EXHIBIT 10.18
SECURITY AGREEMENT
(EAGLE ELECTRICAL SYSTEMS, INC.)
This Agreement, dated as of December 22, 1998, is made by Eagle
Electrical Systems, Inc., an Ohio corporation (the "Debtor"), for the benefit of
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as
agent (in such capacity, the "Secured Party") for the Banks, as defined in the
Credit Agreement described below.
Pursuant to a Credit Agreement of even date herewith (such agreement,
together with all amendments, modifications and restatements thereof, being
herein called the "Credit Agreement"), the Banks have agreed to make advances
and extend other financial accommodations to Nationwide Electric, Inc., a
Delaware corporation (the "Borrower").
As a condition to making such advances and extending such financial
accommodations, the Secured Party has required the execution and delivery of the
Debtor's Guaranty of even date herewith, guaranteeing the payment and
performance of all obligations of the Borrower arising under or pursuant to the
Credit Agreement (the "Guaranty").
As a further condition to making such advances and extending such
other financial accommodations under the Credit Agreement, the Secured Party and
the Banks have required the execution and delivery of this Agreement by the
Debtor.
ACCORDINGLY, in consideration of the mutual covenants contained in the
Credit Agreement and herein, the parties hereby agree as follows:
1. Definitions. All terms defined in the recitals hereto and the
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Credit Agreement that are not otherwise defined herein shall have the meanings
given them in the recitals and the Credit Agreement. In addition, the following
terms have the meanings set forth below:
"Accounts" means each and every account and other right of the Debtor
to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale, lease
or other disposition of goods or other property by the Debtor, out of a
rendering of services by the Debtor, out of a loan by the Debtor, out of
the overpayment of taxes or other liabilities of the Debtor, or otherwise
arises under any contract or agreement, whether such right to payment is or
is not already earned by performance, and howsoever such right to payment
may be evidenced, together with all other rights and interests (including
all liens and security interests) which the Debtor may at any time have by
law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor
or other obligor, all including but not limited to all present and future
debt instruments, chattel papers, accounts, loans and obligations
receivable and tax refunds.
"Collateral" means the Accounts, Inventory, Equipment, General
Intangibles and Investment Property, together with all substitutions and
replacements for, products and proceeds of, any of the foregoing property,
all accessions, all accessories, attachments, parts, equipment and repairs
now or hereafter attached or affixed to or used in connection with any of
the foregoing, and all warehouse receipts, bills of lading and other
documents of title now or hereafter covering any of the foregoing.
"Equipment" means all equipment of the Debtor, whether now owned or
hereafter acquired and wherever located, including but not limited to all
present and future machinery, vehicles, furniture, fixtures, manufacturing
equipment, farm machinery and equipment, shop equipment, office and
recordkeeping equipment, parts and tools.
"Event of Default" has the meaning specified in Section 5.
"General Intangibles" means all general intangibles of the Debtor,
whether now owned or hereafter acquired, including but not limited to
applications for patents, patents, copyrights, trademarks, trade secrets,
good will, trade names, customer lists, permits and franchises, and the
right to use the Debtor's name.
"Inventory" means all inventory of the Debtor, whether now owned or
hereafter acquired and wherever located.
"Investment Property" means all of the Debtor's investment property,
as such term is defined in the UCC, whether now owned or hereafter
acquired, including but not limited to all securities, security
entitlements, securities accounts, commodity contracts, commodity accounts,
stocks, bonds, mutual fund shares, money market shares and U.S. Government
securities.
"Obligations" means (i) the Obligations (as defined in the Credit
Agreement) and (ii) each and every debt, liability and obligation of every
type and description which the Debtor may now or at any time hereafter owe
to the Secured Party, whether such debt, liability or obligation now exists
or is hereafter created or incurred and whether it is or may be direct or
indirect, due or to become due, or absolute or contingent, including
without limitation all obligations under the Guaranty.
"Security Interest" has the meaning specified in Section 2.
"UCC" means the Uniform Commercial Code, as in enacted in the state of
Minnesota.
2. Security Interest. The Debtor hereby grants the Secured Party a
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security interest (the "Security Interest") in the Collateral to secure payment
of the Obligations.
