Exhibit 10.31
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SECURITY AGREEMENT
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A. PARTIES
1. Touchstone Applied Science Associates, Inc.,
Fields Lane, X.X. Xxx 000
Xxxxxxxx, Xxx Xxxx 00000
("Debtor" hereafter)
2. MSB Bank
00 Xxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
("Bank" hereafter)
B. AGREEMENT
Subject to the applicable terms of this security agreement,
Debtor grants to Bank a security interest in the Collateral to
secure the payment of the Obligation.
C. OBLIGATION
The following is "the Obligation" secured by this agreement:
1. Promissory note dated August 28, 1997, in the amount of
$300,000.00.
2. All past, present, and future advances, of whatever type,
by Bank to Debtor, and extension and renewals thereof,
whatever or not of the nature contemplated at the date
hereof.
3. All existing and future liabilities, of whatever type, of
Debtor to Bank and including (but not limited to)
liability for overdrafts and as endorser and surety.
4. All costs incurred by Bank to obtain, preserve, and
enforce this security interest, collect the Obligation,
and maintain and preserve the Collateral, and including
(but not limited to) taxes, assessments, insurance
premiums, repairs, reasonable attorneys fees and legal
expenses, rent, storage costs, and expenses of sale.
5. Interest on the above amounts, as agreed between Bank and
Debtor, or if no such agreement, at the maximum rate
permitted by law.
D. COLLATERAL
1. The security interest is granted in the following,
hereinafter called the "Collateral":
(a) all machinery, equipment, fixtures, appliances and
furniture now owned or hereafter acquired by Debtor and
wherever located.
(b) all inventory now owned or hereafter acquired and
products and proceeds thereof.
(c) all accounts, contract rights, and accounts
receivable, now or hereafter in existence and all
proceeds thereof, and all returned or repossessed goods
arising from or relating to any of said accounts or
rights.
(d) all substitutes and replacements for, accessions,
attachments, and other additions to, and tools, parts,
and equipment used in connection with any of the above.
(e) all property similar to the above hereafter acquired
by Debtor.
(f) all general intangibles, now or hereafter acquired
of arising.
(g) all cash or non-cash proceeds of any of the
foregoing, including insurance proceeds.
(h) all ledger sheets, files, records, documents, and
instruments (including, but not limited to, computer
programs, tapes and related electronic data processing
software) evidencing an interest in or relating to the
above.
2. The location of the office where records concerning
rights are kept is Debtor s address above stated.
E. AGREEMENTS OF DEBTOR
1. Debtor will: take adequate care of the Collateral;
insure the Collateral for such hazards and in such
amounts as Bank directs, policies to be satisfactory to
Bank; pay all costs necessary to obtain, preserve, and
enforce this security interest, collect the Obligation,
and preserve, and enforce this security interest, collect
the Obligation, and preserve the Collateral, including
(but not limited to) taxes, assessments, insurance
premiums, repairs, reasonable attorneys fees and legal
expenses, rent, storage costs, and expenses of sale;
furnish Bank with any information on the Collateral
requested by Bank; allow Bank to inspect the Collateral,
and inspect and copy all records relating to the
Collateral and the Obligation; sign any papers furnished
by Bank which are necessary to obtain and maintain this
security interest; assist Bank in complying with the
Federal Assignment of Claims Act, where necessary to
enable Bank to become an assignee under that Act; take
necessary steps to preserve the liability of account
debtors, obligors, and secondary parties whose
obligations are part of the Collateral; transfer
possession of all instruments, documents, and chattel
paper which are part of the Collateral to Bank
immediately, or to those hereafter acquired, immediately
following acquisition; perfect a security interest (using
a method satisfactory to Bank) in goods covered by
chattel paper which is part of the Collateral; notify
Bank of any change occurring in or to the Collateral, or
in any fact or circumstance warranted or represented by
Debtor in this agreement or furnished to Bank, or if any
event of default occurs.
2. Debtor will not (without Bank s consent): remove the
Collateral from the locations specified herein; allow the
Collateral to become an accession to other goods,; sell,
lease, otherwise transfer, manufacture, process,
assemble, or furnish under contracts of service, the
Collateral to be affixed to real estate, except goods
identified herein as fixtures.
3. Debtor warrants: no financing statement has been filed
with respect to the Collateral, which remains in effect,
other than relating to this security interest; Debtor is
absolute owner of the Collateral, and it is not
encumbered other than by this security interest (and the
same will be true of the Collateral acquired hereafter
when acquired); all account debtors and obligors, whose
obligations are part of the Collateral, are to the extent
permitted by law prevented from asserting against Bank
any claims or defenses they have against sellers.
