Exhibit 10.6
Security Agreement
Date: February 25, 2004.
Debtor: Xxxxx Systems, Inc., a Texas corporation, d/b/a MC Star
Debtor's Mailing Address:
Xxxxx Systems, Inc.
X.X. Xxx 000
Xx Xxxxx, Xxxxx 00000
Xxxxxxx Xxxxxx
Secured Party: Mauitz & Xxxxx, a Texas general partnership
Secured Party's Mailing Address:
Mauitz & Xxxxx
X.X. Xxx 000
Xx Xxxxx, Xxxxx 00000
Xxxxxxx Xxxxxx
Collateral (including all accessions):
Debtor grants to Secured Party, a security interest in all of its
accounts, accounts receivable, inventory, and general intangibles,
whether now owned or hereafter acquired, and all products and proceeds
thereof, pursuant to this Security Agreement. This security interest
shall be subordinate to the first lien in favor of NewFirst National
Bank.
Obligation
Revolving Credit Note
Date: February 25, 2004.
Original principal amount: $1,000,000.00
Borrower (Obligor): Xxxxx Systems, Inc., d/b/a MC Star
Lender (Secured Party): Mauitz & Xxxxx
Maturity date: February 25, 2005.
Terms of Payment: As provided in the note.
Other debt/Future advances: The security interest also secures all
other present and future debts and liabilities of Debtor and/or Obligor to
Secured Party, including future advances.
Debtor's Representations Concerning Debtor and Locations:
The collateral is located solely at El Campo, Xxxxxxx County, Texas and
Bay City, Matagorda County, Texas.
Debtor's, Xxxxx Systems, Inc., state of organization is Texas; Debtor's
name, as shown in its organizational documents, as amended, is exactly as set
forth above; and Debtor's organizational identification number is 0025279000.
Debtor's records concerning the Collateral are located at El Campo,
Xxxxxxx County, Texas and Bay City, Matagorda County, Texas.
Debtor grants to Secured Party a security interest in the Collateral
and all its proceeds to secure the Obligation and all renewals, modifications,
and extensions of the Obligation. Debtor authorizes Secured Party to file a
financing statement describing the Collateral. It is expressly agreed and
understood that this security interest shall be subordinate to the first lien
position in favor of NewFirst National Bank.
A. Debtor represents and warrants the following:
1. No financing statement covering the Collateral is filed in any
public office, other than any financing statement filed by NewFirst National
Bank.
2. Debtor owns the Collateral and has the authority to grant this
security interest, free from any setoff, claim, restriction, security interest,
or encumbrance except liens for taxes not yet due, and security interests and
liens in favor of NewFirst National Bank.
3. None of the Collateral is an accession to any goods, is commingled
with other goods, or will become an accession or part of a product or mass with
other goods, or is or will become covered by a document except as provided in
this agreement.
4. All information about Debtor's financial condition is or will be
accurate when provided to Secured Party.
5. None of the Collateral is affixed to real estate.
B. Debtor agrees to-
1. Defend the Collateral against all claims adverse to Secured Party's
interest; pay all taxes imposed on the Collateral or its use; keep the
Collateral free from liens, except for liens in favor of Secured Party or for
taxes not yet due; keep the Collateral in Debtor's possession and ownership
except as otherwise provided in this agreement; maintain the Collateral in good
condition; and protect the Collateral against waste, except for ordinary wear
and tear.
2. Pay all Secured Party's expenses, including reasonable attorney's
fees, incurred to obtain, preserve, perfect, defend, and enforce this agreement
or the Collateral and to collect or enforce the Obligation. These expenses will
bear interest from the date of advance at the rate stated in the Note for
matured, unpaid amounts and are payable on demand at the place where the
Obligation is payable. These expenses and interest are part of the Obligation
and are secured by this agreement.
3. Sign and deliver to Secured Party any documents or instruments that
Secured Party considers necessary to obtain, maintain, and perfect this security
interest in the Collateral. This includes a certificate of title for any
Collateral covered by a certificate of title so that Secured Party may have the
certificate of title reissued with its lien noted thereon.
4. Notify Secured Party immediately of any material change (a) in the
Collateral, (b) in Debtor's Mailing Address, (c) in the location of any
Collateral, (d) in any other representation or warranty in this agreement, and
(e) that may affect this security interest, and of any change (f) in
Debtor's name and (g) of any location set forth above to another state.
5. Use the Collateral primarily according to the stated classification.
6. Maintain accurate records of the Collateral at the address set forth
above, furnish Secured Party any requested information related to the
Collateral; and permit Secured Party to inspect and copy all records relating to
the Collateral.
7. Permit Secured Party to inspect the Collateral.
C. Debtor agrees not to-
1. Sell, transfer, or encumber any of the Collateral, except in the
ordinary course of Debtor's business.
