SECURITY AGREEMENT
DATED: February 22, 1999
DEBTOR: SECURED PARTY:
Sunrise International Leasing Corporation National City Bank of
0000 Xxxxxxx Xxxxxxxxx Xxxxxxxxxxx
Xxxxx 000 000 Xxxxxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000-0000
1. Security Interest and Collateral. To secure the payment and
performance of each and every debt, liability and obligation of every type and
description which Debtor may now or at any time hereafter owe to Secured Party
(whether such debt, liability or obligation now exists or is hereafter created
or incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or unliquidated,
or joint, several or joint and several; all such debts, liabilities and
obligations collectively referred to as the "Obligations"), Debtor hereby grants
Secured Party a security interest (the "Security Interest") in the following
property (the "Collateral"):
(a) INVENTORY:
The inventory of Debtor, whether now owned or hereafter
acquired and wherever located which is subject to the leases described
on Exhibit A attached hereto, as Exhibit A shall be supplemented or
amended from time to time;
(b) LEASES AND INSTALLMENT SALES CONTRACTS:
All leases and installment sales contracts of Debtor now or
hereafter included within the definition of "Eligible Equipment Lease"
under the Discretionary Revolving Credit Agreement (the "Loan
Agreement") between Debtor and Secured Party dated as of the date
hereof as such Loan Agreement may be amended from time to time;
(c) GENERAL INTANGIBLES:
All general intangibles of Debtor, whether now owned or
hereafter acquired, arising out of or relating to any of the Collateral
described in subsection (a) or (b) above;
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 Collateral, 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 goods, and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
2. Representations, Warranties and Agreements. Debtor represents,
warrants and agrees that:
(a) Debtor is a corporation.
(b) The Collateral will be used primarily for business
purposes.
(c) Debtor's chief executive office is located at the address
of Debtor shown at the beginning of this Agreement.
3. Additional Representations, Warranties and Agreements. Debtor
represents, warrants and agrees that:
(a) Debtor has (or will have at the time Debtor acquires
rights in Collateral hereafter arising) absolute title to each item of
Collateral free and clear of all security interests, liens and
encumbrances, except the Security Interest and the rights of quiet
enjoyment of lessees under leases constituting Collateral, and will
defend the Collateral against all claims or demands of all persons
other than Secured Party. Debtor will not sell or otherwise dispose of
the Collateral or any interest therein without the prior written
consent of Secured Party. This Agreement has been duly and validly
authorized by all necessary corporate action.
(b) Debtor will not permit any tangible Collateral to be
located in any state (and, if county filing is required, in any county)
in which a financing statement covering such Collateral is required to
be, but has not in fact been, filed in order to perfect the Security
Interest.
(c) Each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral
is (or will be when arising or issued) the valid, genuine and legally
enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of the
account debtor or other obligor named therein or in Debtor's records
pertaining thereto as being obligated to pay such obligation. Debtor
will neither agree to any material modification or amendment nor agree
to any cancellation (other then a cancellation available as of right to
a lessee under a lease constituting Collateral) of any such obligation
without Secured Party's prior written consent, and will not subordinate
any such right to claims of other creditors of such account debtor or
other obligor.
(d) Debtor will:
(i) keep, or cause lessees to keep, all tangible
Collateral in good repair, working order and
condition, normal depreciation excepted,
and, from time to time, replace, or cause
lessees to replace, any worn, broken or
defective parts thereof;
(ii) promptly pay all taxes and other
governmental charges levied or assessed upon
or against any Collateral or upon or against
the creation, perfection or continuance of
the Security Interest;
(iii) keep all Collateral free and clear of all
security interests, liens and encumbrances
except the Security Interest and the rights
of quiet enjoyment of lessees under leases
constituting Collateral;
(iv) at all reasonable times, permit Secured
Party or its representatives to examine or
inspect any Collateral, wherever located,
and to examine, inspect and copy Debtor's
books and records pertaining to the
Collateral and its business and financial
condition and to send and discuss with
account debtors and other obligors requests
for verifications of amounts owed to Debtor;
(v) keep accurate and complete records
pertaining to the Collateral and pertaining
to Debtor's business and financial condition
and submit to Secured Party such periodic
reports concerning the Collateral and
Debtor's business and financial condition as
Secured Party may from time to time
reasonably request;
(vi) promptly notify Secured Party of any
material loss of, or damage to, any
Collateral or of any adverse change, known
to Debtor, in the prospect of payment of any
sums due on or under any instrument, chattel
paper, or account constituting Collateral;
(vii) if Secured Party at any time so requests
(whether the request is made before or after
the occurrence of an Event of Default),
promptly deliver to Secured Party any
instrument, document or chattel paper
constituting Collateral, duly endorsed or
assigned by Debtor;
(viii) at all times keep, or cause lessees to keep,
all tangible Collateral insured against
