Xxx. 00-00
SECURITY AGREEMENT
This Security Agreement (this Agreement) is entered into this 6th day of
November,1997, by and between Larco Environmental Services, Inc., a Louisiana
corporation (the Debtor), whose address is 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxx,
Xxxxxxxxx 00000, and American Physicians Service Group, Inc., a Texas
corporation (the Secured Party), whose address is 0000 Xxxxxxx xx Xxxxx Xxxxxxx,
Xxxxx X-000, Xxxxxx, Xxxxx 00000.
RECITALS:
A. Consolidated Eco-Systems, Inc., an Idaho corporation formerly known as
Exsorbet Industries, Inc. (Consolidated) executed and delivered that certain
Promissory Note dated November 26, 1996 (the Original Note) in the original
principal amount of Three Million Three Hundred Thousand Dollars ($3,300,000)
payable to the order of Secured Party.
B. The Original Note was secured pursuant to the following agreements, all for
the benefit of Secured Party: (i) that certain Security Agreement dated December
12, 1996, entered into by7-7, Inc., an Arkansas corporation (7-7), formerly
known as 7-7 Merger, Inc.; (ii) that certain Security Agreement dated September
30, 1996, entered into by 77; (iii) that certain Assignment and Security
Agreement dated September 30, 1996, entered into by Consolidated; and (iv) those
certain Guaranty Agreements dated September 30, 1996, entered into by each of
the following entities:
a. Consolidated Environmental Services, Inc., an Arkansas
corporation (CES);
b. Cierra, Inc., an Arkansas corporation (Cierra);
c. Debtor;
d. KR Industrial Services of Alabama, Inc., an Alabama corporation
(KR Industrial);
e. Exsorbet Technical Services, Inc., an Arkansas corporation
(Exsorbet Technical) doing business as SpilTech Services,
Inc.;
f. Eco Acquisition, Inc., an Arkansas corporation (Acquisition),
also known as Eco-Systems, Inc.; and
g. 7-7
(all of the agreements described in (i) through (iv) above are collectively
referred to herein as the Original Security Documents).
C. Consolidated has executed and delivered a new note of even date herewith,
payable to the order of Secured Party, in the original principal amount of
$3,788,580 (the New Note), in renewal and extension of the Original Note, which
New Note is also secured pursuant to (i) the Original Security Documents, and
(ii) that certain Assignment and Security Agreement of even date herewith
entered into for the benefit of Secured Party by Consolidated (the Consolidated
Security Agreement).
D. Debtor has received, and will continue to receive, valuable consideration as
a result of the transactions evidenced by, or related to, the Original Note, the
New Note, and the Security Documents (as hereinafter defined). Accordingly,
Secured Party has requested that Debtor pledge the Collateral (as defined below)
to secure certain obligations and liabilities, including without limitation (i)
Consolidateds obligations to Secured Party under the New Note, (ii) Debtors,
Consolidateds and all of Consolidateds subsidiaries, obligations under, and
performance of the covenants set forth in, the Original Security Documents,
(iii) Consolidateds obligations under, and performance of the covenants set
forth in, the Consolidated Security Agreement, (iv) Consolidateds, Debtors and
all of Consolidateds subsidiaries, obligations under, and performance of the
covenants set forth in, that certain Master Refinancing Agreement of even date
herewith entered into for the benefit of Secured Party by Debtor, Consolidated
and all of Consolidateds subsidiaries (the Refinancing Agreement), and (v)
Debtors performance of the covenants more fully set forth herein. The Original
Security Documents, the Refinancing Agreement, the Consolidated Security
Agreement, and this Agreement are collectively referred to herein as the
Security Documents.
AGREEMENTS:
Now, Therefore, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which Debtor acknowledges, Debtor and Secured Party
agree as follows:
ARTICLE I
AGREEMENT; INDEBTEDNESS
1.1 SECURITY INTEREST. Subject to the applicable terms of this Agreement, for
good and valuable consideration, the receipt and sufficiency of which Debtor
acknowledges, Debtor assigns and transfers to Secured Party, and grants to
Secured Party a continuing security interest in and lien upon, the Collateral
(as defined in Article II below) to secure the payment and the performance of
the Indebtedness (the Security Interest).
