SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of September 30, 1997, between KOSZEGI
INDUSTRIES, INC., an Indiana corporation, with an address at 000 Xxxxx Xxxxxx
Xx., Xxxxx Xxxx, Xxxxxxx 00000 (the "Secured Party"), and AMPLACO GROUP, INC.,
a New York corporation, with an address at 000 Xxxx 000xx Xx., Xxxxx, Xxx Xxxx
00000 (the "Debtor").
WHEREAS, the Debtor has executed a note (the "Note") in favor of the
Secured Party in the original principal amount of $850,000, which was executed
by the Debtor in favor of the Secured Party pursuant to an asset purchase
agreement, dated as of September 5, 1997, between the Debtor and the Secured
Party (the "Asset Purchase Agreement"); and
WHEREAS, as an inducement to the Secured Party to accept the Note, the
Debtor wishes to grant a security interest in certain collateral to the Secured
Party;
NOW, THEREFORE, the parties hereby agree as follows (terms used and
not defined herein shall have the meanings as defined in the Uniform Commercial
Code as in effect in the State of New York (the "UCC")):
1. Grant of a Security Interest. Debtor hereby grants to Secured Party
a security interest (the "Security Interest") in the Collateral (as defined in
Section 2). Such Security Interest shall be a first lien on the Collateral,
subject only to the rights therein held by The Bank of New York taken in
connection with its financing of the Debtor's obligations pursuant to the Asset
Purchase Agreement (the "BNY Lien").
2. Collateral. The collateral covered by this Agreement consists of
all property of the Debtor, wherever located, whether or not affixed to realty,
and all Proceeds and Products thereof in any form, and all parts, accessories,
attachments, special tools, additions, replacements, substitutions and
accessions thereto or therefor, and all increases or profits received therefrom
(all of the foregoing, including such proceeds, being collectively referred to
as the "Collateral").
3. Debtor's Obligations Secured Hereby. Debtor's obligations (the
"Obligations") to Secured Party secured hereby are the payment of the principal
sum and interest evidenced by the Note, and performance and discharge of each
and every obligation of Debtor under this Agreement, the Note and the Asset
Purchase Agreement.
4. Debtor's Representations and Warranties. Debtor represents and
warrants and, so long as this Security Agreement is in effect, shall be deemed
continuously to represent
and warrant, that:
(a) Debtor owns the Collateral free and clear of any liens, except
the BNY Lien.
(b) Debtor has all necessary power and authority and has taken all
action necessary to execute, deliver and perform this Agreement and the Note
and to encumber and grant a security interest in the Collateral.
(c) There is no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral on file in any
recording office except as may have been filed in favor of Secured Party or in
connection with the BNY Lien.
(d) This Agreement creates a valid security interest of Secured
Party in the Collateral securing payment of the Obligations. On the filing of
the financing statements or the other similar instruments in effect under
Section 5(b), the Secured Party will have valid first and prior perfected liens
on and security interests in the Collateral, subject only to the BNY Lien.
(e) No consent, authorization, approval or other action by, and no
notice to or filing with, any governmental authority, regulatory body, lessor,
franchise or other person or entity is required for the grant by Debtor of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by Debtor or for the perfection or exercise by Secured Party
of its rights and remedies hereunder, except filings of financing documents.
(f) Debtor does not transact any part of its business under any
tradenames, division names, assumed names or other name, except for its name
set forth in the preamble hereto; Debtor's business address and chief executive
office is as set forth in the preamble hereto; and Debtor's records concerning
the Collateral are kept at such address.
(g) Each Account, General Intangible and Chattel Paper constituting
Collateral is genuine and to the best of Debtor's knowledge enforceable in
accordance with its terms against the party obligated to pay it (the "Account
Debtor"), and to the best of Debtor's knowledge no Account Debtor has any
defense, setoff, claim or counterclaim against Debtor which can be asserted
against Secured Party, whether in any proceeding to enforce the Collateral or
otherwise.
(h) Each Instrument and each Document constituting Collateral is
genuine and in all respects what it purports to be.
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5. Debtor's Covenants. Debtor agrees and covenants that:
(a) The Collateral will be used solely for business purposes of
Debtor and will remain in the possession or under the control of Debtor (sale
or replacement in the ordinary course excepted) and will not be used for any
unlawful purpose. The Collateral will not be misused, abused, wasted or allowed
to deteriorate, ordinary wear and tear excepted. Debtor will keep the
Collateral, as appropriate and applicable, in good condition and repair
(ordinary wear and tear excepted), and will clean, shelter, and otherwise deal
with the Collateral in all such ways as are considered good practice by owners
of like property.
(b) Debtor has executed and will promptly file with the appropriate
governmental authorities, or deliver to Secured Party for filing, UCC-1
Financing Statements with respect to the Collateral. Debtor shall, at no cost
to Secured Party, execute, acknowledge and deliver all such other documents as
Secured Party reasonably deems necessary to create, perfect and continue the
security interest in the Collateral contemplated hereby. Debtor will pay all
costs of title searches and filing of financing statements, assignments and
other documents in all public offices reasonably requested by Secured Party,
and will not, without the prior written consent of Secured Party, file or
authorize or permit to be filed in any public office any financing statement
naming Debtor as debtor and not naming Secured Party as secured party.
