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EXHIBIT 10.48
SECURITY AGREEMENT
This Security Agreement is made and entered into this 5th day of June,
1997, between The Sled Dogs Company ("Debtor") and the persons specified on
Exhibit A hereto, as the same may be amended from time to time (collectively
referred to as the "Secured Parties").
RECITALS
WHEREAS, Debtor has borrowed from the Secured Parties and has made,
executed and delivered promissory notes, in favor of the Secured Parties (the
"Promissory Notes") as set forth in Schedule 1 hereto, as amended from time to
time; and
WHEREAS, to induce the Secured Parties to lend such amount, Debtor has
agreed to grant the Secured Parties a security interest in certain of its
assets;
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Creation of Security Interest. Debtor hereby grants to the Secured
Parties a subordinate security interest in all of Debtor's right, title and
interest in and to the collateral described in Section 2 below (the
"Collateral") in order to secure the payment and performance of the obligations
of Debtor to the Secured Parties described in Section 3 below (the "Security
Interest").
2. Collateral. The Collateral under this Security Agreement is as
follows:
INVENTORY: All inventory of Debtor, as such term is defined in the UCC,
whether now owned or hereafter acquired, whether consisting of whole goods,
spare parts or components, supplies or materials, whether acquired, held or
furnished for sale, for lease or under service contracts or for manufacture or
processing, and wherever located; and
ACCOUNTS AND OTHER RIGHTS TO PAYMENT: Each and every right of Debtor to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by Debtor or by some other person who subsequently transfers such
person's interest to Debtor, whether such right to payment is or is not already
earned by performance, and howsoever such right to payment may be evidenced,
together with all other rights and interests (including all liens and security
interests) which Debtor may at any time have by law or agreement against any
account
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debtor or other obligor obligated to make any such payment or against any
property of such account debtor or other obligor, all including all of Debtor's
rights to payment in the form of all present and future accounts, contract
rights, loans and obligations receivable, chattel papers, bonds, notes and
other debt instruments, tax refunds and rights to payment in the nature of
general intangibles; and
EQUIPMENT: All of the Debtor's equipment, as such term is defined in the UCC
whether now or hereafter owned, including all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office
and recordkeeping equipment, parts, tools, supplies, and including specifically
the goods described in any equipment schedule or list herewith or hereafter
furnished to the Secured Parties by the Debtor; and
GENERAL INTANGIBLES: All of the Debtor's general intangibles, as such term is
defined in the UCC, whether now owned or hereafter acquired, including all
present and future contract rights, patents, patent applications, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and
contracts, license agreements regarding any intellectual property (including,
without limitation, the Patent and Trademark License Agreement), manuals,
operating instructions, permits, franchises, the right to use the Debtor's
name, and the goodwill of Debtor's business; and
PROCEEDS: Together with all substitutions and replacements for and products of
any of the foregoing property and together with proceeds of any and all of the
foregoing property and, in the case of all tangible property, together with all
accessions and together with (i) all accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or used in connection with
any such tangible property, and (ii) all warehouse receipts, bills of lading
and other documents of title now or hereafter covering such tangible property.
3. Secured Obligations of Debtor; Subordination.
(a) The Collateral secures and shall hereafter secure (i) the due and
punctual payment by Debtor to the Secured Parties of all amounts now or
hereafter owed to the Secured Parties by Debtor under the Promissory Note,
together with any interest thereon and extensions, modifications and
renewals thereof, and (ii) the performance by Debtor of all other
obligations and the discharge of all other liabilities to the Secured
Parties direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, joint, several and joint and several,
created under the Promissory Notes and Warrants issued to Secured Parties
in connection with the Promissory Notes (the "Warrants") (upon execution
and delivery thereof) or this Security Agreement, (all such obligations,
the "Obligations"). All payments and performance shall be in accordance
with the terms under which the Obligations were or are hereafter incurred
or created. Debtor shall also promptly reimburse the Secured Parties for
any and all amounts expended by the Secured Parties in accordance with, or
in the enforcement (judicially or otherwise) or exercise of its rights
under, the terms of this Security Agreement, including reasonable
attorneys' fees, which amounts are included in the Obligations secured
hereunder.
