HomeMy WebLinkAbout(02) PR:13188 BOWHEAD MANF.interoffice
MEMORANDUM
To: Mayor, City Council, City Manager
From: Mark T. Sokolow, City Attorney ~ ~
Date: June 24, 2005
Subject: P.R. No. 13188; Council Meeting of June 28, 2005
Attached is P. R. No. 13188 approving an economic incentive
contract and loan agreement between Bowhead Manufacturing Company, LLC.
and the City of Port Arthur Section 4A Economic Development Corporation.
The EDC Board has approved this Agreement. The City's legal staff
is still reviewing the contract, and there may be a few minor suggested
changes.
MTS:ts
Attachment
z.pr13188
P.R. No. 13188
06/24/05 jb
RESOLUTION NO.
A RESOLUTION APPROVING AN ECONOMIC
INCENTIVE CONTRACT AND LOAN AGREEMENT
BETWEEN BOWHEAD MANUFACTURING COMPANY~
L.L.C, AND THE CITY OF PORT ARTHUR SECTION
4A ECONOMIC DEVELOPMENT CORPORATION
WHEREAS, the City Council deems it in the public interest to authorize the
City of Port Arthur Section 4A Economic Development Corporation to enter into an
economic incentive contract and loan agreement with Bowhead Manufacturin§
Company, L.L.C.
NOW~ THEREFORE~ BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF PORT ARTHUR:
Section 1. That the facts and opinions in the preamble are true and
correct.
Section 2. That the City of Port Arthur Section 4A Economic Development
Corporation is herein authorized to enter into an economic incentive contract and
loan agreement with Bowhead Manufacturing Company, L.L.C., and the President
and Secretary of the City of Port Arthur Section 4A Economic Development
Corporation are authorized to sign the agreement in substantially the same form as
denoted in Exhibit
Section 3. That a copy of the caption of the Resolution be spread upon
the Minutes of the City Council.
READ, ADOPTED AND APPROVED on this day of , A.D.
2005, at a Regular Meetin§ of the City Council of the City of Port Arthur, Texas by
the following vote: AYES:
Mayor_
z,prt3188
CiW Council
NOES:
OSCAR ORTIZ, MAYOR
ATTEST:
EVANGELINE GREEN, CITY SECRETARY
APPROVED AS TO FORM:
MARK T. SOKOLOW, CITY ATTORNEY
APPROVED FOR ADMINISTRATION:
STEPHEN FITZGIBBONS, CITY MANAGER
APPROVED AS TO THE AVAILABILITY OF FUNDS:
REBECCA UNDERHILL, DIRECTOR OF FINANCE
APPROVED FOR SECTION 4A ECONOMIC DEVELOPMENT CORPORATION:
DEBORAH ECHOLS, ASSISTANT DIRECTOR OF FINANCE
z.prl3 [88
EXHIBIT "A"
ECONOMIC INCENTIVE CONTRACT & LOAN AGREEMENT
BETWEEN
THE CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
AND
BOWHEAD MANUFACTURING COMPANY, L.L.C.
.Executi~
Bowhead Manufacturing Company, L.L.C. ("Bowheadn), is an Alaskan-native-owned
company, who specializes in environmental and safety equipment. Bowhead was recently
awarded an United States Marine Corps (the "Corps") contract to supply the Corps with
specialty, 600-gallon per minute (gpm), fuel and water pumps. The Corps contract has an
estimated potential for $16 million in sales, with costs of about $14.2 million. Bowhead has
agreed to produce the Corps' pumps in Port Arthur, Texas, and the City of Port Arthur Section
4A Economic Development Corporation (~PAEDC') has agreed to provide the funds necessary
to locate the pump operations in Port Arthur.
Bowhead will execute a five-year lease with Magnum Fire and Safety Systems, Inc.
('Magnum"), a the Port Arthur company, for 4150 square feet of manufacturing and office space
located at 6648 Gulfway Drive. Additionally, Bowhead will execute a five-year contract with Mr.
Ken Broussard, President of Magnum, to manage the production of the specialty pumps.
PAEDC has agreed to provide Bowhead with a ~ to be applied exclusively
toward (a) manufacturing equipment, (b) improvements to the Port Arthur manufacturing facility,
and (c) office facilities and equipment in Port Arthur. in return, Bowhead promises to distribute
$1.5 millior~ in payrell over the next five years, as measured by the Internal Revenue Service
(IRS) W-3 form.
If Bowhead breaches this agreement then the PAEDC ,qrant, minus any credits earned,
will automatically convert to a oan (liquidated damages). Bowhead may earn credits as
described in the following paragraph. The loan will have a three-year term, starting on the date
of Bowhead's breach, an interest rate of ten percent (10%), and secured by equipment from two
sources: (1) Bowhead e ui ment urchased with PAEDC monies, with an estimated value of
$35,000, and (2) selected Ma nume ui ment, with an estimated value of at least $30,000.
Bowhead may use the following incentives to reduce the duration of this contract or to
reduce liquidated damages in the event of a breach.
· Starting on the effective date of the contract, Bowhead will receive a $1.00 credit for
each $23.00 of payroll distributed to its employees, up to $65,000 of credit.
· Bowhead will receive a ~3~900 credit for each year that at least fifty percent (50%) of
its employees are Port Arthur residents, as determined from the addresses on IRS
W-2 forms.
To avoid surprises, Bowhead agrees to send PAEDC copies of all equipment invoicee
and ~ Status reports will be required every three (3) months the first year,
every six months the following two years, and annually the last two years. Additionally,
Bowhead will issue a final report fourteen (14) days after the contract is either performed fully or
breached. Bowhead will forfeit its credits for any reporting period for which it did not issue a
report.
ECONOMIC
INCENTIVE CONTRACT & LOAN AGREEMENT
BETWEEN
THE CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
AND
BOHEAD MANUFACTURING COMPANY, L.L.C.
Executive Summary
Bohead Manufacturing Company, L.L.C. ("Bohead"), is an Alaskan-native-owned
company, who specializes in environmental and safety equipment. Bohead was recently
awarded an United States Marine Corps (the "Corps") contract to supply the Corps with
specialty, 600-gallon per minute (gpm), fuel and water pumps. The Corps contract has an
estimated potential for $16 million in sales, with costs of about $14.2 million. Bohead has
agreed to produce the Corps' pumps in Port Arthur, Texas, and the City of Port Arthur Section
4A Economic Development Corporation ("PAEDC") has agreed to provide the funds necessary
to locate the pump operations in Port Arthur.
Bohead will execute a five-year lease with Magnum Fire and Safety Systems, Inc.
("Magnum"),--a-the Port Arthur company, for 4150 square feet of manufacturing and office space
located at 6646 Gulfway Drive. Additionally, Bohead will execute a five-year contract with Mr.
Ken Broussard, President of Magnum, to manage the production of the specialty pumps.
PAEDC has agreed to provide Bohead with a $65~000 .qrant to be applied exclusively
toward (a) manufacturing equipment, (b) improvements to the Port Arthur manufacturing facility,
and (c) office facilities and equipment in Port Arthur. In return, Bohead promises to distribute
$1.5 million in payroll over the next five years, as measured by the Internal Revenue Service
(IRS) W-3 form.
If Bohead breaches this agreement then the PAEDC grant, minus any credits earned,
will automatically convert to a loan (liquidated damages). Bohead may earn credits as
described in the following paragraph. The loan will have a three-year term, starting on the date
of Bohead's breach, an interest rate of ten percent (10%), and secured by equipment from two
sources: (1) Bohead equipment purchased with PAEDC monies, with an estimated value of
· $35,000, and (2) se ected Magnum equ pment, with an estimated value of at least $30,000
Bohead may use the following incentives to reduce the duration of this contract or to
reduce liquidated damages in the event of a breach.
· Starting on the effective date of the contract, Bohead will receive a $1.00 credit for
each $23.00 of payroll distributed to its employees, up to $65,000 of credit.
· Bohead will receive a $3,900 credit for each year that at least fifty percent (50%) of
its employees are Port Arthu_r residents, as determined from the addresses on IR,S
W-2 forms.
To avoid surprises, Bohead agrees to send PAEDC copies of all equipment invoices and
brief status reports. Status reports will be required every three (3) months the first year, every
six months the following two years, and annually the last two years. Additionally, Bohead will
issue a final report fourteen (14) days after the contract is either performed fUlly or breached.
Bohead will forfeit its credits for any reporting period for which it did not issue a report.
ECONOMIC INCENTIVE CONTRACT & LOAN AGREEMENT
BETWEEN
THE CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
AND
BOHEAD MANUFACTURING COMPANY, L.L.C.
CONTRACT DATES ..................................................................................................
PARTIES .................................................................................................................... - 1 -
(A) PERFORMANCE BY PAEDC ................................................................................. - 1 -
(S) PERFORMANCE BY BOHEAD ................................................................................. - 2 -
(C) BOHEAD CREDITS - SUBSTITUTE PERFORMANCE .................................................. - 3 -
BOHEAD'S PERFORMANCE MILESTONE SCHEDULE ......................................... - 3 -
PAEDC'S CONDITIONAL OBLIGATIONS AND LIMITED LIABILITY ...................... - 5 -
LIQUIDATED DAMAGES FOR BREACH OF CONTRACT BY BOHEAD ................ - 5 -
RECORDS / INSPECTION / PAEDC AUDIT ............................................................. - 6 -
HOLD HARMLESS .................................................................................................... - 7 -
SUBCONTRACTS ..................................................................................................... - 7 -
CONFLICT OF INTEREST / DISCLOSURE OBLIGATION ....................................... - 7 -
NONDISCRIMINATION / EMPLOYMENT I REPORTING ......... : ............................... - 8 -
LEGAL AUTHORITY .................................................................................................. - 8 -
NOTICE OF LEGAL OR REGULATORY CLAIMS AGAINST BOHEAD .................. - 9 -
CHANGES AND AMENDMENTS .............................................................................. - 9 -
DEFAULT / TERMINATION ....................................................................................... - 9 -
BOHEAD AUDITS .................................................................................................... - 10 -
ENVIRONMENTAL CLEARANCE REQUIREMENTS ............................................. - 11 -
ORAL AND WRITTEN CONTRACTS / PRIOR AGREEMENTS ............................. - 11 -
VENUE ..................................................................................................................... - 12 -
ADDRESS OF NOTICE AND COMMUNICATIONS ................................................ - 12 -
CAPTIONS ............................................................................................................... - 12 -
COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS ..............................- 12 -
CONTRACT EXECUTION .......................... .'. ............................................................ - 13 -
Exhibit "A" .........................Machinery and Equipment List
Exhibit "B" ........................ Commercial Promissory Note
Exhibit "C" ........................ Commercial Security Agreement
Exhibit "D" .........................UCC-I Financing Statement
Exhibit "E" ........................ Certification Regarding Lobbying
Exhibit "F" ........................ Landlord Agreements
ECONOMIC INCENTIVE CONTRACT & LOAN AGREEMENT
BETWEEN
THE CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
AND
BOHEAD MANUFACTURING COMPANY, L.L.C.
CONTRACT DATES
CONTRACT START DATE ,
1. This Economic Incentive Contract and Loan Agreement ("Agreement") is entered
into with an effective date of ,2005, by and between the City of Port Arthur
Section 4A Economic Development Corporation ('PAEDC") and Bohead Manufacturing
Company, L.L.C. ("Bohead").
CONTRACT END DATE
2. This contract expires the earlier of July 1, 2010 or 30 days after Bohead either
performs fully or breaches the contract, subject to earlier termination or extension,
voluntary or involuntary, as provided herein. In the event of breach, although this contract
expires, the contracts and agreements contained in the Exhibits to this contract become
effective.
PARTIES
3. City of Port Arthur Section 4A Economic Development Corporation CPAEDC"),
located at 4173-39th Street, Port Arthur, Texas, 77642, is a corporation. It is duly
authorized to do business in the State of Texas under Section 4A, Article 5190.6 V.T.C.A.
(the Development Corporation Act of 1979) and duly authorized by Resolution of the City
Council of the City of Port Arthur to enter into this contract. So authorized and as provided
by the PAEDC bylaws, the President and Secretary of the PAEDC Board have the
authority to execute this contract.
4. Bohead Manufacturin.q Company, L.L.C. CBohead") is an ~ limited liability
company, formed on , Bohead's General Manager, Jeff
Guentzel is duly authorized by its members to enter into and execute this contract. The
registered agent for Bohead is , , located at
PROMISED PERFORMANCE
5. The parties agree to perform as follows.
(a) PERFORMANCE BY PAEDC
Bohead/PAEDC Contract ~ I - 6aoaoosc~ #
PAEDC shall give Bohead the sum of $65,000, subject to the limitations detailed
herein, which Bohead is not required to pay back unless Bohead breaches this
contract. This is PAEDC's sole obligation.
(b) PERFORMANCE BY BOHEAD
(1) Bohead shall use the Grant monies provided by the PAEDC exclusively for
(a) manufacturing equipment, (b) improvements to its Port Arthur
manufacturing facility, and (c) office facilities and equipment in Port Arthur.
Bohead will demonstrate compliance with this promised performance by
sending PAEDC copies of all relevant invoices and payment checks, which
can be conveniently included with Bohead's periodic reports to PAEDC.
Manufacturing equipment will be limited to the list of equipment in Exhibit
'~A1;" provided by Bohead. Bohead shall not use PAEDC grant monies to
purchase equipment materially different from the equipment in Exhibit "Al",
unless and until Bohead presents the change to the PAEDC Board and
obtains Board approval for the substitution.
(2) Bohead's Port Arthur operation shall distribute a payroll of $150,000 in 2005,
$300,000.00 per year for the years 2006 through 2009, and $150,000 in the
first half of 2006, for a cumulative total of $1.5 million. PAEDC will measure
Bohead's performance by Bohead's Internal Revenue Service ("IRS") Form
W-3. Additionally, PAEDC will audit Bohead's IRS Form W-2s to ensure that
the increased payroll is primarily~ due to more employment (versus wage,
salary and/or bonus increases).
Bohead may use incentive credits to modify this performance obligation, as
discussed in the next section.
(3) Bohead shall execute and comply with the following stand-alone, collateral
agreements;
A. Commercial Promissory Note automatically effective upon contract
breach by Bohead, contained in Exhibit "B'",
B. Bohead's Commercial Secudty Agreement for equipment purchased
by Bohead with PAEDC grant monies, contained in Exhibit "C".
C. Certification Regarding Lobbying for contracts, grants, loans, and
cooperative agreements, contained in-Exhibit "E."
(4) Bohead shall deliver to PAEDC original copies of (a) a second Commercial
Security Agreement, this one executed by Magnum Fire and Safety Systems,
Inc. (Magnum), Bohead's Port Arthur landlord, for Magnum equipment with a
current value of at least $30,000, and (b) a Landlord Lien Subordination
"Primarily" is defined as at least 80 percent of the total.
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Agreement, executed by Magnum. These agreements are contained in
Exhibit "F".
(5) On demand by PAEDC and in response to Bohead's failure to achieve a
performance milestone, Bohead shall provide PAEDC with assurances that.it
has both the intention and the capabilities to perform fully its contractual
obligations.
(C) BOHEAD CREDITS - SUBSTITUTE PERFORMANCE
Bohead may earn credits according to the following formulas, to either reduce
the duration of this contract or reduce the amount of liquidated contract
damages in the event Bohead breaches the contract.
(1) Starting on the effective date of the contract, Bohead will receive a $1.00
credit for each $23.00 of payroil reportable to the IRS.
(2) Bohead will receive a $3,900 credit for each year that at least fifty percent
(50%) of its employees are Port Arthur residents, as determined from the
addresses on IRS W-2 forms.
(3) Total credit cannot exceed the sum that PAEDC grants to Bohead, which is
assumed to be $65,000; however, if PAEDC provides a sum less than
$65,000, because, for example, the total cost of approved machinery and
equipment was less than $65,000, then Bohead can only earn credits up to
that lesser sum.
(4) Bohead will forfeit any credits it earned dudng a period for which a report is
scheduled but Bohead fails to issue it.
