Exhibit 10.2
[GRAPHIC OF COMERCIA OMITTED]
SECURITY AGREEMENT
(ACCOUNTS RECEIVABLE AND EQUIPMENT)
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As of July 27, 2004, for value received, the undersigned ("Debtor")
pledges, assigns and grants to Comerica Bank ("Bank"), whose address is P. O.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Commercial Lending Services,
Mail Code 6583, a continuing security interest and lien (any pledge, assignment,
security interest or other lien arising hereunder is sometimes referred to
herein as a "security interest") in the Collateral (as defined below) to secure
payment when due, whether by stated maturity, demand, acceleration or otherwise,
of all existing and future indebtedness ("Indebtedness") to the Bank of Debtor.
Indebtedness includes without limit any and all obligations or liabilities of
the Debtor to the Bank, whether absolute or contingent, direct or indirect,
voluntary or involuntary, liquidated or unliquidated, joint or several, known or
unknown, originally payable to the Bank or to a third party and subsequently
acquired by the Bank, including, without limitation, any late charges, loan fees
or charges, and overdraft indebtedness, any and all obligations or liabilities
for which the Debtor would otherwise be liable to the Bank were it not for the
invalidity or unenforceability of them by reason of any bankruptcy, insolvency
or other law, or for any other reason; any and all amendments, modifications,
renewals and/or extensions of any of the above; all costs incurred by Bank in
establishing, determining, continuing, or defending the validity or priority of
any security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Debtor or in connection
with any proceeding involving Bank as a result of any financial accommodation to
Debtor; and all other costs of collecting Indebtedness, including without limit
attorneys' fees. Debtor agrees to pay Bank all such costs incurred by the Bank,
immediately upon demand, and until paid all costs shall bear interest at the
highest per annum rate applicable to any of the Indebtedness, but not in excess
of the maximum rate permitted by law. Any reference in this Agreement to
attorneys' fees shall be deemed a reference to reasonable fees, costs, and
expenses of both in-house and outside counsel and paralegals, whether inside or
outside counsel is used, whether or not a suit or action is instituted, and to
court costs if a suit or action is instituted, and whether attorneys' fees or
court costs are incurred at the trial court level, on appeal, in a bankruptcy,
administrative or probate proceeding or otherwise.
Debtor further covenants, agrees, represents and warrants as follows:
1. Collateral. Collateral shall mean all personal property of Debtor
including, without limitation, all of the following property Debtor now or later
owns or has an interest in, wherever located :
(a) all Accounts Receivable (for purposes of this Agreement, "Accounts
Receivable" consists of all accounts, general intangibles, chattel paper
(including without limit electronic chattel paper and tangible chattel paper),
contract rights, deposit accounts, documents, instruments and rights to payment
evidenced by chattel paper, documents or instruments, health care insurance
receivables, commercial tort claims, letters of credit, letter of credit rights,
supporting obligations, and rights to payment for money or funds advanced or
sold);
(b) all Equipment; and
(c) all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions, rights of any kind
(including but not limited to stock splits, stock rights, voting and
preferential rights), products, and proceeds of or pertaining to the above
including, without limit, cash or other property which were proceeds and are
recovered by a bankruptcy trustee or otherwise as a preferential transfer by
Debtor.
In the definition of Collateral, a reference to a type of collateral
shall not be limited by a separate reference to a more specific or narrower type
of that collateral. Capitalized used in this Section 1 but not defined herein
shall the meanings given such terms in the Uniform Commercial Code in effect in
the State of Texas on the date hereof.
2. Warranties, Covenants and Agreements. Debtor warrants, covenants and
agrees as follows:
2.1 Debtor shall furnish to Bank, in form and at intervals as Bank may
request, any information Bank may reasonably request and allow Bank to examine,
inspect, and copy any of Debtor's books and records.