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3. Representations, Warranties and Agreements. The Debtor hereby
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represents, warrants and agrees as follows:
(a) TITLE. The Debtor (i) has absolute title to each item of
Collateral in existence on the date hereof, free and clear of all security
interests, liens and encumbrances, except the Security Interest, (ii) will
have, at the time the Debtor acquires any rights in Collateral hereafter
arising, absolute title to each such item of Collateral free and clear of
all security interests, liens and encumbrances, except the Security
Interest, (iii) will keep all Collateral free and clear of all security
interests, liens and encumbrances except the Security Interest, and (iv)
will defend the Collateral against all claims or demands of all persons
other than the Secured Party. The Debtor will not sell or otherwise dispose
of the Collateral or any interest therein without the prior written consent
of the Secured Party, except that, until the occurrence of an Event of
Default and the revocation by the Secured Party of the Debtor's right to do
so, the Debtor may sell any inventory constituting Collateral to buyers in
the ordinary course of business.
(b) CHIEF EXECUTIVE OFFICE; IDENTIFICATION NUMBER. The Debtor's chief
executive office is located at the address set forth on Exhibit A hereto.
The Debtor's federal employer identification number is correctly set forth
under its signature below.
(c) LOCATION OF COLLATERAL. As of the date hereof, the tangible
Collateral is located only in the state of Ohio. The Debtor will not permit
any tangible Collateral to be located in any state (and, if county filing
is required, in any county) in which a financing statement covering such
Collateral is required to be, but has not in fact been, filed in order to
perfect the Security Interest.
(d) CHANGES IN NAME OR LOCATION. The Debtor will not change its
business name, without prior written notice to the Secured Party. The
Debtor will not change its business address, without prior written notice
to the Secured Party.
(e) FIXTURES. The Debtor will not permit any tangible Collateral to
become part of or to be affixed to any real property without first assuring
to the reasonable satisfaction of the Secured Party that the Security
Interest will be prior and senior to any interest or lien then held or
thereafter acquired by any mortgagee of such real property or the owner or
purchaser of any interest therein. If any part or all of the tangible
Collateral is now or will become so related to particular real estate as to
be a fixture, the real estate concerned and the name of the record owner
are accurately set forth in Exhibit A hereto.
(f) RIGHTS TO PAYMENT. Each right to payment and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral is (or will be when arising, issued or assigned to the Secured
Party) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim (other
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than those arising in the ordinary course of business), of the account
debtor or other obligor named therein or in the Debtor's records pertaining
thereto as being obligated to pay such obligation. The Debtor will neither
agree to any material modification or amendment nor agree to any
forbearance, release or cancellation of any such obligation without the
Secured Party's prior written consent, and will not subordinate any such
right to payment to claims of other creditors of such account debtor or
other obligor, unless the Debtor in good faith believes it is appropriate
to do so in order to maximize recovery from such account debtor or other
obligor or such account debtor or other obligor has a legitimate basis for
requesting any of the foregoing based on the Debtor's performance.
