SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made as of July 26, 1996 and
effective as of July 31, 1996, between TRICO ENVIROMETRICS, INC., a South
Carolina corporation (the "Debtor'), and ENVIROMETRICS, INC, a Delaware
corporation (the "Secured Party").
A. The Debtor is currently indebted to the Secured Party in an approximate
aggregate amount of Six Hundred Thousand Dollars ($600,000.00US), which
indebtedness is, subject to increase (as such may change from time to time), the
amount transaction documents, and is now evidenced by a certain Promissory Note
of even date, herewith in favor of the Secured Party (the "Note").
B. Concurrent herewith, Xxxxxx X. Xxxxxxxx ("Xxxxxxxx") is purchasing from
the Secured Party pursuant to a certain Stock Purchase Agreement, of even date,
all of the outstanding shares of common stock of the Debtor for a purchase price
of 45,000 shares of Envirometrics, Inc. common stock. The Secured Party has
agreed to sell such stock for such price to Xxxxxxxx subject to, among other
conditions, the Debtor executing and delivering this Agreement to the Secured
Party.
C. To induce the Secured Party to sell to Xxxxxxxx all of the outstanding
shares of common stock of the Debtor for such purchase price, the Debtor wishes
to grant to the Secured Party a security interest in substantially all of the
assets of the Debtor to secure (i) payment of all of the Indebtedness, and (ii)
performance of all of the respective covenants, obligations and agreements of
each of the Debtor and Xxxxxxxx, as set forth in the documents evidencing,
securing the repayment of, executed in connection with, or otherwise related to
the Indebtedness or sale of stock to Xxxxxxxx, including, without limitation,
the Stock Purchase Agreement, the Note, the Pledge Agreement, this Agreement,
the Unconditional Guaranty Agreement and the Accounting Services Agreement, all
of even date (collectively, as hereafter amended, modified, extended or renewed
from time to time, the "Transaction Documents"), all according to the terms and
conditions hereinafter set forth,
D. The purpose of this security agreement is to secure all amounts due from
debtor to secure the promissory note which represents all such sums being owed
to creditor.
AGREEMENT:
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and as an inducement
to the Secured Party to sell all of the issued and outstanding common stock of
the Debtor to Xxxxxxxx, the parties hereby covenant and agree as follows:
1. Grant of Security Interest. The Debtor hereby grants to the Secured
Party, to secure (i) payment of all the Indebtedness and (ii) performance of the
respective covenants, obligations and agreements of each of the Debtor and
Xxxxxxxx, as set forth in the Transaction Documents, or any of them
(collectively, the "Obligations"), a security interest in the property described
in Section 2 of this Agreement (the "Collateral").
2. Collateral. The collateral subject to this Agreement is all of the
Debtor's inventory, chattel paper, accounts, accounts receivable, contract
fights, equipment and general intangibles and all other assets, whether real or
personal, and the proceeds thereof, (all such terms as defined in the Uniform
Commercial Code of South Carolina).
3. Obligations Secured The security interests herein granted are to secure
the Obligations, ratably and without priority of one over another. The term
"Obligations" shall include all Obligations, whether matured or un-matured, or
absolute or contingent, and whether they are from time to time reduced,
thereafter increased, or entirely extinguished and thereafter reincurred. The
term "Obligations" shall further include, with limitation, all liability of the
Debtor to the Secured Party (specifically the mortgage repayment and the
interest in the lease in, the Faber Place facility), whether now or hereafter
incurred; whether direct, indirect, or contingent; whether otherwise guaranteed
or secured; and whether on open account, evidenced by an instrument or
otherwise.
4. Subordination of Security Interest. The Secured Party agrees that, upon
written request of the Debtor, it will subordinate by agreement reasonably
satisfactory to its counsel the lien of the security interest granted by this
Agreement to the lien of a security interest in all or part of the Collateral in
favor of a bank providing an operating line of credit to Debtor in an aggregate
amount not to exceed Three Hundred Fifty Thousand Dollars ($350,000.00 US)
without the written permission of the Note holder, which is also the Secured
Party. Such subordination shall in no way affect the priority of the security
interest granted hereunder as to any other security interest in the collateral
granted by the Debtor to the bank or any other person or entity. The Secured
Party's reasonable out-of-pocket expenses incurred in connection with such
subordination shall be paid by Debtor from the proceeds of the line of credit.
5. Covenants.
5.1. Use of Collateral. The Debtor warrants and covenants that the
Collateral will be used exclusively for business purposes.
5.2. Debtor's Name. The Debtor warrants that the only name by which the
Debtor is known or does business is shown in the caption hereof. The Debtor
shall notify the Secured Party immediately upon any change in the Debtor's
natural, corporate or other name.
5.3. Care of Collateral. The Debtor warrants and covenants that it will (a)
maintain the collateral at the locations set forth on Schedule 1 attached hereto
and in good and salable condition, repair or replace it, if necessary, deal with
the Collateral in all such ways as are considered good practice by owners of
like property, and allow the Secured Party to inspect the Collateral at any
reasonable time; (b) pay when due all taxes and assessments now or hereafter
imposed upon the Collateral, (c) cause the Collateral to be insured against
casualties in reasonable amounts; and (d) take all necessary steps to preserve
the liability of account debtors, obligors, and secondary parties whose
obligations are part of the Collateral.
5.4 Release of Collateral. The Secured Party warrants and covenants to
execute promptly such Termination Statements, and to take such other actions at
Debtor's expenses are reasonably requested by the Debtor to facilitate the
release of the Collateral upon the full and complete payment and performance of
all of the Obligations.