1.2 INDEBTEDNESS. The following indebtedness and obligations (the Indebtedness)
are secured by this Agreement:
(a) All debt, obligations, liabilities, and agreements of Debtor and/or
Consolidated to Secured Party, now or hereafter existing, arising directly
between Debtor and Secured Party and/or Consolidated and Secured Party or
acquired outright, conditionally, or as collateral security from another by
Secured Party, absolute or contingent, joint or several, secured or unsecured,
due or not due, contractual or tortious, liquidated or unliquidated, arising by
operation of law or otherwise, including, without limitation, all obligations
and amounts due under the New Note, the Security Documents, and all renewals,
extensions, modifications, or rearrangements of any of the foregoing.
(b) Secured Partys participation in any debt of Debtor to another person.
(c) All costs incurred by Secured Party to obtain, preserve, perfect, and
enforce this Agreement and the Security Interest, to collect the Indebtedness,
and to maintain, preserve, collect, and enforce the Collateral, including but
not limited to taxes, assessments, insurance premiums, repairs, reasonable
attorneys fees and legal expenses, feed, rent, storage costs, and expenses of
sale.
(d) Interest on the above amounts as agreed between Secured Party and Debtor, or
if there is no agreement, at the highest lawful rate.
ARTICLE II
COLLATERAL
2.1 DESCRIPTION OF COLLATERAL. The Security Interest is granted in the following
(the Collateral):
(a) All of Debtors assets, including without limitation all accounts, chattel
paper, contract rights, equipment, inventory, fixtures, general intangibles, and
investment property, as more particularly described in Exhibit-A attached to and
incorporated herein by reference.
(b) All substitutes and replacements for, accessions, attachments and other
additions to, tools, parts and equipment used in connection with, and proceeds
and products of, the above Collateral (including all income and benefits
resulting from any of the above), all certificates of title, manufacturers
statements of origin, other documents, accounts, and chattel paper arising from
or related to the above Collateral, and returned or repossessed Collateral, any
of which, if received by Debtor, shall be delivered immediately to Secured
Party.
(c) All policies of insurance covering the Collateral and proceeds thereof.
(d) All security for the payment of any of the Collateral, and all goods which
gave or will give rise to any of the Collateral or are evidenced, identified, or
represented therein or thereby.
(e) All property similar to the above hereafter acquired by Debtor.
(f) All proceeds of the items described in subsections (a) through (e) of this
Section 2.1.
ARTICLE III
DEBTORS WARRANTIES
Debtor represents and warrants to Secured Party as follows:
3.1 FINANCING STATEMENTS. No statement covering the Collateral is or will be on
file in any public office, except the financing statements relating to this
Security Interest and those relating to the Prior Liens (as hereinafter
defined). In the past five (5) years, Debtor has not used or done business under
any name other than its legal name which is set forth on the first page of this
Agreement.
3.2 OWNERSHIP. Debtor owns, or will use the proceeds of any loans by Secured
Party to become the owner of, the Collateral free from any setoff, claim,
restriction, lien, security interest, or encumbrance except liens for taxes not
yet due, the Security Interest, and the Prior Liens.
3.3 FIXTURES AND ACCESSIONS. Except for Collateral of nominal value, none of the
Collateral is affixed to real estate or is an accession to any goods, or will
become a fixture or accession, except as expressly set out herein.
3.4 CLAIMS OF DEBTORS ON COLLATERAL. No account debtors and other obligors whose
debts or obligations are part of the Collateral have any right to setoffs,
counterclaims, or adjustments, or any defenses in connection therewith.
3.5 LIENS. Neither Debtor nor any person acting on Debtors behalf has,
or shall have any right, power, or authority to and shall not create, incur, or
permit to be placed or imposed upon the Collateral, any lien of any type or
nature whatsoever superior to the liens in favor of Secured Party provided
herein, except only the liens in favor of Xxxxxxx & Xxxxx Financial, Inc. (the
Prior Liens). As to the Prior Liens, neither Debtor nor any person acting on
Debtors behalf shall have any right, power, or authority to and shall not
increase the amount of indebtedness secured by the Prior Liens or the
Collateral. No item of Collateral is subject to more than one(1) of the Prior
Liens.
