EXHIBIT 10.43
EXHIBIT B
SECURITY AGREEMENT
This "Security Agreement" is made and entered into this 29 day of
November, 1995, among Innovative Accessories, Inc. ("Debtor"), Xxxxx X. and
Xxxxxxx Xxxx ("Stockholders") and Xxxx International Holdings, Inc. ("Secured
Party").
RECITALS
WHEREAS, Debtor has borrowed $1,250,000 from Secured Party and has
made, executed and delivered a promissory note, of even date hereof, in favor of
Secured Party in the principal amount of $1,250,000 (the "Promissory Note"); and
WHEREAS, to induce Secured Party to lend such amount, Debtor has agreed
to grant Secured Party a security interest in 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 Secured Party
a security interest in all of Debtor's right, title and interest in and to the
collateral described in Section 2 hereinbelow (the "Collateral") in order to
secure the payment and performance of the obligations of Debtor to Secured Party
described in Section 3 hereinbelow (the "Security Interest").
2. Collateral. The Collateral under this Security Agreement is all of
Debtor's assets and property, real and personal, tangible and intangible,
including without limitation the real property specified on Schedule 1 hereto,
the equipment specified on Schedule 2 hereto, the patents specified on Schedule
3 hereto (which shall be conditionally assigned to Secured Party), all
inventory, fixtures, supplies, tools, jigs, molds, know-how, processes, bank
accounts, receivables, prepaid items, deposits, designs, blueprints, trade
names, trademarks, other intellectual property, in each case of every kind and
manner whatsoever, and the capital stock of the Stockholders specified on
Schedule 4 hereto.
3. Secured Obligations of Debtor. The Collateral secures and shall
hereafter secure (i) the due and punctual payment by Debtor to Secured Party of
all amounts now or hereafter owed to Secured Party 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 Secured Party of
every kind and character, 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 Note (upon execution and delivery
thereof), this Security Agreement, or the Marketing Agreement, of even date
herewith (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 Secured
Party for any and all amounts expended by Secured Party 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.
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; the security interest hereunder in the Collateral is a
first, prior and perfected security interest; that there are no
security interests, liens or encumbrances, or adverse claims of title
to, or any other interest whatsoever in, the Collateral or any portion
thereof except the interest of Secured Party 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;
(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 Secured Party has not completed foreclosure
proceedings hereunder, Debtor will defend the Collateral against all
claims and demands of all persons (other than Secured Party) at any
time claiming the same or any interest therein;
(b) Debtor will not, without the prior written consent of
Secured Party, 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 Secured Party;
(c) Debtor will, within five (5) business days of a request by
Secured Party, procure or execute and deliver any document (including,
without limitation, subordination agreements) give any notices, execute
and file any financing statements or other documents, all in form and
substance satisfactory to Secured Party, xxxx any chattel paper or
other instrument or document, deliver any chattel paper or instruments
to Secured Party and take any other actions which are necessary or, in
the judgment of Secured Party, desirable to perfect or continue the
perfection and priority of Secured Party's 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, Secured
Party is hereby authorized to sign, deliver and/or file any such
documents, notices, financing statements or other writings, xxxx any
chattel paper or instruments 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
Secured Party, in any way hypothecate or create or permit to exist any
lien, security interest or encumbrance on or other interest in any of
its properties, assets or rights, including the Collateral other than
the interest of the Secured Party created by this Security Agreement,
nor will Debtor sell, transfer, assign, exchange, lease, or otherwise
dispose of the Collateral. 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 Secured
Party 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
Secured Party's benefit. Debtor will, at Secured Party's request,
transfer such proceeds to Secured Party in kind;
(e) Debtor will not enter into, modify or amend any existing
or future contracts or agreements relating to the sale, lease or
disposition of the Collateral or any part thereof without the prior
written consent of Secured Party. Upon request of Secured Party, Debtor
will provide Secured Party with copies of all existing and hereafter
created contracts and agreements relating to the Collateral or any part
thereof and of all amendments and modifications thereto;
(f) 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, so long as
Debtor posts an appropriate bond or takes other actions reasonably
satisfactory to Secured Party that will ensure that Secured Party's
rights hereunder, including its first priority lien in the Collateral,
are not modified or diminished;
(g) 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, and will
comply with all laws, statutes and regulations pertaining to the use or
ownership of the Collateral.