(c) Debtor will defend the Collateral against the claims and
demands of all other parties, including, without limitation, defenses, setoffs,
claims and counterclaims asserted by any Account Debtor against Debtor or
Secured Party, except, as to Inventory, purchasers and lessees in the ordinary
course of Debtor's business; will keep the Collateral free from all security
interests or other encumbrances, except the Security Interest; and will not
sell, transfer, lease, assign, deliver or otherwise dispose of any Collateral
or any interest therein without the prior written consent of Secured Party,
except that Debtor may sell or lease Inventory in the ordinary course of
Debtor's business.
(d) Debtor will, at Secured Party's request, xxxx any and all books
and records to indicate the Security Interest so long as it will not interfere
with the ordinary conduct of Debtor's business.
(e) Debtor will notify Secured Party promptly in writing of any
change in Debtor's business address or chief executive office, any change in
the address at which records concerning the Collateral are kept and any change
in Debtor's name, identity or corporate or other structure.
(f) Debtor will prevent the Collateral or any part thereof from
being or becoming an accession to other goods not covered by this Security
Agreement.
(g) Debtor shall pay all expenses, including reasonable attorneys'
fees
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and costs, incurred by Secured Party in the preservation, realization,
enforcement or exercise of any of Secured Party's rights under this Agreement.
6. Certain Provisions Concerning Collateral. After the occurrence of
an Event of Default (as defined below), Secured Party may notify all or any
Account Debtors of the security interest created hereby and may also direct
such Account Debtors to make all payments on Collateral to Secured Party. All
payments on and from Collateral received by Secured Party directly or from
Debtor shall be applied to the Obligations in accordance with Section 9.
Secured Party may demand of Debtor in writing, before or after notification to
Account Debtors and without waiving in any manner the security interest created
hereby, that any payments on and from the Collateral received by Debtor: (i)
shall be held by Debtor in trust for Secured Party in the same medium in which
received; (ii) shall not be commingled with any assets of Debtor; and (iii)
shall be delivered to Secured Party in the form received, properly indorsed to
permit collection, not later than the next business day following the day of
their receipt; and Debtor shall comply with such demand. Debtor shall also
promptly notify Secured Party of the return to or repossession by Debtor of
Goods underlying any Collateral, and Debtor shall hold the same in trust for
Secured Party and shall dispose of the same as Secured Party directs.
7. Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Security Agreement:
(a) Debtor shall fail to make any payment of principal of, or
interest on, the Note when due after the expiration of any grace period
specified in the Note.
(b) Any representation or warranty made by Debtor in this Agreement
or the Asset Purchase Agreement shall prove to have been incorrect in any
material respect when made.
(c) Debtor shall fail to perform or observe any other term,
covenant or agreement of Debtor contained in this Agreement or the Asset
Purchase Agreement to be performed or observed, if such failure shall continue
for 10 days after written notice thereof to Debtor, unless such failure
reasonably cannot be cured within such 10-day period and the Debtor is
diligently attempting to cure such failure and cures such failure within a
reasonable period not to exceed 45 days.
(d) Any other event which is an "Event of Default" under the Note
(as such term is defined therein) shall occur and be continuing.
8. Remedies on Default. (a) Upon the occurrence of an Event of Default
and, if required, the written notice to the Secured Party, the Secured Party
may, by notice to the Debtor, declare the aggregate unpaid principal balance of
the Note, together with all unpaid accrued interest thereon, to be immediately
due and payable and thereupon such amount shall be
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and become immediately due and payable to the Secured Party. Upon such
acceleration, the Secured Party shall have all rights, privileges, powers and
remedies provided a secured party under the UCC and any other applicable law.
Upon the existence or occurrence of an Event of Default, Secured Party may
require Debtor to assemble the Collateral and make it available to Secured
Party at a place or places designated by Secured Party, and Secured Party may
use and operate the Collateral.
(b) Without in any way requiring notice to be given in the
following time and manner, Debtor agrees that any notice by Secured Party of
sale, disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
Debtor if such notice is mailed by regular or certified mail postage prepaid,
at least five days prior to such action, to Debtor's address specified above or
to any other address which Debtor has specified in writing to Secured Party as
the address to which notices hereunder shall be given to Debtor.
(c) After an Event of Default, Secured Party may demand, collect
and xxx on any of the Accounts, Chattel Paper, Instruments and General
Intangibles (in either Debtor's or Secured Party's name at the latter's
option); may enforce, compromise, settle or discharge such Collateral without
discharging the Obligations or any part thereof; and may indorse Debtor's name
on any and all checks, commercial paper, and any other Instruments pertaining
to or constituting Collateral.
