Exhibit 10.11
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of July 31st,
2003, by and between TOWN CREEK INDUSTRIES, INC., a Maryland corporation
("TCI"), and PINETREE (BARBADOS) INC., a corporation existing under the laws of
Barbados ("Pinetree").
WITNESSETH:
WHEREAS, on the date hereof, TCI and Pinetree entered into a Memorandum
of Understanding (the "MOU") which required TCI to execute this Agreement in
order to secure the performance of TCI's representations, warranties, covenants
and obligations, as well as securing the repayment of the Convertible Secured
Promissory Note issued by Solomon Technologies, Inc. to Pinetree (Barbados),
Inc., executed on the same date hereof; and
WHEREAS, this Agreement constitutes such Security Agreement.
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Security Interest.
1.1 TCI hereby grants and assigns to Pinetree a continuing security
interest in and security title to (the "Security Interest") all of its property,
whether now owned or hereafter created, acquired or reacquired, including,
without limitation, the property described below and all substitutions
therefore, accessions thereto and improvements thereon, whether now owned or
hereafter created, acquired or reacquired:
(a) All of TCI's inventory, now or hereafter acquired, of
whatsoever nature and kind and wheresoever situated (the "Inventory");
(b) All machinery, equipment, marine vessels of any nature and
supplies (installed and uninstalled), now or hereafter acquired, and not
included in Inventory above, including motor vehicles and watercraft and all
accretions and accessions thereto (the "Equipment");
(c) All rights to payment of a monetary obligation, now or
hereafter acquired, whether or not earned by performance, for property that has
been or is to be sold, leased, licensed, assigned or otherwise disposed of, for
services rendered or to be rendered, for a policy of insurance issued or to be
issued or for a secondary obligation incurred or to be incurred, including,
without limitation, all agreements with and sums due from customers, and all
books and records recording, evidencing or relating to such accounts or any part
thereof (the "Accounts");
(d) With the exception of the TCI Marine Applications, defined
in Section 1.2, all general intangibles, now or hereafter acquired, including
personal property not included above, such as, without limitation, all goodwill,
trademarks, trademark applications, trade names, patents, patent applications,
patent extensions, industrial designs, other industrial or intellectual property
or rights therein, whether under license or otherwise, registered or pending,
including, but not limited to, those patents and patent application listed in
the attached Schedule 1.1(d) (collectively, the "Patents") and programs,
software, software source codes, programming material and tax refunds, (the
"Intangibles");
(e) All contracts and contractual rights, remedies or
provisions now existing or hereafter arising in favor of TCI, together with all
amendments thereto and all other documents executed in connection therewith (the
"Contracts");
(f) All investment property, including, without limitation,
all securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts and commodity accounts (the "Investment
Property");
(g) All membership rights, privileges and interests of TCI in
any natural person, partnership, corporation, trust, association, government or
other entity, ("Person"), including, without limitation, (i) the right to
receive distributions at any time or from time to time in cash or other
property, (ii) the right to any specific property of such Person, if any, and
(iii) all of TCI's right to participate in the management of such Person (the
"Membership Interests");
(h) All cash proceeds and any other tangible personal property
acquired through the disposition of an award from any lawsuit or lawsuit
settlement, including, but not limited to, any cash proceeds from enforcing its
patent rights against any third parties ("Litigation Proceeds"); and
(i) All goods, chattel paper, documents, instruments, choses
in action, claims, money, deposits, certificates of deposit, stock or share
certificates and licenses and other rights in intellectual property, and other
tangible personal property not included above (the "Miscellaneous Items"); and
(j) All proceeds of any of the above, and all proceeds of any
loss of, damage to or destruction of the above, whether insured or not insured,
and all other proceeds of any sale, lease or other disposition of any property
or interest therein referred to above, or of any franchise, license, permit or
operating right issued by any governmental or regulatory body or agency, whether
or not constituting a license, including, without limitation, the proceeds of
the sale or other disposition of any licenses, together with all proceeds of any
policies of insurance covering any or all of the above, indemnity or warranty
payments with respect to any of the above, the proceeds of any award in
condemnation with respect to any of TCI's property, any rebates or refunds,
whether for taxes or otherwise, and all proceeds of any such proceeds (the
"Proceeds").
1.2 All general intangibles, patents, industrial designs, other
industrial or intellectual property or rights therein, whether under license or
otherwise, registered or pending, and stated
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in the attached Schedule 1.2 shall be hereinafter referred to as the "TCI Marine
Applications". TCI shall grant and assign to Pinetree a continuing interest in
the TCI Marine Applications, and the TCI Marine Applications shall be considered
part of the Collateral, hereinafter defined, six (6) months from the date of
this Agreement.
