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EXHIBIT 4.20
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of January 21, 1997, between Striker
Industries, Inc., a corporation duly organized and validly existing under the
laws of the State of Delaware, with an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company"), each of the Subsidiaries of the Company
identified under the caption "Subsidiary Guarantors" on the signature pages
hereof (each, a "Subsidiary Guarantor") with an address of ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; and BlueStone Capital Partners, L.P., a New York
limited partnership, with an address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Agent"), as agent for the holders (the "Holders") of the Company's
Original Issue Discount Promissory Notes issued, or to be issued, in the
Offering (the "Notes": terms used and not otherwise defined herein have the
meanings ascribed to them in the Notes);
WHEREAS, the Holders have each extended credit or will extend credit to
the Company represented by separate Notes of identical priority which were (or
are to be) executed by the Company in favor of each Holder pursuant to an
offering (the "Offering") of units (the "Units") of the Company each consisting
of Notes in the face amount of $105,000 and warrants to purchase 15,000 shares
of the Company's common stock, $.20 par value per share;
WHEREAS, the Subsidiary Guarantors have jointly and severally guaranteed
the Company's obligations under the Notes to the Holders pursuant to a Guarantee
Agreement dated December 20, 1996;
WHEREAS, the Holders have entered into Subscription Agreements in
connection with the Offering, pursuant to which, among other things, they have
appointed the Agent to act as agent under this Security Agreement for the
benefit of all Holders to secure the obligations of the Company to the Holders
under their respective Notes;
WHEREAS, the Company is required to deliver this Security Agreement under
the Notes and Subscription Agreements;
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of a Security Interest.
(a) To secure the prompt payment, observance and performance in full
of each and every Guaranteed Obligation (as defined in the Guarantee Agreement),
each Subsidiary Guarantor hereby grants to the Agent a continuing security
interest in, and lien upon, the Collateral (as defined in Section 2) which shall
terminate on full payment of all amounts owed under the Notes.
(b) The Company and Agent acknowledge and agree that the lien created
hereby shall be subordinate to the lien in favor of Finova Capital Corporation
("Finova") under
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that certain Security Agreement dated April 25, 1995 between Finova and the
Company and certain of the Subsidiary Guarantors, and that the security
interest granted hereby is intended to be a second security interest junior in
priority to that of Finova. (The lien in favor of Finova is sometimes referred
to as the "Permitted Liens.")
2. Collateral.
(a) The collateral covered by this Agreement (the "Collateral")
consists of all property (tangible or intangible) of every kind and nature,
wherever located and whether now owned or hereafter owned or acquired any
Subsidiary Guarantor, whether or not affixed to realty, and all Proceeds and
Products thereof in any form, in all parts, accessories, attachments, special
tools, additions, replacements, substitutions and accessions thereto or
therefor, and in all increases or profits received therefor.
(b) Any and all Collateral described or referred to in this Agreement
which is hereafter acquired shall, and without any further conveyance,
assignment or act on the part of the Company, any Subsidiary Guarantor, or the
Secured Party, become and be subject to the security interests created hereby
as fully and completely as though specifically described herein.
3. Representations and Warranties. The Company and each Subsidiary
Guarantor, jointly and severally, represents and warrants, that:
(a) The Company or a Subsidiary Guarantor owns the Collateral free
and clear of any Lien except for Permitted Liens.
(b) The Company and each Subsidiary Guarantor has all necessary
corporate power and authority and has taken all corporate action necessary to
execute, deliver and perform this Agreement and Operative Documents to which it
is a party and to encumber and grant a security interest in the Collateral.
(c) There is no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral on file in any
recording office except as may have been filed in favor of holders of Permitted
Liens.
(d) This Agreement creates a valid security interest of the Agent
in the Collateral securing payment of the Obligations. Upon the filing of
the financing statements and the other instruments similar in effect, the Agent
will have a valid and perfected lien on and security interest in the Collateral
senior to all Liens other than the Permitted Liens.
(e) No consent, authorization, approval or other action by, and no
notice to or filing with, any governmental authority, regulatory body, lessor,
franchisor or other person or entity is required for the grant by the Company
and any Subsidiary Guarantor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by the
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Company or Subsidiary Guarantor, or for the perfection or exercise by the Agent
of its rights and remedies hereunder, except filings of financing documents.
(f) Neither the Company nor any Subsidiary Guarantor transacts any
part of its business under any trade names, division names, assumed names
or other name, except for its name set forth in the preamble hereto; the
Company's and each Subsidiary's Guarantor's principal business address and
chief executive office is as set forth in the preamble; and, with respect to
the Collateral owned by any Subsidiary Guarantor, the records concerning the
Collateral are kept at the Company's facility in Stephens, Arkansas.