9. Payments After an Event of Default. All payments received and
amounts realized by the Secured Party pursuant to Section 8, including all such
payments and amounts received after the entire unpaid principal and interest
amount of the Note has been declared due and payable, as well as all payments
or amounts then held or thereafter received by the Secured Party as part of the
Collateral while an Event of Default shall be continuing, shall be promptly
applied and distributed by the Secured Party in the following order of
priority:
i. first, to the payment of all costs and expenses, including
reasonable legal expenses and attorneys' fees, incurred or made
hereunder by the Secured Party, including any such costs and
expenses of foreclosure or suit, if any, and of any sale or the
exercise of any other remedy under Section 8, and of all taxes,
assessments or liens superior to the lien granted under this
Security Agreement, except any taxes, assessments or other
superior lien subject to which any said sale under Section 8
hereof may have been made; and
ii. second, to the payment to the Secured Party of the amount then
owing or unpaid on the Note or any other obligations, and in case
the payments received and amounts realized by the Secured Party
shall be insufficient to pay in full the whole amount so due,
owing or unpaid upon the Note or
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any other obligations, then, with application thereof on the Note
to be made first to the unpaid interest thereon, and second, to
the unpaid principal thereof, such application to be made upon
presentation of the Note and the notation thereon of the payment,
if partially paid, or the surrender and cancellation thereof, if
fully paid; and
iii. third, to the payment of the balance or surplus, if any, to the
Debtor, its successors and assigns, or to whomsoever may be
lawfully entitled to receive the same.
10. Power of Attorney. Debtor hereby appoints Secured Party the
attorney-in-fact of Debtor to prepare, sign and file or record, for Debtor in
Debtor's name, any financing statement and to take any other action reasonably
deemed by Secured Party necessary or desirable to perfect and continue the
security interest of Secured Party hereunder, and to perform any obligations of
Debtor hereunder, at Debtor's expense, but without obligation to do so. Such
power of attorney is coupled with an interest and is irrevocable so long as
this Agreement is in effect.
11. Secured Party's Right to Cure; Reimbursement. In the event Debtor
should fail to do any act as herein provided, Secured Party may, but without
obligation to do so, without notice to Debtor, and without releasing Debtor
from any obligation hereof, make or do the same in such manner and to such
extent as Secured Party may deem necessary to protect the Collateral,
including, without limitation, the defense of any action purporting to affect
the Collateral or the rights or powers of Secured Party hereunder, at Debtor's
expense. Debtor shall reimburse Secured Party for expenses reasonably incurred
under this Section 11.
12. Miscellaneous. (a) This Agreement, together with the
representations, warranties, covenants and agreements contained in it, shall
inure to the benefit of Secured Party and its successors and assigns, and shall
be binding upon Debtor, its successors and assigns.
(b) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered against receipt to the party
to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 12(b)).
Any notice given to the Debtor shall be to the attention of its Chief Executive
Officer. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address which shall be deemed given at the time of receipt thereof.
Any notice given by other means permitted by this Section 12(b) shall be deemed
given at the time of receipt thereof.
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(c) This Agreement shall terminate on the satisfaction in full of
all Obligations and, on such termination, Secured Party shall release to Debtor
the security interest granted in the Collateral hereunder; provided, that if,
after receipt of any payment of all or any part of the Obligations, Secured
Party is for any reason compelled to surrender such payment to any person or
entity, because such payment is determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, this Agreement shall continue in full force notwithstanding any
contrary action which may have been taken by Secured Party in reliance upon
such payment, and any such contrary action so taken shall be without prejudice
to Secured Party's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
(d) If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
(e) The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
(f) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(g) This Agreement has been negotiated and consummated in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to conflict of laws.
(h) No course of dealing and no delay or omission on the part of
the Secured Party in exercising any right or remedy shall operate as a waiver
thereof or otherwise prejudice the Secured Party's rights, powers or remedies.
No right, power or remedy conferred by this Agreement upon the Secured Party
shall be exclusive of any other right, power or remedy referred to herein or
now or hereafter available at law, in equity, by statute or otherwise, and all
such remedies may be exercised singly or concurrently.
(i) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
(j) The Debtor irrevocably consents to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Agreement, any document or instrument
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delivered pursuant to, in connection with or simultaneously with this
Agreement, or a breach of this Agreement or any such document or instrument. In
any such action or proceeding, the Debtor waives personal service of any
summons, complaint or other process and agrees that service thereof may be made
in accordance with Section 12(b). Within 30 days after such service, or such
other time as may be mutually agreed upon in writing by the attorneys for the
parties to such action or proceeding, the Debtor shall appear or answer such
summons, complaint, or other process. Should the Debtor so served fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Debtor shall be deemed in default and judgment may be entered
against the Debtor for the amount as demanded in any summons, complaint or
other process so served.
IN WITNESS WHEREOF, the parties have executed this Security Agreement
on the date set forth above.
AMPLACO GROUP, INC., as Debtor
By:
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Name:
Title:
KOSZEGI INDUSTRIES, INC., as Secured Party
By:
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Name:
Title:
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