SECURITY AGREEMENT
THIS
SECURITY AGREEMENT is made effective the 19th day of October, 2005, by XXXXXXX
INDUSTRIES INC. (formerly EXCALIBUR INDUSTRIES, INC.), a Delaware corporation
(“Excalibur”) having a notice address of 00000 XX 0000, Xxxxxx, Xxxxx 00000,
XXXXXXX MACHINE WORKS, INC., a Texas corporation (“Machine”) having a notice
address of having a notice address of 00000 XX 0000, Xxxxxx, Xxxxx 00000, in
favor of STILLWATER NATIONAL BANK AND TRUST COMPANY (the "Secured Party"),
having a notice address at 0000 X. Xxxxx, Xxxxx, Xxxxxxxx 00000. Excalibur
and
Machine are sometimes referred to herein collectively as the
“Debtor.”
RECITALS:
WHEREAS,
the Debtor and the Secured Party have entered into a certain Loan Agreement
of
even date herewith (the "Loan Agreement"); and
WHEREAS,
pursuant to the Loan Agreement the Debtor has agreed to secure payment of the
indebtedness described herein by granting the Secured Party a security interest
covering the Property (as defined below);
NOW,
THEREFORE, in consideration of the premises and the agreements herein contained,
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Debtor hereby agrees with the Secured Party
as follows:
1. Definitions.
Unless
otherwise defined herein, all terms which are defined in the Loan Agreement
will
have the same meanings herein as therein, and all terms used herein which are
defined in the Oklahoma Uniform Commercial Code ("UCC") will have the same
meanings herein.
2. Security
Interest.
The
Debtor hereby grants to the Secured Party a security interest in all of the
Debtor’s goods, chattels, accounts, accounts receivable, contract rights,
inventory, supplies, equipment, computer equipment, computer hardware, computer
software, general intangibles, and all other tangible and intangible personal
property, whether now owned or hereafter acquired, and all proceeds, products,
rents, profits and income therefrom (the “Property”).
3. Secured
Indebtedness.
The
security interest granted hereby in the Property is given to secure the Debtor's
payment of (a) a certain Amended and Restated Promissory Note of even date
herewith in the principal face amount of $3,365,000.00 signed by the Debtor
in
favor of the Secured Party (the “Amended and Restated Note”), and all
extensions, renewals, amendments, modifications, substitutions and changes
in
form of the Amended and Restated Note, together with all interest thereon;
(b) a
certain Promissory Note (IRS Note) in a principal face amount to be determined
to be executed by the Debtor in favor of the Secured Party (the “IRS Note”), and
all extensions, renewals, amendments, modifications, substitutions and changes
in form of the IRS Note, together with all interest thereon; (c) a certain
Promissory Note (Revolving Note) of even date herewith in the principal face
amount of $1,000,000.00 signed by the Debtor in favor of the Secured Party
(the
“Revolving Note”), and all extensions, renewals, amendments, modifications,
substitutions and changes in form of the Revolving Note, together with all
interest thereon; (d) all advances made by the Secured Party to protect the
security hereof, including advances made for or on account of levies, insurance,
repairs, taxes and for maintenance or recovery of the Property, together with
interest thereon at the rate specified in the Restructure Note; and (e) all
costs and expenses incurred in connection with the collection and enforcement
of
the foregoing items described at Sections 3(a) through and including Section
3(d) including reasonable attorneys’ fees and expenses. (The foregoing items
described at Sections 3(a) through 3(e) hereof inclusive are collectively
referred to herein as the "Secured Indebtedness.")
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4. Debtor's
Representations and Covenants.
The
Debtor hereby warrants, represents and agrees as follows:
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4.1
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Location
of Debtor.
The Debtors are registered corporations organized under the laws
of
Delaware and Texas. Its chief executive office and present principal
place
of business is the same as set forth in the introductory paragraph
hereof
(the “Business Location”).
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4.2
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Location
of Property.
The Property is now in the possession of the Debtor and is, or will
be,
located at the Debtor’s business location and the Debtor will not move the
Property or locate any of the Property in any other location without
the
prior written consent of the Secured Party.
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4.3
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Business
Purpose.
The Property is to be used by the Debtor in connection with the operation
of its business.
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4.4
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Title.
The Debtor has or will obtain marketable title to the Property free
and
clear of all liens, encumbrances and security
interests.