1.3 The Inventory, Equipment, Accounts, Intangibles, Contracts,
Investment Property, Membership Interests, Litigation Proceeds, Miscellaneous
Items, TCI Marine Applications and Proceeds thereof, as described in this
Section, are hereinafter collectively referred to as the "Collateral". This
Agreement and the Security Interest secure payment of all Obligations.
1.4 For purposes of this Agreement, "Obligations" means all amounts
owing by TCI to Pinetree from time to time under the Secured Note.
SECTION 2. Further Assurances. TCI hereby authorizes Pinetree to file
such financing statements and such other documents as Pinetree may deem
necessary or desirable to protect or perfect its security interest in the
Collateral, and TCI further irrevocably appoints Pinetree as TCI's
attorney-in-fact, with power of attorney to execute on behalf of TCI such
Uniform Commercial Code financing statement amendment forms as Pinetree may,
from time to time, deem necessary or desirable. Such power of attorney is
coupled with an interest and shall be irrevocable for so long as any of the
Obligations remains unpaid or unperformed. In addition, TCI agrees to make,
execute, deliver or cause to be done, executed and delivered, from time to time,
all such further acts, documents and things as Pinetree may reasonably require
for the purpose of perfecting or protecting its rights hereunder or otherwise
giving effect to this Agreement, all promptly upon request. With the exception
of the tax liens, stated and described in the attached Schedule 2, TCI shall
take or cause to be performed such acts and actions as shall be necessary or
appropriate to assure that the Security Interest upon the Collateral shall not
be or become subordinate or junior to the security interests, liens or claims of
any other Person.
TCI represents and warrants that it owns all of the right, title and
interest in and to the Patents and that it is capable of granting to Pinetree a
valid security interest therein. TCI further represents and warrants that it
will not transfer, assign or otherwise dispose of its right, title and interest
in and to the Patents without the prior written consent of Pinetree.
SECTION 3. Location of Collateral, and Change of Jurisdiction or Name.
TCI further represents and warrants that its chief executive office and all of
its records concerning the Collateral is located at:
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx,
X.X.X. 00000
TCI hereby covenants and agrees that it shall not keep any of such records at
any other address, except for the offices of its attorneys, unless written
notice thereof is given to Pinetree at least thirty (30) days prior to the
effective date of any new address for the keeping of such records. TCI further
agrees that it shall promptly advise Pinetree in writing of the opening of any
new place of business or any change in the location of the place where it keeps
the Xxxxxxxxxx. XXX
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hereby covenants and agrees that (i) its jurisdiction of incorporation is the
State of Maryland, and (ii) it shall not change its jurisdiction of
incorporation or its name unless written notice thereof is given to Pinetree
within ten (10) days of the effective date of such change.
SECTION 4. Covenants Concerning Contracts.
4.1 TCI shall (a) fulfill, perform and observe each and every material
condition and covenant contained in any of the Contracts, (b) at the sole cost
and expense of TCI, enforce the performance and observance of each and every
material covenant and condition of the Contracts, to be performed or observed by
other parties to any of the Contracts, and (c) appear in and defend any action
growing out of or in any manner connected with any Contract. The rights and
interest transferred and assigned to Pinetree hereunder include all of TCI's
rights and titles (a) to modify the Contracts, (b) to terminate the Contracts,
and (c) to waive or release the performance or observance of any obligation or
condition of the Contracts, provided that such rights will not be enforced
unless an Event of Default, as hereinafter defined, has occurred and remains
uncured after the expiration of the cure period, and the failure to exercise
such rights, in Pinetree's view, would result in a material decrease in the
value of the Collateral securing the Obligations.
