Exhibit 10.41
SECURITY AGREEMENT
THIS AGREEMENT is made as of May 7, 1997, by THE ANTIGUA GROUP, INC., a
Nevada corporation ("Debtor"), to THE CRUTTENDEN XXXX BRIDGE FUND, LLC, a
California limited liability company ("Secured Party").
RECITALS
A. Debtor has executed and delivered to Secured Party that certain note (the
"Note") captioned "Senior Subordinated Secured Note" dated as of the date
hereof, in the original principal amount of $1,020,000.
B. As part of the consideration for the granting of the loan evidenced by the
Note and as additional security therefor, Secured Party has required that Debtor
grant a security interest in the "Collateral" (as defined below) and Debtor
desires to grant such security interest.
NOW, THEREFORE, in consideration of the covenants and promises hereinafter
set forth and other valuable consideration, the parties agree as follows:
1. Definitions. Certain terms used in this Agreement shall have the meaning
set forth below.
"Collateral" means all of Debtor's right, title and interest (whether now
held or hereafter acquired) in and to all personal property (whether tangible or
intangible) described in Exhibit "A" hereto, incorporated herein by reference.
"Event of Default" means (i) an Event of Default as defined in, and
occurring under, that certain Securities Purchase Agreement (the "Securities
Purchase Agreement") of even date herewith by and between Debtor and Secured
Party or (ii) any default by Debtor in the performance of any obligation,
covenant or agreement contained herein.
"Indebtedness" means the indebtedness evidenced by the Note and any other
indebtedness or liability of Debtor to Secured Party now existing or hereafter
arising under the Note.
"Intercreditor Agreement" means the Intercreditor Agreement entered into
concurrently herewith by and among LaSalle Business Credit, Inc. ("LaSalle"),
Xxxxxx X. Xxxxxx, as agent for the shareholders of Debtor ("Xxxxxx"), the
Secured Party, Imperial Bank ("Imperial"), and the Debtor, which provides for
the relative rights and priorities of the various security interests in the
Collateral.
"Permitted Liens" shall bear the same meaning as in the Securities Purchase
Agreement.
"Senior Debt" shall bear the same meaning as in the Securities Purchase
Agreement.
"Subordination Agreement" means the Subordination Agreement entered into
concurrently herewith by and among LaSalle, Dooley, the Secured Party and
Imperial which provides for the relative rights of payment of the indebtedness
of Debtor.
2. Grant of Security Interest. As security for the Indebtedness, Debtor
hereby grants a security interest in the Collateral to Secured Party.
3. Debtor's Representations and Warranties. Debtor represents and warrants
as follows:
(a) Title to Collateral. Except for the security interests granted to
Secured Party under this Security Agreement, and except for Permitted Liens,
Debtor is the sole legal and equitable owner of each item of the Collateral in
which it purports to grant a security interest hereunder, having good,
marketable and insurable title thereto free and clear of any and all liens other
than Permitted Liens.
(b) Location of Collateral. Debtor shall not, without at least thirty
(30) days' prior written notice to Secured Party, (i) change Debtor's name or
place of business (or, if Debtor has more than one place of business, its chief
executive office), or the office in which Debtor's records relative to
receivables are kept, (ii) keep Collateral consisting of chattel paper at any
location other than its chief executive office set forth in item 1 of Exhibit
"B" hereto, and (iii) keep Collateral consisting of equipment or inventory at
any location other than the locations set forth in item 2 of Exhibit B hereto.
(c) Repair and Inspection of Collateral. Debtor shall maintain and
protect its properties, assets and facilities, including without limitation its
equipment and fixtures, in good order and working repair and condition (taking
into consideration ordinary wear and tear) and from time to time make or cause
to be made all needful and proper repairs, renewals and replacements thereto and
shall competently manage and care for its property in accordance with prudent
industry practices. Upon reasonable notice, Debtor shall permit Secured Party or
its agents to inspect all of such property from time to time.
(d) Insurance of Collateral. Debtor shall maintain, with financially
sound and reputable companies, insurance policies insuring (i) its equipment,
fixtures and inventory against loss by fire, explosion, theft and such other
casualties as are usually insured against by companies engaged in the same or
similar businesses and (ii) Debtor and Secured Party against liability for
personal injury and property damage relating to such equipment, fixtures and
inventory. Such policies are to be in such amounts and against at least such
risk as are usually insured against in the same general area by companies of the
same or a similar size engaged in the same or a similar business as Debtor.
Debtor shall give to Secured Party written notice of loss or damage to the
Collateral, and file proofs of loss. Debtor shall not settle or adjust any claim
in excess of $50,000 without the prior written consent of Secured Party.
