SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made this 9th day of February, 2000 between
TECHDYNE, INC., a Florida corporation ("Debtor") and THE PROVIDENT BANK
("Secured Party"), under the following circumstances:
A. Secured Party has entered into an Asset Based Loan and Security
Agreement (Techdyne Agreement") of even date herewith with Debtor
providing for a loan commitment of $5,500,000.00 in the aggregate
("Techdyne Loan").
B. Lender has previously entered into an Asset Based Loan and
Security Agreement with Lytton Incorporated ("Lytton"), an affiliate
of Debtor, which Lytton Agreement was dated April 14, 1995 and amended
July 31, 1997, April 29, 1998, September 8, 1998, June 30, 1999 and
________, 2000 ("Lytton Agreement").
C. The indebtedness under the Lytton Agreement is evidenced by
Lytton's (a) Amended and Restated Revolving Asset Promissory Note in
the amount of $3,000,000.00, (b) Amended and Restated Term Loan
Promissory Note in the amount of $1,400,000.00, and (c) Amended and
Restated Equipment Acquisition Promissory Note in the amount of
$500,000.00, each of which are hereinafter collectively referred to as
the "Lytton Notes".
D. Secured Party has agreed, in connection with the making of the
Techdyne Loan, to reduce the interest rates charged to Lytton under the
Lytton Notes.
E. As an inducement to Lender to make the Techdyne Loan and to reduce
the interests rates charged to Lytton under the Lytton Notes, the Debtor
has executed and delivered a Guaranty of even date herewith, wherein
Debtor guaranteed the obligations of Lytton under the Lytton Notes
("Guaranty").
F. As security for the Guaranty, Debtor has agreed to pledge to
Secured Party certain of its assets.
NOW, THEREFORE, Debtor and Secured Party agree as follows:
Section 1. Grant of First Priority Security Interest. Debtor hereby
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assigns, pledges and transfers to Secured Party a continuing first priority
security interest in all of the property described in this Section 1,
subject only to a prior security interest granted to Secured Party pursuant
to the Techdyne Agreement, dated of even date herewith. All of the property
described in Section 1 is hereafter called "Collateral".
1.1 All of Debtor's accounts (as that term is defined in the Uniform
Commercial Code, as defined herein), accounts receivable, chattel paper,
contract rights,
documents and instruments; all other obligations or indebtedness owed to
Debtor from whatever source arising; all guarantees of any of the foregoing
and all security therefor; all of the right, title and interest of Debtor
in and with respect to the goods, services or other property which gave
rise to or which secure any of the foregoing and all insurance policies and
proceeds relating thereto; all of the foregoing whether now owned by Debtor
or hereafter acquired or in existence.
1.2 All of Debtor's equipment (as that term is defined in the Uniform
Commercial Code, as defined herein), including, without limitation, all
furniture, fixtures, machinery and other equipment of any kind and all
substitutions and replacements thereof and accessories and parts therefor,
all whether now owned or hereafter acquired by Debtor.
1.3 All of Debtor's inventory (as that term is defined in the Uniform
Commercial Code, as defined herein), including, without limitation, all
goods, merchandise and other personal property which are held for sale or
lease, or are furnished or to be furnished under any contract of service
by Borrower, or are raw materials, work-in-progress, supplies or materials
used or consumed in Borrower's business, and all products thereof, and all
substitutions, replacements, additions and accessories thereto, all whether
now owned or hereafter acquired by Borrower; and all of Borrower's right,
title and interest in and to any leases or rental agreements for such
inventory.
1.4 All of Debtor's general intangibles and payment intangibles (as
those terms are defined in the Uniform Commercial Code, as defined herein),
including, without limitation, all goodwill, patents, formulas, blueprints,
proprietary manufacturing processes, trademarks, licenses, franchises,
beneficial interests in trusts, joint venture interest, partnership
interests, rights to tax refunds, pension plan over funding, literary
rights and other contractual rights of Debtor, all whether now owned or
hereafter acquired by Debtor.
