SECURITY AGREEMENT
THIS SECURITY AGREEMENT (hereinafter referred to as "Agreement") is
made this 28th day of February, 1997, but effective March 1, 1997, by and among
UTILASE PRODUCTION PROCESS, INC., a Michigan corporation (hereinafter referred
to as "UPP"), whose address is 00 Xxxxxxxxxx Xxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000, NOBLE INTERNATIONAL, LTD., a Michigan
corporation (hereinafter referred to as "Noble"), whose address is 00 Xxxxxxxxxx
Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000 (UPP and Noble
hereinafter referred to collectively as "Debtor"), and UTILASE, INC., a Michigan
corporation (hereinafter referred to as "Secured Party"), whose address is 20530
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, UPP has purchased certain assets of Secured Party, pursuant to
an Asset Purchase Agreement dated February 28, 1997, but effective March 1, 1997
(hereinafter referred to as the "Asset Purchase Agreement"); and
WHEREAS, Secured Party is the payee of a certain Promissory Note dated
February 28, 1997 (hereinafter referred to as the "Note"), wherein Debtor is
obligated to pay to Secured Party certain principal pursuant to the terms of the
Note; and
WHEREAS, Secured Party and Debtor desire to secure the payment of the
Note by granting Secured Party a security interest in certain assets of UPP; and
WHEREAS, all capitalized terms used herein but not otherwise defined
shall be as defined in the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the promises and the mutual
covenants hereinafter contained, the parties hereby agree as follows:
Section 1. Grant of Security. As security for the obligations of Debtor
under the Note, UPP hereby grants to Secured Party a continuing security
interest and lien in certain assets of UPP which are described in Exhibit A
which is attached hereto and thereby made a part hereof (hereinafter referred to
as the "Collateral"), including all substitutions thereto and proceeds
therefrom, and all necessary and incidental items related thereto. Collateral
shall not include property acquired after the date hereof to the extent it is
secured by a purchase money security interest.
Section 2. Priority of Lien.
(a) (i) The parties acknowledge and understand that the
security interest evidenced by this Security Agreement is a lien upon
the Collateral which is subordinate to the lien of Comerica Bank and
the lien of the General Retirement Fund of the City of Detroit in such
Collateral (which liens are hereinafter referred to as "Permitted
Liens").
(ii) Upon the payment by Debtor to Secured Party of the
Seven Hundred Fifty Thousand and 00/100 Dollar ($750,000.00)
installment under the Note, Secured Party shall deliver to Debtor
within seven (7) days of such payment a release of such Permitted Liens
in the Collateral, including but not limited to any and all necessary
Uniform Commercial Code Termination Statements (collectively "Release
of Liens").
(b) Upon the satisfaction of the terms of Section 2(a)(ii)
above and as long as any indebtedness under the Note remains unpaid, Debtor
acknowledges that, and shall take whatever action is necessary to perfect a
first and prior security interest in the Collateral for the benefit of Secured
Party. Thereafter, in the event Debtor shall obtain financing on an "arms
length" basis from an institutional lender, which lender shall be acceptable to
Secured Party exercising reasonable judgment (the "Third Party Lender"), then at
Debtor's written request, Secured Party shall subordinate its first and prior
perfected security interest in the Collateral to the security interest of the
Third Party Lender, in an amount not to exceed seventy-five percent (75%) of the
aggregate forced sale value of the Collateral (the "Forced Sale Value").
Notwithstanding the foregoing, Secured Party shall not be required to
subordinate its first and prior perfected security interest unless the proceeds
of the loan from the Third Party Lender shall be used by Debtor to first pay the
Seven Hundred Fifty Thousand and 00/100 Dollar ($750,000.00) installment payment
due Secured Party under the Note (if such installment has not already been paid
in full), and the balance, if any, of such loan proceeds are used to fund the
capital requirements of Debtor in the Relevant Business. Secured Party shall not
be required to subordinate its first and prior perfected security interest in
the Collateral to the lien of the Third Party Lender unless the terms and
conditions of a Subordination Agreement are reasonably satisfactory to Secured
Party (paying due regard to Debtor's then existing financial condition, as well
as the terms and conditions of the loan obtained from the Third Party Lender).