2.2 At the time any Collateral becomes, or is represented to be, subject
to a security interest in favor of Bank, Debtor shall be deemed to have
warranted that (a) Debtor is the lawful owner of the Collateral and has the
right and authority to subject it to a security interest granted to Bank; (b)
none of the Collateral is subject to any security interest other than that in
favor of Bank; (c) there are no financing statements on file, other than in
favor of Bank; (d) no person, other than Bank, has possession or control (as
defined in the Uniform Commercial Code) of any Collateral of such nature that
perfection of a security interest may be accomplished by control; and (e) Debtor
acquired its rights in the Collateral in the ordinary course of its business.
2.3 Debtor will keep the Collateral free at all times from all claims,
liens, security interests and encumbrances other than (i) the Permitted
Encumbrances (as defined in the Credit Agreement dated of even date herewith by
and among Bank and Debtor) or (ii) the claims, liens, security interests and
encumbrances in favor of Bank. Debtor will not, without the prior written
consent of Bank, sell, transfer, lease or grant control to any person other than
Bank over, or permit to be sold, transferred, leased or controlled (by a person
other than Bank), any or all of the Collateral. Bank or its representatives may
at all reasonable times inspect the Collateral and may enter upon all premises
where the Collateral is kept or might be located.
2.4 Debtor will do all acts and will execute or cause to be executed all
writings requested by Bank to establish, maintain and continue an exclusive,
perfected and first security interest of Bank in the Collateral. Debtor agrees
that Bank has no obligation to acquire or perfect any lien on or security
interest in any asset(s), whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the Bank may have a
lien or security interest for payment of the Indebtedness.
2.5 Debtor will pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar charges which at any time
are or may become a lien, charge, or encumbrance upon any Collateral, except to
the extent contested in good faith and bonded in a manner satisfactory to Bank.
If Debtor fails to pay any of these taxes, assessments, or other charges in the
time provided above, Bank has the option (but not the obligation) to do so, and
Debtor agrees to repay all amounts so expended by Bank immediately upon demand,
together with interest at the highest lawful default rate which could be charged
by Bank on any Indebtedness.
2.6 Debtor will keep the Collateral in good condition and will protect
it from loss, damage, or deterioration from any cause. Debtor has and will
maintain at all times (a) with respect to the Collateral, insurance under an
"all risk" policy against fire and other risks customarily insured against, and
(b) public liability insurance and other insurance as may be required by law or
reasonably required by Bank, all of which insurance shall be in amount, form and
content, and written by companies as may be satisfactory to Bank, containing a
lender's loss payable endorsement acceptable to Bank. Debtor will deliver to
Bank immediately upon demand evidence satisfactory to Bank that the required
insurance has been procured. If Debtor fails to maintain satisfactory insurance,
Bank has the option (but not the obligation) to do so and Debtor agrees to repay
all amounts so expended by Bank immediately upon demand, together with interest
at the highest lawful default rate which could be charged by Bank on any
Indebtedness.
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2.7 On each occasion on which Debtor evidences to Bank the account
balances on and the nature and extent of the Accounts Receivable, Debtor shall
be deemed to have warranted that except as otherwise indicated (a) each of those
Accounts Receivable is valid and shown as a receivable in compliance with
generally accepted accounting principles; (b) each of those account balances are
in fact owing, (c) there are no setoffs, recoupments, credits, contra accounts,
counterclaims or defenses against any of those Accounts Receivable, (d) as to
any Accounts Receivable represented by a note, trade acceptance, draft or other
instrument or by any chattel paper or document, the same have been endorsed
and/or delivered by Debtor to Bank, (e) Debtor has not received with respect to
any Account Receivable, any notice of the death of the related account debtor,
or of the dissolution, liquidation, termination of existence, insolvency,
business failure, appointment of a receiver for, assignment for the benefit of
creditors by, or filing of a petition in bankruptcy by or against, the account
debtor, and (f) as to each Account Receivable, except as may be expressly
permitted by Bank to the contrary in another document, the account debtor is not
an affiliate of Debtor. Debtor will do all acts and will execute all writings
requested by Bank to perform, enforce performance of, and collect all Accounts
Receivable. Debtor shall neither make nor permit any modification, compromise or
substitution for any Account Receivable without the prior written consent of
Bank. Debtor shall, at Bank's request, arrange for verification of Accounts
Receivable directly with account debtors or by other methods acceptable to Bank.
