SECURITY AGREEMENT
This SECURITY AGREEMENT (“Agreement”) is
entered into as of this 11th day of June 2009, made by and among Grove Power,
Inc., a Florida corporation (“Buyer”), and XX
Xxxxx, Inc., a Florida corporation (“Secured Party”), with
reference to the following facts:
RECITALS
A. Pursuant
to the Asset Purchase Agreement of even date herewith by and between Buyer,
Secured Party and Xxxxxx Xxxxx (the “APA”), Secured Party
has agreed to sell and Buyer has agreed to purchase certain assets and assume
certain liabilities of Secured Party (the “Assets”).
B. Pursuant
to the APA and as partial purchase price for the Assets (as defined therein),
Buyer has executed a Secured Promissory Note in the principal amount of
$86,612.00 in favor of the Secured Party (the “Note”).
C. Pursuant
to the APA and Note, Buyer has agreed to grant Secured Party a security interest
in Buyer’s rights and interests in and to the Assets n in order to secure
Buyer’s payment of all amounts due under the Note.
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing, and for other good and valuable consideration, the receipt and
adequacy of which hereby is acknowledged, the parties hereto hereby represent,
warrant, covenant and agree as follows:
1.
Creation of
Security Interest. The Buyer hereby pledges to Secured Party
and grants to Secured Party a junior and subordinated security interest in and
to Buyer’s rights and interests in and to the Assets (collectively,
the “Collateral”).
2.
Security
for Obligations. This Agreement and security interest granted
herein secure the prompt payment of the amounts due under the Note. Following
satisfaction and/or waiver of all obligations of Buyer under the Note, this
Agreement and the security interest granted herein shall terminate and be of no
further force or effect.
3.
Further
Assurances. The Buyer agrees that at any time, and from time
to time, they will promptly execute, deliver and file or record all further
financing statements, instruments and documents, and will take all further
actions that may be necessary or desirable, or that Secured Party reasonably may
request, at Secured Party’s expense, in order to perfect and protect the pledge
or security interest granted hereby or to enable Secured Party to exercise and
enforce Secured Party’s rights and remedies hereunder with respect to the
Collateral and to preserve, protect and maintain the Collateral and the value
thereof, including without limitation payment of all taxes, assessments and
other charges imposed on or relating to the Collateral. The Buyer
hereby consents and agrees that the issuers of, or obligors on, the Collateral,
or any registrar or transfer agent or trustee for any of the Collateral, shall
be entitled to accept the provisions of this Agreement as conclusive evidence of
the right of Secured Party to effect any transfer or exercise any right
hereunder, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by the Buyer or any other person to such issuers
or such obligors or to any such registrar or transfer agent or
trustee. Secured Party agrees that, upon termination of the
security interest granted herein, Secured Party shall terminate, or,
alternatively, directs Buyer to terminate and consents to the termination of,
any and all financing statements or other similar statements filed in connection
with such security interest.
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4. Use of
Collateral. So long as no Event of Default (as hereinafter
defined in Section 6) occurs and remains continuing, Buyer shall be
entitled to exercise any and all rights pertaining to the Collateral, or any
part thereof, for any purpose not inconsistent with the terms of this Agreement,
including, without limitation, disposing of the Collateral in the ordinary
course of business; provided, however, that the Buyer shall not exercise, or
shall refrain from exercising, any such right if it would result in an Event of
Default, or an event that with notice, lapse of time or both, would result in an
Event of Default.
5. Subordination, Transfer and
Liens.
5.1 Subordination. The
rights of the Secured Party and the Holder of the Note in and to the Collateral
are hereby expressly subordinated to the prior payment in full of all of the
Buyer’s and/or its Affiliates’ Senior Indebtedness, as hereinafter
defined. “Senior Indebtedness”
shall mean the principal of and unpaid accrued interest on (i) all indebtedness,
directly or indirectly, of the Buyer and/or its Affiliates to banks, insurance
companies or other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Buyer and/or its Affiliates
(whether or not secured), and (ii) any such indebtedness or any debentures,
notes or other evidence of indebtedness issued in exchange for such Senior
Indebtedness.
5.2 Effect of
Subordination. Subject to the rights, if any, of the holders
of Senior Indebtedness in the Collateral, nothing contained in this Section 5
shall impair, as between the Buyer and the Secured Party, the obligation of the
Buyer, subject to the terms and conditions of the Note, to pay to the Secured
Party the outstanding balance of the Note as and when the same become due and
payable.
5.3 Undertaking. Secured
Party agrees to execute and deliver such documents as may be reasonably
requested from time to time by the Buyer or the lender of any Senior
Indebtedness in order to implement the foregoing provisions of this Section
5.
5.4 Other Transfers and
Liens. Except in the ordinary course of business or otherwise described
herein, the Buyer agrees that it will not (i) sell, assign, exchange, transfer
or otherwise dispose of, or contract to sell, assign, exchange, transfer or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, (ii) create or permit to exist any lien or right of others upon or
with respect to any of the Collateral, except for liens in favor of Secured
Party, or (iii) take any action with respect to the Collateral which is
inconsistent with the provisions or purposes of this Agreement.
