EXHIBIT 10.9
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is made between North Texas
Circuit Board Co., Inc., a Texas corporation, ("NTCB"), and Dutchess Private
Equities Fund, L.P. and ▇▇▇▇▇ ▇▇▇▇▇▇ ("Secured Party").
WHEREAS, the Secured Party is purchasing $240,000 of convertible debentures
from Flexxtech Corporation, the net proceeds of which shall be wired directly to
NTCB for the purchase of a Giga 8800 Automatic CNC Drilling Machine and working
capital.
NOW THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, NTCB and Secured Party hereby agree as follows:
1. Grant of Security Interest. NTCB hereby grants to Secured Party a
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security interest in the collateral described in Exhibit A attached hereto and
made a part hereof (the "Collateral") and all proceeds (as that term is defined
in the Texas Uniform Commercial Code) of the Collateral. NTCB and Secured Party
acknowledge their mutual intent that all security interests contemplated herein
are given as a contemporaneous exchange for new value to NTCB.
2. Debts Secured. The security interest granted by this Agreement
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shall secure the following obligation, which is a full recourse obligation of
NTCB: (a) a convertible debenture issued by Flexxtech Corporation in favor of
Dutchess Private Equities Fund, L.P., dated October of 2001, in the principal
amount of SIXTY THOUSAND Dollars ($60,000), any and all renewals, extensions,
replacements, modifications and amendments thereof, including any which increase
the original principal amount and (b) a convertible debenture issued by
Flexxtech Corporation in favor of ▇▇▇▇▇ ▇▇▇▇▇▇, dated October of 2001, in the
principal amount of ONE HUNDRED EIGHTY THOUSAND Dollars ($180,000), any and all
renewals, extensions, replacements, modifications and amendments thereof,
including any which increase the original principal amount (cumulatively
referred to as the "Debentures").
3. Perfection and Enforcement of Assignment and Security Interest.
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NTCB agrees to deliver any and all documents or similar instruments evidencing
the Collateral, to Secured Party or Secured Party's counsel, at the time of
execution of this Agreement. NTCB agrees to give good faith, diligent
cooperation to Secured Party and to perform such other acts as reasonably
requested by Secured Party for perfection and enforcement of said security
interest, including the filing of a UCC-1 Financing Statement with the Texas
Secretary of State's Office. NTCB will promptly deliver to Secured Party all
written notices, or other documents constituting or relating to the Collateral
and will promptly give Secured Party written notice of any other notices which
are received in the future by NTCB with respect to the Collateral.
4. Secured Creditors. NTCB represents and warrants that it does not
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have any outstanding security interests relating to the collateral and it shall
not create or incur any indebtedness or obligation for borrowed money except for
indebtedness with respect to trade obligations and other normal accruals in the
ordinary course of business not yet due and payable, and shall not grant any
other security interests in the Collateral until payment and performance in full
of the obligations hereunder.
5. Representations and Warranties Concerning Collateral. NTCB
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represents and warrants that:
a. NTCB will be the sole owner of the Collateral upon receipt of
the funding from Secured Party.
b. The Collateral is not subject to any security interest, lien,
prior assignment, or other encumbrance of any nature whatsoever except for the
security interest created by the Debentures and this Agreement.
c. A UCC-1 financing statement in favor of Secured Party shall be
filed in the Texas Secretary of State's Office placing Secured Party in a first
lien position concerning the Collateral.
d. NTCB has been duly organized, is validly existing and is in
good standing under the laws of the State of Texas and is duly qualified and in
good standing in each other state in which the nature of its activities requires
it to be so qualified.
e. NTCB has not changed its name or been the subject of any
merger, consolidation or other corporate reorganization during the four month
period immediately prior to the date of this Agreement.
f. NTCB has all requisite power and authority to transact the
business that it now transacts and to own or lease the properties and assets
that it purports to own or lease.
g. The execution performance and delivery of this Agreement and
the Debentures or other instrument or agreement contemplated herein by NTCB has
been duly authorized by all requisite corporate action on behalf of NTCB.
