MISCOR GROUP, LTD. AND CERTAIN OF ITS SUBSIDIARIES MASTER SECURITY AGREEMENT
Exhibit
10.3
MISCOR
GROUP, LTD. AND CERTAIN OF ITS SUBSIDIARIES
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To:
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Laurus
Master Fund, Ltd.
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c/o
M&C Corporate Services Limited
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X.X.
Xxx 000 XX
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Xxxxxx
House
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South
Church Street
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Xxxxxx
Town
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Grand
Cayman, Cayman Islands
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Date:
May 31, 2006
To
Whom It May Concern:
1. To
secure the payment of all Obligations (as hereafter defined), MISCOR Group,
Ltd., an Indiana corporation (the “Company”), each of the other undersigned
parties (other than Laurus Master Fund, Ltd., (“Laurus”)) and each other entity
that is required to enter into this Master Security Agreement (each an
“Assignor” and, collectively, the “Assignors”) hereby assigns and grants to
Laurus a continuing security interest in all of the following property now
owned
or at any time hereafter acquired by such Assignor, or in which such Assignor
now has or at any time in the future may acquire any right, title or interest
(the “Collateral”): all cash, cash equivalents, accounts, accounts receivable,
deposit accounts , inventory, equipment, goods, fixtures, documents, instruments
(including, without limitation, promissory notes), contract rights, commercial
tort claims set forth on Exhibit
B
to this Master Security Agreement, general intangibles (including, without
limitation, payment intangibles and an absolute right to license on terms
no
less favorable than those current in effect among such Assignor’s affiliates),
chattel paper, supporting obligations, investment property (including, without
limitation, all partnership interests, limited liability company membership
interests and all other equity interests owned by any Assignor),
letter-of-credit rights, trademarks, trademark applications, tradestyles,
patents, patent applications, copyrights, copyright applications and other
intellectual property in which such Assignor now has or hereafter may acquire
any right, title or interest, all proceeds and products thereof (including,
without limitation, proceeds of insurance) and all additions, accessions
and
substitutions thereto or therefor. In the event any Assignor wishes to finance
the acquisition in the ordinary course of business of any hereafter acquired
equipment and has obtained a written commitment from an unrelated third party
financing source to finance such equipment, Laurus shall release its security
interest on such hereafter acquired equipment so financed by such third party
financing source. Except as otherwise defined herein, all capitalized terms
used
herein shall have the meanings provided such terms in the Security Agreement
referred to below. All items of Collateral which are defined in the UCC shall
have the meanings set forth in the UCC. For purposes hereof, the term
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided, that in the event
that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or remedies with respect to, Laurus' security
interest in any Collateral is governed
by
the Uniform Commercial Code as in effect in a jurisdiction other than the
State
of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions of this Agreement
relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions; provided further, that to the
extent
that the UCC is used to define any term herein and such term is defined
differently in different Articles or Divisions of the UCC, the definition
of
such term contained in Article or Division 9 shall govern.
2. The
term “Obligations” as used herein shall mean and include all debts, liabilities
and obligations owing by (i) each Assignor to Laurus arising under, out of,
or
in connection with: that certain Guaranty made by Assignors in favor of Laurus
on the date hereof (the “Guaranty”); (ii) Magnetech Industrial Services of
Alabama, LLC (“MIS”) under that certain Security Agreement dated as of the date
hereof between MIS and Laurus (the “Security Agreement”) and (iii) the Ancillary
Agreements referred to in the Security Agreement (the Security Agreement
and
each Ancillary Agreement, as each may be amended, modified, restated or
supplemented from time to time, collectively, the “Documents”), and in
connection with any documents, instruments or agreements relating to or executed
in connection with the Documents or any documents, instruments or agreements
referred to therein or otherwise, and in connection with any other indebtedness,
obligations or liabilities of each such Assignor to Laurus, whether now existing
or hereafter arising, direct or indirect, liquidated or unliquidated, absolute
or contingent, due or not due and whether under, pursuant to or evidenced
by a
note, agreement, guaranty, instrument or otherwise, including, without
limitation, obligations and liabilities of each Assignor for post-petition
interest, fees, costs and charges that accrue after the commencement of any
case
by or against such Assignor under any bankruptcy, insolvency, reorganization
or
like proceeding (collectively, the “Debtor Relief Laws”) in each case,
irrespective of the genuineness, validity, regularity or enforceability of
such
Obligations, or of any instrument evidencing any of the Obligations or of
any
collateral therefor or of the existence or extent of such collateral, and
irrespective of the allowability, allowance or disallowance of any or all
of the
Obligations in any case commenced by or against any Assignor under any Debtor
Relief Law.