4.2 Any of the following shall be an "Event of Default":
(a) TCI defaults in the payment of any principal or interest
on any Obligation for a period of fifteen (15) business days after such payment
becomes due and payable, by acceleration or otherwise; or
(b) TCI's failure to cure within fifteen (15) business days
after receipt of written notice from Pinetree of TCI's breach of any part or
subsection of Sections 1, 2, 4 or 7 of this Agreement; or
(c) TCI's failure to cure within (15) business days after
receipt of written notice from Pinetree of a material breach of any other of its
representations, warranties, covenants or other undertakings under this
Agreement or any of the STI Settlement Documents; or
(d) Without Pinetree's prior written consent, which shall not
be unreasonably withheld or delayed, TCI sells, assigns, transfers, or otherwise
disposes of all or any substantial part of the Collateral, its assets or any
subsidiary corporation, or merges or amalgamates with or is acquired by any
other corporation, or there is a change of control of TCI; or
(e) Except with respect to the payment of taxes disclosed in
Schedule 3.2(f) of the MOU, TCI commits a default with respect to any other
material indebtedness and such default continued for a period of (15) business
days, or there is entered any final judgment against TCI for any payment in
excess of $100,000; or
(f) TCI's failure to provide notice to Pinetree of any
material change of the location of Collateral, as required by section 3 of this
Agreement, such that the financing statement, perfecting Pinetree's security
interest in the Collateral, would no longer be effective; or
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(g) An uninsured material loss, theft, damage or destruction
to any of the Collateral; or
(h) Except for the outstanding tax liabilities disclosed in
Schedule 2 of this Agreement, any lien against or the making of any lien,
seizure or attachment of or on the Collateral, which has a material adverse
affect on TCI's business; or
(i) TCI's failure to cure within fifteen (15) business days
after receipt of written notice from Pinetree of the occurrence of an Event of
Default under the STI Settlement Documents.
4.3 Nothing in this Agreement or the Settlement Documents shall be
construed to prevent TCI from continuing to carry its business in the ordinary
course, except in the Event of Default.
4.4 Special Bankruptcy Provisions. TCI hereby agrees that if TCI shall:
(a) file with any bankruptcy court or be the subject of any
petition under Title 11 of the U.S. Code, as amended;
(b) be the subject of any order for relief issued under such
Title 11 of the U.S. Code, as amended;
(c) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors;
(d) seek, consent to, or acquiesce in the appointment of any
trustee, receiver, conservator, or liquidator; or
(e) be the subject of any order, judgment, or decree entered
by any court of competent jurisdiction approving a petition filed against TCI
for any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or relief for debtors,
that any such event shall constitute an Event of Default hereunder
(provided, however, that in any such case, if the same is dismissed or vacated
within 30 days of being instituted, then any such default shall be deemed
cured), and TCI: (i) agrees that it will not contest, object to, or interpose
any defense, all of which are waived, with respect to any motion by Pinetree
seeking relief from any automatic stay imposed by Section 362 of Title 11 of the
U.S. Code, as amended, or from any other stay or suspension of remedies imposed
in any other manner with respect to the exercise of the rights and remedies
otherwise available to Pinetree with respect to the Collateral under the
Settlement Documents, and (ii) acknowledges and stipulates that TCI cannot
provide Pinetree with adequate protection (as that term is defined in Section
361 of the Bankruptcy Code) and therefore it will not use or seek approval for
continued use of, any of
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Pinetree's cash collateral (as that term is defined in Section 363 of the
Bankruptcy Code), including any of the Collateral.
SECTION 5. Remedies.
5.1. Upon the occurrence and during the continuance of an Event of
Default, Pinetree shall have such rights and remedies as are set forth in the
MOU and those rights set forth herein, and all the rights, powers and privileges
of a secured party under the Uniform Commercial Code of the State of Maryland or
any other applicable jurisdiction, and all other rights and remedies available
to Pinetree at law or in equity. TCI covenants and agrees that any notification
of intended disposition of any Collateral, if such notice is required by law,
shall be deemed reasonably and properly given if given in the manner provided
for in section 12 hereof at least fifteen business (15) days prior to such
disposition. Upon the occurrence and during the continuance of an Event of
Default, Pinetree shall have the right to the appointment of a receiver for the
properties and assets of TCI, and TCI hereby consents to such rights and such
appointment and hereby waives any objection TCI may have thereto or the right to
have a bond or other security posted by Pinetree in connection therewith.
5.2. Upon the occurrence and during the continuance of an Event of
Default, Pinetree may proceed to perform any and all of the Obligations of TCI
contained in any of the Contracts and exercise any and all rights of TCI therein
contained as fully as TCI itself could. TCI hereby appoints Pinetree its
attorney-in-fact, effective upon the occurrence and during the continuance of an
Event of Default, with power of substitution, to take such action, execute such
documents, and perform such work as Pinetree may deem appropriate in exercise of
the rights and remedies granted Pinetree herein. The powers herein granted shall
include, but not be limited to, powers to xxx on the Contracts. The power of
attorney granted herein is coupled with an interest and shall be irrevocable for
so long as any of the Obligations remain unpaid or unperformed.