In no event, however, shall Secured Party be required to subordinate the right
to any payments from Debtor.
(c) For purposes of this Agreement, the Forced Sale Value of
the Collateral shall be determined on a liquidation basis by an appraiser to be
mutually selected by Secured Party and Debtor. Further, the Forced Sale Value of
the Collateral shall be
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determined at the time Debtor shall have requested Secured Party to subordinate
its first and prior perfected security interest in the Collateral.
Section 3. Covenants and Warranties of Debtor.
(a) Upon reasonable request of Secured Party, Debtor shall
execute and deliver to Secured Party all financing statements, security
agreements, certificates of title or other instruments and documents which
Secured Party may reasonably request, in a form satisfactory to Secured Party.
(b) Debtor shall pay promptly when due all taxes, assessments,
fees, licenses and charges upon or necessary for the use or operation of the
Collateral.
(c) Secured Party may at any reasonable time inspect the
Collateral and all records of Debtor relating to the Collateral, and take any
other actions reasonably necessary or convenient to ascertain the existence,
condition and value of the Collateral.
(d) Debtor will not sell or otherwise dispose of the
Collateral or any portion thereof, except for inventory now owned or hereafter
acquired, which is sold in the ordinary course of Debtor's business, and except
for tooling and/or machinery and equipment which is sold in the ordinary course
of business and which (i) is promptly replaced by tooling and/or machinery and
equipment, as applicable, of substantially the same value as the tooling and/or
machinery and equipment, as applicable, which is sold; (ii) is consented to in
advance by Secured Party; (iii) the net proceeds of which are provided to Debtor
in reduction of the obligations under the Note; and/or (iv) the value of which
is less than One Thousand and 00/100 Dollars ($1,000.00).
(e) Debtor will keep the Collateral insured against loss or
damage by fire and casualty for the full, replacement value thereof and which
insurance shall name Secured Party as additional loss payee, and will keep the
Collateral in good repair and operating condition, normal wear and tear
excepted, and will pay, as and when the same become due and before penalties
accrue, all taxes of every nature, special or otherwise, levied or assessed upon
the Collateral or any part thereof, or levied or assessed against Debtor in
respect thereof, and will not permit or suffer any lien of mechanics or
materialmen or any other lien or security interest of any kind to attach to any
of the Collateral.
(f) Debtor will not remove any portion of the Collateral from
its operational location without the written consent of Secured Party.
(g) In case of any failure of Debtor to keep the Collateral
free from liens, except as provided herein, or taxes on
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or in respect thereof, or other adverse claims materially affecting the
Collateral, or to fully and punctually keep and perform any other covenant
hereof, then in any such case, Secured Party may (but shall not be required to
do so) pay or contest or settle such taxes, liens, security interest,
encumbrances, or adverse claims, or any judgments based thereon, or otherwise
make good any other aforesaid failure of Debtor. Debtor shall reimburse Secured
Party promptly for all reasonable sums paid or advanced for any such purpose,
including reasonable attorney fees, and any and all other sums for which Debtor
is obligated to reimburse Secured Party, together with costs, expenses, and
reasonable attorney fees paid or incurred by Secured Party in the premises, and
together with interest on all such sums from the date of advancement until
repaid to Secured Party with interest at the rate of ten percent (10%) per
annum, simple interest until repaid to Secured Party, and it must be repaid
within ten (10) days. All such sums, with interest thereon, shall be and become
additional indebtedness secured by this Security Agreement as part of the
indebtedness.