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(b) The security interest granted hereunder is (a) subordinate in
all respects to any security interest which the Company has granted, or
may grant in the future, in connection with any Senior Debt (as defined
in the Promissory Notes), including without limitation the security
interest granted to Norwest Credit, Inc. (the "Bank"), or in connection
with the financing of any aspect of its operations, such as a security
interest in its inventory granted to a manufacturer or a factor, or any
security interest granted in connection with the purchase of any asset,
and the Secured Parties agree to execute all documents, instruments and
agreements requested by any secured party with a security interest senior
to the security interest granted to the Lender, to effectuate this
subordination.
(c) Whenever this Security Agreement contemplates an action, decision
or notice by the Secured Parties, such an action, decision or notice shall
be deemed to have been validly taken, made or given (as the case may be)
hereunder if concurred in or consented to by a majority in interest of the
Secured Parties. A majority in interest of the Secured Parties shall
consist of a majority of the then outstanding principal amount of
indebtedness held by all Secured Parties under the Promissory Notes.
4. Debtor's Representations and Warranties. Debtor represents and
warrants that:
(a) Debtor is (or to the extent that the Collateral is to be
acquired after the date hereof, will be) the sole owner of the
Collateral; there are no security interests, liens or encumbrances, or
adverse claims of title to, or any other interest in, the Collateral or
any portion thereof except the interest of the Bank and the Secured
Parties and that created by this Security Agreement; and that no
financing statement, mortgage or deed of trust covering the Collateral or
any portion thereof exists or is on file in any public office except for
the security interest granted to the Bank;
(b) Neither the execution and delivery of this Security Agreement by
Debtor nor the consummation of the transactions herein contemplated nor
the fulfillment of the terms hereof will result in a breach of any of the
terms or provisions of, or constitute a default under, or constitute an
event which with notice or lapse of time or both will result in a breach
of or constitute a default under, any agreement, indenture, mortgage,
deed of trust, equipment lease, instrument or other document to which
Debtor is a party, or conflict with any law, order, rule or regulation
applicable to Debtor of any court or any federal or state government,
regulatory body or administrative agency, or any other governmental body
having jurisdiction over Debtor or their respective properties.
5. Covenants of Debtor. Debtor covenants that:
(a) So long as the Secured Parties have not completed foreclosure
proceedings hereunder, Debtor will defend the Collateral against all
claims and demands of all persons (other than the Secured Parties) at any
time claiming the same or any interest therein;
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(b) Debtor will not, without the prior written consent of the
Secured Parties, change its place of business other than that set forth
in this Security Agreement, or change its name, identity or corporate
structure, and, in the event such consent is given, Debtor will execute
and file any and all documents relative thereto, including without
limitation, financing statements and/or amendments thereto, as reasonably
requested by the Secured Parties;
(c) Debtor will, within 5 business days of the date hereof, procure
or execute and deliver any document; give any notices, execute and file
any financing statements or other documents, all in form and substance
satisfactory to the Secured Parties and take any other actions which are
necessary or, in the judgment of the Secured Parties, desirable to
perfect or continue the perfection and priority of the Secured Parties'
security interest in the Collateral, to protect the Collateral against
the rights, claims, or interests of third persons or to effect the
purposes of this Security Agreement, and will pay all reasonable costs
incurred in connection therewith. If Debtor shall fail to fulfill its
obligations described in this subsection (c) within the time periods
provided herein, the Secured Parties are hereby authorized to sign,
deliver and/or file any such documents, notices, financing statements or
other writings, as it deems necessary or advisable as Debtor's agent
and/or attorney-in-fact;
(d) Debtor will not, without the prior written consent of the
Secured Parties, in any way hypothecate or create or permit to exist any
lien, security interest or encumbrance on the Collateral other than the
interest of the Secured Parties created by this Security Agreement, nor
will Debtor sell, transfer, assign, exchange, lease, or otherwise dispose
of the Collateral except in the ordinary course of business. If the
Collateral, or any part thereof, is sold, transferred, assigned, leased,
exchanged, or otherwise disposed of in violation of these provisions, the
security interest of the Secured Parties shall continue in such
Collateral or part thereof notwithstanding such sale, transfer,
assignment, lease, exchange or other disposition, and Debtor will hold
the proceeds thereof in a separate account for the Secured Parties'
benefit. Debtor will, at the Secured Parties' request, transfer such
proceeds to the Secured Parties in kind;
(e) Debtor will pay and discharge all taxes, assessments and
governmental charges or levies against the Collateral prior to
delinquency thereof and will keep the Collateral free of all unpaid
charges whatsoever; provided however, that Debtor shall have the right to
contest any such taxes, assessments, charges or levies;
(f) Debtor will keep and maintain the Collateral in good condition
and repair. Debtor will not misuse or abuse the Collateral, or waste or
allow it to deteriorate except for the ordinary wear and tear of its
normal and expected use in Debtor's business;
(g) Debtor will cause the Collateral to be kept insured at its own
expense under one or more policies and against such risks and liabilities
as are currently covered.
