EXHIBIT 10.26
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), is dated effective as of
September 22, 2002 (the "Effective Date"), and is by and among EXCALIBUR
AEROSPACE, INC., an Oklahoma corporation ("EAI") and EXCALIBUR SERVICES, INC.,
an Oklahoma corporation ("Services"), EXCALIBUR STEEL, INC.. an Oklahoma
corporation ("Steel"), and XXXXXXX MACHINE WORKS, INC., a Texas corporation
("Xxxxxxx"), on the one hand (EAI, Services, Steel, and Xxxxxxx are hereinafter
collectively referred to, jointly and severally, as "Debtor"), each of whose
address is 000 X. Xxxxxx Xxxx, Xxxx Xxxxxxx, Xxxxxxxx 00000, and XXXXX X.
XXXXX., on the other hand ("Secured Party"), whose address is 00000 Xxxxxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000:
WHEREAS, the parent of Debtor, EXCALIBUR INDUSTRIES, INC., a Delaware
corporation ("EII") has executed a promissory note in favor of Secured Party,
dated of even date herewith, in the original principal amount of $50,000.00,
bearing interest and being payable as therein provided (such promissory note
being referred to as the "Note");
WHEREAS, as consideration for, and in order to induce Secured Party to
make, the loan to EII evidenced by the Note, Secured Party has required that
Debtor execute this Agreement, pursuant to which Debtor creates a security
interest in favor of Secured Party, which security interest encumbers certain
Collateral (hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing premises, and in the
further consideration of the sum of Ten and No/100ths Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged and confessed, Debtor and Secured Party hereby agree as follows:
ARTICLE I CREATION OF SECURITY INTEREST
1. CREATION OF SECURITY INTEREST: For valuable consideration, and in
order to secure prompt payment to Secured Party of the amounts due and owing
under the Note, and to secure the performance by Debtor of all of the
obligations, covenants and duties described in this Agreement, Debtor hereby
pledges, grants a security interest in, mortgages, assigns, transfers, delivers,
and sets over in favor of Secured Party a security interest in the Collateral.
2. COLLATERAL. As used in this Security Agreement, the term
"Collateral" shall mean and refer to only the following assets of Debtor: (i)
all of the furniture, fixtures, equipment, machinery, and other machines and
equipment of Debtor (the "Assets"); and (ii) any proceeds, products, rents,
issues, or profits arising out of any of the foregoing.
3. OBLIGATIONS SECURED: This Agreement is executed for the benefit of
Secured Party to secure the prompt and full payment and performance by Debtor of
the following (collectively, the "Obligations"):
(a) All obligations of Debtor under the Note; and
(d) The performance of all obligations, liabilities, covenants, and
duties of Debtor now or hereafter arising under or in connection with
this Agreement, or any other instrument heretofore, simultaneously or
hereafter executed in connection with and as security for the Note or
any other indebtedness of Debtor to Secured Party.
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ARTICLE II COVENANTS, REPRESENTATIONS, AND WARRANTIES
In order to induce Secured Party to enter into this Agreement, Debtor
covenants, represents, and warrants to Secured Party (which covenants,
representations, and warranties shall survive the delivery of this Agreement)
that as of the date hereof and at all times when the Obligations remain
outstanding that:
1. PAYMENT OBLIGATIONS OF DEBTOR:
(a) Debtor shall pay or perform, or cause to be paid or
performed to or for the benefit of Secured Party any sum or sums due or
which may become due pursuant to the Obligations and any and all
covenants of Debtor that form part of the Obligations.
(b) Debtor shall account fully and faithfully to Secured Party
for proceeds from disposition of the Collateral in any manner requested
by Secured Party.
(c) Debtor will pay to Secured Party all reasonable expenses
(including expenses for legal services of every kind) of, or incidental
to the enforcement of, any of the provisions of this Agreement or
incidental to the enforcement of the Obligations.
