EXHIBIT 10.16
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") dated as of December 31, 2001 is
entered into by FIBERCORE, USA, INC., a Delaware corporation, (the "Debtor") and
Employees' Retirement System of Alabama, instrumentality of the State of
Alabama, established as a public corporation pursuant to Code of Alabama 1975,
ss.36-27-2, et seq. and Teachers' Retirement System of Alabama, an
instrumentality of the State of Alabama, established as a public corporation
pursuant to Code of Alabama 1975, ss.16-25-2 et seq. having an address at 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx 00000 , individually and collectively as
their interest may appear, their successors and assigns, as secured parties
("Lenders") (the "Secured Party");
WITNESSETH:
WHEREAS, Secured Party, on the date hereof, has advanced and/or agreed to
advance to the Debtor an aggregate principal amount not to exceed TWENTY TWO
MILLION and N0/100 Dollars ($22,000,000.00) pursuant to a Loan Agreement between
Debtor and the Secured Party of even date herewith the terms and provisions of
which are incorporated herein by reference; and
WHEREAS, capitalized terms used in this agreement, unless otherwise
defined herein, shall have the meanings assigned to such terms in the said Loan
Agreement; and
WHEREAS, the Loan is represented by two (2) Promissory Notes (the
"Notes"), executed and delivered by the Debtor to the Secured Party on the date
hereof; and
WHEREAS, the Secured Party has agreed to make the Loan for the purpose of
payment of the up to two-thirds (2/3) of the Project Costs described in the Loan
Agreement on the Real Property described in Exhibit "A" annexed hereto and made
a part hereof; and
WHEREAS, in order to secure the payment of the Loan and the performance of
the obligations and covenants of the Debtor, the Debtor desires to grant unto
the Secured Party a Security Interest in and to the assets described herein in
accordance with the terms and provisions contained herein.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00), in
consideration of the Secured Party extending the Loan to the Debtor, which it
would not have done but for the execution and delivery of this Agreement by
Debtor, and for other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, and in further consideration of
the mutual promises herein contained, the parties agree as follows:
1. Grant of Security Interest. The Debtor does hereby grant to the Secured
Party a Security Interest ("Security Interest"), in and to all of the following,
to secure the performance and payment of the Note and to secure its performance
under the Loan
Agreement and related Security Documents: The Project Equipment, the Architect's
Agreement, the Construction Agreement, the Construction Drawings, all
construction Contracts and Subcontracts, all other Project Documents, and, all
of the tangible personal property now owned, or hereafter acquired, set forth on
Exhibit "B" annexed hereto and made a part hereof, provided, however, that
except for replacements or proceeds of Project Equipment originally acquired in
whole or part with Lenders' funds, Project Equipment shall not include
equipment, machinery or furnishings purchased or financed after Project
Completion solely with funds obtained from sources other than Lenders,.
(collectively hereinafter referred to as the "Collateral").
2. Security Interest in Proceeds. Upon the sale, assignment, exchange or
other disposition of the Collateral, the Security Interest shall, without break
in continuity and without further formality or act, continue in and attach to
all proceeds and products thereof.
3. Covenants of Debtor. The Debtor covenants and warrants as follows:
(a) Location of Equipment. The Debtor's primary place of business shall
be at the site of the Project in Auburn, Alabama.
(b) Control of Collateral. The Collateral shall remain in Debtor's
possession and control at all times at Debtor's risk of loss.
(c) Condition of Collateral and Maintenance of Records. Debtor will
keep all Collateral in good condition, normal wear and tear excepted, and shall
not permit any material waste to be committed thereon nor permit the value of
the Collateral to be substantially impaired. Debtor agrees to maintain books and
records pertaining to the Collateral in such detail and form as Secured Party
shall reasonably require.
(d) Use. The Collateral shall be used for business purposes in
connection with the ordinary and customary business conducted by Debtor.
(e) Change of Address. Debtor shall immediately advise Secured Party in
writing of any change in address.
