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EXHIBIT 10.46
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated January 8, 1998, is
between ANGELES ACQUISITION CORP., a Delaware corporation ("Debtor"), located
at ▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and BINHAD, INC., a
California corporation (formerly known as CAPITOL METALS CO., INC.) ("Secured
Party"), located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
This Agreement is made with reference to the following facts:
WHEREAS, Secured Party, as seller, and CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC., a Colorado corporation ("CCNA"), as purchaser, entered
into that certain Asset Purchase Agreement, dated as of December 1, 1997 (the
"Asset Purchase Agreement"), pursuant to which Secured Party agreed to sell to
CCNA, and CCNA agreed to purchase, the Assets (as defined in the Asset Purchase
Agreement) upon the terms and conditions provided therein;
WHEREAS, the Asset Purchase Agreement has been amended by that
certain Order Approving Sale of Substantially All Property of the Estate Free
and Clear of Liens and Interests (the "Sale Approval Order"), entered December
29, 1997, by the U.S. Bankruptcy Court in Secured Party's pending Chapter 11
case, and by that certain First Amendment to Asset Purchase Agreement of even
date herewith (the "Amendment"), among Secured Party, CCNA and Debtor, a wholly
owned subsidiary of CCNA;
WHEREAS, pursuant to the Amendment and that certain Assignment
and ▇▇▇▇ of Sale of even date herewith (the "▇▇▇▇ of Sale"), from Secured Party
to Debtor, Secured Party has assigned, transferred and conveyed the Assets to
Debtor, in lieu of CCNA, in order to accommodate CCNA's desire to hold and
operate the Assets in a separate corporate subsidiary wholly owned by CCNA;
WHEREAS, pursuant to the Asset Purchase Agreement, CCNA agreed
to grant a security interest to Secured Party in and to the Assets, to secure
payment and performance of certain promissory notes to be delivered by CCNA to
Secured Party under the Asset Purchase Agreement;
WHEREAS, pursuant to the Amendment, Debtor is now jointly and
severally liable with CCNA under such promissory notes, and Debtor desires to
grant a security interest in the Assets to Secured Party as provided in the
Asset Purchase Agreement to facilitate the closing of the transactions
contemplated by the Asset Purchase Agreement and to enable Debtor to realize
all of the rights and benefits accrued and to be accrued by the purchaser of
the Assets under the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual promises herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
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1. Grant of Security Interest. Debtor hereby grants to
Secured Party a continuing lien on and security interest in the property
described or referred to in Paragraph 2 below (collectively, the "Collateral")
to secure prompt payment and full performance of the liabilities described in
Paragraph 3 below (collectively, the "Liabilities").
2. Collateral. The Collateral consists of all of
Debtor's now owned and hereafter acquired accounts, inventory, equipment,
fixtures, contract rights, general intangibles, chattel paper, instruments,
documents, and other property; including without limitation, all of the Assets
conveyed to Debtor pursuant to the Amendment and the ▇▇▇▇ of Sale, all of the
property described below, and all of the proceeds and products thereof:
(a) all goods of Debtor, including without
limitation, machinery, equipment, furniture, furnishings, fixtures, tools,
parts, supplies and motor vehicles of every kind and description and all
improvements thereto which Debtor now owns or in which Debtor may have or may
hereafter acquire any interest, together with all customer lists and records of
Debtor's business;
(b) all of Debtor's inventory, including, but not
limited to, all goods intended for sale or lease by Debtor, or for display or
demonstration, all work in process, all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
Debtor's business, and all documents evidencing and general intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by
Debtor;
(c) all contract rights and general intangibles
of Debtor, including without limitation, goodwill, trademarks, trade styles,
trade names, patents, patent applications, copyrights, bank deposits, deposit
accounts, income tax refunds and property in the possession, deposited with or
under the control of Secured Party or any of its affiliates;
(d) all present and future accounts, accounts
receivable and other receivables and all books and records relating thereto;
(e) all documents, instruments, pledged assets
and chattel paper; and
(f) all the products and proceeds of the
foregoing, and any replacements, additions, accessions, or substitutions
thereof or thereto, all after-acquired property, all accounts and proceeds
arising from the sale or disposition of any inventory of Debtor including any
returns thereof and including, where applicable, the proceeds of insurance
covering said Collateral or tort claims in connection with the Collateral;
whether such Collateral shall be presently in existence or whether it shall be
acquired or created by Debtor at any time hereafter, wherever located, to
remain in force so long as Debtor is, in any manner, obligated to Secured
Party.