3.6 ACCURACY OF FINANCIAL STATEMENTS. All balance sheets, earnings statements,
and other financial data which have been or hereafter may be furnished to
Secured Party to induce it to permit the Indebtedness or to make this Agreement
or in conjunction herewith truly represent or shall truly represent the
financial condition and operations of Debtor as of the dates and for the periods
shown thereon; and all other information, reports, papers, and data furnished to
Secured Party are or shall be, at the time furnished, accurate and correct in
all respects and complete insofar as necessary to give Secured Party a true and
accurate knowledge of the subject matter.
3.7 POWER AND AUTHORITY. Debtor has full power and authority to make this
Agreement.
3.8 PRINCIPAL PLACE OF BUSINESS. Debtors chief executive office is at Debtors
address stated above in Sulphur, Calcasieu Parish, Louisiana, and such address
is also where Debtor keeps its books and records.
3.9 LOCATION OF COLLATERAL. All of Debtors Inventory and Equipment is located at
Debtors principal place of business located at 0000 Xxxxxxxxxx Xxxxxxxxx,
Xxxxxxx, Xxxxxxxxx. Debtor has exclusive possession and control of its Inventory
and Equipment.
3.10 PERFECTION. Upon the filing of the UCC financing statements with the Office
of the Louisiana Secretary of State and the Office of the Arkansas Secretary of
State, the Security Interest will constitute a valid and perfected lien upon and
security interest in the Collateral superior to all other liens, claims or
encumbrances except only the Prior Liens.
3.11 SOLVENCY. As of the date hereof, and after giving effect to this Agreement
and the completion of all other transactions contemplated by Debtor at the time
of the execution of this Agreement, (i) Debtor is and will be solvent, (ii) the
fair saleable value of Debtor's assets exceeds and will continue to exceed
Debtor's liabilities (both fixed and contingent), (iii) Debtor is paying and
will continue to be able to pay its debts as they mature or within
forty-five(45) days thereafter, and (iv) if Debtor is not an individual, Debtor
has and will have sufficient capital to carry on Debtor's businesses and all
businesses in which Debtor is about to engage.
ARTICLE IV
DEBTORS COVENANTS
Debtor covenants and agrees that:
4.1 INDEBTEDNESS AND THIS AGREEMENT. Debtor shall pay, or cause the payment of,
the Indebtedness in accordance with its terms and shall promptly perform all of
his (or its) agreements herein and in any other agreements between him (or it)
and Secured Party.
4.2 OWNERSHIP OF COLLATERAL. At the time Debtor grants to Secured Party a
security interest in any Collateral, Debtor shall be the absolute owner thereof
(subject only to the Prior Liens) and shall have the right to grant such
security interest. Debtor shall defend the Collateral against all claims and
demands of all persons at any time claiming any interest therein adverse to
Secured Party. Debtor shall keep the Collateral free from all liens and security
interests except those for taxes not yet due, the Security Interest, and the
Prior Liens.
4.3 INSURANCE. Debtor shall insure the Collateral with companies acceptable to
Secured Party against such casualties and in such amounts as Secured Party shall
require. All insurance policies shall be written for the benefit of Debtor and
Secured Party as their interests may appear, or in other form satisfactory to
Secured Party, and such policies or certificates evidencing the same shall be
furnished to Secured Party. All policies of insurance shall provide for written
notice to Secured Party simultaneously with any notice of cancellation or other
termination being given to Debtor, and in any event at least 10 days prior to
cancellation or other termination. Risk of loss or damage is Debtors to the
extent of any deficiency in any effective insurance coverage. Secured Party is
appointed Debtors attorney-in-fact to collect any return or unearned premiums or
the proceeds of such insurance and to endorse any draft or check payable to
Debtor therefor.
4.4 MAINTENANCE. Debtor shall keep and maintain the Collateral in good
condition, reasonable wear and tear excepted.
