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Exhibit 10.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and delivered as of the 7th day of
January, 1997, by HOUTEX METALS COMPANY, INC., a Texas corporation ("Debtor"),
to and for the benefit of LASALLE NATIONAL BANK, a national banking association
("Secured Party").
R E C I T A L S:
A. Pursuant to the terms and conditions of a certain Loan Agreement of
even date herewith (the "Loan Agreement") by and among Secured Party, Debtor and
Metal Management, Inc., a Delaware corporation ("MMI"), Secured Party has
agreed, among other things, (i) to make available to Debtor a working capital
line of credit in the maximum principal amount of $3,500,000 (the "Line of
Credit") and (ii) to loan to MMI the principal amount of $6,500,000 (the
"Loan"). Debtor is executing a certain Note of even date herewith (the "Note")
payable to the order of Secured Party to evidence the Line of Credit. All
capitalized terms which are not defined herein shall have the meanings ascribed
thereto in the Loan Agreement.
B. A condition precedent to Secured Party's extension of the Line of
Credit to Debtor is the execution and delivery by Debtor of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. CREATION OF SECURITY INTEREST. Debtor hereby grants to Secured Party
a security interest in and mortgages the property owned by Debtor (except such
property listed on Exhibit C attached hereto) and described as follows
(hereinafter referred to collectively as the "Collateral"):
(a) All apparatus, machinery, devices, fixtures, communication
devices, systems and equipment, fittings, appurtenances, equipment,
appliances, furniture, furnishings, appointments, accessories,
landscaping, plants and all other items of personal property located at
any real property now or hereafter owned by or leased by Debtor or used
in the operation or maintenance of any real property now or hereafter
owned by or leased by Debtor or any business or operation conducted
thereon. All fixtures and equipment now or hereafter installed for use
in the operation of the buildings, structures and improvements now or
hereafter on any real property now or hereafter owned by or leased by
Debtor, including but not limited to, all lighting, heating, cooling,
ventilating, air-conditioning, plumbing, sprinkling, incinerating,
refrigerating, air-cooling, lifting, fire extinguishing, cleaning,
entertaining, security, communicating and electrical and power systems,
and the machinery, appliances, fixtures and equipment pertaining
thereto, all awnings, ovens, stoves, refrigerators, dishwashers,
disposals, carpeting, switchboards, engines, motors, tanks, pumps,
screens, storm doors and windows, shades, floor coverings, ranges,
washers, dryers, disposals, cabinets, furniture, partitions, conduits,
ducts and compressors, and all elevators and escalators and the
machinery and appliances, fixtures and equipment pertaining thereto.
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(b) Any and all revenues, receivables and income now owned or
hereafter acquired by Debtor.
(c) Any and all other personal property of any kind, nature or
description, whether tangible or intangible, (including without
limitation, any and all goods, accounts, contract rights, franchises,
licenses, permits, chattel paper, money, deposit accounts, documents,
instruments and general intangibles) of Debtor, whether now owned or
hereafter acquired, or in which Debtor now has or shall hereafter
acquire any right, title or interest whatsoever (whether by xxxx of
sale, lease, conditional sales contract, or other title retention
document or otherwise).
(d) Any and all additions and accessories to all of the
foregoing and any and all proceeds (including proceeds of insurance,
eminent domain or other governmental takings and tort claims),
renewals, replacements and substitutions of all of the foregoing.
(e) All of the books and records pertaining to the foregoing.
2. SECURED OBLIGATIONS. The security interest created herein is given
as security for the payment of all indebtedness and the performance and
observance of all covenants, conditions, agreements, representations, warranties
and other liabilities and obligations of Debtor to or benefiting Secured Party
which are evidenced, secured or created by this Agreement or the Note
(collectively, the "Obligations").
3. DEBTOR'S COVENANTS. Debtor covenants and agrees as follows:
(a) The Collateral shall not be misused, wasted or allowed to
deteriorate, except for the ordinary wear and tear resulting from its
use or damage resulting from a casualty.
