Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "AGREEMENT"), is entered into and made
effective as of April 16, 2004, by and between AESP, INC., a Florida
corporation (the "BORROWER") and XXXXXX INVESTMENT LTD, a Hong Kong Limited (the
"SECURED PARTY").
WHEREAS, the Secured Party has loaned to the Borrower the sum of Six
Hundred Thirty-One Thousand And 00/100 Dollars ($631,000.00), as evidenced by
the Xxxxxx Promissory Note;
WHEREAS, in consideration of such financial accommodation and as an
inducement for the Secured Party to grant such financial accommodation to the
Borrower, the Borrower hereby grants to the Secured Party a first security
interest in and to the Pledged Collateral (as hereinafter defined), pursuant to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATIONS
Section 1.1. RECITALS.
The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.
Section 1.2. DEFINITIONS.
All capitalized terms contained herein shall have the meaning ascribed
to them in the Loan Agreement entered into between, among others, the Borrower
and the Secured Party, dated as of April 16, 2004 (the "LOAN AGREEMENT"),
unless specifically provided otherwise in this Agreement.
Section 1.3. INTERPRETATIONS.
Nothing herein expressed or implied is intended or shall be construed
to confer upon any person other than the Secured Party any right, remedy or
claim under or by reason hereof.
Section 1.4. OBLIGATIONS SECURED.
The obligations secured hereby are any and all obligations of the
Borrower to the Secured Party, under the Transaction Documents, and whether
arising before, on or after the date hereof including, without limitation, those
obligations of the Borrower to the Secured Party under the Xxxxxx Promissory
Note, in the principal amounts thereof outstanding from time to time, and
any other amounts payable by or chargeable to the Borrower thereunder or
hereunder (collectively, the "OBLIGATIONS").
ARTICLE 2.
PLEDGED COLLATERAL AND ADMINISTRATION OF COLLATERAL
Section 2.1. PLEDGED COLLATERAL.
(a) Borrower hereby pledges to the Secured Party, and creates
in the Secured Party for its benefit, a first priority perfected security
interest, for such time as the Obligations shall remain outstanding, in and to
all of the property of the Borrower now owned or hereafter acquired as set forth
in EXHIBIT "A" attached hereto (collectively, the "PLEDGED PROPERTY"). The
Pledged Property, as set forth in EXHIBIT "A" attached hereto, and the products
thereof and the proceeds of all such items are hereinafter collectively referred
to as the "PLEDGED COLLATERAL." Notwithstanding anything to the contrary
contained herein, or in any of the Transaction Documents, Secured Party
specifically acknowledges that its priority is subordinate to the security
interest of KBK Financial, Inc. ("KBK") with respect to the specific items of
the Pledged Collateral, and only those specific items of the Pledged Collateral,
identified on the UCC-1 Financing Statement filed in favor of KBK on November 4,
2003 and attached hereto as EXHIBIT "B".
(b) Simultaneously with the execution and delivery of this
Agreement, the Borrower shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Collateral. Simultaneously
with the execution and delivery of this Agreement, the Borrower shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, UCC-1 financing statements,
certificates, affidavits and forms as may, in the Secured Party's reasonable
judgment, be necessary to effectuate, complete or perfect, or to continue and
preserve, the security interest of the Secured Party in the Pledged Collateral,
and the Secured Party shall hold such documents and instruments as secured
party, subject to the terms and conditions contained herein.
Section 2.2. RIGHTS; INTERESTS; ETC.
(a) So long as no Event of Default (as hereinafter defined)
shall have occurred and be continuing:
(i) the Borrower shall be entitled to exercise any
and all rights pertaining to the Pledged Collateral or any part thereof for any
purpose not inconsistent with the terms hereof; and
(ii) the Borrower shall be entitled to receive and
retain any and all payments paid or made in respect of the Pledged Collateral.
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(b) Upon the occurrence and during the continuance of an Event
of Default:
(i) All rights of the Borrower to exercise the rights
which it would otherwise be entitled to exercise pursuant to Section 2.2(a)(i)
hereof and to receive payments which it would otherwise be authorized to receive
and retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all
such rights shall thereupon become vested in the Secured Party who shall
thereupon have the sole right to exercise such rights and to receive and hold as
Pledged Collateral such payments; PROVIDED, HOWEVER, that if the Secured Party
shall become entitled and shall elect to exercise its right to realize on the
Pledged Collateral pursuant to Article V hereof, then all cash sums received by
the Secured Party, or held by Borrower for the benefit of the Secured Party and
paid over pursuant to Section 2.2(b)(iii) hereof, shall be applied against any
outstanding Obligations;
(ii) All interest, dividends, income and other
payments and distributions which are received by the Borrower contrary to the
provisions of Section 2.2(b)(i) hereof shall be received in trust for the
benefit of the Secured Party, shall be segregated from other property of the
Borrower and shall be forthwith paid over to the Secured Party.
