SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made as of the 4th day of November, 1996, by
and among NATIONAL CANADA FINANCE CORP. (which, together with its successors
and assigns, is referred to herein as "Bank"), ENVIRONMENTAL PURIFICATION
INDUSTRIES, INC. (which, together with its permitted successors and assigns,
is referred to herein as "EPI") and ENVIRONMENTAL PURIFICATION INDUSTRIES
COMPANY (which together with its permitted successors and assigns, is
referred to herein as EPIC; EPIC and EPI shall be referred to collectively a
"Borrowers" and individually as a "Borrower").
RECITALS:
Borrowers are indebted to Bank pursuant to the terms of a Term Note of
even date herewith in the principal amount of $1,700,000 (the "EPI Third Term
Note"), executed by Borrowers and Meridian National Corporation, the sole
shareholder of EPI and the sole shareholder of the general partners of EPIC
("MNC"), and payable to the order of Bank (which, as amended, modified or
supplemented from time to time, together with all notes issued in
substitution thereof or replacement thereof, is referred to collectively
herein as the "Note").
PROVISIONS
NOW, THEREFORE, in consideration of the extension of credit heretofore,
now or hereafter made by Bank to Borrowers, the parties hereto hereby agree
as follows:
1. GENERAL
1.1 DEFINED TERMS. In addition to the terms defined above, when used
herein, the following terms shall have the following meanings:
ACCOUNTS - As to each Borrower, all of such Borrower's accounts,
contracts, contract rights, notes, bills, drafts, acceptances, general
intangibles, choses in action, and all other debts, obligations and
liabilities in whatever form, owing to such Borrower from any Person, whether
now existing or hereafter arising, now or hereafter received by or
belonging or owing to such Borrower, for goods sold or leased or for services
rendered, whether or not earned by performance and whether or not evidenced
by contracts, instruments or documents, or however otherwise the same may
have been established or created, all guarantees and security therefor, all
rights, title and interests of such Borrower in the merchandise or services
which gave rise thereto including, but not limited to, the rights of
reclamation and stoppage in transit, and rights of an unpaid seller of
merchandise or services.
ACCOUNT DEBTOR - Any person who is or may become obligated to a Borrower
under, with respect to, or on account of an Account.
AGREEMENT - This Security Agreement as the same may be amended, modified
or supplemented from time to time.
BANKRUPTCY LAWS - All statutes, rules, regulations and other forms of
law, federal, state or otherwise, including, but not limited to, the
provisions of Title 11 of the United States Code, in each instance as in
effect from time to time, relating to the bankruptcy, insolvency, liquidation
or reorganization of debtors or the modification or alteration of the rights
of creditors.
BANK'S LIEN - The Lien upon the Collateral in favor of Bank securing
payment of all Obligations, whether arising pursuant hereto or pursuant to
any of the other Loan Documents.
CODE - The Uniform Commercial Code as adopted and in force in the State
of Ohio as from time to time in effect.
COLLATERAL - All of the Property described in Section 2.1 of this
Agreement, together with all other Property of the Borrowers now or at any
time or times hereafter subject to a Lien in favor of Bank.
COLLATERAL LOCATION - The location(s) identified on EXHIBIT A attached
to this Agreement, and any other locations where the Collateral presently is
or hereafter is located.
CONTRACTS - As to each Borrower, all contracts, instruments,
undertakings, documents or other agreements in or under which such Borrower
may now or hereafter have any right, title or interest and which pertain to
the purchase, lease, sale or other disposition by such Borrower of any
Collateral, as amended, modified or supplemented from time to time.
CONTRACT RATE - As defined in the Note, as the same may be amended,
modified or supplemented from time to time.
CONTRACT RIGHTS - All rights of Borrowers, including, without
limitation, all rights to payment, under each Contract.
DEPOSITORY ACCOUNT - As defined in Section 3.1 of this Agreement.
DEPOSITORY AGREEMENT - As defined in Section 3.1 of this Agreement.
DEPOSITORY BANK - As defined in Section 3.1 of this Agreement.
EQUIPMENT - The equipment and machinery identified on EXHIBIT B attached
hereto, together with all parts, appurtenances and accessions thereto and
substitutions therefor and replacements thereof.
EVENT OF DEFAULT - As defined in the Loan Agreement.
LIEN - Any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or
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contract, including, but not limited to, the security interest or lien
arising from a security agreement, mortgage, encumbrance, pledge, conditional
sale, trust receipt or assignment, lease, consignment or bailment for
security purposes.
LOAN AGREEMENT - Loan And Security Agreement entered into by and among
MNC, Ottawa River Steel Co., National Metal Processing, Inc., Interstate
Metal Processing, Inc., Precise Pac, Inc., Meridian Environmental Services,
Inc. and Bank.
