SUBORDINATED SECURITY AGREEMENT
This security agreement is made on March 24, 1998, between Horizon
Technology, L.L.C., a Delaware limited liability company, of 00000 Xxxxxxxx
Xxxx, Xxxxxx, Xxxxxxxx 48180-5347("Debtor"), and Uniflow Corporation, a
Michigan corporation, 00000 Xxxx Xxxxx, Xxxx, Xxxxxxxx 00000 ("Secured
Party").
1. Grant of Security Interest. Debtor grants to Secured Party a
continuing security interest in all equipment, contracts and
intangible assets purchased by Debtor from Secured Party, together
with (i) all proceeds of the foregoing; and (ii) all books, records,
and documents at any time evidencing or relating to any of the
foregoing. All of the foregoing properties and assets of Debtor are
referred to collectively in this agreement as the "collateral."
2. Indebtedness Secured. The foregoing security interest is given to
secure payment and performance of ALL OBLIGATIONS AND INDEBTEDNESS
OF DEBTOR NOW OR LATER OWING TO SECURED PARTY, including but not
limited to all future advances and all obligations and indebtedness
of Debtor to Secured Party under this agreement and under all other
purchase agreements, notes, and other agreements, instruments, and
documents that have been or are in the future signed by Debtor, and
all extensions or renewals of the indebtedness and obligations. The
indebtedness and obligations now owing by Debtor to Secured Party
include, BUT ARE NOT NECESSARILY LIMITED TO, the obligations and
indebtedness evidenced by the following instrument(s), document(s),
or agreement(s) that have been executed by Debtor:
Royalty Agreement, dated of even date herewith.
Short Term Note in the amount of Seven Hundred Thousand
Dollars ($700,000.00), of even date herewith evidencing the
aggregate unpaid balance of the purchase price of all
equipment and other assets sold to Debtor by Secured Party
as of this date.
The indebtedness and obligations that are secured by this security
interest are collectively called the "indebtedness."
3. Warranties, Representations, and Agreements. Debtor warrants and
represents to, and agrees with, Secured Party as follows:
(a) Debtor is a limited liability company and is organized and
validly existing in good standing under the laws of the
state of Michigan, Debtor has full power and authority to
enter into and perform its obligations under this
agreement; the
execution, delivery, and performance of this agreement have
been duly authorized by all necessary action of Debtor's
managing board and will not violate Debtor's articles of
organization, bylaws, or the like; and this agreement is
the valid and binding obligation of Debtor, enforceable in
accordance with its terms.
(b) Debtor is the owner of the collateral, and none of the
collateral is subject to any lien, security interest,
encumbrance, or claim in favor of any third party, and no
financing statement is on file in any public office
covering any of the collateral, except MetLife Capital
Corporation.
(c) None of the collateral is, and Debtor will not permit any
of the collateral to be, contaminated or the source of
contamination of any other property, by any substance that
is now or later regulated by or subject to any past,
present, or future federal, state, local, or foreign law,
ordinance, rule, regulation, or order that regulates or is
intended to protect public health or the environment or
that establishes liability for the investigation, removal,
or cleanup of, or damage caused by, any environmental
contamination, including without limitation any law,
ordinance, rule, regulation, or order that regulates or
prescribes requirements for air quality, water quality, or
the disposition, transportation, or management of waste
materials or toxic substances. Debtor will operate and
maintain the collateral in compliance with all such laws
and regulations.]
(d) Debtor's address set forth on the face of this agreement is
the location of Debtor's / chief executive office.
4. Agreements of Debtor. Debtor agrees that:
(a) Debtor will not cause or permit any lien, security interest
or encumbrance to be placed on any collateral, except in
favor of Secured Party and except in favor of MetLife
Capital Corporation ["permitted lien(s)"], and Debtor will
not sell, assign, or transfer any collateral or permit any
collateral to be transferred by operation of law.
(b) Debtor will maintain all records concerning the collateral
at Debtor's address appearing on the first page of this
agreement and will keep all tangible collateral at 0000
Xxxxxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
(c) Debtor will furnish Secured Party with the information
regarding the collateral that Secured Party shall from time
to time request and will allow Secured Party at any
reasonable time to inspect the collateral and Debtor's
records regarding the collateral.
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(d) Debtor will execute, file, record, or procure from third
persons the financing statements, subordination agreements,
and other documents and take all other action that Secured
Party may deem necessary to perfect, to continue perfection
of, or to maintain Secured Party's security interest in the
collateral subject to permitted lien(s), and Debtor will
place upon the collateral and/or documents evidencing the
collateral the notice of Secured Party's security interest
that Secured Party may from time to time require.
(e) Secured Party may file a photocopy of this agreement as a
financing statement evidencing Secured Party's security
interest in the collateral.
(f) Debtor will immediately notify Secured Party in writing of
any change in Debtor's name, identity, or corporate
structure, and of any change in the location of Debtor's
chief executive office.