3. Each
Assignor hereby jointly and severally represents, warrants and covenants
to
Laurus that:
(a) it
is a corporation, partnership or limited liability company, as the case may
be,
validly existing, in good standing and formed under the respective laws of
its
jurisdiction of formation set forth on Schedule
A,
and each Assignor will provide Laurus thirty (30) days’ prior written notice of
any change in any of its respective jurisdiction of formation;
(b) its
legal name is as set forth in its Articles of Incorporation or other
organizational document (as applicable) as amended through the date hereof
and
as set forth on Schedule
A,
and it will provide Laurus thirty (30) days’ prior written notice of any change
in its legal name;
(c) its
organizational identification number (if applicable) is as set forth on
Schedule
A
hereto, and it will provide Laurus thirty (30) days’ prior written notice of any
change in its organizational identification number;
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(d) it
is the lawful owner of its Collateral and it has the sole right to grant
a
security interest therein and will defend the Collateral against all claims
and
demands of all persons and entities;
(e) it
will keep its Collateral free and clear of all attachments, levies, taxes,
liens, security interests and encumbrances of every kind and nature
(“Encumbrances”), except (i) Encumbrances securing the Obligations, (ii)
Encumbrances subordinated to Encumbrances securing the Obligations, provided
that such subordination is made under (A) the Subordination Agreement dated
August 24, 2005 among Xxxx Xxxxxxx, Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx Xxxxxxx
Tulcin Xxxxx Inc. (“Strasbourger”) and Laurus, (B) the Subordination Agreement
dated the date hereof among Xxxx Xxxxxxx, Xxxxxxxx Xxxxxxxxx, Xxxxxxxxxxxx
and
Laurus, or (C) terms and conditions satisfactory to Laurus, or (iii)
Encumbrances securing indebtedness of each such Assignor not to exceed $50,000
in the aggregate for all such Assignors so long as all such Encumbrances
are
removed or otherwise released to Laurus’ satisfaction within ten (10) days of
the creation thereof;
(f) it
will, at its and the other Assignors’ joint and several cost and expense keep
the Collateral in good state of repair (ordinary wear and tear excepted)
and
will not waste or destroy the same or any part thereof other than ordinary
course discarding of items no longer used or useful in its or such other
Assignors’ business;
(g) it
will not, without Laurus’ prior written consent, sell, exchange, lease or
otherwise dispose of any Collateral, whether by sale, lease or otherwise,
except
for the sale of inventory in the ordinary course of business and for the
disposition or transfer in the ordinary course of business during any fiscal
year of obsolete and worn-out equipment or equipment no longer necessary
for its
ongoing needs, having an aggregate fair market value of not more than $150,000
and only to the extent that:
(i) the
proceeds of each such disposition are used to acquire replacement Collateral
which is subject to Laurus’ first priority perfected security interest, or are
used to repay the Obligations or to pay general corporate expenses;
or
(ii) following
the occurrence of an Event of Default which continues to exist the proceeds
of
which are remitted to Laurus to be held as cash collateral for the
Obligations;
(h) it
will insure or cause the Collateral to be insured in Laurus’ name (as an
additional insured and loss payee) against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as Laurus shall
specify in amounts and under policies by insurers acceptable to Laurus and
all
premiums thereon shall be paid by such Assignor and the policies delivered
to
Laurus. If any such Assignor fails to do so, Laurus may procure such insurance
and the cost thereof shall be promptly reimbursed by the Assignors, jointly
and
severally, and shall constitute Obligations;
(i) it
will at all reasonable times allow Laurus or Laurus’ representatives free access
to and the right of inspection of the Collateral;
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(j) such
Assignor (jointly and severally with each other Assignor) hereby indemnifies
and
saves Laurus harmless from all loss, costs, damage, liability and/or expense,
including reasonable attorneys’ fees, that Laurus may sustain or incur to
enforce payment, performance or fulfillment of any of the Obligations and/or
in
the enforcement of this Master Security Agreement or in the prosecution or
defense of any action or proceeding either against Laurus or any Assignor
concerning any matter growing out of or in connection with this Master Security
Agreement, and/or any of the Obligations and/or any of the Collateral except
