SECURITY AGREEMENT
THIS AGREEMENT made and entered into this 31 day of January, A.D. 1996,
by and between:
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇ AND ▇▇▇ ▇▇▇▇
(hereinafter "Secured Parties")
and
CASS RIVER COATINGS, INC.,
a Michigan Corporation
(hereinafter "Borrower")
IN CONSIDERATION of those certain Consulting Agreements of even date
herewith entered into by Secured Parties and Borrower (hereinafter
"Obligation"), and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. GRANT OF SECURITY INTEREST: Borrower hereby grants to Secured Parties,
jointly and severally, a continuing security interest in the Collateral
described in Paragraph No. 2 hereinafter to secure the Obligations, including
all renewals and extensions thereof from Secured Parties to Borrower, plus all
interest, costs, expenses and reasonable attorney fees, which may be made or
incurred by Secured Parties in the disbursement, administration and collection
of said Obligations, and in the protection, maintenance and liquidation of the
Collateral. All statements of account rendered by Secured Parties to Borrower
relating to Borrower's Liabilities, including all statements of principal,
interest, expenses and costs owing by Borrower to Secured Parties, shall be
presumed correct and accurate and constitute an account stated between Borrower
and Secured Parties unless within thirty (30) days after mailing thereof to
Borrower by registered or certified mail addressed to Borrower at its principal
place of business. Borrower shall deliver to Secured Parties by registered or
certified mail addressed to Secured Parties at its principal place of business,
written objection thereto specifying the error or errors, if any, contained in
any such statement. This Agreement shall be and become effective when, and
continue in effect as long as any Obligations of Borrower to Secured Parties are
outstanding and unpaid. Borrower will not, outside of the ordinary course of
business, sell, assign, transfer, pledge, alienate, or otherwise dispose of or
encumber any Collateral to any third party while this Agreement is in effect
without the written consent of Secured Parties, except that Borrower may pledge
such assets to the financial institution financing Borrower's purchase and
Borrower' operation and Secured Parties' interest shall be subordinate to such
pledge.
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2. COLLATERAL: The Collateral covered by this Agreement is all the
Borrower's property described below, where an "x" or check ▇▇▇▇ has been placed
on the line applicable thereto, which it now owns or shall hereafter acquire or
create, immediately upon the acquisition or creation thereof, and includes, but
is not limited to, any items listed on any schedule or list attached hereto.
__ A. ACCOUNTS: Accounts, Documents, Chattel Paper, Instruments, Contract
Rights, General Intangibles, Choses in Action, including any right to any
refund of any taxes heretofore or hereafter paid to any governmental
authority (all of which are hereinafter individually and collectively
referred to as "Accounts"), regardless of whether any such Accounts are
acceptable or unacceptable to Secured Parties or whether any such Accounts
have been scheduled to Secured Parties on any schedule or list attached
hereto or otherwise given to Secured Parties.
__ B. INVENTORY: All Inventory, goods, tangible property, stock in trade,
wares and merchandise used in or sold in the ordinary course of business,
including Goods whose sale, lease or other disposition by Borrower has
given rise to any Accounts, and which Goods have been returned to, or
repossessed by or stopped in transit by Borrower.
X__ C. EQUIPMENT: All Equipment, including all machinery, furniture,
furnishings and vehicles, and all substitutions, improvements and
replacements thereof and additions thereto, by way of example, but not
limited to the Attached Exhibit "A".
X__ D. FIXTURES: All Fixtures, whether now or to be hereafter attached, to the
following described real property: See Attached Exhibit "A" ______.
__ E. CROPS: All Crops, grown, growing, or to be grown and located on the
following described real property: See Attached Exhibit
__ F. SPECIFIC: Assignment rights in any State of Michigan Liquor Control
Commission license pursuant to the terms of a Reassignment or Assignment
Agreement attached hereto and made a part hereof, subject to the consent
and approval of the State of Michigan Liquor Control Commission.
3. BORROWER'S WARRANTIES: Except as allowed under paragraph 1 hereof,
financing statement has been filed with respect to the Collateral; except as
allowed under paragraph 1 hereof, Borrower is absolute owner of the Collateral,
and it is not encumbered other than by this security interest (and the same will
be true of Collateral acquired hereafter when acquired); all account borrowers
and obligors, whose obligations are part of the Collateral, are to the extent
permitted by law prevented from asserting against Secured Parties any claims or
defenses they have against Borrower.
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4. PERFECTION OF SECURITY INTEREST: Borrower shall execute and deliver to
Secured Parties, concurrently with Borrower's execution of this Agreement and at
any time hereafter at the request of Secured Parties, and pay the cost of the
filing and recording same in all public offices deemed necessary by Secured
Parties, all financing statements, continuation financing statements,
assignments, certificates of title, applications for vehicle titles, affidavits,
reports, notices, letters of authority and all other documents that Secured
Parties may reasonably request, in form satisfactory to Secured Parties, to
perfect and maintain Secured Parties' security interests in the Collateral in
order to fully consummate all of the transactions contemplated hereunder.
Borrower shall make appropriate entries on its books and records disclosing
Secured Parties' security interests in the Collateral.
