EXIHIBIT 10.5
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") dated as of the 15th day of
December 2005, between Greystone Logistics, Inc., ("Greystone") an Oklahoma
corporation and Greystone Manufacturing, L.L.C., an Oklahoma limited liability
company (collectively the ("Borrower," which term shall be construed to include
its successors-in-interest and assigns), and Xxxxxx X. Xxxxxx, Xx., an
individual ("Creditor," which term shall be construed to include his
successors-in-interest and assigns).
RECITALS
A. Borrower jointly and severally shall be in the future indebted to
Creditor under an open account and/or a promissory note in the amount of TWO
MILLION SIXTY SIX THOUSAND DOLLARS AND NO/100 ($2,066,000) dated the 15th day of
December 2005 (the "Note").
B. All present and future obligations of Borrower to Creditor are to be
secured by a security interest in favor of Creditor in the "Collateral" as such
term is defined in Section 3 of this Agreement.
C. The security interest granted in this Agreement is intended to be
subordinate to the security interest in the Collateral granted by Borrower in
favor of F&M Bank and Trust Company of Tulsa, Oklahoma ("Bank").
D. The purpose of this Agreement is to evidence the security interest
granted Creditor in the Collateral.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms.
(a) The following terms shall have the following meanings, (such terms to
be equally applicable to both singular and plural forms of the terms
defined):
(i) "Code" shall mean the Uniform Commercial Code as the same may
from time to time be in effect in the State of Oklahoma.
(ii) "Collateral" shall have the meaning set forth in Section 3 of
this Agreement.
(iii) "Event of Default" shall mean any default in the timely payment
or performance by Buyer of any of Borrower's Obligations (as
defined in Section 2 hereof) to Creditor.
(b) The following terms shall have the meanings set forth in the Code
(such terms to be equally applicable to both singular and plural forms
of the terms defined): (i) "Accounts," (ii) "Chattel Payer," (iii)
"Document," (iv) "Equipment," (v) "Fixtures," (vi) "General
Intangible," (vii) "Inventory," (viii) "Investment Property," (ix)
"Instrument" (x) "Goods" and (xi) "Proceeds."
2. Obligations Secured by the Agreement. The security interest herein
granted is given to secure all indebtedness of Borrower to Creditor, whether the
same is incurred under an open account, is evidenced by a promissory note
(including the Note) or otherwise and whether such indebtedness is now existing
or is hereafter incurred, and all obligations of Borrower to Creditor under this
Agreement (hereinafter collectively referred to as the "Obligations"), and all
expenditures by Creditor involving the performance of or enforcement of any
agreement, covenant or warranty provided for by this Agreement or under the
Obligations, including all costs, attorneys' fees (whether incurred in
connection with bankruptcy, appellate, probate or nonjudicial proceedings or
otherwise) and other expenditures of Creditor in the collection and enforcement
of any obligation or liability of Borrower to Creditor under this Agreement or
under the Obligations and in the collection and enforcement of or realization
upon any of the Collateral.
3. Assignment and Grant of Security Interest. Borrower hereby assigns,
transfers and conveys to Creditor and grants to Creditor a security interest in,
to and under all assets of Borrower, whether now existing or hereafter created
or acquired (all of which are hereinafter collectively called the "Collateral"),
including without limitation all Accounts, Chattel Paper, Documents, Equipment,
Fixtures, General Intangibles, Membership Interest, Subsidiaries, Inventory,
Investment Property, Intellectual Property, Instruments, Goods and all Proceeds
and products of any and all of the foregoing.