LOAN DOCUMENTS - This Agreement, the Note and the Loan Agreement.
LOCKBOX - As defined in Section 3.2 of this Agreement.
OBLIGATIONS - All debts, liabilities and obligations of Borrowers to
Bank under this Agreement and also any and all other debts, liabilities, and
obligations of Borrowers to Bank of every kind and description, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising including, without limiting the generality of the foregoing,
any debt, liability, or obligation of Borrowers to Bank under any guaranty or
of Borrowers to any other Person which Bank may have obtained by assignment
or otherwise and all interest, fees, charges, and expenses which at any time
may be payable by Borrowers to Bank.
PERMITTED LIENS - As defined in Section 5.2 of this Agreement.
PERSON - An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PRINCIPAL BUSINESS LOCATION - 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000
PROCEEDS - As defined in the Code and, in any event, including, but not
be limited to, (a) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrowers from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to Borrowers from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color
of a governmental authority) and (c) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
PROPERTY - Any kind of property or asset, whether real, personal or
mixed, or tangible or intangible, or any interest in any such property or
asset.
1.2 OTHER TERMS. All other terms contained in this Agreement shall
have, unless the context indicates to the contrary, the meanings provided for
by the Code to the extent the same are used or defined therein.
1.3 USE OF PLURAL FORM. All definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
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2. COLLATERAL; GENERAL TERMS
2.1 GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance of the Obligations, and in addition to any other Collateral or
Lien securing the Obligations, Borrowers hereby grant to Bank a continuing
security interest in and to all of the following Property of Borrowers,
whether now owned or existing or hereafter acquired or arising and
wheresoever located:
(A) All Accounts, Contract Rights and Proceeds;
(B) All Equipment;
(C) Any and all deposits or other sums at any time credited by or due
from Bank to Borrowers, whether in a Depository Account or other account,
together with any and all instruments, documents, policies and certificates
of insurance, securities, goods, Accounts, choses in action, general
intangibles, chattel paper, cash or other Property, and the proceeds of each
of the foregoing, to the extent owned by Borrowers or in which Borrowers have
an interest and which now or hereafter are at any time in the possession or
control of Bank or in transit by mail or carrier to or from Bank or in the
possession of any Person acting in Bank's behalf, without regard to whether
Bank received the same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Bank had conditionally released the
same, and any and all balances, sums, proceeds and credits of Borrowers
with, and any claims of Borrowers against, Bank;
(D) All accessions to, substitutions for and all replacements, products
and proceeds of the Property described in Subsections (A), (B) and (C) above,
including, without limitation, proceeds of insurance policies insuring such
Property; and
(E) All books, records, and other property (including, but not limited
to, credit files, programs, printouts, and other materials and records) of
Borrowers pertaining to any of the Property described in Subsections (A), (B),
(C), or (D) above.
2.2 PERFECTION OF LIENS OF BANK. Borrowers agree to execute such
financing statements provided for by applicable law and to otherwise take
such action, and execute such assignments or other instruments or documents,
in each case as Bank may request, to evidence, perfect or record Bank's Lien
upon the Collateral. Borrowers hereby authorize Bank to execute and file any
such financing statement or continuation statement on Borrowers' behalf. The
parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement.
2.3 INSURANCE. Borrowers shall maintain and pay for insurance upon all
tangible Collateral wherever located, in storage or in transit in vehicles,
including goods evidenced by documents, covering casualty, hazards, public
liability and such other risks and in such amounts and with such insurance
companies as shall in each instance be reasonably satisfactory to Bank.
Borrowers shall deliver certified copies of such policies to Bank with
satisfactory loss payable endorsements naming Bank as its interest may
appear. Each policy of insurance or endorsement shall contain a provision
requiring thirty (30) days advance written notice to Bank in the event of
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cancellation of the policy for any reason whatsoever or any modification
thereto and a clause that the interest of Bank shall not be impaired or
invalidated by any act or neglect of Borrowers or other owner of the premises
where such Property may be located, nor by the occupation of such premises
for purposes more hazardous than are permitted by said policy. Borrowers
shall deliver to Bank, promptly as rendered, true copies of all reports made
by Borrowers in any report forms to insurance companies. Borrowers hereby
irrevocably make, constitute, and appoint Bank (and all officers, employees
or agents designated by Bank) as Borrowers' true and lawful attorney-in-fact
and agent, with full power of substitution, such that upon an Event of
Default or if an Event of Default has occurred and in continuing, then Bank
shall have the right and authority to make, and adjust claims under such
policies of insurance (provided, however, that Bank agrees to consult with
Borrowers prior to finally making, settling, or adjusting claims under such
policies of insurance), receive, and endorse the name of Borrowers on, any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and make all determinations and decisions with respect
to such policies of insurance or to pay any premium in whole or in part
relating thereto. Bank, without waving or releasing any obligation or default
by Borrowers hereunder, may (but shall be under no obligation to do so) at
any time or times thereafter maintain such action with respect thereto which
Bank deems advisable. All sums disbursed by Bank in connection therewith
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, on demand, and until paid by Borrowers to
Bank, with interest thereon at the Contract Rate, shall be additional
Obligations hereunder secured by the Collateral.
