EXHIBIT 10.12
SECURITY AGREEMENT
(NATIONWIDE ELECTRIC, INC.)
This Agreement is made as of the 22nd day of December, 1998, among
Nationwide Electric, Inc., a Delaware corporation (the "Debtor"), and Norwest
Bank Minnesota, National Association, a national banking association, as agent
(in such capacity, the "Secured Party") for the Banks, as defined in the Credit
Agreement described below.
Pursuant to a Credit Agreement (together with all amendments,
modifications and restatements of such Agreement, the "Credit Agreement") of
even date herewith the Banks have agreed to make advances and grant certain
other financial accommodations to the Debtor.
As a condition to making any loan or advance under the Credit
Agreement, the Banks have required the execution and delivery of this Agreement
by the Debtor.
ACCORDINGLY, in consideration of the mutual covenants contained in the
Credit Agreement and herein, the parties hereby agree as follows:
1. Definitions. All terms defined in the Credit Agreement that are
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not otherwise defined herein shall have the meanings given them in the Credit
Agreement. In addition, the following terms have the meanings set forth below:
"Accounts" means each and every account and other right of the Debtor
to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale, lease
or other disposition of goods or other property by the Debtor, out of a
rendering of services by the Debtor, out of a loan by the Debtor, out of
the overpayment of taxes or other liabilities of the Debtor, or otherwise
arises under any contract or agreement, whether such right to payment is or
is not already earned by performance, and howsoever such right to payment
may be evidenced, together with all other rights and interests (including
all liens and security interests) which the Debtor may at any time have by
law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor
or other obligor, all including but not limited to all present and future
debt instruments, chattel papers, accounts, loans and obligations
receivable and tax refunds.
"Collateral" means the Accounts, Inventory, Equipment, General
Intangibles , Investment Property and Stock, together with all
substitutions and replacements for, products and proceeds of, any of the
foregoing property, all accessions, all accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any of the foregoing, and all warehouse receipts, bills of
lading and other documents of title now or hereafter covering any of the
foregoing.
"Equipment" means all equipment of the Debtor, whether now owned or
hereafter acquired and wherever located, including but not limited to all
present and future machinery, vehicles, furniture, fixtures, manufacturing
equipment, farm machinery and equipment, shop equipment, office and
recordkeeping equipment, parts and tools.
"Event of Default" has the meaning specified in Section 5.
"General Intangibles" means all general intangibles of the Debtor,
whether now owned or hereafter acquired, including but not limited to
applications for patents, patents, copyrights, trademarks, trade secrets,
good will, trade names, customer lists, permits and franchises, and the
right to use the Debtor's name.
"Inventory" means all inventory of the Debtor, whether now owned or
hereafter acquired and wherever located.
"Investment Property" means all investment property of the Debtor,
whether now owned or hereafter acquired, including but not limited to all
securities, security entitlements, securities accounts, commodity
contracts, commodity accounts, stocks, bonds, mutual fund shares, money
market shares and U.S. Government securities.
"Security Interest" has the meaning specified in Section 2.
"Specified Shares" means the shares of stock identified in Exhibit B
hereto, said shares being presently evidenced by the certificates listed
therein.
"Stock" means any share of the capital stock of any corporation now or
hereafter owned by the Debtor, including but not limited to the Specified
Shares.
2. Security Interest. The Debtor hereby grants the Secured Party a
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security interest (the "Security Interest") in the Collateral to secure payment
of the Obligations.
3. Representations, Warranties and Agreements. The Debtor hereby
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represents, warrants and agrees as follows:
(a) TITLE. The Debtor (i) has absolute title to each item of
Collateral in existence on the date hereof, including but not limited to
the Specified Shares, described in Exhibit D hereto, free and clear of all
security interests, liens and encumbrances, except the Security Interest,
other Permitted Liens, and, in the case of the Specified Shares, any
restrictive legend appearing on the face of the certificates evidencing
such shares, (ii) will have, at the time the Debtor acquires any rights in
Collateral hereafter arising, absolute title to each such item of
Collateral free and clear of all security interests, liens and
encumbrances, except the Security Interest, other Permitted Liens, and, in
the case of Stock, any restrictive legend appearing on the face of the
certificates evidencing such Stock, (iii) will keep all Collateral free and
clear of all security interests, liens and encumbrances except the Security
Interest and
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Permitted Liens, and (iv) will defend the Collateral against all claims or
demands (other than claims and demands based on Permitted Liens) of all
persons other than the Secured Party. The Debtor will not sell or otherwise
dispose of the Collateral or any interest therein without the prior written
consent of the Secured Party, except that, until the occurrence of an Event
of Default and the revocation by the Secured Party of the Debtor's right to
do so, the Debtor may sell any inventory constituting Collateral to buyers
in the ordinary course of business.