(e) Payment of Taxes and Fees Assessed Upon Collateral. Debtor shall
pay, when due, all taxes and assessments now or hereafter relating to, or
imposed or assessed upon the Collateral.
(f) No Transfer of Collateral. Debtor shall not voluntarily,
involuntarily, or by operation of law, sell, assign, transfer or otherwise
dispose of the Collateral, or any interest therein, or permit any of the
foregoing to occur, and shall not otherwise do or permit anything to be done or
occur that may impair the Collateral as security hereunder, except that Debtor
may sell its inventory in the ordinary course of business, and, so long as
Debtor has not committed an Event of Default, (i) Debtor may sell or otherwise
dispose of the Collateral when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the conduct of the business of Debtor and (ii) Debtor may
grant non-exclusive licenses (and exclusive licenses within specified geographic
regions) and other similar arrangements for the use of Debtor's property for
good faith business purposes.
(g) Defense of Title to Collateral. Debtor shall defend any proceeding
which may affect title to, or Secured Party's security interest in, the
Collateral, or the first priority of such security interest after that created
with respect to Permitted Liens, and shall indemnify, defend, protect and hold
Secured Party harmless against any and all liability, damages, causes of action
or other costs or expenses, including reasonable attorneys' fees, arising out of
or incurred in connection with or on account of any such proceeding, unless such
proceeding is caused by Secured Party's gross negligence or willful misconduct.
(h) Maintenance of Secured Party's Security Interest. Debtor shall do
all such acts and things as may be necessary or appropriate, or which Secured
Party from time to time or at any time reasonably requests as necessary in its
opinion, to establish and maintain a perfected security interest in the
Collateral, subject to no other liens or encumbrances other than Permitted
Liens; and Debtor shall pay the cost of all filings or recordings of this
Agreement or any other document or instrument in all public offices whenever it
is deemed by Secured Party to be necessary or desirable. Debtor irrevocably
constitutes and appoints Secured Party the attorney-in-fact of Debtor to
execute, deliver and, if appropriate, to file or record with the appropriate
filing officer or office such security agreements, financing statements,
continuation statements or other instruments as Secured Party may
request or require in order to impose, perfect or continue the perfection of,
the lien or security interest created hereby. The foregoing power of attorney is
coupled with an interest and shall survive a Transfer or the dissolution,
bankruptcy, insolvency or termination of Debtor as an entity. Debtor shall not
execute or authorize the filing of any financing statement in favor of any
person or entity other than Secured Party or other than related to the Permitted
Liens.
(i) Provision of Accurate Information. Debtor shall provide to Secured
Party any information it reasonably requires pertaining to the Collateral, the
Indebtedness or the provisions hereof. All information supplied to Secured Party
by or on behalf of Debtor is and shall be true, correct and complete, and Debtor
shall promptly notify Secured Party of any material change in such information
not later than five (5) days after any such change. Debtor shall promptly notify
Secured Party of any event causing loss or depreciation in the value of any
Collateral.
(j) Prompt Payment of Expenses. Debtor shall pay to Secured Party
immediately on demand all expenses (including reasonable attorneys' fees, other
legal expenses and costs and the cost of filing financing statements and any
renewals or extensions thereof) incurred by Secured Party under this Agreement,
with interest at the greater of the interest rate charged on the Note or any
default rate thereunder but not more than the maximum rate allowed by applicable
usury law, from the date of such expenditure.
4. Default: Remedies.
(a) Remedies. Subject to the provisions of the Intercreditor Agreement
and the Subordination Agreement, upon an Event of Default, Secured Party may, at
its option and without notice to Debtor, declare the Indebtedness secured hereby
due and payable pursuant to the terms of the Securities Purchase Agreement and
shall have all of the remedies of a secured party under the Uniform Commercial
Code, including the right and power to sell, or otherwise dispose of, the
Collateral, or any part thereof, at any one or more public or private sales as
permitted by applicable law, at such location as Secured Party may choose, and
for that purpose may take immediate and exclusive possession of the Collateral,
or any part thereof, and with or without judicial process enter upon any
premises on which the Collateral, or any part thereof, may be situated and
remove the same therefrom without being deemed guilty of trespass and without
liability for damages thereby occasioned. At Secured Party's option and demand,
Debtor shall assemble the Collateral and make it available to Secured Party at
the premises of Debtor, or at such other place and at the time designated in the
demand.