1.5 All instruments, documents, securities, cash, property, deposit
accounts, certificates of deposit and the proceeds of any of the foregoing,
owned by Debtor or in which Debtor has an interest, which now or hereafter
are at any time in the possession or control of Secured Party or in transit
by mail or carrier to or from Secured Party, or in possession of any third
party acting on behalf of Secured Party, without regard to whether Secured
Party received same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Secured Party had conditionally
released the same.
1.6 All ledger sheets, files, records, documents, blueprints, drawings
and instruments (including without limitation, computer programs, tapes and
related electronic data processing software) evidencing an interest in or
relating to the Collateral described in this Section 1.
1.7 All proceeds and products of the Collateral described above in
this Section 1, including, without limitation, all claims against third
parties for damage to or loss or destruction of any of the foregoing,
including insurance proceeds, and accounts, contract
rights, chattel paper and general intangibles arising out of any sale, lease
or other disposition of any of the foregoing.
1.8 As used herein, the Uniform Commercial Code refers to the Uniform
Commercial Code in effect as of the date hereof or as hereafter adopted or
amended in any jurisdiction where the Collateral is or may from time to time
be located.
Section 2. Indebtedness. The security interests granted hereby are
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granted to secure the following:
2.1 The payment and performance of all indebtedness, liabilities and
obligations to Secured Party of every kind and description, direct or
indirect, absolute or contingent, joint or several, whether due or to become
due and whether now existing or hereafter arising under the Guaranty and all
extensions and renewals thereof (collectively, the "Indebtedness").
2.2 All reasonable costs incurred by Secured Party to obtain, preserve,
and/or enforce the security interests granted by this Agreement; to collect
the obligations secured hereby; and to maintain and preserve the Collateral,
with such costs including, but not limited to, expenditures made by Secured
Party for taxes, assessments, insurance premiums, repairs, reasonable
attorneys' fees and other legal expenses, storage costs, rents, and expenses
of sale, together with interest on the above amounts at the highest rate
being paid by Lytton on any of its obligations to Secured Party, all of
which Debtor agrees to pay to Secured Party; and
Notwithstanding the foregoing, Secured Party waives any rights arising
out of this Security Agreement to the Collateral as security for any
indebtedness of an individual Debtor to which the Truth-in-Lending Act and
Regulation Z promulgated thereunder apply.
Section 3. Debtor's Warranties. Debtor warrants to Secured Party as
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follows:
3.1 Except for the security interests granted herein and in the
Techdyne Agreement, Debtor represents and warrants that it is, and as to
the Collateral to be acquired after the date hereof, shall be, the owner
of the Collateral free from any lien, security interest or encumbrance,
and Debtor shall defend the Collateral and its proceeds and products
against all claims and demands of all persons at any time claiming the
same or any interest therein adverse to Secured Party, and shall preserve
the Collateral free from any subsequent liens, encumbrances or security
interests.
3.2 Debtor represents and warrants that at the time any account
becomes subject to a security interest in favor of Secured Party, said
account shall be a good and valid account representing a bona fide outright
sale of goods by Debtor or services performed by Debtor and such goods shall
have been shipped to the respective account debtors or the services have
been performed for the respective account debtors. Each account shall not
be subject to any claim for credit, allowance or adjustment by account
debtor or any setoff, defense or counterclaim. Debtor shall immediately
notify Secured Party in the event of the refusal of any goods which are the
subject of any such account, and of the bankruptcy, insolvency or financial
embarrassment of any account debtor and of any claim asserted for credit,
allowance, adjustment, setoff or counterclaim.
Section 4. Debtor's Obligations. Debtor agrees that:
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4.1 Debtor shall keep accurate and complete records in accordance with
sound accounting practices of all of its Collateral, and shall at all
reasonable times allow Secured Party to inspect the Collateral, to examine,
audit or make extracts from Debtor's books and records, and to arrange for
verification of the Collateral under reasonable procedures directly with
account debtors and other persons or by other procedures. Debtor will
furnish to Secured Party on request additional statements of any account
together with all notes or other documents and information relating thereto.
