequently invalidated, declared to be void or voidable or set
aside and are required to be repaid to a trustee, custodian, receiver or any
other party under any bankruptcy act, state or federal law, common law or
equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made.
17. Consent to Jurisdiction; Waiver of Jury Trial.
BORROWER IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY KENTUCKY
STATE COURT OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE WESTERN
DISTRICT OF KENTUCKY (PADUCAH DIVISION), AS SECURED PARTY MAY ELECT, IN ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO SUCH SUIT,
ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS.
BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND BORROWER
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. BORROWER
HEREBY EXPRESSLY WAIVES ALL RIGHTS OF ANY OTHER JURISDICTION WHICH BORROWER MAY
NOW OR HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES.
BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY REGISTERED MAIL
SENT TO BORROWER AT ITS ADDRESS REFERRED TO IN SECTION 14. BORROWER AND
SECURED PARTY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
ACTION IN WHICH BORROWER AND SECURED PARTY ARE PARTIES RELATING TO OR ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
IN THE EVENT ANY OF THE BORROWER'S OBLIGATIONS SECURED HEREBY ARE PAYABLE ON
DEMAND, NEITHER THIS AGREEMENT NOR ANYTHING CONTAINED HEREIN SHALL BE DEEMED TO
ALTER OR IMPINGE UPON THE DEMAND CHARACTER OF SUCH OBLIGATION.
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IN WITNESS WHEREOF, Borrower has executed this Security
Agreement this 5th day of October, 1995.
FALCONITE, INC. (Borrower)
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxx
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Title: President
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Address of Principal Place of Business and Chief Executive Office of
Borrower and Location of Books and Records of Borrower:
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
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