2. PRIORITY OF LIEN: Except as set forth herein in this Agreement,
Debtor is the owner and holder of all the Collateral free from any adverse
claim, security interest, encumbrance, or other right, title or interest of any
person other than Secured Party; and Debtor has full power and lawful authority
to sell and assign the Collateral and to grant to Secured Party the security
interest as herein provided, and the execution, delivery, and performance hereof
is not in contravention of any indenture, agreement or undertaking to which
Debtor is a party or by which it is bound; and Debtor shall defend, preserve and
protect the Collateral against all claims and demands of all persons at any time
claiming the same or any interest therein. Debtor shall keep the Collateral,
including the proceeds thereof, free from unpaid charges, including taxes, and
from liens, encumbrances and security interests other than that of Secured
Party. Debtor authorizes Secured Party to file, in jurisdictions where this
authorization will be given effect, a financing statement signed only by Secured
Party covering the Collateral; and at the request of Secured Party, Debtor will
join Secured Party in executing one or more financing statements, pursuant to
the Uniform Commercial Code, in form satisfactory to Secured Party, and will pay
the cost of filing the same or filing or recording this Security Agreement in
all public offices at any time and from time to time whenever filing or
recording of any such financing statement or of this Security Agreement is
deemed by Secured Party to be necessary or desirable, it being further
stipulated in this regard that Secured Party may also at any time or times sign
any counterpart of this Security Agreement signed by Debtor and file same as a
financing statement if Secured Party shall elect so to do.
3. THIRD LIEN. Notwithstanding anything in this Agreement to the
Contrary, Secured Party and Debtor acknowledge and agree that the liens created
by this Agreement securing payment of the Note are subordinate, inferior and
junior in rank to the Prior Liens (hereafter defined) for all purposes and that
the terms, conditions, and provisions of this Agreement are expressly subject to
and subordinate to the Prior Agreements (hereinafter defined). For the purposes
of this Agreement, the term "Prior Liens" shall mean and refer to all liens,
security interests, mortgages, and the like securing payment of the obligations
and indebtedness of Debtor to (i) Stillwater National Bank, or (ii) T.W.
Consulting, Inc. (f/k/a Aeroweld, Inc. ) (whether now in existence or
hereinafter created or advanced), and the term "Prior Agreements" shall mean and
refer to all promissory notes, security agreements, mortgages, financing
statements, loan agreements, and all other instruments and agreements evidencing
or creating the Prior Liens and/or the indebtedness to both Stillwater National
Bank and Aeroweld, Inc. secured by the Prior Liens.
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4. TAXES: If any taxes or governmental assessments of any kind or
character shall be levied upon or against the Collateral or the Obligations
secured hereby, the same shall be promptly paid before delinquency by Debtor,
unless Debtor, in good faith, is contesting such taxes or assessments, and if
any of such taxes or governmental assessments are not paid by Debtor prior to
delinquency thereof, Secured Party may at its option (without any obligation so
to do) pay such taxes or assessments and any interest, costs or penalties in
connection therewith, or any part thereof. In the event Secured Party shall pay
any such taxes, assessments, interests, costs, penalties, or expenses incident
to or in connection with the collection of the Collateral or protection or
enforcement of the Collateral, Debtor, upon demand of Secured Party, shall pay
to Secured Party the full amount thereof with interest at the maximum rate
permitted by applicable law from their respective dates of payment by Secured
Party until repaid to Secured Party; and so long as Secured Party shall be
entitled to any such payment, this Security Agreement shall operate as security
therefor as fully and to the same extent as it operates as security for payment
of the other Obligations secured hereunder, and for the enforcement of such
repayment Secured Party shall have every right and remedy provided for
enforcement of payment of the Obligations secured hereunder.