to
the extent caused by Laurus’ own gross negligence or willful misconduct (as
determined by a court of competent jurisdiction in a final and nonappealable
decision); and
(k) all
commercial tort claims (as defined in the Uniform Commercial Code as in effect
in the State of New York) held by any Assignor are set forth on Schedule
B
to this Master Security Agreement; each Assignor hereby agrees that it shall
promptly, and in any event within five (5) Business Days after the same is
acquired by it, notify Laurus of any commercial tort claim acquired by it
and
unless otherwise consented to in writing by Laurus, it shall enter into a
supplement to this Master Security Agreement granting to Laurus a security
interest in such commercial tort claim, securing the Obligations.
4. The
occurrence of any of the following events or conditions shall constitute
an
“Event of Default” under this Master Security Agreement:
(a) any
covenant or any other term or condition of this Master Security Agreement
is
breached by an Assignor in any material respect and such breach, to the extent
subject to cure, shall continue without remedy for a period of fifteen (15)
days
after the occurrence thereof;
(b) any
representation, warranty or statement made or furnished to Laurus under this
Master Security Agreement by any Assignor or on any Assignor’s behalf should
prove at any time to be false or misleading in any material respect on the
date
as of which made or deemed made;
(c) the
loss, theft, substantial damage, destruction, sale or encumbrance to or of
any
of the Collateral or the making of any levy, seizure or attachment thereof
or
thereon except to the extent:
(i) such
loss is covered by insurance proceeds which are used to replace the item
or
repay Laurus; or
(ii) said
levy, seizure or attachment does not secure indebtedness in excess of $100,000
in the aggregate for all Assignors and such levy, seizure or attachment has
been
removed or otherwise released within ten (10) days of the creation or the
assertion thereof;
(d) an
Event of Default shall have occurred under and as defined in any
Document.
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5. Upon
the occurrence of any Event of Default and at any time thereafter, Laurus
may
declare all Obligations immediately due and payable and Laurus shall have
the
remedies of a secured party provided in the UCC as in effect in the State
of New
York, this Agreement and other applicable law. Upon the occurrence of any
Event
of Default and at any time thereafter, Laurus will have the right to take
possession of the Collateral and to maintain such possession on any Assignor’s
premises or to remove the Collateral or any part thereof to such other premises
as Laurus may desire. Upon Laurus’ request, each Assignor shall assemble or
cause the Collateral to be assembled and make it available to Laurus at a
place
designated by Laurus. If any notification of intended disposition of any
Collateral is required by law, such notification, if mailed, shall be deemed
properly and reasonably given if mailed at least ten (10) days before such
disposition, postage prepaid, addressed to the applicable Assignor either
at
such Assignor’s address shown herein or at any address appearing on Laurus’
records for such Assignor. Any proceeds of any disposition of any of the
Collateral shall be applied by Laurus to the payment of all expenses in
connection with the sale of the Collateral, including reasonable attorneys’ fees
and other legal expenses and disbursements and the reasonable expenses of
retaking, holding, preparing for sale, selling, and the like, and any balance
of
such proceeds may be applied by Laurus toward the payment of the Obligations
in
such order of application as Laurus may elect, and each Assignor shall be
liable
for any deficiency. For the avoidance of doubt, following the occurrence
and
during the continuance of an Event of Default, Laurus shall have the immediate
right to withdraw any and all monies contained in any deposit account in
the
name of any Assignor and controlled by Laurus and apply same to the repayment
of
the Obligations (in such order of application as Laurus may elect). The
parties hereto each hereby agree that the exercise by any party hereto of
any right granted to it or the exercise by any party hereto of any remedy
available to it (including, without limitation, the issuance of a notice
of
redemption, a borrowing request and/or a notice of default), in each
case, hereunder, under the Security Agreement or under any other
Ancillary Agreement which has been publicly filed with the SEC
shall not constitute confidential information and no party
shall have any duty to the other party to maintain such information as
confidential.