2.8 Debtor at all times shall be in strict compliance with all
applicable laws, including without limit any laws, ordinances, directives,
orders, statutes, or regulations an object of which is to regulate or improve
health, safety, or the environment ("Environmental Laws").
2.9 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of (a) the ultimate sale or exchange
thereof; or (b) presentation, collection, renewal, or registration of transfer
thereof; or (c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with it preliminary to sale or
exchange; such redelivery shall be in trust for the benefit of Bank and shall
not constitute a release of Bank's security interest in it or in the proceeds or
products of it unless Bank specifically so agrees in writing. If Debtor requests
any such redelivery, Debtor will deliver with such request a duly executed
financing statement in form and substance satisfactory to Bank. Any proceeds of
Collateral coming into Debtor's possession as a result of any such redelivery
shall be held in trust for Bank and immediately delivered to Bank for
application on the Indebtedness. Bank may (in its sole discretion) deliver any
or all of the Collateral to Debtor, and such delivery by Bank shall discharge
Bank from all liability or responsibility for such Collateral. Bank, at its
option, may require delivery of any Collateral to Bank at any time with such
endorsements or assignments of the Collateral as Bank may request.
2.10 Upon the occurrence of an Event of Default, Bank may (a) cause any
or all of the Collateral to be transferred to its name or to the name of its
nominees; (b) receive or collect by legal proceedings or otherwise all
dividends, interest, principal payments and other sums and all other
distributions at any time payable or receivable on account of the Collateral,
and hold the same as Collateral, or apply the same to the Indebtedness, the
manner and distribution of the application to be in the sole discretion of Bank;
(c) enter into any extension, subordination, reorganization, deposit, merger or
consolidation agreement or any other agreement relating to or affecting the
Collateral, and deposit or surrender control of the Collateral, and accept other
property in exchange for the Collateral and hold or apply the property or money
so received pursuant to this Agreement; and (d) take such actions in its own
name or in Debtor's name as Bank, in its sole discretion, deems necessary or
appropriate to establish exclusive control (as defined in the Uniform Commercial
Code) over any Collateral of such nature that perfection of the Bank's security
interest may be accomplished by control.
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2.11 Bank may assign any of the Indebtedness and deliver any or all of
the Collateral to its assignee, who then shall have with respect to Collateral
so delivered all the rights and powers of Bank under this Agreement, and after
that Bank shall be fully discharged from all liability and responsibility with
respect to Collateral so delivered.
2.12 Reserved.
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2.13 Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and directors from and
against any and all claims, damages, fines, expenses, liabilities or causes of
action of whatever kind, including, without limitation, consultant fees, legal
expenses, and attorneys' fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law by Debtor, including,
without limit, Environmental Laws, or of any remediation relating to any
property required by any law, including, without limitation, Environmental Laws,
INCLUDING ANY CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION
OF WHATEVER KIND RESULTING FROM BANK'S OWN NEGLIGENCE, except and to the extent
(but only to the extent) caused by, or resulting from, Bank's gross negligence
or willful misconduct.
3. Collection of Proceeds.
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3.1 Debtor agrees to collect and enforce payment of all Collateral until
Bank shall direct Debtor to the contrary. Immediately upon notice to Debtor by
Bank and at all times after that, Debtor agrees to fully and promptly cooperate
and assist Bank in the collection and enforcement of all Collateral and to hold
in trust for Bank all payments received in connection with Collateral and from
the sale, lease or other disposition of any Collateral, all rights by way of
suretyship or guaranty and all rights in the nature of a lien or security
interest which Debtor now or later has regarding Collateral. Immediately upon
and after such notice, Debtor agrees to (a) endorse to Bank and immediately
deliver to Bank all payments received on Collateral or from the sale, lease or
other disposition of any Collateral or arising from any other rights or
interests of Debtor in the Collateral, in the form received by Debtor without
commingling with any other funds, and (b) immediately deliver to Bank all
property in Debtor's possession or later coming into Debtor's possession through
enforcement of Debtor's rights or interests in the Collateral. Debtor
irrevocably authorizes Bank or any Bank employee or agent to endorse the name of
Debtor upon any checks or other items which are received in payment for any
Collateral, and to do any and all things necessary in order to reduce these
items to money. Bank shall have no duty as to the collection or protection of
Collateral or the proceeds of it, or as to the preservation of any related
rights, beyond the use of reasonable care in the custody and preservation of
Collateral in the possession of Bank. Debtor agrees to take all steps necessary
to preserve rights against prior parties with respect to the Collateral. Nothing
in this Section 3.1 shall be deemed a consent by Bank to any sale, lease or
other disposition of any Collateral.