(b) CHIEF EXECUTIVE OFFICE; IDENTIFICATION NUMBER. The Debtor's chief
executive office is located at the address set forth by its signature
below. The Debtor's federal employer identification number is correctly set
forth by its signature below.
(c) LOCATION OF COLLATERAL. As of the date hereof, the tangible
Collateral is located only in the state of Minnesota. The Debtor will not
permit any tangible Collateral to be located in any state (and, if county
filing is required, in any county) in which a financing statement covering
such Collateral is required to be, but has not in fact been, filed in order
to perfect the Security Interest.
(d) CHANGES IN NAME OR LOCATION. The Debtor will not change its name
or the location of its place of business, without prior written notice to
the Secured Party.
(e) FIXTURES. The Debtor will not permit any tangible Collateral to
become part of or to be affixed to any real property without first assuring
to the reasonable satisfaction of the Secured Party that the Security
Interest will be prior and senior to any interest or lien then held or
thereafter acquired by any mortgagee of such real property or the owner or
purchaser of any interest therein. If any part or all of the tangible
Collateral is now or will become so related to particular real estate as to
be a fixture, the real estate concerned and the name of the record owner
are accurately set forth in Exhibit A hereto.
(f) STOCK. Exhibit C is a correct and complete list of the number of
authorized and issued shares of each class of capital stock of each
corporation whose shares are included in the Specified Shares. The
Specified Shares are fully paid for and nonassessable. The Debtor will upon
receipt deliver to the Secured Party in pledge as additional Collateral all
securities distributed on account of the Stock or any other Collateral,
including stock dividends and securities resulting from stock splits,
reorganizations and recapitalizations, and all other shares of any class of
stock of any corporation now owned or hereafter acquired by the Debtor for
any reason whatsoever, together in each case with blank stock powers
executed by the Debtor.
(g) RIGHTS TO PAYMENT. Each right to payment and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral is (or will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or
counterclaim (other than those arising in
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the ordinary course of business), of the account debtor or other obligor
named therein or in the Debtor's records pertaining thereto as being
obligated to pay such obligation. The Debtor will not agree to any material
modification or amendment of, or agree to any forbearance, release or
cancellation of, any such obligation without the Secured Party's prior
written consent, and will not subordinate any such right to payment to
claims of other creditors of such account debtor or other obligor.
(h) MISCELLANEOUS COVENANTS. The Debtor will:
(i) Keep all tangible Collateral in good repair, working order and
condition, normal depreciation excepted, and will, from time to
time, replace any worn, broken or defective parts thereof.
(ii) Promptly pay all taxes and other governmental charges levied or
assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interest.
(iii) At all reasonable times, permit the Secured Party or any Bank,
or the representatives of the Secured Party or any Bank, to
examine or inspect any Collateral, wherever located, and to
examine, inspect and copy the Debtor's books and records
pertaining to the Collateral and its business and financial
condition and to send and discuss with account debtors and other
obligors requests for verifications of amounts owed to the
Debtor.
(iv) Keep accurate and complete records pertaining to the Collateral
and pertaining to the Debtor's business and financial condition
and submit to the Secured Party and the Banks such periodic
reports concerning the Collateral and the Debtor's business and
financial condition as the Secured Party or any Bank may from
time to time reasonably request.
(v) Promptly notify the Secured Party of any loss of or material
damage to any Collateral or of any adverse change, known to the
Debtor, in the prospect of payment of any sums due on or under
any instrument, chattel paper, or account constituting
Collateral.
