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EXHIBIT 10.20
SECURITY AGREEMENT
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This SECURITY AGREEMENT (this "Agreement") is made and entered into as
of March 17, 2000, by and between PowerSpring, Inc., a Delaware corporation
("Debtor"), and Xxxx X. Xxxxxxx, a Colorado resident ("Secured Party").
Recitals
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WHEREAS, Secured Party and Debtor have entered into that certain
Agreement and Plan of Merger, of even date herewith (the "Merger Agreement"),
pursuant to which, among other things, Secured Party is exchanging his shares of
Mercator Energy Incorporated, a Colorado corporation ("Mercator"), in exchange
for certain consideration of the Debtor; and
WHEREAS, in connection with the Merger Agreement, Debtor is issuing a
promissory note (the "Note"), of even date herewith, to Secured Party; and
WHEREAS, in order to induce Secured Party to enter into the Merger
Agreement and accept the Note as consideration in part for his shares of
Mercator, Debtor has agreed to grant to Secured Party a security interest in
certain collateral described herein;
Agreement
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agrees as follows:
1. Grant of Security Interest. As security for the prompt and full
payment when due of all of its Obligations (as defined in Section 2) and in
order to induce Secured Party to enter into the Merger Agreement and accept the
Note as consideration in part for his shares of Mercator, Debtor hereby grants
to Secured Party a security interest in all of the Debtor's properties and
assets of every kind, nature and description, real or personal or mixed,
tangible or intangible, wherever located, and whether now owned or hereafter
acquired, including without limitation:
(a) All of Debtor's inventory, meaning all goods, wares,
merchandise, raw materials, supplies, work in process, finished goods,
and other personal property of every description held for sale or lease
or furnished or to be furnished under any contract of service, and all
goods which are in transit, and all returned, repossessed and rejected
goods of the foregoing description, and any other tangible personal
property held by the Debtor for processing, sale or other business
purpose or to be used or consumed in the Debtor's business;
(b) All machinery, equipment, furniture, office equipment and
supplies, plan equipment, tools, dies, molds, fixtures and leasehold
improvements of Debtor, of every kind
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and description, wherever located and including all additions, improvements,
accessions and substitutions thereto;
(c) All accounts, accounts receivable and notes receivable of
the Debtor, whether now existing or hereafter arising, as well as all
right, title and interest of the Debtor in the goods which have given
rise thereto, including the rights or reclamation and of stoppage in
transit, all other rights to the payment of money (including without
limitation, tax refunds);
(d) All contracts and contract rights of the Debtor, now
existing or hereafter arising, under contracts to sell or lease goods
or render services;
(e) All insurance proceeds, whether arising out of any of the
foregoing or otherwise;
(f) All notes, bills, drafts, acceptances, chooses in action,
chattel paper, instruments, and any other forms of obligations and
receivables and right to payments for credit extended and for goods
sold or leased or services rendered, whether or not earned by
performance, documents, books and records and rights in and to the name
and all goodwill and all other general intangibles of the Debtor,
including all customer lists, causes of action, judgment, rights to
performance, licenses, permits, copyrights, trademarks, trade secrets,
patents, patent rights, proprietary processes, software and related
documentation, blueprints, drawings, designs, diagrams, plans, reports,
charts, catalogs, manuals, technical data and any and all concepts or
ideas in any manner related to the design, development, manufacture,
sale, marketing, lease or use of any or all goods produced or sold or
leased or services rendered by the Debtor in its business; and
(g) All collateral and all guaranties for, and all products,
proceeds, substitutions, and accessions of, any of the foregoing
property.
The property described above shall hereafter be collectively referred
to as the "Collateral."
2. Obligations. The security interest in the Collateral is granted
hereby in order to secure the payment and performance of the following
obligations of Debtor to Secured Party, whether now outstanding or incurred
after the date hereof (collectively the "Obligations"):
(a) Debtor's performance of its obligations under the Note (in
an amount equal to the lesser of $666,666.00 or the amount then
outstanding under the Note) and this Agreement;
(b) All interest, fees, expenses, obligations and liabilities
of Debtor arising pursuant to or represented by the Note;
(c) All taxes, assessments, insurance premiums, brokerage
fees, reasonable attorneys' fees and other expenses of sale of the
Collateral; and
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(d) All renewals, extensions and modifications of any of the
indebtedness and obligations referred to in the foregoing clauses, or
any part thereof.