3.2 Debtor agrees that immediately upon Bank's request (whether or not
any Event of Default exists) the Indebtedness shall be on a "remittance basis"
as follows: Debtor shall at its sole expense establish and maintain (and Bank,
at Bank's option may establish and maintain at Debtor's expense): (a) an United
States Post Office lock box (the "Lock Box"), to which Bank shall have exclusive
access and control. Debtor expressly authorizes Bank, from time to time, to
remove contents from the Lock Box, for disposition in accordance with this
Agreement. Debtor agrees to notify all account debtors and other parties
obligated to Debtor that all payments made to Debtor (other than payments by
electronic funds transfer) shall be remitted, for the credit of Debtor, to the
Lock Box, and Debtor shall include a like statement on all invoices; and (b) a
non-interest bearing deposit account with Bank which shall be titled as
designated by Bank (the "Cash Collateral Account") to which Bank shall have
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exclusive access and control. Debtor agrees to notify all account debtors and
other parties obligated to Debtor that all payments made to Debtor by electronic
funds transfer shall be remitted to the Cash Collateral Account, and Debtor, at
Bank's request, shall include a like statement on all invoices. Debtor shall
execute all documents and authorizations as required by Bank to establish and
maintain the Lock Box and the Cash Collateral Account.
3.3 All items or amounts which are remitted to the Lock Box, to the Cash
Collateral Account, or otherwise delivered by or for the benefit of Debtor to
Bank on account of partial or full payment of, or with respect to, any
Collateral shall, at Bank's option, (a) be applied to the payment of the
Indebtedness, whether then due or not, in such order or at such time of
application as Bank may determine in its sole discretion, or, (b) be deposited
to the Cash Collateral Account. Debtor agrees that Bank shall not be liable for
any loss or damage which Debtor may suffer as a result of Bank's processing of
items or its exercise of any other rights or remedies under this Agreement,
including without limitation indirect, special or consequential damages, loss of
revenues or profits, or any claim, demand or action by any third party arising
out of or in connection with the processing of items or the exercise of any
other rights or remedies under this Agreement unless caused by, or resulting
from, Bank's gross negligence or willful misconduct. Debtor agrees to indemnify
and hold Bank harmless from and against all such third party claims, demands or
actions, and all related expenses or liabilities, including, without limitation,
attorneys' fees and INCLUDING CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR
CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK'S OWN NEGLIGENCE except to
the extent (but only to the extent) caused by Bank's gross negligence or willful
misconduct.
4. Defaults, Enforcement and Application of Proceeds.
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4.1 Upon the occurrence of any of the following events (each an "Event
of Default"), Debtor shall be in default under this Agreement:
(a) Any failure to pay the Indebtedness or any other indebtedness
when due, or such portion of it as may be due, by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of or default
under, any term of this Agreement, or any other agreement or commitment between
Debtor or any guarantor of any of the Indebtedness ("Guarantor") and Bank; or
(c) Any warranty, representation, financial statement, or other
information made, given or furnished to Bank by or on behalf of Debtor or any
Guarantor shall be, or shall prove to have been, false or materially misleading
when made, given, or furnished; or
(d) Any loss, theft, substantial damage or destruction to or of any
Collateral or the issuance or filing of any attachment, levy, garnishment or the
commencement of any proceeding in connection with any Collateral or of any other
judicial process of, upon or in respect of Debtor, any Guarantor, or any
Collateral; or
(e) Sale or other disposition by Debtor or any Guarantor of any
substantial portion of its assets or property or voluntary suspension of the
transaction of business by Debtor or any Guarantor, or death, dissolution,
termination of existence, merger, consolidation, insolvency, business failure,
or assignment for the benefit of creditors of or by Debtor or any Guarantor; or
commencement of any proceedings under any state or federal bankruptcy or
insolvency laws or laws for the relief of debtors by or against Debtor or any
Guarantor; or the appointment of a receiver, trustee, court appointee,
sequestrator or otherwise, for all or any part of the property of Debtor or any
Guarantor; or
(f) An event of default shall occur under any instrument, agreement
or other document evidencing, securing or otherwise relating to any of the
Indebtedness.