(vi) If the Secured Party at any time so requests (whether the
request is made before or after the occurrence of an Event of
Default), promptly deliver to the Secured Party any instrument,
document or chattel paper constituting Collateral, duly endorsed
or assigned by the Debtor.
(vii) At all times keep all tangible Collateral insured against risks
of fire (including so-called extended coverage), theft,
collision (in case of Collateral consisting of motor vehicles)
and such other risks and in such amounts as the Secured Party
may reasonably request, with any loss payable to the Secured
Party to the extent of its interest.
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(viii) From time to time execute such financing statements as the
Secured Party may reasonably require in order to perfect the
Security Interest and, if any Collateral consists of a motor
vehicle, execute such documents as may be required to have the
Security Interest properly noted on a certificate of title,
and, if Collateral consists of investment property, execute any
control or transfer agreement which Secured Party may
reasonably require to obtain control over such investment
property.
(ix) Pay when due or reimburse the Secured Party on demand for all
costs of collection of any of the Obligations and all other
out-of-pocket expenses (including in each case all reasonable
attorneys' fees) incurred by the Secured Party in connection
with the creation, perfection, satisfaction, protection,
defense or enforcement of the Security Interest or the
creation, continuance, protection, defense or enforcement of
this Agreement or any or all of the Obligations, including
expenses incurred in any litigation or bankruptcy or insolvency
proceedings.
(x) Execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and
writings which the Secured Party may at any time reasonably
request in order to secure, protect, perfect or enforce the
Security Interest and the Secured Party's rights under this
Agreement.
(xi) Not use or keep any Collateral, or permit it to be used or
kept, for any unlawful purpose or in violation of any federal,
state or local law, statute or ordinance.
(i) SECURED PARTY'S RIGHT TO TAKE ACTION. If the Debtor at any time
fails to perform or observe any agreement contained in Section 3(h), and if
such failure continues for a period of ten calendar days after the Secured
Party gives the Debtor written notice thereof (or, in the case of the
agreements contained in clauses (vii) and (viii) of Section 3(h),
immediately upon the occurrence of such failure, without notice or lapse of
time), the Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of the Debtor (or, at
the Secured Party's option, in the Secured Party's own name) and may (but
need not) take any and all other actions which the Secured Party may
reasonably deem necessary to cure or correct such failure (including,
without limitation the payment of taxes, the satisfaction of security
interests, liens, or encumbrances, the performance of obligations under
contracts or agreements with account debtors or other obligors, the
procurement and maintenance of insurance, the execution of financing
statements, the endorsement of instruments, and the procurement of repairs,
transportation or insurance); and, except to the extent that the effect of
such payment would be to render any loan or forbearance of money usurious
or otherwise illegal under any
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applicable law, the Debtor shall thereupon pay the Secured Party on demand
the amount of all moneys expended and all costs and expenses (including
reasonable attorneys' fees) incurred by the Secured Party in connection
with or as a result of the Secured Party's performing or observing such
agreements or taking such actions, together with interest thereon from the
date expended or incurred by the Secured Party at the highest rate then
applicable to any of the Obligations. To facilitate the performance or
observance by the Secured Party of such agreements of the Debtor, the
Debtor hereby irrevocably appoints (which appointment is coupled with an
interest) the Secured Party, or its delegate, as the attorney-in-fact of
the Debtor with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file, in the name and on
behalf of the Debtor, any and all instruments, documents, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by the Debtor
under this Section 3 and Section 6.
4. Assignment of Insurance. The Debtor hereby assigns to the Secured
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Party, as additional security for the payment of the Obligations, any and all
moneys (including but not limited to proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Debtor under or with respect to, any and all policies of insurance covering the
Collateral, and the Debtor hereby directs the issuer of any such policy to pay
any such moneys directly to the Secured Party. Both before and after the
occurrence of an Event of Default, the Secured Party may (but need not), in its
own name or in the name of the Debtor, execute and deliver proofs of claim,
receive all such moneys, endorse checks and other instruments representing
payment of such moneys, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.
5. Events of Default. Each of the following occurrences shall
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constitute an event of default under this Agreement (herein called "Event of
Default"): (a) an Event of Default shall occur under the Credit Agreement; (b)
the Debtor shall fail to pay any or all of the Obligations when due or (if
payable on demand) on demand; or (c) the Debtor shall fail to observe or perform
any covenant or agreement herein binding on it.