(c) An Event of Default under the Loan Agreement shall be an
Event of Default hereunder.
ARTICLE 3.
ATTORNEY-IN-FACT; PERFORMANCE
Section 3.1. SECURED PARTY APPOINTED ATTORNEY-IN-FACT.
Upon the occurrence of an Event of Default, the Borrower hereby
appoints the Secured Party as its attorney-in-fact, with full authority in the
place and stead of the Borrower and in the name of the Borrower or otherwise,
from time to time in the Secured Party's discretion to take any action and to
execute any instrument which the Secured Party may reasonably deem necessary to
accomplish the purposes of this Agreement, including, without limitation: (i) to
direct any party liable for any payment under any of the Pledged Collateral to
make payment of any and all moneys due, and to become due thereunder, directly
to the Secured Party or as the Secured Party shall direct; and to receive and
collect all instruments made payable to the Borrower representing any payments
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same. Upon the occurrence of an Event of Default, the Secured
Party may demand, collect, receipt for, settle, compromise, adjust, xxx for,
foreclose, or realize on the Pledged Collateral as and when the Secured Party
may determine.
Section 3.2. SECURED PARTY MAY PERFORM.
If the Borrower fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Borrower under Section 8.3.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. AUTHORIZATION; ENFORCEABILITY.
Each of the parties hereto represents and warrants that it has taken
all action necessary to authorize the execution, delivery and performance of
this Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.
Section 4.2. OWNERSHIP OF PLEDGED COLLATERAL.
The Borrower warrants and represents that it is the legal and
beneficial owner of the Pledged Collateral free and clear of any lien, security
interest, option or other charge or encumbrance except for the first priority
perfected security interest created or permitted by this Agreement.
ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
Section 5.1. DEFAULT AND REMEDIES.
(a) If an Event of Default described in Section 2.2(c)(i),
(ii) or (iii) occurs, then in each such case the Secured Party may declare the
Obligations to be due and payable within five (5) days after notice in writing
to the Borrower, and Borrower's failure to cure same within such period, and
thereupon, the Obligations shall become immediately due and payable. If an Event
of Default described in Sections 2.2(c)(iv) or (v) occurs, then the Obligations
shall automatically become immediately due and payable without declaration or
other act on the part of the Secured Party.
(b) Upon the occurrence of an Event of Default, the Secured
Party shall: (i) be entitled to receive all distributions with respect to the
Pledged Collateral, (ii) to cause the Pledged Collateral to be transferred into
the name of the Secured Party or its nominee, (iii) to dispose of the Pledged
Collateral, and (iv) to realize upon any and all rights in the Pledged
Collateral then held by the Secured Party.
Section 5.2. METHOD OF REALIZING UPON THE PLEDGED COLLATERAL: OTHER
REMEDIES.
Upon the occurrence of an Event of Default, in addition to any rights
and remedies available at law or in equity, the following provisions shall
govern the Secured Party's right to realize upon the Pledged Collateral:
(a) Any item of the Pledged Collateral may be sold for cash or
other value in any number of lots at brokers board, public auction or private
sale and may be sold without
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demand, advertisement or notice (except that the Secured Party shall give the
Borrower ten (10) business days' prior written notice of the time and place or
of the time after which a private sale may be made (the "SALE NOTICE")), which
notice period shall in any event is hereby agreed to be commercially reasonable.
At any sale or sales of the Pledged Collateral, the Borrower may bid for and
purchase the whole or any part of the Pledged Collateral and, upon compliance
with the terms of such sale, may hold, exploit and dispose of the same without
further accountability to the Secured Party. The Borrower will execute and
deliver, or cause to be executed and delivered, such instruments, documents,
assignments, waivers, certificates, and affidavits and supply or cause to be
supplied such further information and take such further action as the Secured
Party reasonably shall require in connection with any such sale.