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4.2 Upon the occurrence of any Event of Default, Bank may at its
discretion and without prior notice to Debtor declare any or all of the
Indebtedness to be immediately due and payable, and shall have and may exercise
any right or remedy available to it including, without limitation, any one or
more of the following rights and remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties under the provisions of
the Uniform Commercial Code and other applicable law;
(b) Institute legal proceedings to foreclose upon the lien and
security interest granted by this Agreement, to recover judgment for all amounts
then due and owing as Indebtedness, and to collect the same out of any
Collateral or the proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the judgment or
decree of any court of competent jurisdiction, of any or all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where Collateral may then be located, and take
possession of all or any of it and/or render it unusable; and without being
responsible for loss or damage to such Collateral, hold, operate, sell, lease,
or dispose of all or any Collateral at one or more public or private sales,
leasings or other dispositions, at places and times and on terms and conditions
as Bank may deem fit, without any previous demand or advertisement; and except
as provided in this Agreement, all notice of sale, lease or other disposition,
and advertisement, and other notice or demand, any right or equity of
redemption, and any obligation of a prospective purchaser or lessee to inquire
as to the power and authority of Bank to sell, lease, or otherwise dispose of
the Collateral or as to the application by Bank of the proceeds of sale or
otherwise, which would otherwise be required by, or available to Debtor under,
applicable law are expressly waived by Debtor to the fullest extent permitted.
At any sale pursuant to this Section 4.2, whether under the power of
sale, by virtue of judicial proceedings or otherwise, it shall not be necessary
for Bank or a public officer under order of a court to have present physical or
constructive possession of Collateral to be sold. The recitals contained in any
conveyances and receipts made and given by Bank or the public officer to any
purchaser at any sale made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish the truth and accuracy of
the matters stated (including, without limit, as to the amounts of the principal
of and interest on the Indebtedness, the accrual and nonpayment of it and
advertisement and conduct of the sale); and all prerequisites to the sale shall
be presumed to have been satisfied and performed. Upon any sale of any
Collateral, the receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge to the purchaser for the
purchase money, and the purchaser shall not be obligated to see to the
application of the money. Any sale of any Collateral under this Agreement shall
be a perpetual bar against Debtor with respect to that Collateral. At any sale
or other disposition of the Collateral pursuant to this Section 4.2, Bank
disclaims all warranties which would otherwise be given under the Uniform
Commercial Code, including, without limitation, a disclaimer of any warranty
relating to title, possession, quiet enjoyment or the like, and Bank may
communicate these disclaimers to a purchaser at such disposition. This
disclaimer of warranties will not render the sale commercially unreasonable.
4.3 Debtor shall, at the request of Bank, notify the account debtors or
obligors of Bank's security interest in the Collateral and direct payment of it
to Bank. Bank may, itself, upon the occurrence of any Event of Default so notify
and direct any account debtor or obligor. At the request of Bank, whether or not
an Event of Default shall have occurred, Debtor shall immediately take such
actions as the Bank shall request to establish exclusive control (as defined in
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the Uniform Commercial Code) by Bank over any Collateral which is of such a
nature that perfection of a security interest may be accomplished by control.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank in such order as the Bank,
in its discretion, deems appropriate including, without limitation, the
following order: first upon all expenses authorized by the Uniform Commercial
Code and all reasonable attorneys' fees and legal expenses incurred by Bank; the
balance of the proceeds of the sale or other disposition shall be applied in the
payment of the Indebtedness, first to interest, then to principal, then to
remaining Indebtedness and the surplus, if any, shall be paid over to Debtor or
to such other person(s) as may be entitled to it under applicable law. Debtor
shall remain liable for any deficiency, which it shall pay to Bank immediately
upon demand. Debtor agrees that Secured Party shall be under no obligation to
accept any noncash proceeds in connection with any sale or disposition of
Collateral unless failure to do so would be commercially unreasonable. If
Secured Party agrees in its sole discretion to accept noncash proceeds (unless
the failure to do so would be commercially unreasonable), Secured Party may
ascribe any commercially reasonable value to such proceeds. Without limiting the
foregoing, Secured Party may apply any discount factor in determining the
present value of proceeds to be received in the future or may elect to apply
proceeds to be received in the future only as and when such proceeds are
actually received in cash by Secured Party.