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6. Defaults and Remedies.
6.1 The occurrence of any one or more of the following events or
conditions shall constitute a default under this Security Agreement
("Default(s)").
(a) Debtor fails to pay or perform any Obligation or covenant
required herein, or discharge any liability to the Secured Parties
in accordance with the terms upon which such Obligation, covenant
or liability was incurred or created within thirty (30) days of
giving written notice from the Secured Parties to Debtor of such
failure;
(b) Debtor makes or has made or furnishes or has furnished any
warranty, representation or statement to the Secured Parties as set
forth in with this Security Agreement or in the Promissory Note or
Warrants, which is or was false or misleading in any material
respect when made or furnished (a "False Warranty"), which False
Warranty has a material adverse impact on the Secured Parties;
(c) The Collateral, or any substantial portion thereof, is
destroyed or damaged and for which the Debtor is not fully insured
against;
(d) Any lien or encumbrance other than that created by this
Security Agreement is placed on or any levy is made on the
Collateral or any portion thereof, or the Collateral or any portion
thereof is seized or attached pursuant to legal process; provided,
however, that Debtor shall post an appropriate bond (only if such
lien or encumbrance may be a priority lien to the Secured Parties'
lien hereunder) or take other actions reasonably satisfactory to
the Secured Parties that will ensure that the Secured Parties'
rights hereunder, including its lien in the Collateral, are not
modified or diminished;
(e) Debtor becomes insolvent as defined in the Federal
Bankruptcy Code, admits in writing its insolvency or its present or
prospective inability to pay its debts as they become due, is
unable to or does not pay all or any material portion (in number or
dollar amount) of its debts as they become due, permits or suffers
a judgment to exist against it which has or may have a material
impact on Debtor's ability to perform its obligations under the
Promissory Note, Warrants or hereunder (unless enforcement thereof
is stayed pending appeal) makes or proposes an assignment for the
benefit of creditors, convenes or proposes to convene a meeting of
its creditors, or any class thereof, for purposes of effecting a
moratorium upon or extension or composition of its debts, proposes
any such moratorium, extension or composition, or commences or
proposes to commence any bankruptcy, reorganization or insolvency
proceeding, or other proceeding under any federal, state or other
law for the relief of debtors;
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(f) Debtor fails to obtain the dismissal, within sixty (60)
days after the commencement thereof, of any bankruptcy,
reorganization or insolvency proceeding, or other proceeding under
any law for the relief of debtors, instituted against it by one or
more third parties, fails actively to oppose any such proceeding,
or, in any such proceeding, defaults or files an answer admitting
the material allegations upon which the proceeding was based or
alleges its willingness to have an order for relief entered or its
desire to seek liquidation, reorganization or adjustment of any of
its debts;
(g) Any receiver, trustee or custodian is appointed to take
possession of all or any substantial portion of the assets of
Debtor, or any committee of the Debtor's creditors, or any class
thereof, is formed for the purpose of monitoring or investigating
the financial affairs of Debtor or enforcing such creditors'
rights;
(h) Debtor ceases to conduct its business in the ordinary
course.