BOHEAD'S PERFORMANCE MILESTONE SCHEDULE
6. Although failure to achieve a performance milestone is not a breach of contract,
a failure is grounds for PAEDC to withhold further payments to Bohead and/or demand
reasonable assurances2 from Bohead that it can and will fully perform its contractual
obligations. Failure to provide demanded assurances is a breach of contract.
7. Bohead's performance milestones are contained in the table on the following
page.
2 Examples of reasonable assurances are copies of pending contracts and customer commitment letters.
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BOHEAD'S PERFORMANANCE MILESTONE SCHEDULE
_Deadline Milestone
(a) July 1, 2005 Execute 5-year Lease with Magnum.
(b) July 1, 2005 Deliver copy of Lease, Landlord Lien Subordination agreement, and Magnum's
Commercial Security Agreement to PAEDC.
(c) July 15, 2005 Take Possession of leased premises.
(d) Aug. 15, 2005 Start production.
(e) Oct. 5, 2005 Issue a status report3 to PAEDC Executive Director for the pedod of July 1, 2005 to
September 30, 2005.
(f) Dec. 31, 2005 Distribute the sum of $150,000 in payroll, between July 1, 2005 and Dec. 31, 2005.
(g) Jan. 4, 2006 Status report for Oct. 1, 2005 to Dec. 31, 2005
(h) Apr. 5, 2006 Status report for Jan. 1, 2006 to Mar. 31, 2006
(i) July 5, 2006 Status report for April 1, 2006 to June 30, 2006
(j) Dec. 31,2006 Distribute the sum of $300,000 in payroll, between Jan. 1, 2006 and Dec. 31, 2006
(k) Jan. 5, 2007 Status report for July 1, 2006 to Dec. 31, 2006
(I) July 5, 2007 Status report for Jan. 1,2007 to June 30, 2007
(m) Dec. 31,2007 Distribute the sum of $300,000 in payroll, between Jan. 1 and Dec. 31, 2007
(n) Jan. 5, 2008 Status report for July 1, 2007 to Dec. 31, 2007
(o) Dec. 31,2008 Distribute the sum of $300,000 in payroll, between Jan. 1 and Dec. 31, 2008
(p) Jan. 5, 2009 Status report for Jan. 1, 2008 to Dec. 31, 2008
(q) Dec. 31,2009 Distribute the sum of $300,000 in payroll, between Jan. I and Dec. 31, 2009
(r) Jan. 5, 2010 Status report for Jan 1, 2009 to Dec. 31,2009
(s) June 30, 2010 Distribute the sum of $150,000 in payroll between Jan. 1 and June 30, 2010.
(t) July. 31, 2010 Issue a final report to the PAEDC Board and Executive Director detailing actual
perfQrmance versus promised performance, so the PAED,C Board can take action
at its regularly scheduled August, 2010, Board meeting. If Bohead fully performs
then the Board will deem this contract complete, thereby, extinguishing the
corollary agreements contained in Appendices "B," "(?"and "D."
3 Status reports shall include copies of invoices and check payments for machinery and equipment
purchased with PAEDC funds.
~ January 5m status reports shall also include identity of current General Manager and members who own
more than 5% of the shares.
PAEDC'S CONDITIONAL OBLIGATIONS AND LIMITED LIABILITY
8. It is expressly understood and agreed by the parties hereto that the PAEDC
funding obligations herein are contingent upon the actual receipt of adequate sales tax
revenue funds to meet the PAEDC's liabilities under this Agreement. If adequate funds
are not available to make payments under this Agreement, the PAEDC shall notify Bohead
in writing within a reasonable time after such fact is reasonably determined by the PAEDC
Board of Directors. The PAEDC, at its sole option, may then terminate this Agreement
without further liability. In the event of such termination by the PAEDC, the PAEDC may,
at its sole option, immediately cease all further funding, if any, required by this Agreement
and the PAEDC shall not be liable to Bohead or to any third parties for failure to make
payments to Bohead under the terms and conditions of this Agreement.
9. The PAEDC shall not be liable, in contract or otherwise, to Bohead, or to any
person or entity claiming by or through Bohead, for any expense, expenditure or cost
incurred by or on behalf of Bohead related t0 the project made the basis of this Agreement.
The PAEDC's sole liability/obligations, if any, shall be to Bohead and shall be limited to the
conditional funding obligations detailed in this Agreement.
10. Bohead shall not use the funds herein for any purpose(s) other than that
specifically disclosed herein and as further disclosed within that certain application made
by or on behalf of Bohead, which application is incorporated herein for all purposes.
11. Funds granted by the PAEDC hereunder shall not be utilized by Bohead for
repayment of costs, expenditures or expenses incurred prior to the date of this Agreement.
LIQUIDATED DAMAGES FOR BREACH OF CONTRACT BY Bohead
12. in the event Bohead fails to perform its obligations under this contract, the
PAEDC grant, minus any credits earned, will automatically convert to a loan (liquidated
damages), effective on the day of breach, as agreed by Bohead in the executed
Commercial Promissory Note contained in Exhibit ~B." PAEDC, at its sole option, may
terminate its remaining funding obligations, if any, detailed in Section 4 herein. Further,
the PAEDC shall be entitled to recover its reasonable and customary attorney's fees and
Court costs incurred in collection of said obligation and such remedies as are provided at
law or in equity.
13. It is expressly understood and agreed by the parties that any dght or remedy
shall not preclude the exercise of any other right or remedy under this Contract or under
any provision of law, nor sh~ll any action taken in the exercise of any right o,r remedy be
deemed a waiver of any other rights or remedies. Failure to exercise any fight or remedy
hereunder shall not constitute a waiver of the right to exercise that or any other right or
remedy at any time.
RECORDS / INSPECTION / PAEDC AUDIT
14. Bohead must establish and maintain sufficient records, as reasonably
determined by the PAEDC, to account for the expenditure and utilization of funds received
by Bohead from the PAEDC under the terms and conditions of this Agreement.
15. Bohead shall maintain records of the receipt and disposition of all funds provided
hereunder as necessary to allow the PAEDC to audit and verify proper utilization of said
funds in compliance with this Agreement and the representations and warranties contained
herein and in Bohead's application. Bohead shall provide reports of utilization of said
funds, as reasonably requested by the PAEDC, and upon final termination of this contract.
16. Bohead shall give the PAEDC, or any of its duly authorized representatives,
access to and right to examine all books, accounts, records, reports, flies and other
papers, things or property belonging to or in use by Bohead pertaining to this Agreement.
Such rights to access shall continue as long as the records are maintained by Bohead.
Bohead agrees to maintain such records in an accessible location. As to job creation
performance, intedm status reports shall include documentation substantiating the
accuracy of such reports, including, for example, 941 payment reports, Texas Workforce
Commission reports, or other such reports confirming total jobs, payroll and other relevant
information. Driver's license information is appropriate for interim reporting of Port Arthur
residents hired. Year end reports shall be substantiated with IRS Forms W-2 and W-3.
The reporting objective is to include documentation necessary to for PAEDC to verify said
report without further outside inquiry.
17. All records pertinent to this Agreement shall be retained by Bohead at least
three years following the date of termination of this Agreement, whether said termination is
a result of default or whether said termination is a result of final submission of a close out
report by Bohead detailing Bohead's compliance with its obligations provided herein.
Further, in the event any litigation, claim or audit arising out of or related to this Agreement
is instituted before the expiration of the three (3) year period and extends beyond the three
year period, the records will be maintained until all litigation, claims or audit findings
involving this Agreement and the records made the basis of same have been resolved.
Further, records relating to real property acquisition, including any long-term lease, shall
be retained for a period equal to the useful life of any machinery or equipment purchased
with PAEDC funds.
18. Bohead shall provide PAEDC with all reports necessary for PAEDC compliance
with Article 5190.6 V.T.C.A.
19. It is expressly understoo~ and agreed by the parties hereto that if Bohead ~'ails to
submit to PAEDC in a timely and satisfactory manner any report required by this Contract,
PAEDC may, at its sole discretion, withhold further payments to Bohead and/or demand
assurances that Bohead can and will fully perform its contractual obligations. If Bohead
fails to provide adequate assurances then Bohead is in breach and any monies advanced
by PAEDC automatically become a loan. If PAEDC withholds such payments, it shall
notify Bohead in writing of its decision and the reasons therefore. Payments withheld
pursuant to this paragraph may be held by PAEDC until such time as the delinquent
obligations for which funds are withheld are fulfilled by Bohead.
20. The PAEDC reserves the right, from time to time, to carry out field
inspections/audits to ensure compliance with the requirements of this Agreement. After
completion of any such audit, the PAEDC, at its option, may provide Bohead with a written
report of the audit findings. If the audit report details deficiencies in Bohead's performance
under the terms and conditions of this Agreement, the PAEDC may establish requirements
for the timely correction of any such deficiencies by Bohead.
HOLD HARMLESS
21. Bohead agrees to hold harmless the PAEDC and the City of Port Arthur from
any and all claims, demands, and causes of action of any kind or character which may be
asserted by any third party occurring, arising out of or in any way related to this
Agreement, the project made the basis of this Agreement and the utilization of grant funds
provided by this Agreement.
SUBCONTRACTS
22. Bohead may not subcontract for performance credits described in this Contract
without obtaining PAEDC's written approval, which may be withheld for any reason.
Bohead shall only subcontract for performance credits described in this Contract after
Bohead has submitted Subcontractor Eligibility Request, as specified by PAEDC, for each
proposed subcontract, and Bohead has obtained PAEDC's prior written approval, based
on the information submitted, of Bohead's intent to enter into such proposed subcontract.
Bohead, in subcontracting for any performances described in this contract, expressly
understands that in entering into such subcontracts, PAEDC is in no way liable to
Bohead's subcontractor(s).
23. In no event shall PAEDC's prior written approval of a subcontractor's eligibility,
be construed as relieving Bohead of the responsibility for ensuring that the performances
rendered under all subcontracts are rendered so as to comply with all terms of this
Contract, as if such performances rendered were rendered by Bohead. PAEDC's approval
does not constitute adoption, ratification, or acceptance of Bohead's or subcontractor's
performance hereunder. PAEDC maintains the right to insist upon Bohead's full
compliance with the terms of this Contract, and by the act of subcontractor approval,
PAEDC does not waive any right of action which may exist or which may subsequently
accrue to PAEDC under this Contract.
24. Bohead, as well as all of its approved subcontractors~ shall comply with all
applicable federal, state, and local laws, regulations, and ordinances for making
procurement under this Contract.
CONFLICT OF INTEREST / DISCLOSURE OBLIGATION
25. Conflict of Interest: No employee, agent, officer or elected or appointed official
of the City of Port Arthur or the PAEDC who has participated in a decision making process
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related to this contract (without recusing him/herself and executing a conflict affidavit) may
obtain a personal or financial interest or benefit from an PAl:DC assisted activity, or have
an interest in any contract, subcontract, or agreement (or proceeds thereof) with respect to
an PAEDC assisted activity, during their tenure or for one (1) year thereafter. Bohead
shall ensure compliance with applicable provisions under Article 5190.6 V.T.C.A. and
Chapter 171 Local Government Code V.T.C.A.
26. Disclosure: In conjunction with execution of this Agreement, Bohead has fully
disclosed to PAEDC all known and potential owners of interests in Bohead (whether
stockholder, manager, member or otherwise). In the event of any change in ownership or
control of Bohead of five percent (5 %) or greater, Bohead shall notify PAEDC in writing.
Further, Bohead shall be obligated to notify in writing the PAEDC in the event any time
prior to, during or one (1) year after the term of this Contract, any City or PAFDC employee
or representative or any third party with a conflict of interest obtains or proposes to obtain
a financial benefit, direct or indirect, from Bohead. Failure to provide said notice
immediately or no later than five (5) business days after receipt of information shall
constitute a default herein.
NONDISCRIMINATION / EMPLOYMENT I REPORTING
27. Bohead shall ensure that no person shall on the grounds of race, color, religion,
sex, handicap, or national origin be excluded from participation in, be denied the benefits
of, or be subjected to discrimination under any program or activity funded in whole or in
part with funds provided under this Contract. Funds shall be used in accordance with the
following requirements:
(a) To the greatest extent feasible, opportunities for training and employment arising
in connection with the planning and carrying out of any project assisted with
PAEDC funds provided under this Contract be given to Port Arthur residents;
and
(b) To the greatest extent feasible, contracts for work to be performed in connection
with any such project be awarded to Port Arthur residents and businesses,
including, but not limited to, individuals or firms doing business in the field of
planning, consulting, design, architecture, building construction, rehabilitation,
maintenance, or repair, which are located in or owned in substantial part by
persons residing in the City of Port Arthur.
(c) If Bohead advertises for employment then it will advertise in the Port Arthur
News. -
LEGAL AUTHORITY
28. Bohead assures and guarantees that Bohead possesses legal and/or corporate
authority to enter into this Contract, receive funds authorized by this Contract, and to
perform the services Bohead has obligated to perform hereunder and has provided, and
will in the future provide, as requested by the PAEDC, such corporate resolutions
necessary to evidence this authority.
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29. The person or persons signing and executing this Contract on behalf of Bohead,
or representing themselves as signing and executing this Contract on behalf of Bohead, do
hereby warrant and guarantee that he, she, or they have been duly authorized by Bohead
to execute this Contract on behalf of Bohead and to validly and legally bind Bohead to all
terms, performances, and provisions herein set forth.
NOTICE OF LEGAL OR REGULATORY CLAIMS AGAINST Bohead
30. Bohead shall give PAEDC immediate notice in writing of 1) any legal or
regulatory action, including any proceeding before an administrative agency flied against
Bohead, directly or indirectly; and 2) any material claim against Bohead, which may impact
continued operations. For purposes herein, "material" claims shall mean claims in excess
of $15,000. Except as otherwise directed by PAEDC, Bohead shall furnish immediately to
PAEDC copies of all pertinent documentation of any kind received by Bohead with respect
to such action or claim.
CHANGES AND AMENDMENTS
31. Except as specifically provided otherwise in this Contract, any alterations,
additions, or deletions to the terms of this Contract shall be by amendment in writing and
executed by both parties to this Contract.
32. It is understood and agreed by the parties hereto that performances under this
Contract must be rendered in accordance with Article 5190.6 V.T.C.A. (the Development
Corporation act of 1979), the regulations promulgated under Article 5190.6 V.T.C.A., the
assurances and certifications made to PAEDC by Bohead, and the assurances and
certifications made to the City of Port Arthur with regard to the operation of the .PAEDC's
Projects. Based on these considerations, and in order to ensure the legal and effective
performance of this Contract by both parties, it is agreed by the parties hereto that the
performances under this Contract are by the provisions of the PAEDC Program and any
amendments thereto and may further be amended in the following manner: PAEDC may
from time to time during the period of performance of this Contract issue policy directives
which serve to establish, interpret, or clarify performance requirements under this Contract.
Such policy directives shall be promulgated by the PAEDC Board of Directors in the form
of PAEDC issuances, shall be approved by the City Council and shall have the effect of
qualifying the terms of this Contract and shall be binding upon Bohead, as if written herein.
33. Any alterations, additions, or deletions to the terms of this Contract which are
required by changes in Federal, state law or local law-are automatically incorporated into
this Contract without written amendment hereto, and shall become effective on the date
designated by such law or regulation.
DEFAULT I TERMINATION
34. In the event of default of any of the obligations of Bohead detailed herein or in
the event of breach of any of the representations of or warranties of Bohead either detailed
herein or in Bohead's application to the PAEDC, the PAEDC may, at its sole option,
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terminate this Agreement, in whole or in part. In the event of such termination, in addition
to (i) any other remedies available to the PAEDC as provided by the laws of the State of
Texas or (ii) any other remedies available to the PAEDC as provided herein, the PAEDC
may, at its sole option, utilize one or more of the following actions to resolve or otherwise
remedy said default:
(a) Declare the Commemial promissory note executed in conjunction with this
Agreement immediately due and payable, in full and exercise its default
remedies provided under collateral documentation executed in conjunction with
said Note and this Agreement
(b) Exercise any remedies provided herein and/or within the Loan/Collateral
Documents;
(c) Withhold, whether temporarily or otherwise, disbursement of grant proceeds
pending correction of the deficiency(s) by Bohead;
(d) Disallow all or a part of the incentives which are not in compliance with the terms
and conditions of this Agreement or in compliance with the representations and
warranties contained within this Agreement and Bohead's application to the
PAEDC;
(e) Withhold and/or disallow further PAEDC incentives to Bohead;
(f) Take any and all other remedies that may be legally available to the PAEDC, as
authorized by the terms and conditions of this Agreement, and as may be
authorized by the laws of the State of Texas;
35. In addition to the foregoing, the parties agree that this Agreement may be
terminated at any time when both parties agree, in writing, to the terms and conditions of
any such voluntary termination.