(g) Each Account, General Intangible and Chattel Paper constituting
Collateral is genuine and enforceable in accordance with its terms against the
party obligated to pay it (the "Account Company"), and, to the best knowledge of
Company and the Subsidiary Guarantors, no Account Company has any defense,
setoff, claim or counterclaim against Company or any Subsidiary Guarantor which
can be asserted against the Agent, whether in any proceeding to enforce the
Collateral or otherwise.
(h) Each Instrument and each Document constituting Collateral is
genuine and in all respects what it purports to be.
4. Company's and Subsidiary Guarantors' Covenants. The Company and each
of the Subsidiary Guarantors agrees and covenants that:
(a) The Collateral will be used solely for business purposes of the
Company and will remain in the possession or under the control of the Company
(sale or replacement in the ordinary course excepted) and will not be used for
any unlawful purpose. The Collateral will not be misused, abused, wasted or
allowed to deteriorate (ordinary wear and tear excepted). The Company will keep
the Collateral, as appropriate and applicable, in good condition and repair
(ordinary wear and tear excepted), and will clean, shelter, and otherwise deal
with the Collateral in all such ways as are considered good practice by owners
of like property.
(b) The Company and each Subsidiary Guarantor has executed and will
promptly file with the appropriate governmental authorities, or deliver to the
Agent for filing, UCC-1 Financing Statements with respect to the Collateral.
The Company and each Subsidiary Guarantor shall, at no cost to the Agent,
execute, acknowledge and deliver all such other documents and instruments as
the Agent reasonably deems necessary to create, perfect and continue the
security interest in the Collateral contemplated hereby. The Company and each
Subsidiary Guarantor will pay all costs of title searches and filing of
financing statements, assignments or other documents in all public offices
reasonably requested by the Agent, and will not, without the prior written
consent of the Agent, file or authorize or permit to be filed in any public
office any financing statement, assignment or other document naming the Company
or each Subsidiary Guarantor as Debtor and not naming the Agent, as agent for
the Holders, as secured party, except for continuations of any Permitted Lien.
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(c) Each of the Company and each Subsidiary Guarantor will defend the
Collateral will defend the Collateral against the claims and demands of all
other parties, will keep the Collateral free from all security interests or
other encumbrances other than Permitted Liens; and will not sell, transfer,
lease, assign, deliver or otherwise dispose of any Collateral or any interest
therein without the prior written consent of the Agent, except that the Company
and the Subsidiary Guarantor may sell or lease Inventory in the ordinary course
of the Company's business and as otherwise permitted under the Subscription
Agreement.
(d) The Company will, at the Agent's request, will, or will cause the
appropriate Subsidiary Guarantor to, ▇▇▇▇ any and all books and records to
indicate the security interest created hereby.
(e) The Company and each Subsidiary Guarantor will notify the Agent
promptly in writing of any change in the location of the Collateral, change in
business address or any change in the address at which records concerning the
Collateral are kept and any change in the Company's name, identity or corporate
or other structure.
(f) The Company and each Subsidiary Guarantor will prevent the
Collateral or any part thereof from being or becoming an accession to other
goods not covered by this Agreement.
(g) The Company and each Subsidiary Guarantor will maintain
insurance with responsible insurance companies (and with deductibles)
satisfactory to Agent covering the inventory and Equipment of the Company or
such Subsidiary Guarantor, in such amounts as is usually carried by companies
engaged in similar businesses and in any event not less than the Agent may from
time to time reasonably require, and deliver to the Agent copies of such
insurance policies (and all renewals thereof) together with lender's loss
payable endorsements naming Agent as a secured party executed by the
insurer(s), such policies to provide that coverage may not be modified or
terminated without prior notice to Agent.
(h) The Company and each Subsidiary Guarantor, jointly and severally,
shall pay all reasonable expenses, including reasonable attorneys' fees and
costs, incurred by the Agent in the preservation, realization, enforcement or
exercise of any of the Agent's rights under this Agreement.
5. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(i) A default in the performance, or a breach of any of the
covenants of the Company or any Subsidiary Guarantor contained in this
Agreement, or of the Company in any Operative Agreement, and continuance of
such default or breach for a period of 30 days after receipt of notice from the
Holder as to such breach or after the Company had or should have had knowledge
of such breach.
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(ii) Any representation, warranty or certification made by the
Company or any Subsidiary Guarantor pursuant to this Agreement shall prove to
have been false or misleading as of the date made or thereafter in any material
respect.
