EXHIBIT 10.9
SECURITY AGREEMENT
This SECURITY AGREEMENT is made and entered into as of this 23rd
day of February 1999, by and among NA ACQUISITION CORP., a Pennsylvania
corporation (the "Borrower"), and ARTRA GROUP INCORPORATED, a Pennsylvania
corporation (the "Secured Party").
BACKGROUND
A. The Borrower and the Secured Party have executed a Loan
Agreement of even date herewith (the "Loan Agreement").
B. The Secured Party is willing to grant the extensions of credit
contemplated by the Loan Agreement only on the condition that the Borrower
executes and delivers this Security Agreement to the Secured Party.
C. Capitalized terms which are used herein without definition shall
have the meanings ascribed to them in the Loan Agreement. Other terms used
herein without definition that are defined in the Uniform Commercial Code, as
enacted in the state in which the collateral is located and in effect on the
date hereof (the "Uniform Commercial Code") shall have the meanings ascribed to
them therein, unless the context requires otherwise.
NOW, THEREFORE, intending to be legally bound, the Borrower and the
Secured Party hereby agree as follows:
Section 1. Creation of Security Interest. The Borrower hereby
grants to the Secured Party a lien and security interest in and to the Assets
(as defined in the Loan Agreement) and the property hereinafter described,
whether now owned or hereafter acquired or arising and wherever located
("Collateral"):
All tangible and intangible personal property of the
Borrower, including but not limited to:
(a) all accounts, accounts receivable, rights under
contracts, chattel paper, instruments, and all obligations due the Borrower for
goods sold or to be sold, consigned or leased or to be leased, or services
rendered or to be rendered ("Accounts");
(b) all inventory, whether raw materials, work-in-process,
finished goods, parts or supplies or otherwise; all goods, merchandise and other
property held for sale or lease or to be furnished under any contract of
service; all documents of title covering any goods which are or are to become
inventory and any such goods which are leased or consigned to others and all
returned, reclaimed or repossessed goods sold, consigned, leased or otherwise
furnished by the Borrower to others ("Inventory");
(c) all leases and rental agreements for personal property
between the Borrower as lessor (whether by origination or derivation) and any
and all persons or parties as lessee(s), and all rentals, purchase option
amounts, and other sums due thereunder; and all inventory, equipment, goods and
property subject to such leases and rental agreements and all accessions, parts
and tools attached thereto or used therewith and all of the Borrower's residual
or reversionary rights therein;
(d) all machinery, equipment, furniture, fixtures, tools,
motor vehicles, and all accessories, parts and equipment now or hereafter
attached thereto or used in connection therewith, whether or not the same shall
be deemed affixed to real property, and all other tangible personal property
("Equipment");
(e) all general intangibles, which term shall have the
meaning given to it in the Uniform Commercial Code and shall additionally
include but not be limited to all tax refunds, patents, trademarks, rights under
license agreements, service marks, tradenames, copyrights and other intellectual
property and proprietary rights of any kind;
(f) all additions, replacements, attachments, accretions,
accessions, components and substitutions to or for any Inventory or Equipment;
(g) all books and records evidencing or relating to the
foregoing, including, without limitation, billing records of every kind and
description, customer lists, data storage and processing media, software and
related material, including computer programs, computer tapes, cards, disks and
printouts, and including any of the foregoing which are in the possession of any
affiliate or any computer service bureau;
(h) all proceeds, which term shall have the meaning given
to it in the Uniform Commercial Code and shall additionally include but not be
limited to, whatever is received upon the use, lease, sale, exchange, collection
or other utilization or any disposition of the Assets or any of the collateral
described in subparagraphs (a) through (g) above, whether cash or noncash, and
including without limitation, rental or lease payments, accounts, chattel paper,
instruments, documents, contract rights, general intangibles, equipment,
inventory and insurance proceeds; and all such proceeds of the foregoing
("Proceeds").
Section 2. Secured Obligations. The security interest created
herein is given as security for the prompt payment, performance, satisfaction
and discharge of the Obligations (as defined in the Loan Agreement).
Section 3. Representations and Warranties. The Borrower, as of the
date hereof and at the time of each advance or extension of credit under the
Loan Agreement, represents and warrants as follows:
3.01 Good Title to Collateral. The Borrower has good and marketable
title to the Collateral free and clear of all liens and encumbrances other than
the security interests
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granted to the Secured Party hereunder and those encumbrances (if any) set forth
in the Loan Agreement.