Bohead AUDITS
36. If directed by PAEDC Bohead shall arrange for the performance of a
compliance audit by a certified public accountant of funds received and performances
rendered under this Contract, subject to the following conditions and limitations:
(a) Behead shall have a compliance audit which may be limited to use of funds
received from the PAEDC, made for any of its fiscal years included within the
contract period in which Bohead receives more than $50,000 in PAEDC financial
assistance provided by PAEDC in the form of grants, contracts, loans, loan
guarantees, property, cooperative agreements, interest subsidies, or direct
appropriations. Backup documentation regarding actual expenditures shall be
provided by Bohead. Said audit must be received and accepted by the Director
of PAEDC and/or the PAEDC Board.
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(b) At the option of Bohead, each audit required by this section may cover either
Bohead's entire operations or each department, agency, or establishment of
Bohead which received, expended, or otherwise administered PAEDC funds;
(c) Unless otherwise specifically authorized by PAEDC in writing, Bohead shall
submit the report of such audit to PAEDC within thirty (30) days after completion
of the audit, but no later than one hundred twenty (120) days after the end of
each fiscal period included within the period of this Contract.
(d) As a part of its audit, Bohead shall verify that the expenditures were exclusively
for (a) manufacturing equipment, (b) improvements to its Port Arthur
m'-~nufacturing facility, and (c) office facilities and equipment in Port Arthur. Any
discrepancies in excess of $1,000 shall be specifically documented in writing.
37. Bohead understands and agreesthat it shall be liable to reimburse immediately
PAEDC for any costs disallowed pursuant to financial and compliance audit(s) of funds
received under this Contract and it may be required to submit formal audits at Bohead's
costs.
38. Bohead shall take all necessary actions to facilitate the performance of any and
all such audits, whether annual, mandatory or otherwise requested under this Agreement.
39. Subject to financial privacy requirements of Bohead and properly designated
requests for non-disclosure due to proprietary reasons, all approved audit reports may be
made available for public inspection.
40. PAEDC shall not release any funds for costs incurred by Bohead under this
Contract until PAEDC has received certification from Bohead that its fiscal control and fund
accounting procedures are adequate to assure proper disbursal of and accounting for
funds provided under this Contract. PAEDC shall specify the content and form of such
certification.
ENVIRONMENTAL CLEARANCE REQUIREMENTS
41. Bohead understands and agrees that by execution of this Contract, Bohead shall
be responsible for providing to PAEDC all information, concerning this PAEDC funded
project, required for PAEDC to meet its responsibilities for environmental review, decision
making, and other action which applies to PAEDC in accordance with and to the extent
specified in Federal, State and Local Law. Bohead further understands and agrees that
Bohead shall make all reasonable efforts to assist PAEDC in handling inquiries and
complaints from persons and agencies seeking redress in relation to environmental
reviews covered by approved certifications.
ORAL AND WRITTEN CONTRACTS / PRIOR AGREEMENTS
42. All oral and written contracts between the parties to this Contract relating to the
subject matter of this Contract that were made prior to the execution of this Contract have
been reduced to writing and are contained in this Contract.
43. The documents listed below are hereby made a part of this Contract, and
constitute promised performances by Bohead in accordance with this Contract:
Exhibit"A" Machinery and Equipment List
Exhibit"B" Commercial Promissory Note
Exhibit"C" Commercial Security Agreement
Exhibit"D" UCC-1 Financing Statement
Exhibit"E" Certification Regarding Lobbying
Exhibit "F" Magnum Commercial Security Agreement and Landlord Lien
Subordination Agreement
Bohead Application to PAEDC for funding, by reference
VENUE
44. For purposes of litigation that may accrue under this Contract, venue shall lie in
Jefferson County, Texas, where substantially all the performance will occur.
ADDRESS OF NOTICE AND COMMUNICATIONS
City of Port Arthur Section 4A Economic Development Corporation
444 4th Street
Port Arthur, Texas 77640
ATTN: Deborah Echols, Executive Director
Bohead Manufacturing Company, L.L.C.
1011 Southwest Klickitat Way, Suite 104
Seattle, Washington 98154-1136
A'~-I'N: Jeff Guentzel, President
CAPTIONS
45. This contract has been supplied with captions to serve only as .&-guideto the
contents. The caption does not control the meaning of any paragraph or in any way
determine its interpretation or application.
COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS
46. Bohead shall comply with all Federal, State and local laws, statutes, ordinances,
resolutions, rules, regulations, orders and decrees of any court or administrative body or
tribunal related to the activities and performances of Bohead under this Contract. Upon
request by PAEDC and by the City, Bohead shall furnish satisfactory proof of its
compliance herewith.
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APPROVED AS TO FORM:
Guy Goodson, General Counsel for PAEDC
CONTRACT EXECUTION
SIGNED AND AGREED TO on the __ day of ,2005.
CITY OF PORT ARTHUR SECTION 4A ECONOMIC
DEVELOPMENT CORPORATION
By:,
President
Print Name
Witness
By:
Secretary
Print Name
Witness
SIGNED AND AGREED TO on the .__ day of ,2005.
BOHEAD MANUFACTURING COMPANY, I. LC.
By:
Jeff Guentzel, President
Witness
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EXHIBIT A
INSERT EQUIPMENT TO BE PURCHASED WITH PAEDC I~UNDS AND USED
AS COLLATERAL FOR GRANT/LOAN
EXHIBIT "B"
COMMERCIAL PROMISSORY NOTE
Port Arthur, Texas
This COMMERCIAL PROMISSORY NOTE becomes effective on the date when Bohead
Manufacturing Company, L.L.C. (hereinafter called "Maker") breaches that certain
Economic Incentive Contract and Loan Agreement between the City of Port Arthur Section
4A Economic Development Corporation (hereinafter called "Lender") and Maker, dated
,2005.
Effective Date: the day of ,200
Principal Amount: $ , which is $65.000 minus the incentive credits
earned by Maker according to that certain Economic Incentive Contract and Loan
Agreement between the Lender and Maker (described hereinbefore).
Term of the Loan: Three years from effective date.
Payment Schedule: Monthly until principal is paid fully.
FOR VALUE REC. EIVED; the undersgned Bohead Manufacturing Company, L.L.C.
(hereinafter called Maker', whether one or more, and if more than one, then jointly.and
severall prom se s) to pay to the order of CITY OF PORT ARTHUR SECTION 4A
ECON~)Y)MIC DEV'~LOPMENT CORPORATION, (herein called "Lender"), at its office at
P.O. Box 1089, Port Arthur, Texas 77640-1089, or such other place or places as the
holder hereof shall from time to t me designate in wdtten notice to Maker, the principle
amount, in legal and lawful money of the United States of Amedca, together with interest
thereon from the date hereof until maturity at the rate of ten percent (10%) per annum as
detailed herein.
All past due principal and interest shall bear interest from date of matudty ur'Ail paid
at the rate of fifteen percent (15%) per annum, or to the maximum e~ent al.~w.ed by law
(whichever is less) as may hereafter be in effect, payable on demand a~er maturity.
This note is due and payable as follows: On demand with accrued interest from the
effective date.
Any notices required or permitted to be given by the holder hereof to Maker
pursuant to the provisions of this note shall be in writing and shall be either personally
delivered or transmitted by first class United States mail, addressed to Maker at the
address designated below for receipt of notice (or at such other address as Maker may,
from time to time, designate in wdting to the holder hereof for receipt of notices
hereunder). Any such notice personally delivered shall be effective as of the date of
delivery, and any notice transmitted by mail, in accordance with the foregoing provisions,
sha be deemed to have been given to and received by Maker as of the date on which
such notice was deposited with the United States Posta Service, propedy addressed and
with postage prepaid.
This note is also secured by and entitled to the benefits of all other security
agreements, pledges, collateral assignments, deeds of trust, guaranties, mortgages,
assignments, and lien instruments, if any, of any kind executed by Maker or by any other
party as security for any loans owing by Maker to the Lender. Such lien instruments shall
include those executed simultaneously herewith, those heretofore executed, and those
hereafter executed.
If any installment or payment of principal or interest of this note is not paid when
due or any drawer, acceptor endorser, guarantor, surety, accommodation party or other
erson now or hereafter primar ly or secondarily liable upon or for payment of all or any
pPart of this note (each hereinafter ca ed an "other liabl.e, party") shal! die, or be, come
insolvent (however such insolvency may be evidenced); or ir any proceeaing, proceaure or
remedy suppementary to or in enforcement of judgment shall be resorted to or
commenced against Maker or any other liable party, or with resPect to any property of any
of them; or if any govemmenta authority or any court at the instance thereof shall take
possession of any substantia part of the property of or assume control over the affairs or
operations of, or a receiver shall be appointed for or take possess on of the property of, or
a wrt or order of attachment or garnishment shall be issued or made against any of the
property of Maker or any other liable party or if any indebtedness for which Maker or any
other liable party is primarily or secondarily liable shall not be paid when due or shall
become due and payable by accelerat on of matudty thereof or if any event or condition
shall occur which shall permit the holder of any such indebtedness to declare it due and
payable upon the lapse of t me, g v ng of notice or otherwise or if Maker or any other liable
party (if other than a natural person) shall be dissolved, wound up, liquidated or otherwise
term nated, or a party to any merger or consol dation without the written consent of
Lender; or if Maker or any other liable party shall sell substantially all or an integral portion
of its assets without the wdtten consent of Lender; or if Maker or any other liable party fails
to fum sh financial informat on requested by Lender; or if Maker or any other liable party
furnishes or has fum shed any financial or other information or statements which are
m s eading in any respect or if a default occurs under any instrument now or hereafter
executed ~n connection with or as security for this note or any event occurs or condition
exists which causes Lender to in good faith deem itself insecure or in good faith believe
the prospect of payment or performance by Maker or any other liable party under this note,
under any instrument or agreement executed in connection with or as secudty for this
note, or under any other indebtedness of Maker or any other liable party to Lender is
impaired; thereupon, at the option of Lender, the principal balance and accrued interest of
this note and any and all other indebtedness of Maker to Lender shall become and be due
and payable forthwith without demand, notice of default, notice of acceleration, notice of.
intent to acce erate the maturity hereof notice of nonpayment, presentment, protest or
notice of d shonor a of which are hereby expressly waived by Maker and each other
liable party. Lender may waive any default without waiving any prior or subsequent
default.
f this note s not paid at matudty whether by acceleration or otherwise, and is
placed in the hands of any attorney for collection, or su t s filed hereon or proceedings are
had in probate, bankruptcy, receivership reorganization, arrangement or other legal
proceedings for collection. . hereof, Maker and each other liable party agree to pay Lender
1ts collection costs, ~nc ud ng court costs and a reasonable amount for attomeys fees.
It is the ntent on of Maker and Lender to conform strictly to applicable usury laws.
Accordingly if the transaction contemplated hereby would be usurious under applicable
aw, then, in that event notwithstanding anything to the contrary herein or in any
aereement entered nto in connection wit~ or as security for this note, it is agreed as
fo'~lows: (i) the aggregate of a I consideration which constitutes interest under applicable
law that is taken, reserved, contracted for, charged or received under th s note or under
any of the other aforesaid agreements or otherwise in connection with this note shall under
no circumstances exceed the maximum amount of interest allowed b.~/applicable law, and
any excess shall be credited on this note by the holder hereof (or, If this note shall have
been paid in full, refunded to Maker); (ii)in the event that maturity of this note is
accelerated by reason of an election by the holder hereof resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment, then
such consideration that constitutes interest may never include more than the maximum
amount allowed by applicable law, and excess interest, if any, provided for in this note or
otherwise shall be canceled automatically as of the date of such acceleration or
prepayment and if theretofore prepaid, shall be credited on this note (or if this note shall
have been paid in full, refunded to Maker); and (iii) all calculations of the rate of interest
taken reserved contracted for, charged or received under this note or under any of the
other aforesaid agreements or otherw se n connection w th th s note, that are made for the
purpose of determining whether such rate exceeds the maximum lawful rate shall be
made, to the extent permitted by applicable law by amortizing, prorating, allocating, and
spreading such interest over the entire term of the loan evidenced by this note(including all
renewal and extended terms).
Maker may prepay all or any part of the principal of this note before maturity without
penalty. No partial prepayment shal/reduce postpone or delay the obligation of Maker to
continue paying the installments herein provided on their respective due dates following
any such partial prepayment until this note is fully paid.
The Maker and each other liable party are and shall be directly and primarily, jointly
and severally, liable for the payment of all sums called for hereunder; and, except for
not ces specifically required to be given by the holder hereof to Maker pursuant to the
earlier provisions of this note, Maker and each other liable party hereby expressly waive
demand, presentment for payment, notice of nonpayment, protest, notice of protest, notice
of intention to accelerate maturity, notice of acceleration of maturity, and all other notice,
filing of suit and diligence in collecting this note or enforcing or handling any of the security
therefor, and do hereby agree to any substitution, exchange or release, in whole or in part,
of any security here-for or the release of any other liable party, and do hereby consent to
any and all renewals or extensions from time to time, of this note, or any part hereof, either
before or after maturity all without any notice thereof to any of them and without affecting
or releasing the liability of any of them. Each other liable party does further agree that it
will not be necessary for the holder hereof, in order to enforce payment of this' note by
such other liable party, to first institute suit or exhaust its remedies against Maker or any
other liable party or to enforce its rights against any security therefor.
BOHEAD MANUFACTUIRNG COMPANY, L.L..C.
"Maker"
By:
Beneral Manager
ACKNOWLEGEMENT
THE STATE OF TEXAS *
COUNTY OF JEFFERSON *
BEFORE ME, THE UNDERSIGNED Notary Public, on this day personally
appeared , a representative of the FRP Group, LLC,
known to me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act and deed of the FRP
Group, LLC, for the purposes and consideration therein expressed, and the Capacities
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the day of
,2005.
NOTARY PUBLIC, STATE OF TEXAS
MAKER'S ADDRESS FOR RECEIPT OF NOTICE:
BOHEAD MANUFACTURING COMPANY, EEC.
1011 Southwest Klickitat Way, Suite 104
Seattle, Washington 98134-1136
EXHIBIT "C"
COMMERCIAL SECURITY AGREEMENT
Dated ,200__
Debtor(s) Secured Party
Bohead Manufacturing Company, L.L.C. Port Arthur Economic Development
Corporation ("PAEDC")
1011 Southwest Klickitat Way 444 4~ Street
Suite 104
Seattle, W~hin~on 98134-1136 ?oft Arthur, Texas 77640
hereinafter referred to as ~Debtor" whether one or mor~ (hereinafter referred to as 'Secured Party")
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, Debtor grants to Secured Party the security interest (and the pledges
and assignments as applicable) hereinafter set forth and agrees with Secured Party as
follows:
A. OBLIGATIONS SECURED. The first priority lien and pledges and
assignments as applicable granted hereby are to secure punctual payment and
performance of the following: (i) certain promissory note(s) of even date herewith in
the original principal sum of $65,000, executed by Debtor and payable to the order of
Secured Party, and any and all extensions, renewals, modifications and rearrangements
thereof, (ii) certain obligations of Debtor to Secured Party under that certain Economic
Incentive Contract and Loan Agreement of even date and all extensions, renewals,
modifications and rearrangements thereof, and (iii) any and all other indebtedness,
liabilities and obligations whatsoever and of whatever nature of Debtor to Secured
Party whether direct or indirect, absolute or contingent, primary or secondary, due or
to become due and whether now existing or hereafter arising and howsoever evidenced
or acquired, whether joint or several, Or joint and several (all of which are herein
separately and collectively referred to as the "Obligations"). Debtor acknowledges that
the security interest (and pledges and assignments as applicable) hereby granted shall
secure all future advances as well as any and all other indebtedness, liabilities and
obligations of Debtor to Secured Party whether now in existence or hereafter arising.