Section 4. An Event of Default. An Event of Default under
this Agreement shall exist upon occurrence of any of the following:
(a) Upon failure by Debtor to pay any installment due under
the Note within seven (7) days of the installment becoming due;
(b) Upon failure by Debtor to pay any installment due to a
Third Party Lender within seven (7) days of the installment becoming due under
such Third Party Lender debt instrument for which Secured Party has agreed to
subordinate its security interest pursuant to Section 2(b) above; and
(c) Upon default of any of the other terms and conditions of
this Security Agreement and/or the Note by Debtor.
Section 5. Rights Upon an Event of Default. After the occurrence of an
Event of Default as provided in Section 4(a) and/or Section 4(b) above, and in
the case of an Event of Default under Section 4(c) above, the passage of (i)
thirty (30) days from the date of written notice to Debtor that such Event of
Default has occurred; or (ii) the passage of such longer period of time as is
reasonable if that Event of Default is of a type that cannot be cured in a
commercially reasonable manner in such thirty (30) day period, Secured Party,
without prejudice to any other legal or equitable enforcement rights that may be
available to it, shall have the right to declare a default hereunder and elect
from the following remedies:
(a) declare all outstanding principal due under the Note to be
immediately due and payable; and/or
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(b) exercise all rights to take immediate possession of the
Collateral, or any portion thereof, for liquidation in accordance with the
Michigan Uniform Commercial Code.
Interest shall accrue on the amount so accelerated at the rate of 10 percent
(10%) per annum until paid or until such time as the default is otherwise cured.
Upon the request of Secured Party, Debtor shall assemble the Collateral at its
facility located at 00000 Xxxxxx, Xxxxxxx, Xxxxxxxx. Secured Party shall pay to
Debtor any surplus resulting from a sale of the Collateral and Debtor shall
promptly pay to Secured Party and deficiency balance that remains due after such
a sale. In addition, Secured Party may elect to retain the Collateral as
permitted by MCLA ss.440.9505.
Section 6. Release of Liens. The parties agree that the continuing
security interest and lien in the Collateral which is granted hereunder shall be
released as to the Collateral if Debtor is not in default under the Note and the
Note has been paid in full according to its terms.
Section 7. Attorney-in-Fact. Debtor authorizes and appoints Secured
Party as Debtor's attorney-in-fact to do any act which Debtor is obligated to do
under this Agreement and to exercise rights under this Agreement which Debtor is
entitled to exercise and to use the Collateral in the names in which Debtor may
use it. In addition, Debtor authorizes Secured Party to collect proceeds from
the sale of Collateral in the same manner that Debtor may collect proceeds. The
parties understand and agree that this authorization and appointment of Secured
Party as Debtor's attorney-in-fact is given to Secured Party to enable it to
protect and preserve its rights under this Security Agreement. Debtor agrees to
reimburse Secured Party for expenses which it incurs while acting as Debtor's
attorney-in-fact. Prior to any such action by Secured Party and as long as it
will not be detrimental to Secured Party to do so, Secured Party will provide
Debtor with notice and the reasonable opportunity to take such action on its own
behalf.
Section 8. Benefit and Assignment. This Security Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors, assigns, heirs, and legal representatives.
Section 9. Notice. All notices and demands relating hereto shall be in
writing and mailed, postage prepaid, by certified or registered mail, or by a
nationally recognized courier service, or by facsimile with the original by
mail, to Lessor or Lessee at their respective addresses or at any other address
designated by notice sent in accordance herewith. All notices shall be deemed
received when properly mailed.
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If to Debtor: Utilase Production Process, Inc.
Noble International, Ltd.
00 Xxxxxxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxx, Esq.
General Counsel
Noble International, Ltd.
00 Xxxxxxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
If to Secured Party: Utilase, Inc.
c/o DCT, Inc.
00000 Xxxxxx
Xxxxxxx, XX 00000
With a copy to: Xxxxx X. Xxxxx, Esq.
Stone, Biber & X'Xxxxx, P.C.