(b) The Collateral shall at all times be insured against loss,
damage, theft, and such other risks as Secured Party may require in
such amounts, with such companies, under such policies, in such form
and for such periods as shall be reasonably satisfactory to Secured
Party, and each policy shall provide that the loss thereunder and the
proceeds payable thereunder shall be payable to Secured Party as its
interest may appear.
(c) The Collateral shall not be used in violation of any
applicable law or regulation.
(d) Debtor shall not sell, transfer, lease or otherwise
dispose of any of the Collateral or any interest therein or offer to do
so other than in the ordinary course of Debtor's business without the
prior written consent of Secured Party, or permit anything to be done
that may impair the value of any of the Collateral or the security
intended to be afforded by this Agreement.
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(e) Debtor shall pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation.
(f) Debtor shall sign and execute alone or with Secured Party
any financing statement or other document or procure any documents and
pay all costs, expenses and fees, including reasonable attorneys' fees,
necessary to protect the security interest under this Agreement against
the rights, interests or claims of third persons.
(g) Debtor shall reimburse Secured Party for all costs,
expenses and fees, including, without limitation, court costs and
reasonable attorneys' fees, incurred by or for Secured Party for any
action taken by or for Secured Party to remedy an Event of Default (as
defined below), together with interest thereon at the Default Rate (as
defined in the Loan Agreement) from the date incurred by Secured Party
until repaid to Secured Party.
(h) Debtor shall (i) from time to time promptly execute and
deliver to Secured Party all such other assignments, certificates,
supplemental writings, and financing statements, and do all other
reasonable acts or things as Secured Party may request in order to more
fully evidence and perfect the security interest created herein; (ii)
punctually and properly perform all of its agreements and obligations
under the Loan Agreement and the Note; (iii) pay the indebtedness
secured hereby in accordance with the terms of the Loan Agreement and
the Note; (iv) promptly furnish Secured Party with any information or
writings which Secured Party may reasonably request concerning the
Collateral; (v) allow Secured Party to inspect all records of Debtor
relating to the Collateral, the Obligations and the business and
operation of Debtor with respect to the Collateral, and to make and
take away copies of such records; (vi) promptly notify Secured Party of
any material adverse change in any facts or circumstances warranted or
represented by Debtor in this Agreement or in any other writing
furnished by Debtor to Secured Party in connection with the Collateral,
the Obligations or the business and operation of Debtor or the
Collateral; (vii) promptly notify Secured Party of any claim, action or
proceeding affecting title to the Collateral, or any part thereof, or
the security interest created herein, and, at the request of Secured
Party, appear in and defend, at Debtor's expense, any such action or
proceeding; and (viii) promptly, after being requested by Secured
Party, pay to Secured Party the amount of all expenses, including
reasonable attorneys' fees and other legal expenses, incurred by
Secured Party in enforcing the security interest created herein,
together with interest thereon at the Default Rate from the date
incurred by Secured Party until the date repaid to Secured Party.
(i) Debtor shall not, without the prior written consent of
Secured Party, create any other security interest in, mortgage, pledge,
or otherwise encumber the Collateral, or any part thereof, or permit
the same to be or become subject to any lien, attachment, execution,
sequestration, other legal or equitable process, or any encumbrance of
any kind or character.
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(j) Should any part of the Collateral ever be in any manner
converted by its issuer or maker into another type of property or any
money or other proceeds ever be paid or delivered to Debtor as a result
of Debtor's rights in the Collateral, then all such property, money and
other proceeds shall become part of the Collateral, and Debtor
covenants to forthwith pay or deliver to Secured Party all of the same
which is susceptible of delivery and, at the same time, if Secured
Party deems it necessary and so requests, Debtor will properly endorse
or assign the same (provided that if no Event of Default then exists,
Debtor shall not be required to deliver to Secured Party cash received
in satisfaction of an account receivable, provided further that nothing
in this clause is intended to affect or otherwise restrict the security
interest granted to Secured Party in the proceeds of all Collateral).
With respect to any of such property of a kind requiring any additional
security agreement, financing statement or other writing to perfect a
security interest therein in favor of Secured Party, Debtor will
forthwith execute and deliver to Secured Party whatever Secured Party
shall deem necessary or proper for such purpose.