3. Debtor's Representations, Warranties and Covenants. Debtor hereby
represents, warrants and covenants to and for the benefit of Secured Party, as
follows:
Debtor has all requisite right, power and authority to execute,
deliver, and perform its obligations under, this Agreement and the Note. The
execution, delivery and performance of this Agreement and the Note by Debtor
have been duly authorized by all requisite corporate action on the part of
Debtor and do not and will not violate or conflict with the articles of
incorporation or bylaws of Debtor or any law, rule or regulation applicable to
Debtor or any order, writ, injunction or decree of any court, government
authority or arbitrator, applicable to Debtor, and do not and will not conflict
with, result in a breach of or constitute a default under the provisions of any
material mortgage, deed of trust, indenture, security agreement, loan agreement,
credit agreement or other instrument, agreement or contract binding on Debtor or
any of its property. Debtor has the unrestricted right to grant the security
interest in the Collateral contemplated hereby.
4. Events of Default. Debtor shall be deemed to be in default
hereunder, and an Event of Default hereunder shall be deemed to have occurred,
upon the occurrence of any of the following events:
(a) Debtor's failure to pay when due, or duly and promptly to
observe or perform, any of the Obligations;
(b) Debtor otherwise breaches (whether or not such breaches
are within Debtor's control) any covenants, warranties or
representations in or regarding this Agreement or the Note, and fails
to remedy such breach within 20 business days of receiving written
notice of such breach from Secured Party; or
(c) Debtor becomes insolvent, terminates its existence,
dissolves or experiences business failure; a custodian, as that term is
defined in Title 11, U.S.C., as amended, of any of Debtor's property is
appointed or exists; or Debtor makes any assignment for the benefit of
creditors; or any proceeding under any bankruptcy or insolvency law is
commenced by or against Debtor.
5. Remedies.
(a) If an Event of Default occurs and is continuing hereunder,
Secured Party shall have full power and authority to sell, assign or
deliver the whole or any part of the Collateral at any broker's
exchange or elsewhere, at public or private sale, at the option of
Secured Party, in order to satisfy any part of the obligations of
Debtor now existing or hereinafter arising under the Note. On any such
sale, Secured Party or its assigns may purchase all or part of the
Collateral. In addition, at its sole option, Secured Party may elect to
retain all the Collateral in full satisfaction of Debtor's obligations
under the Note, in accordance with the provisions and procedures set
forth in the Colorado Uniform Commercial Code.
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(b) The rights and remedies granted to Secured Party herein
upon an Event of Default shall be in addition to all the rights, powers
and remedies of Secured Party under the Colorado Commercial Code and
applicable law and such rights, powers and remedies will be exercisable
by Secured Party with respect to all of the Collateral. Debtor agrees
that Secured Party's reasonable expenses of holding the Collateral,
preparing it for resale or other disposition, and selling or otherwise
disposing of the Collateral, including attorneys' fees and other legal
expenses, will be deducted from the proceeds of any sale or other
disposition and will be included in the amounts Debtor must tender to
redeem the Collateral. All rights, powers and remedies of Secured Party
shall be cumulative and not alternative. Any forbearance or failure or
delay by Secured Party in exercising any right, power or remedy
hereunder shall not be deemed to be a waiver of any such right, power
or remedy and any single or partial exercise of any such right, power
or remedy hereunder will not preclude the further exercise thereof.