6. If
any Assignor defaults in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on such Assignor’s
part to be performed or fulfilled under or pursuant to this Master Security
Agreement, Laurus may, at its option without waiving its right to enforce
this
Master Security Agreement according to its terms, immediately or at any time
thereafter and without notice to any Assignor, perform or fulfill the same
or
cause the performance or fulfillment of the same for each Assignor’s joint and
several account and at each Assignor’s joint and several cost and expense, and
the cost and expense thereof (including reasonable attorneys’ fees) shall be
added to the Obligations and such cost and expense shall be payable on demand
with interest thereon at the highest rate permitted by law, or, at Laurus’
option, debited by Laurus from any other deposit accounts in the name of
any
Assignor and controlled by Laurus.
7. Each
Assignor appoints Laurus, any of Laurus’ officers, employees or any other person
or entity whom Laurus may designate as such Assignor’s attorney, with power to
execute such documents in each such Assignor’s behalf and to supply any omitted
information and correct patent errors in any documents executed by any Assignor
or on any Assignor’s behalf; to file financing statements against such Assignor
covering the Collateral (and, in connection with
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the
filing of any such financing statements, describe the Collateral as “all assets
and all personal property, whether now owned and/or hereafter acquired” (or any
substantially similar variation thereof)); to sign such Assignor’s name on
public records; and to do all other things Laurus deem necessary to carry
out
this Master Security Agreement. Each Assignor hereby ratifies and approves
all
acts of the attorney and neither Laurus nor the attorney will be liable for
any
acts of commission or omission, nor for any error of judgment or mistake
of fact
or law other than gross negligence or willful misconduct (as determined by
a
court of competent jurisdiction in a final and non-appealable decision).
This
power being coupled with an interest, is irrevocable so long as any Obligations
remain unpaid.
8. No
delay or failure on Laurus’ part in exercising any right, privilege or option
hereunder shall operate as a waiver of such or of any other right, privilege,
remedy or option, and no waiver whatever shall be valid unless in writing,
signed by Laurus and then only to the extent therein set forth, and no waiver
by
Laurus of any default shall operate as a waiver of any other default or of
the
same default on a future occasion. Laurus’ books and records containing entries
with respect to the Obligations shall be admissible in evidence in any action
or
proceeding and shall constitute prima facie proof thereof. Laurus shall have
the
right to enforce any one or more of the remedies available to Laurus,
successively, alternately or concurrently. Each Assignor agrees to join with
Laurus in executing such documents or other instruments to the extent required
by the UCC in form satisfactory to Laurus and in executing such other documents
or instruments as may be required or deemed necessary by Laurus for purposes
of
affecting or continuing Laurus’ security interest in the
Collateral.
