Exhibit 10.38
[LOGO] First American Security Agreement FORM [ILLEGIBLE]
Professional Displays Inc.
(hereafter called Debtor) a (an) Tennessee corporation organized under the laws
of the State of Tennessee whose chief executive office (or, if none, residence)
is located at ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, hereby assigns and
grants to FIRST AMERICAN National Bank (hereinafter called "Bank") a security
interest in the following described property and in all proceeds and products
thereof and accessions thereto (all of which is called the ("Collateral"),
subject to all applicable conditions, representations, warranties, and
agreements hereinafter set forth:
|_| EQUIPMENT All equipment of every kind and description
owned by or in the possession of Debtor, whether
now owned, held or hereafter acquired and
wherever located, including but not limited to
any equipment listed below or on Exhibit
_________, together with all parts, accessories,
and attachments and all replacements and
additions thereto.
|_| INVENTORY, All inventory owned by or in the possession of
ACCOUNTS, Debtor, all Debtor's agreements for sale or
AND GENERAL INTANGIBLES lease of same and rentals therefrom, all
Debtor's accounts and general intangibles,
including but not limited to any property listed
below or on Exhibit _____, whether now in
existence, owned, held or hereafter acquired,
entered into, or created, and wherever located;
and whether held for sale or lease or furnished
or to be furnished under service contracts.
|X| OTHER PROPERTY Titled Vehicle: 1991 Dodge Dynasty 4-Door
VIN #▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, Title #47050962
Other business location(s) noted in Section 1
below.
1. Use and Location of Collateral
Debtor will use the Collateral primarily -
|_| for personal, family or household purposes
|_| in farming operations located at ____________________________, which is
owned by ______________________________________
|X| in business and that all of Debtor's places of business are in the County
above set forth except ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|_| as fixtures, to be attached to real estate owned by ______________________
and described as follows: __________________________________
2. Debtor's Residence (applicable only in Kentucky).
Debtor's residence, for the purposes of KRS 355 9-401, is different from
the address set forth above.
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Street City County State
3. Secured Obligations.
The indebtedness secured hereby (individually, an "Obligation," and
collectively, the "Obligations") shall include the following indebtednesses and
liabilities of Debtor or Display Arts Inc. (hereinafter called "Borrower"): (1)
loans to be made by Bank concurrently or in connection with this Agreement, all
interest and other charges accrued thereon, and also any renewals, extensions or
refinancings thereof; (2) contingent obligations to Bank, under guaranty
agreements or otherwise, incurred concurrently or in connection with this
Agreement; (3) all expenditures by Bank for taxes, levies, insurance and
preservation of the Collateral and otherwise in performance of any of Debtor's
or Borrower's duties under this Agreement; (4) all other money heretofore or
hereafter advanced by Bank at its option to or for the account of Debtor or
Borrower, and all other present or future, direct or contingent liabilities and
indebtedness of Debtor or Borrower to Bank of any nature whatsoever, and any
extensions or renewals thereof except that the advances, liabilities, and
indebtedness secured by this clause (4) shall not include any debt subject to
the disclosure requirements of the Federal Truth-in-Lending Act if at the time
such debt is created any legally required disclosure of this security interest
respecting such debt shall not have been made; (5) all attorney's fees, court
costs, and expenses of whatever kind incident to the collection of any of the
foregoing Obligations and the enforcement or protection of the security interest
hereby granted.
4. General Representations, Warranties, and Agreements.
Debtor is the sole owner of the Collateral, free and clear of all liens
and security interests, or the Collateral is being acquired solely by Debtor
with the proceeds of the loan(s) described above, and Bank is authorized to
disburse the proceeds of said loan directly to the seller of the Collateral as
shown on Bank's records. Debtor will defend the Collateral against the claims
and demands of all persons. No Debt Collateral, as hereinafter defined, is or
will be subject to any defense or claim of the account debtor, as defined
hereinafter. Except for sales or leases of inventory in the ordinary course of
Debtor's business, Debtor will not sell, transfer, or encumber the Collateral,
or suffer any transfer or encumbrance thereof, or in any way impair the security
afforded by the Collateral, without Bank's prior written consent.
Debtor will promptly notify Bank in writing of any change in Debtor's
residence, as set forth in the introductory paragraph or in paragraph 2, or
chief executive office.
