Exhibit 10.39
SECURITY AND PLEDGE AGREEMENT
THIS AGREEMENT is made as of May 7, 1997, by SOUTHHAMPTON ENTERPRISES
CORP., a corporation organized under the laws of British Columbia, Canada
("Parent"), to THE CRUTTENDEN XXXX BRIDGE FUND, LLC, a California limited
liability company ("Secured Party").
RECITALS
A. THE ANTIGUA GROUP, INC., a Nevada corporation and Parent's indirect
wholly-owned subsidiary ("Debtor") has executed and delivered to Secured Party
that certain note (the "Note") captioned "Senior Subordinated Secured Note"
dated as of the date hereof, in the original principal amount of $1,020,000.
B. As part of the consideration for the granting of the loan evidenced by the
Note to Debtor and as additional security therefor, Secured Party has required
that Parent grant a security interest in the "Collateral" (as defined below) and
Parent desires to grant such security interest.
NOW, THEREFORE, in consideration of the covenants and promises
hereinafter set forth and other valuable consideration, the parties agree as
follows:
1. Definitions. Certain terms used in this Agreement shall have the
meaning set forth below.
"Collateral" means all of Parent's right, title and interest (whether
now held or hereafter acquired) in and to all personal property (whether
tangible or intangible) described in Exhibit "A" hereto, incorporated herein by
reference.
"Event of Default" means (i) an Event of Default as defined in, and
occurring under, that certain Securities Purchase Agreement (the "Securities
Purchase Agreement") of even date herewith by and between Debtor and Secured
Party, inter alia, (ii) any default by Debtor in the performance of any
obligation, covenant or agreement contained in the Security Agreement of even
date herewith to which it is a party, or (iii) any default by Parent in the
performance of any obligation, covenant or agreement contained herein.
"Indebtedness" means the indebtedness evidenced by the Note and any
other indebtedness or liability of Debtor to Secured Party now existing or
hereafter arising under the Note.
"Intercreditor Agreement" means the Intercreditor Agreement entered
into concurrently herewith by and among LaSalle Business Credit, Inc.
("LaSalle"), Xxxxxx X. Xxxxxx, as agent for the shareholders of the Debtor
("Xxxxxx"), the Secured Party, Imperial Bank ("Imperial"), and the Debtor, which
provides for the relative rights and priorities of the various security
interests in the
Collateral.
"Permitted Liens" shall bear the same meaning as in the Securities
Purchase Agreement.
"Senior Debt" shall bear the same meaning as in the Securities Purchase
Agreement.
"Subordination Agreement" means the Subordination Agreement entered
into concurrently herewith by and among LaSalle, Dooley, the Secured Party and
Imperial which provides for the relative rights of payment of the indebtedness
of Debtor.
2. Grant of Security Interest. As additional security for the
Indebtedness, Parent hereby grants a security interest in the Collateral to
Secured Party.
3. Parent's Representations and Warranties. Parent represents and
warrants as follows:
(a) Title to Collateral. Except for the security interests
granted to Secured Party under this Security Agreement, and except for Permitted
Liens, Parent is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good, marketable and insurable title thereto free and clear of any and all liens
other than Permitted Liens.
(b) Location of Collateral. Parent hereby represents and
warrants that Parent's chief executive office is located at the address
specified in item 1 of Exhibit "B". Parent shall not, without at least thirty
(30) days' prior written notice to Secured Party, (i) change Parent's name or
place of business (or, if Parent has more than one place of business, its chief
executive office), or the office in which Parent's records relative to
receivables are kept, (ii) keep Collateral consisting of certificated
securities, as defined in Section 3(j) below, or chattel paper, at any location
other than its chief executive office set forth in item 1 of Exhibit "B" hereto,
and (iii) keep Collateral consisting of equipment or inventory at any location
other than the locations set forth in item 2 of Exhibit "B" hereto.
(c) Repair and Inspection of Collateral. Parent shall maintain
and protect its properties, assets and facilities, including without limitation
its equipment and fixtures, in good order and working repair and condition
(taking into consideration ordinary wear and tear) and from time to time make or
cause to be made all needful and proper repairs, renewals and replacements
thereto and shall competently manage and care for its property in accordance
with prudent industry practices. Upon reasonable notice, Parent shall permit
Secured Party or its agents to inspect all of such property from time to time.