(h) 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 reasonably satisfactory to Secured Party.
(i) Debtor will, upon Secured Party's request, promptly notify
Secured Party in writing of any event, or change of law, regulation,
business practice, or business condition, of which it is aware, which
may materially and adversely affect Debtor's ability to pay or perform
any obligations secured hereunder; provided, however, that nothing
contained in this subsection (i) shall require Debtor to disclose any
proprietary or confidential information which could adversely impact
Debtor's competitive position;
(j) Secured Party shall have the right at any time to make any
payments and do any other acts Secured Party may reasonably deem
necessary to protect its security interest in the Collateral,
including, without limitation, the rights to pay, purchase, contest or
compromise any encumbrance, charge or lien which in the judgment of
Secured Party appears to cover or include the Collateral, and appear in
and defend any action or proceeding purporting to affect its security
interest in and/or the value of the Collateral, and in exercising any
such powers or authority, the right to pay all expenses incurred in
connection therewith, including reasonable attorneys' fees. Debtor
hereby agrees to reimburse Secured Party for all reasonable payments
made and reasonable expenses incurred, which amounts shall be secured
under this Security Agreement, and agrees it shall be bound by any
payment made or act taken by Secured Party hereunder. Secured Party
shall have no obligation to make any of the foregoing payments or
perform any of the foregoing acts.
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
Secured Party 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 Secured
Party to Debtor of such failure;
(b) Debtor makes or has made or furnishes or has
furnished any warranty, representation or statement to Secured
Party as set forth in with this Security Agreement, 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 Secured Party;
(c) The Collateral, or any substantial portion
thereof, is destroyed or damaged and for which the Secured
Party 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 Secured Party's lien hereunder) or take other
actions reasonably satisfactory to Secured Party that will
ensure that Secured Party's rights hereunder, including its
first priority lien in the Collateral, are not modified or
diminished;
(e) Debtor 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
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;
(f) Debtor fails to obtain the dismissal, within
thirty (30) 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,
Secured Party 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 Secured Party in the enforcement of this
Security Agreement or in connection with Debtor's redemption
of the Collateral;
(c) Require Debtor to assemble the Collateral or any
part thereof (as such term is used by the relevant Uniform
Commercial Code(s) and/or applied in cases thereunder) and
make it available at one or more places as Secured Party may
designate, and to deliver possession of the Collateral or any
part thereof to Secured Party, which delivery and assembly
shall be accomplished by execution of document of title and
Secured Party shall have full right to enter upon any or all
of Debtor's premises and property to exercise Secured Party's
rights hereunder;
(d) Use, manage, operate and control the Collateral
to preserve the Collateral or its value, including, without
limitation, the rights to make repairs, replacements,
alterations, additions and improvements to the Collateral and
to dispose of all or any portion of the Collateral;
(e) Use, in connection with any assembly, use or
disposition of the Collateral, copyright, patent or technical
knowledge or process used or utilized by Debtor;
(f) Enforce one or more remedies hereunder,
successively or concurrently, and such action shall not
operate to estop or prevent Secured Party 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 Secured Party upon demand for, or
Secured Party may apply any proceeds of Collateral to, the
costs and expenses (including reasonable attorneys' fees,
transfer taxes and any other charges) incurred by Secured
Party in connection with any sale, disposition or retention of
any Collateral hereunder;
(g) In connection with any public or private sale
under the applicable Uniform Commercial Code, Secured Party
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 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.
Secured Party 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;
(h) 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
(i) In the event Secured Party recovers possession of
all or any part of the Collateral pursuant to a writ of
possession or other judicial process, whether prejudgment or
otherwise, Secured Party 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,
Secured Party 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 Secured Party of such judicial action,
and Debtor further consents to the exoneration of any bond
which Secured Party 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 agree that
any action regarding this Security Agreement shall be venued solely in
any federal district or state court in the State of Minnesota. The
parties agree to submit to the personal jurisdiction of any such court
and hereby waive any objection thereto. This Security Agreement
constitutes the entire agreement between the parties and supersedes all
previous understandings, commitments or representations concerning the
subject matter. 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:
TO SECURED PARTY:
If by mail: Xxxx International Holdings, Inc.
