Exhibit 2(iv)
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 1, 1999, is made by Enviro-Clean of
America, Inc., a Nevada Corporation (the "Acquiror"), in favor of Xxxxxxx
Xxxxxx, an individual residing at 0000 Xxxxxxx Xxx, Xxxxxxx Xxxxx, XX, 00000
("Xxxxxx").
WITNESSETH:
WHEREAS, Acquiror has issued and delivered to Xxxxxx a promissory note in
the principal amount of One Million Two Hundred Thousand Dollars ($1,200,000)
maturing on August 1, 2002 (the "Note"), evidencing certain payment obligations
of Acquiror to Xxxxxx under a Stock Purchase Agreement dated as of August 1,
1999 among Acquiror, SCS Acquisition Corp., a Nevada Corporation and a wholly
owned subsidiary of Acquiror ("Acquiror's Subsidiary"), Superior Chemical and
Supply, Inc. ("Superior") and Xxxxxx (the "Purchase Agreement"):
NOW, THEREFORE, in consideration of the promises contained herein and to
induce Xxxxxx to enter into the Purchase Agreement, Acquiror hereby agrees with
Xxxxxx as follows:
ARTICLE 1.
DEFINED TERMS
1.1 Definitions.
(a) Unless otherwise defined herein, terms defined in the Purchase
Agreement and used herein shall have the meanings given to them in the
Purchase Agreement:
(b) The following terms shall have the following meanings:
"Agreement" this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Code" the Uniform Commercial Code as from time to time in effect in
the State of Kentucky.
"Obligations" the collective reference to the unpaid principal of and
interest on the Note.
"Receivable" any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
The terms "Accounts", "Chattel Paper", "Documents", "Instruments",
"Inventory" and
"Proceeds" shall have the meanings ascribed to such terms in the Code.
1.2 Other Definitional Provisions.
(a) The words "hereof", "herein", "hereto" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, subsection and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE II.
GRANT OF SECURITY INTEREST
As collateral security for the prompt and complete payment and performance
when due of the Obligations, Acquiror hereby grants to Xxxxxx a security
interest in all of the following assets, wherever located, now owned or at any
time hereafter acquired by Superior in which Superior now has or at any time in
the future may acquire any right, title or interest (collectively, the
"Collateral"):
(a) all Accounts resulting from any Receivables;
(b) all Chattel Paper resulting from any Receivables;
(c) all Inventory;
(d) all Receivables;
(e) all books and records pertaining to the Collateral;
(f) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
ARTICLE III.
COVENANTS
The Acquiror covenants and agrees with Xxxxxx that, from and after the
date of this Agreement until the Obligations shall have been paid in full:
3.1 Delivery of Instruments and Chattel Paper. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
Instrument or Chattel Paper, such Instrument or Chattel Paper shall be held as
Collateral pursuant to this Agreement.
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3.2 Maintenance of Perfected Security Interest, Further Documentation.
(a) The Acquiror shall maintain the security interest created by this
Agreement as a perfected security interest and shall defend such security
interest against the claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
Xxxxxx, and at the sole expense of the Acquiror, the Acquiror will promptly and
duly execute and deliver such further instruments and documents and take such
further action as Xxxxxx may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests created hereby.
3.3 Changes in Locations, Name, etc. The Borrower will not permit any of
the Inventory to be kept at a location other than the premises of Superior.
ARTICLE IV.
REMEDIES
4.1 Notice to Obligors. Upon the request of Xxxxxx at any time after the
occurrence and during the continuance of a Default or an Event of Default (after
any applicable cure periods), under the Note, the Acquiror shall notify obligors
on the Receivables that the Receivables have been assigned to Xxxxxx and that
payments in respect thereof shall be made directly to Xxxxxx.
4.2 Proceeds to be Turned Over to Xxxxxx. If a Default or an Event of
Default under the Note shall occur and be continuing (after any applicable cure
periods), all Proceeds received by the Acquiror consisting of cash, checks and
other cash equivalent items shall be held by the Acquiror in trust for Xxxxxx,
segregated from all other funds of the Acquiror, and shall forthwith upon
receipt by the Acquiror, be turned over to Xxxxxx in the exact form received by
the Acquiror (duly endorsed by the Acquiror, to Xxxxxx, if required) and held by
Xxxxxx in a Collateral Account maintained under the sole dominion and control of
Xxxxxx. All Proceeds while held by Xxxxxx in a Collateral Account (or by the
Acquiror in trust for Xxxxxx) shall continue to be held as collateral security
or the Obligations and shall not constitute payment thereof until applied as
provided in Section 4.3.