2. Except as permitted in this agreement, permit the Collateral to be
affixed to any real estate, to become an accession to any goods, to be
commingled with other goods, to become a fixture, accession, or part of a
product or mass with other goods or to be covered by a document, except a
document in the possession of Secured Party.
3. Change its name or jurisdiction of organization, merge or
consolidate with any person, or convert to a different entity without notifying
Secured Party in advance and taking action to continue the perfected status of
the security interest in the Collateral.
D. Insurance and Risk of Loss
1. Debtor will insure the Collateral in accordance with Secured Party's
reasonable requirements regarding choice of carrier, risks insured against, and
amount of coverage. Policies must be written in favor of Debtor, be endorsed to
name Secured Party as an additional insured or as otherwise directed in writing
by Secured Party, and provide that Secured Party will receive at least ten days'
notice before cancellation. Debtor must provide copies of the policies or
evidence of insurance to Secured Party.
2. Debtor assumes all risk of loss to the Collateral.
3. Debtor appoints Secured Party as attorney-in-fact to collect any
returned unearned premiums and proceeds of any insurance on the Collateral and
to endorse and deliver to Secured Party any payment from such insurance made
payable to Debtor. Debtor's appointment of Secured Party as Debtor's agent is
coupled with an interest and if Debtor is an individual will survive any
disability of Debtor.
E. Default and Remedies
1. A default exists if -
a. Debtor, Obligor, or any secondary obligor fails to timely pay or
perform any obligation or covenant in any written agreement between Secured
Party and any of Debtor, Obligor, or secondary obligor;
b. any warranty, covenant, or representation in this agreement or in
any other written agreement between Secured Party and any of Debtor, Obligor, or
secondary obligor is materially false when made;
c. a receiver is appointed for Debtor, Obligor, any secondary obligor,
or any Collateral;
d. any Collateral is assigned for the benefit of creditors;
e. a bankruptcy or insolvency proceeding is commenced by Debtor, a
partnership in which Debtor is a general partner, Obligor, or any secondary
obligor;
f. a bankruptcy or insolvency proceeding is commenced against Debtor, a
partnership in which Debtor is a general partner, Obligor, or any secondary
obligor, and the proceeding continues without dismissal for sixty days, the
party against whom the proceeding is commenced admits the material allegations
of the petition against it, or an order for relief is entered;
g. any of the following parties is dissolved, begins to wind up its
affairs, is authorized to dissolve or wind up its affairs by its governing body
or persons, or any event occurs or condition exists that permits the dissolution
or winding up of the affairs of any of the following parties: Debtor; a
partnership of which Debtor is a general partner; Obligor; or any secondary
obligor; and
h. any Collateral is impaired by loss, theft, damage, levy and
execution, issuance of an official writ or order of seizure, or destruction,
unless it is promptly replaced with collateral of like kind and quality or
restored to its former condition.
2. If a default exists, Secured Party may -
a. demand, collect, convert, redeem, settle, compromise, receipt for,
realize on, xxx for, and adjust the Collateral either in Secured Party's or
Debtor's name, as Secured Party desires, or take control of any proceeds of the
Collateral and apply the proceeds against the Obligation;
b. take possession of any Collateral not already in Secured Party's
possession, without demand or legal process, and for that purpose Debtor grants
Secured Party the right to enter any premises where the Collateral may be
located;
c. without taking possession, sell, lease, or otherwise dispose of the
Collateral at any public or private sale in accordance with the law; and
d. exercise any rights and remedies granted by law or this agreement.
3. Foreclosure of this security interest by suit does not limit Secured
Party's remedies, including the right to sell the Collateral under the terms of
this agreement. Secured Party may exercise all remedies at the same or different
times, and no remedy is a defense to any other. Secured Party's rights and
remedies include all those granted by law and those specified in this agreement.
4. Secured Party's delay in exercising, partial exercise of, or failure
to exercise any of its remedies or rights does not waive Secured Party's rights
to subsequently exercise those remedies or rights. Secured Party's waiver of any
default does not waive any other default by Debtor. Secured Party's waiver of
any right in this agreement or of any default is binding only if it is in
writing. Secured Party may remedy any default without waiving it.
5. Secured Party has no obligation to clean or otherwise prepare the
Collateral for sale.
6. Secured Party has no obligation to satisfy the Obligation by
attempting to collect the Obligation from any other person liable for it.
Secured Party may release, modify, or waive any
collateral provided by any other person to secure any of the Obligation. If
Secured Party attempts to collect the Obligation from any other person liable
for it or releases, modifies, or waives any collateral provided by any other
person, that will not affect Secured Party's rights against Debtor. Debtor
waives any right Debtor may have to require Secured Party to pursue any third
person for any of the Obligation.