h. NTCB will notify Secured Party in writing not fewer than thirty
(30) days in advance of any change in NTCB's principal place of business or
other business locations, or change in its state of incorporation.
i. The execution, delivery and performance of this Agreement and
the Debentures or other instrument or agreement contemplated herein by NTCB will
not result in a breach of any terms or conditions of any other contract or
agreement or in the acceleration of any other obligation of NTCB.
j. No consent or approval of any other person or entity that has
not been obtained by NTCB is required before NTCB may execute, deliver and
perform its obligations under this Agreement.
6. Covenants Concerning Collateral. NTCB covenants that:
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a. NTCB covenants, represents and warrants that there are
presently no other secured creditors that are able to obtain priority over
Secured Party concerning the Collateral or any proceeds of the Collateral.
b. NTCB agrees to promptly execute and deliver any UCC Financing
Statements reasonably requested by Secured Party for perfection or enforcement
of this Agreement and the security interests created hereby, and to give good
faith, diligent cooperation to Secured Party and to perform such other acts
reasonably requested by Secured Party for perfection and enforcement of said
security interests.
c. NTCB will defend the Collateral against all claims and demands
of all persons. NTCB will keep the Collateral free from any lien, security
interest, assignment or other encumbrances except for the security interest
granted herein. NTCB will take all steps necessary or advisable to preserve
rights against account debtors and other parties. NTCB will promptly and fully
inform Secured Party of any matter or information that may come to its attention
which might impair the Collateral or proceeds thereof. NTCB will not sell,
transfer or further encumber or lien the Collateral in any way whatsoever.
d. NTCB will execute and deliver to Secured Party, at such times
and in such form and containing such terms as Secured Party may require,
instruments, documents and agreements evidencing all or any part of the
indebtedness and such certificates of title, financing and continuation
statements and other instruments as Secured Party may deem necessary or
desirable to protect, perfect and preserve the security interest created herein.
NTCB will pay all reasonable costs of filing and recording incurred by Secured
Party in connection with the protection, perfection and preservation of the
security interest. Furthermore, NTCB irrevocably appoints Secured Party its
attorney-in-fact in NTCB's name and on its behalf to make, execute, deliver and
file any instruments or documents and to take any action as Secured Party deems
necessary or appropriate to protect and preserve the Collateral on behalf of and
for the benefit of Secured Party.
e. NTCB will be responsible for all risk of loss and any damage to
the Collateral. NTCB will (if applicable to the type of collateral indicated in
Exhibit A) have and maintain insurance at all times with respect to the
collateral against risks of fire (including so-called extended coverage), theft
and such other risks as Secured Party may require. All insurance with respect
to the Collateral shall be written by such companies, on such terms, in such
form and for such periods and amounts as may be satisfactory to Secured Party,
and shall be payable to Secured Party and NTCB as their interests may appear on
such policies, with annual premiums prepaid by NTCB. NTCB shall deliver the
insurance policies to Secured Party upon request. NTCB hereby irrevocably
appoints Secured Party as its agent to collect, compromise and settle any loss
or claim payable under such policies and to endorse any loss payment or return
premium check in NTCB's name and to apply the proceeds thereof to the
satisfaction of the indebtedness in such manner as Secured Party shall
determine. NTCB shall give immediate written notice to Secured Party and to
insurers of loss or damage to the Collateral and will promptly file proofs of
loss with insurers.
f. NTCB will permit Secured Party or its agent to inspect the
Collateral, during normal business hours (or at other times, if Secured Party
shall have notified NTCB in advance). NTCB will furnish to Secured Party copies
of all records, documents and instruments which Secured Party may reasonably
request solely as same relates to the Collateral.
g. NTCB shall pay its debts promptly as they become due.
h. NTCB shall not change its name without giving Secured Party
notice not fewer than thirty (30) days in advance. The notice shall set forth
NTCB's new name and the date on which the new name shall first be used.
i. NTCB shall immediately deliver to Secured Party all
certificates of title, or other such similar documents, to any Collateral for
which such certificates are used.
