SECURITY AGREEMENT
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AGREEMENT made as of the 9th day of September, 1993, by and between the
United States Small Business Administration, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇ ("Secured Party") and Elk Associates Funding Corporation, a New York
corporation, having its offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ("Debtor").
W I T N E S S E T H:
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WHEREAS, Debtor is licensed by Secured Party as a Specialized Small
Business Investment Company ("SSBIC") pursuant to the Small Business Investment
Act of 1958, as amended (the "Act") and the Regulations promulgated thereunder
(the "Regulations"); and
WHEREAS, Debtor has previously issued to Secured Party, or Secured Party
has guaranteed certain debentures issued pursuant to the Act and Regulations, a
schedule of which is annexed hereto as Exhibit "A" (the "Debentures"); and
WHEREAS, from time to time, Debtor may issue new or additional Debentures
to Secured Party or Secured Party may guarantee repayment of such Debentures as
may be authorized by the Act and the Regulations; and
WHEREAS, Debtor and Secured Party have entered into a certain Agreement
dated as of the date hereof (the "Agreement"), under the terms of which Debtor
agreed to enter into a Security Agreement and grant Secured Party a security
interest in all of Debtor's assets, including its portfolio assets of loans
receivable and securities owned as a result of Debtor's business operations as
an SSBIC, to secure obligations now or hereafter owed or contingently owed by
Debtor to Secured Party; and
WHEREAS, the Debtor has agreed to execute this Security Agreement granting
Secured Party a security interest in the Collateral hereinafter described;
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, it is hereby agreed as follows:
1. Creation of Security Interest
The Debtor hereby grants and mortgages to the Secured Party and the Secured
Party hereby accepts, a security interest in the Collateral described in
Paragraph 2 herein to secure the payment of the Debentures by Debtor in
accordance with the terms set forth in each Debenture, and any "Obligations"
referred to in Paragraph 2 of this Security Agreement. Debtor agrees to execute
and deliver UCC-1 Financing Statements in favor of Secured Party and to deliver
possession of its instruments and certain other personal property in order to
perfect the security interests herein created in the Collateral hereinafter
described. The security interest granted herein by Debtor to Secured Party shall
be deemed subject to any senior security interest in favor of any bank(s) that
presently have a security interest against Debtor's Collateral (as defined in
Paragraph 2 hereof) and any bank(s) that may hereafter be substituted for
Debtor's existing bank(s) or which may obtain a security interest in addition to
Debtor's existing senior bank(s), but only to the extent of the maximum amount
of allowable senior secured debt that Debtor may be permitted to maintain, as
has previously been agreed to pursuant to any separate written agreement between
Debtor and Secured Party.
2. Collateral
To secure the payment of the Debentures set forth on Exhibit "A" with
interest and any other amounts owing thereon payable in accordance with the
terms of such Debentures, and also to secure any other indebtedness or liability
of the Debtor to the Secured Party (but not including any preferred stock issued
now or hereafter by Debtor to Secured Party), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, including
all future Debentures which may be issued to or guaranteed by Secured Party at
the option of the Secured Party (all hereinafter called the "Obligations"),
Debtor does hereby grant and convey to Secured Party, a security interest and
does hereby assign as collateral security to Secured Party, the following
Collateral (as such term is used in Article 9 of the New York Uniform Commercial
Code) now owned or hereafter acquired by Debtor or in which Debtor now has or at
any time in the future may acquire any right, title or interest (collectively,
the "Collateral"):
a. Debtor's portfolio of loans receivable from parties who have borrowed
monies from Debtor together with any guarantees thereon, and all other
obligations owing to the Debtor;
b. Investment securities acquired by Debtor as a result of making any
investment in a small concern arising out of Debtor's operations as a
Specialized Small Business Investment Company, including stocks, bonds,
debentures, notes receivable, options, warrants and all other similar investment
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securities, instruments and participation agreements/interests carried as assets
by Debtor;
c. All of Debtor's furniture, fixtures, machinery, contract rights,
accounts receivable, and all tangible and intangible assets, including but not
limited to all computer software and any New York City taxi medallion rights,
now owned or later acquired; and
d. All security interests of Debtor in any New York City taxi medallion
acquired as collateral for Debtor's loans to its borrowers. Debtor and Secured
Party further agree that Debtor shall have thirty (30) days from the date hereof
to assign to the Custodian (as hereinafter defined) on behalf of the Senior
Lenders (as hereinafter defined) and the Secured Party fifty (50%) percent of
all security interests of Debtor in any New York City Taxi medallion which
secures a loan made by Debtor and an additional thirty (30) days to assign the
balance of such security interests; provided, however, Secured Party agrees that
Debtor shall have a reasonable period of time beyond such sixty (60) day period
to assign those security interests which collateralize loans with respect to
which Debtor has not, as of the date hereof, received a copy of the recorded
UCC-1 Financing Statement from the applicable recorder's office.