F. RIGHTS OF BANK
Bank may, in its discretion, before or after
default: terminate, on notice to Debtor, Debtor s
authority to sell, lease, otherwise transfer,
manufacture, process or assemble, or furnish under
contracts of service, inventory Collateral, or any other
Collateral as to which such permission has been given;
require Debtor to give possession or control of the
Collateral to Bank; endorse as Debtor s agent any
instruments or chattel paper in the Collateral; notify
account debtors and obligors on instruments to make
payment directly to Bank; contact account debtors
directly to verify information furnished by Debtor; take
control of proceeds and use cash proceeds to reduce any
part of the Obligation; take any action Debtor is
required to take or otherwise necessary to obtain,
preserve, and enforce this security interest, and
maintain and preserve the Collateral, without notice to
Debtor, and add costs of same to the Obligation (but Bank
is under no duty to take any such action); release
Collateral in its possession to Debtor, temporarily or
otherwise; take control of funds generated by the
Collateral, such as dividends, interest, proceeds or
refunds from insurance, and use same to reduce any part
of the Obligation; waive any of its rights hereunder
without such waiver prohibiting the later exercise of
the same or similar rights; revoke any permission or
waiver previously granted to Debtor.
G. MISCELLANEOUS
The rights and privileges of Bank shall inure to its
successors and assigns. All representations, warranties,
and agreements of Debtor shall bind Debtors s successors
and assigns. Definitions in the Uniform Commercial Code
apply to words and phrases in this agreement. Debtor
waives presentment, demand, notice of dishonor, protest,
and extension of time without notice as to any
instruments and chattel paper in the Collateral. Notice
mailed to Debtor's address in A, or to Debtors, or to
Debtors most recent changed address on file with Bank, at
least five days prior to the related action (or, if the
Uniform Commercial Code specified a longer period, such
longer period prior to the related action), shall be
deemed reasonable. A photographic or other reproduction
of this agreement, or any financing statement signed by
Debtor, is sufficient as a financing statement.
H. DEFAULT
1. Any of the following is an event of default: failure of
Debtor to pay note in the Obligation in accordance with
its terms, or any other liability in the Obligation when
due, or if a demand obligation, on demand, or to perform
any act or duty required by this agreement or any other
provision of the Note or Term Loan Agreement; falsity of
any warranty or representation in this agreement when
made; substantial change in any fact warranted or
represented in this agreement; involvement of Debtor in
bankruptcy or insolvency proceedings;, dissolution, or
other termination of Debtor s existence; merger or
consolidation of Debtor with another; substantial loss,
theft, destruction, sale, reduction in value, encumbrance
of, damage to, or change in the Collateral; modification
of any contract, the rights to which are part of the
Collateral; levy on, seizure, or attachment of the
Collateral; judgment against Debtor which is not paid or
discharged pursuant to the provisions of the Term Loan
Agreement; filing any financing statement with regard to
the Collateral, other than relating to this security
interest and other than purchase money financed
equipment; Bank s belief that the prospect of any payment
of any part of the Obligation or the performance of any
part of this agreement, is materially impaired; default
on the payment when due of any other indebtedness for
borrowed money owed by the borrower to the bank any other
person or entity and the expiration of applicable cure
periods, or any obligation of the borrower for payment of
borrowed money when it becomes or is declared to be due
and payable prior to the expressed maturity thereof.
2. When an event of default occurs, the entire Obligation
becomes immediately due and payable at Bank s option
without notice to Debtor, and bank may proceed to enforce
payment of same and exercise any and all of the rights
and remedies. When Debtor is in default, Debtor upon
demand by Bank, shall assemble the Collateral and make it
available to Bank at a place reasonably convenient to
both parties. Debtor is entitled to any surplus and
shall be liable to Bank for any deficiency, arising from
accounts, contract rights, or chattel paper included in
the Collateral through sale thereof to Bank.
I. FIRST AND PROPER LIEN
This security agreement grants to Bank a first and prior
lien to secure the payment of the Obligation listed
herein, and extensions and renewals thereof. If Bank
disposes of the Collateral following default, the
proceeds of such disposition available to satisfy the
Obligation shall be applied first to the notes included
therein, and thereafter to all remaining indebtedness
secured hereby, as well as any other indebtedness owed to
the bank, in the order in which such remaining
indebtedness was executed or contracted. For purposes of
this paragraph, an extended or renewed note will be
considered executed on the date of the original note.
Touchstone Applied Science Associates, Inc.
By: /s/ XXXXXX X. XXXXX
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President
Attest:
/s/ XXXXXXX CRUSH
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Attorney