4.5 Nothing in this Agreement is intended, nor shall it be construed, to
preclude Bank from pursuing any other remedy provided by law or in equity for
the collection of the Indebtedness or for the recovery of any other sum to which
Bank may be entitled for the breach of this Agreement by Debtor. Nothing in this
Agreement shall reduce or release in any way any rights or security interests of
Bank contained in any existing agreement between Debtor or any Guarantor and
Bank.
4.6 No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized officer of Bank. No
waiver of any default or forbearance on the part of Bank in enforcing any of its
rights under this Agreement shall operate as a waiver of any other default or of
the same default on a future occasion or of any rights.
4.7 Debtor (a) irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful attorney of Debtor
(with full power of substitution) in the name, place and stead of, and at the
expense of, Debtor and (b) authorizes Bank or any agent of Bank, in its own
name, at Debtor's expense, to do any of the following, as Bank, in its sole
discretion, deems appropriate:
(i) to demand, receive, ▇▇▇ for, and give receipts or acquittances
for any moneys due or to become due on any Collateral (including, without limit,
to draft against Collateral) and to endorse any item representing any payment on
or proceeds of the Collateral;
(ii) to execute and file in the name of and on behalf of Debtor all
financing statements or other filings or Collateral control agreements deemed
necessary or desirable by Bank to evidence, perfect, or continue the security
interests granted in this Agreement; and
(iii) to do and perform any act on behalf of Debtor permitted or
required under this Agreement.
4.8 Upon the occurrence of an Event of Default, Debtor also agrees, upon
request of Bank, to assemble the Collateral and make it available to Bank at any
place designated by Bank which is reasonably convenient to Bank and Debtor.
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4.9 The following shall be the basis for any finder of fact's
determination of the value of any Collateral which is the subject matter of a
disposition giving rise to a calculation of any surplus or deficiency under
Section 9-615(f) of the Uniform Commercial Code (as in effect on or after July
1, 2001): (a) the Collateral which is the subject matter of the disposition
shall be valued in an "as is" condition as of the date of the disposition,
without any assumption or expectation that such Collateral will be repaired or
improved in any manner; (b) the valuation shall be based upon an assumption that
the transferee of such Collateral desires a resale of the Collateral for cash
promptly (but no later than 30 days) following the disposition; (c) all
reasonable closing costs customarily borne by the seller in commercial sales
transactions relating to property similar to such Collateral shall be deducted
including, without limitation, brokerage commissions, tax prorations, attorneys'
fees, whether inside or outside counsel is used, and marketing costs; (d) the
value of the Collateral which is the subject matter of the disposition shall be
further discounted to account for any estimated holding costs associated with
maintaining such Collateral pending sale (to the extent not accounted for in (c)
above), and other maintenance, operational and ownership expenses; and (e) any
expert opinion testimony given or considered in connection with a determination
of the value of such Collateral must be given by persons having at least 5 years
experience in appraising property similar to the Collateral and who have
conducted and prepared a complete written appraisal of such Collateral taking
into consideration the factors set forth above. The "value" of any such
Collateral shall be a factor in determining the amount of proceeds which would
have been realized in a disposition to a transferee other than a secured party,
a person related to a secured party or a secondary obligor under Section
9-615(f) of the Uniform Commercial Code.