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4.5
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Transfers.
Without the prior written consent of the Secured Party, the Debtor
agrees
that the Debtor will not sell, exchange, lease or in any manner dispose
of
any of the Property or any interest therein, without replacing same
with
property of comparable value in the ordinary course of
business.
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4.6
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Maintenance
of Property.
The Debtor will use the utmost care to maintain the Property in good
condition and repair, ordinary wear and tear excepted, and without
the
Secured Party’s prior written consent, will not suffer or permit any lien,
charge or encumbrance to attach thereto, whether by reason of repairs,
taxes, assessments or otherwise. The Debtor will not use or permit
the
Property to be used in violation of any law, statute or ordinance.
The
Debtor will not, in any event, permit anything to be done that may
impair
the value of the Property or the security intended to be afforded
by this
Agreement.
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4.7
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Insurance.
The Debtor will insure the Property as required under the Loan Agreement.
If the Debtor fails to pay the premiums for any such insurance, the
Secured Party may do so for the Debtor's account, adding the amount
so
paid by the Secured Party to the other amounts secured hereby; however,
the Secured Party is under no obligation and has no duty to pay such
premiums. The Secured Party is here-by appointed the Debtor's
attorney-in-fact to endorse any draft or check which may be payable
to the
Debtor in order to collect the proceeds of such property damage insurance.
All insurance proceeds will be applied either to the Secured Indebtedness,
or to the repair, restoration or replacement of the damaged or destroyed
property, at the election of the Lender. Any proceeds required to
be made
available to Debtor for use in restoring, repairing and/or replacing
any
such damage to Property will be made available in accordance with
the
procedures for Debtor obtaining an advance under the Loan
Agreement.
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4.8
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Inspection
of Property.
At any reasonable time and on reasonable prior notice to Debtor,
the
Secured Party may inspect the Property and all of the Debtor's records
concerning the Property and the Borrower’s business
operations.
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4.9
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Further
Assurances.
The Debtor will from time to time sign, execute, deliver and file,
alone
or with the Secured Party, any financing statements, secu-rity agreements
or other documents; procure any instru-ments or documents; and take
all
further action that may be reasonably necessary or desirable, or
that the
Secured Party’s reasonable discretion in order to confirm, perfect,
preserve and protect the security inter-ests intended to be granted
hereby, and in addi-tion, the Debtor hereby authorizes the Secured
Party
to file such financing statements in such locations covering the
Property
as may be deemed necessary by the Secured Party without the signa-ture
of
the Debtor.
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4.10
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Filing
Reproductions.
At the option of the Secured Party, a carbon, photographic or other
reproduction of this Agreement or of a financing statement cover-ing
the
Property will be sufficient as a financing statement and may be filed
as a
financing statement.
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4.11
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Financing
Statement Filings; Notifications.
The Debtor will immediately notify the Secured Party of any condition
or
event that may change the proper location for the filing of any financing
statements or other public notice or recordings for the purpose of
perfecting a security interest in the Property. Without limiting
the
generality of the foregoing, the Debtor will: (a) immediately notify
the
Secured Party of any change to a jurisdiction other than the State
of
Texas of the State of Delaware in the Debtor’s state of organization; (b)
prior to any of the Property becoming so related to any particular
real
estate, other than the Business Location, so as to become a fixture
on
such real estate, notify the Secured Party of the description of
such real
estate and the name of the record owner thereof; and (c) immediately
notify the Secured Party of any change in the Debtor's name, identity
or
company structure. In any notice furnished pursuant to this Section
4.11,
the Debtor will expressly state that the notice is required by this
Agreement and contains facts that will or may require additional
filings
of financing statements or other notices for the purpose of con-tinuing
perfection of the Secured Party's security interest in the
Property.
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5. Secured
Party's Expenditures.
If the
Debtor fails to make any expenditure or pay any sum necessary to: (1)
keep
and main-tain the Property in good repair, ordinary wear and tear and insured
casualty excepted; (2)
discharge any lien, encum-brance, levy, security interest or other charge on
the
Property; or (3)
maintain insurance upon the Property as required hereby, the Secured Party
may
but will not be required to make any expenditure for such purpose or purposes
and all sums so expended will be payable on demand, will bear interest at the
rate specified in the Restructure Note and all such sums and interest will
additionally be secured hereby. The Debtor will pay all costs of filing any
financ-ing, continuation or termination statements with respect to the security
interest granted hereby in the Property.