4.2 Debtor shall keep the Collateral insured against such casualties,
and in such amounts and on such terms as required by the Loan Agreement.
Debtor shall furnish Secured Party with satisfactory evidence of such
insurance and Secured Party shall be added to any such insurance as loss
payee. Debtor shall promptly pay when due all taxes and assessments imposed
on, or with respect to the Collateral, and shall maintain the Collateral in
good condition and repair. If Debtor fails to pay the premiums on any such
insurance or such taxes when due, or to maintain the Collateral in good
condition and repair, the Secured Party may do so for Debtor's account and
add the amount of its expenditures with respect thereto to Debtor's out-
standing obligations, which said amount shall be payable on demand with
interest at the highest rate being paid by Debtor on any of its obligations
to Secured Party. If an Event of Default has occurred and is continuing
beyond any applicable cure periods, Secured Party shall have the right to
settle and compromise any and all claims under any of the insurance policies
required to be maintained by Debtor hereunder, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact, with power to demand, receive
and receipt for all monies payable thereunder, to execute in the name of the
Debtor any proof of loss, notice, draft, and other instruments in connection
with such policies or loss thereunder and generally to do and perform any and
all acts as Debtor could perform in connection with such policies.
4.3 Debtor shall execute such financing statements and other documenta-
tion as shall reasonably be requested by Secured Party in order to perfect
the security interests granted Secured Party hereunder and to carry out the
terms of this Agreement. A photocopy of this Security Agreement shall be
sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof.
4.4 Upon request of Secured Party, Debtor shall furnish Secured Party
with any financial statements or other information as required by the terms
of the Loan Agreement.
Section 5. Debtor's Rights with Respect to the Collateral.
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5.1 With respect to the Collateral specified in Section 1.1, Debtor
is authorized to collect the proceeds of such Collateral and utilize them
in the ordinary course of business, provided that Secured Party shall have
the right at any time, before or after default, to notify account debtors
on any and all of Debtor's accounts of the security interest of Secured Party
in such accounts, to send requests for verification to the account debtors,
and, after an Event of Default, to notify such account debtors to make
payments of such accounts directly to Secured Party. At the request of
Secured Party, Debtor shall so notify such account debtors and indicate on
all xxxxxxxx that the accounts are payable directly to Secured Party. In
addition, Debtor shall, at the request of Secured Party, hold all proceeds
from collection of accounts in trust for Secured Party without commingling
the same with other funds, and shall promptly turn over the same to Secured
Party in the identical form received, endorsed by Debtor to Secured Party.
The proceeds of such Collateral shall be applied to the Indebtedness in such
order as Secured Party determines in its sole discretion.
5.2 Until default, Debtor shall have the right to use, consume, or
sell any items of the Collateral described in Section 1.2 in the regular
course of business, but not to otherwise dispose of such Collateral.
Section 6. Default. If the Indebtedness is due other than on demand,
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upon the happening of any one or more of the following events or conditions,
Secured Party may, at its option, declare the entire amount of Indebtedness
of Debtor to it then outstanding due and payable immediately without notice
to Debtor, and Secured Party may proceed to enforce payment of the same, and
to exercise all of the rights and remedies of a Secured Party under the
Ohio Uniform Commercial Code, in addition to the rights and remedies
provided herein. The events of default hereunder are as follows:
6.1 Default in the payment of any of the Indebtedness when due.
6.2 The failure of Debtor to observe or perform any of the provisions
of this Agreement, the Loan Agreement or any other agreement between the
Debtor and the Secured Party.
6.3 If any warranty, representation, certificate, schedule, financial
statement or other information given to Secured Party hereunder shall prove
to be untrue or materially misleading.
6.4 If any proceedings are instituted by or against Debtor under any
insolvency laws, or if Debtor shall become insolvent or otherwise suffer
such changes in his condition or affairs as in the sole discretion of Secured
Party impairs Secured Party's security interests hereunder, or increases its
risk as to repayment of any item of the Indebtedness, or if Secured Party
shall otherwise deem itself insecure with respect to the Indebtedness.