5. FURTHER ASSURANCES: Debtor will execute, deliver, and file such
financing statements, continuation statements, security agreements and other
documents as reasonably may be necessary from time to time to confirm, perfect,
and preserve the security interest created hereby, and in addition, Debtor
hereby authorizes Secured Party to execute on Debtor's behalf, deliver and file
such financing statements, continuation statements, security agreements and
other documents without Debtor's signature. At Secured Party's option, a
photocopy of this Security Agreement may be filed as a financing statement.
6. CHANGE OF ADDRESS: Debtor shall promptly notify Secured Party in
writing of any addition to, change in or discontinuance of: (a) its address as
shown herein; and (b) the location of its principal place of business as set
forth in this Agreement.
7. SALE OF COLLATERAL: Debtor will not sell, mortgage, pledge,
hypothecate, transfer or dispose of any portion of the Collateral unless Secured
Party consents to such sale, transfer or disposition in writing, in advance.
8. CARE OF COLLATERAL. Debtor shall use its best efforts to prevent any
occurrence or event which would impair the value of the Collateral.
9. INSURANCE. Debtor will, at its sole cost and expense, keep the
Collateral insured in such company, and in such amounts, and against such risks
as Secured Party shall reasonably require.
ARTICLE III DEFAULT
1. EVENTS OF DEFAULT: The happening of any of the following events or
conditions shall be referred to as "Event of Default":
(a) Debtor commits an event of default under the Note or if an
event of default under the Note otherwise occurs (after the expiration
any applicable notice and cure period set forth in the Note); or
(b) Failure or refusal of Debtor to perform or observe any of
the obligations, covenants, terms or provisions contained or referred
to in this Agreement, which failure or refusal has not been cured by
Debtor within thirty (30) days after the date Secured Party provides
written notice of such failure to Debtor; or
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(c) Any warranty, representation, or statement contained in
this Agreement proves to have been false in a material respect when
made or furnished, and is not cured by Debtor within thirty (30) days
after the date Secured Party provides written notice of such breach to
Debtor; or
(d) A judgment is entered, or injunction, order, attachment,
garnishment, or any other process is issued against any of the
Collateral and Debtor's obligations thereunder go unsatisfied for over
ninety (90) days; or
(e) Debtor is voluntarily adjudicated bankrupt or insolvent,
has a petition filed against it seeking relief under the bankruptcy,
arrangement, reorganization, or other debtor relief laws of the United
States or any state or other competent jurisdiction, has a court of
competent jurisdiction enter an order, judgment, or decree appointing,
without the Secured Party's consent, a receiver or a trustee for all or
any part of Debtor's property (including, without limitation, the
Collateral), and such petition, order, judgment, or decree shall not be
and remain discharged or stayed within the period of sixty (60) days
after its entry, seeks, consents to, or does not contest the
appointment of a receiver or a trustee for itself or for all or any
part of its property, files a petition seeking relief under the
bankruptcy, arrangement, reorganization, or other debtor relief laws of
the United States or any state or any other competent jurisdiction,
makes a general assignment for the benefit of its creditors, admits in
writing its inability to pay its debts as they mature, or dissolves or
terminates its existence.
2. SECURED PARTY'S RIGHTS AND REMEDIES: Upon the occurrence of an Event
of Default, and at any time thereafter, Secured Party may declare all
Obligations secured hereby immediately due and payable and shall have the rights
and remedies of a Secured Party under the Uniform Commercial Code of the State
of Oklahoma, including without limitation thereto, the right to sell, at public
or private sale or sales, or otherwise dispose of or utilize the Collateral and
any part or parts thereof in any manner authorized or permitted under the
Uniform Commercial Code after default by a debtor, at such prices and on such
terms as Secured Party may deem reasonable under the circumstances. Secured
Party shall have the right to take possession of all or any part of the
Collateral and of all books, records, papers and documents in Debtor's
possession or control relating to the Collateral which are not already in
Secured Party's possession, and for such purpose may enter upon any premises
upon which any of the Collateral or any security therefor or any of said books,
records, papers and documents are situated and remove the same therefrom. Unless
the Collateral threatens to decline in value or is of a type customarily sold on
a recognized market, Secured Party will send Debtor reasonable notice of the
time and place of any public sale thereof or of the time after which any private
sale or other disposition thereof is to be made. The requirement of sending
reasonable notice shall be met if such notice is mailed, postage prepaid, to
Debtor at the address designated on the first page of this Agreement (or at such
other address as Debtor shall have designated at its address for receipt of
notices hereunder in a writing duly received by Secured Party) at least ten (10)
days before the time of the sale or disposition. Expenses of retaking, holding,
selling or the like shall include Secured Party's reasonable attorneys' fees and
legal expenses, and Debtor agrees to pay such expenses, plus interest thereon at
the maximum non-usurious rate permitted by applicable law from the date such
expenses are incurred until repaid.
