EXHIBIT 10.2
SECURITY AGREEMENT
This Security Agreement (the "Agreement") dated as of the 15th day of July,
1997, is made by and between Alliance Trophy Club, Inc. whose mailing address is
0 Xxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxx 00000 (the "Debtor"), and Xxxxx Xxxxx and
Xxxxxxx Xxxxx whose mailing address is 0 Xxxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxx,
00000 (collectively the "Secured Party").
INTRODUCTORY PROVISIONS
A. The Debtor has this day executed two promissory notes which notes
evidences a loan from the Secured Party to the Debtor (the "Loan"). One
promissory note (the "Demand Note") in the original principal amount of $50,000
payable to the order of the Secured Party and the second promissory note (the
"Note") in the original principal amount of $287,690.75 payable to the order of
the Secured Party.
B. As a condition to the making of the Loan to the Debtor, the Secured
Party requires that the Debtor pledge to Secured Party and grant a security
interest to Secured Party in 1,000 shares of $.005 par value Common Stock of
Castle Custom Homes, Inc., d/b/a White Castle Custom Homes, a Texas corporation,
represented by Certificate No. ___ (the "Certificate") and owned by the Debtor,
to secure the payment and performance of the Note.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged and confessed, the parties hereto agree as follows:
16. The Debtor hereby pledges to and grants to the Secured Party a
security interest in and to any and all present or future rights of
the Debtor in and to all of the following rights, interests, and
property (all of the following being herein sometimes called
"Collateral"): (a) the Certificate, and any and all substitutes,
replacements, accessions, attachments, increases, revisions, or
additions thereto, including, but not limited to, stock dividend; and
(b) any and all proceeds arising from or by virtue of the sale or
other disposition of, or from the collection of, the Collateral
described in (a) preceding.
17. This Agreement is being executed and delivered to convey the security
interest herein granted (the "Security Interest") and shall secure (a)
full payment and performance by Debtor of the obligations of Debtor to
Secured Party pursuant to that certain Stock Purchase and Sale
Agreement (the "Loan Agreement") between Debtor and Secured Party of
even date herewith, which provides for the making of the Loan, and (b)
all indebtedness and liabilities of the Debtor to the Secured Party at
any time arising under the terms of the Note, and any revisions,
modifications or extensions of the Note, and (c) any other promissory
note, instrument or other obligation from Debtor to Secured Party,
whether presently existing or created after the date hereof (all of
such debts, instruments or obligations referred to in (a), (b) and (c)
of this paragraph are hereinafter collectively referred to as the
"Obligation").
18. The Certificate and the Security Interest shall only be released upon
the payment and satisfaction of the Obligation, and Maker shall do all
things necessary to release the Collateral upon such satisfaction.
19. Debtor represents and warrants to Secured Party that: (a) the Security
Interest is the first, prior and exclusive security interest in and to
all of the Collateral; (b) no other person or entity is an owner of
the Collateral; (c) no other presently effective security agreement
covering the Collateral, or any part thereof, has been executed; (d)
no dispute, right of set-off, counterclaim, or defense exists with
respect to any part of the Collateral; and (e) Debtor has full right
and power to execute and deliver this Security Agreement.
20. The Collateral has been (and any other such instruments at any time
constituting part of the Collateral will be) delivered to Secured
Party, together with an Irrevocable Stock Power, to be held by Secured
Party in accordance with the terms and provisions hereof. The delivery
at any time by any Debtor to Secured Party of any additional
Collateral to be covered by this Security Agreement shall constitute a
representation and warranty by Debtor of the matters set forth in
Paragraph 4 hereof, as of that time with respect to the additional
Collateral.
21. As used herein, the term "Default" means (a) the occurrence of an
"Event of Default", as that term is defined in the Note; (b) any
material warranty, representation or statement made or furnished to
the Secured Party by or in behalf of the Debtor proving to be false or
untrue or the breach of any other covenant of Debtor in this Security
Agreement; (e) the sale, loss, theft, encumbrance or transfer of any
of the Collateral in violation hereof, and (d) the execution and
delivery of any other security agreement with regard to the
Collateral, or the attachment of any lien or security interest on the
Collateral.
22. Upon the occurrence of a Default, in addition to any and all other
rights and remedies which Secured Party may then have hereunder, under
the Uniform Commercial Code of the State of Texas or of any other
pertinent jurisdiction (the "Code"), or otherwise, Secured Party may,
at its option: (a) enter upon the premises where any of the Collateral
not in the possession of Secured Party or its agent is located and
take possession thereof and remove the same, with or without judicial
process; (b) reduce its claim to judgement or foreclosure or otherwise
enforce the Security Interest, in whole or in part, by any available
judicial procedure; (c) after notification, if any, provided for
herein, sell or otherwise dispose of, at the office of Secured Party,
on the premises of Debtor, or elsewhere, all or any part of the
Collateral, and to cause the conveyance of the Collateral to the
purchaser of the Collateral, including, if necessary, the completion
of said Irrevocable Stock Power; (d) at its discretion, retain the
Collateral in satisfaction of the Obligation whenever the
circumstances are such that Secured Party is entitled to do so under
the Code or otherwise; (e) vote or give any consent with respect to
the Collateral; and (f) exercise any and all other rights, remedies,
and privileges it may have under any of the documents executed in
connection with the Loan.