5.3. Upon the occurrence and during the continuance of an Event of
Default, should TCI fail to perform or observe any covenant or comply with any
condition contained in any of the Contracts then Pinetree may, without
obligation to do so and without releasing TCI from its obligation to do so,
perform such covenant or condition and, to the extent that Pinetree shall incur
any reasonable costs or pay any reasonable expenses in connection therewith,
including any reasonable costs or expenses of litigation associated therewith,
such costs, expenses or payments shall be included in the Obligations secured
hereby and shall bear interest from the payment of such costs or expenses at the
rate of 11% per annum, calculated and compounded monthly. Pinetree shall not be
obligated to perform or discharge any obligation of TCI under any of the
Contracts and, except as may result from the gross negligence or willful
misconduct of Pinetree, TCI agrees to indemnify and hold Pinetree harmless from
and against any and all liability, loss and damage which Pinetree may incur
under any of the Contracts or under or by reason of this Agreement, and any and
all claims and demands whatsoever which may be asserted against TCI by reason of
an act of Pinetree under any of the terms of this Agreement or under the
Contracts.
5.4. TCI hereby acknowledges that the Obligations arose out of a
commercial transaction, and agrees that if an Event of Default shall occur and
be continuing, Pinetree shall have the right to an immediate writ of possession
without notice of a hearing, and hereby
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knowingly and intelligently waives any and all rights it may have to any notice
and posting of a bond by Pinetree prior to seizure by Pinetree, or any of its
transferees, assigns or successors in interest, of the Collateral or any portion
thereof.
SECTION 6. Pinetree Attorney-In-Fact. TCI hereby further appoints
Pinetree as its attorney-in-fact, effective upon the occurrence and during the
continuance of an Event of Default, with the power of substitution, and with the
authority to receive, open and dispose of all mail addressed to TCI, and to
notify the postal authorities to change the address for delivery of mail
addressed to TCI to such address as Pinetree may designate, to endorse the name
of TCI on any note, acceptance, check, draft, money order or other evidence of
debt or of payment which may come into the possession of Pinetree, and generally
to do such other things and acts in the name of TCI as are necessary or
appropriate to protect or enforce the rights hereunder of Pinetree. TCI further
authorizes Pinetree effective upon the occurrence and during the continuance of
an Event of Default, to compromise and settle or to sell, assign or transfer or
to ask, collect, receive or issue any and all claims possessed by TCI all in the
name of TCI. After deducting all reasonable expenses and charges (including
Pinetree's reasonable attorneys' fees) of retaking, keeping, storing and selling
the Collateral, Pinetree shall apply the proceeds in payment of any of the
Obligations and, if a deficiency results after such application, TCI covenants
and agrees to pay such deficiency to Pinetree. The power of attorney granted
herein is coupled with an interest and shall be irrevocable for so long as any
of the Obligations remains unpaid or unperformed. TCI agrees that if steps are
taken by Pinetree to enforce rights hereunder, or to realize upon any of the
Collateral, TCI shall pay to Pinetree the amount of the reasonable costs,
including reasonable attorneys' fees, incurred in connection with such
enforcement, and TCI's obligation to pay such amounts shall be deemed to be a
part of the Obligations secured hereunder.
SECTION 7. Indemnification and Expenses.
7.1. TCI shall indemnify and hold harmless Pinetree and any other
person acting hereunder on behalf of Pinetree, including, but not limited to,
officers, directors, employees and affiliates of Pinetree and Pinetree Capital
Corp. (collectively, a "Pinetree Agent"), from and against all losses, costs,
damages, fees and expenses whatsoever associated with the exercise of the powers
of attorney granted herein and shall release Pinetree, Pinetree Capital Corp.
and any Pinetree Agent from all liability whatsoever for the exercise of the
foregoing powers of attorney and all actions taken pursuant thereto, except in
the case of gross negligence or willful misconduct by Pinetree and any Pinetree
Agent.
7.2 TCI will, upon demand, pay to Pinetree the amount of any and all
reasonable expenses, including the disbursements and reasonable fees of
Pinetree's counsel and of any experts, Pinetree's and Pinetree's Agents, which
Pinetree may incur upon the occurrence and during the continuation of an Event
of Default, in connection with (i) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any Collateral;
(ii) the exercise or enforcement of any of the rights of Pinetree hereunder; or
(iii) the failure by TCI to perform or observe any of the provisions hereof.