5. Miscellaneous.
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5.1 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or by law shall be
given to, or made upon, Debtor at the following address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
5.2 Debtor will give Bank not less than 90 days prior written notice
of all contemplated changes in Debtor's name, location, chief executive office,
principal place of business, and/or location of any Collateral, but the giving
of this notice shall not cure any Event of Default caused by this change.
5.3 Bank assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
5.4 Bank has the right to sell, assign, transfer, negotiate or grant
participations or any interest in, any or all of the Indebtedness and any
related obligations, including without limit this Agreement. In connection with
the above, but without limiting its ability to make other disclosures to the
full extent allowable, Bank may disclose all documents and information which
Bank now or later has relating to Debtor, the Indebtedness or this Agreement,
however obtained. Debtor further agrees that Bank may provide information
relating to this Agreement or relating to Debtor or the Indebtedness to the
Bank's parent, affiliates, subsidiaries, and service providers.
5.5 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any Indebtedness at any
time(s) either before or after maturity or demand without notice to anyone. Any
such action shall not constitute acceptance of collateral in discharge of any
portion of the Indebtedness.
5.6 Debtor, to the extent not expressly prohibited by applicable
law, waives any right to require the Bank to: (a) proceed against any person or
property; (b) give notice or notification of the terms, time and place of, or of
any other information relating to, any public or private sale or disposition of
personal property security held from Debtor or any other person, or otherwise
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comply with the provisions of Sections 9-611 or 9-621 of the Uniform Commercial
Code; or (c) pursue any other remedy in the Bank's power. Debtor waives notice
of acceptance of this Agreement and presentment, demand, protest, notice of
protest, dishonor, notice of dishonor, notice of default, notice of intent to
accelerate or demand payment or notice of acceleration of any Indebtedness, any
and all other notices to which the undersigned might otherwise be entitled, and
diligence in collecting any Indebtedness without affecting in any manner the
unconditional obligation of Debtor under this Agreement. Debtor unconditionally
and irrevocably waives each and every defense and setoff of any nature which,
under principles of guaranty or otherwise, would operate to impair or diminish
in any way the obligation of Debtor under this Agreement, and acknowledges that
such waiver is by this reference incorporated into each security agreement,
collateral assignment, pledge and/or other document from Debtor now or later
securing the Indebtedness, and acknowledges that as of the date of this
Agreement no such defense or setoff exists.
5.7 Reserved.
---------
5.8 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this Agreement, Debtor
agrees that a written notice given to Debtor at least ten days before the date
of the act shall be reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of the time after which
any private sale, lease, or other disposition is to be made, unless a shorter
notice period is reasonable under the circumstances. A notice shall be deemed to
be given under this Agreement when delivered to Debtor or when placed in an
envelope addressed to Debtor and deposited, with postage prepaid, in a post
office or official depository under the exclusive care and custody of the United
States Postal Service or delivered to an overnight courier. The mailing shall be
by overnight courier, certified, or first class mail.
5.9 Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the effectiveness of this
Agreement shall automatically continue or be reinstated in the event that any
payment received or credit given by Bank in respect of the Indebtedness is
returned, disgorged, or rescinded under any applicable law, including, without
limitation, bankruptcy or insolvency laws, in which case this Agreement, shall
be enforceable against Debtor as if the returned, disgorged, or rescinded
payment or credit had not been received or given by Bank, and whether or not
Bank relied upon this payment or credit or changed its position as a consequence
of it. In the event of continuation or reinstatement of this Agreement, Debtor
agrees upon demand by Bank to execute and deliver to Bank those documents which
Bank determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of Debtor to
do so shall not affect in any way the reinstatement or continuation.
5.10 This Agreement and all the rights and remedies of Bank under
this Agreement shall inure to the benefit of Bank's successors and assigns and
to any other holder who derives from Bank title to or an interest in the
Indebtedness or any portion of it, and shall bind Debtor and the heirs, legal
representatives, successors, and assigns of Debtor. Nothing in this Section 5.10
is deemed a consent by Bank to any assignment by Debtor.
5.11 If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and authorities given to or
conferred upon Bank are made or given jointly and severally.