If the Indebtedness is due on demand, the Secured Party may proceed to
enforce payment of same and exercise all of the remedies provided herein at
any time, without notice and without reason.
Secured Party's remedies include, but are not limited to, the right to
take possession of the Collateral or any part thereof, and Debtor hereby
grants Secured Party authority to enter upon any premises on which the
Collateral or any part thereof may be situated, and remove the Collateral
from such premises or use such premises, together with the materials,
supplies, books and records of Debtor, to maintain possession and/or the
condition of the Collateral and to prepare the Collateral for sale. All
rights and remedies of Secured Party hereunder shall be cumulative, not
exclusive, and shall be enforceable alternatively, successively or concur-
rently with any other remedy available hereunder or otherwise available at
law or in equity.
Section 7. Power of Attorney. Debtor hereby irrevocably appoints
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Secured Party as Debtor's true and lawful attorney-in-fact, with full power
of substitution, for Debtor, and in Debtor's name, place and stead, upon
the occurrence of any event of default as defined in Section 6 above, and
in the event that Secured Party elects to exercise any rights granted to it
hereunder. As attorney-in-fact, Secured Party may act for Debtor with
respect to the Collateral as if Secured Party were the owner thereof, and
may endorse and cash promissory notes, checks and other instruments,
institute legal proceedings, make, adjust, and settle claims, and do all
other acts necessary and incidental to the exercise of its rights provided
hereunder, or otherwise available to it in the event of default. Neither
Secured Party nor its agents shall be liable for any acts or omissions or
for any error of judgment or mistake of fact or law in its capacity as such
attorney-in-fact.
Section 8. Miscellaneous. Any required notices to Debtor, including
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notice of the sale of any of the Collateral, shall be deemed to be reasonable
if mailed to Debtor at the address shown below, or such other address
furnished Secured Party in writing, at least five (5) business days prior to
the action which is the subject of the notice. The term "Debtor" as used
herein shall include the singular as well as the plural, and other words in
the singular shall include the plural and words of one gender shall include
the other gender when the sense requires. The term "Uniform Commercial Code"
as used herein shall mean the Uniform Commercial Code as adopted by the State
of Ohio. No waivers by Secured Party of any default shall be effective
unless given in writing, and shall not operate as a waiver of any other
default. The rights of Secured Party shall inure to the benefits of its
successors and assigns, and the obligations of Debtor shall bind Debtor's
heirs, executors, administrators, successors and assigns. If there is more
than one Debtor, their obligations hereunder shall be joint and several.
This Agreement contains the entire understanding between the parties
hereto with respect to the transactions contemplated herein, and such
understanding shall not be modified except in a writing signed by or on
behalf of the parties hereto. This Agreement shall be deemed to be a
contract entered into and made pursuant to the laws of the State of Ohio
and shall in all respects be governed, construed, applied and enforced in
accordance with the laws of said state.
As a specifically bargained inducement for Secured Party to extend
credit to Debtor: (i) THE DEBTOR HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS SECURITY AGREEMENT OR
ARISING IN ANY WAY FROM THE INDEBTEDNESS OR TRANSACTIONS INVOLVING SECURED
PARTY AND THE DEBTOR AND (ii) THE DEBTOR HEREBY DESIGNATE(S) ALL COURTS OF
RECORD SITTING IN CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT
MATTER, STATE AND FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING
IN RESPECT OF OR ARISING FROM OR OUT OF THIS SECURITY AGREEMENT, ITS MAKING,
VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL PARTIES, THEIR
SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE DEBTOR
CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH COURTS.
EXECUTED at ________________, Ohio on the 9th day of February, 2000.
THE PROVIDENT BANK
("Secured Party")
/s/ Xxxxxxxx X. Xxxxxx
BY:--------------------------------
Xxxxxxxx X. Xxxxxx
Vice President
TECHDYNE, INC.
("Debtor")
/s/ Xxxxx Xxxxx
BY:--------------------------------
Xxxxx Xxxxx
ITS Chief Financial Officer