(d) Insurance of Collateral. Parent shall maintain,
with financially sound and reputable companies, insurance policies insuring (i)
its equipment, fixtures and inventory against loss by fire, explosion, theft and
such other casualties as are usually insured against by companies engaged in the
same or similar businesses and (ii) Parent and Secured Party against liability
for personal injury and property damage relating to such equipment, fixtures and
inventory. Such policies are to be in such amounts and against at least such
risk as are usually insured against in the same general area by companies of the
same or a similar size engaged in the same or a similar business as Parent.
Parent shall give to Secured Party written notice of loss or damage to the
Collateral, and file proofs of loss. Parent shall not settle or adjust any claim
in excess of $50,000 without the prior written consent of Secured Party.
(e) Payment of Taxes and Fees Assessed Upon Collateral. Parent
shall pay, when due, all taxes and assessments now or hereafter relating to, or
imposed or assessed upon the Collateral.
(f) No Transfer of Collateral. Parent shall not voluntarily,
involuntarily, or by operation of law, sell, assign, transfer or otherwise
dispose of the Collateral, or any interest therein, or permit any of the
foregoing to occur, and shall not otherwise do or permit anything to be done or
occur that may impair the Collateral as security hereunder, except that Parent
may sell its inventory in the ordinary course of business, and, so long as
Parent has not committed an Event of Default, (i) Parent may sell or otherwise
dispose of the Collateral when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the conduct of the business of Parent and (ii) Parent may
grant non-exclusive licenses (and exclusive licenses within specified geographic
regions) and other similar arrangements for the use of Parent's property for
good faith business purposes.
(g) Defense of Title to Collateral. Parent shall defend any
proceeding which may affect title to, or Secured Party's security interest in,
the Collateral, or the first priority of such security interest after that
created with respect to Permitted Liens, and shall indemnify, defend, protect
and hold Secured Party harmless against any and all liability, damages, causes
of action or other costs or expenses, including reasonable attorneys' fees,
arising out of or incurred in connection with or on account of any such
proceeding, unless such proceeding is caused by Secured Party's gross negligence
or willful misconduct.
(h) Maintenance of Secured Party's Security Interest. Parent
shall do all such acts and things as may be necessary or appropriate, or which
Secured Party from time to time or at any time reasonably requests as necessary
in its opinion, to establish and maintain a perfected security interest in the
Collateral, subject to no other liens or encumbrances other than Permitted
Liens; and Parent shall pay the cost of all filings or recordings of this
Agreement or any other document or instrument in all public offices whenever it
is deemed by Secured Party to be necessary or
desirable. Parent irrevocably constitutes and appoints Secured Party the
attorney-in-fact of Parent to execute, deliver and, if appropriate, to file or
record with the appropriate filing officer or office such security agreements,
financing statements, continuation statements or other instruments as Secured
Party may request or require in order to impose, perfect or continue the
perfection of, the lien or security interest created hereby. The foregoing power
of attorney is coupled with an interest and shall survive a Transfer or the
dissolution, bankruptcy, insolvency or termination of Parent as an entity.
Parent shall not execute or authorize the filing of any financing statement in
favor of any person or entity other than Secured Party or other than related to
the Permitted Liens.
(i) Provision of Accurate Information. Parent shall provide to
Secured Party any information it reasonably requires pertaining to the
Collateral, the Indebtedness or the provisions hereof. All information supplied
to Secured Party by or on behalf of Parent is and shall be true, correct and
complete, and Parent shall promptly notify Secured Party of any material change
in such information not later than five (5) days after any such change. Parent
shall promptly notify Secured Party of any event causing loss or depreciation in
the value of any Collateral.
(j) Certificated Securities. On or prior to the date hereof,
Parent shall deliver to Secured Party any note, certificated security or
instrument (a "certificate security") not otherwise pledged or hypothecated to
an unaffiliated creditor or otherwise owned by and in control of Parent,
including, without limitation, those certificated securities listed on Exhibit
"C" hereto. In the event a certificated security is returned to Parent's control
while Debtor continues to have unsatisfied obligations under the Note, such
certificated security shall be immediately delivered to Secured Party who shall
hold same until Debtor's obligations under the Note are satisfied in full. In
the event that Parent purchases, acquires or is otherwise transferred
certificated securities while Debtor continues to have unsatisfied obligations
under the Note, Parent shall immediately deposit such security with Secured
Party and Secured Party shall continue to hold same as if such security were
listed on Exhibit "C" hereto until Debtor's obligations under the Note are
satisfied in full. All certificated securities delivered to Secured Party
pursuant hereto shall be delivered in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment or stock
powers, executed in blank, in form and substance reasonably acceptable to
Secured Party.