(f) Mortgages and Liens. Except as otherwise is specifically permitted
in the Loan Agreement, the Debtor will at all times keep the Collateral free
from all liens, encumbrances and security interests, other than the security
interest herein granted to Secured Party, and the Debtor agrees that the
Security Interest constitutes and shall at all times remain a first lien and
security interest in the Collateral.
(g) Insurance. Debtor will obtain and maintain at all times,
comprehensive insurance against risks of fire, theft and such amounts as the
Secured Party shall reasonably require (but in no event in an amount less than
the replacement value thereof), written by such companies as are rated A+ or
higher by AM Best Company (or if such company shall hereafter change its rating
system, then with such insurance companies which shall have Best's then highest
rating), with a loss payable clause in favor of the Debtor and Secured Party as
their interests may appear, and such
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insurance shall only be subject to alteration or cancellation only after
thirty (30) days' written notice to Secured Party; and that Debtor will deliver
to Secured Party a certificate or memorandum of such insurance within forty-five
(45) days of the date hereof and renewals of such policy or policies at least
forty-five (45) days prior to expiration dates thereof, the said renewals or
policies to be marked "paid" by the issuing company or agent;
(i) If the Debtor fails to keep the Collateral insured as above
specified, then the Secured Party, may, at Secured Party's option, insure the
same for its insurable value, including replacement value, and the cost of such
insurance to Secured Party shall become a debt owing to Secured Party by Debtor
and secured hereby.
(ii) No loss or damage to the Collateral shall otherwise affect
the Debtor's obligations hereunder.
(iii) Except as otherwise provided in the Loan Agreement, all
proceeds of any such policy, on any Collateral, shall constitute "proceeds"
under this Security Agreement and the Security Interest shall attach thereto.
(h) Title. Upon exercise of the Option, and except for the Security
Interest hereby granted, Debtor has full and fee simple title to the Collateral
free from any and all liens, encumbrances, charges or claims of any nature or
kind whatsoever. To its actual knowledge, Debtor has not done or suffered
anything to prejudice, frustrate or destroy the Security Interest and Debtor
will defend the Collateral and every part thereof unto the Secured Party, its
successors and assigns, against any and all claims and demands of all persons
claiming the same or any interest therein, at any time.
(i) Financing Statements. To Debtor's actual knowledge, except for the
financing statements of even date herewith filed on behalf of the Secured Party,
no financing statement, security agreement or other instrument required covering
or affecting the Collateral or any part thereof or any proceeds thereof is on
file or recorded in any public office or place.
(j) Sale, Lease or Disposition of Collateral. Except as otherwise is
specifically provided in the Loan Agreement, the Debtor, will not, without
written consent of the Secured Party sell, contract to sell, lease encumber or
otherwise transfer or dispose of the Collateral or any interest therein or
permit it to become an accession to other goods except in the ordinary course of
business, until this Security Agreement and all debts secured thereby have been
fully satisfied.
(k) Taxes and Assessments. Debtor shall promptly pay when due all
taxes, license fees, assessments, claims, and other charges ("Taxes") levied or
assessed against or on the Collateral or on its use and operation, except when
and to the extent Debtor is contesting such items in good faith. If the Taxes
remain unpaid at the date fixed for the payment thereof, or if any lien shall be
claimed thereunder which in Secured Party's opinion may create a valid
obligation having priority over the rights
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granted to Secured Party herein and if Debtor is not diligently contesting such
items in good faith, Secured Party may, without notice to Debtor, on Debtor's
behalf, pay such Taxes, and the amount thereof shall be an obligation secured
hereby and due to Secured Party on demand. Debtor further agrees to pay any and
all fees, costs, and expenses of whatever kind and nature (including any taxes,
reasonable attorney's fees, or costs for insurance of any kind) which Secured
Party may incur in filing public notices, preparing or filing documents, making
title examinations or rendering opinions, protecting, maintaining, or preserving
the Collateral, foreclosing the Security Interest granted hereunder, whether
through judicial proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or related to the Secured Party's
transactions with Debtor under this Agreement.
