EXHIBIT 10.17
SECURITY AGREEMENT
July 30, 1997
BORROWER: Nortech Forest Technologies, Inc. SECURED PARTY: Itasca Business
Credit LLC
ADDRESS: 0000 Xxxx 00xx Xx., Xxxxx X00 ADDRESS:
Xx. Xxxxx Xxxx, XX 00000 Xxxxxxxx Xxxxx, Xxxxx 000
0000 Xxxxx Xxxxxxx 000
Xx. Xxxxx Xxxx, XX 00000-0000
1. SECURITY INTEREST AND COLLATERAL.
To secure the payment and performance of each and every debt, liability
and obligation of every type and description which Borrower may now or at any
time hereafter owe to Secured Party (whether such debt, liability or obligation
now exists or is hereafter created or incurred, and whether it is or may be
direct or indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or joint, several or joint and several,
including all obligations owed to the Secured Party by the Borrower, pursuant to
the Financing Agreement of even date herewith between the Borrower and the
Secured Party (the "Financing Agreement") and evidenced by the Revolving Note
and Term Note, if any, payable by the Borrower to the order of the Secured Party
of even date herewith (the "Note"); all such debts, liabilities and obligations
being herein collectively referred to as the "Obligations"), Borrower hereby
grants Secured Party a security interest (herein called the "Security Interest")
in the following property (herein called the "Collateral"):
(a) ACCOUNTS, CONTRACT RIGHTS AND OTHER RIGHTS TO PAYMENT:
Each and every right of Borrower 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 Borrower, out of a rendering
of services by Borrower, out of a loan by Borrower, out of the
overpayment of taxes or other liabilities of Borrower, 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 Borrower 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 and contract rights of Borrower.
(b) INVENTORY:
All inventory of Borrower, wherever located, whether
now owned or hereafter acquired.
(c) EQUIPMENT:
All equipment of Borrower, wherever located, whether
now owned or hereafter acquired, including but not limited to: office
and shop equipment.
(d) GENERAL INTANGIBLES:
All general intangibles of Borrower, whether now
owned or hereafter acquired, including, but not limited to, all tax
refunds, applications for patents, copyrights and trademarks, together
with all substitutions and replacements for any of the foregoing
property and proceeds of any and all of the foregoing property and, in
the case of all tangible Collateral, together with (i) all accessories,
attachments, parts, equipment, accessions and repairs now or hereafter
attached or affixed to or used in connection with any such goods, and
(ii) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Borrower represents, warrants and agrees that:
(a) Borrower is a corporation.
(b) The Collateral will be used primarily for business.
(c) If any part or all of the tangible Collateral will
become so related to particular real estate as to
become a fixture, the real estate concerned is:
and the name of the record owner is:_____________________________
or if left blank, at the address of Borrower shown at the
beginning of this Agreement. Borrower's records concerning its
accounts and contract rights are kept at ________________________
_________________________________________________________________
or, if left blank, at Borrower's chief place of business.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Borrower represents, warrants and agrees that:
(a) Borrower has (or will have at the time Borrower acquires
rights in Collateral hereafter arising) absolute title to each
item of Collateral free and clear of all security interests,
liens and encumbrances (except the Security Interest and
except as otherwise disclosed in the Financing Agreement), and
will defend the Collateral against all claims or demands of
all persons other than Secured Party. Borrower will not sell
or otherwise dispose of the Collateral or any interest therein
without the prior written consent of Secured Party, except
that, until the occurrence of an Event of Default and the
revocation by Secured Party of Borrower's right to do so,
Borrower may sell any inventory constituting Collateral to
buyers in the ordinary course of business. This Agreement has
been duly and validly authorized by all necessary corporation
action.
(b) Borrower 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.
(c) Each right to payment and each instrument, document, chattel
paper and other agreement constituting or evidencing
Collateral is (or will be when arising in the ordinary course
of business) of the account debtor or other obligor named
therein or in Borrower's records pertaining thereto as being
obligated to pay such obligation. Borrower will neither agree
to any material modification or amendment nor agree to any
cancellation of any such obligation without 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.