6. Default;
Remedies.
On the
occurrence of a Default under the Loan Agreement, the Secured Party may, at
its
option and without notice to any party, declare all or any portion of the
Secured Indebtedness to be immediately due and payable and may proceed to
enforce payment of the same, to foreclose the Secured Party’s security interest
in the Property pursuant to the provisions of the UCC, to exercise any or all
other rights and remedies provided herein and in the other Loan Documents and
by
the UCC or otherwise available at law or in equity. Whenever the Debtor is
in
Default under the Loan Agreement, the Debtor on demand by the Secured Party,
will assemble the Property and make it available to the Secured Party at the
Business Location, or if the Business Location is unavailable, at a place
designated by the Secured Party. All remedies hereunder are cumulative, and
any
indulgence or waiver by the Secured Party will not be construed as an
abandon-ment of any other right hereunder or of the power to enforce the same
or
another right at a later time. Whether the Secured Party elects to exercise
any
other rights or remedies under this Agreement or applicable law, the Secured
Party, as a matter of right and without regard to the sufficiency of the
security for repayment of the Secured Indebtedness, without notice to Debtor
and
without any showing of insolvency, fraud, or mismanagement on the part of
Debtor, and without the necessity of filing any judicial or other proceeding
other than the proceeding for appointment of a receiver, shall be entitled
to
the appointment of a receiver or receivers of the Property or any part thereof,
including, but not limited to, all healthcare accounts receivable, healthcare
insurance receivables, and all other accounts receivable (the “Receivables”),
and Debtor hereby irrevocably consents to the appointment of a receiver or
receivers. Any receiver appointed pursuant to the provisions of this subsection
shall have the usual powers and duties of receivers in such matters including,
but not limited to, the collection of the Receivables
7. Secured
Party's Duties.
The
powers conferred upon the Secured Party by this Agreement are solely to protect
its interest in the Property and will not impose any duty upon the Secured
Party
to exercise any such powers. Except as may otherwise be provided in the Loan
Agreement, the Secured Party will be under no duty whatsoever to make or give
any presentment, demand for performance, notice of nonperformance, protest,
notice of protest, notice of dishonor, or other notice or demand in connection
with any of the Property or the Secured Indebtedness, or to take any steps
neces-sary to preserve any rights against prior parties. The Secured Party
will
not be liable for failure to collect or realize upon any or all of the Secured
Indebtedness or Property, or for any delay in so doing, nor will the Secured
Party be under any duty to take any action whatsoever with regard
thereto.
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8. Continuing
Agreement.
This is
a continuing agreement and the grant of a security interest hereunder will
remain in full force and effect and all the rights, powers and remedies of
the
Secured Party hereunder will continue to exist until all of the Secured
Indebtedness is paid in full.
9. Preservation
of Liability.
Neither
this Agreement nor the exercise by the Secured Party of (or the failure to
so
exercise) any right, power or remedy conferred herein or by law will be
construed as relieving any person liable on the Secured Indebted-ness from
liability on the Secured Indebtedness and for any deficiency
thereon.
10. Successors
and Assigns.
The
covenants and agreements herein contained by or on behalf of the Debtor will
bind the Debtor, and the Debtor's legal representatives, successors and assigns
and will inure to the benefit of the Secured Party and the Secured Party's
successors and assigns.
11. Invalidity.
If any
provision hereof will for any reason be held to be invalid or unenforceable,
such invalidity or unenforceability will not affect any other provision
hereof.
12. Construction.
This
Agreement will be construed and interpreted in accordance with the laws of
the
State of Oklahoma.
This
Agreement is executed effective the date first above written.
| XXXXXXX MACHINE WORKS, INC., a Texas corporation | ||
| By: /s/ Xxxxxxx X. Xxxxxxxx | ||
| Name: Xxxxxxx X. Xxxxxxxx | ||
| Title: CFO | ||
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XXXXXXX
INDUSTRIES, INC., (formerly EXCALIBUR
INDUSTRIES, INC.), a Delaware corporation
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| By: /s/ Xxxxxxx X. Xxxxxxxx | ||
| Name: Xxxxxxx X. Xxxxxxxx | ||
| Title: Chief Financial Officer |
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