(b) Any cash being held by the Secured Party as Pledged
Collateral and all cash proceeds received by the Secured Party in respect of,
sale of, collection from, or other realization upon all or any part of the
Pledged Collateral shall be applied as follows:
(i) to the payment of all amounts due the Secured
Party for the expenses reimbursable to it hereunder or owed to it pursuant to
Section 8.3 hereof;
(ii) to the payment of the Obligations then due and
unpaid;
(iii) the balance, if any, to the person or persons
entitled thereto, including, without limitation, the Borrower.
(c) In addition to all of the rights and remedies which the
Secured Party may have pursuant to this Agreement, the Secured Party shall have
all of the rights and remedies provided by law, including, without limitation,
those under the Uniform Commercial Code.
(d) If the Borrower fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the Secured Party
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Borrower and collect the monies adjudged or decreed
to be payable in the manner provided by law out of the property of Borrower,
wherever situated.
(e) The Borrower agrees that it shall be liable for any
reasonable fees, expenses and costs incurred by the Secured Party in connection
with enforcement, collection and preservation of the Xxxxxx Note, including,
without limitation, reasonable legal fees and expenses, and such amounts shall
be deemed included as Obligations secured hereby and payable as set forth in
Section 8.3 hereof.
Section 5.3. PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Borrower or the property of the
Borrower or of such other obligor or its creditors, the Secured Party
(irrespective of whether the Obligations shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Secured Party shall have made any
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demand on the Borrower for the payment of the Obligations) shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
the Obligations and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Secured Party (including any
claim for the reasonable legal fees and expenses and other expenses paid or
incurred by the Secured Party permitted hereunder and of the Secured Party
allowed in such judicial proceeding); and
(ii) to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
the Secured Party to make such payments to the Secured Party and, in the event
that the Secured Party shall consent to the making of such payments directed to
the Secured Party, to pay to the Secured Party any amounts for expenses due it
hereunder.
Section 5.4. DUTIES REGARDING PLEDGED COLLATERAL.
The Secured Party shall have no duty as to the collection or protection
of the Pledged Collateral or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Collateral actually in the Secured Party's possession.
ARTICLE 6.
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, from the date hereof and until
the Obligations have been fully paid and satisfied, unless the Secured Party
shall consent otherwise in writing (as provided in Section 8.4 hereof):
Section 6.1. EXISTENCE, PROPERTIES, ETC.
(a) The Borrower shall do, or cause to be done, all things, or
proceed with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Borrower's due organization, valid
existence and good standing under the laws of its state of incorporation, and
(ii) to preserve and keep in full force and effect all qualifications, licenses
and registrations in those jurisdictions in which the failure to do so could
have a Material Adverse Effect (as defined below); and (b) the Borrower shall
not do, or cause to be done, any act impairing the Borrower's corporate power or
authority (i) to carry on the Borrower's business as now conducted, and (ii) to
execute or deliver this Agreement or any other document delivered in connection
herewith, including, without limitation, any UCC-1 Financing Statements required
by the Secured Party to which it is or will be a party, or perform any of its
obligations hereunder or thereunder. For purpose of this Agreement, the term
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect, upon (a)
the Borrower's assets, business, operations, properties or condition, financial
or otherwise; (b) the Borrower's ability to make payment as and when due of all
or any part of the Obligations; or (c) the Pledged Collateral.
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Section 6.2. FINANCIAL STATEMENTS AND REPORTS.
The Borrower shall furnish to the Secured Party (or cause to be
furnished to the Secured Party) the following:
(a) as soon as practicable and in any event within one-hundred
five (105) calendar days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower as of the close of such fiscal year,
the consolidated statement of earnings and retained earnings of the Borrower as
of the close of such fiscal year, and consolidated statement of cash flows for
the Borrower for such fiscal year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles consistently applied,
certified by the either the chief executive or chief financial officer of the
Borrower as being true and correct and accompanied by a certificate of either
the chief executive or chief financial officer of the Borrower, stating that the
Borrower has kept, observed, performed and fulfilled each covenant, term and
condition of this Agreement and the other Transaction Documents during such
fiscal year and that no Event of Default hereunder has occurred and is
continuing, or if an Event of Default has occurred and is continuing, specifying
the nature of same, the period of existence of same and the action the Borrower
proposes to take in connection therewith;
(b) within fifty (50) calendar days of the end of each
calendar quarter, a balance sheet of the Borrower as of the close of such
quarter, and statement of earnings and retained earnings of the Borrower as of
the close of such quarter, all in reasonable detail, and prepared substantially
in accordance with generally accepted accounting principles consistently
applied, certified by either the chief executive or chief financial officer of
the Borrower as being true and correct; and
(c) promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to the Borrower by
independent accountants in connection with any annual examination of the
Borrower.