4.5 SECURED PARTYS COSTS. Debtor shall pay all costs necessary to obtain,
preserve, perfect, defend, and enforce this Security Interest, collect the
Indebtedness, and preserve, defend, enforce, and collect the Collateral,
including but not limited to taxes, assessments, insurance premiums, repairs,
reasonable attorneys fees and legal expenses, feed, rent, storage costs, and
expenses of sales. Whether Collateral is or is not in Secured Partys possession,
and without any obligation to do so and without waiving Debtors default for
failure to make any such payment, Secured Party at its option may pay any such
costs and expenses, discharge encumbrances on the Collateral, and pay for
insurance of Collateral, and such payment shall be a part of the Indebtedness.
Debtor agrees to reimburse Secured Party on demand for any costs so incurred.
4.6 INFORMATION AND INSPECTION. Debtor shall (i) furnish Secured Party any
financial statements of Debtor or reports to Debtor by accountants or others
pertaining to Debtors business as soon as available, and any information with
respect to the Collateral requested by Secured Party; (ii) allow Secured Party
to inspect the Collateral, at any time and wherever located, and to inspect and
copy, or furnish Secured Party with copies of, all records relating to the
Collateral and the Indebtedness; (iii) furnish Secured Party such information as
Secured Party may request to identify inventory, accounts, and general
intangibles in Collateral, at the time and in the form requested by Secured
Party; and (iv) deliver upon request to Secured Party shipping and delivery
receipts evidencing the shipment of goods and invoices evidencing the receipt
of, and the payment for, inventory in Collateral.
4.7 ADDITIONAL DOCUMENTS. Debtor shall sign any papers furnished by Secured
Party which are necessary in the judgment of Secured Party to obtain, maintain,
and perfect the Security Interest and to enable Secured Party to comply with the
Federal Assignment of Claims Act or any other federal or state law in order to
obtain or perfect Secured Partys interest in collateral or to obtain proceeds of
collateral.
4.8 PARTIES LIABLE ON COLLATERAL. Debtor will preserve the liability of all
obligors on any Collateral and will preserve the priority of all security
therefor. Secured Party shall have no duty to preserve such liability or
security, but may do so at the expense of Debtor, without waiving Debtors
default.
4.9 MODIFICATION OF COLLATERAL. Without the written consent of Secured Party,
which consent shall not be unreasonably withheld, Debtor shall not agree to any
modification of any of the terms of any accounts, contracts, chattel paper,
general intangibles, or instruments constituting part of the Collateral.
4.10 RIGHT OF SECURED PARTY TO NOTIFY DEBTORS. At any time, whether
Debtor is or is not in default under this Agreement, Secured Party may notify
persons obligated on any Collateral to make payments directly to Secured Party
and Secured Party may take control of all proceeds of any Collateral. Until
Secured Party elects to exercise such rights, Debtor, as agent of Secured Party,
shall collect and enforce all payments owed on Collateral.
4.11 DELIVERY OF RECEIPTS OF SECURED PARTY; REJECTED GOODS. Upon
Secured Party's demand, Debtor shall deposit, upon receipt and in the form
received, with any necessary endorsement, all payments received as proceeds of
Collateral, in a special bank account in a bank of Secured Party's choice over
which Secured Party alone shall have power of withdrawal. The funds in said
account shall secure the Indebtedness. Secured Party is authorized to make any
endorsement in Debtor's name and behalf. Pending such deposit, Debtor shall not
mingle any such payments with any of Debtor's other funds or property, but will
hold them separate and upon an express trust for Secured Party. Secured Party
may from time to time apply the whole or any part of the funds in the special
account against the Indebtedness. Unless Secured Party notifies Debtor in
writing that it dispenses with any one or more of the following requirements,
Debtor shall:
(a) inform Secured Party immediately of the rejection of
goods, delay in delivery or performance, or claim made, in regard to
any Collateral;
(b) keep returned goods segregated from Debtor's other
property, and hold the goods as trustee for Secured Party until it has
paid Secured Party the amount loaned against the related account or
chattel paper and deliver the goods on demand to Secured Party; and
(c) pay Secured Party the unpaid amount of any account in
Collateral (i) if the account is not paid when due; (ii) if purchaser
rejects the goods or services covered by the account; or (iii) if
Secured Party shall at any time reject the account as unsatisfactory.