e. All proceeds and products from all Collateral covered by this Security
Agreement, together with all substitutions and replacements of such Collateral
and all proceeds therefrom, and whether or not such Collateral is maintained at
Debtor"s offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or
elsewhere.
To the extent that the same may be necessary, Debtor does hereby assign
to Secured Party all of its rights in and to the Collateral as collateral
security for the Obligations.
3. Debtor warrants, covenants and agrees as follows:
a. Debtor agrees to pay and perform all of the Obligations secured by this
Agreement according to their terms and defend the title to the Collateral
against all persons and against all claims and demands whatsoever, which
Collateral is lawfully owned by the Debtor and is now free and clear of any and
all liens, security interests, claims, charges, encumbrances, taxes and
assessments except for the security interests and collateral assignments granted
hereby and the senior security interests and collateral assignments previously
granted to Israel Discount Bank of New York, Bank Leumi Trust Company of New
York, Extebank and Bank Hapoalim (hereinafter sometimes collectively referred to
as the "Senior Lenders"), subject to the rights of third party participants
pursuant to applicable
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bona fide participation agreements and/or participation interests ("Third Party
Participants").
b. Upon the request of the Secured Party, Debtor will furnish further
assurance of title, and do any other acts reasonably necessary to effectuate the
purposes and provisions of this Agreement, including execution of any instrument
or statement required by law or otherwise in order to perfect, continue, modify,
assign, or terminate the security interest of the Secured Party in the
Collateral and pay all costs or filing fees in connection therewith, including
reasonable fees of counsel.
c. Debtor agrees to deliver possession of all original promissory notes and
other instruments (as defined in the New York Uniform Commercial Code), security
agreements and mortgages to Israel Discount Bank of New York (the "Custodian")
to be held by the Custodian for the benefit of the Senior Lenders and Secured
Party pursuant to the terms of the custodian agreement between Debtor, the
Senior Lenders, Secured Party and the Custodian (the "Custodian Agreement").
Subsequent promissory notes, security agreements, mortgages and other
instruments held by Debtor shall also be delivered to the Custodian to be held
in accordance with the terms of the Custodian Agreement.
d. Debtor will not create, incur or permit to exist any liens, charges,
encumbrances, taxes or assessments on the Collateral, except in favor of the
Senior Lenders, and if for bona fide consideration, to Third Party Participants.
e. Debtor agrees to notify the Secured Party in writing of any change in or
discontinuance of Debtor's place of business as required by SBA Regulations.
f. Except for any financing statement filed in favor of the Secured Party
and the Senior Lenders, and except for financing statements evidencing the
interest of Third Party Participants (as set forth in Schedule 1 hereto), no
financing statement covering any of the Collateral is on file in any public
office. Debtor has not granted or given, and shall not grant or give, a security
interest in or financing statement covering the Collateral, or any part thereof,
to anyone other than the Senior Lenders and the Secured Party, without the
Secured Party's prior written consent, provided however that Debtor shall have
the right in its sole discretion to substitute senior institutional bank
lender(s) for Debtor's existing Senior Lenders, and in such event, Secured Party
agrees to amend the Intercreditor Agreement to allow for the substitution of the
new lender provided the aggregate amount of senior bank indebtedness does not
exceed the amount of senior bank indebtedness that Debtor may be entitled to
have in accordance with applicable SBA Regulations or the Agreement or such
lower or higher amount that may have been agreed to pursuant to any subsequent
written agreement in effect from time to time between
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Debtor and Secured Party. Notwithstanding the foregoing, Debtor shall be
entitled to sell, assign or transfer any interest in any of the Collateral in
the ordinary course of business, for bona fide consideration, subject to any
restrictions or limitations set forth in the Custodian Agreement.
g. Debtor shall notify Secured Party immediately in writing, of any events
which at any time may cause the representations and warranties or agreements
herein to cease to be true.