4. Continuing Liability. Borrower hereby expressly agrees that, anything
herein to the contrary notwithstanding, it shall remain liable under each
contract, agreement and instrument, assigned by it to Creditor hereunder to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, and covenants and agrees to observe and perform all
such conditions and obligations, all in accordance with and pursuant to the
terms and provisions thereof. Creditor shall have no obligation or liability
under any such contract, agreement or instrument, or the Accounts, by reason of
or arising out of this Agreement or the assignment thereof to Creditor or the
receipt by Creditor of any payment relating to any such contract, agreement or
instrument, or the Accounts pursuant hereto, nor shall Creditor be required or
obligated in any manner to perform or to fulfill any of the obligations of
Borrower thereunder or pursuant thereto, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any such contract, agreement
or instrument, or the Accounts, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
5. Representations, Warranties and Covenants of Borrower.
(a) Borrower hereby represents and warrants to Creditor that:
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(i) this Security Agreement constitutes and shall at all times
constitute the only lien on the Collateral except for the lien of
Bank which shall have priority over the lien granted pursuant to
this Agreement;
(ii) Borrower is the absolute owner of the Collateral, free and clear
of any and all claims or liens in favor of others (except as
noted in (i) above), with full right to pledge, sell, assign,
transfer and create a security interest therein;
(iii) The Borrower are validly existing and in good standing under the
laws of the State of Oklahoma.
(iv) The Borrower has always done business under the name "Greystone"
except as follows: prior to "Greystone" Borrower did business as
PalWeb Corporation.
(v) The Borrower has places of business at the following locations:
Tulsa, Oklahoma, and Bettendorf, Iowa;
(vi) If the Borrower has more than one place of business, the Borrower
has its chief executive office at: Tulsa, Oklahoma.
(b) Borrower shall at its expense forever warrant and, at Creditor's
request, defend the Collateral from any and all claims and demands of
any other person and it shall not grant, create or permit to exist any
lien upon or security interest in the Collateral in favor of any other
person (except for the Bank).
(c) Borrower shall not sell, transfer, lease or otherwise dispose of any
of the Collateral (except for sales of Inventory in the ordinary
course of business) without obtaining the prior written consent of
Creditor to such sale, transfer, lease or other disposition.
(d) Borrower shall not move any item of Equipment from the State in which
it is now located, locate at a new place of business, remove from a
place of business as set forth above, establish a new chief executive
office, change its corporate name or state of incorporation or use a
trade name not listed above without giving the Creditor not less than
thirty (30) days prior written notice of such intended relocation,
removal, establishment, change or use.
(e) Borrower shall not merge, consolidate, dissolve, liquidate, convert or
otherwise engage in any restructuring or reorganization without
obtaining the prior written consent of Creditor to such transaction.
(f) Borrower shall not agree to do anything which it is prohibited from
doing under subsections (b), (c) or (e) above.
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6. Creditor Appointed as Attorney-in-Fact.
(a) Borrower hereby irrevocably constitutes and appoints Creditor and any
officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of Borrower and in the name of Borrower or in
its own name, from time to time in Creditor's discretion, for the
purpose of carrying out the terms of this Agreement, such power and
authority to be exercisable upon the occurrence of an Event of
Default, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, including, without limiting
the generality of the foregoing, the power and right, without notice
to or assent by Borrower to do the following:
(i) upon the occurrence and continuance of any Event of Default, to
ask, demand, collect, receive and give acquittances and receipts
for any and all moneys due and to become due, or any performance
to be rendered, under any Account or any contract, agreement or
instrument included in the Collateral and, in the name of
Borrower or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any
Account, or any other contract, agreement or instrument included
in the Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise
deemed appropriate by Creditor for the purpose of collecting any
and all such moneys due or securing any performance to be
rendered under any such contract, agreement or instrument pledged
and assigned hereby;
(ii) upon the occurrence and continuance of any Event of Default, to
pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the
Collateral; and
(iii) upon the occurrence and continuance of any Event of Default (A)
to direct any party liable for any payment or performance under
any of the Accounts included in the Collateral to make payment of
any and all moneys due and to become due thereunder or to render
any performance provided for therein directly to Creditor or as
Creditor shall direct; (B) to receive payment of and receipt for
any and all moneys, claims and other amounts due and to become
due at any time in respect of or arising out of any Collateral;
(C) to sign and endorse any invoices, freight or express bills,
bills of lading, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other
documents relating to the
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Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any Proceeds thereof
and to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against Borrower
with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as
Creditor may deem appropriate; and (G) generally to sell,
transfer, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though
Creditor was the absolute owner thereof for all purposes, and to
do, at Creditor's option and Borrower's expense, at any time, or
from time to time, all acts and things which Creditor deems
necessary to protect, preserve or realize upon the Collateral and
Creditor's security interest therein in order to effect the
intent of this Agreement, all as fully and effectively as
Borrower might do.
Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power-of-attorney is a power coupled with an
interest and shall be irrevocable.
(b) The powers conferred on Creditor and the other attorneys appointed
hereunder are solely to protect the interests of Creditor in the
Collateral and shall not impose any duty upon them to exercise any
such powers. Creditor and the other attorneys appointed hereunder
shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers, and neither they nor any of
their officers, directors, employees or agents shall be responsible to
Borrower for any act or failure to act, except for their gross
negligence or willful misconduct.
(c) Borrower also authorizes Creditor, at any time and from time to time,
(i) to communicate in its own name with any party to any contract,
agreement or Account included in the Collateral with regard to the
assignment thereof hereunder and other matters relating thereto; and
(ii) to execute, in connection with the sale provided for in Section 9
of this Agreement, any endorsements, assignments, bills of sale or
other instruments of conveyance or transfer with respect to the
Collateral.
7. Performance by Creditor of Borrower's Obligations. If Borrower fails to
perform or comply with any of its agreements contained herein, under the
obligations or in any contract, agreement or instrument included in the
Collateral, and Creditor, as provided for by the terms of this Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the expenses of Creditor incurred in connection with such
performance or
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compliance, together with interest thereon at the maximum lawful interest rate
permitted under the laws of the State of Oklahoma shall be payable by Borrower
to Creditor on demand and until such payment shall constitute Obligations
secured hereby. Creditor shall have the right to pay off any lien, security
interest or other encumbrance on the Collateral, regardless of whether the
obligations secured by such lien, security interest or other encumbrance are due
and owing, and such amount shall constitute obligations secured hereby.
8. Inspection Rights. Creditor is hereby given the right and privilege,
during regular business hours, of making such inspections of the Collateral and
records thereof as it deems necessary and of auditing or causing an audit or
verification of the books and records of Borrower relating to the Collateral at
any time and from time to time, including the contacting of customers or
suppliers of Borrower in connection with such audit or verification. Borrower
agrees to assist Creditor in every way necessary to facilitate such audits,
verifications and inspections.
9. Remedies. If an Event of Default hereunder or under the obligations has
occurred and is continuing, Creditor may exercise, in addition to all other
rights and remedies granted to it in this Agreement, all rights and remedies of
a secured party under the Code or any other applicable law. Creditor, at its
option, may proceed as to all or any part of the Collateral in accordance with
its rights or remedies hereunder. Without limiting the generality of the
foregoing, Borrower expressly agrees that in any such event Creditor, without
demand of performance or other demand, advertisement or notice of any kind to or
upon Borrower or any other person (all and each of which demands, advertisements
and/or notices are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, license, assign, give option or options to purchase, or
sell or otherwise dispose of and deliver said Collateral (or contract to do so),
or any part thereof, in one or more parcels at public or private sale or sales,
at any exchange, broker's board or at any of Creditor's offices or the
Borrower's offices or elsewhere at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit risk, and
Creditor shall apply the net proceeds (after expenses) of any such sale, lease,
license, assignment or other disposition against the indebtedness secured hereby
in such order as Creditor in its sole discretion shall determine, Borrower
remaining liable for any deficiency therein. Creditor shall have the right upon
any such public sale or sales to purchase the whole or any part of the
Collateral so sold. To the extent permitted by applicable law, Borrower waives
all claims, damages and demands against Creditor arising out of the
repossession, retention, sale or license of the Collateral. In the event
Creditor is required by law to give written notice to Borrower of any
disposition of the Collateral, Borrower agrees that five (5) days' prior written
notice by Creditor to Borrower shall be deemed to be reasonable notice.
