EXHIBIT 10.5
SECURITY AGREEMENT
This Security Agreement is dated as of January 19, 2005 between
_________________________, an ______________ corporation ("Debtor"), and
National City Bank of the Midwest ("Lender").
1. Description of Collateral. Debtor hereby grants to Lender a security
interest in the following described assets and any and all additions, accessions
and substitutions thereto or therefor (collectively referred to as the
"Collateral").
a. All equipment, machinery, furniture, furnishings, and any and all
other tangible personal property, and all additions, accessions and
substitutions thereto or therefor now owned or hereafter acquired by the
Borrower (collectively referred to as "Equipment");
b. All accounts receivable, contract rights, chattel paper,
documents, instruments, general intangibles, as such term is defined in
the Illinois Uniform Commercial Code (810 ILCS 5/1-101 et. seq.) as in
effect from time to time, all accounts, as such term is defined in the
Illinois Uniform Commercial Code as in effect from time to time, and other
forms of obligation and other rights to the payment of money, now owned or
which may hereafter arise in favor of the Borrower (hereinafter called
"Accounts");
c. All of the Borrower's inventory, including all goods,
merchandise, materials, raw materials, work in process, finished goods and
other tangible personal property now owned or hereafter acquired and held
for sale or lease or furnished or to be furnished under contracts of
services or used or consumed in the Borrower's business, and any documents
of title representing any thereof (hereinafter called "Inventory");
d. All fixtures, fittings, appliances, apparatus, equipment,
machinery, furniture and furnishings, and all other personal property now
owned or hereafter acquired by Borrower (hereinafter called "Fixtures");
e. All deposit accounts of Debtor with Lender; and
f. All proceeds, including insurance proceeds, and products of (a),
(b), (c), (d) and (e) above.
2. Obligations. The security interest granted hereby is to secure the
payment and performance of all of the liabilities and obligations of Debtor to
Lender hereunder and also any and all other obligations of Pioneer Railcorp
("Pioneer") to Lender described in the Loan Agreement between Pioneer and Lender
of even date herewith (all hereinafter called "Obligations").
3. Warranties. Debtor represents and warrants as follows:
a. Debtor is duly organized and existing under the laws of the State
of its incorporation and is duly qualified and in good standing in every
other state in which it is doing business. The exact name of Debtor is
correctly stated in the first paragraph of this Agreement.
b. The execution, delivery and performance hereof are within
Debtor's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Debtor's
organizational documents, or of any indenture, agreement or undertaking to
which Debtor is a party or by which it is bound.
c. Debtor's (i) sole place of business (or its chief executive
office, if it has more than one place of business); and (ii) the office
where it keeps its records concerning the Collateral is at the address
stated in Section 17 of this Agreement.
d. The Debtor is the sole and absolute owner of the Collateral free
and clear of liens and encumbrances of every kind and nature except only
the lien and encumbrance hereby granted and created, other liens and
encumbrances to Lender and other liens and encumbrances disclosed in
writing to Lender by Debtor.
e. The Debtor has signed no financing statements covering the above
described property, except the financing statements signed with respect to
this Security Agreement, other financing statements in favor of Lender and
the other financing statements disclosed in writing to Lender by Debtor.
f. The officers of the Debtor executing this Security Agreement have
been duly elected and qualified and have been duly authorized and
empowered so to execute and deliver this Security Agreement on behalf of
the Debtor.
4. Records. Debtor will at all reasonable times and from time to time
allow Lender by or through any of its officers, agents, employees, attorneys or
accountants, to examine and inspect and make extracts or copies from Debtor's
books and other records to arrange for verification of the Collateral, directly
with account debtors or by other methods. Debtor will furnish to Lender upon
request statements of any account, together with all notes or other papers
evidencing the same and any guaranties, securities or other documents and
information relating thereto; and generally at all times and from time to time
furnish to Lender such statements and information as it may reasonably request.