(d) Borrower 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) keep all
Collateral free and clear of all security interest, liens and
encumbrances except the Security Interest; (iv) at all
reasonable times, permit Secured Party or its representatives
to examine or inspect any Collateral, wherever located, and to
examine, inspect and copy Borrower's books and records
pertaining to the Collateral and its business and financial
condition; (v) keep accurate and complete records pertaining
to the Collateral and pertaining to Borrower's business and
financial condition and submit to Secured Party such periodic
reports concerning the Collateral and pertaining to Borrower's
business and financial conditions as Secured Party may from
time to time reasonably request; (vi) promptly notify Secured
Party of any loss of or material damage to any Collateral or
of any adverse change, known to Borrower, in the prospect of
payment of any sums due on or under any instrument, chattel
paper, account or contract right constituting Collateral;
(vii) if Secured Party at any time so requests (whether the
request is made before after the occurrence of an Event of
Default), promptly deliver to Secured Party any instrument,
document or chattel paper constituting Collateral, duly
endorsed or assigned by Borrower; (viii) 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 Secured Party may reasonably require,
with any loss payable to Secured Party to the extent of its
interest; (ix) from time to time execute such financing
statements as Secured Party may reasonably require in order to
perfect the Security Interest and, if any Collateral exists of
a motor vehicle, execute such documents as may be required to
have the Security Interest properly noted on a certificate of
title; (x) pay when due or reimburse Secured Party on demand
for all costs of collection of any of the Obligations and all
their out-of-pockets expenses (including in each case all
reasonable attorneys' fees) incurred by Secured Party in
connection with the creating, perfection, satisfaction or
enforcement of the Security Interest or the creation,
continuance or enforcement of this Agreement or any or all of
the Obligation; and Borrower will indemnify and saved Secured
Party harmless from all loss, costs, damage, liability or
expense, including reasonable attorney fees that it may
sustain or incur by reason of defending or protecting the
Security Interest or the priority thereof, or in the
prosecution or defense of any action or proceeding concerning
any matter growing out of or connected with this Agreement
and/or the obligations and/or the Collateral; (xi) execute,
deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements, and
writings which Secured Party may at any time reasonably
request in order to secure, protect, perfect or enforce the
Security Interest and Secured party's rights under this
Agreement; (xii) 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; and
(xiii) 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 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 Borrower at
any time fails to perform or observe any agreement contained
in this Section 3(d), Secured Party may (but need not) perform
or observe such agreement on behalf and in the name, place and
stead of Borrower (or, at Secured Party's option, in Secured
Party's own name) and may (but need not) take any and all
other actions which Secured Party may reasonable deem
necessary to cure or correct such failure (including, without
limitation, the payment of taxes, the satisfaction of security
interest, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtor
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
applicable law, Borrower shall thereupon pay Secured Party on
demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees) incurred by
Secured Party in connection with or as a result of Secured
Party's performing or observing such agreements or taking such
actions, together with interest thereon from the date expended
or incurred by Secured Party at the highest rate then
applicable to any of the Obligations. To facilitate the
performance or observance by Secured Party of such agreements
of Borrower, Borrower hereby irrevocably appoints (which
appointment is coupled with an interest) Secured Party, or its
delegate, as the attorney-in-fact of Borrower 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 Borrower, any and all instruments, documents,
financing statements, applications for insurance and other
agreements and writings required to be obtained, executed,
delivered or endorsed by Borrower under this Section 3 and
Section 4.
(e) Borrower will pay promptly when due all indebtedness,
liability, or obligation secured hereby with interest.
4. LOCK BOX, COLLATERAL ACCOUNT.
If Secured Party so requests at any time (whether before or after the
occurrence of an Event of Default), Borrower will 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 Secured Party.
Borrower hereby authorizes and directs Secured Party to deposit into a special
collateral account to be established and maintained with Secured Party all
checks, drafts and cash payments received in said lock box. All deposits in said
collateral account shall constitute proceeds of Collateral and shall not
constitute payment of any Obligation. At its option, 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 Secured Party may
determine, or permit Borrower to withdraw all or any part of the balance on
deposit into said collateral account, all payments on accounts and chattel paper
received by it. All such payment shall be delivered to Secured Party in the form
received (except for Borrower's endorsement where necessary). Until so
deposited, all payments on accounts and chattel paper received by Borrower shall
be held in trust by Borrower for and as the property of Secured Party and shall
not be commingled with any funds or property of Borrower.
5. COLLECTION RIGHTS OF SECURED PARTY.
Notwithstanding Secured Party's rights under Section 4 with respect to
any and all debt instruments, chattel papers, accounts, and other rights to
payment constituting Collateral (including proceeds), Secured Party may, at any
time (both before and after the occurrence of an Event of Default), 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 Secured Party for security and shall be paid directly to Secured
Party. If Secured Party so requests at any time, Borrower 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 Secured Party. At any time after Secured Party or Borrower gives
such notice to an account debtor or other obligor, Secured Party may (but need
not), in its own name or in Borrower's name, 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, notify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor.
6. ASSIGNMENT OF INSURANCE.
Borrower hereby assigns to Security Party, as additional security for
the payment of the Obligations, 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 Borrower under or with respect to, any and all