2.4 PROTECTION OF COLLATERAL; REIMBURSEMENT. All insurance expenses and
all expenses of protecting, storing, warehousing, insuring, handling,
maintaining, and shipping any Collateral, any and all excise, property,
sales, use or other taxes imposed by any state, federal or local authority on
any of the Collateral, or in respect of the sale thereof, or otherwise in
respect of Borrowers' business operations, which, if unpaid, could result in
the imposition of any Lien upon the Collateral, shall be borne and paid by
Borrowers. If Borrowers fail to promptly pay any portion thereof when due,
then at Bank's option it may pay the same. All sums so paid or incurred by
Bank for any of the foregoing and any and all other sums for which Borrowers
may become liable hereunder and all costs and expenses (including reasonable
attorneys' fees, legal expenses, and court costs) which Bank may incur in
enforcing or protecting its Lien on or rights and interest in the Collateral
or any of its rights or remedies under this or any other agreement between
the parties hereto or in respect of any of the transactions to be had
hereunder shall be repayable on demand and, until paid by Borrowers to Bank
with interest thereon at the Contract Rate, shall be additional Obligations
hereunder secured by the Collateral. Bank shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever.
2.5 INSPECTION. Bank, by any of its officers, employees, agents or
representatives, shall have the right to inspect the Collateral, all records
related thereto (and to make extracts from such records), and the premises
upon which any of the Collateral is located, to verify the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral.
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3. COLLECTION OF ACCOUNTS
3.1 PROCEEDS. Except for minor xxxxx cash required in the ordinary
course of business of Borrowers, all checks, drafts, cash and other proceeds
realized from the sale of any goods or services or from the sale or other
disposition of any of the Collateral, including, but not limited to, all
proceeds realized from the collection of the Accounts or otherwise pursuant
to any Contract Right, note, xxxx, draft, acceptance, chose in action and
other like forms of general intangibles, and all remittances received by
Borrowers in respect to the foregoing, shall, be held by Borrowers as trustee
of an express trust for Bank's sole benefit and subject to immediate deposit
(in their original form duly endorsed in blank) in a special account over
which Bank has the sole right and power of withdrawal, maintained at a
financial institution acceptable to Bank (such financial institution and
account being herein referred to as the "Depository Bank" and "Depository
Account" respectively). The Depository Account shall be subject to the
written agreement of the Depository Bank to waive any right of setoff it
might otherwise claim to have against any funds in the Depository Account
and to otherwise charge any costs relative to the Depository Account to
Borrowers or such other account(s) as Borrowers may maintain with the
Depository Bank, such agreement (the "Depository Agreement") to be in form
and substance acceptable to Bank. Bank assumes no responsibility for any
claim of accord and satisfaction or release with respect to funds which have
been deposited in the Depository Account.
3.2 LOCKBOX. If at any time requested by Bank, Borrowers shall instruct
all Account Debtors to mail their payments directly to a designated post
office lockbox (a "Lockbox") maintained at Borrowers' expense, with respect
to which only Bank or, should Bank so agree, a designated financial
institution shall have the right of access and all payments so received shall
be subject to immediate deposit into the Depositary Account.
3.3 BANK'S ACCOUNT. All funds held in the Depository Account shall be
subject to transfer to an account designated by the Bank (the "Bank's
Account") as set forth in the Depository Agreement or as otherwise designated
by Bank and the application of any such funds to the payment of the
Obligations shall not occur until Bank's receipt of such funds in cleared
federal funds in the Bank's Account. The order and method of application of
such payment shall be in the sole discretion of Bank.
3.4 NOTIFICATION OF ACCOUNT DEBTORS. Upon the occurrence and
continuance of an Event of Default, Bank shall have the right to notify
Account Debtors and other Persons indebted to Borrowers of Bank's interest in
such amounts payable to Borrowers and to instruct such Account Debtors and
other Persons to remit the same directly to Bank. Upon the collection and
deposit of such amounts in cleared federal funds in Bank's Account (less any
costs of collection and other charges or expenses incurred in connection
therewith), such amounts shall be subject to application to the Obligations.
3.5 VERIFICATION OF ACCOUNTS. Any of Bank's officers, employees, or
agents shall have the right, at any time or times thereafter, in the name of
Bank, any designee of Bank or in the name of Borrowers, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph, or otherwise.