B. USE OF COLLATERAL. Debtor represents, warrants and covenants
that Collateral will be used by the Debtor primarily for business.
C. DESCRIPTION OF COLLATERAL. Debtor hereby grants to Secured
Party a first, priority lien in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge and
assignment of as applicable), the following property, to wit: (DEBTOR TO INITIAL
APPROPRIATE BLANKS)
[] All Accounts. A security interest in all accounts now owned or existing as
well as any and all that may hereafter arise or be acquired by Debtor, and all
the proceeds and products thereof, including without limitation, all notes,
drafts, acceptances, instruments and chattel paper arising therefrom, and all
returned Or repossessed goods arising from or relating to any such accounts, or
other proceeds of any sale or other disposition of inventory.
[] Specific Accounts. A security interest in only those specific accounts
and/or contracts listed and described on Schedule A attached or which may
hereafter be attached hereto, and all the proceeds and products thereof,
including without limitation, all notes, drafts, acceptances, instruments and
chattel paper arising therefrom, and all returned or repossessed goods arising
from or relating to any such accounts or other proceeds of any sale or other
disposition of inventory.
[] Ali Inventory. A security interest in all of Debtor's inventory, including
all goods, merchandise, raw materials, goods in process, finished goods and
other tangible personal property, wheresoever located, now owned or hereafter
acquired and held for sale or lease or furnished or to be furnished under
contracts for service or used or consumed in Debtor's business and all additions
and accessions thereto and contracts with respect thereto and all documents of
title evidencing or representing any part thereof, and all products and proceeds
thereof, including, without limitation, all of such which is now or hereafter
located at the following locations: (give locations)
[] All Fixtures. A security interest in all of Debtor's fixtures and
appurtenances thereto, and such other goods, chattels, fixtures, equipment and
personal property affixed or in any manner attached to the real estate and/or
building(s) or structure(s), including all additions and accessions thereto and
replacements thereof and articles in substitution therefor, howsoever attached or
affixed, located at the following locations: (give legal address)
The record owner'of the real estate is: "
[] Ail Equipment. A security interest in all equipment of every nature and
description whatsoever now owned or hereafter acquired by Debtor including
all appurtenances and additions thereto and substitutions therefor, wheresoever
located, including all tools, parts and accessories used in connection therewith.
the event of default or if Secured Party deems itself insecure, Surety may use the
inventory in any manner not inconsistent with this Agreement, may sell that part of the.
Collateral consisting of inventory provided that all such sales are in the ordinary course
of business, and may use and consume any raw materials or supplies that are necessary
in order to carry on Surety's business. A sale in the ordinary course of business does
not include a transfer in partial or total satisfaction of a debt.
4. Accounts as Proceeds: All accounts that are proceeds of the inventory
included within the Collateral shall be subject to all of the terms and provisions hereof
pertaining to accounts.
5. Protection of Inventory: Surety shall take all action necessary to protect
and preserve the inventory.
H. ADDITIONAL PROVISIONS REGARDING SECURITIES AND
SIMILAR COLLATERAL. The following provisions shall apply to all securities and
similar property included within the Collateral:
1. Additional Warranties: As to each and all securities and similar
property included within the Collateral (including securities hereafter acquired that are
part of the Collateral), Surety further represents and warrants (as of the time of
delivery of same to Secured Party) as follows: (a) such securities are genuine, validly
issued and outstanding, fully paid and non-. assessable, and are not issued in violation
of the preemptive rights of any person or of any agreement by which the issuer or
obligor thereof or Surety is bound; (b) such securities are not subject to any interest,
option or right of any third person; (c) such securities are in compliance with
applicable law concerning form, content and manner of preparation and execution; and
(d) Surety acquired and holds the securities in compliance with all applicable laws and
regulations.
2. Dividends and Proceeds: Any and all payments, dividends, other
distributions (including stock redemption proceeds), or other securities in respect of or
in exchange for the Collateral, whether by way of dividends, stock dividends,
recapitalizations, mergers, consolidations, stock splits, combinations or exchanges of
shares or otherwise, received by Surety shall be held by Surety in trust for Secured
Party and Surety shall immediately deliver same to Secured Party to be held as part of
the Collateral. Surety may retain ordinary cash dividends unless and until Secured
Party requests that same be paid and delivered to Secured P, arty (which Secured Party
may request either before or after default).
3. Collections: Secured Party shall have the right at any time and from
time to time (whether before or after default) to notify and direct the issuer or obligor
to make all payments, dividends and distributions regarding the Collateral directly to
Secured Party. Secured Party shall have the authority to demand of the issuer or
obligor, and to receive and receipt for, any and all payments, dividends and other
distributions payable in respect thereof, regardless Of the medium in which paid and
whether they are ordinary or extraordinary. Each issuer and obligor making payment to
Secured Party hereunder shall be fully protected in relying on the written statement of
Secured Party that it then holds a security interest which entitles it to receive such
payment, and the receipt by Secured Party for such payment shall be full acquittance
therefor to the one making such payment.
4. Voting Rights: Upon default, or if Secured Party deems itself insecure,
Secured Party shall have the right, at its discretion, to transfer to or register in the
name of Secured Party or any nominee of Secured Party any of the Collateral and/or to
exercise any or all voting rights as to any or all of the Collateral. For such purposes,
Surety hereby names, constitutes and appoints the President or any Vice President of
Secured Party as Surety's proxy in the Surety's name, place and stead to vote any and
all of the securities, as such proxy may elect, for and in the name, place and stead of
Surety, as to all matters coming before shareholders, such proxy to be irrevocable and
deemed coupled with an interest. The rights, powers and authority of said proxy shall
remain in full force and effect, and shall not be rescinded, revoked, terminated,
amended or otherwise modified, until all Obligations have been fully satisfied.
5. No Duty: Secured Party shall never be liable for its failure to give notice
to Surety of default in the payment of or. upon the Collateral: Secured Party shall have
no duty to fix or preserve rights against prior parties to the Collateral and shall never
be liable for its failure to use diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Surety for what it may actually collect
or receive thereon. Without limiting the foregging, it is specifically understood and
agreed that Secured Party shall have no responsibility for ascertaining any maturities,
calls, conversions, exchanges, offers, tenders, or similar matters relating to any of the
Collateral or for informing Surety with respect to any of such matters (irrespective of
whether Secured Party actually has, or may be deemed to have, knowledge thereof).
The foregoing provisions of this paragraph shall he fully applicable to all securities or
similar property held in pledge hereunder, irrespective of whether Secured Party may
have exercised any right to have such securities or similar property registered in its
name or in the name of a nominee.
6. Further Assurances: Surety agrees to execute such stock powers,
endorse such instruments, or execute such additional pledge agreements or other
documents as may be required by the Secured Party in order effectively to grant to
Secured Party, the security interest in (and pledge and assignment o,f) the Collateral and
to enforce and exercise Secured Party's rights regarding same.
7. Securities Laws: Surety hereby agrees to cooperate fully with Secured
Party in order to permit Secured Party to sell, at foreclosure or other private sale, the
Collateral pledged hereunder. Specifically, Surety agrees to fully comply with the
securities laws of the United States and of the State of Texas and to take such action as
may be necessary to permit Secured Party to sell or otherwise transfer the securities
pledged hereunder in compliance with such laws. Without limiting the foregoing,
Surety, at its own expense, upon request by Secured Party, agrees to effect and obtain
such registrations, filings, statements, rulings, consents and other matters as Secured
Party may request.
8. Power of Attorney: Surety hereby makes, constitutes, and appoints
Secured Party or its nominee, its true and lawful attorney in fact and in its name, place
and stead, and on its behalf, and for its use and benefit to complete, execute and file
'with the United States Securities and Exchange Commission one or more notices of
proposed sale of securities pursuant to Rule 144 under the Securities Act of 1933
and/or any similar filings or notices with any applicable state agencies, and said
attorney in fact shall have full power and authority to do, take and perform all and
every act and thing whatsoever requisite, proper or necessary to be done, in the
exercise of the rights and powers herein granted, as fully to all intents and purposes as
Surety might or could do if personally Present. This power shall be irrevocable and
deemed coupled with an interest. The rights, powers and authority of said attorney in
fact herein granted shall commence and be in full force and effect from the date of this
agreement, and such rights, powers and authority shall remain in full force and effect,
and this power of attorney shall not be rescinded, revoked, terminated, amended or
otherwise modified, until all Obligations have been fully satisfied.
9. Private Sales: Because of the Securities Act of 1933, as amended, or
any other laws or regulations, there may be legal restrictions or limitations affecting
Secured Party in any attempts to dispose of certain portions of the Collateral in the
enforcement of its rights and remedies hereunder. For these reasons Secured Party is
hereby authorized by Surety, but not obligated, in the event any default hereunder, to
sell all or any part of the Collateral at private sale, subject to investment letter or in any
other manner which will not require the Collateral, or any part thereof, to be registered
in accordance with the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder,-or any other law or regulation. Secured Party is also hereby
authorized, by Surety, but not obligated, to take such actions, give such notices, obtain
such rulings and consents, and do such other things as Secured Party may deem
appropriate in the event of a sale or disposition of any of the Collateral. Surety clearly
understands that Secured Party may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a lower price
for the Collateral or any part or parts thereof than would otherwise be obtainable if
same were registered and sold in the open market, and Surety agrees that such private
sales shall constitute, a commercially reasonable method of disposing of the. Collateral.
I. ADDITIONAL PROVISIONS REGARDING CERTIFICATES OF
DEPOSIT AND SIMILAR COLLATERAL. The following provisions shall apply to
certificates of deposit and similar property included within the Collateral:
1. Collection of Deposits: Surety agrees that Secured Party may, at any
time (whether before or after default) and in its sole discretion, surrender for payment
and obtain payment of any portion of the Collateral, whether such have matured or the
exercise of Secured Party's rights results in loss of interest or principal or other penalty
on such deposits, and, in connection therewith, cause payment to be made directly to
Secured Party.
2. Notice to Third Party Issuer: With regard to any certificates of deposit
or similar Collateral for which Secured Party is not the issuer, Surety agrees to notify
the issuer or obligor of the interests hereby granted to Secured Party and to obtain from
such issuer or obligor acknowledgement of the interests in favor of Secured Party and
the issuer's or obligor's agreement to waive in favor of Secured Party any and all
rights of set-off or similar rights or remedies to which such issuer or obligor may be
entitled, and, in connection therewith, to execute and cause the issuer or obligor to
execute, any and all acknowledgments, waivers and other agreements in such form and
upon such terms as Secured Party may request.
3. Proceeds: Any and all replacement or renewal certificates, instruments,
or other benefits or proceeds related to the Collateral that are received by Surety shall
be held by Surety in trust for Secured Party and immediately delivered to Secured
Party to be held as part of the Collateral.
4. No Duty: Secured Party shall never be liable for its failure to give notice
to Surety of default in the payment of or upon the Collateral. Secured Party shall have
no duty to fix or preserve rights against prior parties to the Collateral and shall never
be liable for its failure to use diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Surety for what it may actually collect
or receive thereon. Without limiting the foregoing, it s specifically understood and
agreed that Secured Party shall have no responsibility for ascertaining any maturities or
similar matters relating to any of the Collateral or for informing Surety with respect to
any of such matters (irrespective of whether Secured Party actually has, or may be
deemed, to have, knowledge thereof).
J. EVENTS OF DEFAULT. Surety shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal, interest
or other amount due on any Obligation; (ii) the occurrence of any event which under
the terms of any evidence of indebtedness, indenture, loan agreement, security
agreement or, similar instrument permits the acceleration of maturity of any obligation
of Surety (whether to Secured Party or to others); (iii) any representation or warranty
made by Surety to Secured Party in connection with this Agreement, the Collateral or
the Obligations, or in any statements or certificates, proves incorrect in any material
respect as of the date of the making or the issuance thereof; (iv) default occurs in the
observance or performance of, or if Surety fails to furnish adequate
evidence of performance of, any provision of this Agreement or of any note,
assignment, transfer, other agreement, document or instrument delivered by Surety to
Secured Party in connection with this Agreement, the Collateral or the Obligations; (v)
death, dissolution, liquidation, termination of existence, insolvency, business failure or
winding-up of Surety or any maker, endorser, guarantor, surety or other party liable in
any capacity for any of the Obligations; (vi) the commission of an act of bankruptcy
by, or the application for appointment of a receiver or any other legal custodian for any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy, arrangement,
reorganization, insolvency or similar laws for the relief of suretys by Or against, the
Surety or any maker, endorser, guarantor, surety or other party primarily or
secondarily liable for any of the Obligations: (vii) the Collateral becomes, in the
judgment of Secured Party, impaired, unsatisfactory or insufficient in character or
value; or (viii) the filing of any levy, attachment, execution, garnishment or other
process against the Surety or any of the Collateral or any maker, endorser, guarantor,
surety or other party liable in any capacity for any of the Obligations.
K. REMEDIES: Upon the occUrrence of an event of default, or if Secured
Party deems payment of the Obligations to be insecure, Secured Party, at its option,
shall be entitled to exercise any one or more of the following remedies (all of which are
cumulative):
1. Declare Obligations Due: Secured Party, at its option, may declare the
Obligations or any part thereof iramediately due and payable, without demand, notice
of intention to accelerate, notice of acceleration, notice of non-payment, presentment,
protest, notice of dishonor, or any other notice whatsoever, all of which are hereby
waived by Surety and any maker, endorser, guarantor, surety or other party liable in
any capacity for any of the Obligations.
2. Remedies: Secured Party shall have all of the rights and remedies
provided for in this Agreement and in any other agreements executed by Surety, the
rights and remedies Of the Uniform Commercial Code of Texas, and any and all of the
rights and remedies at law and in equity, all of which shall be deemed cumulative.
Without limiting the foregoing, Surety agrees that Secured Party shall have the right to:
(a) require Surety to assemble the Collateral and make it available to Secured Party at a
place designated by Secured Party that is reasonably convenient to both parties, which
Surety agrees to do; (b) peaceably take possession of the Collateral and remove same,
with or without judicial process; (c) without removal, render equipment included within
the Collateral unusable, and dispose of the Collateral on the Surety's premises; (d) sell,
lease or otherwise dispose of the Collateral, at one or more locations, by public or
private proceedings for cash or c~edit, without assumption of credit risk; and/or (e)
whether before or after default, collect and receipt for, compound, compromise, and
settle, and give releases, discharges and acquittances with respect to, any and all
amounts owed by any person or entity with respect to the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Secured Party will send Surety reasonable
notice of the time and place of any public sale or of the time after which any private
sale or other disposition will be made. Any requirement of reasonable notice to Surety
shall be met if such notice is mailed, postage prepaid, to Surety at the address of Surety
designated at the beginning of this Agreement, at least five (5) days before the day of
any public sale or at least fiye (5) days before the time after which any private sale or
other disposition will be made.
3. Expenses: Surety shall be liable for and agrees to pay the reasonable
expenses incurred by Secured Party in enforcing its rights and remedies, in retaking,
holding, testing, repairing, improving, selling, leasing or disposing of the Collateral, or
like expenses, including, without limitatiOn, attorneys' fees and legal expenses incurred
by Secured Party. These expenses, together with interest thereon from date incurred
until paid by Surety at the maximum contract rate allowed under applicable laws,
which Surety agrees to pay, shall constitute additional Obligations and shah be secured
by and entitled to the benefits of this Agreement.
4. Proceeds, Surplus, Deficiencies: Proceeds received by Secured Party
from disposition of the Collateral shall be applied toward Secured Party's expenses and
other Obligations in such order or manner as Secured Party may elect. Surety shall be
entitled to any surplus if one results after lawful application of the proceeds. Surety
shall remain liable for any deficiency.
5. Remedies Cumulative: The rights and remedies of Secured Party are
cumulative and the exercise of any one or more of the rights or remedies shall not be
deemed an election of rights or remedies or a waiver of any other right or remedy.
Secured Party may remedy any default and may waive any default without waiving the
default remedied or without waiving any other prior or subsequent default.