6.2 Immediately upon the occurrence of a Default hereunder, the
Secured Parties may, at its option, upon five (5) business days' notice to or
demand upon Debtor, do any one or more of the following:
(a) Declare all Obligations to be immediately due and payable,
whereupon all unpaid amounts and interest on said amounts shall
become and be immediately due and payable;
(b) Exercise any or all of the rights and remedies provided
for by the applicable Uniform Commercial Code, specifically
including, without limitation, the right to recover the reasonable
attorneys' fees and other reasonable expenses incurred by the
Secured Parties in the enforcement of this Security Agreement or in
connection with Debtor's redemption of the Collateral;
(c) Enforce one or more remedies hereunder, successively or
concurrently, and such action shall not operate to estop or prevent
the Secured Parties from pursuing any other or further remedy which
it may have, and any repossession or retaking or sale of the
Collateral pursuant to the terms hereof shall not operate to
release Debtor until full and final payment of any deficiency has
been made in cash. Debtor shall reimburse the Secured Parties upon
demand for, or the Secured Parties may apply any proceeds of
Collateral to, the costs and expenses (including reasonable
attorneys' fees, transfer taxes and any other charges) incurred by
the Secured Parties in connection with any sale, disposition or
retention of any Collateral hereunder;
(d) In connection with any public or private sale under the
applicable Uniform Commercial Code, the Secured Parties shall give
Debtor at least five (5) business days' prior written notice of the
time and place of any public sale of the Collateral or of the time
after which any private sale or other intended disposition
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thereof is to be made, which shall be deemed to be reasonable
notice of such sale or other disposition. Such notice may be
delivered to Debtor at the address set forth in Section 7.2 of this
Security Agreement. The Secured Parties shall have no obligation
to exhibit (as may be required, if any, under any relevant Uniform
Commercial Code(s) and/or applied in cases thereunder) any part of
the Collateral at or prior to the sale thereof;
(e) Proceed by an action or actions at law or in equity to
recover the amounts secured hereunder or to foreclose this Security
Agreement and sell the Collateral, or any portion thereof, pursuant
to a judgment or decree of a court or courts of competent
jurisdiction; and
(f) In the event the Secured Parties recover possession of all
or any part of the Collateral pursuant to a writ of possession or
other judicial process, whether prejudgment or otherwise, the
Secured Parties may thereafter retain, sell or otherwise dispose of
such Collateral in accordance with this Security Agreement or the
applicable Uniform Commercial Code, and following such retention,
sale or other disposition, the Secured Parties may voluntarily
dismiss without prejudice the judicial action in which such writ of
possession or other judicial process was issued. Debtor hereby
consents to the voluntary dismissal by the Secured Parties of such
judicial action, and Debtor further consents to the exoneration of
any bond which the Secured Parties filed in such action.
7. Miscellaneous Provisions.
7.1 Applicable Law; Entire Agreement; Modification. The existence,
validity, construction, operation and effect of this Security Agreement
shall be determined in accordance with and be governed by the laws of the
State of Minnesota. The parties each acknowledge that the other party
has not made any representations other than those which are contained
herein (or any exhibit or attachment thereto). This Security Agreement
may not be amended or modified in any way, except by a writing signed by
an authorized officer or the party against whom the amendment,
modification or waiver is sought to be enforced.
7.2 Notices. All notices and other communications from either party
to the other hereunder shall be in writing and shall be deemed received
upon actual receipt when personally delivered, upon acknowledgment of
receipt if sent by facsimile or upon the expiration of the third business
day after being deposited in the United States mails, postage prepaid,
certified or registered mail, addressed to the other party as follows: if
to a Secured Party, to his address as it appears on the Schedule 1
attached hereto and if to the Company, to 000 Xxxxx Xxxxxx X., Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000.
All payments to be made under this Security Agreement, if made by mail,
shall be deemed to have been made on the date of receipt thereof. The
parties hereto may change their addresses
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by giving notice thereof in conformity with this Section 7.2 except that
if such notice is sent by United States mail it need not be certified or
registered.
7.3 Severability. Nothing contained in this Security Agreement
shall be construed so as to require the commission of any act contrary to
Law, and wherever there is any conflict between any provision of this
Security Agreement and any Law, such Law shall prevail; provided,
however, that in such event the provisions of this Security Agreement so
affected shall be curtailed and limited only to the extent necessary to
permit compliance with the minimum legal requirement, and no other
provisions of this Security Agreement shall be affected thereby and all
such other provisions shall continue in full force and effect.
7.4 Successors, Assignment. This Security Agreement shall be
binding on and shall inure to the benefit of any and all successors and
assigns of the parties. Any purported assignment by Debtor without the
prior written consent of the Secured Parties, which may be withheld in
its sole discretion, shall be null and void and of no force and effect.
the Secured Parties shall have the right to assign its interest under
this Security Agreement.
7.5 Heading. The descriptive headings of the several sections and
paragraphs of this Security Agreement are inserted for convenience only
and do not constitute a part of this Security Agreement.