Secured Party may retain the account in Collateral. Secured Party may
charge any deposit amount of Debtor with any such amounts.
4.12 RECORDS OF COLLATERAL. Debtor at all times will maintain accurate
books and records covering the Collateral. Debtor immediately will xxxx all
books and records with an entry showing the absolute assignment of all accounts
in Collateral to Secured Party and Secured Party is hereby given the right to
audit the books and records of Debtor relating to Collateral at any time and
from time to time. The amounts shown as owed to Debtor on Debtor's books and on
any assignment schedule will be the undisputed amounts owing and unpaid. Debtor
shall disclose to Secured Party all agreements modifying any account,
instrument, or chattel pater.
4.13 DISPOSITION OF COLLATERAL. Debtor will not sell, transfer,
mortgage, or otherwise encumber any Collateral or impair the value thereof in
any manner without Secured Party's prior written consent, which Debtor is under
no obligation whatsoever to give, including without limitation by purchase,
lease, barter, trade, payment deferral, or the creation, assumption or guarantee
of indebtedness or other lending of credit; provided, however, the foregoing
shall not be applicable to Debtor with respect to (i) inventory sold, leased,
manufactured, processed, or consumed in the ordinary course of business, and
(ii) unsecured open account trade debts to unrelated parties incurred by Debtor
in the ordinary course of business, not to exceed, cumulatively, $50,000 over
the aggregate amount of such debts as of October 15, 1997. Secured Party's
written consent to any sale, mortgage, transfer, or encumbrance shall not be
construed to be a waiver of this provision in respect to any subsequent proposed
sale, mortgage, transfer, or encumbrance. If disposition of any Collateral gives
rise to an account, chattel paper, or instrument, Debtor immediately shall
notify Secured Party, and upon request of Secured Party shall assign or endorse
the same to Secured Party.
4.14 ACCOUNTS RECEIVABLE. Each account receivable constituting
Collateral will represent the valid and legally enforceable obligation of third
parties and shall not be evidenced by any instrument or chattel paper. In the
event any account shall give rise to any instrument or chattel paper, Debtor
shall immediately endorse the same to Secured Party and deliver all original
such instruments and chattel paper to Secured Party.
4.15 LOCATION OF ACCOUNTS AND INVENTORY. Debtor shall give Secured
Party written notice of each office of Debtor in which records of Debtor
pertaining to accounts in Collateral are kept, and each location at which
inventory in Collateral is or will be kept, and of any change of any such
location. If no such notice is given, all records of Debtor pertaining to
accounts and all inventory are and shall be kept at Debtor's address shown
above.
4.16 NOTICE OF CHANGES. Debtor will notify Secured Party immediately of
any material change in the Collateral, of a change in Debtor's residence or
location, of a change in any matter warranted or represented by Debtor in this
Agreement or furnished to Secured Party, and of any Event of Default.
4.17 USE AND REMOVAL OF COLLATERAL. Debtor will not use the Collateral
illegally nor, except for Collateral of nominal value, permit the Collateral to
be affixed to real or personal property without the prior written consent of
Secured Party. Debtor will not permit any of the Collateral to be removed from
the locations specified herein without the written consent of Secured Party,
except for equipment used in Texas, Louisiana or Alabama in the ordinary course
of Debtor's business as previously conducted.
4.18 POSSESSION OF COLLATERAL. If the Collateral is chattel paper,
documents, instruments, or investment securities or other instruments, Secured
Party may deliver a copy of this Agreement to the broker or seller thereof, or
any person in possession thereof, and such delivery shall constitute notice to
such person of Secured Party's security interest therein and shall constitute
Debtor's instruction to such person to deliver to Secured Party certificates or
other evidence of the same as soon as available. Debtor will deliver all
investment securities, other instruments, documents, and chattel paper which are
part of the Collateral and in Debtor's possession to the Secured Party
immediately, or if hereafter acquired, immediately following acquisition,
appropriately endorsed to Secured Party's order, or with appropriate, executed
powers. Debtor waives presentment, demand, notice of dishonor, protest, and all
other notices with respect thereto.