L. OTHER AGREEMENTS.
1. Savings Clause: Notwithstanding any provision to the contrary herein,
or in any of the documents evidencing the Obligations or otherwise relating thereto, no
such provision shall require the payment or permit the collection of interest in excess of ' _~."
the maximum permitted by applicable usury laws. If any such excessive interest is so
provided for, then in such event (i) the provisions of this paragraph shall govern and
control; (ii) neither the Surety nor his heirs, legal representatives, successors or assigns
or any other party liable for the payment thereof, shall be obligated to pay the amount
of such interest to the extent that is in excess of the maximum amount permitted by
law; (iii) any such excess interest that may have been collected shall be, at the option of
.. the holder of the instrument evidencing ,the Obligations, either applied as a credit
against the then unpaid principal amount thereof or refunded to the maker thereof; and
(iv) the effective rate of interest shall be automatically reduced to the maximum lawful
rate under applicable usury laws as now or hereafter construed by the courts having
jurisdiction.
2. Joint and Several Responsibility: If this Security Agreement is
executed by more than one Surety, the obligations of all such Suretys shall be joint and
several.
3. Waivers: Surety and any maker, endorser, guarantor, surety or other
party liable in any capacity respecting the Obligations hereby waive demand, notice of
intention to accelerate, notice of acceleration, notice of non-payment, presentment,
protest, notice of dishonor and any other similar notice whatsoever.
4. Severability: Any provision hereof found to be invalid by courts having
jurisdiction shall be invalid only with respect to such provision (and then only to the
extent necessary to avoid such invalidity). The offending provision shall be modified to
the maximum extent possible to confer upon Secured Party the benefits intended
thereby. Such provision as modified and the remaining provisions hereof shall be
construed and enforced to the same effect as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.
5. Use of Copies: Any carbon, photographic or other reproduction of any
financing statement signed by Surety is sufficient as a financing statement for all
purposes, including without limitation, filing in any state as may be permitted by the
provisions of the Uniform Commercial Code of such state.
6. Relationship to Other Agreements: This Security Agreement and the
security interests (and pledges and assignments as applicable) herein granted are in
addition to (and not in substitution, novation or discharge of) any and all prior or
contemporaneous security agreements, security interests, pledges, assignments, liens,
rights, titles or other interests in favor of Secured Party or assigned to Secured Party
by others in connection with the Obligations. All lights and remedies of Secured Party
in all such agreements are cumulative, but in the event of actual conflict in terms and
conditions, the terms and conditions of the latest security agreement shall govern and
control.
7. Notices: Any notice or demand given by Secured Party to Surety in
connection with this Agreement, the Collateral or the Obligations, shall be deemed
given and effective upon deposit in the United States mail, postage prepaid, addressed
to Surety at the address of Surety designated at the beginning of this Agreement. Actual
notice to Surety shall always be effective no matter how given or received.
8. Headings and Gender: Paragrapr~ headings in this Agreement are for
convenience only and shall be given no meaning or significance in interpreting this
Agreement. All words used herein shall be construed to be of such gender or number
as the circumstances require.
9. Amendments: Neither this Agreement nor any of its provisions may be
changed, amended, modified, waived or discharged orally, but only by an instrument
in writing signed by the party against whom enforcement of the change, amendment,
modification, waiver or discharge is sought.
10. Continuing Agreement: The security interest (and pledges and
assignments as applicable) hereby granted and all of the terms and provisions in this
Agreement shall be deemed a continuing agreement and shall continue in full rome and
effect until terminated in writing. Any such revocation or termination shall only be
effective if explicitly confirmed in a signed writing issued by Secured Party to such
effect and shall in no way impair or affect any transactions entered into or rights
created or Obligations incurred or arising prior to such revocation or termination, as to
which this Agreement shall be fully operative until same are repaid and discharged in
full. Unless otherwise required by applicable la Secured Party shall be under no
obligation to issue a termination statement or similar documents unless Surety requests
same in writing and, provided further, that all Obligations have been repaid and
discharged in full and there are no commitments to make advances, incur any
Obligations or otherwise give value.
11. Binding Effect: The provisions of this Security Agreement shall be
binding upon the heirs, personal representatives, successors and assigns of Surety and
the rights, powers and remedies of Secured Party hereunder shall inure to the benefit of
the successors and assigns of Secured Party.
12. Governing Law: This Security Agreement shall be governed by the law
of the State of Texas and applicable federal law.
EXECUTED this __ day of ,200
MAGNUM FIRE & SAFETY SYSTEMS, Inc.
By:
President
Exhibit Fl, Attachment 1
List of Magnum Fire and Safety Systems, Inc. Equipment
Used to Secure Bohead Manufacturing Company, Inc.'s Debt to PAEDC
Exhibit Fl, Attachment 1
List of Magnum Fire and Safety Systems, Inc. Equipment
Used to Secure Bohead Manufacturing Company, Inc.'s Debt to PAEDC
EXHIBIT "F2"
CITY OF PORT ARTHUR SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION
("PAEDC')
LANDLORD'S SUBORDINATE AGREEMENT
STATE OF TEXAS
COUNTY OF JEFFERSON
WHEREAS, Magnum Fire and Safety Systems, Inc., hereinafter referred to as
"Landlord," is the owner of certain real property, hereinafter referred to as "subject
property," located at 6648 Gulfway Drive, Port Arthur, Texas 77642; and
WHEREAS, Bohead Manufacturing Company, L.L.C., hereinafter referred to as
"Tenant," is the tenant of Landlord with respect to the subject property and has placed or may
place upon the subject property certain personal property and/or fixtures owned by said
Tenant; and
WHEREAS, Tenant has borrowed, may borrow or will borrow certain sums of money
from PAEDC and has given or may give as security therefore a security interest or other lien
upon personal property and/or fixtures located upon the subject property; and
WHEREAS, it is the desire of Landlord and Tenant that any such security interest or
lien shall be in all things first and prior to any other lien or liens against said property, free of
any of the liens or claims of Landlord.
NOW THEREFORE, KNOW ALL MEN BY THESE PRESENTS: That'Landlord for
an in consideration of One Dollar ($1.00) and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in order to induce PAEDC to
advance monies to Tenant, does hereby agree that any presently existing or future landlord's
EXHIBIT "f2"
liens that may exist as a result of a lease or rental of the subject property by Tenant from
Landlord, shall be and the same are hereby made subordinate, subject and inferior to any
security interest or liens now or hereafter held by PAEDC upon any personal property and/or
fixtures of Tenant located on the subject property and Landlord does hereby agree that in the
event PAEDC becomes entitled to possession of any property located on the subject property,
it shall have the right to enter the subject property in order to remove such property, free of
any of the liens or claims of Landlord.
EXECUTED this day of ,2005.
Fire and Safety Systems, Inc.
By.
President
STATE OF TEXAS
COUNTY OF JEFFERSON
BEFORE ME, the undersigned, a Notary Public in and for said County and State, on
this day personally appeared Ken Broussard _whose name is subscribed to the foregoing
instrument, and acknowledged to me that he/she executed the same for the purposes and
consideration therein expressed.
GIVEN under my hand and seal of office, this day of ,2005.
NOTARY PUBLIC, STATE OF TEXAS
374956
EXHIBIT "F3"
UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS Ifront and backI CAREFULLY
A. NAME & PHONE OF CONTACT AT FILER [optionall
~, SEND ACKNOWLEDGMENT TO: (Name and Address)
[-~City of Port Arthur Section 4A Economic
Development Corporation
4173 39th Street
Port Arthur, Texas 77642
L -- THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
OF~ la ORGANIZATION'S NAME Port Arthur TX 77642 USA
-- Magnum Fire and Safety Systems, Inc.
6648 Gulfway Drive
2d S£EINSTRUCTIONS ORGAN[ZA33ON I 2f. JURISDiC'RONOFORGANIZA~'ION
City of Port Arthur Section 4A Economic Development Corporation
O~ 5a. ORGANIZ^~ION'$ NAME Port Arthur TX 77642 USA
3b INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
-- 4t73 39th Street
FILING OFFICE COPY -- UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)
[] General Intangibles. A security interest in all general intangibles and
other personal property now owned or hereafter acquired by Debtor other than
goods, accounts, chattel paper, documents and instruments.
[] Chattel Paper. A security interest in all of Debtor's interest under chattel
paper, lease agreements and other instruments or documents, whether now
existing or owned by Debtor or hereafter arising or acquired by Debtor,
evidencing both a debt and security interest in or lease of specific goods.
[] Farm Products. A security interest in alt of Debtor's interest in any and
all crops, livestock and supplies used or produced by Debtor in fanning
operations wheresoever located: Debtor's residence is in the county shown at
the beginning of this Agreement and Debtor agrees to notify promptly Secured
Party of any change in the county of Debtor's residence; all of Debtor's crops
or livestock are presently located in the following counties: (give counties)
[] Securities. A pledge and assignment of and security interest in the
securities described below, together with all instruments and general intangibles
related thereto and all monies, income, proceeds and benefits attributable or
accruing to said property, including, but not limited to, all stock fights, options,
rights to subscribe, dividends, liquidating dividends, stock dividends, dividends
paid in stock, new security or other properties or benefits to which the Debtor is
or may hereafter become entitled to receive on account of said property. (give
description)
[] Certificates of Deposit. A pledge and assignment of and security interest
in all of Debtor's interest in and to the certificates of deposit described below
and instruments related thereto, and all renewals or substitutions therefor,
together with all monies, income, interest, proceeds and benefits attributable or
accruing to said property or to which Debtor is or may hereafter be entitled to
receive on account of said property. (give description)
[] Instruments. A pledge and assignment of and security interest in all of
Debtor's now owned o~ existing as well as hereafter acquired or arising
instruments and documents.
[] Other. A first priority lien on all of Debtor's interest, now owned or
hereafter acquired, in and to the equipment purchased with PAEDC Grant
monies as listed in that certain incentive agreement between Bohead and
PAEDC and attached hereto.
The term "Collateral" as used in this Agreement shall mean and include, and
the security interest (and pledge and assignment as applicable) shall cover, all of the
foregoing property, as well as any accessions, additiOns and attachments thereto and
the proceeds and products thereof, including without limitation, all cash, general
intangibles, accounts, inventory, equipment, fixtures, farm products, notes, drafts,
acceptances, securities, instruments, chattel paper, insurance proceeds payable because
of loss or damage, or other property, Benefits or rights arising therefrom, and in and to
all returned or repossessed goods arising from or relating to any of the property
described herein or other proceeds of any sale or other disposition of such property.
As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Debtor hereby grants to Secured Party a
security interest in, and a pledge and assignment of, any and all money, property,
deposit accounts, accounts, securities, documents, chattel paper, claims, demands,
instruments, items or deposits of the Debtor, and each of them, or to which any of
them is a party, now held or hereafter coming within Secured Party's custody or
control, including without limitation, all certificates of deposit and other depository
accounts, whether such have matured or the exercise of Secured Party's rights results
in loss of interest or principal or other penalty on such deposits, but excluding deposits
subject to tax penalties if assigned. Without prior notice to or demand upon the
Debtor, Secured Party may exercise its rights granted above at any time when a default
has occurred or Secured Party deems itself insecure. Secured Party's rights and
remedies under this paragraph shall be in addition to and cumulative of any other rights
or remedies at law and equity, including, without limitation, any rights of set-off to
which Secured Party may be entitled.
D. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
DEBTOR. Debtor represents and warrants as follows:
1. Ownership; No Encumbrances: Except for the security interest (and
pledges and assignments as applicable) granted hereby, the Debtor is, and as to any
property acquired after the date hereof which is included within the Collateral, Debtor
will be, the owner of all such Collateral free and clear from all charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.
2. No Financing Statements: There is no financing statement or similar
~ing now on file in any public office oovering any part of the Collateral, and Debtor
will not execute and there will not be on file in any public office any financing
statement or similar filing except the financing statements filed or to be filed in favor of
Secured Party.
3. Accuracy of Information: All information furnished to Secured Party
concerning Debtor, the Collateral and the Obligations, or otherwise for the purpose of
obtaining or maintaining credit, is or will be at the time the same is furnished, accurate
and complete in all material respects.
4. Authority: Debtor has full right and authority to execute and perform
this Agreement and to create the security interest (and pledges and assignment as
applicable) created by this Agreemem. The making and performance by Debtor of this
Agreement will not violate any articles of incorporation, bylaws or similar document
respecting Debtor, any provision of law, any order of court or governmental agency,
or any indenture or other agreement to which Debtor is a party, or by which Debtor or
any of Debtor's property is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such indenture or
other agreement, or result in the creation or imposition of any charge, lien, security
interest, claim or encumbrance of any and every nature whatsoever upon the Collateral,
except as contemplated by this Agreement.
5. Addresses: The address of Debtor designated at the beginning of this
Agreement is Debtor's place of business if Debtor has only one place of business;
Debtor's chief executive office if Debtor has more than one place of business; or
Debtor's residence if Debtor has no place of business. Debtor agrees not to change
such address without advance written notice to Secured Party.
E. GENERALCOVENANTS. Debtor covenants and agrees as follows:
1. Operation of the Collateral: Debtor agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper manner,
and in conformity with all applicable permits or licenses. Debtor shall comply in all
respects with all applicable statutes, laws, ordinances and regulations. Debtor shall not
use the Collateral in any unlawful manner or for any unlawful purposes, or in any
manner or for any purpose that would expose the Collateral to unusual risk, or to
penalty, forfeiture or capture, or that would render inoperative any insurance in
connection with the Collateral.
2. Condition: Debtor shall maintain, service and repair the Collateral so as
to keep it in good operating condition. Debtor shall replace within a reasonable time all
parts that may be worn out, lost, destroyed or otherwise rendered unfit for use, with
appropriate replacement parts. Debtor shall obtain and maintain in good standing at all
times all applicable permits, licenses, registrations and certificates respecting the
Collateral. ..
3. Assessments: Debtor shall promptly pay when due all taxes,
assessments, license fees, registration fees, and governmental charges levied or
assessed against Debtor or with respect to the Collateral or any part thereof.
4. No Encumbrances: Debtor agrees not to suffer or permit any charge,
lien, security interest, adverse claim or encumbrance of any and every nature
whatsoever against the Collateral or any part thereof.
5. No Removal: Except as otherwise provided in this Agreement, Debtor
shall not remove the Collateral from the county or counties designated at the beginning
of this Agreement without Secured Party's prior written consent.
6. No Transfer: Except as otherwise provided in this Agreement with
respect to inventory, Debtor shall not, without the prior written consent of Secured
Party, sell, assign, transfer, lease, charter, encumber, hypothecate or dispose of the
Collateral, or any part thereof, or interest therein, or offer to do any of the foregoing.
7. Notices and Reports: Del~tor shall promptly notify Secured Party in
writing of any change in the name, identity or structure of Debtor, any charge, lien,
security interest, claim or encumbrance asserted against the Collateral, any litigation
against Debtor or the Collateral, any theft, loss, injury or similar incident involving the
Collateral, and any other material matter adversely affecting Debtor or the Collateral.
Debtor shall furnish such other reports, information and data regarding Debtor's
financial condition and operations, the Collateral and such other matters as Secured
Party may request from time to time.
8. Landlord's Waivers: Debtor shall furnish to Secured Party, if
requested, a landlord's waiver of all liens with respect to any Collateral covered by this
Agreement that is or may be located upon leased premises, such landlord's waivers to
be in such form and upon such terms as are acceptable to Secured Party.
9. Additional Filings: Debtor agrees to execute and deliver such financing
statement or statements, or amendments thereof or supplements thereto, or other
documents as Secured Party may from time to time require in order to comply with the
Texas Uniform Commemial Code (or other applicable state law of the jurisdiction
where any of the Collateral is located) and to preserve and protect the Secured Party's
rights to the Collateral.