000 Xxxx Xxxxxxxxx
Xxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxx
If by Fax: (000) 000-0000
Attention: Xxx Xxxxxx
TO DEBTOR:
If by mail: Innovative Accessories, Inc.
0000 Xxxx X-00 Xxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx, President
If by Fax: (000) 000-0000
Attention: Xxxxx X. Xxxx, President
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 by giving notice thereof in
conformity with this Section 7.2.
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 Secured Party, which may be withheld in its
sole discretion, shall be null and void and of no force and effect.
Secured Party 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 Secured Party shall constitute a
waiver by Secured Party of such right. No waiver by Secured Party 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 Time of the Essence. Time is of the essence of each
provision of this Security Agreement of which time is an element.
7.9 Definitions. All terms not defined herein shall have the
meaning set forth in the applicable Uniform Commercial Code, except
where the context otherwise requires.
7.10 Survival of Provisions. All representations, warranties
and covenants of Debtor contained herein shall survive the execution
and delivery of this Security Agreement, and shall terminate only upon
the full and final payment and performance by Debtor of its
indebtedness and obligations secured hereunder.
7.11 Power of Attorney. Debtor hereby appoints and constitutes
Secured Party 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, (iii) executing, delivering, marking and/or filing any
documents or instruments which Secured Party may file pursuant to the
last sentence of Section 5(c) hereof; and (iv) making any payments or
taking any acts under section 5(j) hereof. Secured Party's authority
hereunder shall include, without limitation, the authority to endorse
and negotiate, for Secured Party's own account, any checks or
instruments in the name of Debtor, to execute and receive any
certificate of ownership or any document, to transfer title to any item
of Collateral, and to take any other actions necessary or incident to
the powers granted to Secured Party in this Security Agreement. This
power of attorney is coupled with an interest and is irrevocable by
Debtor.
7.12 Authority of the Secured Party. Secured Party shall have
and be entitled to exercise all powers hereunder which are specifically
delegated to Secured Party by the terms hereof, together with such
powers as are reasonably incident thereto. Secured Party may perform
any of its duties hereunder or in connection with the Collateral by or
through agents or employees and shall be entitled to retain counsel and
to act in reliance upon the advice of counsel concerning all such
matters. Neither Secured Party nor any director, officer, employee,
attorney or agent of Secured Party shall be liable to Debtor for any
action taken or omitted to be taken by it or them hereunder, except for
its or their own recklessness, gross negligence or willful misconduct;
nor shall Secured Party be responsible for the validity, effectiveness
or sufficiency hereof or of any document or security furnished pursuant
hereto, except for the release of the Security documents. Secured
Party, and its directors, officers, employees, attorneys or agents,
shall be entitled to rely on any communication, instrument or document
believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons. Debtor agrees to
indemnify and hold harmless Secured Party and/or any such other person
from and against any and all costs, expenses (including reasonable
attorneys' fees) claims or liability incurred by Secured Party or such
person hereunder, unless such claim or liability shall be due to
recklessness, willful misconduct or gross negligence on the part of
Secured Party or such person.
7.13 Termination of Agreement. This Security Agreement shall
terminate upon full and final payment and performance of all the
Obligations. At such time, Secured Party shall release its interest to
Debtor in all of the Collateral hereunder which has not been sold,
disposed of, retained or applied by Secured Party in accordance with
the terms hereof. Such release shall be without warranty by or recourse
to Secured Party, except that Secured Party 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.
7.14 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.
"SECURED PARTY" "DEBTOR"
XXXX INTERNATIONAL HOLDINGS, INC. INNOVATIVE ACCESSORIES,
INC.
By: /s/ Xxx X. Xxxxxx By: /s/ Xxxxx X. Xxxx
Its: CFO Its: PRES