(k) Prompt Payment of Expenses. Parent shall pay to Secured
Party immediately on demand all expenses (including reasonable attorneys' fees,
other legal expenses and costs and the cost of filing financing statements and
any renewals or extensions thereof) incurred by Secured Party under this
Agreement, with interest at the greater of the interest rate charged on the Note
or any default rate thereunder but not more than the maximum rate
allowed by applicable usury law, from the date of such expenditure.
4. Default: Remedies.
(a) Remedies. Subject to the provisions of the Intercreditor
Agreement and the Subordination Agreement, upon an Event of Default, Secured
Party may, at its option and without notice to Parent or Debtor, declare the
Indebtedness secured hereby due and payable pursuant to the terms of the
Securities Purchase Agreement and shall have all of the remedies of a secured
party under the Uniform Commercial Code, including the right and power to sell,
or otherwise dispose of, the Collateral, or any part thereof, at any one or more
public or private sales as permitted by applicable law, at such location as
Secured Party may choose, and for that purpose may take immediate and exclusive
possession of the Collateral, or any part thereof, and with or without judicial
process enter upon any premises on which the Collateral, or any part thereof,
may be situated and remove the same therefrom without being deemed guilty of
trespass and without liability for damages thereby occasioned. At Secured
Party's option and demand, Parent shall assemble the Collateral and make it
available to Secured Party at the premises of Parent, or at such other place and
at the time designated in the demand.
(b) Secured Party's Rights to Collateral. Subject to the
provisions of the Intercreditor Agreement and the Subordination Agreement,
Secured Party may hold, maintain, preserve and prepare the Collateral for sale;
control, manage, rent and lease the Collateral; collect all rents and income
from the Collateral and apply the same in any order of priority to reimburse
Secured Party for any costs and expenses incurred hereunder and to the payment
or performance of Parent's obligations hereunder, and apply the balance to
interest and then to principal of the Indebtedness secured hereby; or secure the
appointment of a receiver of the Collateral. Secured Party may also render the
Collateral unusable, or repair and renovate the same, and dispose of the
Collateral on Parent's premises. Parent expressly waives any right to require an
election of remedies by Secured Party existing after an Event of Default
hereunder, except that Parent shall be entitled to notice of sale or other
disposition of the Collateral, and Parent agrees that if such notice is served
on Parent as hereinafter specified a minimum of five (5) days before the time of
sale or disposition, such notice shall be deemed commercially reasonable and
shall fully satisfy any requirement for giving of such notice. Any person,
including Parent and Secured Party, shall be eligible to purchase any part or
all of such Collateral at any such sale or disposition. Parent acknowledges that
sales of the Collateral for cash or on credit to a wholesaler, retailer or user
of the Collateral, or at public or private auction, within the discretion of
Secured Party, are all commercially reasonable. Any disposition made hereunder
may be conducted by an employee or agent of Secured Party.
(c) Stay; Extension. The Parent agrees (to the extent it may
lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or other law that would prohibit or forgive the Debtor
from paying all or a portion of the principal of or interest on the Note as
contemplated herein, wherever enacted, now or at any time hereinafter in force,
or that may materially affect the covenants or the performance of this Agreement
in a manner inconsistent with the provisions of this Agreement. The Parent
expressly waives all benefit or advantage of any such law and agrees not to
hinder, delay or impede the execution of any power granted to Secured Party
hereunder, but will suffer and permit the execution of such power as though no
such law has been enacted. If a court of competent jurisdiction prescribes that
the Parent may not waive its rights to take the benefit or advantage of any stay
or extension law or any other law in accordance with the prior sentence, then
the obligation to pay interest on the Note shall be reduced to the maximum legal
limit under applicable law governing the interest payable in connection with the
Note.