4.19 CHATTEL PAPER. Debtor has perfected or will perfect a security
interest by means satisfactory to Secured Party in goods covered by chattel
paper in Collateral.
4.20 CONSUMER CREDIT. If any Collateral or proceeds includes
obligations of third parties to Debtor, the transactions giving rise to the
Collateral shall conform in all respects to the applicable state or federal
consumer credit law. DEBTOR SHALL HOLD HARMLESS AND INDEMNIFY SECURED PARTY
AGAINST ANY COST, LOSS, OR EXPENSE INCLUDING ATTORNEY'S FEES, ARISING FROM
DEBTOR'S BREACH OF THIS COVENANT.
4.21 CHANGE OF NAME. Debtor shall not change its name (or any assumed
name or other name under which Debtor does business) or its corporate structure
without Secured Party's prior written consent, which shall not be unreasonably
withheld. Debtor will not change its principal place of business, chief
executive office, or the place where it keeps its books and records unless
Debtor (i) shall have given Secured Party thirty (30) days prior written notice
thereof, and (ii) shall have taken all action deemed necessary or desirable by
Secured Party to cause the Security Interest to be and remain perfected with the
priority required by this Agreement. Debtor shall execute all such documents and
agreements (including without limitation security agreements, financing
statements, and amendments to financing statements) as Secured Party may
reasonably request in connection with any such name change.
4.22 NOTATION ON TITLE CERTIFICATES. If certificates of title are
issued or outstanding with respect to any of the Collateral, Debtor will cause
the Security Interest to be properly noted therein.
4.23 POWER OF ATTORNEY. Debtor appoints Secured Party as Debtor's
attorney-in-fact with full power in Debtor's name and behalf to do every act
which Debtor is obligated to do or may be required to do hereunder; however,
nothing in this section shall be construed to obligate Secured Party to take any
action hereunder.
4.24 DEBTOR'S WAIVERS. Debtor waives notice of the creation, advance,
increase, existence, extension, or renewal of, and of any indulgence with
respect to, the Indebtedness; waives notice of intent to accelerate, notice of
acceleration, notice of intent to demand, presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Indebtedness
outstanding at any time, notice of any change in financial condition of any
person liable for the Indebtedness or any part thereof, notice of any Event of
Default, and all other notices respecting the Indebtedness; and agrees that
maturity of the Indebtedness and any part thereof may be accelerated, extended,
or renewed one or more times by Secured Party in its discretion, without notice
to Debtor.
4.25 OTHER PARTIES AND OTHER COLLATERAL. No renewal or extension of or
any other indulgence with respect to the Indebtedness or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor, or surety) liable on the Indebtedness, no delay in
enforcement of payment, and no delay or admission or lack of diligence or care
in exercising any right or power with respect to the Indebtedness or any
security therefor or guaranty thereof or under this Agreement shall in other
manner impair or affect the rights of Secured Party under the law, under this
Agreement, or under any other agreement pertaining to the other security for the
Indebtedness, before foreclosing upon the Collateral for the purpose of paying
the Indebtedness. Debtor waives any right to the benefit of or to require or
control application of any other security or proceeds thereof, and Debtor agrees
that Secured Party shall have no duty or obligation to Debtor to apply to the
Indebtedness any such other security or proceeds thereof.