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3. Liabilities. The liabilities ("Liabilities") secured
under this Agreement are all liabilities of Debtor to Secured Party from time
to time, including, without limitation:
(a) the Secured Promissory Note of even date
herewith from CCNA and Debtor to Secured Party in the principal amount of
$1,200,000.00;
(b) the Secured Promissory Note of even date
herewith from CCNA and Debtor to Secured Party in the principal amount of
$300,000.00, and
(c) any and all expenditures made or incurred by
Secured Party to protect and maintain the Collateral and to enforce the rights
of Secured Party under this Agreement.
4. Covenants of Debtor. Until the Liabilities are paid
in full, Debtor agrees that it shall:
(a) not sell or otherwise dispose of the
Collateral except for the sale of inventory in the ordinary course of business
or dispositions of obsolete or worn-out equipment in the ordinary course of
business;
(b) except for "Permitted Liens" (as defined
below), not create, incur, assume or, permit to exist any liens, encumbrances,
security interests, levies, assessments or charges on or in any of the
Collateral, without Secured Party's prior consent;
(c) appear in and defend, at Debtor's own
expense, any action or proceeding which may affect Debtor's title to or Secured
Party's interest in the Collateral;
(d) procure or execute and deliver, from time to
time, in form and substance satisfactory to Secured Party, any endorsements,
assignments, financing statements or other writings deemed necessary or
appropriate by Secured Party to perfect, maintain or protect Secured Party's
security interest in the Collateral and the priority thereof, and take such
other action and deliver such other documents, instruments and agreements
pertaining to the Collateral as Secured Party may request to effectuate the
intent of this Agreement;
(e) notify Secured Party in writing at least
thirty (30) days prior to any change in Debtor's name, identity or corporate
structure, or any addition or change to the address of Debtor specified in the
introductory paragraph hereof;
(f) keep accurate and complete records of the
Collateral and provide Secured Party during normal business hours and upon
reasonable notice with access thereto and to Debtor's financial records, in
each case with the right to make extracts therefrom;
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(g) provide Secured Party during normal business
hours and upon reasonable notice with access to the Collateral, and with such
other information as Secured Party may reasonably request from time to time;
(h) maintain and preserve its corporate
existence, and all rights, privileges, franchises and other authority necessary
for the conduct of its business; and
(i) continue operations in the same form and
structure of business as currently conducted, and not merge or consolidate with
or acquire or be acquired by any other corporation, partnership, entity or
person, without Secured Party's prior written consent.
"Permitted Liens" means (i) liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of Debtor's business securing sums
not overdue; (ii) liens incurred in the ordinary course of Debtor's business in
connection with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums not
overdue or being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Debtor in
conformity with GAAP; (iii) liens in favor of Secured Party; (iv) liens for
taxes not yet due or being diligently contested in good faith, provided that
adequate reserves with respect thereto are maintained on the books of Debtor in
conformity with GAAP; provided, that, the foregoing liens shall have no effect
on the priority of the liens in favor of Secured Party or the value of the
assets in which Secured Party has such a lien and a stay of enforcement of any
such lien shall be in effect; (v) liens in favor of Congress Financial
Corporation (Western) securing an aggregate loan amount not exceeding
$6,400,000.00, and (iv) liens in favor of the Nat and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Family
Trust securing an aggregate loan amount not exceeding $625,000.00.
5. Authorized Action By Secured Party. (a) After the
occurrence of any "Event of Default" (as defined below) and while it is
continuing, Debtor hereby irrevocably appoints Secured Party as its
attorney-in-fact to do (but Secured Party shall not be obligated to and shall
not incur any liability to Debtor or any third party for failure so to do) any
act which Debtor is obligated by this Security Agreement to do, and to exercise
such rights and powers as Debtor might exercise with respect to the Collateral,
including, without limitation, the right to:
(i) collect by legal proceedings or otherwise and
endorse, receive and receipt for all payments, proceeds and
other sums and property now or hereafter payable on or on
account of the Collateral;
(ii) enter into any extension, deposit or other
agreement pertaining to, or deposit, surrender, accept, hold
or apply other property in exchange for, the Collateral;
(iii) process and preserve the Collateral; and
(iv) make any compromise, settlement or
adjustment, and take any action it deems advisable, with
respect to the Collateral.