(b) Secured Party's Rights to Collateral. Subject to the provisions of
the Intercreditor Agreement and the Subordination Agreement, Secured Party may
hold, maintain, preserve and prepare the Collateral for sale; control, manage,
rent and lease the
Collateral; collect all rents and income from the Collateral and apply the same
in any order of priority to reimburse Secured Party for any costs and expenses
incurred hereunder and to the payment or performance of Debtor's obligations
hereunder, and apply the balance to interest and then to principal of the
Indebtedness secured hereby; or secure the appointment of a receiver of the
Collateral. Secured Party may also render the Collateral unusable, or repair and
renovate the same, and dispose of the Collateral on Debtor's premises. Debtor
expressly waives any right to require an election of remedies by Secured Party
existing after an Event of Default hereunder, except that Debtor shall be
entitled to notice of sale or other disposition of the Collateral, and Debtor
agrees that if such notice is served on Debtor as hereinafter specified a
minimum of five (5) days before the time of sale or disposition, such notice
shall be deemed commercially reasonable and shall fully satisfy any requirement
for giving of such notice. Any person, including Debtor and Secured Party, shall
be eligible to purchase any part or all of such Collateral at any such sale or
disposition. Debtor acknowledges that sales of the Collateral for cash or on
credit to a wholesaler, retailer or user of the Collateral, or at public or
private auction, within the discretion of Secured Party, are all commercially
reasonable. Any disposition made hereunder may be conducted by an employee or
agent of Secured Party.
(c) Stay; Extension. The Debtor agrees (to the extent it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or other law that would prohibit or forgive the Debtor from paying all or a
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereinafter in force, or that may
materially affect the covenants or the performance of this Agreement in a manner
inconsistent with the provisions of this Agreement. The Debtor expressly waives
all benefit or advantage of any such law and agrees not to hinder, delay or
impede the execution of any power granted to Purchaser hereunder, but will
suffer and permit the execution of such power as though no such law has been
enacted. If a court of competent jurisdiction prescribes that the Debtor may not
waive its rights to take the benefit or advantage of any stay or extension law
or any other law in accordance with the prior sentence, then the obligation to
pay interest on the Note shall be reduced to the maximum legal limit under
applicable law governing the interest payable in connection with the Note.
(d) Application of Proceeds. Subject to the provisions of the
Intercreditor Agreement, the Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be distributed by
Secured Party in the following order of priorities:
First, to Secured Party in an amount sufficient to pay in full the reasonable
costs of Secured Party in connection with such sale, disposition or other
realization, including all fees, costs,
expenses, liabilities and advances incurred or made by Secured Party in
connection therewith, including, without limitation, reasonable attorneys' fees;
Second, to Secured Party in an amount equal to the then unpaid principal amount
of and accrued interest and prepayment premiums, if any, on the Note;
Third, to Secured Party in an amount equal to any other Indebtedness which is
then unpaid; and
Finally, upon payment in full of all Indebtedness and upon satisfaction of all
other provisions of the Intercreditor Agreement, to Debtor or its
representatives or as a court of competent jurisdiction may direct.
(e) Assumption of Expenses and Payments. In connection with any Event
of Default, Secured Party may incur expenses, including reasonable attorneys'
fees, expenses and costs, appropriate to the exercise of any right or power
under this Agreement, make any payment agreed to be made by Debtor hereunder,
and perform any obligation of Debtor hereunder, without, however, any obligation
so to do. Any monies expended hereunder by Secured Party, including attorneys'
fees, shall be chargeable, with interest at the greater of the interest rate
then charged on the Note or any default rate thereunder, but not more than the
maximum rate allowed by applicable usury law, to Debtor and become part of the
Indebtedness secured hereby.
(f) Remedies Cumulative. The remedies of Secured Party hereunder are
cumulative and the exercise of any one or more of the remedies provided for
herein, or under the Uniform Commercial Code, shall not be construed as a waiver
of any of the other remedies of the Secured Party, so long as any part of the
Indebtedness remains unsatisfied. The acceptance by Secured Party of this
Security Agreement shall not waive or impair any other security Secured Party
may have or hereafter acquire for the payment of the Indebtedness, nor shall the
taking of any such additional security waive or impair this Agreement, or any
term, covenant or condition herein contained, but Secured Party may resort to
any security it may have in such order it may deem proper. Release of the
security interest hereunder in any or all of the Collateral shall not affect the
liability of any person on the Indebtedness secured hereby.