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3.6 CONDITIONAL ASSIGNMENTS, RECORDS AND SCHEDULES AND SCHEDULES OF
ACCOUNTS. Commencing on November 15, 1996, and continuing on November 30,
1996, and on the fifteenth (15th) day and the last day of each month
thereafter, Borrowers shall deliver to Bank, in form and substance
acceptable to Bank, a detailed aged trial balance of all then existing
Accounts specifying the names, face value and dates of invoices for each
Account Debtor obligated on an Account so listed. In addition, upon Bank's
request, Borrowers shall furnish Bank with copies of proof of delivery and
the original copy of all documents relating to the Accounts including, but
not limited to, repayment histories and present status reports relating to
the Accounts and such other matters and information relating to the status of
then existing Accounts as Bank shall reasonably request. Upon an Event of
Default or if an Event of Default has occurred and is continuing Borrowers
shall execute and deliver to Bank, on forms supplied by Bank and at such
intervals as Bank may from time to time require, written assignments of all of
their Accounts after shipment of the subject goods, together with copies of
invoices and/or invoice registers related thereto.
4. REPRESENTATIONS AND WARRANTIES
As an inducement to Bank to make advances under the Notes, EPI and EPIC
warrant, represent and covenant to Bank that:
(A) EPI is a corporation duly formed, legally existing and in good
standing under the laws of its state or jurisdiction of organization and has
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each other state or jurisdiction where the character
of its Property, the nature of its business operations or the nature of its
other business activities or Property owned or leased makes such
qualification necessary.
(B) EPIC is a general partnership duly organized and validly
existing under the laws of the State of Ohio and is duly qualified and
authorized to do business and is in good standing as a foreign partnership in
each other state or jurisdiction where the character of its Property or the
nature of its activities makes such qualification necessary.
(C) EPI has the right and power and is duly authorized and empowered
to enter into, execute, deliver and perform its obligations under this
Agreement and each of the other Loan Documents to which it is a party. This
Agreement and each of the other Loan Documents to which EPI is a party have
each been duly authorized and approved by all requisite corporate action of
EPI, and are the legal, valid and binding obligations of EPI, enforceable
against EPI in accordance with their respective terms. EPI's execution and
delivery of, and performance under, this Agreement and each of the other Loan
Documents to which it is party will not (i) require any consent or approval
of any Person other than the Board of Directors of EPI, (ii) contravene any
provision of the Articles of Incorporation or Certificate of Incorporation,
Bylaws or Code of Regulations of EPI, (iii) violate, or cause EPI to be in
default under, any provision of any writ, judgement, injunction or decree
having applicability to EPI or any of its Property, or (iv) result in the
creation or imposition of any Lien (other than Permitted Liens) upon any
Property of EPI.
(D) EPIC has the right and power and is duly authorized and
empowered to enter into, execute, deliver and perform this Agreement and each
of the other Loan Documents to which it is a party. This Agreement and each
of the other Loan Documents to which EPIC is a
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party have each been duly authorized and approved by an officer of each of
National Purification, Inc. ("NPI"), an Ohio corporation, and MEPI Corp., an
Ohio corporation, in their capacities as general partners of EPIC, and are
the legal, valid and binding obligations of EPIC, enforceable against EPIC in
accordance with their respective terms. NPI and MEPI are wholly owned
subsidiaries of Meridian National Corporation. EPIC's execution and delivery
of, and performance under, this Agreement and each of the other Loan
Documents to which it is a party will not (i) require any consent or approval
of any person other than the Boards of Directors of NPI and MEPI, (ii)
contravene any provision of the EPIC Partnership Agreement, (iii) violate, or
cause EPIC to be in default under, any provision of any writ, judgment,
injunction or decree having applicability to EPIC or any of its Property, or
(iv) result in the creation or imposition of any Lien (other than Permitted
Liens) upon any property of EPIC.
(E) All of the Collateral is located at a Collateral Location.
(F) Each Borrower has good, indefeasible and marketable title to and
ownership of all Property it purports to own, which, in the case of the
Collateral, is free and clear of all Liens, except Permitted Liens.
5. COVENANTS AND CONTINUING AGREEMENTS
5.1 AFFIRMATIVE COVENANTS. During the period that any Obligations remain
outstanding and unpaid, Borrowers covenant that, unless otherwise consented
to by Bank in writing, they will:
(A) Comply in all respects with all covenants, agreements and
conditions on their part to be performed or observed under the terms of the
Notes and each of the other Loan Documents to which they are a party.
(B) Promptly notify Bank in writing, upon Borrowers' learning thereof,
of any claim by any Person to any of the Collateral or any right therein, to
the extent not otherwise a Permitted Lien, or any action by any Person to
levy upon, repossess or attach any Collateral.