(g) Debtor will indemnify Secured Party with respect to all
losses, damages, liabilities, and expenses (including
attorney fees) incurred by Secured Party by reason of any
failure of Debtor to comply with any of Debtor's
obligations under this agreement or by reason of any
warranty or representation made by Debtor to Secured Party
in this agreement being false in any material respect.
(h) Debtor will maintain all tangible collateral in good
condition and repair and maintain fire and extended
coverage insurance covering all tangible collateral in the
amounts and against the risks that is customarily
maintained by similar businesses. Each insurance policy
will provide that its proceeds will be payable to Secured
Party to the extent of Secured Party's interest in the
collateral and that the policy will not be canceled, and
the coverage will not be reduced, without at least 10 days
prior written notice by the insurer to Secured Party.
Debtor will provide Secured Party with evidence of the
insurance coverage.
5. Events of Default and Acceleration. Any part or all of the
indebtedness shall, at the option of Secured Party, become
immediately due and payable without notice or demand upon the
occurrence of any of the following events of default:
(a) If default occurs in the payment or performance of any of
the indebtedness, when and as it shall be due and, and if
the default continues for 10 days after Secured Party has
given written notice of it to Debtor.
(b) If default occurs in the performance of any obligation of
Debtor to Secured Party under this agreement or under any
promissory note or other instrument at any time evidencing
any indebtedness or under any other or other agreement that
now or later secures or relates to any indebtedness or
obligation now or later owing by Debtor to Secured Party
("security documents").
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(c) If any warranty, representation, or statement made to
Secured Party by Debtor in this agreement or in any
security document, credit application, financial statement,
or otherwise, was false in any material respect when made
or furnished.
(d) If Debtor dissolves, becomes insolvent, or makes an
assignment for the benefit of creditors.
If a voluntary or involuntary case in bankruptcy,
receivership, or insolvency is at any time commenced by or against
Debtor, then the entire indebtedness shall automatically become
immediately due and payable, without notice or demand. All or part
of the indebtedness also may become, or may be declared to be,
immediately due and payable under the terms of any note at any time
evidencing any of the indebtedness or of any other agreement entered
into between Debtor and Secured Party.
6. Secured Party's Rights and Remedies. Secured Party shall have all
rights and remedies of a secured party under applicable laws.
Without limiting these rights and remedies:
(a) If all or any part of the indebtedness is not paid at
maturity, Debtor, upon demand by Secured Party, shall
deliver the collateral and proceeds of collateral to
Secured Party at such place as Secured Party shall
designate, and Secured Party may dispose of the collateral
in any commercially reasonable manner. Any notification
required to be given by Secured Party to Debtor regarding
any sale or other disposition of collateral shall be
considered reasonable if mailed at least five days before
the sale or other disposition.
(b) The proceeds of any collection or disposition of collateral
shall be applied first to Secured Party's attorney fees and
expenses, as provided in paragraph 7, and then to the
indebtedness, and Debtor shall be liable for any deficiency
remaining. Excess proceeds, if any, shall be returned to
Debtor.
All rights and remedies of Secured Party shall be cumulative and may
be exercised from time to time; provided, however, this security interest
shall be subject to a Subordination Agreement (as to collateral only) with
Buyer's lender.
7. Expenses. Debtor shall reimburse Secured Party on demand for all
attorney fees, legal expenses, and other expenses that Secured Party
incurs in protecting and enforcing its rights under this agreement.
This includes fees and expenses incurred in trying to take
possession of collateral from Debtor, a trustee or receiver in
bankruptcy, or any other person. Secured Party may apply any
proceeds of collection or disposition of collateral to Secured
Party's reasonable attorney fees, legal expenses, and other
expenses.
8. Amendments and Waivers. No provision of this agreement may be
modified or waived except by a written agreement signed by Secured
Party. Secured Party will continue to
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have all of its rights under this agreement even if it does not
fully and promptly exercise them on all occasions.
9. Notices. Any notice to Debtor or to Secured Party shall be deemed to
be given if and when mailed, with postage prepaid, to the respective
address of Debtor or Secured Party appearing on the first page of
this agreement, or if and when delivered personally.
10. Other. In this agreement, maturity of any of the indebtedness means
the time when that indebtedness has become due and payable, for any
reason (including, for example, acceleration due to default or
bankruptcy). This agreement will be governed by, and interpreted
according to, Michigan law.
11. Binding Effect. This agreement shall be binding upon and inure to
the benefit of Debtor and Secured Party and their respective
successors and permitted assigns.
Debtor and Secured Party have executed this Security Agreement on
the date listed on the first page of this agreement.
DEBTOR:
Horizon Technology, L.L.C.
a Delaware limited liability company
By: /s/ Xxxxxxx Xxxx
___________________________
Its: President and CEO
_______________________
SECURED PARTY:
Uniflow Corporation
By: /s/ Xxxxxx X. Xxxxxxxx
____________________________
Its: Chairman
________________________