10. Grant of License to Use Intangibles. For the purpose of enabling
Creditor to exercise rights and remedies under this Agreement at such time as
Creditor shall be lawfully entitled to exercise such rights and remedies and for
no other purpose, Borrower hereby grants to Creditor an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to Borrower) to use, assign or sublicense any of the Collateral,
now owned or hereafter acquired by Borrower and wherever the same may be
located, including in such license reasonable access to all media in which any
of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof. Until such time as
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Creditor is entitled to exercise such rights and remedies Borrower is entitled
to use the Collateral without payment of royalty or other compensation to
Creditor.
11. Limitation on Creditor's Duty in Respect of Collateral. Beyond the use
of reasonable care in the custody and preservation thereof, Creditor shall not
have any duty as to any Collateral in its possession or control or in the
possession or control of its agent or nominee or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.
12. Further Assurances, Etc. Borrower authorizes Creditor to sign and file
financing statements, continuation statements and any other forms, filings or
other statements required or permitted under the Code at any time and from time
to time with respect to the Collateral without Borrower's signature and on
Borrower's behalf. Borrower will, however, at any time upon Creditor's request,
sign financing statements, continuation statements, trust receipts, security
agreements or other agreements, forms, filings or other statements with respect
to the Collateral. Upon the failure of Borrower to do so, Creditor is authorized
as Borrower's agent to sign any such instrument or agreement. Borrower agrees
that at any time and from time to time upon the written request of Creditor,
Borrower will promptly execute and deliver any and all such further instruments
and documents and do such further acts as Creditor may reasonably request in
order to carry out more effectively the purposes of this Agreement and obtain
for Creditor the full benefits of the security interests granted to Creditor
hereby.
13. Notices. All notices and other communications required or permitted to
be made by one party to the other under this Agreement shall be given in writing
to the addresses of the parties set forth next to their signatures subject to
each party's right to change such notice address upon giving the other party
written notice in compliance with this Section.
14. Partial Invalidity. If any term, covenant or condition of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
held valid and be enforced to the fullest extent permitted by law.
15. No Waiver; Cumulative Remedies. Creditor shall not by any act, delay,
and omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Creditor,
and then only to the extent therein set forth. A waiver by Creditor of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Creditor would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Creditor any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative with any rights and remedies under the Note or any other loan
document and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law or equity.
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16. Limitations by Law. All rights, remedies and powers provided by this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable in whole or in part
or not entitled to be recorded, registered or filed under the provisions of any
applicable law.
17. Binding Effect. This Agreement and all the covenants and agreements
herein will be binding upon and inure to the benefit of the parties hereto and
their respective successors in interest and assigns. The Creditor shall at all
times have the right to assign its rights and interest under this Agreement.
18. Applicable Law. This Agreement shall be governed by, and be construed
and interpreted in accordance with, the laws of the State of Oklahoma and the
United States.
19. Venue. The parties agree that jurisdiction and venue for any matter
arising out of or pertaining to this Agreement shall be proper only in the state
courts located in Tulsa County, Oklahoma and the federal courts having
jurisdiction over the Northern District of Oklahoma, and the parties hereby
consent to such venue and jurisdiction.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed as
of the day and year first set forth above.
"Creditor"
By: /s/ Xxxxxx X. Xxxxxx, Xx.
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Printed Name: Xxxxxx X. Xxxxxx, Xx.
"Borrower"
GREYSTONE LOGISTICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Printed Name: Xxxxxx X. Xxxxxx
Title: Chief Operating Officer and
Chief Financial Officer
GREYSTONE MANUFACTURING, L.L.C.
By: /s/ Xxxxxx X. Xxxxxx
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Printed Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