risks of fire (including so-called extended
coverage), theft, collision (in case of
Collateral consisting of motor vehicles) and
such other risks and in such amounts as
Secured Party may reasonably request with
any loss payable to Secured Party to the
extent of its interest;
(ix) from time to time execute such financing
statements as Secured Party may reasonably
require in order to perfect the Security
Interest and, if any Collateral consists of
an asset subject to a certificate of title,
execute such documents as may be required to
have the Security Interest properly noted on
a certificate of title;
(x) pay when due or reimburse Secured Party on
demand for all costs of collection of any of
the Obligations and all other out-of-pocket
expenses (including in each case all
reasonable attorneys' fees) incurred by
Secured Party in connection with the
creation, perfection, satisfaction,
protection, defense or enforcement of the
Security Interest or the creation,
continuance, protection, defense or
enforcement of this Agreement or any or all
of the Obligations, including expenses
incurred in any litigation or bankruptcy or
insolvency proceedings;
(xi) execute, deliver or endorse any and all
instruments, documents, assignments,
security agreements and other agreements and
writings which Secured Party may at any time
reasonably request in order to secure,
protect, perfect or enforce the Security
Interest and Secured Party's rights under
this Agreement;
(xii) not use or keep any Collateral, or permit it
to be used or kept, for any unlawful purpose
or in violation of any federal, state or
local law, statute or ordinance; and
(xiii) not permit any tangible Collateral to become
part of or to be affixed to any real
property without first assuring to the
reasonable satisfaction of Secured Party
that the Security Interest will be prior and
senior to any interest, or lien then held or
thereafter acquired by any mortgagee of such
real property or the owner or purchaser of
any interest therein.
If Debtor at any time fails to perform or observe any agreement
contained in this Section 3(d), and if such failure shall continue for
a period of ten calendar days after Secured Party gives Debtor written
notice thereof (or, in the case of the agreements contained in clauses
(viii) and (ix) of this Section 3(d), immediately upon the occurrence
of such failure, without notice or lapse of time), Secured Party may
(but need not) perform or observe such agreement on behalf and in the
name, place and stead of Debtor (or, at Secured Party's Option, in
Secured Party's own name) and may (but need not) take any and all other
actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of
taxes, the satisfaction of security interests, liens, or encumbrances,
the performance of obligations under contracts or agreements with
account debtors or other obligors, the procurement and maintenance of
insurance, the execution of financing statements, the endorsement of
instruments, and the procurement of repairs, transportation or
insurance); and, except to the extent that the effect of such payment
would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Debtor shall thereupon pay
Secured Party on demand the amount of all moneys expended and all costs
and expenses (including reasonable attorneys' fees) incurred by Secured
Party in connection with or as a result of Secured Party's performing
or observing such agreements or taking such actions, together with
interest thereon from the date expended or incurred by Secured Party at
the highest rate then applicable to any of the obligations. To
facilitate the performance or observance by Secured Party of such
agreements of Debtor, Debtor hereby irrevocably appoints (which
appointment is coupled with an interest) Secured Party, or its
delegate, as the attorney-in-fact of Debtor with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver,
endorse or file, in the name and on behalf of Debtor, any and all
instruments, documents, financing statements, applications for
insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by Debtor under this Section 3 and
Section 4.
4. Lock Box, Collateral Account. If Secured Party so requests at any
time after the occurrence and during the continuance of an Event of Default,
Debtor will direct the obligor on any Collateral to make payments due under the
relevant Collateral directly to a special lockbox to be under the control of
Secured Party. Prior to such a request by Secured Party, Debtor will maintain
the lockbox arrangements required under the terms of the Loan Agreement. Debtor
hereby authorizes and directs Secured Party to deposit into a special collateral
account to be established and maintained with Secured Party all checks, drafts
and cash payments, received in the lockbox, if any, established under this
Section. All deposits in said collateral account shall constitute proceeds of
Collateral and shall not constitute payment of any Obligations. Secured Party
shall either (i) apply finally collected funds on deposit in said collateral
account to the payment of the Obligations in such order of application as
Secured Party may determine, or (ii) permit Debtor to withdraw all or any part
of the balance on deposit in said collateral account. Debtor agrees that it will
promptly deposit into the collateral account, if any, established under this
Section or, if no collateral account is established under this Agreement, into
the lockbox established under the Loan Agreement, all payments on Collateral
received by it. All such payments shall be delivered to Secured Party in the
form received (except for Debtor's endorsement where necessary). Until so
deposited, all payments on Collateral received by Debtor shall be held in trust
by Debtor for and as the property of Secured Party and shall not be commingled
with any funds or property of Debtor.