5. Covenants. The Debtor hereby covenants and agrees with Lender that so
long as the Debtor shall owe any amounts under any of the Obligations to Lender,
the Debtor will:
a. Maintain the Collateral in good working order, condition and
repair;
b. Keep the Collateral in its possession and control, and within the
continental United States;
c. Provide to Lender from time to time, upon the request of the
Lender, a listing of the Collateral specifying the physical location and
the then condition of each item thereof;
d. From time to time at the request of Lender, do, make, execute and
deliver all such additional and further acts, things, deeds, assurances
and instruments as Lender may require, to more completely vest in and
assure to Lender its rights hereunder and in or to the Collateral and the
proceeds thereof;
e. Immediately notify Lender in writing of the opening of any new
office or place of business or the closing of any of its existing offices
or places of business and of any change in the location of its chief
executive office or the places where its records concerning the Collateral
are kept; and
f. Maintain the existence of Debtor as described in Section 3a
above, and not change any of the matters stated in said Section without
the written consent of Lender.
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6. Financing Statements. At the request of Lender, Debtor shall execute
one or more financing statements pursuant to the Illinois Commercial Code in a
form satisfactory to Lender and will pay the cost of filing the same in all
public offices wherever filing is deemed by Lender to be necessary or desirable.
Without the written consent of Lender, Debtor will not allow any financing
statement covering any Collateral, proceeds thereof or any of Debtor's inventory
to be on file in any public office. The Debtor will pay all costs of filing any
financing, continuation or termination statements with respect to the security
interest created by this Security Agreement.
7. Accounts.
a. Lender authorizes Debtor to collect any and all amounts owing on
all Accounts subject to this agreement, and Debtor shall use its best
efforts to effect the prompt collection of such Accounts. The Lender may,
at its election, notify any debtor on any Account of the assignment
thereof and effect collection of any Account directly from the debtor
obligated thereon. Lender shall have full power to collect, compromise,
endorse, sell or otherwise deal with the accounts or proceeds thereof in
its own name or that of Debtor.
b. Debtor hereby irrevocably appoints Lender, or any person
designated by Lender, its attorney in fact to receive, open and dispose of
all mail addressed to Debtor, to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders or other remittances, to endorse
the name of Debtor on any invoice, freight or express ▇▇▇▇ or ▇▇▇▇ of
lading, storage receipt, warehouse receipt or other instrument or document
in respect to any account subject to this agreement, to sign the name of
Debtor to drafts against account debtors, assignments or verifications of
Accounts subject to this agreement and notices to account debtors, and to
do all other acts and things necessary to carry out the intent of this
Security Agreement. The authority granted Lender shall remain in full
force and effect until all Accounts subject to this Security Agreement
have been paid in full.
c. Upon request of Lender at any time, Debtor will notify such
account debtors and will indicate on all ▇▇▇▇▇▇▇▇ to such account debtors
that the Accounts are payable to Lender. Any proceeds of Accounts
thereafter received by Debtor shall be turned over to Lender daily in the
exact form in which they are received.
d. The Debtor will not, without the written consent of Lender, grant
any extension of the time of payment of the Accounts, compromise, compound
and settle the same for less than the full amount thereof, release, wholly
or partly, any person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than trade discounts specifically
noted at the time of assignment.
e. The Debtor will deliver to Lender all original and other
documents evidencing, and relating to, the sale and delivery of
merchandise or the performance of labor or services which created the
Accounts, including, but not limited to, all original orders, invoices and
shipping receipts.
f. Lender shall have the right, at the Debtor's expense, to make
test verifications of all Accounts in any manner and through any medium
Lender considers advisable, and the Debtor agrees to furnish all such
assistance and information as Lender may require in connection therewith.
g. The Debtor will furnish to Lender, at the Debtor's expense, the
following reports: reconciliation of all Accounts; an aging of all
Accounts; trial balances; a test
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verification of all Accounts; and such other reports and information
relating to the Accounts as Lender may request. All reports shall be in
form satisfactory to Lender and shall be furnished to Lender at such times
as Lender may request.
h. The Debtor will stamp, in form and manner satisfactory to Lender,
the Debtor's accounts ledger and other books and records pertaining to the
Accounts with an appropriate reference to the fact that the Accounts and
the proceeds thereof have been assigned to Lender.