(k) Should any covenant, duty or agreement of Debtor fail to
be performed in accordance with its terms hereunder, Secured Party may,
but shall never be obligated to, perform or attempt to perform such
covenant, duty or agreement on behalf of Debtor, and any amount
expended by Secured Party in such performance or attempted performance
shall become a part of the indebtedness secured hereby, and, upon
demand of Secured Party, Debtor agrees to pay such amount promptly to
Secured Party, together with interest thereon at the Default Rate from
the date of such expenditure by Secured Party until repaid to Secured
Party.
4. DEFAULT. An "Event of Default" shall occur under this Agreement only
upon the occurrence of (a) a breach by Debtor of any of the covenants,
agreements, representations, warranties or other provisions hereof which is not
cured or waived within the applicable grace or cure period, if any, set forth in
the Loan Agreement, or (b) a HouTex Event of Default described in the Loan
Agreement.
5. SECURED PARTY'S RIGHTS AND REMEDIES. Secured Party shall have
available to it the following rights and remedies:
(a) Right to Assign. Secured Party may assign this Agreement,
and if Secured Party does assign this Agreement, the assignee shall be
entitled to the performance of all of Debtor's agreements and
obligations under this Agreement, and the assignee shall be entitled to
all the rights and remedies of Secured Party under this Agreement.
Debtor expressly agrees that it will assert no claims or defenses it
may have against Secured Party against the assignee except those
available to it pursuant to this Agreement.
(b) Right to Discharge Debtor's Obligations. Secured Party
may, at its option, discharge taxes, liens or security interests or
other encumbrances at any time levied or placed on the Collateral, may
remedy or cure any default of Debtor under the terms of any
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lease, rental agreement, or other document which in any way pertains to
or affects Debtor's title to or interest in any of the Collateral, may
pay for insurance on the Collateral, and may pay for the maintenance
and preservation of the Collateral, and Debtor agrees to reimburse
Secured Party, on demand, for any payment made or any expense incurred
by Secured Party, including reasonable attorneys' fees, pursuant to the
foregoing authorization, together with interest at the Default Rate
from the date so paid or incurred by Secured Party until repaid to
Secured Party, which payments, expenses and interest shall be secured
by this Agreement and by the other Loan Documents.
(c) Rights as Secured Creditor. Upon the occurrence of an
Event of Default, Secured Party, in its sole and absolute discretion,
may: (a) exercise any one or more of the rights and remedies afforded
to secured parties under the Uniform Commercial Code in force in the
State(s) in which the Collateral is located, together with any and all
other rights and remedies otherwise provided and available to Secured
Party at law or in equity; (b) enter, with process of law and without
breach of the peace, any premises where the Collateral (or the books
and records of Debtor related thereto) is or may be located, and
without charge or liability to Secured Party therefor seize and remove
the Collateral (and copies of Debtor's books and records in any way
relating to the Collateral) from said premises and/or remain upon said
premises and use the same (together with said books and records) for
the purpose of collecting, preparing and liquidating the Collateral,
all without cost to Secured Party; and (c) upon prior notice to Debtor
as required by this Agreement, sell or otherwise dispose of the
Collateral at public or private sale or auction for cash or credit
(which sale or auction may, at the option of Secured Party, occur on
the premises where the Collateral is located or elsewhere, at no cost
to Secured Party) and from the proceeds of such sale or disposal retain
(i) all costs and charges incurred by Secured Party in taking and
causing the removal and sale or disposal of the Collateral, including
reasonable attorneys' fees; and (ii) an amount equal to all other
Obligations; provided, however, that Debtor shall be credited with the
net proceeds of such sale only when such proceeds are actually received
by Secured Party.
(d) Assembly of Collateral; Injunctive Relief. Upon the
occurrence of an Event of Default, Debtor, immediately upon demand by
Secured Party, shall assemble the Collateral and make it available to
Secured Party at a place or places to be designated by Secured Party at
Debtor's primary place of business or other reasonable locations within
Texas. Debtor hereby acknowledges and agrees that if Debtor fails to
perform, observe or discharge any of its obligations or liabilities
under this Agreement, no remedy of law shall provide adequate relief to
Secured Party, and that Secured Party shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity
of proving actual damages or the posting of bond, surety or other
security.