(l) Debtor's Other Taxes. Debtor has and will continue to duly pay all
franchise taxes and corporation taxes, sales taxes, payroll taxes, income taxes,
permit fees, imposts, duties and charges, levied, assessed or imposed upon it,
or upon any of its property, the Collateral, or other property of whatsoever
kind or description, except when and to the extent Debtor is contesting such
items in good faith.
(m) Performance of Agreement. Debtor shall perform and/or comply with
all covenants and agreements set forth in this Security Agreement and in the
Loan Agreement.
4. Subsequent Documents. During the term hereof Debtor agrees to execute
and deliver, upon demand at any time, to Secured Party confirmatory assignments
or other forms of identification in the form required by Secured Party of any or
all Collateral, together with such other evidence of the existence and identity
of such collateral as Secured Party may reasonably require.
5. Rights Upon Default. Upon the occurrence and during the continuance of
an Event of Default described in Paragraph 7 hereof, Secured Party may then, or
any time thereafter (such default not having previously been cured), declare the
whole of the indebtedness hereby secured with interest thereon, to be due and
payable according to the terms of the Note, and shall then have all the remedies
of a secured party under the laws of the State of Alabama, including without
limitation, the following:
(a) Assembly. Secured Party may require Debtor to assemble the
Collateral and to make it available to Secured Party at any reasonable place
designated by Secured Party.
(b) Possession. Secured Party may take possession of the Collateral and
control any proceeds thereof, peaceably enter into the premises on which the
Collateral or any proceeds or any part thereof may be situated and remove the
same therefrom. Debtor hereby waives and releases Secured Party of and from any
and all claims in connection with such removal.
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(c) Notice. Written notice, when required by law, sent to the Debtor's
address shown herein at least fifteen (15) calendar days (counting the day of
sending) before the date of a proposed disposition of the Collateral is
reasonable notice.
(d) Reimbursement. Debtor shall reimburse Secured Party for any expense
reasonably incurred by Secured Party in protecting or enforcing Secured Party's
rights under this Security Agreement, including without limitation reasonable
attorney's fees and legal expense and all reasonable expenses of insuring,
taking possession, holding, preparing for disposition, and disposing of the
Collateral. After deduction of such expenses, Secured Party may apply the
proceeds of disposition to the indebtedness specifically secured hereby, in such
order and amounts as Secured Party elects.
(e) Exemptions. The Debtor waives to the extent allowed by law all
personal property rights of exemption allowed Debtor under the Constitution and
laws of Alabama or any other jurisdiction, in connection with or related to the
collection of the indebtedness created herein, whether by garnishment, levy,
attachment or any other process of law. The Debtor agrees to pay all reasonable
costs of collection and foreclosure hereof, including a reasonable attorney's
fee, in the event said indebtedness is not paid to maturity, or other Event of
Default occurs hereunder.
(f) Judicial Foreclosure. To foreclose the Security Interest created
herein by any available judicial procedure.
(g) Right of Disposition. To sell, lease, or otherwise dispose of all
or any part of the Collateral, whether in its then condition or after further
preparation or processing, either at public or private sale, or through any
broker, in lots or in bulk, for cash or for credit, with or without warranties
or representations, and upon such other commercially reasonable terms and
conditions as Secured Party in its reasonable discretion may deem advisable, and
Secured Party shall have the right to purchase all or any part of the Collateral
at any such sale.
(h) Stored Property. Debtor authorizes and licenses Secured Party to
take custody of and store for Debtor's account any personal property placed on,
or in, or attached to any item of Collateral repossessed or taken under process
hereunder. All such personal property that does not constitute Collateral shall
be returned to Debtor on demand. No such repossession, taking, or storing shall
be deemed a conversion or otherwise deemed to be a wrongful act.