5. Special Provisions Concerning Trademarks.
(a) Additional Representations and Warranties. The Debtor represents
and warrants that it is the true and lawful exclusive owner of the trademarks
listed in Exhibit "D" hereto, incorporated herein as reference, and that said
listed trademarks constitute all the trademarks registered in the United States
Patent and Trademark Office that the Debtor now owns or uses in connection with
its business. The Debtor represents and warrants that it owns or is licensed to
use all trademark that it uses. The
Debtor further warrants that it is aware of no third party claim that any aspect
of the Debtor's present or contemplated business operations infringes or will
infringe any trademark.
(b) Licenses and Assignments. The Debtor hereby agrees not to divest
itself of any right under a xxxx absent prior written approval of the Secured
Party.
(c) Infringements. The Debtor agrees, promptly upon learning thereof,
to notify the Secured Party in writing of the name and address of, and to
furnish such pertinent information that may be available with respect to, any
party who may be infringing or otherwise violating any of the Debtor's rights in
and to any significant trademark, or with respect to any party claiming that the
Debtor's use of any significant trademark violates any property right of that
party. The Debtor further agrees, unless otherwise directed by the Secured
Party, diligently to prosecute any Person infringing any significant trademark.
(d) Preservation of Trademark. The Debtor agrees to use its
significant trademark in interstate commerce during the time in which this
Agreement is in effect, sufficiently to preserve such trademark as marks or
service marks registered under the laws of the United States
(e) Maintenance of Registration. The Debtor shall, at its own expense,
diligently process all documents required by the Trademark Act of 1946, 15
U.S.C. xx.xx. 1051 et seq. to maintain trademark registration, including, but
not limited to, affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its trademark
pursuant to 15 U.S.C. xx.xx. 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith, and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Required Banks. The Debtor agrees to notify the Secured Party six months prior
to the dates on which the affidavits of use or the applications for renewal
registration are due that the affidavit of use or the renewal is being
processed.
(f) Future Registered Trademark. If any xxxx registration issues
hereafter to the Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office, within 30 days of receipt
of such certificate the Debtor shall deliver a copy of such certificate, and a
grant of security in such xxxx, to the Secured Party, confirming the grant
thereof hereunder, the form of such confirmatory grant to be substantially the
same as the form hereof.
(g) Remedies. Subject to the provisions of the Intercreditor Agreement
and the Subordination Agreement, if an Event of Default shall occur and be
continuing, the Secured Party
may, by written notice to the Debtor, take any or all of the following actions:
(i) declare the entire right, title and interest of the Debtor in and to each of
the trademark, together with all trademark rights and rights of protection to
the same, vested, in which event such rights, title and interest shall
immediately vest, in the Secured Party for satisfaction of the Indebtedness
secured hereby due and payable pursuant to the terms of the Securities Purchase
Agreement, in which case the Debtor agrees to execute an assignment in form and
substance satisfactory to the Secured Party of all its rights, title and
interest in and to the trademark to the Secured Party for satisfaction of the
Indebtedness secured hereby due and payable pursuant to the terms of the
Securities Purchase Agreement; (ii) take and use or sell the trademark and the
goodwill of the Debtor's business symbolized by the trademark and the right to
carry on the business and use the assets of the Debtor in connection with which
the trademark have been used; and (iii) direct the Debtor to refrain, in which
event the Debtor shall refrain, from using the trademark in any manner
whatsoever, directly or indirectly, and, if requested by the Secured Party,
change the Debtor's corporate name to eliminate therefrom any use of any
trademark and execute such other and further documents that the Secured Party
may request to further confirm this and to transfer ownership of the trademark
and registrations and any pending trademark application in the United States
Patent and Trademark Office to the Secured Party.
6. Miscellaneous.
(a) Secured Party's Rights Not Barred. Until the Indebtedness is paid
and performed in full, Secured Party's rights shall continue even if the
Indebtedness, or any portion thereof, is barred by any statute of limitations.
The right of Debtor, if any, to plead any and all statutes of limitation as a
defense to any demand with respect to the Indebtedness is expressly waived by
Debtor, to the full extent permissible by law.
(b) Form and Effect of Waivers. No delay or failure on the part of
Secured Party in exercising any right, privilege or remedy hereunder shall
operate as a waiver of such or any other right, privilege or remedy, and no
waiver whatsoever shall be valid unless in writing, signed by Secured Party and
then only to the extent set forth therein.
(c) Notices. Except when otherwise required by law, all notices
required to be given hereunder shall be served in the manner and at the
addresses specified for the giving of notice in the Securities Purchase
Agreement, and shall, unless otherwise provided by law, be deemed given,
received, made or communicated on the date personal delivery is effected or, if
mailed, on the delivery date or attempted delivery date if refused.