6. Attorney-in-Fact. Debtor hereby appoints Secured Party as the
attorney-in-fact for Debtor for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument which Secured
Party may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, Secured Party shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to Debtor and included within the Collateral and to give full
discharge for the same. Neither Secured Party nor any director or officer of any
issuer of the Securities shall have any liability for the distribution to and
collection of the Proceeds by Secured Party, but shall be fully protected in
relying on the written statement of Secured Party as to its authorization
pursuant to this paragraph. Any and all amounts collected by Secured Party
pursuant hereto shall be applied against the Obligations in the manner that
Secured Party shall determine, in Secured Party's sole and absolute discretion.
7. Certain Other Rights of Secured Party.
(a) Duty of Care. Secured Party's only duty with respect to
the Collateral shall be to exercise reasonable care to secure the safe
custody thereof. Secured Party shall not have a duty to fix or preserve
rights against prior parties to the Collateral, and shall never be
liable for its failure to use diligence to collect any amount payable
with respect to the Collateral, but shall be liable only to the account
of Debtor for what Secured Party may actually collect or receive
thereon.
(b) Financing Statement. Secured Party shall have the right at
any time to execute and file this Agreement or a copy of this Agreement
as a financing statement, but the failure of Secured Party to do so
shall not impair the validity or enforceability of this Agreement.
(c) Payment of Expenses. At Secured Party's option, Secured
Party may discharge taxes, liens and interest, perform or cause to be
performed, for and on behalf of Debtor, any actions and conditions,
obligations or covenants which Debtor has failed or refused to perform
and may pay for the repair, maintenance or preservation of any of the
Collateral, and all sums so expended, including, but not limited to,
attorneys' fees, court costs, agents' fees or
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commissions, or any other costs or expenses, shall bear interest from
the date of payment at the highest legal rate and shall be deemed to
constitute part of the Obligations secured by this Agreement.
8. Cumulative Rights and Remedies. All rights and remedies of Secured
Party hereunder are cumulative of each other and of every other right or remedy
which Secured Party may otherwise have at law or in equity or under any other
contract or other writing for the enforcement of the security interest herein or
the collection of the Obligations, and the exercise by Secured Party of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies. Should Debtor have heretofore
executed or hereafter executed any other security agreement in favor of Secured
Party in which a security interest is created as security for the debts of
another or others, in respect of which Debtor may not be personally liable, the
security interest therein created and all other rights, powers and privileges
vested in Secured Party by the terms thereof shall exist concurrently with the
security interest created herein, and, in addition, all property in which
Secured Party holds a security interest under any such other security agreement
shall also be part of the Collateral hereunder, and all or any part of the
proceeds of the sale or disposition of such property may, in the discretion of
Secured Party, be applied by Secured Party in accordance with the terms hereof,
and of such other security agreement or agreements, or any of them.
9. Termination. Upon payment and performance in full by Debtor of all
Obligations in accordance with their terms, this Agreement and the security
interest granted hereunder shall terminate.
10. Further Assurances. Debtor agrees to execute and deliver such
further instruments and take such further actions as Secured Party may
reasonably request from time to time to preserve or give effect to its rights
under this Agreement.
11. Arbitration. In the event that any dispute, controversy or claim
arises out of, under or in connection with, or otherwise relates to, this
Agreement, including, but not limited to, the parties' rights and obligations
hereunder, or to the actual or alleged breach or termination hereof, then the
parties hereto agree that the same shall be resolved, determined and settled by
final and binding arbitration in Denver, Colorado utilizing the procedures set
forth in Section 11 of the Merger Agreement.
12. General Provisions.
12.1 Governing Law. This Agreement shall in all respects be governed
by, and construed in accordance with, the internal substantive laws of the State
of Colorado, without giving effect to any conflict or choice of law principles
or rules.
12.2 Amendment. This Agreement may not be amended or modified in whole
or in part in any manner except in a writing which makes reference to this
Agreement executed by both Debtor and Secured Party.
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12.3 Assignment. Neither the Agreement, nor any rights, obligations or
duties hereunder, may be assigned or delegated without the prior written consent
of the other parties hereto.
12.4 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, legatees,
personal representatives, devisees, executors, successors and permitted assigns.
