SECURITY AGREEMENT
Exhibit
10.01
| DEBTOR: SANZ INC. | SECURED PARTY: AVNET, INC. |
| ADDRESS: | Avnet Partner Solutions |
| 0000 Xxxxxxx Xxxxx | 0000 Xxxxx Xxxxx Xxxx |
| Xxxxx 000 | Xxxxx, Xxxxxxx 00000 |
| Xxxxxxxxx, XX 00000 | |
| Attn: Xxxxxx Xxxxx | Attn: Legal Department |
Avnet Partner Solutions, a division of Avnet, Inc. ("AVNET"), enters into this Security Agreement (this "Agreement") with SANZ INC. ("Debtor") as of the 12 day of October, 2005 (“Effective Date”).
Debtor
agrees that in order to secure the full, prompt and satisfactory performance
of
each and every obligation of Debtor to AVNET for the goods sold by AVNET
to
Debtor, including but not limited to Debtor's obligation to make full and
timely
payment of the invoices issued by AVNET, but subject to the limitation set
forth
in the fifth unnumbered paragraph of this Agreement (the “Obligations”), Debtor
grants to AVNET a first position security interest and continuing lien on
all
Debtor's right, title and interest (the "Security Interest") (such priority
being subject to the fourth unnumbered paragraph of this Agreement and the
final
unnumbered paragraph of this Agreement) in and to the following described
collateral:
The
goods
sold by AVNET to Debtor (in which AVNET shall be deemed to have a first priority
purchase money security interest), as well as all other Debtor goods, inventory,
chattel paper, deposit accounts, accounts, accounts receivable, rights to
payment of every kind, general intangibles, instruments, equipment and
machinery, accessions, furnishings, and fixtures of Debtor, together with
all
related proceeds, attachments, additions and substitutions, as each of those
terms are defined by the Uniform Commercial Code of the State of Arizona
in
effect as of the date of this Agreement, now existing or hereafter arising
out
of the business of the Debtor and regardless as to whether such collateral
is in
the possession of Debtor, warehouseman, bailee, or any other third party
(collectively, the "Collateral").
With
regards to any first priority security interest held by Xxxxx Fargo Bank,
N.A.
or any successor-in-interest thereto or assignee (collectively, the “Bank”) in
the Collateral, or any first priority security interest held by any agreed
substitute lender as contemplated by the final unnumbered paragraph of this
Agreement, the Security Interest granted herein shall be deemed a second
position priority interest to the Bank’s interest(s).
The
Obligations secured by the Security Interest shall be that portion (if any)
of
the total obligations of Debtor to AVNET outstanding from time to time that
exceed $1,000,000. For the avoidance of doubt, if the Debtor’s total obligations
to AVNET are hereafter reduced to an amount less than $1,000,000 and are
thereafter increased once again to an amount greater than $1,000,000, such
excess shall constitute Obligations and shall be secured by the Security
Interest without re-execution of this Agreement, re-filing of financing
statements, or any other action by any person. Except in connection with
the
termination of this Agreement, in no event shall AVNET have to withdraw any
UCC
filing or other financing statements once filed, such documents and related
Security Interest remaining effective regardless of the amount of outstanding
Obligations.
The
Security Interest granted shall at all times be valid, perfected and enforceable
against the Debtor and all third parties, in accordance with the terms hereof,
as security for the unpaid Obligations owing to
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AVNET
as
provided above and, subject to the terms of this Agreement, the Collateral
shall
not at any time be subject to any other lien(s) without the prior written
approval of AVNET. AVNET hereby grants its prior approval of the lien in
favor
of the Bank and all other rights of the Bank under its loan/line of credit
agreements between the Debtor and the Bank.
Upon
mutual agreement of the parties, such agreement not to be unreasonably withheld,
and if all Obligations have been paid, AVNET, within fifteen (15) days of
such
agreement, shall execute any and all instruments and documents, including
but
not limited to termination statements to any financing statements filed to
evidence or perfect the Security Interest that are necessary to evidence
the
release of the Security Interest in and to the Collateral (the “Release
Documents”); thereafter, this Agreement shall terminate. Thereafter, Debtor
shall not incur any additional Obligations from AVNET without signing a
subsequent Security Agreement.