ARTICLE V
RIGHTS AND POWERS OF SECURED PARTY
Secured Party, after default, without liability to Debtor, may: obtain
from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
require Debtor to give possession or control of any Collateral to Secured Party;
endorse as Debtor's agent any instruments, documents, or chattel paper in
Collateral or representing proceeds of Collateral; contact account debtors
directly to verify information furnished by Debtor; take control of proceeds;
release Collateral in its possession to any Debtor temporarily or otherwise;
require additional collateral; reject as unsatisfactory any property hereafter
offered by Debtor as Collateral; set standards from time to time to govern what
may be used as after-acquired collateral; designate, from time to time, a
certain percent of the Collateral as the loan value and require Debtor to
maintain the Indebtedness at or below such figure; take control of funds
generated by the Collateral, such as cash dividends, interest, and proceeds or
refunds from insurance, and use same to reduce any part of the Indebtedness and
exercise all other rights which an owner of such Collateral may exercise, except
the right to vote or dispose of Collateral before an Event of Default; at any
time transfer any of the Collateral or evidence thereof into its own name of
that of its nominee; and demand, collect, convert, redeem, receipt for, settle,
compromise, adjust, xxx for, foreclose, or realize upon Collateral, in its own
name or in the name of Debtor, as Secured Party may determine in its sole and
absolute discretion. Secured Party shall not be liable for failure to collect
any account or instrument, or for any act or omission on the part of the Secured
Party, its officers, agents, or employees, except willful misconduct. The
foregoing rights and powers of Secured Party will be in addition to, and not a
limitation upon, any rights and powers of Secured Party given by law, elsewhere
in this Agreement, or otherwise. If Debtor fails to maintain any required
insurance, to the extent permitted by applicable law Secured Party may (but is
not obligated to) purchase single interest insurance coverage for the Collateral
which insurance may at Secured Party's option (i) protect only Secured Party and
not provide any remuneration or protection for Debtor directly and (ii) provide
coverage only after the Indebtedness has been declared due as herein provided.
The premiums for any such insurance purchased by Secured Party shall be a part
of the Indebtedness and shall bear interest as provided in Section 1.2(d) above.
ARTICLE VI
DEFAULT
6.1 Events of Default. The following are events of default under this
Agreement ("Events of Default"):
(a) default, which exists for longer than fifteen (15)
calendar days, in the timely payment of any part of the New Note or
other Indebtedness or in performance or observance of the terms and
conditions herein, in any of the other Security Documents, or in any
other agreement between Debtor and Secured Party;
(b) any warranty, representation, or statement made or
furnished to Secured Party by Debtor, Consolidated, or any of
Consolidated's subsidiaries proves to have been false in any material
respect when made or furnished;
(c) acceleration of the maturity of debt of Debtor,
Consolidated, or any of Consolidated's subsidiaries to any other
person;
(d) substantial change in any fact warranted or represented in
this Agreement or in any other agreement between Debtor and Secured
Party or in any statement, schedule, or other writing furnished in
connection therewith;
(e) sale, loss, theft, destruction, encumbrance, or transfer
of any Collateral in violation hereof, or substantial damage to any
Collateral;
(f) belief by Secured Party that the prospect of payment of
the Indebtedness or performance of this Agreement is impaired;
(g) death, incapacity, dissolution, merger, or consolidation,
termination of existence, insolvency or business failure of Debtor or
any person liable on the Indebtedness; commencement of proceedings for
the appointment of a receiver for any property of Debtor; commencement
of any proceeding under any bankruptcy or insolvency law by or against
Debtor (or any corporate action shall be taken to effect same), or any
partnership of which Debtor is a partner, or by or against any person
liable upon the Indebtedness or any part thereof, or liable upon
Collateral;
(h) levy on, seizure, or attachment of any property
of Debtor, Consolidated, or any of Consolidated's subsidiaries;
(i) a judgment against Debtor in excess of $1,000 becomes
final and remains unsatisfied and unappealed for thirty (30) calendar
days; or
(j) any liability or agreement of third parties to Debtor or
on the Collateral shall not be paid or performed in accordance with the
terms thereof.
6.2 REMEDIES OF SECURED PARTY UPON DEFAULT. When an Event of Default
occurs, and at any time thereafter, Secured Party without notice or demand may
declare the Indebtedness in whole or part immediately due and may enforce
payment of the same and exercise any rights under the Texas UCC, rights and
remedies of Secured Party under this Agreement, or otherwise. Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place which is reasonably convenient to both parties. Unless the Collateral
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Secured Party will give Debtor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or other intended disposition thereof is to be
made. Expenses of retaking, holding, preparing for sale, selling, leasing, or
the like shall include Secured Party's reasonable attorney's fees and legal
expenses. Secured Party shall be entitled to immediate possession of all books
and records evidencing any accounts or general intangibles or pertaining to
chattel paper covered by this Agreement and shall have the authority to enter
upon any premises upon which any of the same, or any Collateral, may be situated
and remove the same therefrom without liability. Secured Party may surrender any
insurance policies in Collateral and receive the unearned premium thereon.