3. APPLICATION OF PROCEEDS; DEFICIENCY: The proceeds of any sale or
other disposition of the Collateral and all sums received or collected by
Secured Party from or on account of the Collateral shall be applied by Secured
Party in the manner set forth in the Oklahoma Uniform Commercial Code, as
amended from time to time. The application of proceeds or collections of the
Collateral may be made in payment of any sums outstanding in such order or
manner as Secured Party may determine in its sole discretion. Debtor shall
remain personally liable to Secured Party for any deficiencies, liabilities,
indebtedness, advances, costs, charges, expenses, and damages, together with
interest thereon, remaining unpaid with respect to the Obligations and/or an
Event of Default, and shall pay the same immediately to Secured Party.
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ARTICLE IV TERM; PARTIAL RELEASES
This Agreement and the liens created hereby is a binding and continuing
agreement, and shall continue in full force and effect all amounts owing under
the Note have been repaid in full. However, it is expressly understood and
agreed by Secured Party that, as payments are made under the Note, Debtor shall
have the right to obtain partial releases, from time to time, of all liens
securing the payment of the Note on the following basis: as the total
outstanding principal balance of all of the indebtedness represented by the Note
owing as of the Effective Date is reduced by repayment, Debtor shall have the
right, from time to time, to release a corresponding proportionate part of the
Collateral from the liens and security interests created or evidenced by this
Agreement. By way of example, assume that, as of the Effective Date, the
aggregate outstanding amount of all indebtedness owing under the Note is
$50,000. Then assume that EAI makes a payment under one or more of the Note that
causes the aggregate principal amount to be reduced to $45,000 (in other words,
this would result in a 10% reduction in principal amount from the aggregate
principal balance as of the Effective Date). As such, Debtor would have the
right in this case to release 10% of the Collateral (determined by fair market
value) from the liens created or evidenced by this Agreement. In such case,
Debtor shall be entitled to file such releases and other documents as Debtor may
deem reasonably necessary or advisable, from time to time to evidence such
partial releases, and in addition, Secured Party hereby authorizes Debtor to
execute on Secured Party's behalf (as necessary), deliver and file such releases
without Secured Party's signature.
ARTICLE V MISCELLANEOUS
1. BINDING EFFECT: This Agreement shall be binding upon Debtor and its
successors and assigns, shall inure to the benefit of Secured Party and Debtor,
and their respective successors and assigns.
2. SEVERABILITY: Any clause, sentence, or provision of this Agreement
held by a court of competent jurisdiction to be invalid, illegal, or ineffective
shall not impair, invalidate, or nullify the remainder of this Agreement, but
the effect thereof shall be confined to the clause, sentence or provision so
held to be invalid, illegal, or ineffective.
3. WAIVER; RELIANCE; SUBROGATION: Debtor waives any and all notice of
acceptance of this Agreement; and waives any defense arising by reason of any
cessation from any cause whatsoever of the liability of Debtor or any other
person. All dealings between Debtor and Secured Party, whether or not resulting
in the creation of indebtedness, shall conclusively be presumed to have been had
or consummated in reliance upon this Agreement. Until all Obligations shall have
been performed in full, Debtor shall have no rights of subrogation, and Debtor
waives any benefit of and any right to participate in any Collateral or security
whatsoever now or hereafter held by Secured Party.