7. Right to Perform for NTCB. Secured Party may, in its sole
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discretion and without any duty to do so, elect to discharge taxes, tax liens,
security interests, or any other encumbrance upon the Collateral, perform any
duty or obligation of NTCB, pay filing, recording, insurance and other charges
payable by NTCB, or provide insurance as provided herein if NTCB fails to do so.
Any such payments advanced by Secured Party shall be repaid by NTCB upon demand,
together with interest thereon from the date of advance until repaid at the rate
of ten percent (10%) per annum.
8. Default. Time is of the essence of this Agreement. The
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occurrence of any of the following events shall constitute a default under this
Agreement:
a. Any representation, warranty or covenant made by or on behalf
of NTCB in this Agreement is materially false or materially misleading when
made;
b. NTCB fails in the payment or performance of any obligation,
covenant, agreement or liability created by or contemplated by this Agreement or
secured by this Agreement;
c. Any default in the payment or performance of any amounts,
obligation, covenant, agreement or liability under the Debentures; or
d. Any default, as that term is defined in the Debentures.
No course of dealing or any delay or failure to assert any default shall
constitute a waiver of that default or of any prior or subsequent default.
9. Remedies. Upon the occurrence of any default under this
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Agreement, Secured Party shall have the following rights and remedies, in
addition to all other rights and remedies existing at law, in equity, or by
statute or provided in the Debentures:
a. Secured Party shall have all the rights and remedies available
under the Uniform Commercial Code:
b. If NTCB fails to cure any default within fifteen (15) days
after NTCB's receipt of written notice of default from Secured Party, Secured
Party may sell, assign, deliver or otherwise dispose of any or all of the
Collateral for cash and/or credit and upon such terms and at such place or
places, and at such time or times, and to such person, firms, companies or
corporation as Secured Party reasonably believes expedient, without any
advertisement whatsoever, and, after deducting the reasonable costs and
out-of-pocket expenses incurred by Secured Party, including, without limitation,
(1) reasonable attorneys fees and legal expenses, (2) advertising of sale of the
Collateral, (3) sale commissions, (4) sales tax, and (5) costs for preservation
and protection of the Collateral, apply the remainder to pay, or to hold as a
reserve against, the obligations secured by this Agreement.
c. The rights and remedies herein conferred are cumulative and not
exclusive of any other rights and remedies and shall be in addition to every
other right, power and remedy herein specifically granted or hereafter existing
at law, in equity, or by statute which Secured Party might otherwise have, and
any and all such rights and remedies may be exercised from time to time and as
often and in such order as Secured Party may deem expedient. Such remedies may
be exercised singularly or concurrently. No delay or omission in the exercise
of any such right, power or remedy or in the pursuance of any remedy shall
impair any such right, power or remedy or be construed to be a waiver thereof or
of any default or to be an acquiescence therein.
d. In the event of breach or default under the terms of this
Agreement by NTCB, NTCB agrees to pay all reasonable attorneys fees and legal
expenses incurred by or on behalf of Secured Party in enforcement of this
Agreement, in exercising any remedy arising from such breach or default, or
otherwise related to such breach or default. NTCB additionally agrees to pay
all reasonable costs and out-of-pocket expenses, including, without limitation,
(1) reasonable attorneys fees and legal expenses, (2) advertising of sale of the
Collateral, (3) sale commissions, (4) sales tax, and (5) costs for preservation
and protection of the Collateral, incurred by Secured Party in obtaining
possession of Collateral, preparation for sale, sale or other disposition, and
otherwise incurred in foreclosing upon the Collateral. Any and all such costs
and out-of-pocket expenses shall be payable by NTCB upon demand, together with
interest thereon at ten percent (10.0%) per annum.
