SECURITY AGREEMENT - PLEDGE
Date: June 30, 1997
Debtor: Regal Oak Properties, Inc.
Debtor's Mailing Address (including county):
00000 Xxxxx Xxxx, Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx 00000
Secured Party: EIF Holdings, Inc.
Secured Party's Mailing Address (including county):
000 XX 0000 Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx 00000
Classification of Collateral: Instruments
Collateral (including all accessions):
100% of the issued and outstanding shares of common stock of Kelar
Controls, Inc., a corporation formed under the laws of California (the
"Corporation").
Obligation:
Note:
Date: June 30, 0000
Xxxxxx: $2,500,000
Maker: Regal Oak Properties, Inc.
Payee: EIF Holdings, Inc.
Final Maturity Date: June 30, 1998
Other Obligation: NONE
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Debtor's Representation Concerning Location of Collateral:
Subject to the terms of this agreement, Debtor grants to Secured Party
a security interest in the Collateral and all its proceeds to secure payment and
performance of Debtor's obligation in this security agreement and all renewals
and extensions of any of the obligation.
Debtor's Warranties
1. Financing Statement. Except for that in favor of Secured
Party, no financing statement covering the Collateral is filed in any public
office.
2. Ownership. Debtor owns the Collateral and has the authority to grant
this security interest. Ownership is free from any setoff, claim, restriction,
lien, security interest, or encumbrance except this security interest and liens
for taxes not yet due.
3. Financial Statements. All information about Debtor's financial
condition provided to Secured Party was accurate when submitted, as will be any
information subsequently provided.
Debtor's Covenants
1. Protection of Collateral. Debtor will defend the Collateral against
all claims and demands adverse to Secured Party's interest in it and will keep
it free from all liens except those for taxes not yet due and from all security
interests except this one. The Collateral will remain in Secured Party's
possession or control at all times, except as otherwise provided in this
agreement. Debtor will maintain the Collateral in good condition and protect it
and the Corporation against misuse, abuse, waste, and deterioration. Debtor will
immediately deliver to Secured Party all Collateral in Debtor's possession. If
the Collateral is hereafter acquired, Debtor will deliver it to Secured Party
immediately following acquisition. When delivered to Secured Party, all
Collateral will either be endorsed to Secured Party's order or accompanied by
appropriate executed powers. If the Collateral is instruments not in possession
of Debtor or Secured Party, transfer of a security interest in the Collateral to
Secured party will occur on delivery of a copy of this agreement to the
financial intermediary on whose books Debtor's interest in the Collateral
appears or to any other person in possession of the Collateral. Delivery of the
copy of the agreement is also Debtor's instruction to deliver to Secured Party
certificates or other evidence of the Collateral when available. If the
Collateral is certificated securities not in possession of Debtor or Secured
Party, Debtor will issue appropriate instructions to register Secured Party as
owner or pledgee of the Collateral, according to Secured Party's demand. Debtor
agrees to do everything required by Secured Party to complete the transfer and
perfection of this security interest.
2. Secured Party's Costs. Debtor will pay all expenses incurred by
Secured Party in obtaining, preserving, perfecting, defending, and enforcing
this security interest or the Collateral and in collecting or enforcing the
Obligation. Expenses for which Debtor is liable include, but are not limited to,
taxes, assessments, reasonable attorney's fees, and other legal expenses. These
expenses will bear interest from the dates of payments at the highest rate
stated in notes that are part of the obligation, and Debtor will pay Secured
Party this interest on demand at a time and place reasonably specified by
Secured Party. These expenses and interest will be part of the obligation and
will be recoverable as such in all respects.
3. Additional Documents. Debtor will sign any papers that Secured Party
considers necessary to obtain, maintain, and perfect this security interest or
to comply with any relevant law.
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4. Notice of Changes. Debtor will immediately notify Secured Party of
any material change in the Collateral; change in Debtor's name, address, or
location; change in any matter warranted or represented in this agreement;
change that may affect this security interest; and any event of default.
5. Sale. Debtor will not sell, transfer, or encumber any of
the Collateral without the prior written consent of Secured Party.
6. Information and Inspection. At the time and in the form specified by
Secured Party, Debtor will furnish Secured Party any requested information
related to the Collateral, which may include financial information regarding the
Corporation and any and all information necessary to identify or value any of
the Collateral. Debtor will also allow Secured Party to inspect the Collateral
at any time and place and to inspect and copy all records relating to the
Collateral and the obligation, as long as these are accomplished without breach
of the peace.
7. Modification of Collateral. Without the written consent of Secured
Party, Debtor will not agree to any modification of terms in any writing related
to the Collateral. Further, Debtor will not permit the Corporation to sell any
material portion of the assets of the Corporation outside of the ordinary course
of the business of the Corporation without the express written consent of
Secured Party. Debtor will not cause, or permit, the Corporation to issue any
additional common stock or any other form of security without the express
written consent of Secured Party.