6. Events of Default and
Remedies.
6.1 Event of
Default. The occurrence of any one or more of the following
events or conditions shall be deemed to be an event of default (“Event of Default”)
hereunder:
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(a) any
representation or warranty made by the Buyer in this Agreement shall prove to be
materially incorrect or materially misleading on the date as of which made;
or
(b) the
Buyer shall breach any material obligation or material covenant under this
Agreement, the APA or the Note (including, but not limited to, failure to pay
the amounts due under the Note);
provided that, the Buyer shall
have up to thirty (30) days following receipt of written notice from Secured
Party to cure any such Event of Default, and during this cure period, the
Buyer’s rights with respect to the Collateral shall remain intact and
uncompromised.
6.2 Rights Upon Event of
Default. Upon the occurrence and during the continuance of an
Event of Default, following the expiration of the applicable cure period, the
Buyer shall be in default hereunder and Secured Party shall have in any
jurisdiction where enforcement is sought, in addition to all other rights and
remedies that Secured Party may have under this Agreement or the Note and under
applicable laws or in equity, all rights and remedies or a secured party under
the Uniform Commercial Code as enacted in any such jurisdiction all of which may
be exercised at the sole option and in the sole discretion of Secured
Party.
6.3 Notice of
Sale. Secured Party shall give the Buyer at least five (5)
days’ written notice of sale of all or any part of the
Collateral. Any sale of the Collateral shall be held at such time or
times and at such place or places as Secured Party may
determine. Secured Party may bid (which bid may be, in whole or in
part, in the form of cancellations of obligations) for and purchase for the
account of Secured Party the whole or any part of the
Collateral. Secured Party shall not be obligated to make any sale of
the Collateral if it shall determine not to do so regardless of the fact that
notice of sale of the Collateral may have been given. Secured Party
may, without notice or publication, adjourn the sale from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.
7. Miscellaneous.
7.1 This
Agreement and the terms, conditions, covenants and agreements hereof are
intended to and shall inure to the benefit of and extend to and include the
respective successors and assigns of Secured Party and shall be binding upon the
successors and assigns of the Buyer. The foregoing notwithstanding,
this Agreement may not be assigned by the Buyer, in fact or by operation of law,
without the prior written consent of Secured Party.
7.2 This
Agreement shall be deemed to be made under, and shall be construed in accordance
with, the laws of the State of Florida and any action hereunder shall be brought
in Miami-Dade County, Florida.
7.3 The
captions contained in this Agreement are for reference purposes only and are not
part of this Agreement.
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7.4 All
notices, requests or instructions which are required or permitted to be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered personally or by
registered or certified mail, postage prepaid, as follows:
If to Secured Party:
XX Xxxxx, Inc.
Attention: Xxx
Xxxxx
0000 XX 00xx
Xxxxxx
Xxxxx, Xxxxxxx 00000
Fax (000) 000-0000
If to the Buyer:
Grove Power, Inc.
Attention: Xxxxxxx
Xxxxxxxx, CFO and Chairman
00000 Xxxxx Xxxxx
Xxx Xxxxxx, Xxxxxxxx
Fax: (000)
000-0000
Notice
shall be deemed to have been given upon receipt thereof as to communications
which are personally delivered and two (2) days after deposit of the same in any
United States mail post office box in the state to which the notice is
addressed, or five (5) days after deposit of the same in any such post office
box other than in the state to which the notice is addressed, postage prepaid,
addressed as set forth above. The addresses and addressees for the
purposes of this Section 7.4 may be changed by giving written notice of such
change in the manner provided herein for giving notice.
7.5 The Buyer
covenants and agrees to prepare, execute, acknowledge, file, record, publish and
deliver to Secured Party such other instruments, documents and statements,
including without limitation instruments and documents of assignment, transfer
and conveyance, and take such other action as may be reasonably necessary or
convenient in the discretion of Secured Party to effect the purposes of this
Agreement.
7.6 This
Agreement may not be altered, amended, changed, waived, terminated or modified
in any manner unless the same shall be in writing and signed by or on behalf of
the party to be bound.
7.7 Any
provision of this Agreement which may be prohibited by law or otherwise held
invalid shall be ineffective only to the extent of such prohibition or
invalidity and shall not invalidate or otherwise render ineffective the
remaining provisions of this Agreement.
8. Attorneys’
Fees. In the event of any legal action or if it becomes
necessary for Secured Party to take any action to perfect Secured Party’s
rights, including pursuant to a sale of the Collateral, Secured Party shall be
entitled to Secured Party’s reasonable attorneys’ fees and costs in taking such
action, whether or not suit is brought hereunder.
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IN WITNESS WHEREOF, the parties have
caused this Agreement to be executed as of the day and year indicated
above.
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“Buyer”
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Grove
Power, Inc.
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/s/ Xxxxxxx Xxxxxxxx
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Xxxxxxx
Xxxxxxxx, CFO and Chairman
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“Secured
Party”
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XX
Xxxxx, Inc.
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/s/ Xxxxxx Xxxxx
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Xxxxxx
Xxxxx,
President
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