e. Regardless of any breach or default, NTCB agrees to pay all
expenses, including reasonable attorneys fees and legal expenses, incurred by
Secured Party in any bankruptcy proceeding of any type involving NTCB, the
Collateral, or this Agreement, including, without limitation, expenses incurred
in modifying or lifting the automatic stay, determining adequate protection, use
of cash collateral, or relating to any plan of reorganization.
f. If NTCB shall be in default under this Agreement, Secured
Party, immediately and at any time thereafter, may declare all of the
indebtedness secured pursuant to this Agreement immediately due and payable,
shall have all rights available in law or at equity, including, without
limitation, specific performance of this Agreement or for an injunction against
violations of any of the terms hereof, and the rights and all the remedies of a
secured party under the Texas UCC and any other applicable law.
10. Notices. All notices or demands by any party hereto shall be in
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writing and may be sent by regular mail. Notices shall be deemed received when
deposited in a United States post office box, postage prepaid, properly
addressed to NTCB or Secured Party at the mailing addresses stated below or to
such other addresses as NTCB or Secured Party may from time to time specify in
writing. Any notice otherwise delivered shall be deemed to be given when
actually received by the addressee. Additionally, copies of all notices or
demands made by one party shall be faxed by such party to the other parties
attorney on the same date as mailed.
If to NTCB to:
North Texas Circuit Board Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Secured Party to:
Dutchess Private Equities Fund, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
AND
▇▇▇▇▇ ▇▇▇▇▇▇
c/o Dutchess Private Equities Fund, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
11. Indemnification. NTCB agrees to indemnify Secured Party for any
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and all claims and liabilities, and for damages which may be awarded against
Secured Party and for all reasonable attorneys fees, legal expenses, and other
out-of-pocket expenses incurred in defending such claims, arising from or
related in any manner to the negotiation, execution, or performance of this
Agreement, excluding any claims and liabilities based upon breach or default by
Secured Party under this Agreement or upon the negligence or misconduct of
Secured Party. Secured Party shall have sole and complete control of the
defense of any such claims, and is hereby given the authority to settle or
otherwise compromise any such claims as Secured Party in good faith determines
shall be in its best interests.
12. Litigation. Other than as disclosed in the public filings of
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Flexxtech Corporation and in writing to Secured Party, NTCB represents that
there are no actions, suits, investigations or proceedings pending or threatened
against or affecting the validity or enforceability of the Debentures or this
Agreement, any guaranty or any instrument, document or agreement concerning the
Collateral or of which, if adversely determined, would have a material adverse
effect on the financial condition, operations, business or properties of NTCB,
and there are no outstanding orders or judgments of any court or governmental
authority or awards of any arbitrator or arbitration board against NTCB that
would have a material adverse effect on the financial condition, operations,
business or properties of NTCB.
13. Miscellaneous.
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a. This Agreement is made for the sole and exclusive benefit of
NTCB and Secured Party and is not intended to benefit any third party. No such
third party may claim any right or benefit or seek to enforce any term or
provision of this Agreement.
b. In recognition of Secured Party's right to have all its
attorneys fees and expenses incurred in connection with this Agreement secured
by the Collateral, notwithstanding payment in full of the obligations secured by
the Collateral, Secured Party shall not be required to release, reconvey, or
terminate any security interest in the Collateral unless and until NTCB and has
executed and delivered to Secured Party a general release in form and substance
satisfactory to Secured Party.
c. Secured Party and its officers, directors, employees,
representatives, agents and attorneys, shall not be liable to NTCB for
consequential damages arising from or relating to any breach of contract, tort,
or other wrong in connection with or relating to the Debentures, this Agreement
or the Collateral.
d. NTCB waives presentment, demand for payment, notice of
dishonor, protest and any other notices or demands in connections with the
delivery, acceptance, performance, default and enforcement of the Debentures or
any instruments representing all or any part of the indebtedness.
e. The provisions of this Agreement are binding on the successors and
assigns of NTCB.
f. NTCB will pay to Secured Party on demand any costs, expenses,
reasonable attorneys' fees and their reasonable disbursements incurred or paid
by Secured Party in protecting or enforcing its rights in the Collateral and in
collecting any part of the indebtedness and such amounts extended pursuant to
this section shall be added to the indebtedness.