Debtor
warrants, covenants and agrees: (1) to pay and perform all of the obligations
secured by this Agreement (including but not limited to AVNET's cost of
enforcement, collection and attorney's fees), to defend title to the Collateral,
to keep the Collateral free and clear, except with respect to the Bank, of
all
mortgages, liens, pledges, charges, encumbrances, further security interests,
taxes and assessments and to keep, at its sole expense, the Collateral in
good
repair and condition; (2) to keep the Collateral insured (with insurance
companies providing coverage under this Agreement must be rated by A.M. Best
with at least an A- rating and a financial size category of at least Class
VII)
against
loss by fire, theft and other hazards in an amount equal to at least one
hundred
percent (100%) of the replacement value of the Collateral and evidence such
by
providing AVNET current certificates of insurance with the loss payable and
proceed clauses directly payable to AVNET; (3) that on demand by AVNET, to
furnish further assurance of title, execute and deliver any instrument or
do
other acts necessary to effectuate the purposes of this Agreement; (4) to
promptly notify AVNET of any change in the principal location of or with
respect
to the financial condition or the discontinuance of Debtor's business; (5)
promptly notify AVNET of the commencement of any litigation or governmental
proceeding against the Debtor which, if adversely determined, might affect
Debtor, or Debtor's business, or Debtor's ability to repay the Obligations
in
any material respect; (6) its operations are and will continue to be in
compliance with and not in violation of all applicable laws and regulations;
and
(7) provide AVNET with Debtor’s collateral reports provided periodically to the
Bank, such reports to be generated no less than weekly and sent to Avnet
within
(24) hours of sending to the Bank.
If
Debtor
shall fail to procure or to pay the premium on any insurance required to
be
maintained by this Agreement, AVNET is hereby authorized (but not obligated)
to
pay and advance any sums required and all such advances shall be secured
by the
Collateral and be repaid immediately by Debtor upon notice by AVNET. Debtor
shall give AVNET or any persons designated by AVNET the right, without hindrance
or delay, upon two Business Days' notice, during normal business hours, to
inspect, audit, check and make copies of Debtor's books, records and accounts.
Debtor
will be in default (“Default”) of this Agreement upon the occurrence of any of
the following:
(1)
excluding items 2, 3, 4, 5, 6, 7, and 8 below, failure to perform any obligation
under this Agreement after AVNET has sent Debtor notice of such non-performance
and a ten (10) day cure period has elapsed;
(2)
failure to pay any invoice, note, account, obligation or liability due AVNET
within ten days after the date when due;
(3)
making any false or misleading statement, representation or warranty in
connection with this Agreement;
(4)
commencement
of insolvency or like proceedings against Debtor or its parent or subsidiary
that is not vacated
or dismissed within ten
(10)
days thereafter (except that involuntary bankruptcy filings may be vacated
or
withdrawn within ninety (90) days prior to being deemed a Default) or any
assignment for the benefit of creditors, receiver or trustee;
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(5)
any
material adverse change in the financial condition of Debtor or any action
by
Debtor to cease operations or business conducted;
(6)
any
failure to maintain the Collateral, except in the ordinary course of business;
(7)
the
death, dissolution, termination of existence, insolvency, business failure,
or
like event of Debtor; or
(8)
failure to maintain Receivables available to AVNET in an amount equal to
or
greater than the Obligations less another $1,000,000. For the purposes
of
this item 8, “Receivables” shall mean Debtor’s total cash and non-contra,
non-escrow customer receivables at 100%, except maintenance receivables which
are at 50%, less all
obligations of Debtor to the Bank. AVNET shall provide Debtor five (5) days
notice prior to exercising its default remedies for this item 8.