4. General Provisions
a. The waiver of or acquiescence in any default by the Debtor, or failure
of the Secured Party to insist upon strict performance by the Debtor of any
warranties or agreements in this Security Agreement, shall not constitute a
waiver of any subsequent or other default or failure.
b. Notices to either party shall be in writing and shall be delivered
personally or by certified mail return receipt requested addressed to the party
at the address herein set forth or otherwise designated in writing.
c. The Uniform Commercial Code in effect in the State of New York shall
govern the rights, duties and. remedies of the parties with respect to the
granting, perfection and enforcement of the security interest set forth in this
Security Agreement and any provisions herein declared invalid under any law
shall not invalidate any other provision of this agreement. The parties agree
that the laws of the United States of America as set forth in the United States
Code, and the Regulations promulgated thereunder, shall be applied to Debtor and
Secured Party with respect to any matter of interpretation of the rights of
either party arising out of their relationship of Debtor holding a license from
Secured Party as a Specialized Small Business Investment Company and Debtor's
and Secured Party's obligations to each other as a result of that relationship.
In any case or controversy resulting from this Security Agreement, the parties
agree that the United States District Court for the Southern District of New
York shall have exclusive jurisdiction with respect to litigation of any claim.
d. The Debtor agrees to execute the necessary financing statements in order
that such financing statements may be filed by or on behalf of the Secured Party
to perfect the Secured Party's interest in the Collateral, subject to the rights
of the Senior Lenders.
5. Events of Default
The following shall constitute an event of default ("Event of Default") by
Debtor:
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a. In the event Debtor is in default in the payment of any senior
indebtedness beyond any applicable grace periods and provided that the senior
secured bank(s) have "accelerated" their indebtedness (as that term is commonly
used under the Uniform Commercial Code); or
b. Debtor is in default under any Obligation beyond any applicable grace
periods, and Secured Party has elected to accelerate the payment of the
obligation(s) as provided for pursuant to SBA Regulations, or Secured Party has
transferred the Debtor to "liquidation status", as provided for pursuant to SBA
Regulations.
6. Remedies on Default
Upon any Event of Default of the Debtor and at the option of the Secured
Party, the Obligations secured by this agreement may be "accelerated", in which
event they shall immediately become due and payable in full, and the Secured
Party shall have all the rights, remedies, and privileges as are accorded to a
Secured Party by the Uniform Commercial Code or as may be available to Secured
Party under the Act or Regulations. The Secured Party may exercise such rights,
remedies and privileges either concurrently or in such order as Secured Party
may determine, it being expressly agreed that any such action will not be
considered an election of remedies nor bar Secured Party from any further
remedies provided for by agreement or by law. Nothing contained. in this
paragraph shall be interpreted as restricting in any way SBA's ability to
exercise the rights and remedies available to it under the Act or Regulations.
7. Successors and Assigns
All terms and provisions of this agreement shall be binding upon and shall
inure to the benefit of, and be enforceable by the parties hereto and their
respective legal representatives, successors and assigns.
8. Notices
All communications and notices hereunder shall be in writing and shall be
deemed to have been duly given if sent by United States mail, postage prepaid,
to the parties at the address first above written, or at such other place or
places as the party addressed may have designated by written notice to the
other.
9. Headings
The headings of the paragraph and sections of this agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof.
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10. Severability
In the event that any word, sentence, paragraph or article of this
agreement is found to be void or voidable, the balance of this agreement shall
nevertheless be legal and binding with the same force and effect as though the
void or voidable parts were deleted.
11. Entire Agreement
This writing and the documents referred to herein contain the entire
agreement of the parties with respect to its subject material and no
modifications, alterations or waiver of all or any part shall be valid unless
made by a writing and signed by all the parties hereto.
12. Counterparts
This agreement may be executed in two counterparts each of which is an
original, but both of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.
DEBTOR:
ELK ASSOCIATES FUNDING
CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
SECURED PARTY:
UNITED STATES SMALL BUSINESS
ADMINISTRATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇ Associate
Administrator for Investment
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EXHIBITS AND SCHEDULES OMITTED