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(b) Debtor agrees to reimburse Secured Party upon
demand for any costs and expenses, including attorneys' fees, Secured Party may
incur while acting as Debtor's attorney-in-fact hereunder, all of which costs
and expenses are included in the Liabilities secured hereby and are payable
upon demand, with interest thereon at the rate applicable to the obligations
under the note referred to in Paragraph 3(a) above.
(c) It is further agreed and understood between
the parties hereto that such care as Secured Party gives to the safekeeping of
its own property of like kind shall constitute reasonable care of the
Collateral when in Secured Party's possession; provided, however, that Secured
Party shall not be required to make any presentment, demand or protest, or give
any notice and need not take any action to preserve any rights against any
prior party or any other person in connection with the Liabilities or with
respect to the Collateral.
(d) Whether or not Debtor is in default, Debtor
agrees that Secured Party may at any time send verification requests, and so
long as an Event of Default has not occurred, such requests will not identify
Secured Party to any account debtor on any Collateral.
(e) If Debtor's records are prepared or retained
by a computer service company or any accountant or accounting service, so long
as any Liabilities are outstanding, Debtor grants Secured Party the absolute
and irrevocable right, with reasonable notice to Debtor, to inspect such
records (including Debtor's internal work papers), receive duplicate copies of
all information furnished to Debtor and prepared by such company, accountant or
accounting service, and agrees to furnish such consents as may be necessary to
effectuate the same. Debtor further agrees to promptly notify Secured Party of
the name and address of such company, accountant or accounting service and of
any change in respect thereof.
(f) All the foregoing powers authorized herein,
being coupled with an interest, are irrevocable so long as any Liabilities are
outstanding.
6. Default. The occurrence of any of the following
events or conditions (herein "Events of Default") shall constitute an Event of
Default hereunder:
(a) Debtor fails to perform, keep or observe any
covenant (other than for payment of Liabilities) within 5 calendar days of the
date Debtor is required to perform, keep or observe such covenant;
(b) non-payment of any of the Liabilities as and
when due and payable to Secured Party; or
(c) any bankruptcy or other insolvency proceeding
is commenced by Debtor, or any such proceeding is commenced against Debtor and
remains undischarged or unstayed for forty-five (45) days.
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7. Remedies. Upon the occurrence and during the
continuation of any Event of Default, Secured Party may, at its option, without
notice to or demand on Debtor, declare all Liabilities immediately due and
payable, and Secured Party shall have all the default rights and remedies of a
secured party under Chapter 5 of Division 9 of the California Uniform
Commercial Code and other applicable law as well as the following rights and
remedies, all of which may be exercised with or without further notice to
Debtor:
(a) to the extent permitted by law, to notify any
and all obligors and account debtors on the Collateral that the same has been
assigned to Secured Party and that all payments thereon are to be made directly
to Secured Party;
(b) to settle, compromise or release, on terms
acceptable to Secured Party, in whole or in part, any amounts owing on the
Collateral, and to extend the time of payment, make allowances and adjustments
and to issue credits in Secured Party's name or in the name of Debtor in
respect thereof;
(c) to enter any premises where any Collateral
may be located and to take possession of and remove the Collateral, with or
without judicial process;
(d) to sell or otherwise dispose of the
Collateral or any part thereof, for cash, on credit or otherwise, with or
without representations or warranties, and upon such terms as shall be
acceptable to Secured Party;
(e) to remove from any premises where the same
may be located, any and all documents, instruments, files and records relating
to the collateral, and Secured Party may, at Debtor's expense, use the supplies
and space of Debtor at its places of business as may be necessary to properly
administer and control the Collateral or the handling of collections and
realizations thereon;
(f) receive, open and dispose of all mail
addressed to Debtor and notify postal authorities to change the address for
delivery thereof to such address as Secured Party may designate; and
(g) take or bring, in Secured Party's name or in
the name of Debtor, all steps, actions, suits or proceedings deemed by Secured
Party necessary or desirable to effect collection of or to realize upon the
Collateral;
all at Secured Party's sole option and as Secured Party in its sole discretion
may deem advisable.