Debtor will at all tames keep the Collateral insured against all insurable
hazards in amounts equal to the full cash value of the Collateral. Such
insurance shall be in such companies as may be acceptable to Bank, with
provisions satisfactory to Bank for payment of all losses thereunder to Bank as
its interest may appear, and, if required, Debtor shall deposit the policies
with Bank. Any money received by Bank under said policies may be applied to the
payment of any Obligation, whether or not then due and payable, or at Bank's
option may be delivered by Bank to Debtor or for the purpose of repairing or
restoring the Collateral. Debtor assigns to Bank all rights to receive proceeds
of insurance not exceeding the total amount of the Obligations, directs any
insurer to pay proceeds directly to Bank. If Debtor fails to keep the Collateral
insured as required by Bank, Bank shall have the right to obtain such insurance
at Debtor's and Borrower's expense, which shall be deemed an Obligation.
Debtor and Borrower shall pay all costs of, and taxes imposed upon, the
filing of financing statements and amendments thereto, and continuation and
termination statements with respect to the security interest created hereby, and
Bank is authorized to do all things which it deems necessary to perfect and
maintain perfection and priority of the security interest created hereby, to
preserve the enforceability of any Obligation, and to protect the Collateral,
and all expenditures for these purposes by Bank shall be deemed Obligations. Any
photographic or other reproduction of (1) this Agreement or (2) any financing
statement or amendment thereto executed pursuant to this Agreement shall be
sufficient as the original.
If any provision of this Agreement is held invalid or inapplicable, such
invalidity or inapplicability shall not affect the validity or enforceability of
the remaining provisions of this Agreement. Captions are inserted herein for
convenience only, and have no bearing on the interpretation or construction of
this Agreement. This Agreement shall inure to the benefit of Bank's successors
and assigns and shall bind Debtor's and Borrower's heirs, representatives,
successors and assigns, including any corporation or other legal entity
resulting from a merger, consolidation, or other restructuring of Debtor or
Borrower. Borrower shall be fully liable for all Obligations arising under this
Agreement, whether expressly imposed upon both Debtor and Borrower or on Debtor
alone. This Agreement shall be binding on Debtor even without Borrower's
signature.
Bank shall be deemed to have exercised reasonable care of any Collateral
in its possession if Bank takes such action respecting the Collateral as Debtor
or Borrower may reasonably request in writing, but no noncompliance by Bank with
Debtor's or Borrower's request, written or oral, of failure to give Debtor or
Borrower notice of any decline in the market value of any Collateral, shall be
deemed, or shall give rise to a presumption of a failure to exercise reasonable
care.
Any term used herein that is not otherwise defined shall have the meaning
accorded such term in the Uniform Commercial Code, except that "account debtor"
shall also mean any person obligated on Collateral consisting of: certificates
of deposit; deposit or share accounts or other indebtednesses of financial
institutions; instruments; debt securities; and, without limiting the generality
of the foregoing, any other Collateral consisting of or representing an
indebtedness, direct or contingent, matured or unmatured, of any person to
Debtor. (Any such Collateral, together with accounts, chattel paper, and general
intangibles consisting indebtedness to Debtor, is hereinafter referred to as
"Debt Collateral").
5. Default.
The Obligations shall be in default upon failure to pay when due any
amount payable hereunder, under any promissory note or other agreement
pertaining to an Obligation, or upon any failure to observe or perform any of
Debtor's or Borrower's other agreements contained herein or in any instrument
evidencing or pertaining to an Obligation or the Collateral, or if any warranty
or statement by Debtor herein or furnished in connection herewith is false or
misleading, or if Debtor or Borrower becomes the subject of any bankruptcy or
insolvency proceeding or makes an assignment for the benefit of creditors, or if
Bank in good faith believes the prospect of payment and performance of any
Obligation is impaired.
If the promissory note or instrument evidencing, or agreement pertaining
to, an Obligation does not contain specific repayment provisions, or if an
Obligation arises under this Agreement, such Obligation shall be due and payable
on demand by Bank. If such note, instrument, or agreement does not provide for
an interest rate on an Obligation, including any Obligation arising under this
Agreement, the Obligation shall bear interest from its inception on the unpaid
balance at the highest interest rate applicable to any other Obligation then in
existence or, in the absence of such other rate, the Bank's Index Rate, adjusted
daily, plus 3% per annum, but not in excess of any maximum applicable lawful
contract rate.