3.02 Location of Books and Records. The locations of the
offices where the Borrower maintains its books and records concerning the
Collateral are as set forth in Exhibit A.
3.03 Chief Executive Office. The chief executive offices
of the Borrower are at the address set forth in Exhibit A.
3.04 Location of Inventory and Equipment. All Inventory
and Equipment of the Borrower is located at one or more of the addresses set
forth in Exhibit A.
3.05 Other Representations. As of the date of this
Security Agreement, each representation, warranty or other statement by the
Borrower in, or in connection with, any of the Loan Documents is true and
correct and states all material facts necessary to make it not misleading.
Section 4. Collection, Disposition and Use of Collateral.
4.01 Accounts. The Secured Party hereby authorizes the
Borrower to collect all Accounts from the account debtors. Upon the occurrence
of a default ("Default") as set forth in Section 6 hereof, the authority hereby
given to the Borrower to collect the Proceeds of Accounts in trust for the
Secured Party may be terminated by the Secured Party at any time and Secured
Party shall have the right at any time thereafter, acting if it so chooses in
the Borrower's name, to collect Accounts itself, to sell, assign, compromise,
discharge or extend the time for payment of any Account, and to do all acts and
things necessary or incidental thereto and the Borrower hereby ratifies all such
acts. Upon the occurrence of a Default, at the Secured Party's request, the
Borrower will notify account debtors and any guarantor thereof that the Accounts
payable by such account debtors have been assigned to the Secured Party and
shall indicate on all xxxxxxxx to account debtors that payments thereon are to
be made to the Secured Party.
4.02 Inventory. So long as there has been no Default
hereunder, the Borrower shall be permitted to process and sell its Inventory,
but only to the extent that such processing and sale are conducted in the
ordinary course of the Borrower's business.
4.03 Equipment. So long as there has been no Default
hereunder, the Borrower shall be permitted to use its Equipment in the ordinary
course of its business. No sale, lease or other disposition of any item of
equipment shall be permitted, except in accordance with such terms and
conditions as the Secured Party shall have expressly approved in writing and
except for the sale or other disposition of obsolete Equipment which is no
longer used or useful in the Borrower's business.
Section 5. Power of Attorney. The Borrower hereby appoints the
Secured Party as its lawful attorney-in-fact to do, at the Secured Party's
option, all acts and things which the Secured
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Party may deem reasonably necessary or desirable to effectuate its rights under
this Security Agreement, including without limitation, (a) file financing
statements and otherwise perfect any security interest granted hereby, (b) upon
the occurrence of a Default hereunder, communicate with account debtors and
other third parties for the purpose of protecting or preserving the Collateral,
and (c) upon the occurrence of a Default hereunder which has not been cured in
accordance with the terms of the Loan Agreement, in the Borrower's or the
Secured Party's name, to demand, collect, receive, and receipt for, compound,
compromise, settle and give acquittance for, and prosecute and discontinue or
dismiss, with or without prejudice, any suit or proceeding respecting any of the
Collateral.
Section 6. Default. The occurrence of any one or more of the
following shall be a default ("Default") hereunder:
6.01 Default Under Loan Agreement. The occurrence of an
Event of Default under the Loan Agreement or any of the Loan Documents.
6.02 Failure to Observe Covenants. The failure of the
Borrower to keep, observe or perform any provisions of this Security Agreement,
which failure is not cured and remedied within thirty (30) days after written
notice thereof is given to the Borrower.
6.03 Representations, Warranties. If any representation,
warranty or certificate furnished by the Borrower under or in connection with
this Security Agreement shall, at any time, be materially false or incorrect.
Section 7. Secured Party's Rights Upon Default. Upon the occurrence
of a default hereunder which has not been cured in accordance with the terms of
the Loan Agreement, or at any time thereafter, the Secured Party may immediately
and without notice do any or all of the following, which rights and remedies are
cumulative, may be exercised from time to time, and are in addition to any
rights and remedies available to the Secured Party under the Loan Agreement or
any other Loan Document:
7.01 Uniform Commercial Code Rights. Exercise any and all
of the rights and remedies of a secured party under the Uniform Commercial Code,
including the right to require the Borrower to assemble the Collateral and make
it available to the Secured Party at a place reasonably convenient to the
parties.