Section 6.3. ACCOUNTS AND REPORTS.
The Borrower shall maintain a standard system of accounting in
accordance with generally accepted accounting principles consistently applied
and provide, at its sole expense, to the Secured Party the following:
(a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of the Borrower in
excess of $50,000 (other than the Obligations), or any demand or other request
for payment under any guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $50,000, including any received from any person acting on behalf of
the Secured Party or beneficiary thereof; and
(b) within fifteen (15) business days after the making of each
submission or filing, a copy of any report, financial statement, notice or other
document, whether periodic or otherwise, submitted to the shareholders of the
Borrower, or submitted to or filed by the Borrower with any governmental
authority involving or affecting (i) the Borrower that could
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have a Material Adverse Effect; (ii) the Obligations; (iii) any part of the
Pledged Collateral; or (iv) any of the transactions contemplated in this
Agreement or the Transaction Documents.
Section 6.4. MAINTENANCE OF BOOKS AND RECORDS; INSPECTION.
The Borrower shall maintain its books, accounts and records in
accordance with generally accepted accounting principles consistently applied,
and permit the Secured Party, its officers and employees and any professionals
designated by the Secured Party in writing, at any time upon reasonable notice
to visit and inspect any of its properties (including but not limited to the
collateral security described in the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
officer or director thereof.
Section 6.5. MAINTENANCE AND INSURANCE.
(a) The Borrower shall maintain or cause to be maintained, at
its own expense, all of its assets and properties in good working order and
condition, reasonable wear and tear excepted, making all necessary repairs
thereto and renewals and replacements thereof.
(b) The Borrower shall maintain or cause to be maintained, at
its own expense, insurance in form, substance and amounts (including
deductibles), which the Borrower deems reasonably necessary to the Borrower's
business, (i) adequate to insure all assets and properties of the Borrower,
which assets and properties are of a character usually insured by persons
engaged in the same or similar business against loss or damage resulting from
fire or other risks included in an extended coverage policy; (ii) against public
liability and other tort claims that may be incurred by the Borrower; (iii) as
may be required by the Transaction Documents or applicable law and (iv) as may
be reasonably requested by Secured Party, all with adequate, financially sound
and reputable insurers.
Section 6.6. CONTRACTS AND OTHER COLLATERAL.
The Borrower shall perform all of its obligations under or with respect
to each instrument, receivable, contract and other intangible included in the
Pledged Collateral to which the Borrower is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement, except, in each case, where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
Section 6.7. DEFENSE OF COLLATERAL, ETC.
The Borrower shall defend and enforce its right, title and interest in
and to any part of: (a) the Pledged Collateral; and (b) if not included within
the Pledged Collateral, those assets and properties whose loss could have a
Material Adverse Effect. The Borrower shall defend the Secured Party's right,
title and interest in and to each and every part of the Pledged Collateral, each
against all manner of claims and demands on a timely basis to the full extent
permitted by applicable law.
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Section 6.8. PAYMENT OF DEBTS, TAXES, ETC.
The Borrower shall pay, or cause to be paid, all of its indebtedness
and other liabilities and perform, or cause to be performed, all of its
obligations in accordance with the respective terms thereof, and pay and
discharge, or cause to be paid or discharged, all taxes, assessments and other
governmental charges and levies imposed upon it, upon any of its assets and
properties on or before the last day on which the same may be paid without
penalty, as well as pay all other lawful claims (whether for services, labor,
materials, supplies or otherwise) as and when due, except, in each case, where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
Section 6.9. TAXES AND ASSESSMENTS; TAX INDEMNITY.
The Borrower shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Borrower, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
PROVIDED, HOWEVER, that the Borrower in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves that may be required by GAAP are
maintained with respect thereto.
Section 6.10. COMPLIANCE WITH LAW AND OTHER AGREEMENTS.
The Borrower shall maintain its business operations and property owned
or used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Borrower is a party
or by which the Borrower or any of its properties is bound and, without limiting
the foregoing, the Borrower shall pay all of its indebtedness promptly in
accordance with the terms thereof; except, in each case, where the failure to do
so could not reasonably be expected to have a Material Adverse Effect.
Section 6.11. NOTICE OF DEFAULT.
The Borrower shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement or any other
Loan Instrument or any other agreement of Borrower for the payment of money,
promptly upon the occurrence thereof.