4. CUMULATIVE RIGHTS: The rights, powers, and remedies of Secured Party
hereunder shall be in addition to all rights, powers, and remedies given by
statute or rule of law or available in equity; and furthermore, regardless of
whether the Texas Uniform Commercial Code is in effect in the jurisdiction where
such rights, powers, and remedies are asserted, Secured Party shall have the
rights, powers, and remedies of a secured party under Chapter 9 of the Texas
Uniform Commercial Code, as amended from time to time. No forbearance, failure,
or delay by Secured Party in exercising any right, power, or remedy shall be
deemed a waiver thereof or preclude any other or further exercise thereof; and
no single or partial exercise of any right, power, or remedy shall be deemed a
waiver or preclude any other or further exercise thereof; or the exercise of any
other right, power, or remedy.
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5. GOVERNING LAW: This Agreement has been made in and shall be governed
by the laws of the State of Texas in all respects, including matters of
construction, validity, enforcement and performance, and shall not be amended
(nor shall any of its terms be waived) except in writing duly signed by Secured
Party and by Debtor. Except as the context may otherwise require, any term used
herein that is defined in Articles 1 or 9 of the Texas Uniform Commercial Code
shall have the meaning given therein.
6. COUNTERPARTS: This Agreement may be executed in any number of
counterparts, each of which shall constitute an original.
7. NOTICE: Debtor agrees and stipulates that written notice mailed to
Debtor thirty (30) days prior to the date of a foreclosure sale of the
Collateral or any portion thereof shall constitute reasonable notice. Except as
otherwise required by applicable law, all notices or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be considered as properly given if mailed first class United States
Mail, postage prepaid, registered or certified with return receipt requested, or
by delivering the same in person to the intended addressee or by prepaid
telegram. Except as otherwise required by applicable law, any notice so sent by
United States Mail, as aforesaid, shall be deemed received, if not actually
received previously, on the third day after deposit in the United States Mail.
For purposes of notice, the addresses of the parties shall be as set forth
herein; provided, however, that either party shall have the right to change its
address for notice hereunder to any other location within the United States by
the giving of thirty (30) days notice to the other party in the manner set forth
above.
8. ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENT. This Agreement
sets forth the entire understanding of the parties with respect to the subject
matter hereof. Any previous agreements or understandings (whether oral or
written) between the parties regarding the subject matter hereof are merged into
and superseded by this Agreement, including, without limitation, the Prior
Security Agreement, which is deemed to be terminated and canceled in its
entirety, is no longer of any force or legal effect, and the liens and security
interests created thereby terminated, released and relinquished for all
purposes. Debtor is hereby authorized to file such termination statements,
releases and other instruments evidencing the termination of the liens and
security interests created or evidenced by the Prior Security Agreement as
Debtor shall deem necessary or advisable without the signature of Secured Party.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
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WITNESS THE EXECUTION HEREOF, to be effective as of the Effective Date.
DEBTOR:
EXCALIBUR AEROSPACE, INC., an
Oklahoma corporation
By: /S/ Xxxxxxx X.X. Xxxxxx
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Xxxxxxx X.X. Xxxxxx, President
EXCALIBUR SERVICES, INC.,
an Oklahoma corporation
By: /S/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx, Vice Presiden
EXCALIBUR STEEL, INC.,
an Oklahoma corporation
By: /S/ Xxxxxxx X.X. Xxxxxx
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Xxxxxxx X.X. Xxxxxx, President
XXXXXXX MACHINE WORKS, INC.,
a Texas corporation
By: /S/ Xxxxxxx X.X. Xxxxxx
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Xxxxxxx X.X. Xxxxxx, President
SECURED PARTY:
/S/ XXXXX X. XXXXX
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XXXXX X. XXXXX
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