7.02 Operation of Collateral. Operate, utilize,
recondition and/or refurbish (at the Secured Party's sole option and discretion
and in any manner) any of the Collateral which is Equipment, for the purpose of
enhancing or preserving the value thereof or the value of any other Collateral.
7.03 Notification of Account Debtors. Notify the account
debtors for any of the Accounts that such Accounts have been assigned to the
Secured Party and that payments are to be made directly to the Secured Party, or
to such post office box as the Secured Party may
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direct. The Borrower shall not compromise, discharge, extend the time for
payment or otherwise grant any indulgence or allowance with respect to any
Account without the prior written consent of the Secured Party.
7.04 Sale of Collateral. Upon five (5) business days'
prior written notice to the Borrower, which the Borrower hereby acknowledges to
be sufficient, commercially reasonable and proper, sell, lease or otherwise
dispose of any or all of the Collateral at any time and from time to time at
public or private sale, with or without advertisement thereof and apply the
proceeds of any such sale first to the Secured Party's expenses in preparing the
Collateral for sale (including reasonable attorneys' fees) and second to the
complete satisfaction of the Obligations. The Borrower waives the benefit of any
marshalling doctrine with respect to the Secured Party's exercise of its rights
hereunder. The Borrower grants a royalty-free license to the Secured Party for
all patents, service marks, trademarks, tradenames, copyrights, computer
programs and other intellectual property and proprietary rights sufficient to
permit Secured Party to exercise all rights granted to Secured Party under this
Section.
Section 8. Notices. Any written notices required or permitted by
this Security Agreement shall be effective if delivered in accordance with of
the Loan Agreement.
Section 9. Miscellaneous.
9.01 No Waiver. No delay or omission by the Secured Party
in exercising any right or remedy hereunder shall operate as a waiver thereof or
of any other right or remedy, and no single or partial exercise thereof shall
preclude any further exercise thereof or the exercise of any other right or
remedy.
9.02 Preservation of Rights. The Secured Party shall have
no obligation or responsibility to take any steps to enforce or preserve rights
against any parties to any Account and such obligation and responsibility shall
be those of the Borrower exclusively.
9.03 Successors. The provisions of this Security Agreement
shall inure to the benefit of and be binding upon the Secured Party and the
Borrower and their respective successors and assigns, provided that the
Borrower's obligations hereunder may not be assigned without the written consent
of the Secured Party.
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9.04 Amendments. No modification, rescission, waiver,
release or amendment of any provisions of this Security Agreement shall be
effective unless set forth in a written agreement signed by the Borrower and an
authorized officer of the Secured Party.
9.05 Governing Law. This Security Agreement shall be
construed under the internal laws of the Commonwealth of Pennsylvania without
reference to conflict of laws principles.
9.06 Severability. If any provision of this Security
Agreement shall be held invalid or unenforceable under applicable law in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of such provision in any other jurisdiction or the validity or
enforceability of any other provision of this Security Agreement that can be
given effect without such invalid or unenforceable provision.
9.07 Judicial Proceedings. Each party to this Agreement
agrees that any suit, action or proceeding, whether claim or counterclaim,
brought or instituted by any party hereto or any successor or assign of any
party, on or with respect to this Agreement or the dealings of the parties with
respect hereto, shall be tried only by a court and not by a jury. EACH PARTY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives any
right it may have to claim or recover, in any such suit, action or proceeding,
any special, exemplary, punitive or consequential damages or any damages other
than, or in addition to, actual damages. THE BORROWER ACKNOWLEDGES AND AGREES
THAT THIS PARAGRAPH IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT
THE SECURED PARTY WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS SET
FORTH IN THIS PARAGRAPH WERE NOT A PART OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed and delivered by their authorized officers the day and
year first above written.
Attest: NA ACQUISITION CORP.
__________________________ By: __________________________
Title:________________________
ARTRA GROUP INCORPORATED
By: __________________________
Title:________________________
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EXHIBIT A
Location of books and records:
000 Xxxxxx Xxx
Xx. Xxxxxx, XX 00000
Location of chief executive office:
000 Xxxxxx Xxx
Xx. Xxxxxx, XX 00000
Location of Inventory and Equipment:
000 Xxxxxx Xxx
Xx. Xxxxxx, XX 00000
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