Debtor shall be entitled to any surplus after payment of the Indebtedness and
shall be liable to Secured Party for any deficiency. The process of any
disposition after default available to satisfy the Indebtedness shall be applied
to the Indebtedness in such order and in such manner as Secured Party in its
discretion shall decide. If, in the opinion of Secured Party, there is any
question that a public sale or distribution of any Collateral will violate any
state or federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment purposes and
not with a view to distribution and who will agree to imposition of restrictive
legends on the certificates representing the security, or (ii) may sell such
securities in an intrastate offering under Section 3(a)(11) of the Securities
Act of 1933, and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.
ARTICLE VII
GENERAL
7.1 PARTIES BOUND. Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any assignment or transfer of any of the Indebtedness or the
Collateral, Secured Party thereafter shall be fully discharged from any
responsibility with respect to the Collateral so assigned or transferred, but
Secured Party shall retain all rights and powers hereby given with respect to
any of the Indebtedness or Collateral not so assigned or transferred. All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives, heirs,
successors, and assigns of Debtor. Debtor may not assign this Agreement or any
of its rights or obligations hereunder without the express prior written consent
of Secured Party in each instance.
7.2 WAIVER. No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. No waiver by Secured Party of any right hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured Party to exercise any power or right hereunder or waiver
of any default by Debtor shall operate as a waiver of any other or further
exercise of such right or power of any further default.
7.3 AGREEMENT CONTINUING. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties.
7.4 DEFINITIONS. Unless the context indicates otherwise, definitions in
the Texas UCC apply to words and phrases in this Agreement; if Texas UCC
definitions conflict, Chapter 9 definitions apply.
7.5 NOTICE. Notice shall be deemed reasonable if mailed postage prepaid
at least 5 days before the related action (or if the Texas UCC elsewhere
specifies a longer period, such longer period) to Debtor's address shown above.
7.6 INTEREST. No agreement relating to the Indebtedness shall be
construed to be a contract for or to authorize charging or receiving, or require
the payment or permit the collection of, interest at a rate or in an amount
above that authorized by law. Interest payable under any agreement above that
authorized by law shall be reduced automatically to the highest amount permitted
by law.
7.7 MODIFICATIONS. No provision hereof shall be modified or limited
except by a written agreement expressly referring hereto and to the provisions
so modified or limited and signed by Debtor and Secured Party, nor by course of
conduct, usage of trade, or by the law merchant.
7.8 SEVERABILITY. The unenforceability of any provision of this
Agreement shall not affect the enforceability or validity of any other
provision.
7.9 GENDER AND NUMBER. Where appropriate, the use of one gender shall
be construed to include the others or any of them; and the singular number shall
be construed to include the plural, and vice versa.
7.10 APPLICABLE LAW AND VENUE. THIS AGREEMENT SHALL BE CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF
AMERICA APPLICABLE TO TRANSACTIONS IN THE STATE OF TEXAS. Except at otherwise
stated, this Agreement and the Security Interest shall be construed in
accordance with the Uniform Commercial Code as in effect in the State of Texas
("Texas UCC"). This Agreement is performable by Debtor in the county of Secured
Party's address set out above.
7.11 FINANCING STATEMENT. A carbon, photographic, or other reproduction
of this security agreement or any financing statement covering the Collateral
shall be sufficient as a financing statement.
7.12 LIMITATIONS OF LAW. If any law prohibits or limits any charge or
expense provided for in this Agreement in connection with any loan secured
hereby, such charge or expense will not be made or incurred in connection with
such loan beyond the limits permitted by such law.
EXECUTED this 6th day of November, 1997.
DEBTOR:
LARCO ENVIRONMENTAL SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
SECURED PARTY:
AMERICAN PHYSICIANS SERVICE GROUP, INC.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: Senior VP
EXHIBIT-A
LIST OF ASSETS OF DEBTOR