(e) Notice of Collateral Disposition. Any notice required to
be given by Secured Party of a sale, lease or other disposition of the
Collateral or any other intended action by Secured Party, sent by
registered or certified United States mail, postage prepaid
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and duly addressed to Debtor at Debtor's address set forth in the Loan
Agreement not less than ten days prior to such proposed action, shall
constitute commercially reasonable and fair notice to Debtor thereof.
(f) Matters Regarding Sale of Collateral. Debtor agrees that
Secured Party may, if Secured Party deems it reasonable, postpone or
adjourn any sale of Collateral from time to time by an announcement at
the time and place of sale or by announcement at the time and place of
such postponed or adjourned sale, without being required to give a new
notice of sale. Debtor also waives and releases any right of Debtor to
redeem the Collateral from such sale. At any sale or sales made
pursuant to this Agreement or in a suit to foreclose the same, the
Collateral, at the option of Secured Party or its assigns, may be sold
in its entirety or separately, at the same or at different times, and
the Collateral need not be present at the time or place of sale. At any
such sale, Secured Party or the holder of the indebtedness hereby
secured may bid for and purchase any of the property sold,
notwithstanding that such sale is conducted by Secured Party or its
attorneys, agents, or assigns, and no irregularity in the manner of
sale or of giving notice shall operate to preclude Secured Party from
recovering the Obligations.
(g) Replevin. If Secured Party seeks possession of the
Collateral through replevin or other court action, Debtor hereby
irrevocably waives (i) any bond, surety or security required as an
incident to such possession, and (ii) any demand by Secured Party for
possession of the Collateral prior to the commencement of any such suit
or action.
(h) Enforcement Standards. Secured Party shall have the right
at all times to enforce the provisions of this Agreement in strict
accordance with the terms hereof, notwithstanding any conduct or custom
on the part of Secured Party in refraining from so doing at any time or
times. The failure of Secured Party at any time or times to enforce its
rights under said provisions strictly in accordance with the same shall
not be construed or operate as a waiver of any of the rights and
remedies granted Secured Party hereunder or as having created a custom
in any way or manner contrary to the specific provisions of this
Agreement or as having in any way or manner modified the same. All
rights and remedies of Secured Party are cumulative and concurrent, and
the exercise of one right or remedy by Secured Party shall not be
deemed a waiver or release of any other right or remedy.
6. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants that:
(a) Debtor has authority to execute and deliver this
Agreement;
(b) no financing statement covering the Collateral, or any
part thereof, has been filed and remains in effect;
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(c) no other security agreement covering the Collateral, or
any part thereof, has been made and no security interest, other than
the one herein created, has attached or been perfected in the
Collateral or in any part thereof;
(d) no material dispute, right of setoff, counterclaim or
defense exists with respect to any part of the Collateral;
(e) all information supplied and statements made in any
financial or credit statements or application for credit prior to the
execution of this Agreement are true and correct in all material
respects as of the date hereof;
(f) at the time Secured Party's security interest attaches to
any of the Collateral or its proceeds, Debtor will be the lawful owner
with the right to transfer any interest therein, and Debtor will make
such further assurances as to prove Secured Party's security interest
in the Collateral as may be required and will defend the Collateral and
its proceeds against the lawful claims and demands of all persons
whomsoever.
(g) There is listed on EXHIBIT A hereto the location of the
principal place of business of Debtor, all of the other places of
business of Debtor and all locations where all tangible Collateral and
the books and records of Debtor are kept. Debtor shall not change the
location of (i) its places of business or its books and records, or
(ii) any tangible Collateral, without in each case providing not less
than thirty days prior written notice thereof to Secured Party.
(h) All trade or assumed names under which Debtor is doing
business or proposes to do business are listed on EXHIBIT B. Debtor
shall give Secured Party not less than thirty days prior written notice
of any change in Debtor's name or any new or change in any trade name
that Debtor uses in its business.
