EXHIBIT 10.3
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SECURITY AGREEMENT
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THIS SECURITY AGREEMENT is made effective the 1st day of
March, 2001, between YORKTOWN MANAGEMENT AND FINANCIAL SERVICES, L.L.C., an
Oklahoma limited liability company, having a mailing address of 0000 Xxxxx
Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 (the "Secured Party"), and PLASTIC
PALLET PRODUCTION, INC., a Texas corporation, having a mailing address of 0000
Xxxx Xxxxxxxx, Xxxxxx, Xxxxx 00000 (the "Debtor").
W I T N E S S E T H:
1. SECURITY INTEREST. For value received, the receipt of which
is hereby acknowledged, the Debtor hereby grants to the Secured Party a security
interest in and to the personal property of the Debtor more particularly
described on Exhibit "A" hereto, and all future additions to, replacements of,
substitutions for and all proceeds and products thereof (the "Collateral"). This
Agreement is intended for security only, and is to secure obligations of the
Debtor owing to the Secured Party as herein described. It is specifically
understood that the Secured Party does not hereby assume any of the obligations
of the Debtor in connection with the Collateral.
2. INDEBTEDNESS. This Agreement is given to secure:
(a) Payment of a promissory note (the "Note") executed by
Debtor and PalWeb Corporation, to the Secured Party
in the principal sum of Two Hundred Fifty Thousand
Dollars ($250,000.00), payable as to principal and
interest as provided therein;
(b) All renewals, consolidations, extensions and
substitutions for the Note;
(c) All liabilities of Debtor to Secured Party of every
kind or description, including (i) future advances,
(ii) both direct and indirect liabilities, (iii)
liabilities due or to become due and whether absolute
or contingent, and (iv) all liabilities now existing
or hereafter arising and however evidenced; and
(d) Payment of all expenditures by the Secured Party for
taxes, insurance and maintenance of the Collateral
and all costs and expenses incurred by the Secured
Party in the collection and enforcement of the
obligations due the Secured Party by the Debtor,
including all of the Secured Party's attorney's fees.
3. OTHER ENCUMBRANCES. The Debtor is the owner of the
Collateral, subject to a prior security interest granted therein in favor of
Xxxxxxxx Trading Company, L.C. ("Xxxxxxxx") under that certain Security
Agreement dated July 27, 2000. The Debtor and Secured Party hereby acknowledge
and agree that the security interest in the Collateral granted herein to the
Secured Party is and shall be subject,
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junior and inferior to the security interest of Xxxxxxxx and, irrespective of
whether the security interest of Xxxxxxxx is or becomes unperfected under
applicable law, Secured Party hereby agrees that the security interest granted
herein shall be at all times subordinate to the security interest of Xxxxxxxx.
Except for the security interest of Xxxxxxxx and the security interest granted
hereby, the Debtor will not further encumber the Collateral without the prior
written consent of the Secured Party.
4. DEBTOR'S AGREEMENTS. The Debtor expressly warrants and
covenants as follows:
4.1 FINANCING STATEMENTS. The Debtor will join with
the Secured Party in executing one or more financing
statements, if applicable, in form satisfactory to the Secured
Party, and the Debtor will perform all further acts necessary
to perfect a security interest in the Collateral in favor of
the Secured Party.
4.2 INSURANCE. The Debtor will purchase or cause to
be purchased, and continuously maintain or cause to be
maintained with companies acceptable to the Secured Party,
policies of insurance covering the Collateral, covering loss
or damage to the Collateral. All such insurance policies will
be written for the benefit of the Debtor and the Secured Party
as their interests may appear, and such policies or
certificates evidencing the same will be furnished to the
Secured Party. All policies of insurance will provide at least
ten (10) days prior written notice of cancellation to the
Secured Party.
4.3 TAXES. Debtor shall promptly pay any and all
taxes, assessments and license fees with respect to the
Collateral or the use of the collateral.
4.4 REIMBURSEMENT FOR EXPENSES. At the option of the
Secured Party, the Secured Party may discharge taxes, liens,
security interest of other encumbrances affecting the
Collateral, and may pay for the maintenance and preservation
thereof, and for insurance covering the Collateral, and may
pay all costs incurred in performing the obligations owing by
the Debtor to the Secured Party. The Debtor agrees to
reimburse the Secured Party on demand for any payments so
made, and until such reimbursement, the amount of any such
payment, with interest at the rate after maturity specified in
the Note, accrued from the date of payment until
reimbursement, will be added to the indebtedness owed by the
Debtor and will be secured by this Agreement.
4.5 CHANGE OF LOCATION OF COLLATERAL. Except as
otherwise provided herein, the Collateral shall at all times
be kept at 0000 Xxxx Xxxxxxxx, Xxxxxx Xxxxx. The Debtor will
immediately notify the Secured Party in writing of any change
in the Debtor's principal place of business, or in the
location of the Collateral from that stated in this paragraph.