23. Any and all proceeds ever received by Secured Party from any sale or
other disposition of the Collateral, or any part thereof, or the
exercise of any other remedy pursuant hereto, shall be applied by
Secured Party to reasonable attorneys' fees incurred by Secured Party
for said sale or disposition and then to the Obligation and, if such
proceeds are not sufficient to pay sum in full, Debtor shall remain
liable to Secured Party for the deficiency.
24. Reasonable notification of the time and place of any public sale of
the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be
made, shall be sent to Debtor and to any other person entitled under
the Code to notice. It is agreed that notice, sent or given not less
than ten calendar days prior to the taking of the action to which the
notice relates, is reasonable notification for the purposes of this
paragraph.
25. The Debtor hereby designates, constitutes and appoints the Secured
Party and any designee or agent of the Secured Party as
attorney-in-fact of the Debtor, irrevocably and with power of
substitution. This power of attorney being coupled with an interest is
irrevocable while the Obligation is unpaid with respect to the
Certificate, Secured Party may, without notice to Debtor, notify and
direct the issuer of the Collateral to thereafter make all payments
with respect to same directly to Secured Party, regardless of whether
Debtor was previously receiving same, and, with respect to such
Certificate, Secured Party shall have authority without notice to
Debtor, to receive and receipt for, any and all dividends and other
distributions payable with respect thereto, regardless of the medium
in which paid and whether it be ordinary or extraordinary. Each issuer
making payment to Secured Party hereunder shall be fully protected in
relying on the written statement of Secured Party that Secured Party
then holds a security interest which entitles it to receive such
payment; the signed receipt of Secured Party for such payment shall be
full acquittance therefor to the one making such payment; and Debtor
agrees, at the request of Secured Party to execute and deliver a
letter to each such issuer acknowledging this right of Secured Party;
provided, that the failure of Debtor to execute and deliver such
letters, or any of them, shall not affect or limit Secured Party's
rights as set forth herein.
26. Because of the Securities Act of 1933, as amended, or other laws or
regulations, there may be legal restrictions or limitations affecting
the Secured Party in any attempts to dispose of certain portions of
the Collateral in the enforcement of its rights and remedies
hereunder. For these reasons the Secured Party is hereby authorized by
Debtor, but not obligated, in the event of any Default hereunder
giving rise to the Secured Party's rights to sell or otherwise dispose
of the Collateral, to sell all or any part of the Collateral at
private sale, subject to investment letter or in any other manner
which will not require the Collateral, or any part thereof, to be
registered in accordance with the Securities Act of 1933, as amended,
or the rules and regulations promulgated thereunder, or any other law
or regulation, at the best price reasonably obtainable by the Secured
Party at any such private sale or other disposition in the manner
mentioned above. The Secured Party is also hereby authorized by
Debtor, but not obligated, to take such actions, give such notices,
obtain such consents, and do such other things as the Secured Party
may deem required or appropriate in the event of a sale or disposition
of any of the Collateral. Debtor clearly understands that the Secured
Party may in its discretion approach a restricted number of potential.
purchasers and that a sale under such circumstances may yield a lower
price for the Collateral, or any part or parts thereof, than would
otherwise be obtainable if the Collateral were registered and sold in
the open market. Secured Party shall have the right to bid the price
for the Collateral established by any stock purchase agreement for
similar stock, and such bid shall be conclusive evidence that the
Secured Party handled such matter in a commercially reasonable manner
under the Code.
27. Secured Party shall have the right at any time to execute and file
this Security Agreement as a financing statement, but the failure of
Secured Party to do so shall not impair the validity or enforceability
of this Security Agreement.
28. This Agreement shall be construed under the laws of Texas, and venue
for any action arising hereunder shall be in Tarrant County, Texas.
29. Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions of
this Agreement shall be valid, binding, and effective as if the
illegal or unenforceable provisions had never been included in this
Agreement.
30. Any notices or other communications required or permitted by this
Agreement shall be delivered personally or sent by registered or
certified mail, postage prepaid, to Debtor and Secured Party, at the
address first written hereinabove, or at any other address furnished
in writing by either party to the other, and shall be deemed to have
been given as of the date the notice is personally delivered or
deposited in the United States mail.
31. Agreement and the Security Interest shall be assignable by the Secured
Party, and shall inure to the benefit of Secured Party's heirs,
executors, or administrators, and shall be binding upon the Debtor and
his or her heirs, executors, administrators, legal representatives,
successors, and assigns.
32. No failure or delay by Secured Party in exercising any right, power,
or privilege given by any provision of this Agreement shall operate as
a waiver of the provision. Additionally, no single or partial exercise
of any right, power, or privilege shall preclude any other or further
exercise of that or any other right, power, or privilege.
33. Debtor covenants to sign such other instruments and agreements as
Secured Party deems necessary or appropriate to perfect or carry out
the agreements of Debtor in this Agreement.
DEBTOR:
Alliance Trophy Club, Inc.
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By: Xxxxxxx Xxxxxx
Its: Chairman
SECURED PARTY:
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Xxxxx Xxxxx
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Xxxxxxx Xxxxx
