1
Exhibit 23.2
SECURITY AGREEMENT
FOR VALUE RECEIVED, and to induce GENERAL VISION SERVICES, INC., a Delaware
corporation with offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(hereinafter referred to as "Secured Party"), to loan to ACTION INDUSTRIES,
INC., a Pennsylvania corporation with offices at 000 Xxxxx Xxxx, Xxxxxxxx,
Xxxxxxxxxxxx 00000 (hereinafter referred to as "Debtor"), Two Million Five
Hundred ($2,500,000) Dollars which loan is evidenced by a 6% note dated March
18, 1998 issued by Debtor to Secured Party (the "Note"), Debtor, hereby agrees
that Secured Party shall have the rights, remedies and benefits hereinafter set
forth.
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
(i) "Action Private Placement" shall mean the private financing
effected by Secured Party pursuant to which it sold Private Placement Notes
in the aggregate principal amount of approximately $4 million.
(ii) "Collateral" shall mean the GVS Shares and all other assets of
the Debtor, together with all products, proceeds, additions and
substitutions thereto, but excluding all after acquired property, proceeds
of income tax refunds, proceeds of the sales of debt or equity securities.
(iii) "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 5 of the Note.
(iv) "Financing Agreements" shall mean this Agreement, the Private
Placement Security Agreement, all current and future related agreements,
documents and instruments, as now existing and as hereafter amended,
modified or supplemented, and the Note.
(v) "GVS Shares" shall mean all of the 26,800,000 shares of Secured
Party's common stock purchased by Debtor pursuant to the Purchase
Agreement and all dividends thereon, including but not limited to Stock
dividends, and shares resulting from stock splits thereof.
(vi) "Note" shall mean the note dated March 18, 1998 issued by Debtor
to Secured party in the principal amount of Two Million Five Hundred
($2,500,000) Dollars due March 31, 2000 and bearing interest at the rate of
six percent (6%) per annum until maturity and twelve percent (12%) per
annum thereafter.
(vii) "Obligations" shall mean the Obligations as defined in the Note.
PAGE 1 OF 8 PAGES
2
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
(viii) "Private Placement Notes" shall mean the 10% convertible
promissory notes acquired by the Private Placement Purchasers.
(ix) "Private Placement Purchasers" shall mean the purchasers of the
Private Placement Notes.
(x) "Private Placement Security Agreement" shall mean the security
agreement dated as of the date hereof Debtor, Secured Party and X. Xxxxxxx
Securities, LLC, as agent for the Private Placement Purchasers, pursuant to
which Secured Party has pledged the GVS Shares as security for the payment of
the Private Placement Notes, the form of which is appended hereto as EXHIBIT A.
(xi) "Purchase Agreement" shall mean the stock purchase agreement, to
which the form of this agreement is appended as EXHIBIT B, between Debtor and
Secured Party dated as of the date hereof, pursuant to which Debtor is
purchasing the GVS Shares.
All other terms defined in the preamble or the recitals hereto shall have the
respective meanings ascribed to them therein. Unless the context otherwise
indicates, all terms used without definition in this Agreement shall have the
meanings ascribed to them in the Uniform Commercial Code of the State of New
York as presently in effect, to the extent the same are used or defined therein.
ARTICLE II
SECURITY
As security for the payment and performance of the Obligations, Debtor hereby
grants to Secured Party a continuing security interest in and a general lien
upon the Collateral, subject in the case of the GVS Shares to a senior security
interest granted to the Private Placement Purchasers in accordance with the
terms of the Private Placement Security Agreement and in the case of the
Debtor's other assets, pari passu with the Private Placement Purchasers. Debtor
hereby agrees that upon the execution of this Agreement it will deliver the GVS
Shares to Xxxxxxx as agent for the Secured Parties to be held in accordance with
the terms hereof and the terms of the Senior Security Agreement.
ARTICLE III
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF DEBTOR
3.1 INCORPORATION OF COVENANTS, REPRESENTATIONS AND WARRANTIES.
All covenants of Debtor set forth in Sections 1 and 2 of the Note and all
representations and warranties of Debtor set forth in Section 3 of the Note are
hereby made a part hereof and incorporated by reference herein.