Upon
Default and at any time after such Default, but subject in all events to
the
rights of the Bank in the Xxxxx Intercreditor Agreement, defined below, (unless
waived by Bank, which waiver may be granted without Debtor’s consent), (1) AVNET
may declare all obligations secured by this Agreement immediately due and
payable in full without presentment, demand, protest or notice of dishonor
of
any kind, all of which are hereby expressly waived, and AVNET shall have
all the
rights, remedies and privileges with respect to repossession, retention and
sale
of the Collateral and disposition of the proceeds available to a secured
party
under the Uniform Commercial Code of the State of Arizona in effect as of
the
date of this Agreement; (2) AVNET may enter peaceably onto Debtor's premises
to
possess, render unusable by Debtor, dispose of or require Debtor to assemble
the
Collateral and deliver or make it available to AVNET at a place to be designated
by AVNET; (3) AVNET may foreclose its liens, security interests and assignments
or exercise any powers of sale; and/or (4) AVNET may pursue all rights and
remedies available at law or in equity. All expenses, (including but not
limited
to reasonable attorneys' fees) costs of collection, sale or storage or the
like
shall be borne by Debtor.
Debtor
agrees that waiver or acquiescence in any Default, or AVNET's failure to
strictly enforce Debtor's performance of the obligations under this Agreement,
shall not constitute a waiver of any subsequent or other Default or failure.
Notices to either party shall be sent by certified mail or other guaranteed
delivery to the address set forth above. AVNET may assign this Agreement;
however, Debtor may not. All rights of AVNET shall inure to its successors
and
assigns; and all obligations, duties and promises of Debtor shall be binding
upon its heirs, executors or administrators. If the Debtor is a partnership,
joint venture or proprietorship, then the liabilities pursuant to this Agreement
shall be joint and several. Except as otherwise expressly provided herein,
the
rights and obligations of the parties shall be governed by the laws of the
State
of Arizona, including the Uniform Commercial Code as adopted by the State
of
Arizona.
Any
amendment or modification of this Agreement must be in a separate writing
expressly identified as such and signed by the authorized representatives
of
both parties in order to be effective. This Agreement and all other documents
executed in connection herewith shall consti-tute the entire agreement between
the parties hereto and shall supersede all other prior agreements, written
or
oral, with respect thereto. If any provision of this Agreement is held invalid,
the remaining provisions shall continue in full force and effect and the
parties
shall substitute for the invalid provision a valid provision which most closely
approximates the economic effect and intent of the invalid
provision.
Debtor
hereby irrevocably appoints AVNET (and any AVNET designated employees and/or
agents) its attorney-in-fact (A) to execute any Security Interest related
financing statements or other similar instruments, and (B) to do such other
acts
and things as may be necessary to establish or preserve the Security Interest
in
and to the Collateral. AVNET will promptly furnish Debtor with a copy of
each
writing executed under this Power of Attorney upon the execution
thereof.
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Prior
to
the execution of this Agreement, AVNET has entered into a certain Intercreditor
Agreement with the Bank (the “Xxxxx Intercreditor Agreement”) providing for the
relative rights of AVNET and the Bank. In the event Debtor shall replace
or
supplement its existing credit facility with a credit facility or other loan
from another institutional lender, AVNET may, in AVNET’s sole discretion, enter
into an Intercreditor Agreement with such other lender on substantially the
same
terms as the Xxxxx Intercreditor Agreement or on such other terms as AVNET
and
such new lender may agree following good faith negotiation.
THIS
SECURITY AGREEMENT IS SUBJECT TO THE TERMS OF A REMITTANCE AND INTERCREDITOR
AGREEMENT BY AVNET PARTNER SOLUTIONS, A DIVISION OF AVNET, INC. IN FAVOR
OF
XXXXX FARGO BANK, NATIONAL ASSOCIATION, ACTING THROUGH ITS XXXXX FARGO BUSINESS
CREDIT OPERATING DIVISION, DATED AS OF OCTOBER 12,
2005.
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the Effective Date.
DEBTOR:
SANZ
INC.
BY:
/s/
Xxxxxx Xxxxx
PRINTED
NAME:
Xxxxxx Xxxxx
ITS
AUTHORIZED REPRESENTATIVE
AVNET
PARTNER SOLUTIONS,
A
DIVISION OF AVNET, INC.
BY:
/s/
Xxxxx X. Xxxx
PRINTED
NAME:
Xxxxx
X. Xxxx
ITS
AUTHORIZED REPRESENTATIVE
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