The delivery at any time by Debtor to Secured Party of the Collateral shall
constitute a representation and warranty by Debtor that, with respect to such
Collateral, and each item thereof, Debtor is owner of the Collateral and the
matters heretofore represented and warranted in this Paragraph 6 are true and
correct. Further, Debtor, upon the request of Secured Party, agrees to amend
this Agreement and any and all financing statements filed in connection
therewith for the purpose of setting forth in said Agreement and said financing
statements an accurate and itemized list of the Collateral now generally
described herein and in said financing statements and to include in said
accurate and itemized list an identification of the Collateral by make, model,
serial number and other appropriate descriptive data.
7. SUBROGATION. If the Obligations, or any part thereof, are renewed or
extended, or applied toward the payment of any indebtedness secured by any
mortgage, pledge, security agreement or other lien, Secured Party shall be and
is hereby subrogated to all of the rights, titles, security interests and other
liens securing the indebtedness so renewed, extended or paid.
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8. FURTHER AGREEMENTS.
(a) "Debtor" and "Secured Party" as used in this Agreement
include the legal representatives, successors and assigns of those
parties.
(b) Neither Debtor nor Secured Party shall be bound by any
amendment not expressed in writing and signed by the party to be bound
thereby.
(c) It is expressly intended, understood and agreed: (i) that
this Agreement is made and entered into for the sole protection and
benefit of Secured Party and Debtor, and their successors and assigns
and no other person or persons shall have any right of action hereunder
or rights to the proceeds of the Line of Credit at any time; (ii) that
the proceeds of the Line of Credit do not constitute a trust fund for
the benefit of any third party; and (iii) that no third party shall
under any circumstances be entitled to any equitable lien on any
undisbursed proceeds of the Line of Credit at any time. The
relationship between Secured Party and Debtor is solely that of a
lender and borrower, and nothing contained herein, or in the Note or
the Loan Agreement shall in any manner be construed as making the
parties hereto partners, joint venturers or as creating any
relationship other than lender and borrower.
(d) This Agreement shall be construed in accordance with and
governed by the laws of the State of Illinois. In the event that any
provision of this Agreement is deemed to be invalid by reason of the
operation of law, or by reason of the interpretation placed thereon by
any administrative agency or any court, Debtor and Secured Party shall
negotiate an equitable adjustment in the provisions of the same in
order to effect, to the maximum extent permitted by law, the purpose of
this Agreement and the validity and enforceability of the remaining
provisions, or portions or applications thereof, shall not be affected
thereby and shall remain in full force and effect.
(e) To the extent permitted by law, Debtor hereby waives any
and all rights to require marshalling of assets.
(f) All notices, demands, requests and other correspondence
which are required or permitted to be given hereunder shall be deemed
sufficiently given when delivered or mailed in the manner and to the
address of Debtor or Secured Party, as the case may be, as specified in
the Loan Agreement.
(g) This Agreement shall inure to the benefit of Secured Party
and its successors and assigns and shall be binding upon Debtor and its
successors and assigns.
(h) DEBTOR AND SECURED PARTY ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THE LOAN AGREEMENT, THIS AGREEMENT OR
THE NOTE OR WITH
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RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES. ACCORDINGLY, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR AND SECURED PARTY HEREBY
KNOWINGLY AND VOLUNTARILY MUTUALLY (A) WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY CIVIL ACTION, CLAIM, COUNTERCLAIM, CROSS-CLAIM, THIRD- PARTY
CLAIM, DISPUTE, DEMAND, SUIT OR PROCEEDING ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THE LOAN AGREEMENT, THIS AGREEMENT OR THE NOTE, OR ANY
RENEWAL, EXTENSION OR MODIFICATION THEREOF, OR ANY CONDUCT OF ANY PARTY
RELATING THERETO, AND (B) AGREE THAT ANY SUCH ACTION, CLAIM, SUIT OR
PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
HOUTEX METALS COMPANY, INC., a LASALLE NATIONAL BANK, a national
Texas corporation banking association
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxx
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Title: Vice President Title: Senior Vice President
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EXHIBIT A
Locations of Property and Records
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EXHIBIT B
Names of Debtor