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5. DEFAULT. The Debtor will be in default under this Agreement
on the happening of any of the following events or conditions:
(a) Default in the payment or performance of any
obligation, covenant or liability contained in the
Note or this Agreement.
(b) Any warranty, representation or statement made or
furnished to the Secured Party by or on behalf of the
Debtor proves to have been false in any material
respect when made;
(c) Sale, loss or additional encumbrance of the
Collateral, or the making of any levy, seizure or
attachment thereof or thereon;
(d) The default on the obligation to any first security
interest holder as to any of the Collateral;
(e) Insolvency or business failure of the Debtor,
appointment of a receiver for the Debtor or the
Collateral, assignment for the benefit of creditors
or the commencement of any proceeding under any
bankruptcy or insolvency law by or against the
Debtor; or
(f) The default by PalWeb Corporation, on that certain
Security Agreement to the Secured Party executed on
this date.
6. REMEDIES. Upon the occurrence of any event of default the
Secured Party, at the Secured Party's option, may declare all obligations
secured hereby immediately due and payable, and may proceed to selectively and
successively enforce and exercise any and all rights and remedies which Secured
Party may have under this Agreement, any other applicable agreement or
applicable law, including, without limitation: (i) commencing one or more
actions against Debtor and reducing the claims of Secured Party against Debtor
to judgment, (ii) foreclosure or other enforcement of Secured Party's security
interest in the Collateral, or any portion thereof, or other enforcement of
Secured Party's rights and remedies in respect of and to recover upon the
Collateral, through judicial action or otherwise, including all available
remedies under the applicable provisions of the Uniform Commercial Code, (iii)
payment or discharge of any claim or lien, prior or subordinate, in respect of
or affecting the Collateral; and (iv) sell, lease or otherwise dispose of the
Collateral at private or public sale, in which event Secured Party will give
Debtor reasonable notice of the time and place of any public sale or other
disposition thereof or the time after which any private sale or other
disposition thereof is to be made. The requirements of reasonable notice shall
be met if such notice is given to Debtor at least ten (10) days before the time
of any such sale or disposition. Secured Party shall not be obligated to make
any such sale pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at
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any time or place to which the same may be so adjourned. Secured Party shall be
entitled to recover from Debtor an amount equal to all costs, expenses and
attorney's fees incurred by Secured Party in connection with the exercise of the
rights contained or referred to herein, together with interest on such sums at
the rate applicable to the Note from time to time.
7. WAIVER OF DEFAULT. Secured Party may, by an instrument in
writing signed by Secured Party, waive any event of default which shall have
occurred and any of the consequences thereof and, in such event, Secured Party
and Debtor shall be restored to their respective former positions, rights and
obligations. Any event of default so waived shall, for all purposes of this
Agreement, be deemed to have been cured and not to be continuing, but no such
waiver shall extend to any subsequent or other default or impair any consequence
thereof.
8. MISCELLANEOUS. The provisions of this Agreement are
severable, and the invalidity of any part or application hereof will not affect
any other provision or application hereof. No indulgence or waiver hereunder by
the Secured Party will be construed to affect any other default hereunder, or
preclude the Secured Party from asserting any right or remedy with respect to a
later default. The Secured Party's remedies hereunder are cumulative and not
alternative, the exercise of one remedy will not preclude the Secured Party from
exercising another for the same default. The terms of this Agreement will be
binding on the successors and permitted assigns of the parties hereto. The laws
of the State of Oklahoma will govern the construction and validity of this
Agreement and the rights and duties of the parties hereunder.
EXECUTED AND DELIVERED the date first above written.
"DEBTOR" PLASTIC PALLET PRODUCTION, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President
"SECURED PARTY" YORKTOWN MANAGEMENT AND FINANCIAL
SERVICES, L.L.C.
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, Manager
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EXHIBIT "A"
(Description of Collateral)
All accounts, chattel paper, documents, instruments, inventory
(as such terms are defined in Article 9 of the UCC) of the
Debtor, now existing or hereafter acquired; All equipment (as
such term is defined in Article 9 of the UCC) of the Debtor,
now existing or hereafter acquired and wherever located,
including, without implied limitation, all prototype injection
molding equipment, molds, chillers and extruders; All general
intangibles (as such term is defined in Article 9 of the UCC)
of the Debtor, of every kind and nature, whether now owned or
existing or hereafter arising or acquired, including, without
implied limitation, all books, records, computer programs,
source codes, computer tapes, computer cards, computer disks,
permits, know-how, technologies, trade secrets, designs,
drawings, processes, claims (including, without limitation,
claims for income tax and other refunds), causes of action,
choses in action, judgments, goodwill, patents, copyrights,
brand names, trademarks, tradenames, service names, service
marks, logos, licensing agreements and other intellectual
property, franchises, royalty payments, settlements,
partnership interests (whether general, limited or special),
interests in joint ventures, contracts, contract rights and
monies due under any contract or agreement; All future
additions to, replacements of, substitutions for and proceeds
and products of any of the foregoing items.
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