6. Remedies upon Event of Default. Upon the occurrence of an Event
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of Default and at any time thereafter, the Secured Party may exercise any one or
more of the following rights and remedies:
(a) ACCELERATION. The Secured Party may declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon
be immediately due and payable, without presentment or other notice or
demand;
(b) ACCOUNT VERIFICATION. The Secured Party may verify any accounts
in the name of the Debtor or in its own name; and the Debtor, whenever
requested, shall furnish the Secured Party with duplicate statements of the
accounts, which statements may be mailed or delivered by the Secured Party
for that purpose.
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(c) COLLATERAL ACCOUNT. The Secured Party may establish a collateral
account for the deposit of checks, drafts and cash payments made by the
Debtor's account debtors. If a collateral account is so established, the
Debtor shall promptly deliver to the Secured Party, for deposit into said
collateral account, all payments on accounts and chattel paper received by
it. All such payments shall be delivered to the Secured Party in the form
received (except for the Debtor's endorsement where necessary). Until so
deposited, all payments on accounts and chattel paper received by the
Debtor shall be held in trust by the Debtor for and as the property of the
Secured Party and shall not be commingled with any funds or property of the
Debtor. All deposits in said collateral account shall constitute proceeds
of Collateral and shall not constitute payment of any Obligation. At its
option, the Secured Party may, at any time, apply finally collected funds
on deposit in said collateral account to the payment of the Obligations in
such order of application as the Secured Party may determine, or permit the
Debtor to withdraw all or any part of the balance on deposit in said
collateral account.
(d) LOCK BOX. The Secured Party may, by notice to the Debtor, require
the Debtor to direct each of its account debtors to make payments due under
the relevant account or chattel paper directly to a special lock box to be
under the control of the Secured Party. The Debtor hereby authorizes and
directs the Secured Party to deposit all checks, drafts and cash payments
received in said lock box into the collateral account established as set
forth above.
(e) DIRECT COLLECTION. The Secured Party may notify any account
debtor, or any other person obligated to pay any amount due, that such
chattel paper, account, or other right to payment has been assigned or
transferred to the Secured Party for security and shall be paid directly to
the Secured Party. If the Secured Party so requests at any time, the Debtor
will so notify such account debtors and other obligors in writing and will
indicate on all invoices to such account debtors or other obligors that the
amount due is payable directly to the Secured Party. At any time after the
Secured Party or the Debtor gives such notice to an account debtor or other
obligor, the Secured Party may (but need not), in its own name or in the
name of the Debtor, demand, xxx for, collect or receive any money or
property at any time payable or receivable on account of, or securing, any
such chattel paper, account, or other right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor.
(f) ADDITIONAL RIGHTS REGARDING PLEDGED STOCK INTERESTS. The Secured
Party may (i) exercise all voting and other rights as a holder of the
Stock; (ii) notify the issuer of any Stock to make payments and other
distributions thereon directly to the Secured Party, (iii) receive all
proceeds of the Pledged Stock, and (iv) hold any increase or profits
received from the Stock as additional security for the Obligations, except
that any money received from the Collateral may, at the Secured Party's
option, be applied in reduction of the Obligations in such order of
application as the
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Secured Party may determine or be remitted to the Debtor. The Debtor hereby
irrevocably authorizes and directs each corporation whose stock is included
in the Stock pledged hereunder to remit any and all money, distributions
and other property described in this paragraph directly to the Secured
Party in the Secured Party's name alone. Such remittances shall continue to
be made to the Secured Party until the Secured Party otherwise notifies the
applicable corporation, in writing. To the extent that such remittances are
made directly to the Secured Party, the remitting entity shall have no
further liability to the Debtor for the same.
(g) RIGHTS UNDER UCC. The Secured Party may exercise and enforce any
or all rights and remedies available upon default to a secured party under
the Uniform Commercial Code, including but not limited to the right to take
possession of any Collateral, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which the
Debtor hereby expressly waives), and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith, the
Secured Party may require the Debtor to make the Collateral available to
the Secured Party at a place to be designated by the Secured Party which is
reasonably convenient to both parties, and if notice to the Debtor of any
intended disposition of Collateral or any other intended action is required
by law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8) at least 10
calendar days prior to the date of intended disposition or other action;
(h) OTHER RIGHTS. The Secured Party may exercise or enforce any or
all other rights or remedies available to the Secured Party by law or
agreement against the Collateral, against the Debtor or against any other
person or property.