g. Any delay, failure or waiver by Secured Party to exercise any right
it may have under this Agreement is not a waiver of Secured Party's right to
exercise the same or any other right at any other time.
h. If any provision of this Agreement or the application of any
provision to any person or circumstance shall be invalid or unenforceable,
neither the balance of this Agreement nor the application of the provision to
other persons or circumstances shall be affected. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction only, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
i. In the interest of a speedy resolution of any lawsuit which may
arise hereunder, NTCB and Secured Party waive a trial by jury in any action with
respect to this Agreement and as to any issues arising relating to this
Agreement.
j. If the incurring of any debt by NTCB or the payment of any money or
transfer of property to Secured Party by or on behalf of NTCB should for any
reason subsequently be determined to be "voidable" or avoidable" in whole or in
part within the meaning of any state or federal law of the United States,
(collectively "voidable transfers"), including, without limitation, fraudulent
conveyances or preferential transfers under the United States Bankruptcy Code or
any other federal or state law, and Secured Party is required to repay or
restore any voidable transfers or the amount or any portion thereof, or upon the
advise of Secured Party's counsel is advised to do so, then, as to any such
amount or property repaid or restored, including all reasonable costs, expenses,
and attorneys fees of Secured Party related thereto, the liability of NTCB and
this Agreement, shall automatically be revived, reinstated and restored and
shall exist as though the voidable transfers had never been made.
k. The parties hereto expressly agree that this Agreement shall be
governed by, interpreted under, and construed and enforced in accordance of the
laws of the State of Texas. Any action to enforce, arising out of, or relating
in any way to, any provisions of this Agreement shall be brought exclusively, in
the federal courts for the State of Texas.
l. All references in this Agreement to the singular shall be deemed to
include the plural if the context so requires and vice versa. Reference in the
collective or conjunctive shall also include the disjunctive unless the context
otherwise clearly requires a different interpretation.
m. All agreements, representations, warranties and covenants made by
NTCB shall survive the execution and delivery of this Agreement, the filing and
consummation of any bankruptcy proceedings, and shall continue in effect so long
as any obligation to Secured Party contemplated by this Agreement is outstanding
and unpaid, notwithstanding any termination of this Agreement.
n. This Agreement constitutes the entire agreement between NTCB and
Secured Party as to the subject matter hereof and may not be altered or amended
except by written agreement signed by NTCB and Secured Party. All other prior
and contemporaneous understandings between the parties hereto as to the subject
matter hereof are rescinded.
[Balance of this page intentionally left blank.]
Dated: October 24, 2001
SECURED PARTY:
DUTCHESS PRIVATE EQUITIES FUND, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
BY:__________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: A Managing Member
SECURED PARTY:
▇▇▇▇▇ ▇▇▇▇▇▇
BY:__________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
NORTH TEXAS CIRCUIT BOARD CO., INC.
By: ________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
SCHEDULE A
TO FINANCING STATEMENT AND SECURITY AGREEMENT
This FINANCING STATEMENT and SECURITY AGREEMENT covers, and the undersigned
("Debtor") hereby grants DUTCHESS PRIVATE EQUITIES FUND, L.P. and ▇▇▇▇▇ ▇▇▇▇▇▇
("Secured Party") a security interest in, the following property, as collateral
for the payment and performance of all present and future indebtedness,
liabilities, guarantees and obligations of Debtor to Secured Party:
a Giga 8800 Automatic CNC Drilling Machine, Serial No._______________
and all proceeds, as that term is defined in the Texas Uniform Commercial Code,
including proceeds of any insurance policies and claims against third parties.
Debtor agrees that said security interest may be enforced by Secured Party in
accordance with the terms and provisions of all security and other agreements
between Secured Party and Debtor, the Texas Uniform Commercial Code, or both.
NORTH TEXAS CIRCUIT BOARD CO., INC.
By: ________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