8. Inventory. Lender shall have the right at all times to immediate
possession of all Inventory and its products and proceeds, and to inspect the
Inventory and the Debtor's records pertaining thereto. None of the Inventory
shall be removed or disposed without Lender's written consent, except to bona
fide purchasers thereof in the ordinary course of the Debtor's business. Upon
Lender's request, the Debtor will:
a. From time to time, at the Debtor's expense, pledge and deliver
the Inventory to Lender or to a third party as Lender's bailee; to hold
the same in trust for Lender's account; or store the same in a warehouse
or warehouses in Lender's name; or deliver to Lender documents of title
representing the same; or evidence Lender's security interest in the
Inventory and the proceeds and products thereof in such other manner as
may be acceptable to Lender.
b. Remove or dispose of Inventory (whether or not to bona fide
purchasers in the ordinary course of the Debtor's business) only on orders
approved by Lender in writing.
c. Report all sales of Inventory to Lender in a form satisfactory to
Lender at such times as Lender may request.
9. Insurance. The Debtor shall insure at its expense, and keep insured by
solvent insurers, all Collateral in such amounts as similar goods are usually
insured by companies similarly situated, against loss or damage of the kinds
usually insured against by companies similarly situated, and upon Lender's
request, the policies evidencing such insurance shall be duly endorsed in
Lender's favor and certificates evidencing such insurance shall be provided to
Lender. If the Debtor defaults in this regard, Lender shall have the right to
insure and charge the cost to the Debtor. Lender assumes no risk or
responsibility in connection with the payment or non-payment of losses, the only
responsibility of Lender being to credit the Debtor with any insurable payments
received on account of losses.
10. Taxes. All taxes that may be assessed upon or paid by Lender with
respect to any of the Collateral shall be charged to and paid by the Debtor who
agrees to indemnify Lender against loss by reason of any such taxes. The Debtor
will make due and timely payment or deposit of all federal, state and local
taxes, assessments or contributions required of the Debtor by law, and will
execute and deliver to Lender, on demand, appropriate certificates attesting to
the payment or deposit thereof.
11. Proceeds. The proceeds from the sale or other disposition of the
Collateral that are delivered by Debtor to Lender, or the net sums collected
directly by Lender, after first deducting all costs of collection, shall be
credited against the amount owed by Debtor.
12. Default.
a. If Debtor fails to pay when due to Lender any amount payable on
any Obligations, or fails to observe or perform any of the covenants and
warranties in this Security Agreement or in any loan agreement with
Lender, Debtor shall be in default.
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b. In addition, at the election of Lender and without necessity of
demand or notice, all or any part of the indebtedness of Debtor secured
hereby shall become immediately due and payable, irrespective of any
agreed maturity date, on the occurrence of any of the following events of
default:
(i) Any warranty, representation, financial statement, or
other information made, given, or furnished to Lender by or on
behalf of Debtor shall prove to have been untrue in any material
respect when made, given, or furnished; or
(ii) The issuance or filing of any attachment, levy,
garnishment, or other judicial process of or on Debtor or any of the
Collateral; or
(iii) The sale or other disposition by Debtor of any
substantial portion of its assets or property, except in the
ordinary course of business; or, dissolution, termination of
existence, insolvency, business failure, or assignment for the
benefit of creditors of or by Debtor; or commencement of any
proceedings under any state or federal Bankruptcy or insolvency laws
by or against Debtor; or the appointment of a receiver or trustee
for all or any party of the property of Debtor.