5. Account Verification and Collection Rights of Secured Party. Secured
Party shall have the right to verify any Collateral in the name of Debtor or in
its own name; and Debtor, whenever requested, shall furnish Secured Party with
duplicate statements of accounts with respect to Collateral, which statements
may be mailed or delivered by Secured Party for that purpose. Notwithstanding
Secured Party's rights under Section 4 with respect to any and all debt
instruments, chattel papers, accounts, and other rights to payment constituting
Collateral (including proceeds), Secured Party may at any time after the
occurrence of an Event of Default notify any account debtor, or any other person
obligated to pay any amount due, that such chattel paper, account, or other
right to payment has been assigned or transferred to Secured Party for security
and shall be paid directly to Secured Party. If Secured Party so requests at any
such time, Debtor will so notify obligors under Collateral in writing and will
indicate on all invoices to such obligors that the amount due is payable
directly to Secured Party. At any time after Secured Party or Debtor gives such
notice to an obligor, Secured Party may (but need not), in its own name or in
Debtor's name, demand, xxx for, collect or receive any money or property at any
time payable or receivable on account of, or securing, any such chattel paper,
account, or other right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such obligor.
6. Assignment of Insurance. Debtor hereby assigns to Secured Party, as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party. In a case where a lease constituting Collateral
grants the lessee the right to apply insurance proceeds to the repair or
replacement of equipment, insurance proceeds may be paid to the lessee for such
purpose so long as the lease is not in default. Both before and after the
occurrence of an Event of Default, Secured Party may (but need not), in its own
name or in Debtor's name, execute and deliver proofs of claim, receive all such
moneys, endorse checks and other instruments representing payment of such
moneys, and adjust, litigate, compromise or release any claim against the issuer
of such policy.
7. Events of Default. An Event of Default under the Loan Agreement
shall be an Event of Default hereunder.
8. Remedies upon Event of Default. Upon and during the continuance of
an Event of Default under Section 7, Secured Party may exercise any one or more
of the following rights and remedies: (i) declare all unmatured Obligations to
be immediately due and payable, and the same shall thereupon be immediately due
and payable, without presentment of other notice or demand; (ii) exercise and
enforce any or all rights and remedies available upon default to a secured party
under the Uniform Commercial Code, including but not limited to the right to
take possession of any Collateral, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which Debtor hereby
expressly waives), and the right to sell, lease or otherwise dispose of any or
all of the Collateral, and in connection therewith, Secured Party may require
Debtor to make the Collateral available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties, and
if notice to Debtor of any intended disposition of Collateral or any other
intended action is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given (in the manner specified in Section
10) at least 10 calendar days prior to the date of intended disposition or other
action; (iii) exercise or enforce any or all other rights or remedies available
to Secured Party by law or agreement against the Collateral, against Debtor or
against any other person or property. In exercising any right under this
Section, Secured Party will recognize the rights of quiet enjoyment of lessees
under leases constituting Collateral.
9. Other Personal Property. Unless at the time Secured Party takes
possession of any tangible Collateral, or within seven days thereafter, Debtor
gives written notice to Secured Party of the existence of any goods, papers or
other property of Debtor, not affixed to or constituting a part of such
Collateral, but which are located or found upon or within such Collateral,
describing such property, Secured Party shall not be responsible or liable to
Debtor for any action taken or omitted by or on behalf of Secured Party with
respect to such property without actual knowledge of the existence of any such
property or without actual knowledge that it was located or to be found upon or
within such Collateral.
10. Miscellaneous. This Agreement does not contemplate a sale of
accounts, or chattel paper. This Agreement can be waived, modified, amended,
terminated or discharged and the Security Interest can be released, only
explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in a specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. All notices to be given to Debtor shall be deemed
sufficiently given if delivered or mailed by registered or certified mail,
postage prepaid, to Debtor at its address set forth above or at the most recent
address shown on Secured Party's records. Secured Party's duty of care with
respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if Secured Party exercises reasonable care in physically safekeeping
such Collateral or, in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and Secured Party need not otherwise preserve,
protect, insure or care for any Collateral. Secured Party shall not be obligated
to preserve any rights Debtor may have against prior parties, to realize on the
Collateral at all or in any particular manner or order, or to apply any cash
proceeds of Collateral in any particular order of application. This Agreement
shall be binding upon and inure to the benefit of Debtor and Secured Party and
their respective heirs, representatives, successors and assigns and shall take
effect when signed by Debtor and delivered to Secured Party, and Debtor waives
notice of Secured Party's acceptance hereof. Secured Party may execute this
Agreement if appropriate for the purpose of filing, but the failure of Secured
Party to execute this Agreement shall not affect or impair the validity or
effectiveness of this Agreement. A carbon, photographic or other reproduction of
this Agreement or of any financing statement signed by Debtor shall have the
same force and effects as the original for all purposes of a financing
statement. This Agreement shall be governed by the internal laws of the State of
Minnesota. If any provision or application of this Agreement is held unlawful or
unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations. Debtor hereby irrevocably submits to the
jurisdiction of the Minnesota District Court, Fourth District, and the Federal
District Court, District of Minnesota, Fourth Division, over any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court.
National City Bank of Sunrise International Leasing Corporation
Minneapolis
By /s/ Xxxx Xxxx By /s/ Xxxxxxx X. Xxxxxxxx
Its Vice President Its Executive Vice President