12.5 Entire Agreement. This Agreement and the other documents,
instruments and agreements referred to herein, sets forth the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof and supersedes in their entirety all prior and contemporaneous written
and oral agreements, arrangements, understandings, negotiations, communications,
covenants, representations and warranties among the parties hereto relating to
the subject matter hereof.
12.6 Notices. Any and all notices, demands, requests, elections and
other communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given (i) upon personal delivery;
(ii) upon confirmation of receipt when sent by facsimile transmission; (iii) one
business day after deposit during normal business hours with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt; (iv) five business days after being sent by first class
(certified or registered) mail, postage prepaid, return receipt requested, in
each case to the following addresses:
If to Debtor, to:
PowerSpring, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
Metretek Technologies, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: W. Xxxxxxx Xxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxx X. Xxxx, Esq.
Kegler, Brown, Hill & Xxxxxx Co., L.P.A.
00 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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If to Secured Party, to:
Xxxx X. Xxxxxxx
Mercator Energy Incorporated
000 00xx Xxxxxx, Xxxxx 000 Xxxxx
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party hereto may send any notice, demand, request, election or other
communication to the intended recipient at its address set forth above using any
other means (such as expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, demand, request or other
communication shall be deemed to have been given until it is actually received
by the recipient. Any party hereto may change its designated address by giving
written notice to all other parties.
12.7 Waiver. The obligations of any party hereunder may be waived only
with the written consent of the party or parties entitled to the benefits the
obligations so involved. Any waiver of a breach or violation of or default under
any provision of this Agreement shall not be construed or operate as, or
constitute, a waiver of any other or subsequent breach or violation of or
default under that provision or any other provision of this Agreement. The
failure of any party to insist upon strict compliance with any provision of this
Agreement on any one or more occasions shall not be construed or operate as, or
constitute, a continuing waiver of, or an estoppel of that party's right to
insist upon strict compliance with, that provision or any other provision of
this Agreement.
12.8 Severability. The provisions of this Agreement shall be deemed
severable. If any provision of this Agreement is determined to be illegal,
invalid or unenforceable in any situation: (a) the parties hereto shall agree to
a suitable and equitable provision to be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision; and (b) the remainder of this Agreement
shall remain in full force and effect, and the application of such provision in
any other situation shall not be affected.
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12.9 Counterparts. This Agreement may be executed in any number of
counterparts (including counterparts executed by less than all parties hereto),
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
12.10 Headings. The headings used herein are solely for convenience of
reference and shall not be given any effect in the construction or
interpretation of this Agreement.
12.11 No Third Party Beneficiaries. Nothing in this Agreement, express
or implied, in intended to create or confer and shall not be construed or
operate as creating or conferring, any rights or remedies under or by reason of
this Agreement, upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
12.12 Further Assurances. The parties hereto agree to take or cause to
be taken all actions, including without limitation, the execution and delivery
of documents and instruments, which are necessary, convenient or desirable in
order to effect the transactions contemplated by this Agreement.
12.13 Best Efforts. Each of the parties hereto shall act in good faith
and use its best efforts to bring about the transactions contemplated by this
Agreement.
12.14 Expenses. Each of the parties to this Agreement shall pay its own
costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby.
12.15 Construction. In the event an ambiguity or question or intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party hereto by virtue of the authorship of any of the
provisions of this Agreement.
12.16 Specific Performance. Each of the parties hereto acknowledges and
agrees that the other parties hereto would suffer irreparable damage for which
an adequate remedy at law would not be available in the event any of the
provisions of this Agreement is not performed in accordance with its specific
terms or otherwise is breached. Accordingly, each of the parties hereto agrees
that the non-breaching parties shall be entitled to an injunction, restraining
order or other form of equitable relief from any court of competent jurisdiction
to prevent breaches of, and to specifically enforce, the provisions of this
Agreement.
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IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by or on behalf of the parties hereto, effective as of the date first
above written.
DEBTOR:
POWERSPRING, INC.
By /s/ W. Xxxxxxx Xxxxxx
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W. Xxxxxxx Xxxxxx, President
SECURED PARTY:
/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
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