(C) If any of the Accounts arise out of a contract with the United
States of America, or any department, agency, subdivision or instrumentality
thereof, execute any instruments and take any other action required or
requested by Bank to perfect Bank's security interest in such Accounts under
the provisions of the Assignment of Claims Act of 1940.
(D) In the event any Account is or becomes evidenced by any note,
trade acceptance or other instrument, promptly notify Bank of such fact and,
upon Bank's request, deliver the same to Bank, appropriately endorsed.
5.2 NEGATIVE COVENANTS. During the period that any Obligations remain
outstanding and unpaid, Borrowers covenant that, unless Bank has first
consented thereto in writing, they will not:
(A) Permit or suffer to exist any lien in or upon any of the
Collateral except the following (herein referred to as "Permitted Liens"):
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(1) Those security interests and liens granted in favor of Bank
pursuant to this Agreement and the other Loan Documents;
(2) Liens securing taxes, assessments or governmental charges or
levies or the claims or damages of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, provided the payment
thereof is not at the time required;
(3) Liens incurred or deposits made in the ordinary course of
business, and provided any amounts secured thereby are not overdue or
delinquent in any respect (a) in connection with worker's
compensation, unemployment insurance, social security and other like
laws, or (b) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations, surety,
appeal and performance bonds and other similar obligations not
incurred in connection with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase price of Property;
(4) Attachment, judgment, and other similar non-tax Liens arising
in connection with court proceedings, provided the execution or other
enforcement of such Liens is effectively stayed or bonded within
thirty (30) days after issuance or filing and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings; and
(5) Such other Liens as described on EXHIBIT C hereto or as
hereafter approved by Bank in writing.
(B) Sell, lease, transfer or otherwise dispose of any of the Equipment.
(C) Change its name or otherwise use any fictitious name, trade name,
trade style or "d/b/a", unless it provides Bank with at least thirty (30)
days prior written notice thereof. Bank acknowledges that EPI has given Bank
notice of its intent to change its name to EPI Technologies, Inc., and that
such change will not violate this covenant.
(D) Transfer its executive offices to, or maintain records with
respect to any Accounts at, any location other than Borrowers' Principal
Business Location as set forth above, or otherwise permit any other
Collateral to be located at any location other than a Collateral Location,
except upon providing Bank with thirty (30) days prior written notice thereof.
6. TERMINATION OF AGREEMENT
The undertakings, agreements, covenants, warranties and representations of
Borrower contained in this Agreement shall terminate, and Bank shall release
its Lien on the Collateral and all of its rights under this Agreement, at
such time as all Obligations have been fully paid and satisfied.
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7. RIGHTS AND REMEDIES ON DEFAULT
7.1 REMEDIES. Upon and after the occurrence of an Event of Default,
Bank shall have, to the extent permitted by applicable law, and in addition
to any other right or remedy provided for in this Agreement, the following
rights and remedies:
(A) All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights
to which Bank may be entitled, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted by
law, in addition to any other rights or remedies contained in this Agreement
or in any of the other Loan Documents.
(B) The right to take immediate possession of the Collateral, and
(i) require Borrowers to assemble the Collateral, at Borrowers' expense, and
make it available to Bank at a place to be designated by Bank which is
reasonably convenient to both parties, and (ii) enter any of the premises of
any Borrower or wherever any Collateral shall be located and to keep and
store the same on said premises until sold (and if said premises be the
property of Borrowers, Borrowers agree not to charge Bank for storage thereof
for a period of at least ninety (90) days after sale or disposition of the
Collateral). Bank is hereby granted a non-exclusive license or other right to
use, without charge, Borrowers' labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrowers' rights under
all licenses and all franchise agreements shall inure to Bank's benefit.
(C) The right to foreclose the Bank's Liens.
(D) The right to sell or to otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, wholesale
dispositions, or sales pursuant to one or more contracts, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as
Bank, in its sole discretion, may deem advisable. Borrowers agree that ten
(10) days written notice to Borrowers of any public or private sale or other
disposition of Collateral shall be reasonable notice thereof, and such sale
shall be at such location(s) as Bank shall designate in said notice. Bank
shall have the right to conduct such sales on Borrowers' premises, without
charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law without further requirement of notice to
Borrowers Bank shall have the right to bid or credit bid at any such sale on
its own behalf.
(E) In connection with any sale of Collateral, Bank shall have the
right to sell, lease or otherwise dispose of the Collateral, or any part
thereof, for cash, credit or any combination thereof, and Bank may purchase
all or any part of the Collateral at public or private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. Subject to the rights of the holders of any
Permitted Lien having priority over the Liens of Bank, if any, the proceeds
realized from the sale of any Collateral shall be applied first to the
reasonable costs, expenses and attorneys' fees and legal expenses incurred by
Bank for collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the
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Collateral; second, to interest due upon any of the Obligations; and third,
to the principal of the Obligations. If any deficiency shall arise, Borrowers
shall remain liable to Bank therefor.