13. Remedies. On any such default and at any time thereafter:
a. Lender may declare all Obligations secured under this Security
Agreement immediately due and payable and may proceed to enforce payment
and exercise any and all of the rights and remedies provided by the
Illinois Commercial Code, as well as any and all other rights and remedies
possessed by Lender.
b. Lender shall have the right to take immediate possession of the
Collateral, and for that purpose may pursue the same wherever the
Collateral may be found, and may enter upon any of the premises of the
Debtor with or without force or process of law, wherever the Collateral
may be or may be supposed to be, and search for the same, and, if found,
take possession of and remove the Collateral, or any part thereof. The
Debtor shall, upon Lender's request, assemble the Collateral and make the
Collateral available to Lender at any place designated by Lender which is
reasonably convenient to the Debtor.
c. Lender may sell at public or private sale, for such price as
Lender may deem fair, any and all of the Collateral and any other security
or property held by Lender. Lender may be the purchaser of the Collateral
or other property or security so sold and may hold the Collateral
thereafter in its own right absolutely against any claims of Debtor or
right of redemption.
d. In the case of public sale, notice shall be deemed to be adequate
and reasonable if such notice appears three (3) times in a newspaper
published in the City or County wherein the sale is to be held, the first
such publication being at least ten (10) days before such sale. In the
case of a private sale, notice shall be deemed to be adequate and
reasonable if such notice is mailed to the Debtor at its last known
address at least ten (10) days before such sale.
e. The net proceeds of any sale or sales shall be applied against
the amount owed Lender by Debtor and any other indebtedness of Debtor to
Lender. Debtor shall forthwith pay to Lender any deficiency on demand of
Lender and shall be entitled to any surplus resulting from such sale or
sales. Demand of performance, advertisement, and presence of the
Collateral at sale are hereby waived by Debtor. All demands and
presentments of every kind or nature are expressly waived by Debtor.
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f. Lender may require Debtor to assemble the Collateral at a place
mutually convenient to Lender and Debtor at the expense of Debtor.
14. Expenses. Debtor shall pay to Lender on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, reasonably incurred or
expended by Lender in the recovery and sale or attempted recovery and sale of
Collateral and in protecting and enforcing the Obligations and other rights of
Lender hereunder.
15. Termination. This Security Agreement shall be terminable only by the
filing of a termination statement in accordance with applicable provisions of
the Illinois Commercial Code. Until terminated, the security interest created
hereunder shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by Lender to Debtor, whether or
not Debtor is indebted to Lender immediately prior to the time of any such
advance. Any termination of this Security Agreement by either party shall not
affect the obligation of Debtor or Lender with respect to accounts assigned by
Debtor to Lender prior to such termination.
16. Applicable Law.
a. The validity of this Security Agreement and any provision hereof
shall be determined under and shall be construed according to the Illinois
Commercial Code and other applicable laws of the State of Illinois, and
all duties of the parties created under this Security Agreement are
performable in the State of Illinois.
b. Unless otherwise defined, all terms used in this Security
Agreement that are defined in the Illinois Commercial Code shall have the
same meaning in this Security Agreement as therein defined.
17. Notices. All notices provided for herein shall be in writing and shall
be deemed to have been given when delivered personally or when deposited in the
United States mail, postage prepaid, addressed as follows, or to such other
address as may hereafter be designated in writing by the respective parties
hereto:
If to Lender:
National City Bank of the Midwest
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇-▇▇▇-▇▇
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Elias, Meginnes, ▇▇▇▇▇▇ & Seghetti
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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If to Debtor:
Pioneer Railcorp
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇
18. No Waiver. The failure of Lender to exercise any right or remedy,
including acceptance by Lender of partial or delinquent payments, shall not
constitute a waiver of any obligation from Debtor or right of Lender or
constitute a waiver of any other similar default occurring subsequently.
19. Intent. This Security Agreement expresses the entire understanding of
the parties and may not be altered or amended except with the written consent of
each of the parties and except as provided in any other written document signed
and delivered by Debtor to Lender.
20. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of the Debtor and Lender and their respective
successors and assigns.
____________________________________ NATIONAL CITY BANK OF THE MIDWEST
BY: __________________________________ BY: ___________________________________
ITS: ________________________________ ITS: ________________________________
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