10. Protection of Collateral: Secured Party, at its option, whether before or
after default, but without any obligation whatsoever to do so, may (a) discharge taxes,
claims, charges, liens, security interests, assessments or other encumbrances of any
trod every nature whatsoever at any time levied, plaoed upon or asserted against the
Collateral, (b) place and pay for insurance on the Collateral, including insurance that
only protects Secured Party's interest, (c) pay for the repair, improvement, testing,
maintenance and preservation of the Collateral, (d) pay any filing, recording,
registration, licensing or certification fees or other fees and charges related to the
Collateral, or (e) take any other action to preserve and protect the Collateral and
Secured Party's rights and remedies under this Agreement as Secured Party may deem
necessary or appropriate. Debtor agrees that Secured Party shall have no duty or
obligation whatsoever to take any of the foregoing action. Debtor agrees to promptly
reimburse Secured Party upon demand for any payment made or any expense incurred
by the Secured .Party pursuant to this authorization. These. payments and
expenditures, together with interest thereon from date incurred until paid by Debtor at
the maximum contract rate allowed under applicable laws, which Debtor agrees to pay,
shall constitute additional Obligations and shall be secured by and entitled to the
benefits of this Agreement.
11. Inspection: Debtor shall at all reasonable times allow Secured Party by
or through any of its officers, agents, attorneys or accountants, to examine the
Collateral, wherever located, and to examine and make extracts from Debtor's books
and records.
12. Further Assurances: Debtor shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and assurances as
Secured Party may require from time so time to protect, assure and enforce Secured
Party's rights and remedies.
13. Insurance: Debtor shall have and maintain insurance at all times with
respect to all tangible Collateral insuring against risks of fire (including so-called
extended coverage), theft and other risks as Secured Party may require, containing
such terms, in such form and amounts and written by such companies as may be
satisfactory to Secured Party, all of such insurance to contain toss payable clauses in
favor of Secured Party as its interest may appear. All policies of insurance shall
provide for ten (10) days written minimum cancellation notice to Secured Party and at
the request of Secured Party shall be delivered to and held by it: Secured Party is
hereby authorized to act as attorney for Debtor in obtaining~ adjusting, settling and
canceling such insurance and endorsing any drafts or instruments. Secured Party shall
be authorized to apply the proceeds from any insurance to the Obligations secured
hereby whether or not such Obligations are then due and payable. Debtor specifically
authorizes Secured Party to disclose information from the policies of insurance to
prospective insurers regarding the Collateral.
14. Additional Collateral: If Secured Party should at any time be of the
opinion that the Collateral is impaired, not sufficient or has declined or may decline in
value, or should Secured Party deem payment of the Obligations to be insecure, then
Secured Party may call for additional security satisfactory to Secured Party, and Debtor
promise~ to furnish such additional security forthwith. The call for additional security
may be oral, by telegram, or United States mail addressed to Debtor, and shall not
affect any other subsequent right of Secured Party to exercise the same.
F. ADDITIONAL PROVISIONS REGARDING ACCOUNTS. The
following provisions shall apply to all accounts included within the Collateral:
1. Definitions: The term "account", as used in this Agreement, shall have
the same meaning as set forth in the Uniform Commercial Code of Texas in effect as of
the date of execution hereof, and as set forth in any amendment to the Uniform
Commercial Code of Texas to become effective after the date of execution hereof, and
also shall include all present and furore notes, instruments, documents, general
intangibles, drafts, acceptances and chattel paper of Debtor, and the proceeds thereof.
2. Additional Warranties: As of the time any account becomes subject to
the security interest (or pledge or assignment as applicable) granted hereby, Debtor
shall be deemed ~urther to have warranted as to each and all of such accounts as
follows: (a) each account and all papers and documents relating thereto are genuine and
in all respects what they purport to be; (b) each account is valid and subsisting and
arises out of a bona fide sale of goods sold and delivered to, or out of and for services
theretofore actually rendered by the Debtor to the account debtor named in the account;
(c) the amount of the account represented as owing is the correct amount actually and
unconditionally owing except for normal cash discounts and is not subject to any
setoffs, credits, defenses, deductions or countercharges; and (d) Debtor is the owner
thereof free and clear of any charges, liens, security interests, adverse claims and
eacumbrances of any and every nature whatsoever.
3. Collection of Accounts: Secured Party shall have the right in its own
name or in the aame of the Debtor, whether before or after default, to require Debtor
forthwith to transmit all proceeds of collection of accounts to Secured Party, to notify
any and all account debtors to make payments of the accounts directly to Secured
Party, to demand, collect, receive, receipt for, sue for, compound and give acquittal
for, any and all amounts due or to become due on the accounts and to endorse the name
of the Debtor on all commercial paper given in payment or part payment thereof, and
in Secured Party's discretion to file any claim or take any other action or proceeding
that Secured Party may deem necessary or appropriate to protect and preserve and
realize upon the accounts and related Collateral. Unless and until Secured Party elects
to collect accounts, and the privilege of Debtor to collect accounts is revoked by
Secured Party in writing, Debtor shall continue to collect accounts, account for same to
Secured Party, and shall not commingle the proceeds of collection of accounts with any
funds of the Debtor. In order to assure collection of accounts in which Secured Party
has a security interest (or pledge or assignment of as applicable) hereunder, Secured
Party may notify the post office authorities to change the address for delivery of mail
addressed to Debtor to such address as Secured Party may designate, and to open and
dispose of suchqnail and receive the collections of accounts included.herewith. Secured
Party shall have no duty or obligation whatsoever to collect any account, or to take any
other action to preserve or protect the Collateral; however, should Secured Party elect
to collect any account or take possession of any Collateral, Debtor releases Secured
Party from any claim or claims for loss or damage arising from any act or omission in
connection therewith.
4. Identification and Assignment of Accounts: Upon Secured Party's
request, whether before or after default, Debtor shall take such action and execute and
deliver such documents as Secured Party may reasonably request in order to identify,
confirm, mark, segregate and assign accounts and to evidence Secured Party's interest
in same. Without limitation of the foregoing, Debtor, upon request, agrees to assign
accounts to Secured Party, identify and mark accounts as being subject to the security
interest (or pledge or assignment as applicable) granted hereby, mark Debtor's books
and records to reflect such assignments, and forthwith to transmit to Secured Party in
the form as received by Debtor any and all proceeds of collection of such accounts.
5. Account Reports: Debtor will deliver to Secured Party, prior to the
tenth (10) day of each month, or on such other frequency as Secured Party may
request, a written report in form and content satisfactory to Secured Party, showing a
listing and aging of accounts and such other information as Secured Party may request
from time to time. Debtor shall immediately notify Secured Party of the assertion by
any account debtor of any set-off, defense or claim regarding an account or any other
matter adversely -affecting an account.
6. Segregation of Returned Goods: Returned or repossessed goods arising
from or relating to any accounts included within the Collateral shall if requested by
Secured Party be held separate and apart from any other property. Debtor shall as often
as requested by Secured Party, but not less often than weekly even though no special
reqUest has been made, report to Secured Party the appropriate identifying information
with respect to any such returned or repossessed goods relating to accounts included in
assignments or identifications made pursuant hereto.
G. ADDITIONAL PROVISIONS REGARDING INVENTORY. The
following provisions shall apply to all inventory included within the Collateral:
1. Inventory Reports: Debtor will deliver to Secured Party, prior to the
tenth (10th) day of each month, or on such other frequency as Secured Party may
request, a written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Debtor's opening
inventory, inventory acquired, inventory sold, inventory returned, inventory used in
Debtor's business, closing inventory, any other inventory not within the preceding
categories, and such other information as Secured Party may request from time to time.
Debtor shall immediately notify Secured Party of any matter adversely affecting the
inventory, including, without limitation, any event causing loss or depreciation in the
value of the inventory and the amount of such possible loss or depreciation.
2. Location of Inventory: Debtor will promptly notify Secured Party ia
writing of any addition to, change in or discontinuance of its place(s) of business as
shown in this agreement, the places at which inventory is located as shown herein, the
location of its chief executive office and the location of the office where it keeps its
records as set forth herein. All Collateral will be located at the place(s) of business
shown at the beginning of this agreement as modified by any written notice(s) given
pursuant hereto.
3. Use of Inventory: Unless and until the privilege of Debtor to use
inventory in the ordinary course-of Debtor's business is revoked by Secured Party in
the event of default or if Secured Party deems itself insecure, Debtor may use the
inventory in any manner not inconsistent with this Agreement, may sell that part of the
Collateral consisting of inventory provided that all such sales are in the ordinary course
of business, and may use and consume any raw materials or supplies that are necessary
in order to carry on Debtor's business. A sale in the ordinary course of business does
not include a transfer in partial or total satisfaction of a debt.
4. Accounts as Proceeds: All accounts that are proceeds of the inventory
included within the Collateral shall be subject to all of the terms and provisions hereof
pertaining to accounts.
5. Protection of Inventory: Debtor shall take all action necessary to
protect and preserve the inventory.
H. ADDITIONAL PROVISIONS REGARDING SECURITIES AND
SIMILAR COLLATERAL. The following provisions shall apply to all securities and
similar property included within the Collateral:
1. Additional Warranties: As m each and all securities and similar
property included within the Collateral (including securities hereafter acquired that are
part of the Collateral), Debtor further represents and warrants (as of the time of
delivery of same to Secured Party) as follows: (a) such securities are genuine, validly
issued and outstanding, fully paid and non-. assessable, and are not issued in violation
of the preemptive rights of any person or of any agreement by which the issuer or
obligor thereof or Debtor is bound; (b) such securities are not subject go any interest,
option or right of any third person; (c) such securities are in compliance with
applicable law concerning form, content and manner of preparation and execution; and
(d) Debtor acquired and holds the securities in compliance with all applicable laws and
regulations.
2. Dividends and Proceeds: Any and all payments, dividends, other
distributions (including stock redemption proceeds), or other securities in respect of or
in exchange for the Collateral, whether by way of dividends, stock dividends,
recapitalizations, mergers, consolidations, stock splits, combinations or exchange~ of
shares or otherwise, received by Debtor shall be held by Debtor in trust for Secured
Party and Debtor shall immediately deliver same to Secured Party to be held as part of
the Collateral. Debtor may retain ordinary cash dividends unless and until Secured
Party requests that same be paid and delivered to Secured Party (which Secured Party
may request either before or after default).
3. Collections: Secured Party shall have the right at any time and from
time to time (whether before or after default) to notify and direct the issuer or obligor
to make all payments, dividends and distributions regarding the Collateral directly to
Secured Party. Secured Party shall have the authority to demand of the issuer or
obligor, and to receive and receipt for,. any and all payments, dividends and other
distributions payable in respect thereof, regardless Of the medium in which paid and
whether they am ordinary or extraordinary. Each issuer and obligor making payment to
Secured Party hereunder shall be fully protected in relying on the written statement of
Secured Party that it then holds a security interest which entitles it to receive such
payment, and the receipt by Secured Party for such payment shall be full acquittance
therefor to the one making such payment.
4. Voting Rights: Upon default, or if Secured Party deems itself insecure,
Secured Party shall have the right, at its discretion, to transfer to or register in the
name of Secured Party or any nominee of Secured Party any of the Collateral and/or to
exemise any or all voting rights as to any or all of the Collateral. For such purposes,
Debtor hereby names, constitutes and appoints the President or any Vice President of
Secured Party as Debtor's proxy in the Debtor's name, place and stead to vote any and
all of the securities, as such proxy may elect, for and in the name, place and stead of
Debtor, as to all matters coming before shareholders, such proxy to be irrevocable and
deemed coupled with an interest. The rights, powers and authority of said proxy shall
remain in full force and effect, and shall not be rescinded, revoked, terminated,
amended or otherwise modified, until all Obligations have been fully satisfied.
5. No Duty: Secured Party shall never be liable for its failure to give notice
to Debtor of default in the payment of or. upon the Collateral: Secured Party shall have
no duty to fix or preserve rights against prior parties to the Collateral and shall never
be liable for its failure to use diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Debtor for what it may actually collect
or receive thereon. Without limiting the foregoing, it is specifically understood and
agreed that Secured Party shall have no responsibility for ascertaining any maturities,
calls, conversions, exchanges, offers, tenders, or similar matters relating to any of the
Collateral or for informing Debtor with respect to any of such matters (irrespective of
whether Secured Party actually has, or may be deemed to have, knowledge thereof).
The foregoing provisions of this paragraph shall he fully applicable to all securities or
similar property held in pledge hereunder, irrespective of whether Secured Party may
have exemised any right to have such securities or similar property registered in its
name or in the name of a nominee.
6. Further Assurances: Debtor agrees to execute such stock powers,
endorse such instruments, or execute such additional pledge agreements or other
documents as may be required by the Secured Party in order effectively to grant to
Secured Party the security interest in (and pledge and assignment of) the Collateral and
to enforce and exercise Secured Party's rights regarding same.
7. Securities Laws: Debtor hereby agrees to cooperate fully with Secured
Party in order to permit Secured Party to sell, at foreclosure or other private sale, the
Collateral pledged hereunder. Specifically, Debtor agrees to fully comply with the
securities laws of the United States and of the State of Texas and to take such action as
may be necessary to permit Secured Party to sell or otherwise transfer the securities
pledged hereunder in compliance with such laws. Without limiting the foregoing,
Debtor, at its own expense, upon request by Secured Party, agrees to effect and obtain
such registrations, filings, statements, rulings, consents and other matters as Secured
Party may request.
8. Power of Attorney: Debtor hereby makes, constitutes, and appoints
Secured Party or its nominee, its tree and lawful attorney in fact and in its name, place
and stead, and on its behalf, and for its use and benefit to complete, execute and file
'with the United States Securities and Exchange Commission one or more notices of
proposed sale of securities pursuant to Rule 144 under the Securities Act of 1933
and/or any similar filings or notices with any applicable state agencies, and said
attorney in fact shall have full power and authority to do, take and perform all and
every act and thing whatsoever requisite, proper or necessary to be done, in the
exercise of the rights and powers herein granted, as fully to all intents and purposes as
Debtor might or could do if personally present. This power shall be irrevocable and
deemed coupled with an interest. The rights, powers and authority of said attorney in
fact herein granted shall commence and be in full force and effect from the date of this
agreement, and such rights, powers and authority shall remain in full force and effect,
and this power of attorney shall not be rescinded, revoked, terminated, amended or
otherwise modified, until all Obligations have been fully satisfied.
9. Private Sales: Because of the Securities Act of 1933, as amended, or
any other laws or regulations, there may be legal restrictions or limitations affecting
Secured Party in any attempts to dispose of certain portions of the Collateral in the
enforcement of its fights and remedies hereunder. For these reasons Secured Party is
hereby authorized by Debtor, but not obligated, in the event any default hereunder, to
sell all or any part of the Collateral at private sale, subject to investment letter or in any
other manner which will not require the Collateral, or any part thereof, to be registered
in accordance with the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder,-or any other law or regulation. Secured Party is also hereby
authorized by Debtor, but not obligated, to take such actions, give such notices, obtain
such rulings and consents, and do such other things as Secured Party may deem
appropriate in the event of a sale or disposition of any of the Collateral. Debtor clearly
understands that Secured Party may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a lower price
for the Collateral or any part or parts thereof than would otherwise be obtainable if
same were registered and sold in the open market, and Debtor agrees that such private
sales shall constitute a commercially reasonable method of disposing of the Collateral.
I. ADDITIONAL PROVISIONS REGARDING CERTIFICATES OF
DEPOSIT AND SIMILAR COLLATERAL. The following provisions shall apply to
certificates of deposit and similar property included within the Collateral:
1. Collection of Deposits: Debtor agrees that Secured Party may, at any
time (whether before or after default) and in its sole discretion, surrender for payment
and obtain payment of any portion of the Collateral, whether such have matured or the
exercise of Secured Party's rights results in loss of interest or principal or other penalty
on such deposits, and, in connection therewith, cause payment to be made directly to
Secured Party.
2. Notice to Third Party Issuer: With regard to any certificates of deposit
or similar Collateral for which Secured Party is not the issuer, Debtor agrees to notify
the issuer or obligor of the interests hereby~ granted to Secured Party and to obtain from
such issuer or obligor acknowledgement of the interests in favor of Secured Party and
the issuer's or obligor's agreement to waive in favor of Secured Party any and all
rights of set-off or similar rights or remedies to which such issuer or obligor may be
entitled, and, in connection therewith, to execute and cause the issuer or obligor to
execute, any and all acknowledgments, waivers and other agreements in such form and
upon such terms as Secured Party may request.
3. Proceeds: Any and all replacement or renewal certificates, instruments,
or other benefits or proceeds related to the Collateral that are received by Debtor shall
be held by Debtor in trust for Secured Party and immediately delivered to Secured
Party to be held as part of the Collateral.