8. Delivery of Receipts to Secured Party. On Secured Party's demand
Debtor will deposit all payments received as proceeds of Collateral in a special
bank account designated by Secured Party, who alone will have power of
withdrawal. Debtor will deposit the payments on receipt, in the form received,
and with any necessary endorsements as security for the obligation. Secured
Party may make any endorsements in Debtor's name and behalf. Between receiving
and depositing these payments, Debtor will not mingle them with any of Debtor's
other funds or property but will hold them separate and in an express trust for
Secured Party. Secured Party shall apply these funds against the obligation.
9. Records of Collateral. Debtor will maintain accurate books and
records covering the Collateral and the Corporation. Only undisputed and unpaid
amount will be shown as owed to Debtor on the book and any assignment schedule.
10. Disposition of Collateral. Debtor will not sell, lease, or
otherwise dispose of any Collateral without the prior written consent of Secured
Party.
11. Possession of Collateral. By delivering a copy of this agreement to
the broker, seller, or other person in possession of Collateral that is chattel
paper or documents, Secured Party will effectively notify that person of Secured
Party's interest in the Collateral. Delivery of the copy of the agreement will
also constitute Debtor's instruction to deliver to Secured Party certificates or
other evidence of the Collateral as soon as it is available. Debtor will
immediately deliver to Secured Party all chattel paper and documents that are
Collateral in Debtor's possession. If that Collateral is hereafter acquired,
Debtor will deliver it to Secured Party immediately following acquisition and
either endorse it to Secured Party's order or give Secured Party appropriate
executed powers.
12. Uncertificated Securities. If the Collateral is uncertificated
securities, Secured Party's delivery of a copy of this agreement to the
financial intermediary on whose books the Debtor's interest in the Collateral
appears will effectively notify the financial intermediary of Secured Party's
interest in the Collateral and will constitute Debtor's instruction that the
issuer of the securities register their pledge to Secured Party. Debtor agrees
to do everything required by Secured Party to complete the transfer and
perfection of this security interest.
Page 40
13. Voting Rights. All voting rights with respect to the Collateral
shall remain with Debtors until an event of default occurs. Upon the occurrence
of an event of default, Secured Party alone shall have the sole and exclusive
right of voting and other corporate powers relating to the Collateral.
Rights and Remedies of Secured Party
Generally. Secured party may exercise the following rights and
remedies either before or after default:
a. take control of any proceeds of the Collateral;
b. release any Collateral in Secured Party's possession
to any debtor, temporarily or otherwise;
c. take control of any funds generated by the
Collateral, such as refunds from and proceeds of
insurance, and reduce any part of the obligation
accordingly or permit Debtor to use such funds to
repair or replace damaged or destroyed Collateral
covered by insurance;
d. demand, collect, convert, redeem, settle, compromise,
receipt for, realize on, adjust, xxx for, and
foreclose on the Collateral either in Secured Party's
or Debtor's name, as Secured Party desires;
e. take control of all proceeds of Collateral or
payments on account of any Collateral and apply
them against the obligation; and
d. as Debtor's agent, endorse any documents that is
Collateral or that represents proceeds of
Collateral.
Events of Default
Each of the following conditions is an event of default:
1. if Debtor defaults in timely payment or performance of any
obligation, covenant, or liability in any written agreement between Debtor and
Secured Party or in any other transaction secured by this agreement;
2. if any warranty, covenant, or representation made
to Secured Party by or on behalf of Debtor proves to have been false in any
material respect when made;
3. if a receiver is appointed for Debtor or any of the
Collateral;
4. if the Collateral is assigned for the benefit of creditors
or, to the extent permitted by law, if bankruptcy or insolvency proceedings
commence against or by any of these parties: Debtor; any partnership of which
Debtor is a general partner; and any maker, drawer, acceptor, endorser,
guarantor, surety, accommodation party, or other person liable on or for any
part of the obligation;
5. if any financing statement regarding the Collateral
but not related to this security interest and not favoring Secured Party is
filed;
6. if any lien attaches to any of the Collateral;
7. if any of the Collateral is lost, stolen, damaged, or
destroyed, unless it is promptly replaced with Collateral of like quality or
restored to its former condition.