Section 6.12. NOTICE OF LITIGATION.
The Borrower shall give notice, in writing, to the Secured Party of (a)
any actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Borrower, or affecting any of the
assets of the Borrower, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Borrower on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
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expected to have a Material Adverse Effect on the business operations or
financial condition of the Borrower.
ARTICLE 7.
NEGATIVE COVENANTS
The Borrower covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Borrower shall not, unless
the Secured Party shall consent otherwise in writing:
Section 7.1. INDEBTEDNESS.
The Borrower shall not create, incur or assume any additional
indebtedness from and after the date hereof of any description whatsoever in an
aggregate amount in excess of $10,000 (excluding trade accounts payable and
accrued expenses incurred in the ordinary course of business and the endorsement
of negotiable instruments payable to the Borrower, respectively for deposit or
collection in the ordinary course of business and debt in favor of KBK pursuant
to the September 18, 2003 Account Transfer and Purchase Agreement); PROVIDED
that Secured Party shall not unreasonably withhold its consent to any additional
debt proposed by Borrower.
Section 7.2. LIENS AND ENCUMBRANCES.
The Borrower shall not directly or indirectly make, create, incur,
assume or permit to exist any assignment, transfer, pledge, mortgage, security
interest or other lien or encumbrance of any nature in, to or against any part
of the Pledged Collateral, except in favor of KBK to the extent set forth in
Section 2.1, and liens securing purchase money debt or capital lease otherwise
permitted under Section 7.1; or offer or agree to do so; or own or acquire or
agree to acquire any asset or property of any character subject to any of the
foregoing encumbrances; or assign, pledge or in any way transfer or encumber its
right to receive any income or other distribution or proceeds from any part of
the Pledged Collateral; or enter into any sale-leaseback financing respecting
any part of the Pledged Collateral as lessee; or cause or assist the inception
or continuation of any of the foregoing.
Section 7.3. ARTICLES, BY-LAWS, MERGERS, CONSOLIDATIONS, ACQUISITIONS
AND SALES.
Without the prior express written consent of the Secured Party, the
Borrower shall not: (a) be a party to any merger, consolidation or corporate
reorganization, (b) purchase or otherwise acquire all or substantially all of
the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity in excess of $50,000, (c) sell, transfer, convey,
grant a security interest in or lease all or any substantial part of the Pledged
Collateral, nor (d) convey any of its assets to any subsidiary.
Section 7.4. MANAGEMENT, OWNERSHIP.
The Borrower shall not terminate or change the employment status of
Xxxx Xxxxx or Xxxxx Xxxxxxx without the prior written consent of the Secured
Party. The employment of Slav
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Xxxxx and Xxxxx Xxxxxxx are material factors in the Secured Party's willingness
to institute and maintain a lending relationship with the Borrower.
Section 7.5. DIVIDENDS, ETC.
The Borrower shall not declare or pay any dividend of any kind, in cash
or in property, on any class of its capital stock, nor purchase, redeem, retire
or otherwise acquire for value any shares of such stock, nor make any
distribution of any kind in respect thereof, nor make any return of capital to
shareholders, nor make any cash payments in respect of any pension, profit
sharing, retirement, stock option, stock bonus, incentive compensation or
similar plan (except as required or permitted hereunder), without the prior
written consent of the Secured Party and except matching contributions to the
Borrower's 401(k) Plan in an amount not to exceed $100,000 annually.
Section 7.6. GUARANTIES; LOANS.
The Borrower shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person or
persons, except the endorsement of negotiable instruments payable to the
Borrower for deposit or collection in the ordinary course of business. The
Borrower shall not make any loan, advance or extension of credit to any person
other than in the normal course of its business.
Section 7.7. CONDUCT OF BUSINESS.
The Borrower will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.
ARTICLE 8.
MISCELLANEOUS
Section 8.1. NOTICES. All notices, requests, demands, instructions,
consents or other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if and
(a) when delivered personally, (b) five days after they are mailed by first
class certified mail, return receipt requested, postage prepaid, or (c) two days
after they are sent by a nationally recognized express courier service, postage
or delivery charges prepaid, to the parties at the following addresses or to
such other addresses as the parties may give notice in accordance herewith:
If to Secured Party: Xxxxxx Investment Ltd
0000 Xxxxxx'x Xxxxxxxx
00 Xxxxxx Xxxx
Xxxx Xxxx, XXX
Attention: Xx. Xxxxxxxx X. Xxxxxxxxxx
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With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
Miami Center, Suite 2000
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to Borrower: AESP, Inc.