7. If Secured Party must comply with any applicable state or federal
law requirements in connection with a disposition of the Collateral, such
compliance will not be considered to adversely affect the commercial
reasonableness of a sale of the Collateral.
8. Secured Party may sell the Collateral without giving any warranties
as to the Collateral. Secured Party may specifically disclaim any warranties of
title or the like. This procedure will not be considered to adversely affect the
commercial reasonableness of a sale of the Collateral.
9. If Secured Party sells any of the Collateral on credit, Debtor will
be credited only with payments actually made by the purchaser and received by
Secured Party for application to the indebtedness of the purchaser. If the
purchaser fails to pay for the Collateral, Secured Party may resell the
Collateral and Debtor will be credited with the proceeds of the sale.
10. If Secured Party purchases any of the Collateral being sold,
Secured Party may pay for the Collateral by crediting the purchase price against
the Obligation.
11. Secured Party has no obligation to marshal any assets in favor of
Debtor or against or in payment of the Note, any of the Other Obligation, or any
other obligation owed to Secured Party by Debtor or any other person.
12. If the Collateral is sold after default, recitals in the xxxx of
sale or transfer will be prima facie evidence of their truth and all
prerequisites to the sale specified by this agreement and by law will be
presumed satisfied.
F. General
1. Secured Party may at any time-
a. take control of proceeds of insurance on the Collateral and reduce
any part of the Obligation accordingly or permit Debtor to use the funds to
repair or replace the Collateral and
b. purchase single-interest insurance coverage that will protect only
Secured Party if Debtor fails to maintain insurance, and premiums for the
insurance will become part of the Obligation.
2. Notice is reasonable if it is mailed, postage prepaid, to Debtor at
Debtor's Mailing Address at least ten days before any public sale or ten days
before the time when the Collateral may be otherwise disposed of without further
notice to Debtor.
3. This security interest will attach to after-acquired consumer goods
only to the extent permitted by law.
4. This security interest will neither affect nor be affected by any
other security for any of the Obligation. Neither extensions of any of the
Obligation nor releases of any of the Collateral will affect the priority or
validity of this security interest.
5. This agreement binds, benefits, and may be enforced by the
successors in interest of
Secured Party and will bind all persons who become bound as debtors to this
agreement. Assignment of any part of the Obligation and Secured Party's delivery
of any part of the Collateral will fully discharge Secured Party from
responsibility for that part of the Collateral. If such an assignment is made,
Debtor will render performance under this agreement to the assignee. Debtor
waives and will not assert against any assignee any claims, defenses, or setoffs
that Debtor could assert against Secured Party except defenses that cannot be
waived. All representations, warranties, and obligations are joint and several
as to each Debtor.
6. This agreement may be amended only by an instrument in writing
signed by Secured Party and Debtor.
7. The unenforceability of any provision of this agreement will not
affect the enforceability or validity of any other provision.
8. This agreement will be construed according to Texas law, without
regard to choice-of- law rules in any jurisdiction. This agreement is to be
performed in, and has been signed by Debtor in, the county of Secured Party's
Mailing Address.
9. Interest on the Obligation secured by this agreement will not exceed
the maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged, or received under law. Any interest in excess of that maximum
amount will be credited on the principal of the Obligation or, if that has been
paid, refunded. On any acceleration or required or permitted prepayment, any
such excess will be canceled automatically as of the acceleration or prepayment
or, if already paid, credited on the principal of the Obligation or, if the
principal of the Obligation has been paid, refunded. This provision overrides
any conflicting provisions in this and all other instruments concerning the
Obligation.
10. In no event may this agreement secure payment of any debt subject
to title IV of the Texas Finance Code or create a lien otherwise prohibited by
law.
11. When the context requires, singular nouns and pronouns include the
plural.
12. Any term defined in sections 1.101 to 11.108 of the Texas Business
and Commerce Code and not defined in this agreement has the meaning given to the
term in the Code.
13. Except for inventory collateral, if the Obligation includes
purchase money for the Collateral, Debtor's repayment of the Obligation will be
applied on a first-in-first-out basis with the effect that the portion of the
Obligation used to purchase a particular item of Collateral will be paid in the
chronological order in which Debtor purchased the Collateral.
14. The farm products addendum is attached to this agreement and
incorporated into it for all purposes.
Xxxxx Systems, Inc.
BY:
--------------------------------------------
Xxxxx Xxxxx
President
STATE OF TEXAS )
COUNTY OF XXXXXXX )
This instrument was acknowledged before me on_________________________,
2004, by Xxxxx Xxxxx, President of Xxxxx Systems, Inc., a Texas corporation, on
behalf of said corporation.
--------------------------------
Notary Public, State of Texas
PREPARED IN THE OFFICE OF:
Xxxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P.
000 X. Xxxxxxx
X.X. Xxx 0000
Xx Xxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