4.3 Application of Proceeds. At such intervals as may be agreed upon by
the Acquiror, or, if an Event of Default shall occurred and be continuing (after
any applicable cure periods), at any time at the election of Xxxxxx, Xxxxxx may
apply all or any part of any Proceeds held in any Collateral Account in payment
of the Obligations in such order at Xxxxxx may elect, and any part of such funds
which Xxxxxx elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by Xxxxxx to
the Acquiror or to whomsoever may be lawfully entitled to receive the same. Any
balance of such Proceeds remaining after the
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Obligations shall have been paid in full shall have expired or otherwise been
terminated shall be paid over to the Acquiror or whomsoever may be lawfully
entitled to receive the same.
4.4 Code Remedies. If an Event of Default shall occur and be continuing
under the Note (after any applicable cure periods), Xxxxxx may exercise, in
addition to all other rights and remedies granted to him in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, Xxxxxx without demand of performance
or other demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon the Acquiror or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of Xxxxxx or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. Xxxxxx shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Acquiror, which right or equity is hereby waived or
released. The Acquiror further agrees, at the request of Xxxxxx, to assemble the
Collateral and make it available to Xxxxxx at places which Xxxxxx shall
reasonably select, whether at the Acquiror's premises or elsewhere. Xxxxxx shall
apply the net proceed of any action taken by him pursuant to this subsection,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of Xxxxxx
hereunder, including, without limitation, reasonable attorney's fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as Xxxxxx may elect, and only after such application and after the payment
by Xxxxxx of any other amount required by any provision of law, including,
without limitation, Section 0-000 (x)(x) of the Code, need Xxxxxx account for
the surplus, if any, to the Acquiror. To the extent permitted by applicable law,
the Acquiror waives all claims, damages and demands it may acquire against
Xxxxxx arising out to the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least ten
(10) days before such sale or other disposition.
ARTICLE V.
EXECUTION OF FINANCING STATEMENTS
5.1 Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, the Acquiror authorizes Xxxxxx to file financing statements with respect
to the Collateral without the signature of the Acquiror in such form and in such
filing offices as Xxxxxx reasonably determines appropriate to perfect the
security interests of Xxxxxx under this Agreement. A carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
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ARTICLE VI.
NOTICES
6.1 Notices. All notices, requests and demands to or upon Xxxxxx or the
Acquiror hereunder shall be affected in the manner provided for in Section 12.04
of the Purchase Agreement.
ARTICLE VII.
MISCELLANEOUS
7.1. Amendment and Modification. This Agreement may only be amended,
modified or supplemented by written agreement of Xxxxxx and the Acquiror.
7.2. Waiver of Compliance. Any failure of Xxxxxx or the Acquiror to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the Acquiror or Xxxxxx, respectively, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
7.3. Expenses; Transfer Taxes, Etc. Except as otherwise provided herein
Xxxxxx and the Acquiror agree that each party shall bear all fees and expenses
incurred by him or it in connection with this Agreement.
7.4. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail
with postage prepaid:
(a) If to Xxxxxx, to:
Xxxxxxx Xxxxxx
0000 Xxxxxxx Xxx
Xxxxxxx Xxxxx, XX 00000
Phone: (502) ___-____
Fax: (502) ___-____
(with a copy to:)
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Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxxxxx & Xxxxxxx
X.X. Xxx 0000
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other person or address as the Company shall furnish to Acquiror in
writing.
(b) If to Acquiror, to:
Enviro-Clean of America, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, President
Phone: (000) 000-0000
Fax: (000) 000-0000
(with a copy to:)
Xxxxxxxxxx, Xxxx & Xxxx, LLP
00 Xxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or to such other person or address as Acquiror shall furnish to the Company in
writing.
7.5. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, except by
operation of law; provided, however, that Acquiror may assign both its rights
-------- -------
and obligations hereunder to any successor to its business.
7.6. Publicity. Neither Xxxxxx nor Acquiror shall make or issue, or cause
to be made or issued, any announcement or written statement concerning this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior consent of the other party. This provision
shall not apply, however, to any announcement or written statement required to
be made by law or the regulations of any federal or state governmental agency or
any stock exchange, except that the party required to make such announcement
shall, whenever practicable, consult with the other party concerning the timing
and content of such announcement before such announcement is made.
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7.7. Governing Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to its conflicts of law doctrine.
7.8. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.9. Headings. The headings of the Sections and Articles of this Agreement
are inserted for convenience only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement.
7.10. Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein, and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto.
7.11. Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
7.12. Severability. Should any provision of this Agreement be held by a
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as modified by the court or the arbitration panel
shall be binding upon and enforceable against each of them. In any event, should
one or more of the provisions of this Agreement be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and if such provision or provisions
are not modified as provided above, this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been set forth herein.
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IN WITNESS WHEREOF, the undersigned has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
ENVIRO-CLEAN OF AMERICA, INC.
By:________________________________
Xxxxxxx Xxxxxx
President
________________________________
Xxxxxxx Xxxxxx
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