(d) Severability of Terms. If any term of this Agreement, or the
application thereof to any person or circumstance, shall, to any extent, be
declared invalid or
unenforceable, the remainder of this Agreement, or the application of such term
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each such term shall be valid
and enforceable to the fullest extent permitted by law.
(e) Financing Statement. A financing statement (and when requested by
Secured Party, a fixture filing) placing of record the security interest
hereunder shall be executed and delivered by Debtor to Secured Party
contemporaneously herewith, and Secured Party is authorized to file or record
the same.
(f) Construction. The terms and provisions contained herein shall,
unless the context otherwise requires, have the meaning and be construed as
provided in the Uniform Commercial Code. Reference in this Agreement to the
"Uniform Commercial Code" refers to the Uniform Commercial Code as enacted in
the State of California. Whenever the words "including", "includes" or "include"
are used in this Agreement (including any Exhibit hereto), they shall be read as
though the phrase, "without limitation," immediately followed the same.
(g) Successors and Assigns. The terms "Debtor"and"Secured Party"
include and are binding upon the successors and assigns hereof.
(h) Definition of Prompt Notice. The use herein of the words "prompt
notice", or "notify promptly", or "give notice promptly", or "promptly", or
"immediately," or words of similar import, when used with reference to any
notice to be given or act to be undertaken by Debtor, shall mean notice given or
such act performed in any event not later than five (5) days after the
occurrence of the specified event for which notice or action is required, unless
another time period is expressly made applicable.
(i) Amendment in Writing. This Agreement may not be amended, modified
or changed, nor shall any waiver of any provision hereof be effective, except by
an instrument in writing and signed by the party against whom enforcement of any
amendment, change or modification is sought.
(j) Governing Law. This Security Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California
(without regard to conflicts of law), except where federal law is applicable
(including, without limitation, any applicable federal law preempting state
laws).
(k) Chief Executive Office. Debtor hereby represents and warrants that
Debtor's chief executive office is located in Scottsdale, Arizona.
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement to
Secured Party as of the day and year first above written.
"DEBTOR"
THE ANTIGUA GROUP, INC.
a Nevada corporation
By: /s/ Xxxxxx X. Xxxxxxx
Its: Vice President - Finance
EXHIBIT "A"
COLLATERAL
Any of the following, whether now owned or hereafter acquired by Debtor:
a. all present and future rights to payment for goods sold or leased or for
services rendered, whether or not represented by instruments or chattel paper,
and whether or not earned by performance; all present and future rights to
payments arising out of the licensing of computer software and systems; all
accounts, contract rights, chattel paper, instruments and documents, proceeds of
any letter of credit of which Debtor is a beneficiary; all forms of obligations
whatsoever owed to Debtor, including any obligations of any subsidiary or
affiliate of Debtor owed to Debtor, together with all instruments and documents
of title representing any of the foregoing; all rights in any returned or
repossessed goods; all rights, security and guarantees with respect to any of
the foregoing, including, without limitation, any right of stoppage in transit;
together with all property included within the definitions of "accounts",
"chattel papers", "documents" and "instruments" set forth in the Uniform
Commercial Code in effect in the State of California (the "UCC");
b. all goods held or intended for sale or lease by Debtor; or furnished or
to be furnished under contracts of service, all raw materials, work in process,
finished goods, materials and supplies of every nature used or usable in
connection with the manufacture, packing, shipping, advertising or sale of any
such goods, together with all property included within the definition of
"inventory" set forth in the UCC;
c. all choses in action, causes of action and all other intangible property
of every kind and nature, including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, processes, operation manuals, techniques,
trade secrets, goodwill, registrations, copyrights, licenses, franchises,
customer lists, tax refunds, tax refund claims, rights of claims against
carriers and shippers, investments and interests in subsidiaries, leases and
rights to indemnification, together with all property which is included within
the definition of "general intangibles" as set forth in the UCC;
A-1
d. equipment and fixtures, including, without limitation, computer
hardware, computer software, and systems, furniture, machinery, vehicles and
trade fixtures, together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof, together
with all other such items which are included within the definitions of
"equipment" and "fixtures" as set forth in the UCC; and
e. to the extent not otherwise included, all proceeds and products of any
or all of the foregoing.
A-2
EXHIBIT "B"
1. The legal name of Debtor and the address of its chief executive office
is:
The Antigua Group, Inc..
0000 Xxxxx 00xx Xxx
Xxxxxxxxxx, Xxxxxxx 00000
2. Debtor has the following places of business:
Address
0000 Xxxxx 00xx Xxx
Xxxxxxxxxx, Xxxxxxx 00000
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