(g) MISCELLANEOUS COVENANTS. The Debtor will:
(i) keep all tangible Collateral in good repair, working order
and condition, normal depreciation excepted, and will, from time to
time, replace any worn, broken or defective parts thereof;
(ii) promptly pay all taxes and other governmental charges
levied or assessed upon or against any Collateral or upon or against
the creation, perfection or continuance of the Security Interest;
(iii) at all reasonable times, permit the Secured Party, the
Banks or their representatives to examine or inspect any Collateral,
wherever located, and to examine, inspect and copy the Debtor's books
and records pertaining to the Collateral and its business and
financial condition and to send and discuss with account debtors and
other obligors requests for verifications of amounts owed to the
Debtor;
(iv) keep accurate and complete records pertaining to the
Collateral and pertaining to the Debtor's business and financial
condition and submit to the Secured Party such periodic reports
concerning the Collateral and the Debtor's business and financial
condition as the Secured Party may from time to time reasonably
request;
(v) promptly notify the Secured Party of any loss of or
material damage to any Collateral or of any adverse change, known to
the Debtor, in the prospect of payment of any sums due on or under any
instrument, chattel paper, or account constituting Collateral;
(vi) if the Secured Party at any time so requests (whether the
request is made before or after the occurrence of an Event of
Default), promptly deliver to the Secured Party any instrument,
document or chattel paper constituting Collateral, duly endorsed or
assigned by the Debtor;
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(vii) at all times keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft,
collision (in case of Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Secured Party may
reasonably request, with any loss payable to the Secured Party to the
extent of its interest;
(viii) from time to time execute such financing statements as
the Secured Party may reasonably require in order to perfect the
Security Interest and, if any Collateral consists of a motor vehicle,
execute such documents as may be required to have the Security
Interest properly noted on a certificate of title;
(ix) pay when due or reimburse the Secured Party on demand for
all costs of collection of any of the Obligations and all other out-
of-pocket expenses (including in each case all reasonable attorneys'
fees) incurred by the Secured Party in connection with the creation,
perfection, satisfaction, protection, defense or enforcement of the
Security Interest or the creation, continuance, protection, defense or
enforcement of this Agreement or any or all of the Obligations,
including expenses incurred in any litigation or bankruptcy or
insolvency proceedings;
(x) execute, deliver or endorse any and all instruments,
documents, assignments, security agreements and other agreements and
writings which the Secured Party may at any time reasonably request in
order to secure, protect, perfect or enforce the Security Interest and
the Secured Party's rights under this Agreement; and
(xi) not use or keep any Collateral, or permit it to be used or
kept, for any unlawful purpose or in violation of any federal, state
or local law, statute or ordinance.
(h) SECURED PARTY'S RIGHT TO TAKE ACTION. If the Debtor at any time
fails to perform or observe any agreement contained in Section 3(g), and if
such failure continues for a period of ten calendar days after the Secured
Party gives the Debtor written notice thereof (or, in the case of the
agreements contained in clauses (vii) and (viii) of Section 3(g),
immediately upon the occurrence of such failure, without notice or lapse of
time), the Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of the Debtor (or, at
the Secured Party's option, in the Secured Party's own name) and may (but
need not) take any and all other actions which the Secured Party may
reasonably deem necessary to cure or correct such failure (including,
without limitation the payment of taxes, the satisfaction of security
interests, liens, or encumbrances, the performance of obligations under
contracts or agreements with account debtors or other obligors, the
procurement and maintenance of insurance, the execution of financing
statements, the
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endorsement of instruments, and the procurement of repairs, transportation
or insurance); and, except to the extent that the effect of such payment
would be to render any loan or forbearance of money usurious or otherwise
illegal under any applicable law, the Debtor shall thereupon pay the
Secured Party on demand the amount of all moneys expended and all costs and
expenses (including reasonable attorneys' fees) incurred by the Secured
Party in connection with or as a result of the Secured Party's performing
or observing such agreements or taking such actions, together with interest
thereon from the date expended or incurred by the Secured Party at the
highest rate then applicable to any of the Obligations. To facilitate the
performance or observance by the Secured Party of such agreements of the
Debtor, the Debtor hereby irrevocably appoints (which appointment is
coupled with an interest) the Secured Party, or its delegate, as the
attorney-in-fact of the Debtor with the right (but not the duty) from time
to time to create, prepare, complete, execute, deliver, endorse or file, in
the name and on behalf of the Debtor, any and all instruments, documents,
financing statements, applications for insurance and other agreements and
writings required to be obtained, executed, delivered or endorsed by the
Debtor under this Section 3 and Section 6.
4. Assignment of Insurance. The Debtor hereby assigns to the Secured
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Party, as additional security for the payment of the Obligations, any and all
moneys (including but not limited to proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Debtor under or with respect to, any and all policies of insurance covering the
Collateral, and the Debtor hereby directs the issuer of any such policy to pay
any such moneys directly to the Secured Party. Both before and after the
occurrence of an Event of Default, the Secured Party may (but need not), in its
own name or in the Debtor's name, execute and deliver proofs of claim, receive
all such moneys, endorse checks and other instruments representing payment of
such moneys, and adjust, litigate, compromise or release any claim against the
issuer of any such policy.