0000 X. X. 000 Xxxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxx
With a copy to: Akerman Senterfitt
Xxx Xxxxxxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
Section 8.2. SEVERABILITY.
If any provision of this Agreement not affecting the commercial purpose
of this Agreement shall be held invalid or unenforceable, such invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render invalid or unenforceable any other severable provision of this
Agreement, and this Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained herein.
Section 8.3. EXPENSES.
In the event of an Event of Default, the Borrower will pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Secured Party may incur
in connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Collateral; (ii) the
exercise or enforcement of any of the rights of the Secured Party hereunder or
(iii) the failure by the Borrower to perform or observe any of the provisions
hereof.
Section 8.4. WAIVERS, AMENDMENTS, ETC.
The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Borrower of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Borrower contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.
12
Section 8.5. CONTINUING SECURITY INTEREST.
This Agreement shall create a continuing security interest in the
Pledged Collateral and shall: (i) remain in full force and effect until payment
in full of the Obligations; and (ii) be binding upon the Borrower and its
successors and heirs and (iii) inure to the benefit of the Secured Party and its
successors and assigns. Upon the payment or satisfaction in full of the
Obligations, the Borrower shall be entitled to the return, at its expense, of
such of the Pledged Collateral as shall not have been sold in accordance with
Section 5.2 hereof or otherwise applied pursuant to the terms hereof.
Section 8.6. INDEPENDENT REPRESENTATION.
Each party hereto acknowledges and agrees that it has received or has
had the opportunity to receive independent legal counsel of its own choice and
that it has been sufficiently apprised of its rights and responsibilities with
regard to the substance of this Agreement.
Section 8.7. APPLICABLE LAW: JURISDICTION.
This Agreement and all transactions contemplated by this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Florida, without regard to principles of conflicts of law. The
parties hereto hereby agree to the exclusive jurisdiction of the state courts
situated in Miami-Dade County and the parties hereby waive any objection which
they may have to the laying of venue of any such proceeding in such court and
waive any claim of inconvenient forum with respect to such venue. The parties
hereto further agree that service of process, relating to an action arising
hereunder, pursuant to the notice provision set forth in this Agreement shall be
sufficient and hereby waive any claim for insufficiency of process as a result
of a party's use of such method of service.
Section 8.8. WAIVER OF JURY TRIAL.
AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS
AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE BORROWER, THE BORROWER
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY
WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS
TRANSACTION.
Section 8.9. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AESP, INC.
By: /s/ Xxxx Xxxxx
-----------------------------------------
Name: Xxxx Xxxxx
Title: President and Chief Executive Officer
XXXXXX INVESTMENT LTD
By: /s/ Xx. Xxxxxxxx X. Xxxxxxxxxx
-----------------------------------------
Name: Xx. Xxxxxxxx X. Xxxxxxxxxx
Title: Director
14
EXHIBIT A
DEFINITION OF PLEDGED PROPERTY
For the purpose of securing prompt and complete payment and performance
by the Borrower of all of the Obligations, the Borrower unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Borrower:
(a) all goods of the Borrower, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Borrower or in which the Borrower may have or may
hereafter acquire any interest, and all replacements, additions, accessions,
substitutions and proceeds thereof, arising from the sale or disposition
thereof, and where applicable, the proceeds of insurance and of any tort claims
involving any of the foregoing;
(b) all inventory of the Borrower, including, but not limited
to, all goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily out of
Borrower's custody or possession and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing;
(c) all contract rights and general intangibles of the
Borrower, including, without limitation, goodwill, trademarks, trade styles,
trade names, leasehold interests, partnership or joint venture interests,
patents, patent applications, copyrights, deposit accounts whether now owned or
hereafter created;
(d) all documents, warehouse receipts, instruments and chattel
paper of the Borrower whether now owned or hereafter created;
(e) all accounts and other receivables, instruments or other
forms of obligations and rights to payment of the Borrower (herein collectively
referred to as "ACCOUNTS"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Borrower's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Borrower may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Borrower represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by the
Borrower in the ordinary course of business;
(f) to the extent assignable, all of the Borrower's rights
under all present and future authorizations, permits, licenses and franchises
issued or granted in connection with the operations of any of its facilities;
and
(g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.
A-1
EXHIBIT B
KBK FINANCIAL, INC. UCC-1 FINANCING STATEMENT
B-1