(i) Completion of Work in Process. If any Collateral shall require
maintenance, preparation, or is in process or other unfinished state, Secured
Party shall have the right, at Secured Party's option, to do such maintenance,
preparation, processing, or completion for the purpose of putting the Collateral
in such salable form as it shall deem reasonably appropriate at Debtor's
expense.
(j) Deficiency and Surplus. Debtor shall be liable to Secured Party
for, and shall pay to Secured Party on demand, any deficiency which shall remain
after such
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sale, lease, or other disposition of the Collateral, and Secured Party, in turn
agrees to remit to Debtor, or Debtor's successors or assigns, within a
reasonable time, any surplus resulting therefrom.
(k) Nonexclusive. No remedy of Secured Party hereunder shall be
exclusive of any other remedy herein or by law provided, but each shall be
cumulative and in addition to every other remedy.
6. Continuing Obligation of Debtor. During the term any amount or amounts
are payable under the Note, Debtor agrees, in addition to any other agreement or
covenants in the Loan Agreement, to do the following:
(a) Financing Statements. Upon five (5) calendar days' notice, Debtor
shall join with Secured Party at the request of Secured Party, or in the
execution of or will execute, one or more financing statements or instruments of
like tenor, and any other documents deemed necessary by Secured Party for the
purpose of preserving, protecting, confirming or otherwise evidencing the
security interest granted hereby for filing in such offices as are deemed by
Secured Party to be necessary or desirable. Debtor shall pay all costs of
recording and filing of financing statements.
(b) Information Relative to Collateral. Debtor shall furnish to Secured
Party such information relative to the Collateral as Secured Party shall from
time to time reasonably request. Debtor's failure, however, to promptly give
Secured Party such statements shall not affect, diminish, modify, or otherwise
limit Secured Party's Security Interest in the Collateral.
(c) Inspection of Books. Secured Party, at its own expense, shall have
the right, upon reasonable notice, to inspect, during normal business hours, the
Collateral and books, records or other writings relative thereto. Debtor agrees
that Secured Party or its agent may enter upon Debtor's premises at any time
during normal business hours, for the purpose of inspecting the Collateral and
any and all books and records pertaining thereto.
7. Events of Default. Debtor shall be deemed to be in default hereunder in
the event that:
(a) Default Under Loan Documents. The occurrence of an Event of Default
under the Loan Agreement or any of the other related agreements between the
parties; or
(b) Non-Observance. If Default shall be made by Debtor in the due
performance or observance of any covenant, agreement or provision contained
herein and such default shall have continued for a period of sixty (60) days (or
ninety (90) days if such default shall not be curable within such time and the
Debtor shall, in good faith and with reasonable diligence, continue to prosecute
such cure) after written notice from Secured Party to Debtor.
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8. No Election of Remedies. To the extent that Debtor's obligations are
now or hereafter secured by any assets or property other than the Collateral, or
by the guaranty, endorsement, assets, or property of any other person, Secured
Party shall have the right in its sole and absolute discretion to determine
which rights, security, liens, security interests, or remedies it shall at any
time pursue, foreclose upon, relinquish, subordinate, modify, or take any other
action with respect to, without in any way modifying or affecting any of them,
or waiving any of Secured Party's rights hereunder.
9. Waiver. No failure on the part of Secured Party to exercise, and no
delay in exercising any of its rights or remedies hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Secured Party of any
right or remedy hereunder preclude any other or future exercise thereof or the
exercise of any other right or remedy permitted hereunder or under the Alabama
Code, or other law.
10. Amendment. This Security Agreement may not be changed or terminated
except by written agreement between the parties hereto.
11. Binding Upon Successors. This Security Agreement shall be binding upon
and shall inure to the benefit of all the successors and assigns of the parties.
12. Assignment. This Agreement or the obligations hereunder may not be
assigned by Debtor.
13. Headings. The headings contained in this Agreement shall not be deemed
a material or substantive part thereof and are included herein by the parties
for ease of reference only.