8. Application of Proceeds of Collateral. The net cash
proceeds resulting from the collection, liquidation, sale or other disposition
of the Collateral shall be applied first to the expenses (including all
attorneys' fees) of retaking, holding, processing and preparing for sale,
selling, collecting, liquidating and the like, and then to the satisfaction of
all Liabilities secured hereby, application as to any particular obligation or
indebtedness or against principal or interest to be in Secured Party's
discretion. The balance, if any, shall be paid in accordance with
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applicable law or as a court of competent jurisdiction may direct. Debtor
shall be liable to Secured Party and shall pay to Secured Party on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of Collateral.
9. Cumulative Rights. The rights, powers and remedies
of Secured Party under this Agreement shall be in addition to all rights,
powers and remedies given to Secured Party under any statute or rule of law or
any other document, instrument or agreement, all of which rights, powers and
remedies shall be cumulative and may be exercised successively or concurrently.
10. Waiver. Any forbearance, failure or delay by Secured
Party in exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect until such right, power or remedy is
specifically waived in a writing executed by Secured Party. Debtor waives any
right to require Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in Secured Party's power prior to pursuing
Debtor in respect of the Liabilities.
11. Setoff. Debtor agrees that Secured Party may
exercise its rights of setoff with respect to the Liabilities in the same
manner as if the Liabilities were unsecured.
12. Binding Upon Successors. All rights of Secured Party
under this Agreement shall inure to the benefit of Secured Party and its
successors and assigns, and all obligations of Debtor shall bind the Debtor and
its successors and assigns.
13. Entire Agreement; Severability. This Agreement
contains the entire security agreement between Secured Party and Debtor with
respect to the Collateral. If any of the provisions of this Agreement shall be
held invalid or unenforceable, this Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
14. References. The captions or titles of the paragraphs
of this Agreement are for convenience of reference only and shall not define or
limit the provisions hereof.
15. Choice of Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California, and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the California Uniform Commercial Code. DEBTOR
IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF THE SUPERIOR
COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES OR THE UNITED
STATES DISTRICT COURT OF THE CENTRAL DISTRICT OF CALIFORNIA, AS SECURED PARTY
MAY DEEM APPROPRIATE, OR IF REQUIRED, THE MUNICIPAL COURT OF THE STATE OF
CALIFORNIA FOR THE COUNTY OF LOS ANGELES IN CONNECTION WITH ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND DEBTOR WAIVES ANY
OBJECTION RELATING TO THE BASIS FOR PERSONAL OR IN REM JURISDICTION OR TO VENUE
WHICH IT MAY
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NOW OR HEREAFTER HAVE IN ANY SUCH SUIT, ACTION OR PROCEEDING. BOTH DEBTOR AND
SECURED PARTY WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.
16. Attorneys' Fees. If any legal action or proceeding
shall be commenced at any time by any party to this Agreement in connection
with the interpretation of this Agreement or the enforcement of any rights or
remedies hereunder, the prevailing party or parties in such action or
proceeding shall be entitled to reimbursement of its reasonable attorneys' fees
and costs in connection therewith, in addition to all other relief to which the
prevailing party or parties may be entitled.
17. Notice. Any written notice, consent or other
communication provided for in this Agreement shall be delivered personally
(effective upon delivery), via overnight courier (effective the next day after
dispatch) or via U.S. Mail (effective 3 days after mailing, postage prepaid,
first class) to each party at its address set forth above, or to such other
address as either party shall specify to the other; provided, that all notices
to Secured Party shall be copied to any assignee of Secured Party's rights
hereunder.
18. Counterparts. This Agreement may be executed in any
number of counterparts, and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same
instrument.
DEBTOR:
ANGELES ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Chief Executive Officer
SECURED PARTY:
BINHAD, INC. (formerly known as
CAPITOL METALS CO., INC.)
By: /s/ ▇▇▇▇▇▇ ▇. Eget
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▇▇▇▇▇▇ ▇. Eget
Chief Executive Officer
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