6. Remedies on Default. Upon the occurrence of an Event of Default, the
Agent, for the benefit of the Holders, shall have all rights, privileges,
powers and remedies provided an Agent under the UCC and any other applicable
law and such additional rights, privileges, powers and remedies as are set
forth herein and in the Subscription Agreement, Note and the other Operative
Agreements. Without limiting the foregoing, upon the existence or occurrence of
any Acceleration:
(a) The Agent may require the Company or any Subsidiary Guarantors to
assemble the Collateral and make it available to the Agent at a place or places
designated by the Agent, and the Agent may use and operate the Collateral. At
any time following the occurrence of an Acceleration and during the
continuation thereof, the Agent shall have full power, in its own name or that
of Company or a Subsidiary Guarantor, as the case may be, to collect, endorse,
compromise, settle, sell or otherwise deal with any or all the Collateral or
Proceeds thereof in a commercially reasonable manner.
(b) The Agent, in a commercially reasonable manner, may sell, lease
or otherwise dispose of and deliver any or all Collateral at public or private
sale, for cash, upon credit or otherwise, at such prices and upon such terms as
the Agent deems advisable in its sole discretion. Any requirement of reasonable
notice shall be met if such notice is mailed postage prepaid to the Agent at
its address set forth herein at least ten days before the time of sale or other
disposition. The Agent may be the purchaser at any such sale, if it is public,
and in such event the Agent shall have all rights of a good faith, bona fide
purchaser for value from an Agent after a default. The proceeds of any sale may
be applied (in whatever order and manner the Agent elects in its sole
discretion) to all costs and expenses of sale, including payment of the
Obligations, and any remaining proceeds shall be applied in accordance with
Article 9, Part 5, of the UCC. Each of the Company and the Subsidiary
Guarantors shall remain liable to the Agent for any deficiency.
(c) Without in any way requiring notice to be given in the
following time and manner, each of the Company and the Subsidiary
Guarantors agrees that any notice by the Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the
UCC or otherwise, shall constitute reasonable notice to the Company or such
Subsidiary Guarantor, as the case may be, if such notice is mailed by regular
or certified mail postage prepaid, at least ten days prior to such action, to
Company's or such Subsidiary Guarantor's address specified in Annex, or to any
other address which the Company or any Subsidiary Guarantor has specified in
writing to the Agent as the address to which notices hereunder shall be given
to the Company or such Subsidiary Guarantor.
(d) After an Acceleration, the Agent may demand, collect and ▇▇▇ on
any of
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the Accounts, Chattel Paper, Instruments and General Intangibles (in the name
of the Company, a Subsidiary Guarantor, or the Agent, at the Agent's option);
may enforce, compromise, settle or discharge such Collateral without
discharging the Obligations or any part thereof; and may endorse the name of
the Company or any Subsidiary Guarantor on any and all checks commercial paper,
and any other Instruments pertaining to or constituting Collateral.
(e) The Company or the appropriate Subsidiary Guarantor, as the case
may be, will deliver to the Agent, upon demand, all Documents and all Chattel
Paper (duly indorsed to the Agent) constituting, representing or relating to
the Collateral or any part thereof, and any schedules, invoices, shipping
documents, delivery receipts, purchase orders, contracts or other documents
representing or relating to the Collateral or any part thereof.
7. Payments After an Event of Default. All payments received and amounts
realized by the Secured Party pursuant to Section 6, including all such payments
and amounts received after the entire unpaid principal and interest amount of
the Notes has been declared due and payable, as well as all payments or amounts
then held or thereafter received by the Agent as part of the Collateral while an
Event of Default shall be continuing, shall be promptly applied and distributed
by the Agent in the following order of priority:
(a) first, to the payment of all reasonable costs and expenses,
including legal expenses and reasonable attorneys' fees, incurred or made
hereunder by the Agent, or by any other Holder, including any such costs and
expenses of foreclosure or suit, if any, and of any sale or the exercise of any
other remedy under Section 6, and of all taxes, assessments or liens superior to
the lien granted under this Agreement, except any taxes, assessments or other
superior lien subject to which any said sale under Section 6 may have been made;
and
(b) second, to the payment to each Holder of the amount then owing or
unpaid on such Holder's Note, and in case the payment received and amounts
realized by the Agent shall be insufficient to pay in full the whole amount so
due, owing or unpaid upon all the Notes, then ratably, in the proportion that
the unpaid principal amount of each Note bears to the aggregate unpaid
principal amount of all Notes, and in the proportion that the amount of
interest accrued under each Note bears to the aggregate amount of interest
accrued under all the Notes, with application on each Note to be made first to
the unpaid interest thereon, and second, to the unpaid principal thereof, such
application to be made upon presentation of the Notes and the notation thereon
of the payment, if partially paid, or the surrender and cancellation thereof,
if fully paid; and
(c) third, to the payment of the balance or surplus, if any, to the
Company, its successors and assigns, or to whomsoever may be lawfully entitled
to receive the same.