The rights granted under this Section shall include the right to offer and sell
any Stock or similar Collateral privately to purchasers who will agree to take
the Collateral for investment and not with a view to distribution and who will
agree to the imposition of restrictive legends on the certificates representing
the Collateral, and the right to arrange for a sale which would otherwise
qualify as exempt from registration under the Securities Act of 1933. The
Secured Party is hereby granted a nonexclusive, worldwide and royalty-free
license to use or otherwise exploit all trademarks, trade secrets, franchises,
copyrights and patents of the Debtor that the Secured Party deems necessary or
appropriate to the disposition of any Collateral.
7. Other Personal Property. Unless at the time the Secured Party
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takes possession of any tangible Collateral, or within seven days thereafter,
the Debtor gives written notice to the Secured Party of the existence of any
goods, papers or other property of the Debtor, not affixed to or constituting a
part of such Collateral, but which are located or found upon or within such
Collateral, describing such property, the Secured Party shall not be responsible
or liable to the Debtor for any action taken or omitted by or on behalf of the
Secured Party with respect to such property without actual knowledge of the
existence of any
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such property or without actual knowledge that it was located or to be found
upon or within such Collateral.
8. Notice. All notices and other communications hereunder shall be in
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writing and shall be delivered, and deemed delivered, in accordance with the
Credit Agreement.
9. Miscellaneous. This Agreement has been duly and validly authorized
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by all necessary corporate action. This Agreement does not contemplate a sale of
accounts, or chattel paper. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by the Secured Party. A waiver signed by the
Secured Party shall be effective only in the specific instance and for the
specific purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of the Secured Party's rights or remedies. All
rights and remedies of the Secured Party shall be cumulative and may be
exercised singularly or concurrently, at the Secured Party's option, and the
exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any other. The Secured
Party's duty of care with respect to Collateral in its possession (as imposed by
law) shall be deemed fulfilled if the Secured Party exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and the Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. The
Secured Party shall not be obligated to preserve any rights the Debtor may have
against prior parties, to exercise at all or in any particular manner any voting
rights which may be available with respect to any Collateral, to realize on the
Collateral at all or in any particular manner or order, or to apply any cash
proceeds of Collateral in any particular order of application. This Agreement
shall be binding upon and inure to the benefit of the Debtor and the Secured
Party and their respective successors and assigns and shall take effect when
signed by the Debtor and delivered to the Secured Party, and the Debtor waives
notice of the Secured Party's acceptance hereof. The Secured Party may execute
this Agreement if appropriate for the purpose of filing, but the failure of the
Secured Party to execute this Agreement shall not affect or impair the validity
or effectiveness of this Agreement. A carbon, photographic or other reproduction
of this Agreement or of any financing statement signed by the Debtor shall have
the same force and effect as the original for all purposes of a financing
statement. This Agreement shall be governed by the internal law of Minnesota. If
any provision or application of this Agreement is held unlawful or unenforceable
in any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect and this Agreement shall be
construed as if the unlawful or unenforceable provision or application had never
been contained herein or prescribed hereby. All representations and warranties
contained in this Agreement shall survive the execution, delivery and
performance of this Agreement and the creation and payment of the Obligations.
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THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
Address: NATIONWIDE ELECTRIC, INC.
0000 Xxxxxxxxxxxx Xxxxxx
By /s/ Xxxxxxxxx X. Xxxxx XX
000 Xxxxx Xxxxxxx Xxxxxx --------------------------------
Xxxxxxxxxxx, XX 00000 Xxxxxxxxx X. Xxxxx, XX
Its President
Employer identification number:
00-0000000
Address: NORWEST BANK MINNESOTA, as agent
Norwest Center
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000 By /s/ Xxxxx Xxxxxxxx Xxxxxx
--------------------------------
Employer identification number: Xxxxx Xxxxxxxx Xxxxxx
00-0000000 Its Vice President
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