policies of insurance covering the Collateral, and Borrower hereby directs the
issuer of any such policy to pay any such monies directly to Secured Party. Both
before and after the occurrence of an Event of Default, Secured Party may (but
need not), in its own name or in Borrower's name, execute and deliver proofs of
claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
7. EVENTS OF DEFAULT.
Each of the following occurrences shall constitute an event of default
under this Agreement (herein called "Event of Default"): (i) Borrower shall fail
to pay any or all of the Obligations when due or (if payable on demand) on
demand, or shall fail to observe or perform any covenant or agreement herein
binding on it; (ii) any representation or warranty by Borrower set forth in this
Agreement or made to Secured Party in any financial statements or reports
submitted to Secured Party by or on behalf of Borrower shall prove materially
false or misleading; (iii) Borrower or any guarantor of any Obligation shall (A)
fail to conduct its business substantially as now conducted; or (B) be or become
insolvent (however defined); or (C) the entry of any judgment against any
debtor; or (D) file or have filed against it, voluntarily or involuntarily, a
petition in bankruptcy or for reorganization under the United States Bankruptcy
Code; or (E) initiate or have initiated against it voluntarily or involuntarily,
any act, process of proceeding under any insolvency law or other statute or law
providing for the modification or adjustment of the rights of creditors; or (F)
Borrower shall be dissolved or liquidated; or (iv) Secured Party shall in good
faith believe that the prospects of due and punctual payment of any or all of
the Obligations is impaired.
8. REMEDIES UPON EVENT OF DEFAULT.
Upon the occurrence of an Event of Default under Section 7 and at any
time thereafter, Secured Party may exercise any one or more of the following
rights and remedies: (i) 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; (ii) 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 Borrower hereby
expressly waives), and the right to sell, lease or otherwise dispose of any or
all of the Collateral, and in connection therewith, Secured Party may require
Borrower to assemble the Collateral and make it available to Secured Party at a
place to be designated by Secured Party which is reasonably convenient to both
parties, and if notice to Borrower 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 10 at least ten calendar days prior to the date of intended
disposition of other action; (iii) exercise or enforce any or all other rights
or remedies available to Secured Party by law or agreement against the
Collateral, against Borrower or against any other person or property.
Notwithstanding the foregoing, the Borrower acknowledges and agrees that all
Obligations owed by the Borrower to the Secured Party are payable upon demand
and that the Secured Party can make a demand at any time in its absolute
discretion even if the Borrower is then in compliance with all of its
obligations to the Secured Party.
9. OTHER PERSONAL PROPERTY.
Unless at the time Secured Party takes possession of any tangible
Collateral, or within seven days thereafter, Borrower gives written notice to
Secured Party's of the existence of any goods, paper or the property of
Borrower, not affixed to or constituting a part of such Collateral, but which
are located or found upon or within such Collateral, describing such property,
Secured Party shall not be responsible or liable to Borrower for any action
taken or omitted by or on behalf of Secured Party with respect to such property
without actual knowledge of the existence of any such property or without actual
knowledge that it was located or to be found upon or within such Collateral.
10. MISCELLANEOUS.
This Agreement does not contemplate a sale of accounts, contract rights
or chattel paper, and, as provided by law, Borrower is entitled to any surplus
and shall remain liable for any deficiency. This Agreement can be waived,
modified, amended, terminated or discharged, and the Security Interest can be
released, only explicitly in a writing signed by Secured party. A waiver signed
by 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 Secured Party's rights or remedies. All rights
and remedies of Secured Party shall be cumulative and may be exercised
singularly or concurrently, at Secured Party's option, and the exercise or
enforcement of any one such right to remedy shall neither be a condition to nor
bar the exercise or enforcement of any other. All notices to be given to
Borrower shall be deemed sufficiently given if delivered or mailed by registered
or certified mail, postage prepaid, to Borrower at its address set forth above
or at the most recent address shown on Secured Party's records. Secured Party's
duty of care with respect to collateral in its possession (as imposed by law)
shall be deemed fulfilled if 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 Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. Secured
Party shall not be obligated to preserve any rights Borrower may have against
prior parties, 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
Borrower and Secured Party and their
respective heirs, representatives, successors and assigns and shall take effect
when signed by Borrower and delivered to Secured Party, and Borrower waives
notice of Secured Party's acceptance hereof. Except to the extent otherwise
required by-law, this agreement shall be governed by the internal laws of the
State 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 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. If this Agreement is signed by more than one person
as Borrower, the term "Borrower" shall refer to each of them separately and to
both or all of them jointly; all such persons shall be bound both severally and
jointly with the other(s); and the Obligations shall include all debts,
liabilities and obligations owed to Secured Party by a Borrower solely or by
both or several or all Borrowers jointly or jointly and severally, and all
property described in Section 1 shall be included as part of the Collateral,
whether it is owned jointly by both or all Borrowers or is owned in whole or in
part by one (or more) of them.
11. OTHER AGREEMENT.
Borrower and Secured Party have entered into the Financing Agreement
pursuant to which the Secured Party may, in its election, extend financial
accommodations to the Borrower. The loans will be evidenced by the Note. The
terms of said Financing Agreement and Note are incorporated herein by reference
and made a part hereof, and any default under or misrepresentation contained in
the Financing Agreement or Note shall be an event of default hereunder.
ITASCA BUSINESS CREDIT LLC NORTECH FOREST TECHNOLOGIES, INC., Borrower
Secured Party
By: _____________________________
By: ___________________________ Name: Xxxxxx X. Xxxxx
Name: Xxxxxxx X. XxXxxxx Title: President
Title Vice President