Upon default, all Obligations shall immediately become due and payable at
Bank's option without notice to Debtor or Borrower, and Bank may proceed to
enforce payment of same and to exercise any or all rights and remedies provided
by the Uniform Commercial Code or other applicable law, as well as all other
rights and remedies possessed by Bank all of which shall be cumulative. Whenever
Debtor or Borrower is in default hereunder, and upon demand by Bank, Debtor
shall assemble the Collateral and make it available to Bank at a place
reasonably convenient to Bank and Debtor, and if Debtor fails to do so in any
respect, Debtor shall be liable for all costs and expenses, including reasonable
attorney's fees, incurred by Bank as a result. Any notice of sale, lease or
other intended disposition of the Collateral by Bank sent to Debtor at the
address specified above, or at such other address of Debtor as may be shown on
Bank's records, at least 5 days prior to such action, shall constitute
reasonable notice to Debtor. If more than one Obligation is outstanding, Bank
may apply all sums realized from the Collateral to the Obligations in such order
as it may choose without thereby releasing Debtor, Borrower, or any other party
liable on an Obligation. Bank may waive any default before or after the same has
been declared without imparting its right to declare a subsequent default
hereunder and accelerate the maturities of the Obligations, these rights being
continuing ones.
6. Collateral Verification.
Bank shall have the right, at any time, by its own auditors, accountants,
or other agents, to examine or audit the Collateral or any of the books and
records of Debtor or any agent of Debtor pertaining to the Collateral, all of
which shall be made available upon request. Such accountants or other
representatives of Bank will be permitted to make any verification of the
existence of the Collateral or accuracy of the records which Bank deems
necessary or proper. All reasonable expenses incurred by Bank in making such
examination, inspection, verification or audit shall be deemed an Obligation.
7. Termination.
Debtor agrees that, notwithstanding the payment in full of all Obligations
and except as otherwise required by applicable law, Bank shall not be required
to send Debtor a termination statement with respect to any financing statement
filed to perfect Bank's security interest in any of the Collateral or release
any of the Collateral, unless and until Debtor shall have made written demand
therefor. Upon receipt of proper written demand, Bank may, at its option, in
lieu of sending a termination statement to Debtor, cause said termination
statement to be filed with the appropriate filing officer(s). If Bank is, or
reasonably believes itself to be, under a duty to make any future advance that
would constitute an Obligation, Bank shall in no event be required to send or
record such a termination statement or release any of the Collateral.
8. Deposit Accounts, Securities, Instruments.
If the Collateral consists in whole or in part of certificates of deposit,
deposit or share accounts or other indebtednesses of financial institutions;
instruments; or securities; then all immediate and remote renewals thereof,
substitutions therefor, and dividends, interest, earnings, and distributions
thereon, of whatever kind or character, shall likewise be subject to the
security interest hereby granted. Debtor shall immediately deliver to Bank any
additional shares received by way of stock split or stock dividend on stock
Collateral or as replacement shares therefor issued in connection with a
corporate merger, acquisition, or reorganization, or any other replacement
shares therefor issued in connection with a corporate merger, acquisition, or
reorganization, or any other replacement or renewal securities, instruments, or
certificates of deposit issued with respect to Collateral, along with all
instruments Bank deems necessary to transfer the same, but may retain cash
dividends paid solely out of the undivided profits of the issuing corporation,
absent a default on an Obligation. If the Collateral consists of or includes any
securities, certificated or uncertificated, registered in Debtor's name, at
Bank's request Debtor shall cause the Issuer to register the pledge of such
securities in Bank's name.
9. Equipment and Other Goods.
If any of the Collateral is equipment or other goods, Debtor will
contemporaneously herewith furnish Bank a list of the cities, counties, and
states wherein such equipment or goods are or will be used, and hereafter will
notify Bank in writing of any other states in which the equipment or goods are
so used.
Debtor will not permit any of the Collateral to be removed from the
locations specified herein or disclosed in writing to Bank, except for temporary
periods in the normal and customary use thereof, without prior written consent
of Bank, and will permit Bank to inspect the Collateral at any time.
Debtor will keep the Collateral in good condition and repair, and Debtor
and Borrower will pay and discharge all taxes, levies and other impositions
levied thereon as well as the cost of repairs to or maintenance of same, and
will not permit anything to be done that may impair the value of any of the
Collateral. If Debtor fails to pay such sums, Bank may do so for Debtor's and
Borrower's account, and such expenditure shall be deemed an Obligation.