14. Notices. Any Notices required or permitted hereunder shall be
effective if in writing and mailed to the parties as follows:
(1) If to the Borrower:
FiberCore USA, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxx Xxxxxxx, Esq
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
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(2) If to ERSA:
Employees' Retirement System of Alabama
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xx. Xxxxx X. Xxxxxxx, Secretary-Treasurer
with a copy to:
Xxxx X. Xxxxxxxxxxx, Esq.
Xxxxxxxxxxx, Xxxxxx & Assoc., P.C.
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
(3) If to TRSA:
Teachers' Retirement System of Alabama
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xx. Xxxxx X. Xxxxxxx,
Secretary-Treasurer
with a copy to:
Xxxx X. Xxxxxxxxxxx, Esq.
Xxxxxxxxxxx, Xxxxxx & Associates, P.C.
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
15. Capitalized Terms. The capitalized terms used herein, unless defined
herein, shall have the meaning assigned to them in the Loan Agreement.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be construed under and in
accordance with the Alabama Uniform Commercial Code and other applicable laws of
the State of Alabama.
(b) Legal Construction. In case any one or more of the provisions
contained in this Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provisions had never been
contained herein.
(c) Survival. The representations and warranties, indemnifications,
covenants and other provisions hereof contained in and made pursuant to this
Security Agreement shall survive (i) the execution and delivery of this
Agreement and (ii) the
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execution and delivery of all documents necessary for the consummation of the
transactions herein contemplated.
(d) Time of Essence. Time is of the essence as to each provision of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
under seal on the day and year first above written.
DEBTOR:
FIBERCORE, USA, INC.,
an Alabama non profit corporation
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Xxxxxx Xxxxxx
Its: Chief Financial Officer
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxx
Its: Secretary (Ass't)
SECURED PARTY:
Employees Retirement System of Alabama Teachers
Retirement System of Alabama
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Xxxxx X. Xxxxxxx
Its Secretary-Treasurer
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Mortgage and Security Agreement
Signature Page
IN WITNESS WHEREOF, this Security Document has been executed by Borrower
the day and year first above written.
BORROWER / MORTGAGOR
FIBERCORE, USA, INC.,
A Delaware Corporation
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Xxxxxx Xxxxxx
Its: Chief Financial Officer
ATTEST:
/s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx
Its: Secretary (Ass't)
STATE OF MASSACHUSETTS
COUNTY OF WORCESTER
Before me the undersigned Notary Public, appeared XXXXXX XXXXXX whose name as
CHIEF FINANCIAL OFFICER of FIBERCORE USA, INC., a Delaware corporation, is
signed to the foregoing, and who is known to me, acknowledged before me on this
day that being informed of the contents of the foregoing, he executed the same
voluntarily for and as the act of said corporation on the date the same bears
date.
Given under my hand and official seal this 28th day of December, 2001.
/s/ Xxxxxxxxx Xx Xxxx
------------------------------------
NOTARY PUBLIC
My Commission expires: 12/17/04
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EXHIBIT "A"
TO SECURITY AGREEMENT BETWEEN
FIBERCORE USA, INC (as Debtor)
and
and EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA and
TEACHERS' RETIREMENT SYSTEM OF ALABAMA
-------------------------------------------------------------
[Real Property Legal Description]
Xxx 0 xx xxx Xxxxxx Xxxxxxxxxx Xxxx Xxxxx, as same appears in the
records of the office of the Judge of Probate for Xxx County, Alabama at:_______
__________________________________________________
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EXHIBIT "B"
TO SECURITY AGREEMENT BETWEEN
FIBERCORE USA, INC (as Debtor)
and
EMPLOYEES' RETIREMENT SYSTEM OF ALABAMA and
TEACHERS' RETIREMENT SYSTEM OF ALABAMA
[Collateral Description]
--------------------------------------------------------------
1. The Construction Contract;
2. The Architect Contract;
3. The Construction Drawings;
4. The Project Equipment;
5. The Project fixtures.
6. The Project Contracts and Subcontracts.
7. The Project Documents.
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