7.2 APPLICATION OF COLLATERAL. Upon the occurrence of any Event of
Default, Bank may also, with or without proceeding with sale or foreclosure
or demanding payment of the Obligations, without notice, appropriate and
apply on any Obligations any and all Collateral in the possession of Bank or
in any Lockbox, and any and all balances, credits, deposits, accounts,
reserves, indebtedness, or other monies due or owing to Borrowers or held by
Bank hereunder or otherwise, whether accrued or not.
7.3 REMEDIES CUMULATIVE. All covenants, conditions, provisions,
warranties, guaranties, indemnities and other undertakings of Borrowers
contained in this Agreement, the other Loan Documents or in any document
referred to herein or therein or contained in any agreement supplementary
hereto or thereto or in any schedule or report give to Bank, or contained in
any other agreement between Bank and Borrowers, heretofore, concurrently, or
hereafter entered into or delivered, shall be deemed cumulative to and not in
derogation or substitution of any of the terms, covenants, conditions or
agreements of Borrowers herein contained. The failure or delay of Bank to
exercise or enforce any rights, powers or remedies hereunder or under the
other Loan Documents or under any document referred to herein or therein or
contained in any agreement supplementary hereto or thereto or against any
Collateral shall not operate as a waiver of such rights, powers and remedies,
but all such rights, powers, and remedies shall continue in full force and
effect until all Obligations owing or to become owing from Borrowers to Bank
shall have been fully satisfied, and all rights, powers and remedies of Bank
as aforesaid are cumulative and none are exclusive.
7.4 CROSS-COLLATERAL AND CROSS-DEFAULT. Each of the security interests
and liens granted to Bank by Borrowers and MNC pursuant to the Loan Documents
or otherwise shall secure any and all of Borrowers' and MNC's liabilities and
obligations to Bank under the Loan Documents including, but not limited to,
MNC's obligations under the Term Note and the Credit Note (each as defined in
the Loan Agreement). It is further understood and agreed that (a) a default
under either of the Credit Note or the Term Note, or any of the Loan
Documents shall constitute a default under each of the Notes and under this
Agreement, and (b) a default under the Notes or under this Agreement shall
constitute a default under the Credit Note, the Term Note and the Loan
Agreement. References in any of the other Loan Documents to events or
conditions constituting a default shall in no way impair Bank's absolute and
unconditional right to demand immediate repayment of the unpaid balance of
the Credit Note, notwithstanding the fact that at the time of such demand
there may not exist any event or condition constituting a default.
8. APPOINTMENT OF BANK AS BORROWERS' LAWFUL ATTORNEY
Each Borrower hereby irrevocably designates, makes, constitutes and
appoints Bank (and all persons designated by Bank) as each Borrower's true
and lawful attorney (and agent-in-fact) to, upon the occurrence, or at any
time during the continuance, of an Event of Default, as Bank may determine,
in each Borrower's or Bank's name: (i) demand payment of the Accounts; (ii)
enforce payment of the Accounts, by legal proceedings or otherwise; (iii)
exercise all of each Borrower's rights and remedies with respect to the
collection of the Accounts and any other Collateral; (iv) settle, adjust,
compromise, extend or renew the Accounts; (v) settle, adjust or compromise
any legal
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proceeding brought to collect the Accounts; (vi) if permitted by applicable
law, sell or assign the Accounts and other Collateral upon such terms, for
such amounts and at such time or times as Bank deems advisable; (vii)
discharge and release the Accounts and any other Collateral; (viii) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (ix) prepare, file and sign Borrower's name on a proof of claim
in bankruptcy or similar document against any Account Debtor; (x) prepare,
file and sign each Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Accounts;
(xi) do all acts and things necessary, in Bank's sole discretion, to fulfill
each Borrower's obligations under this Agreement; (xii) endorse the name of
each Borrower upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Bank on account of the
Obligations (xiii) endorse the name of each Borrower upon any chattel paper
document, instrument, invoice, freight xxxx, xxxx of lading or similar
document or agreement relating to the Accounts and any other Collateral;
(xiv) use each Borrower's stationery and sign the name of each Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (xv)
use the information recorded on or contained in any data processing equipment
and computer hardware and software relating to the Accounts and any other
Collateral to which each Borrower has access; and (xvi) notify post office
authorities to change the address for delivery of such Borrower's mail to an
address designated by Bank and receive and open all mail addressed to each
Borrower, and after removing all remittances and other proceeds of
Collateral, forwarding the mail to such Borrower.