7.6 Counterparts. This Security Agreement may be executed in
several counterparts, each of which shall be deemed an original, and all
such counterparts together shall constitute but one and the same
instrument.
7.7 No Waiver. No delay in enforcing or failure to enforce any
right under this Security Agreement by the Secured Parties shall
constitute a waiver by the Secured Parties of such right. No waiver by
the Secured Parties of any default or Default hereunder shall be
effective unless in writing, nor shall any waiver operate as a waiver of
any other default or Default or of the same default or Default on a
future occasion.
7.8 Power of Attorney. Debtor hereby appoints and constitutes the
Secured Party designated in writing by Secured Parties holding at least
51% of the aggregate principal amount of the Promissory Notes as Debtor's
attorney-in-fact for purposes of (i) collecting accounts or proceeds of
any Collateral, (ii) conveying any item of Collateral, only upon an event
of Default, to any purchaser thereof, and (iii) executing, delivering,
marking and/or filing any documents or instruments which the Secured
Parties may file pursuant to the last sentence of Section 5(c) hereof.
This power of attorney is coupled with an interest and is irrevocable by
Debtor.
7.9 Termination of Agreement. This Security Agreement shall
terminate upon full and final payment and performance of all indebtedness
and fulfillment of the other Obligations secured hereunder. At such
time, the Secured Parties shall release its interest to
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Debtor in all of the Collateral hereunder which has not been sold,
disposed of, retained or applied by the Secured Parties in accordance
with the terms hereof. Such release shall be without warranty by or
recourse to the Secured Parties, except that the Secured Parties shall
warrant that the Collateral shall be free and clear of any liens or
encumbrances caused by it, and shall be at the expense of Debtor. Both
parties shall reasonably provide the other with requested documentation
and filings with respect to such release.
7.10 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Security Agreement, or to seek damages for
a breach of any provision hereof, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to any other available
remedy.
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the day and year first written above.
"DEBTOR"
The Sled Dogs Company
By: _____________________
Its: ____________________
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EXHIBIT A
Secured Parties Amount of Promissory Note
Name and Address Signature
Xxxx Xxxxxxxxx ______________________ $100,000
0000 Xxxxxx Xxxx
Xxxxx, XX 00000
Xxxxx Xxxxx ______________________ $25,000
00 Xxxx Xxxxxx
Xxxxxxxxx Xxxx
X. Xxxxxx, XX 00000
Xxx Xxxxxxx ______________________ $25,000
00 Xxxx Xxxx
Xxxxx Xxxxx, XX 00000
Xxxxxxx X. Xxxxx ______________________ $50,000
000 Xxxxx Xxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
Xxxx Xxxxxx _______________________ $25,000
000 Xxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Xxxxx X. Xxxxxx _______________________ $50,000
00 Xxxx Xxxxx
Xxxxxx, XX 00000
Xxxxxx X. Xxxxxx _______________________ $50,000
Xxxxxxx X. Xxxxxx
00 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx _______________________ $25,000
Xxxxx Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
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Xxxxx X. Xxxxxx _______________________ $25,000
c/x Xxxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxxx _______________________ $12,500
Xxxxxxx Xxxxxxx
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx Xxxxxxxx
Xxxxxxxxx, XX 00000-0000
Xxxx Xxxxxxxxx _______________________ $12,500
000 Xxxx 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, XX 00000
Xxxxxxx X. Xxxxxxxx ________________________ $12,500
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxx Xxxxx ________________________ $25,000
Xxxxxxxx Xxxxx
0 Xxxx Xxxx Xxxxx (0X)
Xxxxx Xxxx, XX 00000
Xxxx X. Xxxxxxx ________________________ $12,500
0000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxxxx X. xxXxxxxx ________________________ $12,500
Xxxxxxxxx X. xxXxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxxxxx X. Xxxxxx _________________________ $25,000
00 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Xxxxxx X. Xxxxx _________________________ $12,500
x/x Xxxxxx & Xxxxxx
0 Xxxxxxxx
Xxx Xxxx, XX 00000
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UPDATED AS OF JUNE 9, 1997
Xxxxxx X. Xxxxx _________________________ $12,500
x/x Xxxxxx & Xxxxxx
0 Xxxxxxxx
Xxx Xxxx, XX 00000
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