0000 Xxxx Xxxxxx Xx., Xxxxx 000
Xxxx, XX 00000
or to such other address as the addressee may have specified in a notice given
to the sender as provided herein.
Section 10. Waiver. The failure of either party at any time to require
performance by the other party of any provision of this Security Agreement shall
not be deemed a continuing waiver of that provision or a waiver of any other
provision of this Security Agreement and shall in no way affect the full right
to require such performance from the other party at any time thereafter. No
right or remedy herein or otherwise conferred upon Secured Party is intended to
be exclusive of any right or remedy, but each and every such right and remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder and now or hereafter provided by law, and may be exercised from time
to time or as often as deemed expedient, separately or concurrently.
Section 11. Miscellaneous. This Security Agreement shall not be deemed
to be in lieu or substitution of any other security agreement or other
Collateral now or hereafter held by Secured Party but shall be supplemental
thereto. No right or remedy herein or otherwise conferred upon Secured Party is
intended to be exclusive of any right or remedy, but each and every such right
and remedy shall be cumulative and shall be in addition to every other remedy
given hereunder and now or hereafter provided by law, and may be exercised from
time to time or as often as deemed expedient, separately or concurrently. The
failure or delay of Secured Party to insist in any one or more instances upon
the performance of any of the terms, covenants, or conditions of this Security
Agreement, or to exercise any right, remedy, or privilege herein conferred,
shall not impair or be construed as thereafter waiving any such covenants,
remedies, conditions, or provisions, but every such
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term, condition, and covenant shall continue and remain in full force and
effect. The giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment of the indebtedness hereby secured shall
not operate to prejudice, waive or affect the security of this Security
Agreement or of any rights, powers, or remedies hereunder; nor shall Secured
Party be required to first look to, enforce, or exhaust such other additional
security, collateral, or guaranties. The obligations of Debtor hereunder shall
be joint and several.
Section 12. Interpretation. The background and paragraph headings
included in this Security Agreement are used for reference and reference only,
and shall not be interpreted to limit in any way the content of this Security
Agreement. This Security Agreement shall be construed in accordance with the
laws of the State of Michigan, including the Michigan Uniform Commercial Code
(hereinafter referred to as the "Code"), and such laws shall govern the
interpretation, construction and enforcement hereof. Wherever possible each
provision of this Security Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provisions of this
Security Agreement shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Security Agreement.
IN WITNESS WHEREOF, the parties have caused this Security Agreement to
be duly executed on the day and year first above written.
WITNESSES: "Debtor"
"UPP"
UTILASE PRODUCTION PROCESS,
INC., a Michigan corporation
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxxx
------------------------ -------------------------------
/s/ A. Xxxxxxxx Xxxxxx By: Xxxxxxx X. Xxxx
------------------------ Its: Secretary
"NOBLE"
NOBLE INTERNATIONAL, LTD.,
a Michigan corporation
/s/ Xxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxxx
------------------------ -------------------------------
/s/ A. Xxxxxxxx Xxxxxx By: Xxxxxxx X. Xxxx
------------------------ Its: Secretary
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"Secured Party"
UTILASE, INC., a Michigan
corporation
/s/ Xxxxx X. Xxxxx
------------------------ -------------------------------
By: Xxxxx X. Xxxxx
________________________ Its: Assistant Secretary
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Exhibit A
Description of Collateral
A. [Disclosure Schedule 1 information]
B. [Disclosure Schedule 2 information]
C. Any and all general intangibles, as such term is defined in
Section 9-106 of the Code, now or hereafter owned by UPP and,
in any event, shall mean and include, but not be limited to,
all customer lists, employment and personnel records,
trademarks, patents, computer programs and software or
interest therein or rights thereto which are issued for the
purpose of supporting UPP together with the media in which
such software and programs are stored, rights in intellectual
property, rights to trade names, licenses, telephone numbers,
permits and copyrights now or hereafter owned by UPP.
And all additions, substitutions, replacements, proceeds and products of any of
the foregoing.