9. The
Assignors shall jointly and severally pay all of Laurus’ out-of-pocket costs and
expenses, including reasonable fees and disbursements of in-house or outside
counsel and appraisers, in connection with the preparation, execution and
delivery of the Documents, and in connection with the prosecution or defense
of
any action, contest, dispute, suit or proceeding concerning any matter in
any
way arising out of, related to or connected with any Document. The Assignors
shall also jointly and severally pay all of Laurus’ reasonable fees, charges,
out-of-pocket costs and expenses, including reasonable fees and disbursements
of
counsel and appraisers, in connection with (a) the preparation, execution
and
delivery of any waiver, any amendment thereto or consent proposed or executed
in
connection with the transactions contemplated by the Documents, (b) Laurus’
obtaining performance of the Obligations under the Documents, including,
but not
limited to the enforcement or defense of Laurus’ security interests, assignments
of rights and liens hereunder as valid perfected security interests, (c)
any
attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
dispose of any Collateral, (d) any appraisals or re-appraisals of any property
(real or personal) pledged to Laurus by any Assignor as Collateral for, or
any
other Person as security for, the Obligations hereunder and (e) any
consultations in connection with any of the foregoing. The Assignors shall
also
jointly and severally pay Laurus’ customary bank charges for all bank services
(including wire transfers) performed or caused to be performed by Laurus
for any
Assignor at any Assignor’s request or in connection with any Assignor’s loan
account (if any) with Laurus. All such costs and expenses together with all
filing, recording and search fees, taxes and interest payable by the Assignors
to Laurus shall be payable on demand and shall be secured by the Collateral.
If
any tax by any nation
or government, any state or other political subdivision thereof, and any
agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative
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functions
of or pertaining to government (each, a “Governmental Authority”)
is or may be imposed on or as a result of any transaction between any Assignor,
on the one hand, and Laurus on the other hand, which Laurus is or may be
required to withhold or pay, the Assignors hereby jointly and severally
indemnify and hold Laurus harmless in respect of such taxes, and the Assignors
will repay to Laurus the amount of any such taxes which shall be charged
to the
Assignors’ account; and until the Assignors shall furnish Laurus with indemnity
therefor (or supply Laurus with evidence satisfactory to it that due provision
for the payment thereof has been made), Laurus may hold without interest
any
balance standing to each Assignor’s credit (if any) and Laurus shall retain its
liens in any and all Collateral.
10. THIS
MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE
AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
All of the rights, remedies, options, privileges and elections given to Laurus
hereunder shall inure to the benefit of Laurus’ successors and assigns. The term
“Laurus” as herein used shall include Laurus, any parent of Laurus’, any of
Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
existing or hereafter created or acquired, and all of the terms, conditions,
promises, covenants, provisions and warranties of this Agreement shall inure
to
the benefit of each of the foregoing, and shall bind the representatives,
successors and assigns of each Assignor.
11. Each
Assignor hereby consents and agrees that the state of federal courts located
in
the County of New York, State of New York shall have exclusive jurisdiction
to
hear and determine any claims or disputes between Assignor, on the one hand,
and
Laurus, on the other hand, pertaining to this Master Security Agreement or
to
any matter arising out of or related to this Master Security Agreement,
provided, that Laurus and each Assignor acknowledges that any appeals from
those
courts may have to be heard by a court located outside of the County of New
York, State of New York, and further provided, that nothing in this Master
Security Agreement shall be deemed or operate to preclude Laurus from bringing
suit or taking other legal action in any other jurisdiction to collect, the
Obligations, to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Laurus.
Each Assignor expressly submits and consents in advance to such jurisdiction
in
any action or suit commenced in any such court, and each Assignor hereby
waives
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens.
Each Assignor hereby waives personal service of the summons, complaint and
other
process issues in any such action or suit and agrees that service of such
summons, complaint and other process may be made by registered or certified
mail
addressed to such assignor at the address set forth on the signature lines
hereto and that service so made shall be deemed completed upon the earlier
of
such Assignor’s actual receipt thereof or three (3) days after deposit in the
U.S. mails, proper postage prepaid.