5. Events of Default. Each of the following occurrences shall
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constitute an event of default under this Agreement (herein called "Event of
Default"): (i) an Event of Default shall occur under the Credit Agreement; or
(ii) the Debtor shall fail to pay any or all of the Obligations when due or (if
payable on demand) on demand; or (iii) the Debtor shall fail to observe or
perform any covenant or agreement herein binding on it.
6. Remedies upon Event of Default. Upon the occurrence of an Event of
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Default and at any time thereafter, the Secured Party may exercise any one or
more of the following rights and remedies:
(a) ACCELERATION. The Secured Party may declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon
be immediately due and payable, without presentment or other notice or
demand;
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(b) ACCOUNT VERIFICATION. The Secured Party may verify any accounts in
the name of the Debtor or in its own name; and the Debtor, whenever
requested, shall furnish the Secured Party with duplicate statements of the
accounts, which statements may be mailed or delivered by the Secured Party
for that purpose.
(c) COLLATERAL ACCOUNT. The Secured Party may establish a collateral
account for the deposit of checks, drafts and cash payments made by the
Debtor's account debtors. If a collateral account is so established, the
Debtor shall promptly deliver to the Secured Party, for deposit into said
collateral account, all payments on accounts and chattel paper received by
it. All such payments shall be delivered to the Secured Party in the form
received (except for the Debtor's endorsement where necessary). Until so
deposited, all payments on accounts and chattel paper received by the
Debtor shall be held in trust by the Debtor for and as the property of the
Secured Party and shall not be commingled with any funds or property of the
Debtor. All deposits in said collateral account shall constitute proceeds
of Collateral and shall not constitute payment of any Obligation. At all
times prior to the occurrence of a Default or Event of Default, the Secured
Party shall permit the Debtor to withdraw all or any part of the balance on
deposit in said collateral account. Following the occurrence and during the
continuance of a Default or Event of Default, the Secured Party may, at its
option at any time, apply finally collected funds on deposit in said
collateral account to the payment of the Obligations in such order of
application as the Secured Party may determine, or permit the Debtor to
withdraw all or any part of the balance on deposit in said collateral
account.
(d) LOCKBOX. The Secured Party may, by notice to the Debtor, require
the Debtor to direct each of its account debtors to make payments due under
the relevant account or chattel paper directly to a special lockbox to be
under the control of the Secured Party. The Debtor hereby authorizes and
directs the Secured Party to deposit all checks, drafts and cash payments
received in said lockbox into the collateral account established as set
forth above.
(e) DIRECT COLLECTION. The Secured Party may, after the occurrence and
during the continuance of an Event of Default, notify any account debtor,
or any other person obligated to pay any amount due, that such chattel
paper, account, or other right to payment has been assigned or transferred
to the Secured Party for security and shall be paid directly to the Secured
Party. If the Secured Party so requests at any time, the Debtor will so
notify such account debtors and other obligors in writing and will indicate
on all invoices to such account debtors or other obligors that the amount
due is payable directly to the Secured Party. At any time after the Secured
Party or the Debtor gives such notice to an account debtor or other
obligor, the Secured Party may (but need not), in its own name or in the
Debtor's name, demand, ▇▇▇ for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such chattel
paper, account, or other right to payment, or grant any extension to, make
any compromise or settlement with or otherwise agree to waive,
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modify, amend or change the obligations (including collateral obligations)
of any such account debtor or other obligor.
(f) RIGHTS UNDER UCC. The Secured Party may exercise and enforce any
or all rights and remedies available upon default to a secured party under
the Uniform Commercial Code, including but not limited to the right to take
possession of any Collateral, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof, which the
Debtor hereby expressly waives), and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith, the
Secured Party may require the Debtor to make the Collateral available to
the Secured Party at a place to be designated by the Secured Party which is
reasonably convenient to both parties, and if notice to the Debtor of any
intended disposition of Collateral or any other intended action is required
by law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8) at least 10
calendar days prior to the date of intended disposition or other action;
(i) exercise or enforce any or all other rights or remedies available to
the Secured Party by law or agreement against the Collateral, against the
Debtor or against any other person or property.