(d) Application of Proceeds. Subject to any applicable
provisions of the Intercreditor Agreement, the Proceeds of any sale, disposition
or other realization upon all or any part of the Collateral shall be distributed
by Secured Party in the following order of priorities:
First, to Secured Party in an amount sufficient to pay in full the reasonable
costs of Secured Party in connection with such sale, disposition or other
realization, including all fees, costs, expenses, liabilities and advances
incurred or made by Secured Party in connection therewith, including, without
limitation, reasonable attorneys' fees;
Second, to Secured Party in an amount equal to the then unpaid principal amount
of and accrued interest and prepayment premiums, if any, on the Note;
Third, to Secured Party in an amount equal to any other Indebtedness which is
then unpaid; and
Finally, upon payment in full of all Indebtedness and upon satisfaction of all
other provisions of the Intercreditor Agreement, to Parent or its
representatives or as a court of competent jurisdiction may direct.
(e) Assumption of Expenses and Payments. In connection with
any Event of Default, Secured Party may incur expenses, including reasonable
attorneys' fees, expenses and costs, appropriate to the exercise of any right or
power under this Agreement, make any payment agreed to be made by Parent
hereunder, and perform any obligation of Parent hereunder, without, however, any
obligation so to do. Any monies expended hereunder by Secured Party, including
attorneys' fees, shall be chargeable, with interest at the greater of the
interest rate then charged on the Note or any default rate thereunder, but not
more than the maximum
rate allowed by applicable usury law, to Debtor and become part of the
Indebtedness secured hereby.
(f) Remedies Cumulative. The remedies of Secured Party
hereunder are cumulative and the exercise of any one or more of the remedies
provided for herein, or under the Uniform Commercial Code, shall not be
construed as a waiver of any of the other remedies of the Secured Party, so long
as any part of the Indebtedness remains unsatisfied. The acceptance by Secured
Party of this Security Agreement shall not waive or impair any other security
Secured Party may have or hereafter acquire for the payment of the Indebtedness,
nor shall the taking of any such additional security waive or impair this
Agreement, or any term, covenant or condition herein contained, but Secured
Party may resort to any security it may have in such order it may deem proper.
Release of the security interest hereunder in any or all of the Collateral shall
not affect the liability of any person on the Indebtedness secured hereby.
5. Miscellaneous.
(a) Secured Party's Rights Not Barred. Until the Indebtedness
is paid and performed in full, Secured Party's rights shall continue even if the
Indebtedness, or any portion thereof, is barred by any statute of limitations.
The right of Parent, if any, to plead any and all statutes of limitation as a
defense to any demand with respect to the Indebtedness is expressly waived by
Parent, to the full extent permissible by law.
(b) Form and Effect of Waivers. No delay or failure on the
part of Secured Party in exercising any right, privilege or remedy hereunder
shall operate as a waiver of such or any other right, privilege or remedy, and
no waiver whatsoever shall be valid unless in writing, signed by Secured Party
and then only to the extent set forth therein.
(c) Notices. Except when otherwise required by law, all
notices required to be given hereunder shall be served (i) to Parent at the
addresses specified item 1 on Exhibit "B" hereto and (ii) to Secured Party at
the address specified with respect thereto in the Securities Purchase Agreement,
and shall in each instance, unless otherwise provided by law, be deemed given,
received, made or communicated on the date personal delivery is effected or, if
mailed, on the delivery date or attempted delivery date if refused.
(d) Severability of Terms. If any term of this Agreement, or
the application thereof to any person or circumstance, shall, to any extent, be
declared invalid or unenforceable, the remainder of this Agreement, or the
application of such term to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
such term shall be valid and enforceable to the fullest extent permitted by law.
(e) Financing Statement. A financing statement (and
when requested by Secured Party, a fixture filing) placing of record the
security interest hereunder shall be executed and delivered by Parent to Secured
Party contemporaneously herewith, and Secured Party is authorized to file or
record the same.
(f) Construction. The terms and provisions contained herein
shall, unless the context otherwise requires, have the meaning and be construed
as provided in the Uniform Commercial Code. Reference in this Agreement to the
"Uniform Commercial Code" refers to the Uniform Commercial Code as enacted in
the State of California. Whenever the words "including", "includes" or "include"
are used in this Agreement (including any Exhibit hereto), they shall be read as
though the phrase, "without limitation," immediately followed the same.
(g) Successors and Assigns. The terms "Parent" and "Secured
Party" include and are binding upon the successors and assigns hereof.