The
parties desire that their disputes be resolved by a judge applying such
applicable laws. Therefore, to achieve the best combination of the benefits
of
the judicial system and of arbitration, the parties hereto waive all rights
to
trial by jury in any action, suite, or proceeding brought to resolve any
dispute, whether arising in contract, tort, or otherwise between Laurus,
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and/or
any Assignor arising out of, connected with, related or incidental to the
relationship established between them in connection with this Master Security
Agreement or the transactions related hereto.
12. It
is understood and agreed that any person or entity that desires to become
an
Assignor hereunder, or is required to execute a counterpart of this Master
Security Agreement after the date hereof pursuant to the requirements of
any
Document, shall become an Assignor hereunder by (x) executing a Joinder
Agreement in form and substance satisfactory to Laurus, (y) delivering
supplements to such exhibits and annexes to such Documents as Laurus shall
reasonably request and (z) taking all actions as specified in this Master
Security Agreement as would have been taken by such Assignor had it been
an
original party to this Master Security Agreement, in each case with all
documents required above to be delivered to Laurus and with all documents
and
actions required above to be taken to the reasonable satisfaction of
Laurus.
13. Assignors
hereby acknowledge that the obligations and liabilities secured by that certain
Pledge Agreement dated as of August 24, 2005 between Assignors and Laurus
(as
amended, modified or supplemented, the “Pledge Agreement”) shall include,
without limitation, all Obligations described herein, and hereby ratifies
and
confirms the security interest granted by Assignor to Laurus set forth in
the
Pledge Agreement.
14. All
notices from Laurus to any Assignor shall be sufficiently given if mailed
or
delivered to such Assignor’s address set forth below.
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Very
truly yours,
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By:
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/s/ Xxxx X. Xxxxxxx | |
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Name:
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Xxxx X. Xxxxxxx | |
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Its:
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President | |
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Address:
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0000
X. Xxxxxx Xxxxxx
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Xxxxx
Xxxx, Xxxxxxx
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Telephone:
000-000-0000
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Facsimile:
000-0000-0000
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MAGNETECH
INDUSTRIAL SERVICES, INC.
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By:
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/a/ Xxxx X. Xxxxxxx | |
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Name:
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Xxxx X. Xxxxxxx | |
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Its:
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President | |
8
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Address:
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0000
X. Xxxxxx Xxxxxx
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|
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Xxxxx
Xxxx, Xxxxxxx
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||
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Telephone:
000-000-0000
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||
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Facsimile:
000-0000-0000
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XXXXXXX
ELECTRIC, LLC
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By:
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/s/ Xxxx X. Xxxxxxx | |
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Name:
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Xxxx X. Xxxxxxx | |
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Its:
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President | |
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Address:
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0000
X. Xxxxxx Xxxxxx
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|
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Xxxxx
Xxxx, Xxxxxxx
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||
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Telephone:
000-000-0000
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||
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Facsimile:
000-0000-0000
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HK
ENGINE COMPONENTS, LLC
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By:
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/s/ Xxxx X. Xxxxxxx | |
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Name:
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Xxxx X. Xxxxxxx | |
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Its:
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President | |
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Address:
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0000
X. Xxxxxx Xxxxxx
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|
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Xxxxx
Xxxx, Xxxxxxx
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||
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Telephone:
000-000-0000
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||
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Facsimile:
000-0000-0000
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ACKNOWLEDGED:
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LAURUS
MASTER FUND, LTD.
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By:
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/s/ Xxxxx Grin | |
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Name:
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Xxxxx Grin | |
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Its:
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Partner | |
9
SCHEDULE
A
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Entity
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Jurisdiction
of
Formation
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Organization
Identification Number
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Indiana
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Magnetech
Industrial Services, Inc.
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Indiana
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Xxxxxxx
Electric, LLC
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Indiana
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HK
Engine Components, LLC
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Indiana
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SCHEDULE
B
COMMERCIAL
TORT CLAIMS
None.