4. No Duty: Secured Party shall never be liable for its failure to give notice
to Debtor of default in the payment of or upon the Collateral. Secured Party shall have
no duty to fix or preserve rights against prior parties to the Collateral and shall never
be liable for its failure to use diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Debtor for what it may actually collect
or receive thereon. Without limiting the foregoing, it s specifically understood and
agreed that Secured Party shall have no responsibility for ascertaining any maturities or
similar matters relating to any of the Collateral or for informing Debtor with respect to
any of such matters (irrespective of whether Secured Party actually has, or may be
deemed, to have, knowledge thereof).
J. EVENTS OF DEFAULT. Debtor shall be in default hereunder upon the
happening of any of the following events or conditions: (i) non-payment when due
(whether by acceleration of maturity or otherwise) of any payment of principal, interest
or other amount due on any Obligation; (ii) the occurrence of any event which under
the terms of any evidence of indebtedness, indenture, loan agreement, security
agreement or, similar instrument permits the acceleration of maturity of any obligation
of Debtor (whether to Secured Party or to others); (iii) any representation or warranty
made by Debtor to Secured Party in connection with this Agreement, the Collateral or
the Obligations, or in any statements or certificates, proves incorrect in any material
respect as of the date of the making or the issuance thereof; (iv) default occurs in the
observance or performance of, or if Debtor fails to furnish adequate
evidence of performance of, any provision of this Agreement or of any note,
assignment, transfer, other agreement, document or instrument delivered by Debtor to
Secured Party in connection with this Agreement, the Collateral or the Obligations; (v)
death, dissolution, liquidation, termination of existence, insolvency, business failure or
winding-up of Debtor or any maker, endorser, guarantor, surety or other party liable in
any capacity for any of the Obligations; (vi) the commission of an act of bankruptcy
by, or the application for appointment of a receiver or any other legal custodian for any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy, arrangement,
reorganization, insolvency or similar laws for the relief of debtors by or against, the
Debtor or any maker, endorser, guarantor, surety or other party primarily or
secondarily liable for any of the Obligations: (vii) the Collateral becomes, in the
judgment of Secured Party, impaired, unsatisfactory or insufficient in character or
value; or (viii) the filing of any levy, attachment, execution, garnishment or other
process against the Debtor or any of the Collateral or any maker, endorser, guarantor,
surety or other party liable in any capacity for any of the Obligations.
K. REMEDIES: Upon the occurrence of an event of default, or if Secured
Party deems payment of the Obligations to be insecure, Secured Party, at its option,
shall be entitled to exercise any one or more of the following remedies (all of which are
cumulative):
1. Declare Obligations Due: Secured Party, at its option, may declare the
Obligations or any part thereof immediately due and payable, without demand, notice
of intention to accelerate, notice of acceleration, notice of non-payment, presentment,
protest, notice of dishonor, or any other notice whatsoever, all of which are hereby
waived by Debtor and any maker, endorser, guarantor, surety or other party liable in
any capacity for any of the Obligations.
2. Remedies: Secured Party shall have all of the fights and remedies
provided for in this Agreement and in any other agreements executed by Debtor, the
rights and remedies Of the Uniform Commercial Code of Texas, and any and all of the
rights and remedies at law and in equity, all of which shall be deemed cumulative.
Without limiting the foregoing, Debtor agrees that Secured Party shall have the right
to: (a') require Debtor to assemble the Collateral and make4t available to Secured Party
at a place designated by Secured Party that is reasonably convenient to both parties,
which Debtor agrees to do; (b) peaceably take possession of the Collateral and remove
same, with or without judicial process; (c) without removal, render equipment included
within the Collateral unusable, and dispose of the Collateral on the Debtor's premises;
(d) sell, lease or otherwise dispose of the Collateral, at one or more locations, by
public or private proceedings for cash or credit, without assumption of credit risk;
and/or (e) whether before or after default, collect and receipt for, compound,
compromise, and settle, and give releases, discharges and acquittances with respect to,
any and all mounts owed by any person or entity with respect to the Collateral. Unless
the Collateral is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Secured Party will send Debtor reasonable
notice of the time and place of any public sale or of the time after which any private
sale or other disposition will be made. Any requirement of reasonable notice to Debtor
shall be met if such notice is mailed, postage prepaid, to Debtor at the address of
Debtor designated at the beginning of this Agreement, at least five (5) days before the
day of any public sale or at least fiye (5) days before the time after which any private
sale or other disposition will be made.
3. Expenses: Debtor shall be liable for and agrees to pay the reasonable
expenses incurred by Secured Party in enforcing its rights and remedies, in retaking,
holding, testing, repairing, improving, selling, leasing or disposing of the Collateral, or
like expenses, including, without limitation, attorneys' fees and legal expenses incurred
by Secured Party. These expenses, together with interest thereon from date incurred
until paid by Debtor at the maximum contract rate allowed under applicable laws,
which Debtor agrees to pay, shall constitute additional Obligations and shall be secured
by and entitled to the benefits of this Agreement.
4. Proceeds, Surplus, Deficiencies: Proceeds received by Secured Party
from disposition of the Collateral shall be applied toward Secured Party's expenses and
other Obligations in such order or manner as Secured Party may elect. Debtor shall be
entitled to any surplus if one results after lawful application of the proceeds. Debtor
shall remain liable for any deficiency.
5. Remedies Cumulative: The rights and remedies of Secured Party are
cumulative and the exercise of any one or more of the rights or remedies shall not be
deemed an election of rights or remedies or a waiver of any other right or remedy.
Secured Party may remedy any default and may waive any default without waiving the
default remedied or without waiving any other prior or subsequent default.
L. OTHER AGREEMENTS.
1. Savings Clause: Notwithstanding any provision to the contrary herein,
or in any of the documents evidencing the Obligations or otherwise relating thereto, no
such provision shall require the payment or permit the collection of interest in excess of
the maximum permitted by applicable usury laws. If any such e~cessive interest is so
provided for, then in such event (i) the provisions of this paragraph shall govern and
control; (ii) neither the Debtor nor his heirs, legal representatives, successors or
assigns or any other party liable for the payment thereof, shall be obligated to pay the
amount of such interest to the extent that is in excess of the maximum amount
permitted by law; (iii) any such excess interest that may have been collected shall be, at
the option of the holder of the instrument evidencing the Obligations, either applied as
a credit against the then unpaid principal amount thereof or refunded to the maker
thereof; and (iv) the effective rate of interest shall be automatically reduced to the
maximum lawful rate under applicable usury laws as now or hereafter construed by the
courts having jurisdiction.
2. Joint and Several Responsibility: If this Security Agreement is
executed by more than one Debtor, the obligations of all such Debtors shall be joint
and several.
3. Waivers: Debtor and any maker, endorser, guarantor, surety or other
party liable in any capacity respecting the Obligations hereby waive demand, notice of
intention to accelerate, notice of acceleration, notice of non-payment, presentment,
protest, notice of dishonor and any other similar notice whatsoever.
4. Severability: Any provision hereof found to be invalid by courts having
jurisdiction shall be invalid only with respect to such provision (and then only to the
extent necessary to avoid such invalidity). The offending provision shall be modified to
the maximum extent possible to confer upon Secured Party the benefits intended
thereby. Such provision as modified and the remaining provisions hereof shall be
construed and enforced to the same effect as if such
offending provision (or portion thereof) had not been contained herein, to the
maximum extent possible.
5. Use of Copies: Any carbon, photographic or other reproduction of any
financing statement signed by Debtor is sufficient as a financing statement for all
purposes, including without limitation, filing in any state as may be permitted by the
provisions of the Unlforra Commercial Code of such state.
6. Relationship to Other Agreements: This Security Agreement and the
security interests (and pledges and assignments as applicable) herein granted are in
addition to (and not in substitution, novation or discharge of) any and all prior or
contemporaneous security agreements, security interests, pledges, assignments, liens,
rights, titles or other interests in f~lvor of Secured Party or assigned to Secured Party
by others in connection with the Obligations. All lights and remedies of Secured Party
in all such agreements are cumulative, but in the event of actual conflict in terms and
conditions, the terms and conditions of the latest security agreement shall govern and
control.
7. Notices: Any notice or demand given by Secured Party to Debtor in
connection with this Agreement, the Collateral or the Obligations, shall be deemed
given and effective'upon deposit in the United States mail, postage prel~aid, addressed
to Debtor at the address of Debtor designated at the beginning of this Agreement.
Actual notice to Debtor shall always 'be effective no matter how given or received.
8. Headings and Gender: Paragraph headings in this Agreement are for
convenience only and shall be given no meaning or significance in interpreting this
Agreement. All words used herein shall be construed to be of such gender or number
as the circumstances require.
9. Amendments: Neither this Agreement nor any of its provisions may be
changed, amended, modified, waived or discharged orally, but only by an instrument
in writing signed by the party against whom enforcement of the change, amendment,
modification, waiver or discharge is sought.
10. Continuing Agreement~ The security interest (and pledges and
assignments as applicable) hereby granted and all of the terms and provisions in this
Agreement shall be deemed a continuing agreement and shall continue in full force and
effect until terminated in writing. Any such revocation or termination shall only be
effective if explicitly confirmed in a signed writing issued by Secured Party to such
effect and shall in no way impair or affect any transactions entered into or rights
created or Obligations incurred or arising prior to such revocation or termination, as to
which this Agreement shall be fully operative until same are repaid and discharged in
full. Unless otherwise required by applicable la Secured Party shall be under no
obligation to issue a termination statement or similar documents unless Debtor requests
same in writing and, provided further, that all Obligations have been repaid and
discharged in full and there are no commitments to make advances, incur any
Obligations or otherwise give value.
11. Binding Effect: The provisions of this Security Agreement shall be
binding upon the heirs, personal representatives, successors and assigns of Debtor and
the rights, powers and remedies of Secured Party hereunder shall inure to the benefit of
the successors and assigns of Secured Party.
12. Governing Law: This Security Agreement shall be governed by the law
of the State of Texas and applicable federal law.
EXECUTED this __ day of ,200
BOHEAD MANUFACTURING COMPANY, L.L.C.
By:
General Manager
EXHIBIT "D"
ICC FINANCING STATEMENT
:OLLOW INSTRUCTIONS Ifront and backI CAREFULLY
NAME & PHONE OF CONTACT AT FILER [optional]
B. SEND ACKNOWLEDGMENT TO: (Name and Address)
~City of Port Arthur Section 4A Economic
Development Corporation
4173 39th Street
Port Arthur, Texas 77642
L_ -
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
OR la ORGANIZATION'S NAME Seattle WA 98134-1136 USA
-- Bohead Manufacturing Company, L. L. C.
1011 Southwest Klickitat Way, Suite 104
OR 3a. ORGANIZAT~ON'$ NAME Port Arthur TX 77642 USA
City of Port Arthur Section 4A Economic Development Corporation
-- 4173 39th Street
S. AL~RNA~iVEDESlGNArmON['~.,,lac.bi.i:~L~ ....... ESSOR ~OONSI~NE~OO,~I~OR I~B~IL~AILOR ~I~LL~R~UYER~:UE" I~
FILING OFFICE COPY -- UCC FINANCING STATEMENT (FORM UCC1) (REV. 05/22/02)
EXHIBIT"E"
CERTIFICATION REGARDING LOBBYING
For Contracts, Grants, Loans, and Cooperative Agreements
The undersigned certifies, to the best of his knowledge and belief, that:
1. No funds have been paid or will be paid, by or on behalf of the
undersigned, to any person for influencing or attempting to influence an
officer or employee of any agency, a member of the City or of the PAEDC
in connection with the awarding of any contract, the making of any grant,
the making of any loan, the entedng into of any cooperative agreement, or
modification of any contract, grant, loan, or cooperative agreement.
2 The undersigned shall require that the language of this certification be
included in the award documents for all sub-awards at all tiers (including
subcontracts, sub-grants, and contracts under grants, loans, and
cooperative agreements), and
that all Sub-GPs shall certify and disclose accordingly.
This certification is material representation of fact which reliance was placed when this
transaction was made or entered into. Submission of this certification is a prerequisite
for making or entering into this transaction.
Signed:
Bohead Manufacturing Company, L.L.C.
By:
Its:
Date:
EXHIBIT "Fl"
COMMERCIAL SECURITY AGREEMENT
Dated ,200
Surety Secured Party
Magnum Fire and Safety Systems, Inc. POrtcorporationArthur EconomiC(,PAEDC,,)Development
6648 Gulfway Drive 444 4~ Street
Port Arthur, Texas 77642 Port Arthur, Texas 77640
(hereinafter referred to as "Surety~ whether one or more) (hereinafter referred to as ~Secured Party")
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, Surety grants to Secured Party the security interest (and the pledges and
assignments as applicable) hereinafter set forth and agrees with Secured Party as
follows:
A. OBLIGATIONS SECURED. The first priority lien and pledges and
assigmnents as applicable granted hereby are to secure punctual payment and
performance by the principal, BOHEAD MANUFACTURING COMPANY, L.L.C.
("BOHEAD"), of the following obligations: (i) certain promissory note(s) of even date
herewith in the original principal sum of $65,000, executed by Bohead and payable to
the order of Secured Party, and any and all extensions, renewals, modifications and
rearrangements thereof, (ii) certain obligations of Bohead to Secured Party under that
certain Economic Incentive Contract and Loan Agreement of even date and all
extensions, renewals, modifications and rearrangements thereof, and (iii) any and all
other indebtedness, liabilities and obligations whatsoever and of whatever nature of
Bohead to Secured Party whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due and whether now existing or hereafter arising and
howsoever evidenced or acquired, whether joint or several, or joint and several (all of
which are herein separately and collectively referred to as the "Obligations"). Surety
acknowledges that the security interest (and pledges and assignments as applicable)
hereby granted shall secure all future advances as well as any and all other
indebtedness, liabilities and obligations of Bohead or Surety to Secured Party whether
now in existence or hereafter arising.
B. USE OF COLLATERAL. Surety represents, warrants and covenants
that Collateral will be used by the Surety primarily for business.
C. DESCRIPTION OF COLLATEI~AL. Surety hereby grants to Secured
Party a first priority lien in (and hereby pledges and assigns as applicable) and agrees
that Secured Party shall continue to have a security interest in (and a pledge and
assignment of as applicable), the following property, to wit: (SURETY TO INITIAL
APPROPRIATE BLANKS)
[] All Accounts. A security imerest in all accounts now owned or existing as
well as any and all that may hereafter arise or be acquired by Surety, and all the
proceeds and products thereof, including without limitation, all notes, drafts,
acceptances, instruments and chattel paper arising therefrom, and all returned or
repossessed goods arising from or relating to any such accounts, or other
proceeds of any sale or other disposition of inventory.
[] Specific Accounts. A security interest in only those specific accounts
and/or contracts listed and described on Schedule A attached or which may
hereafter be attached hereto, and all the proceeds and products thereof,
including without limitation, all notes, drafts, acceptances, instruments and
chattel paper arising therefrom, and all returned or repossessed goods arising
from or relating to any such accounts or other proceeds of any sale or other
disposition of inventory.
[] All Inventory. A security interest in all of Surety's inventory, including
all goods, merchandise, raw materials, goods in process, finished goods and
other tangible personal property, wheresoever located, now owned or hereafter
acquired and held for sale or lease or furnished or to be furnished under
contracts for service or used or consumed in Surety's business and all additions
and accessions thereto and contracts with respect thereto and all documents of
title evidencing or represeming any part thereof, and all products and proceeds
thereof, including, without limitation, all of such which is now or hereafter
located at the following locations: (give locations)
[] Ail Fixtures. A security interest in all of Surety's fixtures and
appurtenances thereto, and such other goods, chattels, fixtures, equipment and
personal property affixed or in any manner attached to the real estate and/or
building(s) or structure(s), including all additions and accessions thereto and
replacements thereof and articles in substitution therefor, howsoever attached or
affixed, located at the following locations: (give legal address)
The record owner of the real estate is:
[] All Equipment. A security interest in all equipmem of every nature and
description whatsoever now owned or hereafter acquired by Surety including all
appurtenances and additions thereto and substitutions therefor, wheresoever
located, including all tools, parts and accessories used in connection therewith.