5.12 Except as otherwise expressly provided in this Agreement, all
terms in this Agreement which are defined in the Uniform Commercial Code shall
have the meanings assigned to them in Article 9 (or, absent definition in
Article 9, in any other Article) of the Uniform Commercial Code, as those
meanings may be amended, revised or replaced from time to time. "Uniform
Commercial Code" means the Texas Business and Commerce Code as amended, revised
or replaced from time to time. Notwithstanding the foregoing, the parties intend
that the terms used herein which are defined in the Uniform Commercial Code
have, at all times, the broadest and most inclusive meanings possible.
Accordingly, if the Uniform Commercial Code shall in the future be amended or
9
held by a court to define any term used herein more broadly or inclusively than
the Uniform Commercial Code in effect on the date of this Agreement, then such
term, as used herein, shall be given such broadened meaning. If the Uniform
Commercial Code shall in the future be amended or held by a court to define any
term used herein more narrowly, or less inclusively, than the Uniform Commercial
Code in effect on the date of this Agreement, such amendment or holding shall be
disregarded in defining terms used in this Agreement.
5.13 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or further exercise of
the rights and powers under this Agreement. The unenforceability of any
provision of this Agreement shall not affect the enforceability of the remainder
of this Agreement. This Agreement constitutes the entire agreement of Debtor and
Bank with respect to the subject matter of this Agreement. No amendment or
modification of this Agreement shall be effective unless the same shall be in
writing and signed by Debtor and an authorized officer of Bank. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the terms and
conditions of that Indebtedness nor shall anything contained in this Agreement
prevent Bank from making demand, without notice and with or without reason, for
immediate payment of any or all of that Indebtedness at any time(s), whether or
not an Event of Default has occurred.
5.15 Debtor represents and warrants that Debtor's exact name is the
name set forth in this Agreement. Debtor further represents and warrants the
following and agrees that Debtor is, and at all times shall be, located at the
address given for notice in Section 5.1. Debtor is a registered organization
which is organized under the laws of one of the states comprising the United
States (e.g. corporation, limited partnership, registered limited liability
partnership or limited liability company), and Debtor is located (as determined
pursuant to the Uniform Commercial Code) in the state under the laws of which it
was organized. The Collateral is located and shall be maintained at the address
given for notice in Section 5.1. Collateral shall be maintained only at the
location identified in this Section 5.15.
5.16 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform Commercial Code
and may be filed by Bank in any filing office.
5.17 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable provisions of the
Uniform Commercial Code, but the obligations contained in Section 2.13 of this
Agreement shall survive termination.
5.18 Reserved.
---------
5.19 Debtor agrees to reimburse the Bank upon demand for any and all
costs and expenses (including, without limit, court costs, legal expenses and
reasonable attorneys' fees, whether inside or outside counsel is used, whether
or not suit is instituted and, if suit is instituted, whether at the trial court
level, appellate level, in a bankruptcy, probate or administrative proceeding or
otherwise) incurred in enforcing or attempting to enforce this Agreement or in
exercising or attempting to exercise any right or remedy under this Agreement or
incurred in any other matter or proceeding relating to this Security Agreement.
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6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
7. THIS IS A TEXAS SPECIFIC PROVISION: THIS WRITTEN LOAN AGREEMENT (AS
DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE) REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
---------------------------------------
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DEBTOR:
ENGLOBAL CORPORATION,
a Nevada corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
ENGLOBAL CORPORATE SERVICES, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
THERMAIRE, INC., a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
ENGLOBAL ENGINEERING, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
ENGLOBAL CONSTRUCTION
RESOURCES, INC., a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
12
ENGLOBAL SYSTEMS, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
RPM ENGINEERING, INC.,
a Louisiana corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
ENGLOBAL TECHNOLOGIES, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
ENGLOBAL CONSTANT POWER, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
SENFTLEBER & ASSOCIATES, L.P.,
a Texas limited partnership
By: ENGlobal Design Group, Inc.,
a Texas corporation, its general partner
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇
Chief Financial Officer and Treasurer
13
ENGLOBAL DESIGN GROUP, INC.,
a Texas corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇.▇. ▇▇▇▇▇▇▇,
Chief Financial Officer and Treasurer
SECURED PARTY:
COMERICA BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
14