9. MISCELLANEOUS
9.1 MODIFICATION OF AGREEMENT. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrowers and
Bank.
9.2 COSTS, EXPENSES AND ATTORNEYS' FEES. All reasonable costs,
expenses, charges and fees, including reasonable attorneys' fees which are
incurred by Bank at any time or times, whether prior or subsequent to the
date hereof, and regardless of the existence of an Event of Default, in
connection with:
(A) The preparation of this Agreement or any amendment of or
modification of this Agreement;
(B) The administration of this Agreement and the transactions
contemplated hereby;
(C) Any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Bank, Borrowers or any other Person) in any way
relating to the Collateral, this Agreement or Borrower's affairs, but
excluding any litigation between Borrowers and Bank as adverse parties unless
otherwise permitted by law in connection with any judgment awarded in favor
of the prevailing party;
(D) Any attempt to enforce any rights of Bank against any other
Person which may be obligated to Bank by virtue of this Agreement including,
without limitation, any guarantor of the Obligations and any Account Debtors;
-12-
(E) Any attempt to protect, collect, sell, liquidate or
otherwise dispose of the Collateral; or
(F) The filing and recording of all documents required by Bank
to perfect Bank's Liens in the Collateral, including without limitation, any
documentary stamp tax, intangibles tax or any other taxes incurred because of
such filing or recording;
shall be payable, on demand, by Borrowers to Bank and shall be additional
Obligations hereunder secured by the Collateral. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may
include accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges, telegraph
charges; secretarial overtime charges; and expenses for travel, lodging and
food paid or incurred in connection with the performance of services.
Additionally, if any taxes shall be payable on account of the execution or
delivery of this Agreement, or the execution, delivery, issuance or recording
of any of the other Loan Documents, or the creation of any of the Obligations
hereunder, by reason of any existing or hereafter enacted federal or state
statute, Borrowers will pay all such taxes, including, but not limited to,
any interest and/or penalty thereon, and will indemnify and hold Bank
harmless from and against liability in connection therewith. Borrowers
otherwise agree to indemnify and hold Bank harmless from any and all loss,
damage, cost, liability or expense (including reasonable attorneys' fees)
arising out of the use, generation, storage or release of any hazardous
waste or hazardous substance in respect of any Borrower's operations or any
real property used by a Borrower in the conduct of such operations.
9.3 WAIVER BY BANK. Bank's failure, at any time or times hereafter, to
require strict performance by Borrowers of any provision of this Agreement
shall not waive, affect or diminish any right of Bank thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by Bank
of an Event of Default by Borrowers under this Agreement or the other Loan
Documents shall not suspend, waive or affect any other Event of Default by
Borrowers under this Agreement or the other Loan Documents, whether the same
is prior or subsequent thereto and whether of the same or of a different type.
None of the undertakings, agreements, warranties, covenants and
representations of Borrowers contained in this Agreement or the other Loan
Documents and no Event of Default by Borrowers under this Agreement or the
other Loan Documents shall be deemed to have been suspended or waived by
Bank, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of Bank and directed to Borrowers.
9.4 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under applicable 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 the Agreement.
9.5 PARTIES. This Agreement and the other Loan Documents shall be
binding upon and inure to the benefit of the successors and assigns of
Borrowers and Bank.
-13-
9.6 CONFLICT OF TERMS. The provisions of the other Loan Documents and
any exhibit or schedule hereto are incorporated in this Agreement by this
reference thereto. Except as otherwise provided in this Agreement and except
as otherwise provided in the other Loan Documents by specific reference to
the applicable provision of this Agreement, if any provision contained in
this Agreement is in conflict with, or inconsistent with, any provision in
the other Loan Documents, the provision contained in this Agreement shall
govern and control.
9.7 WAIVERS BY BORROWERS. Except as otherwise provided in any of the
Loan Documents, Borrowers waive (i) presentment, demand and protest and notice
of presentment, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Bank on which Borrowers may in any way be liable and (ii) notice
prior to taking possession or control of the Collateral which might be
required by any court prior to allowing Bank to exercise any of Bank's
remedies.
9.8 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS
OF THE STATE OF OHIO. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED,
BORROWERS HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF OHIO AND CONSENT THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO BORROWER IN THE
MANNER SET FORTH IN SECTION 9.9 BELOW AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED UPON ACTUAL RECEIPT THEREOF. BORROWERS WAIVE ANY OBJECTION TO
JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER, AGREE NOT TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. NOTHING CONTAINED
HEREIN SHALL AFFECT THE RIGHT OF BANK TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF BANK TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWERS OR THEIR PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
NOTICES. Except as otherwise provided herein, any notice or demand
required hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered when personally delivered or when sent by
first class mail, return receipt requested, with proper postage prepaid, and
addressed to the party at the following addresses or to such other address
as each party may designate for itself by like notice given in accordance
with this Section 9.9:
If to Bank: National Canada Finance Corp.
Xxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxx Xxxxxxxx
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With copy to: Xxxxx & Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxx
If to Borrowers: Environmental Purification Industries, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
With copy to: Benesch, Friedlander, Xxxxxx & Xxxxxxx P.L.L.
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
ATTN: Xxxxxxxx X. Xxxx
9.10 SECTION TITLES. The section titles and table of contents contained
in this Agreement are and shall be without substantive meaning and content of
any kind whatsoever and are not, and shall not be deemed, a part of the
agreement between the parties hereto.
(Remainder of Page Intentionally Left Blank)
-15-
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
ENVIRONMENTAL PURIFICATION
INDUSTRIES, INC.
By: /s/ XXXXX X. MAISON
------------------------------
Name: /s/ XXXXX X. MAISON
------------------------------
Title: President
------------------------------
Accepted at Cleveland, Ohio as of the ENVIRONMENTAL PURIFICATION
date first above written. INDUSTRIES COMPANY
NATIONAL CANADA FINANCE By National Purification, Inc.
CORP. General Partner
By: /s/ XXXX XXXXXXXX /s/ XXXXX X. XXXXXX, Treasurer
------------------------ -------------------------------------
Name: /s/ XXXX XXXXXXXX and
------------------------
Title: VP By MEPI Corp.
------------------------ General Partner
/s/ XXXXX X. XXXXXX, Treasurer
-------------------------------------
-16-
EXHIBIT A
COLLATERAL LOCATIONS
Plant Location:
0000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Executive Offices:
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
-17-
EXHIBIT B
Environmental Purification Industries
Equipment List
System/Vendor Description
------------- -------------------------------
RECEIVING XXXXXX
Xxxxxx Iron Works 30 cubic yard receiving xxxxxx
RAW SLUDGE HANDLING SYSTEM
Xxxxxxx America 50gpm Positive displacement pump with various valves & controls
Applied Electronics Metal detection system
Fluid Process Equip. IWAKI Walchem pump
FMC Invalco Inc. Turbine meter and totalizer
CONDITIONED SLUDGE HANDLING SYSTEM
Xxx Industries 2,000 gallon tank assembly
Fluid Process Equip. Moyno progressing cavity pump
Fluid Process Equip. Pipeliner
Fluid Process Equip. Moyno progressing cavity drum pump
Mc Stay & Assoc Six inch tank bottom valve
REACTOR SYSTEM
Xxx Industries 3,000 gallon tank assembly
Mc Stay & Assoc Six inch tank bottom valve
Seco Pumping trap
PLASTICIZER SYSTEM
Xxxxxxx Tank Co. 9,800 gallon vertical storage tank
CPI Controls Liquid level indicator and 4 inch guage hatch
Fluid Process Equip. Xxxxx iron gear pump. (30 gpm and 117 psi)
FMC Invalco Inc. Turbine meter and totalizer
PACKAGING SYSTEM
Integrated Process Systems Grinder and offloading system
Xxxxxx Industrial Sales Co. Conveyor system
STEAM GENERATION & DISTR.
Donlee Technologies 150 psi Boiler
Xxxxx Steam Tray type deaerator (10.000 #/hr.)
Xxxxxxxx Sales Co. Economizer for 225 h.p boiler
Boiler Controls Chemical feed system
COOLING TOWER SYSTEM
BCE Inc. Penn blowdown separator.
Toledo Thermal Two 2-stage vertical turbine pumps
Xchanger Inc. Heat exchanger
Marley Cooling Tower Co. Cooling tower
Xxxxx-Xxxxxxx Level control and still chamber
COMPRESSED AIR SYSTEM
Toledo Compressor Water cooled air compressor with various valves and filters
LAB EQUIPMENT
Xxxxxxx Xxxx & Son 1 qt planetary mixer
BMC Lab Cabinets
WASTEWATER TREATMENT
HLT Gear pump
Xxxxxx Industries Oil / water separator
EXHIBIT C
PERMITTED LIENS
1. Affidavit of Mechanic's Lien as filed with the Recorder of Xxxxx County,
Ohio on October 2, 1996 by Gem Industrial, Inc.
2. Affidavit of Mechanic's Lien as filed with the Recorder of Xxxxx County,
Ohio on October 11, 1996 by Xxxxxx Iron Works, Inc.
3. Primary Reserve Fund held by Mellon Bank, as trustee, pursuant to the
terms of a loan agreement between the Xxxxxx-Xxxxx County Port Authority
and Environmental Purification Industries Company.
4. Closure Fund held by Mellon Bank, as trustee, established as required
under regulations issued by the U.S. Environmental Protection Agency.
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