8. Power of Attorney. Each of the Company and the Subsidiary Guarantors
hereby appoints the Agent the attorney-in-fact of Company or such Subsidiary
Guarantor, as the case may be, to (i) prepare, sign and file or record, for
Company in Company's name, or a
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Subsidiary Guarantor is such Subsidiary Guarantor's name, any financing
statement and to take any other action reasonably deemed by the Agent necessary
or desirable to perfect and continue the security interest of the Agent
hereunder, and to perform any obligations of Company or any Subsidiary
Guarantor hereunder, at Company's expense, but without obligation to do so; and
(ii) after an Acceleration to take any and all actions necessary or appropriate
to collect, compromise, settle, sell or otherwise deal with any or all of the
Collateral or proceeds thereof and to obtain, adjust, settle and cancel any
policies of insurance referred to herein or in the Subscription Agreement. Such
power of attorney is coupled with an interest and is irrevocable so long as
any of the Obligations remains outstanding.
9. Agent's Right to Cure Reimbursement. If the Company or any Subsidiary
Guarantor should fail to do any act as herein provided, the Agent may make or
do the same, but shall have no obligation to do so, with reasonable notice to
Company or such Subsidiary Guarantor, and without releasing the Company or any
Subsidiary Guarantor from any obligation hereof, make or do the same in such
manner and to such extent as the Agent may deem necessary to protect the
Collateral, including without limitation, the defense of any action purporting
to affect the Collateral or the rights or powers of the Agent hereunder, at the
Company's expense. The Company shall reimburse the Agent for expenses
reasonably incurred under this Section 9.
10. Miscellaneous.
(a) Successors and Assigns. This Agreement, together with the
covenants and warranties contained in it, shall inure to the benefit of the
Agent, the Holders (subject to the agency of the Agent) and their respective
permitted successors, assigns, heirs and personal representatives, and shall be
binding upon each of the Company and the Subsidiary Guarantors, and the
successors and assigns of each.
(b) Notice. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified
mail, return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered against receipt to the party
to whom it is to be given at the address of such party and in the manner set
forth in the Subscription Agreement, except that notices to the Subsidiary
Guarantor shall be given at the address set forth in above.
(c) Termination. This Agreement shall terminate on the satisfaction
in full of all the Obligations for the payment of money under the Notes and, on
such termination, the Agent shall release to the Company and the Subsidiary
Guarantors the security interest granted in the Collateral hereunder; provided,
however, that if, after receipt of any payment of all or any part of the
Obligations, however, the Agent is for any reason compelled to surrender such
payment to any person or entity, because such payment is determined to be void
or voidable as a preference, an impermissible setoff, or a diversion of trust
funds, or for any other reason relating to the status of the Company or any
Subsidiary Guarantor, this Agreement shall continue in full force
notwithstanding any contrary action which may have been taken by the Agent in
reliance upon
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such payment, and any such contrary action so taken shall be without prejudice
to the Agent's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
(d) Severability. If any provision of this Agreement is invalid,
illegal, or unenforceable, the balance of this Agreement shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
(e) Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its
principles of conflicts of law.
(h) Waiver. No course of dealing and no delay or omission on the
part of the Agent in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Agent's rights, powers or remedies. No
right, power or remedy conferred by this Agreement upon the Agent shall be
exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise, and all such
remedies may be exercised singly or concurrently.
(i) Standard of Care. In the absence of willful misconduct taken or
omitted in bad ▇▇▇▇▇ ▇▇▇▇▇ negligence or other action which, by clear and
convincing evidence, greatly departs from commercially reasonable conduct,
neither the Agent nor any attorney-in-fact pursuant to this Agreement or any
other Operative Agreement shall be liable to the Company, any Subsidiary
Guarantor, or any other person for any act or omission, any mistake of fact or
any error of judgment in exercising any right or remedy granted herein.
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IN WITNESS WHEREOF, the parties have executed this Guarantee and Security
Agreement on the date set forth above.
STRIKER INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO
SUBSIDIARY GUARANTORS
WEST OXFORD INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
STRIKER HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO
STRIKER PAPER CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO
BLUESTONE CAPITAL PARTNERS, LP
By: BlueStone Capital
Management, Inc.,
general partner
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇
President