PAGE 2 OF 8 PAGES
3
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
3.2 FURTHER ASSURANCES; FINANCING STATEMENTS.
Upon request of Secured Party, at any time and from time to time, Debtor will,
at its own cost and expense, execute and deliver to Secured Party one or more
financing statements pursuant to the Uniform Commercial Code, or amendments or
continuations thereof, and any other documents required by Secured Party to
further evidence, effect or perfect the security interest granted herein or to
otherwise effectuate the purposes of this Agreement, and, to the extent
permitted by applicable law, Debtor hereby authorizes Secured Party to execute
and file at any time or times one or more financing statements pursuant to the
Uniform Commercial Code with respect to any or all of the Collateral, signed
only by Secured Party. Debtor hereby agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
3.3 COLLATERAL TO BE HELD FREE AND CLEAR OF LIENS AND ENCUMBRANCES;
RESTRICTIONS ON SALE.
During the term of this Agreement and until the Obligations are paid in full,
Debtor (i) shall not sell or otherwise transfer the GVS Shares and shall hold
such shares free and clear of any liens and encumbrances except as provided in
the Private Placement Security Agreement; and (ii) shall place a legend on the
certificates representing the GVS Shares, acceptable to Secured Party,
referencing this Agreement and the restrictions set forth in this Section 3.3,
which legend shall not be removed without the written approval of Secured Party.
3.4 DISCHARGE OF LIENS.
Debtor shall immediately pay and cause the discharge of any liens, taxes or
assessments which may be levied upon the Collateral; provided, however, that
Debtor shall not be required to pay or discharge any lien, tax or assessment
which is being contested in good faith by appropriate proceedings diligently
pursued, and for which adequate reserves have been established.
3.5 ACTIONS BY SECURED PARTY.
Secured Party may, in its sole discretion and at any time, for the account and
expense of Debtor, pay any amount or do any act required of Debtor hereunder or
requested by Secured Party to preserve, protect, maintain or enforce the
Obligations, the Collateral or security interest granted herein, and which
Debtor fails to do or pay, including, without limitation, payment of any
judgment against Debtor, and insurance premium, any warehouse charge and any
lien, claim or encumbrance upon or with respect to the Collateral, and any such
payment shall be added to the Obligations and shall be payable upon demand.
3.5 ADVERSE CHANGES.
Debtor shall promptly notify Secured Party in writing of any event which
materially adversely affects the value of the Collateral.
PAGE 3 OF 8 PAGES
4
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
3.6 PRESERVATION OF CORPORATE EXISTENCE.
Debtor will at all times preserve and keep in full force and effect its
corporate existence, licenses, permits, rights and franchises.
ARTICLE IV
REMEDIES UPON EVENT OF DEFAULT
4.1 ACCELERATION OF OBLIGATIONS.
For purposes of this Article IV, upon the occurrence of an Event of Default as
set forth in Section 5 of the Note, all or any portion of the Obligations shall,
at the option of Secured Party and without notice, demand or legal process,
become immediately due and payable.
4.2 RIGHTS UNDER UNIFORM COMMERCIAL CODE.
In addition to all of its other rights and remedies under this Agreement, the
other Financing Agreements and any other agreement with Debtor, Secured Party
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State of New York and of any state in which the
Collateral is located from time to time.
4.3 ACTION PENDING DISPOSITION.
Until Secured Party is able to effect a sale or other disposition of the
Collateral, Secured Party shall have the right to use or take such action with
respect to the Collateral, or any part thereof, as it deems appropriate for the
purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by Secured Party. Secured Party shall have no obligation to
Debtor to maintain or preserve the rights of Debtor as against third parties
with respect to the Collateral while the Collateral is in the possession of
Secured Party. Secured Party may, if it so elects, seek the appointment of a
receiver or keeper to take possession of the Collateral and to enforce any of
Secured Party's remedies with respect to such appointment without prior notice
or hearing.