(h) Definition of Prompt Notice. The use herein of the words
"prompt notice", or "notify promptly", or "give notice promptly", or "promptly",
or "immediately," or words of similar import, when used with reference to any
notice to be given or act to be undertaken by Parent, shall mean notice given or
such act performed in any event not later than five (5) days after the
occurrence of the specified event for which notice or action is required, unless
another time period is expressly made applicable.
(i) Amendment in Writing. This Agreement may not be amended,
modified or changed, nor shall any waiver of any provision hereof be effective,
except by an instrument in writing and signed by the party against whom
enforcement of any amendment, change or modification is sought.
(j) Governing Law. This Security Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of
California (without regard to conflicts of law), except where federal law is
applicable (including, without limitation, any applicable federal law preempting
state laws).
IN WITNESS WHEREOF, Parent has executed and delivered this Agreement to
Secured Party as of the day and year first above written.
"PARENT"
SOUTHHAMPTON ENTERPRISES
CORP., a corporation organized under
the laws of British Columbia, Canada
By: /s/ Xxxxxx X. Xxxxxx, Xx.
Its: President
EXHIBIT "A"
COLLATERAL
Any of the following, whether now owned or hereafter acquired by Parent, as
defined as "Debtor" for purposes of this Exhibit "A":
a. all present and future rights to payment for goods sold or leased or
for services rendered, whether or not represented by instruments or chattel
paper, and whether or not earned by performance; all present and future rights
to payments arising out of the licensing of computer software and systems; all
accounts, contract rights, chattel paper, instruments and documents, proceeds of
any letter of credit of which Debtor is a beneficiary; all forms of obligations
whatsoever owed to Debtor, including any obligations of any subsidiary or
affiliate of Debtor owed to Debtor, together with all instruments and documents
of title representing any of the foregoing; all rights in any returned or
repossessed goods; all rights, security and guarantees with respect to any of
the foregoing, including, without limitation, any right of stoppage in transit;
together with all property included within the definitions of "accounts",
"chattel papers", "documents" and "instruments" set forth in the Uniform
Commercial Code in effect in the State of California (the "UCC");
b. all goods held or intended for sale or lease by Debtor; or furnished
or to be furnished under contracts of service, all raw materials, work in
process, finished goods, materials and supplies of every nature used or usable
in connection with the manufacture, packing, shipping, advertising or sale of
any such goods, together with all property included within the definition of
"inventory" set forth in the UCC;
c. all choses in action, causes of action and all other intangible
property of every kind and nature, including, without limitation, corporate or
other business records, inventions, designs, patents, patent applications,
trademarks, trademark applications, trade names, processes, operation manuals,
techniques, trade secrets, goodwill, registrations, copyrights, licenses,
franchises, customer lists, tax refunds, tax refund claims, rights of claims
against carriers and shippers, investments and interests in subsidiaries, leases
and rights to indemnification, together with all property which is included
within the definition of "general intangibles" as set forth in the UCC;
A-1
d. equipment and fixtures, including, without limitation, computer
hardware, computer software, and systems, furniture, machinery, vehicles and
trade fixtures, together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof, together
with all other such items which are included within the definitions of
"equipment" and "fixtures" as set forth in the UCC;
e. all certificated securities, all uncertificated securities, all
securities entitlements, all securities accounts and all other investment
property, each as defined is Division of the UCC, including, without limitation,
those securities listed on Exhibit "C" to the Security Agreement by and between
Secured Party and Debtor together with all options and other rights with respect
to such securities and financial instruments and all dividends, cash and other
property (including any distribution with respect to any stock dividend or
split) from time to time received or receivable with respect thereto or in
exchange therefor; and
f. to the extent not otherwise included, all proceeds and products of
any or all of the foregoing.
A-2
EXHIBIT "B"
1. The legal name of Parent and the address of its chief executive
office is:
SOUTHHAMPTON ENTERPRISES CORP.
0000 Xxxxxxxxx Xxx
Xxxxxx, Xxxxx 00000
2. The Parent has the following places of business:
SOUTHHAMPTON ENTERPRISES CORP.
0000 Xxxxxxxxx Xxx
Xxxxxx, Xxxxx 00000
B-1
EXHIBIT C
Certificate Number of
Issuer and Address No. Shares
C-1