5.5 Financial Information The Debtor agrees to provide quarterly financial
statements to the Secured Party within 30 days of the quarter close and to
provide annual financial statements to the Secured Party within 60 days of the
fiscal year end. In addition, the Debtor must provide annual audited financial
statements prepared in accordance with generally accepted accounted principles
if the Secured Party does not waive such requirement, but in any event must
engage a Certified Public Accountant to perform, at a minimum, agreed upon
procedures to selected accounts of the Debtor, including billed and unbilled
trade receivables, service revenues, and debt as of the fiscal year end. Debtor
agrees to pay all such fees related to the auditing or accounting services
described above.
5.6 Miscellaneous Covenants.
a. The Debtor agrees to pay all fees for the filing of statement(s) and to
take such other actions as might be necessary for the perfection, continuation
and/or termination of the security interests hereby granted to the Secured
Party, including the execution and filing of UCC financing statements, and
renewals thereof.
b. The parties hereto agree that this Agreement shall be construed and
enforced in accordance with the laws of the State of South Carolina. In case any
one or more of the provisions contained in this Agreement should be invalid,
illegal or un-enforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall in no way be
affected or impaired thereby.
6. Rights of the Secured Party. Subject to the fights of prior lien
holders, the Secured Party may upon default under this Agreement or any of the
Obligations: (i) require the Debtor to give possession or control of the
Collateral to the Secured Parties: (ii) take control of proceeds and use cash
proceeds to reduce any part of the Note; ('iii) take any action required of the
Debtor or otherwise necessary to obtain, preserve, and enforce the security
interest granted herein, and maintain and preserve the Collateral, without
notice to the Debtor, and add costs of the same to the Note, but the Secured
Party is under no duty to take such action; (iv) take control of funds generated
by the Collateral and to use the same to reduce any part of the Note; (v) waive
any of its rights hereunder without such waiver prohibiting the later exercise
of the same or similar rights; (vi) revoke any permission or waiver previously
granted to the Debtor; and (vii) proceed to enforce any other rights against the
Collateral which may be available pursuant to this Agreement, the Transaction
Documents, and applicable law,
7. Default.
7.1 Events of Default. Any of the following shall be an Event of Default
under this Agreement: (i) failure of the Debtor to pay the Note in accordance
with its terms, or the occurrence of any other default under the Note, or
failure of the Debtor to perform any act or duty required of it under the
Transaction Documents; (ii) material falsity of any warranty or representation
in this Agreement when made; (iii) substantial loss, theft, destruction, sale,
reduction in value, damage to, or change in the Collateral; and (iv) levy on,
seizure, or attachment of the Collateral.
7.2. Occurrence of Event of Default. When an Event of Default occurs, all
of the Note shall become immediately due and payable at the Secured Party's
option without notice to the Debtor, and the Secured Party may proceed to
enforce payment of the same and exercise any and all of the fights or remedies
available to a Secured Party under the Uniform Commercial Code of South
Carolina, as well as any other rights or remedies available to the secured party
under law or transaction documents.. When the Debtor is in default, the Debtor,
upon demand by the Secured Party, shall assemble the Collateral and make it
available to the Secured Party at a place reasonable convenient to both parties.
If the Secured Party disposed of the Collateral following default, the proceeds
of such disposition available to satisfy the indebtedness shall be applied to
the Note in such manner as the Secured Party in its sole discretion deems best.
The Debtor is entitled to any surplus.
7.3. Application of Proceeds. If the Secured Party sells the collateral or
any part thereof, the proceeds shall be applied by the Secured Party in the
following order:
(a) First to the payment of the reasonable costs and expenses of care,
safekeeping, collection and sale incurred by the Creditor, including without
limitation, reasonable attorneys' fees and all other reasonable expenses,
liabilities and costs incurred by the Creditor in connection therewith;
(b) Next to the payment of all amounts then owing and unpaid, whether
principal, interest or otherwise, pursuant to the obligations, in such order as
the Creditor may elect; and
(c) Finally to the payment to the Debtor or as required by applicable law
of any surplus then remaining from such proceeds.
8. Miscellaneous. The rights and privileges of the Secured Party shall
inure to its successors and assigns. All representations, warranties and
agreements of the Debtor shall bind the Debtor's successors and assigns.
Definitions in the Uniform Commercial Code of South Carolina apply to words and
phrases in this agreement, If Code Definitions conflict, Title 8.9 definitions
apply. The debtor waives presentment, demand, notice or dishonor, protest, and
extension of time without notice as to any instruments and chattel paper in the
Collateral. Notice to the Debtor's address at 0000 Xxxxxxxxxx, Xxxxxxx, XX
00000, or to the Debtor's most recent change of address on file with Secured
Party, at least ten (10) days prior to the related action (or, if the Uniform
Commercial Code of South Carolina specifies a longer period, such longer period
prior to the related action), shall be deemed reasonable. Photographic or other
reproduction of this Agreement, or any financing statements signed by the Debtor
is sufficient as a financing statement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
TRICO ENVIROMETRICS
By:
Xxxxxx X. Xxxxxxxx, Vice President
ENVIROMETRICS, INC.
By:
Xxxxxxx X. Xxxxxxx
President and CEO
By:
Xxxxx L, Xxxx, CPA Treasurer
List of Schedules:
Schedule 1 - Collateral Locations