5. AGREEMENTS OF BORROWER:
A. Borrower will take adequate care of the Collateral; insure the
Collateral for such hazards and in such amounts as Secured Parties direct,
policies to be satisfactory to Secured Parties; pay all costs necessary to
obtain, preserve, and enforce this security interest, collect the Obligation,
and preserve the Collateral, including, but not limited to, taxes, assessments,
insurance premiums, repairs, reasonable attorneys' fees and legal expenses,
rent, storage costs, and expenses of sale; furnish Secured Parties with any
information on the Collateral requested by Secured Parties; allow Secured
Parties to inspect the Collateral and inspect and copy all records relating to
the Collateral and the Obligation; sign any papers furnished by Secured Parties
which are necessary to obtain and maintain this security interest; assist
Secured Parties in complying with the Federal Assignment of Claims Act, where
necessary to enable Secured Parties to become an assignee under that Act; take
necessary steps to preserve the liability of account borrowers, obligators, and
secondary parties whose obligations are part of the Collateral; notify Secured
Parties of any material change occurring in or to the Collateral, or in material
fact or circumstance warranted or represented by Borrower in this Agreement or
furnished to Secured Parties, or if any event of default occurs.
B. Outside of the ordinary course of business, Borrower will not, without
Secured Parties' consent, remove the Collateral from the locations specified
herein; allow the Collateral to become an accession to other goods; sell, lease,
otherwise transfer the Collateral.
6. DEFAULT:
A. Any of the following is an event of default: failure of Borrower to pay
the Obligation in accordance with its terms, or to perform any act or duty
required by this Agreement; falsity of any warranty or representation in this
Agreement when made; substantial change in any fact warranted or represented in
this Agreement; involvement of Borrower in bankruptcy or insolvency proceedings;
death, dissolution, or other termination of Borrower's existence; substantial
loss, theft, destruction, sale, reduction in value, encumbrance of, damage to,
or
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change in the Collateral; filing any financing statement with regard to the
Collateral, other than relating to this security interest, except as permitted
in paragraph 1 hereof.
B. When an event of default occurs, Secured Parties shall provide Borrower
written notice thereof by certified or registered mail and Borrower shall have
ten (10) days from date of notice to cure said default. Should Borrower not cure
said default within the allotted time then the entire Obligation becomes
immediately due and payable at Secured Parties' option without further notice to
Borrower, and Secured Parties may proceed to enforce payment of same and
exercise any and all of the rights and remedies available to a secured party
under the Uniform Commercial Code as well as all other rights and remedies. When
Borrower is in default, Borrower, upon demand by Secured Parties, shall assemble
the Collateral and make it available to Secured Parties at a place reasonably
convenient to both parties. Borrower is entitled to any surplus and shall be
liable to Secured Parties for any deficiency, arising from accounts, contract
rights, or chattel paper included in the Collateral through sale thereof to
Secured Parties.
C. Borrower agrees that the Secured Parties shall in the event of any
default have the right to peacefully retake any of the goods Borrower waives any
right it may have in such instance, to a judicial hearing prior to such
retaking.
7. GENERAL: Time shall be deemed of the very essence of this Agreement.
Except as otherwise defined in this Agreement, all terms in this Agreement shall
have the meanings provided by the Michigan Uniform Commercial Code and Secured
Parties shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if it takes such action for
that purpose as Borrower requests in writing, but failure of the Secured Parties
to comply with any such request shall not of itself be deemed a failure to
exercise reasonable care, and failure of the Secured Parties to preserve or
protect any rights with respect to such Collateral against any prior parties or
to do any act with respect to the preservation of such Collateral not so
requested by Borrower shall not be deemed a failure to exercise reasonable care
in the custody and preservation of such Collateral. Any delay on the part of the
Secured Parties in exercising any power, privilege, or right hereunder, or under
any other instrument executed by Borrower to Secured Parties in connection
herewith shall not operate as a waiver thereof, and no single or partial
exercise thereof, or the exercise of any other power, privilege, or right shall
preclude other or further exercise thereof, or the exercise of any other power,
privilege, or right. The waiver by Secured Parties of any default by Borrower
shall not constitute a waiver of any subsequent defaults, but shall be
restricted to the default so waived. If any part of this Agreement shall be
contrary to any law which Secured Parties might seek to apply or enforce, or
should otherwise be defective, the other provisions of this Agreement shall not
be affected thereby, but shall continue in full force and effect. All rights,
remedies and powers of Secured Parties hereunder are irrevocable and cumulative,
and not alternative or exclusive, and shall be in addition to all rights,
remedies and powers given hereunder of in or by any other instruments or by the
Michigan Uniform Commercial Code, or any other laws now existing or hereafter
enacted.
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8. This Agreement has been delivered in Michigan, and shall be construed in
accordance with the laws of the State of Michigan. Whenever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
9. The rights and privileges of the Secured Parties hereunder shall inure
to the benefit of its successor and assigns and this Agreement shall be binding
on all heirs, executors, administrators, assigns, and successors of Borrower.
Witness: Cass River Coating, Inc.
/s/Illegible /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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By:
"Borrower"
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
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