4.4 DISPOSITION OF COLLATERAL.
4.41 Right to Sell or Otherwise Dispose of Collateral. Secured Party shall have
the right to sell or otherwise dispose of all or any of the Collateral except
for the GVS Shares which may be disposed of only in accordance with the terms of
the Private Placement Security Agreement, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash or on
credit, all as Secured Party, in its sole discretion, may deem advisable. Such
sales may be adjourned and continued from time to time with or without notice.
To enable Secured Party to effect any such sale, assignment and/or transfer,
Debtor hereby makes, constitutes and appoints Secured Party as its true and
lawful attorney, in its name, place and stead, and for its account and risk, to
make, execute and deliver any and all assignments or other instruments which
Secured Party may deem necessary or proper to
PAGE 4 OF 8 PAGES
5
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
effectuate the authority hereby conferred by signing Debtor's name only or by
signing the same as its attorney-in-fact, as may be deemed by Secured Party to
be necessary or proper in connection with any sale, assignment or transfer of
all or any part of the Collateral. The foregoing power of attorney is coupled
with an interest and shall be a continuing one and irrevocable so long as any
portion of the Obligations remains unpaid in whole or in part.
4.42. Right to Purchase Collateral. Secured Party may purchase all or any part
of the Collateral at public sale or, if permitted by law, private sale, and in
lieu of actual payment of such purchase price, may set off the amount of such
price against the Obligations.
4.43 Application of Proceeds of Sale of Collateral. Except as otherwise
provided by law, the proceeds realized from the sale of any of the Collateral
shall be applied by Secured Party as follows:
First, to the reasonable costs and expenses of every kind incurred in
connection with or incidental to the care, safekeeping or otherwise of any and
all of the Collateral or in any way relating to the rights of the Secured Party
hereunder, including reasonable attorney's fees and legal expenses;
Second, solely with respect to the proceeds from any sale of the GVS
Shares, to the payment of the Private Placement Notes;
Third, to the satisfaction of the Obligations;
Fourth, to the payment of any other amounts required by applicable law;
and
Fifth, to Debtor to the extent of the surplus proceeds, if any.
In the event that the proceeds realized from the sale as aforesaid are
insufficient to pay all amounts to which Secured Party is legally entitled,
Debtor will be liable for the deficiency, together with interest thereon, at the
rate of twelve (12%) percent per annum, and the reasonable fees of any attorneys
employed by Secured Party to collect such deficiency.
4.5 WAIVER OF BOND.
In connection with the foregoing remedies, Debtor hereby waives the posting of
any bond which might otherwise be required.
4.6 REMEDIES CUMULATIVE.
All rights and remedies of Secured Party arising under this Agreement, the other
Financing Agreements, any other agreement with Debtor or by operation of law
shall be cumulative and non-exclusive, to the fullest extent permitted by law.
PAGE 5 OF 8 PAGES
6
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
ARTICLE V
LIABILITY OF DEBTOR FOR
SECURED PARTY'S EXPENSES AND ATTORNEYS' FEES
Debtor will be liable to Secured Party for any and all sums, costs and expenses
which Secured Party may pay or incur pursuant to the provisions of this
Agreement or in defending, protecting and enforcing the security interest
granted herein or in enforcing payment of the Obligations or otherwise in
connection with the provisions hereof, including without limitation all search,
filing and recording fees, appraisal fees, taxes, levies and reasonable
attorneys' and accountants' fees and legal expenses, all fees and expenses for
the service and filing of papers, fees of marshals, sheriffs, custodians,
auctioneers and others, travel expenses, court costs and collection charges all
expenditures in connection with the repossession, holding, preparation for sale
and sale of the Collateral, as well as all damages for breach of warranty,
misrepresentation or breach of covenant by Debtor, and all such liabilities
shall be part of the Obligations and shall be payable upon demand.
ARTICLE VI
MISCELLANEOUS
6.1 AMENDMENT.
This Agreement may be amended only by an instrument in writing executed by
parties hereto.