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Remedies of Secured Party on Default
During the existence of any event of default, Secured Party may declare
the unpaid principal and earned interest of the obligation immediately due in
whole or part, enforce the obligation, and exercise any rights and remedies
granted by the Texas Uniform Commercial Code or by this agreement, including the
following:
1. require Debtor to deliver to Secured Party all books and
records relating to the Collateral;
2. require Debtor to assemble the Collateral and make it
available to Secured Party at a place reasonably convenient to both parties;
3. take possession of any of the Collateral and for this
purpose enter any premises where it is located if this can be done without
breach of the peace;
4. sell, lease, or otherwise dispose of any of the Collateral in accord
with the rights, remedies, and duties of a secured party under chapters 2 and 9
of the Texas Uniform Commercial Code after giving notice as required by those
chapters; unless the Collateral threatens to decline speedily in value, is
perishable, or would typically be sold on a recognized market, Secured Party
will give Debtor reasonable notice of any public sale of the Collateral or of a
time after which it may be otherwise disposed of without further notice to
Debtor; in this event, notice will be deemed reasonable if it is mailed, postage
prepaid, to Debtor at the address specified in this agreement at least ten days
before any public sale or ten days before the time when the Collateral may be
otherwise disposed of without further notice to Debtor;
5. surrender any insurance policies covering the Collateral and
receive the unearned premium;
6. apply any proceeds from disposition of the Collateral after
default in the manner specified in chapter
9 of the Texas Uniform Commercial Code, including payment of Secured Party's
reasonable attorney's fees and court expenses; and
7. if disposition of the Collateral leaves the obligation
unsatisfied, collect the deficiency from Debtor.
General Provisions
1. Parties Bound. Secured Party's rights under this agreement shall
inure to the benefit of its successors and assigns. Assignment of any part of
the obligation and delivery by Secured Party of any part of the Collateral will
fully discharge Secured Party from responsibility for that part of the
Collateral. If Debtor is more than one, all their representations, warranties,
and agreements are joint and several. Debtor's obligations under this agreement
shall bind Debtor's personal representatives, successors, and assigns.
2. Waiver. Neither delay in exercise nor partial exercise of any of
Secured Party's remedies or rights shall waive further exercise of those
remedies or rights. Secured Party's failure to exercise remedies or rights does
not waive subsequent exercise of those remedies or rights. Secured Party's
waiver of any default does not waive further default. Secured Party's waiver of
any right in this agreement or of any default is binding only if it is in
writing.
Secured Party may remedy any default without waiving it.
Page 42
3. Reimbursement. If Debtor fails to perform any of Debtor's
obligations, Secured Party may perform those obligations and be reimbursed by
Debtor on demand at the place where the note is payable for any sums so paid,
including attorney's fees and other legal expenses, plus interest on those sums
from the dates of payment at the rate stated in the note for matured, unpaid
amounts. The sum to be reimbursed shall be secured by this security agreement.
4. Interest Rate. Interest included in the obligation shall not exceed
the maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged, or received under law; any interest in excess of that maximum
amount shall be credited to the principal of the obligation or, if that has been
paid, refunded. On any acceleration or required or permitted prepayment of the
obligation, any such excess shall be canceled automatically as of the
acceleration or prepayment or, if already paid, credited on the principal amount
of the obligation, or if the principal amount has been paid, refunded. This
provision overrides other provisions in this and all other instruments
concerning the obligation. 5. Modifications. No provisions of this agreement
shall be modified or limited except by written agreement.
6. Severability. The unenforceability of any provision
of this agreement will not affect the enforceability or validity of any
other provision.
7. After-Acquired Consumer Goods. This security interest shall
attach to after-acquired consumer goods only to the extent permitted by law.
8. Applicable Law. This agreement will be construed according to
Texas laws.
9. Place of Performance. This agreement is to be performed
in the county of Secured Party's mailing address.
10. Financing Statement. A carbon, photographic, or other
reproduction of this agreement or any financing statement covering the
Collateral is sufficient as a financing statement.
11. Presumption of Truth and Validity. If the Collateral is sold after
default, recitals in the xxxx of sale or transfer will be prima facie evidence
of their truth, and all prerequisites to the sale specified by this agreement
and by the Texas Uniform Commercial Code will be presumed satisfied.
12. Singular and Plural. When the context requires, singular
nouns and pronouns include the plural.
13. Priority of Security Interest. This security interest
shall neither affect nor be affected by any
other security for any of the obligation. Neither extensions of any of the
obligation nor releases of any of the Collateral will affect the priority or
validity of this security interest with reference to any third person.
14. Cumulative Remedies. Foreclosure of this security interest by suit
does not limit Secured Party's remedies, including the right to sell the
Collateral under the terms of this agreement. All remedies of Secured Party may
be exercised at the same or different times, and no remedy shall be a defense to
any other. Secured Party's rights and remedies include all those granted by law
or otherwise, in addition to those specified in this agreement.
15. Agency. Debtor's appointment of Secured Party as Debtor's
agent is coupled with an interest and will survive any disability of Debtor.
* * * * *
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DEBTOR:
REGAL OAK PROPERTIES, INC.
Authorized Agent:
/s/Xxxxxx Xxxxx
------------------------------
SECURED PARTY:
EIF HOLDINGS, INC.
BY: /s/Xxxxx X. Xxxxxxxx
------------------------------
NAME: Xxxxx X. Xxxxxxxx
----------------------------
TITLE: President
---------------------------
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