[] General Intangibles. A security interest in all general intangibles and
other personal property now owned or hereafter acquired by Surety other than
goods, accounts, chattel paper, documents and instruments.
[] Chattel Paper. A security interest in all of Surety's interest under chattel
paper, lease agreements and other instruments or documents, whether now
existing or owned by Surety or hereafter arising or acquired by Surety,
evidencing both a debt and security interest in or lease of specific goods.
[] Farm Products. A security interest in alt of Surety's interest in any and
all crops, livestock and supplies used or produced by Surety in farming
operations wheresoever located: Surety's residence is in the county shown at the
beginning of this Agreement and Surety agrees to notify promptly Secured Party
of any change in the county of Surety's residence; all of Surety's crops or
livestock are presently located in the following counties: (give counties)
[] Securities. A pledge and assignment of and security interest in the
securities described below, together with all instruments and general intangibles
related thereto and all monies, income, proceeds and benefits attributable or
accruing to said property, including, but not limited to, all stock rights, options,
rights to subscribe, dividends, liquidating dividends, stock dividends, dividends
paid in stock, new security or other properties or benefits to which the Surety is
or may hereafter become entitled to receive on account of said property. (give
description)
[] Certificates of Deposit. A pledge and assignment of and security interest
in all of Surety's interest in and to the certificates of deposit described below
and instruments related thereto, and all renewals or substitutions therefor,
together with all monies, income, interest, proceeds and benefits attributable or
accruing to said property or to which Surety is or may hereafter be entitled to
receive on account of said property. (give description)
[] Instruments. A pledge and assignment of and security interest in all of
Sllrety's now owned or existing as well as hereafter acquired or arising
instruments and documents.
X [] Other. A first priority lien on all of Surety's interest, now owned or
hereafter acquired, in and to the equipment listed in Attachment 1.
The term "Collateral" as used in this Agreement shall mean and include, and
the security interest (and pledge and assignment as applicable) shall cover, all of the
foregoing property, as well as any accessions, additions and attachments thereto and
the proceeds and products thereof, including withom limitation, all cash, general
intangibles, accounts, inventory, equipment, fixtures, farm products, notes, drafts,
acceptances, securities, instruments, chattel paper, insurance proceeds payable because
of loss or damage, or other property, benefits or rights arising therefrom, and in and to
all returned or repossessed goods arising from or relating to any of the property
described herein or other proceeds of anY sale or other disposition of such property.
As additional security for the punctual payment and performance of the
Obligations, and as part of the Collateral, Surety hereby grants to Secured Party a
security imerest in, and a pledge and assignment of, any and all money, property,
deposit accounts, accounts, securities, documents, chattel paper, claims, demands,
instruments, items or deposits of the Suret?, and each of them, or to which any of them
is a party, now held or hereafter coming within Secured Party's custody or control,
including without limitation, all certificates of deposit and other depository accounts,
whether such have matured or the exercise of Secured Party's rights results in loss of
interest or principal or other penalty on such deposits, but excluding deposits subject to
tax penalties if assigned. Without prior notice to or demand upon the Surety, Secured
Party may exemise its rights granted above at any time when a default has occurred or
Secured Party deems itself insecure. Secured Party's rights and remedies under this
paragraph shall be in addition to and cumulative of any other rights or remedies at law
and equity, including, without limitation, any rights of set-off to which Secured Party
may be entitled.
D. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SURETY. Surety represents and warrants as follows:
1. Ownership; No Encumbrances: Except for the security interest (and
pledges and assignments as applicable) granted hereby, the Surety is, and as to any
property acquired after the date hereof which is included within the Collateral, Surety
will be, the owner of all such Collateral free and clear from all charges, liens, security
interests, adverse claims and encumbrances of any and every nature whatsoever.
2. No Financing Statements: There is no financing statement or similar
filing now on file in any public office covering any part of the Collateral, and Surety
will not execute, and there will not be on file in any public office any financing
statement or similar filing except the financing statements filed or to b~ fried in favor of
Secured Party.
3. Accuracy of Information: All information furnished to Secured Party
concerning Surety, the Collateral and the Obligations, or otherwise for the purpose of
obtaining or maintaining credit, is or will be at the time the same is furnished, accurate
and complete in all material respects.
4. Authority: Surety has full right and authority to execute and perform
this Agreement and to create the security interest (and pledges and assignment as
applicable) created by this Agreement. The making and performance by Surety of this
Agreement will not violate any articles of incorporation, bylaws or similar document
respecting Surety, any provision of law, any order of court or governmental agency, or
any indenture or other agreement to which Surety is a party, or by which Surety or any
of Surety's property is bound, or be in conflict with, result in a breach of or constitute
(with due notice and/or lapse of time) a default under any such indenture or other
agreement, or result in the creation or imposition of any charge, lien, security interest,
claim or encumbrance of any and every nature whatsoever upon the Collateral, except
as contemplated by this Agreement.
5. Addresses: The address of Surety designated at the beginning of this
Agreement is Surety's place of business~if Surety has only one place of business;
Surety's chief executive office if Surety has more than one place of business; or
Surety's residence if Surety has no place of business. Surety agrees not to change such
address without advance written notice to Secured Party.
E. GENERALCOVENANTS. Surety covenants and agrees as follows:
1. Operation of the Collateral: Surety agrees to maintain and use the
Collateral solely in the conduct of its own business, in a careful and proper manner,
and in conformity with all applicable permits or licenses. Surety shall comply in all
respects with all applicable statutes, laws, ordinances and regulations. Surety shall not
use the Collateral in any unlawful manner or for any unlawful purposes, or in any
manner or for any purpose that would expose the Collateral to unusual risk, or to
penalty, forfeiture or capture, or that would render inoperative any insurance in
connection with the Collateral.
2. Condition: Surety shall maintain, service and repair the Collateral so as
to keep it in good operating condition. Surety shall replace within a reasonable time all
parts that may be worn out, lost, destroyed or otherwise rendered unfit for use, with
appropriate replacement parts. Surety shall obtain and maintain in good standing at all
times all applicable permits, licenses, registrations and certificates respecting the
Collateral.
3. Assessments: Surety shall promptly pay when due all taxes,
assessments, license leis, registration fees, and governmental charges l~vied or
assessed against Surety or with respect to the Collateral or any part thereof.
4. No Encumbrances: Surety agrees not to suffer or permit any charge,
lien, security interest, adverse claim or encumbrance of any and every nature
whatsoever against the Collateral or any part thereof.
5. No Removal: Except as otherwise provided in this Agreement, Surety
shall not remove the Collateral from the county or counties designated at the beginning
of this Agreement without Secured Party's prior written consent.
6. No Transfer: Except as otherwise provided in this Agreement with
respect to inventory, Surety shall not, without the prior written consent of Secured
Party, sell, assign, transfer, lease, charter, encumber, hypothecate or dispose of the
Collateral, or any part thereof, or interest therein, or offer to do any of the foregoing.
7. Notices and Reports: Surety shall promptly notify Secured Party in
writing of any change in the name, identity or structure of Surety, any charge, lien,
security interest, claim or encumbrance asserted against the Collateral, any litigation
against Surety or the Collateral, any theft, loss, injury or similar incident involving the
Collateral, and any other material matter adversely affecting Surety or the Collateral.
Surety shall furnish such other reports; information and data regarding Surety's
financial condition and operations, the Collateral and such other matters as Secured
Party may request from time to time.
8. Landlord's Waivers: Surety shall furnish to Secured Party, if
requested, a landlord's waiver of all liens with respect to any Collateral covered by this
Agreement that is or may be located upon leased premises, such landlord's waivers to
be in such form and upon such terms as are acceptable to Secured Party.
9. Additional Filings: Surety agrees to execute and deliver such financing
statement or statements, or amendments thereof or supplements thereto, or other
documents as Secured Party may from time to time require in order to comply with the
Texas Uniform Commercial Code (or other applicable state law of the jurisdiction
where any of the Collateral is located) and to preserve and protect the Secured Party's
fights to the Collateral.
I0. Protection of Collateral: Secured Party, at its option, whether before or
after default, but without any obligation whatsoever to do so, may (a) discharge taxes,
claims, charges, liens, security interests, assessments or other encumbrances of any
and every nature whatsoever at any time levied, placed upon or asserted against the
Collateral, (b) place and pay for insurance on the Collateral, including insurance that
only protects Secured Party's interest, (c) pay for the repair, improvement, testing,
maintenance and preservation of the Collateral, (d) pay any filing, recording,
registration, licensing or certification fees or other fees and charges related to the
Collateral, or (e) take any o~her action to preserve and protect the Collateral ~nd
Secured Party's rights and remedies under this Agreement as Secured Party may deem
necessary or appropriate. Surety agrees that Secured Party shall have no duty or
obligation whatsoever to take any of the foregoing action. Surety agrees to promptly
reimburse Secured Party upon demand for any payment made or any expense incurred
by the Secured .Party pursuant to this authorization. These. payments and
expenditures, together with interest thereon from date incurred until paid by Surety at
the maximum contract rate allowed under applicable laws, which Surety agrees to pay,
shall constitute additional Obligations and shall be secured by and entitled to the
benefits of this Agreement.
11. Inspection: Surety shall at all reasonable times allow Secured Party by
or through any of its officers, agents, attorneys or accountants, to examine the
Collateral, wherever located, and to examine and make extracts from Surety's books
and records.
12. Further Assurances: Surety shall do, make, procure, execute and
deliver all such additional and further acts, things, deeds, interests and assurances as
Secured Party may require from time so time to protect, assure and enforce Secured
Party's rights and remedies.
13. Insurance: Surety shall have and maintain insurance at all times with
respect to all tangible Collateral insuring against risks of fire (including so-called
extended coverage), theft and other risks as Secured Party may require, containing
such terms, in such form and amounts and written by such companies as may be
satisfactory to Secured Party, all of such insurance to contain toss payable clauses in
favor of Secured Party as its interest may appear. All policies of insurance shall
provide for ten (10) days written minimum cancellation notice to Secured Party and at
the request of Secured Party shall be delivered to and held by it. Secured Party is
hereby authorized to act as attorney for Surety in obtaining, adjusting, settling and
canceling such insurance and endorsing any drafts or instruments. Secured Party shall
be authorized to apply the proceeds from any insurance to the Obligations secured
hereby whether or not such Obligations are then due and payable. Surety specifically
authorizes Secured Party to disclose information from the policies of insurance to
prospective insurers regarding the Collateral.
14. Additional Collateral: If Secured Party should at any time be of the
opinion that the Collateral is impaired, not sufficient or has declined or may decline in
value, or should Secured Party deem payment of the Obligations to be insecure, then
Secured Party may call for additional security satisfactory to Secured Party, and Surety
promises to furnish such additional security forthwith. The call for additional security
may be oral, by telegram, or United States mail addressed to Surety, and shall not
affect any other subsequent right of Secured Party to exercise the same.
F. ADDITIONAL PROVISIONS REGARDING ACCOUNTS. The
following provisions shall apply to all accounts included within the Collateral:
1. Definitions: The term "account", as used in this Agreement, shall have
the same meaning as set forth in the Uniform Commercial Code of Texas in effect as of
the date of execution hereof, and as set forth in any amendment to the Uniform
Commercial Code of Texas to become effective after the date of execution hereof, and
also shall include all present and future notes, instruments, documents, general
intangibles, drafts, acceptances and chattel paper of Surety, and the proceeds thereof.
2. Additional Warranties: As of the time any account becomes subject to
the security interest (or pledge or assignment as applicable) granted hereby, Surety
shall be deemed further to have warranted as to each and all of such accounts as
follows: (a) each account and all papers and documents relating thereto are genuine and
in all respects what they purport to be; (b) each account is valid and subsisting and
arises out of a bona fide sale of goods sold and delivered to, or out of and for services
theretofore actually rendered by the Surety to the account surety named in the account;
(c) the amount of the account represented as owing is the correct amount actually and
unconditionally owing except for normal cash discounts and is not subject to any
setoffs, credits, defenses, deductions or countercharges; and (d) Surety is the owner
thereof free and clear of any charges, liens, security interests, adverse claims and
encumbrances of any and every nature whatsoever.
3. Collection of Accounts: Secured Party shall have the right in its own
name or in the name of the Surety, whether before or after default, to require Surety
forthwith to transmit all proceeds of collection of accounts to Secured Party, to notify
any and all account suretys to make payments of the accounts directly to Secured Party,
to demand, collect, receive, receipt for, sue for, compound and give acquittal for, any
and all amounts due or to become due on the accounts and to endorse the name of the
Surety on all commercial paper given in payment or part pa. ymem thereof, and in
Secured Party's discretion to file any claim or take any other action or proceeding that
Secured Party may deem necessary or appropriate to protect and preserve and realize
upon the accounts and related Collateral. Unless and until Secured Party elects to
collect accounts, and the privilege of Surety to collect accounts is revoked by Secured
Party in writing, Surety shall continue to collect accounts, account for same to Secured
Party, and shall not commingle the proceeds of collection of accounts with any funds of
the Surety. In order to assure collection of accounts in which Secured Party has a
security interest (or pledge or assignment of as applicable) hereunder, Secured Party
may notify the post office authorities to change the address for delivery of mail
addressed to Surety to such address as Secured Party may designate, and to open and
dispose of such mail and receive the collections of accounts included herewith. Secured
Party shall have no duty or obligation whatsoever to collect any account, or to take any
other action to preserve or protect the Collateral; however, should Secured Party elect
to collect any account or take possession of any Collateral, Surety releases Secured
Party from any claim or claims for loss or damage arising from any act or omission in
connection therewith.
4. Identification and Assignment of Accounts: Upon Secured Party's
request, whether before or after default, Surety shall take such action and execute and
deliver such documents as Secured Party may reasonably request in order to identify,
confirm, mark, segregate and assign accounts and to evidence Secured Party's interest
in same. Without limitation of the foregoing, Surety, upon request, agrees to assign
accounts to Secured Party, identify and mark accounts as being subject to the security
interest (or pledge or assignment as applicable) granted hereby, mark Surety's books
and records to reflect such assignments, and forthwith to transmit to Secured Party in
the form as received by Surety any and all proceeds of collection of such accoums.
5. Account Reports: Surety will deliver to Secured Party, prior to the
tenth (10) day of each month, or on such other frequency as Secured Party may
request, a written report in form and content satisfactory to Secured Party, showing a
listing and aging of accounts and such other information as Secured Party may request
from time to time. Surety shall immediately notify Secured Party of the assertion by
any account surety of any set-off, defense or claim regarding an account or any other
matter adversely -affecting an account.
6. Segregation of Returned Goods: Returned or repossessed goods arising
from or relating to any accounts included within the Collateral shall if requested by
Secured Party be held separate and apart from any other property. Surety shall as often
as requested by Secured Party, but not less often than weekly even though no special
request has been made, report to Secured Party the appropriate identifying information
with respect to any such returned or repossessed goods relating to accounts included in
assignments or identifications made pursuant hereto.
G. ADDITIONAL PROVISIONS REGARDING INVENTORY. The
following provisions shall apply to all inventory included within the Collateral:
1. Inventory Reports: Surety will deliver to Secured Party, prior to the
tenth (10th) day of each month, or on such other frequency as Secured Party may
request, a written report in form and content satisfactory to Secured Party, with respect
to the preceding month or other applicable period, showing Surety's opening inventory,
inventory acquired, inventory sold, inventory returned, inventory used in Surety's
business, closing inventory, any other inventory not within the preceding categories,
and such other information as Secured Party may request from time to time. Surety
shall immediately notify Secured Party of any matter adversely affecting the inventory,
including, without limitation, any event causing loss or depreciation in the value of the
inventory and the amount of such possible loss or depreciation.
2. Location of Inventory: Surety will promptly notify Secured Party in
writing of any addition to, change in or discontinuance of its place(s) of business as
shown in this agreement, the places at which inven~ry is located as shown herein, the
location of its chief executive office and the location of the office where it keeps its
records as set forth herein. All Collateral will be located at the place(s) of business
shown at the beginning of this agreement as modified by any written notice(s) given
pursuant hereto.
3. Use of Inventory: Unless and until the privilege of Surety to use
inventory in the ordinary course-of Surety's business is revoked by Secured Party in