Until default in any of the terms hereof or under the terms of any
Obligation, Debtor shall be entitled to possession of the Collateral and to use
the same in any lawful manner, provided that such use does not cause excessive
wear and tear to the Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
Unless this Agreement states that the Collateral is or is to become a
fixture and describes the property to which it is or will be affixed and the
record owner thereof, Debtor will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real estate.
10. Inventory, Accounts or General Intangibles.
So long as Debtor or Borrower is not in default hereunder, Debtor shall
have the right to process and sell Debtor's inventory in the regular course of
business. Bank's security interest hereunder shall attach to all proceeds of all
sales or other dispositions of the Collateral. If at any time any such proceeds
are represented by any instruments, chattel paper or documents of title, then
such instruments, chattel paper, or documents of title shall be promptly
delivered to Bank and included in the security interest granted hereby.
Bank shall not be obligated to do and perform any of the acts or things to
be done or performed by Debtor, under any contract representing any account or
other Debt Collateral, but if there is a default by Debtor with respect to such
contract, then Bank may, at its election, perform some or all of the obligations
of Debtor under such contract, and, if Bank incurs any liability or expenses by
reason thereof, the same shall be deemed an Obligation. Debtor shall not,
without Bank's prior written consent, consent to or make any material amendment
to the terms of (i) any undertaking constituting Debt Collateral or (ii) any
general intangible subject to Bank's security interest.
Debtor will on request from Bank submit to Bank duplicate copies of all
invoices on outstanding accounts subject to Bank's security interest. Bank shall
have the right to notify any account debtor to make payment directly to Bank and
to take control of all proceeds of any Debt Collateral, which right Bank may
exercise at any time whether or not Debtor or Borrower is then in default
hereunder or was previously making collections thereon. Debtor hereby authorizes
any account debtor so make such payment to Bank at Bank's election, whether or
not the applicable Debt Collateral is then matured, and agrees so indemnify such
account debtor from any liability to Debtor for so paying. Until such time as
Bank elects to exercise such right by mailing to Debtor written notice thereof,
Debtor is authorized, as agent of Bank, to collect and enforce such Debt
Collateral. Debtor will forthwith, on receipt of all checks, drafts, cash, and
other remittances in payment either of inventory sold or with respect to any
Debt Collateral, if directed by Bank, deposit the same in a special bank account
maintained with Bank, over which Bank alone has power of withdrawal. The funds
in said account shall be held by Bank as security for all Obligations. Said
proceeds shall be deposited in precisely the form received, except for the
endorsement of Debtor where necessary to permit collection of items, which
endorsement Debtor agrees to make. Pending such deposit, Debtor agrees that it
will not commingle any such checks, drafts, cash and other remittances with any
of Debtor's other funds or property, but will hold them separate and apart
therefrom and in trust for Bank until deposit thereof is made in the special
account. Bank is authorized at least once a week to apply the whole or any part
of the collected funds on deposit in the special account against the
Obligations, the amount, order and method of such application to be in the
discretion of Bank. Any portion of said funds on deposit in the special account
which Bank elects not to so apply may be paid over by Bank to Debtor.
11. Power of Attorney.
Debtor hereby irrevocably constitutes and appoints Bank or any officer,
agent on employee of Bank as Debtor's attorney-in-fact to do any one, more or
all of the following on Debtor's behalf: (a) to execute and record any financing
statement, amendment thereto, or copy thereof or of this Agreement, or other
instrument Bank deems necessary to perfect and maintain the perfection and
priority of the security interest created hereby; (b) to endorse any check,
draft, or other instrument constituting Collateral or proceeds thereof or
representing proceeds of or payments under any insurance policy covering
Collateral; (c) to endorse any security, instrument, document of title, or
chattel paper constituting Collateral for the purpose of transferring,
negotiating, or enforcing the same; (d) to grant releases to account debtors
respecting payments or compromises on Debt Collateral; and (e) without limiting
the generality of the foregoing, to execute any writing or perform any act that
Debtor is obligated to execute or perform hereunder.
EXECUTED this 15th day of August, 1996
Professional Displays Inc. Professional Displays Inc.
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Debtor/Borrower Debtor/Borrower
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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President Secretary/Treasurer