(g) OTHER RIGHTS. The Secured Party may exercise or enforce any or all
other rights or remedies available to the Secured Party by law or agreement
against the Collateral, against the Debtor or against any other person or
property.
The Secured Party is hereby granted a nonexclusive, worldwide and royalty-free
license to use or otherwise exploit all trademarks, trade secrets, franchises,
copyrights and patents of the Debtor that the Secured Party deems necessary or
appropriate to the disposition of any Collateral.
7. Other Personal Property. Unless at the time the Secured Party
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takes possession of any tangible Collateral, or within seven days thereafter,
the Debtor gives written notice to the Secured Party of the existence of any
goods, papers or other property of the Debtor, not affixed to or constituting a
part of such Collateral, but which are located or found upon or within such
Collateral, describing such property, the Secured Party shall not be responsible
or liable to the Debtor for any action taken or omitted by or on behalf of the
Secured Party with respect to such property without actual knowledge of the
existence of any such property or without actual knowledge that it was located
or to be found upon or within such Collateral.
8. Notice. All notices and other communications hereunder shall be in
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writing and shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or (d)
transmitted by telecopy, in each case addressed or telecopied to the party to
whom notice is being given at its address or telecopier number as set forth
below its signature or, as to each party, at such other address or telecopier
number as may hereafter be designated by such party in a written notice to the
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other party complying as to delivery with the terms of this Section. All such
notices, requests, demands and other communications shall be deemed to have been
given on (i) the date received if personally delivered, (ii) when deposited in
the mail if delivered by mail, (iii) the date sent if sent by overnight courier,
or (iv) the date of transmission if delivered by telecopy.
9. Miscellaneous. This Agreement has been duly and validly authorized
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by all necessary corporate action. This Agreement does not contemplate a sale of
accounts, or chattel paper. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by the Secured Party. A waiver signed by the
Secured Party shall be effective only in the specific instance and for the
specific purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of the Secured Party's rights or remedies. All
rights and remedies of the Secured Party shall be cumulative and may be
exercised singularly or concurrently, at the Secured Party's option, and the
exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any other. The Secured
Party's duty of care with respect to Collateral in its possession (as imposed by
law) shall be deemed fulfilled if the Secured Party exercises reasonable care in
physically safekeeping such Collateral or, in the case of Collateral in the
custody or possession of a bailee or other third person, exercises reasonable
care in the selection of the bailee or other third person, and the Secured Party
need not otherwise preserve, protect, insure or care for any Collateral. The
Secured Party shall not be obligated to preserve any rights the Debtor may have
against prior parties, to realize on the Collateral at all or in any particular
manner or order, or to apply any cash proceeds of Collateral in any particular
order of application. This Agreement shall be binding upon and inure to the
benefit of the Debtor and the Secured Party and their respective successors and
assigns and shall take effect when signed by the Debtor and delivered to the
Secured Party, and the Debtor waives notice of the Secured Party's acceptance
hereof. The Secured Party may execute this Agreement if appropriate for the
purpose of filing, but the failure of the Secured Party to execute this
Agreement shall not affect or impair the validity or effectiveness of this
Agreement. A carbon, photographic or other reproduction of this Agreement or of
any financing statement signed by the Debtor shall have the same force and
effect as the original for all purposes of a financing statement. This Agreement
shall be governed by the law of Minnesota. If any provision or application of
this Agreement is held unlawful or unenforceable in any respect, such illegality
or unenforceability shall not affect other provisions or applications which can
be given effect and this Agreement shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein or
prescribed hereby. All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations.
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THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
NORWEST BANK MINNESOTA, EAGLE ELECTRICAL SYSTEMS, INC.
NATIONAL ASSOCIATION, as Agent
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President Its Assistant Secretary
Address: Address:
Norwest Center c/o Nationwide Electric, Inc.
Sixth Street and Marquette Avenue ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Employer identification number: Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇-▇▇▇▇▇▇▇
Employer identification number:
▇▇-▇▇▇▇▇▇▇
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