6.2 ENTIRE AGREEMENT.
This Agreement, the Stock Purchase Agreement, the Financing Agreements and any
exhibits, schedules, certificates or documents referred to herein and therein,
constitute the entire agreement of the parties hereto, and supersede all prior
understandings with respect to the subject matter hereof and thereof.
6.3 WAIVERS.
Any failure or delay by Secured Party to require strict performance by Debtor of
any of the provisions, warranties, terms or conditions contained herein or in
any of the other Financing Agreements shall not affect Secured Party's right to
demand strict compliance therewith and performance thereof, and any waiver of
any default shall not waive or affect any other default, whether prior or
subsequent thereto, and whether of the same or of a different type. None of the
warranties, conditions, provisions and terms contained herein or in any other
agreement, document or instrument shall be deemed to have been waived by any act
or knowledge of Secured Party, its agents, officers, stockholders or employees,
but only by an instrument in writing, signed by an officer of Secured Party and
directed to Debtor, specifying such waiver.
6.4 NOTICES.
PAGE 6 OF 8 PAGES
7
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
6.41 Procedure for Notice. Any notice, demand, consent, approval, disapproval
or statement (collectively, "Notices") required or permitted to be given by the
terms and provisions of this Agreement, or by any law or governmental
regulation, shall be in writing and, unless otherwise required by such law or
regulation, shall be personally delivered or sent by United States mail, postage
prepaid, as registered or certified mail or by nationally recognized overnight
courier service. Any Notice to Debtor shall be addressed to such party at its
address herein above set forth. Any Notice to Secured Party shall be addressed
to such party at its address herein above set forth. By giving the other party
at least ten (10) days' prior written notice, any party may, by Notice given as
above provided, designate a different address or addresses for Notices.
6.42 When Notice Deemed Given. Any Notice shall be deemed given as of the date
of delivery as indicated by affidavit in the case of personal delivery; in the
case of mailing, any Notice shall be deemed given on the fifth day after
mailing; in the case of delivery by nationally recognized overnight courier
service, any Notice shall be deemed given on the next business day after
dispatch.
6.5 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted in a
manner so as to be effective and valid under applicable law. If any provision of
this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such provision
and the remaining provisions of this Agreement shall remain unaffected and in
full force and effect.
6.6 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and for the benefit of the parties hereto
and their respective legal representatives, successors and assigns.
6.7 GOVERNING LAW; CONSENT TO JURISDICTION; VENUE WAIVER; WAIVER OF JURY
TRIAL.
The validity, interpretation and effect of this Agreement shall be governed by
the laws of the State of New York. Debtor hereby consents to the non-exclusive
jurisdiction of all courts in said State and hereby waives all right to trial by
jury in any action, suit or proceeding brought to enforce or defend any rights
or remedies under this Agreement.
6.8 ARTICLES AND SECTION TITLES.
The titles of articles and sections contained in this Agreement are merely for
convenience and shall be without substantive meaning or content.
6.9 COUNTERPARTS.
PAGE 7 OF 8 PAGES
8
SECURITY AGREEMENT BETWEEN GENERAL VISION
SERVICES, INC., AND ACTION INDUSTRIES,
INC. DATED AS OF MARCH 18, 1998.
This Agreement may be executed in any number of counterparts, each of which
shall be considered and original but all of which shall constitute one and the
same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 18th
day of March, 1998.
ACTION INDUSTRIES, INC.
a Pennsylvania corporation
By: /s/ T. XXXXXX XXXXXX
----------------------------------
T. Xxxxxx Xxxxxx, President
GENERAL VISION SERVICES, INC.
a Delaware corporation
By: /s/ XXXXXXX XXXXXXXXX, PRESIDENT
----------------------------------
Xxxxxxx Xxxxxxxxx, President
PAGE 8 OF 8 PAGES
9
EXHIBIT A
TO
SECURITY AGREEMENT
AMONG
SECURED PARTIES,
ACTION INDUSTRIES, INC.
AND
GENERAL VISION SERVICES, INC.
SCHEDULE OF SECURED PARTIES
Name and Address Number of Principal Amount
of Secured Party Note Secured of Note Secured
---------------- ------------ ---------------
PAGE 9 OF 8 PAGES