SECTION 8. Remedies Cumulative. TCI agrees that the rights of Pinetree
under this Agreement shall be cumulative, and that Pinetree may from time to
time exercise such rights and
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such remedies as Pinetree, or any of them, may have thereunder and under the
laws of the United States of America and any state, as applicable, in the manner
and at the time that Pinetree in its sole discretion desires. TCI further
expressly agrees that Pinetree shall not in any event be under any obligation to
resort to any Collateral prior to exercising any other rights that Pinetree may
have against TCI or its properties, or to resort to any other collateral for the
Obligations prior to the exercise of remedies hereunder.
SECTION 9. Waiver. Pinetree shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder,
unless such waiver is in writing and signed by Pinetree. A waiver by Pinetree of
any right or remedy on any occasion shall not be construed as a bar to the
exercise of any such right or remedy which Pinetree would otherwise have had on
any other occasion.
SECTION 10. Assignment by Pinetree. TCI agrees that this Agreement and
the rights of Pinetree may, in the sole discretion of Pinetree, be assigned in
whole or in part by Pinetree, provided that the Secured Note is assigned to the
same third party and in accordance with the assignment provisions set forth in
the Secured Note. In the event that this Agreement is so assigned by Pinetree,
the term "Pinetree" wherever used herein shall be deemed to refer to and include
any such assignee or assignees, as appropriate.
SECTION 11. Assignment by TCI. This Agreement shall be binding upon and
enure to the benefit of the parties hereto and their respective legal successors
and permitted assigns, provided that (i) if TCI assigns this agreement or merges
or consolidates with any corporation, or sells, leases, transfers or otherwise
disposes of all or any substantial part of its assets whether now owned or
hereafter acquired (an "Assignment"), TCI shall remain liable hereunder together
with any successor, assignee or transferee and (ii) TCI provides written notice
to Pinetree within fifteen (15) business days of any Assignment.
SECTION 12. Terms. All capitalized terms used herein and not defined
herein shall have the meaning ascribed to such term in the Settlement Documents.
SECTION 13. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be given in a manner and at
the addresses set forth in the Secured Note.
SECTION 14. Binding Agreement. The provisions of this Agreement shall
be construed and interpreted, and all rights and obligations of the parties
hereto determined, in accordance with the laws of the State of Maryland. This
Agreement, together with all documents referred to herein, constitutes the
entire Agreement between the parties with respect to the matters addressed
herein, and may not be modified except by a writing executed by Pinetree and TCI
and delivered by each party to the other. The parties agree that the sole
agreements in force as of the date hereof are the MOU, and this Agreement and
their attachments, as well as the Secured Convertible Promissory Note and
Convertible Note Security Agreement, each executed on the same date hereof, by
and between Pinetree and Solomon Technologies, Inc.
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SECTION 15. Severability. If any paragraph or part thereof shall for
any reason be held or adjudged to be invalid, illegal or unenforceable by any
court of competent jurisdiction, such paragraph or part thereof so adjudicated
as invalid, illegal or unenforceable shall be deemed separate, distinct and
independent, and the remainder of this Agreement shall remain in full force and
effect and shall not be affected by such holding or adjudication.
SECTION 16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered as of the date first above written.
TOWN CREEK INDUSTRIES, INC.
/s/ XXXXX X. TETHER
-------------------
Name:Xxxxx X. Tether
Title: President
PINETREE (BARBADOS), INC.
/s/ DR. J. XXXXXX XXXXXX
------------------------
Name:DR. J. XXXXXX
XXXXXX Title:
Director
PINETREE (BARBADOS), INC.
/s/ XXXXX XXXXXXXX
------------------
Name:Xxxxx Xxxxxxxx
Title: Director
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SCHEDULE 1.1(d)
TOWN CREEK INDUSTRIES, INC.
PATENTS
COUNTRY FILED SERIAL # ISSUED PATENT # STATUS
DUAL-INPUT INFINITE-SPEED INTEGRAL MOTOR AND TRANSMISSION DEVICE
AUSTRALIA 11/19/91 90067/91 11/19/94 551,644 ISSUED
CANADA 11-19/91 2,096,842 01/28/03 2,096,642 ISSUED
JAPAN 11/19/91 4-502318 01/31/03 3,394,771 ISSUED published
for six-month
opposition period
04/7/03
SOUTH KOREA 11/19/91 701571/1993 01/07/99 187697 ISSUED
UNITED STATES 11/28/90 07/618,934 11/26/91 5,067,932 ISSUED
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SCHEDULE 1.2
TCI Marine Applications
The TCI Patents listed in Schedule 1.1(d) of this Security Agreement are the TCI
Marine Applications, but only to the extent they are applied in the marine
industry.
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SCHEDULE 2
TCI Tax Liens
None.
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