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SECURITY AGREEMENT
AGREEMENT dated as of the 23rd day of October, 1999, by and between
GUNTHER INTERNATIONAL, LTD., a Connecticut corporation with its principal place
in the Town of Norwich, County of New London and State of Connecticut, (herein
referred to as "Debtor"), and PEOPLE'S BANK, a Connecticut stock savings bank
with a principal place of business at 850 Main Street, Bridgeport, Connecticut,
(herein referred to as "Bank").
WHEREAS, Debtor has requested Bank to make loans and financing
available to Debtor, and
WHEREAS, Bank has agreed to do so on certain conditions, including,
without limitation, the granting of certain security interests and rights and
the making of certain representations and covenants by Debtor.
W I T N E S S E T H
NOW, THEREFORE, Debtor and Bank agree as follows:
(1) GRANT OF SECURITY INTEREST.
(a) Debtor hereby grants to the Bank a security interest in all
personal property now or hereafter owned or acquired by Debtor, including but
not limited to Accounts, Chattel, Paper, Documents, Equipment, Fixtures, General
Intangibles, Instruments and Inventory as more particularly described on Exhibit
A attached hereto and incorporated herein (the "Collateral"). This grant is made
to secure the payment and performance of any and all existing and future
obligations and liabilities of Debtor to Bank relating in any way to that
certain note of even date herewith in the amount of $500,000.00 made by Debtor
to the order of Bank (the "Note") pursuant to the terms of that certain
Commercial Revolving Loan Agreement of even date herewith between Debtor and
Bank (the "CRLA"), copies of which Note and which CRLA are attached hereto and
marked as Exhibit "B" and "C", or to any other document evidencing the
obligations thereunder or securing same. As used in this Agreement,
"Liabilities" or "Obligations" mean any and all indebtedness, obligations and
liabilities of Debtor (and any endorser, guarantor or surety
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of for Debtor) to Bank relative to the loan evidenced by said Note and CRLA of
every kind and description, direct or indirect, primary or secondary, absolute
or contingent due or to become due, now existing or hereafter arising,
regardless of how they arise or by what agreement or instrument further
evidencing or securing same they may be evidenced, or whether evidenced by any
agreement or instrument, including, without limitation, all costs incurred by
Bank to obtain, preserve and enforce this security interest, collect and enforce
the liabilities therein contained, and maintain and preserve collateral and
including, but not limited to, reasonable attorneys fees and legal expenses.
(b) To the extent applicable, the Uniform Commercial Code of
Connecticut shall govern security interests provided for herein. In connection
therewith, the Debtor shall take such steps and execute and deliver such
financing statements, assignments and other papers as Bank may from time to time
request.
(c) If, by reason of location of Collateral or otherwise, the
creation, validity or perfection of security interests provided for herein are
governed by the law of a jurisdiction other than Connecticut, the Debtor shall
take steps and execute and deliver such papers as Bank may from time to time
request to comply with such law.
(d) As long as any Liabilities of the Debtor to Bank are
outstanding under this Agreement, the Debtor will not become obligated for any
loans or other grants of credit (except for merchandise purchased or services
rendered in the ordinary course of business) to any person other than Bank,
without Bank's prior written consent.
(e) It is understood and agreed that all advances now or hereafter
made by the Bank to Debtor under the CRLA are hereby deemed to be secured by
this Agreement.
(2) PROMISES TO PAY.
The Debtor promises to pay to Bank:
(a) All Liabilities of Debtor to Bank in accordance
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with their terms;
(b) Any and all taxes, charges and expenses of every kind or
description paid or incurred by the Bank under or with respect to any
Liabilities or any Collateral therefor or the collection of or realization of
the same including costs of collection, attorneys fees, expenses of litigation
and otherwise.
(3) DEBTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
In order to induce the Bank to make loans under the CRLA, Debtor
hereby represents, warrants and covenants to the Bank that:
(a) Except as provided in Exhibit C attached hereto and made a
part hereof and except for the security interests herein granted, no financing
statement has been filed with respect to the Collateral, Debtor is the absolute
and undisputed owner of the Collateral. Except as provided in Exhibit C hereto,
the Collateral is not, and will not be permitted to be in any respect encumbered
other than by this security interest (and the same will be true of collateral
acquired hereafter when acquired). All indebtedness to Debtor with respect to
any accounts receivable is bona fide and valid and no setoffs or counterclaims
exist against such indebtedness. No suits or actions are pending against Debtor,
and no claims, including, without limitation, taxes, assessments and insurance
premiums, are due and unpaid. Debtor's chief place of business is the address
shown above, and Debtor shall promptly give Bank written notice of any change
thereto, and the Collateral and business records pertaining to the Collateral
and Obligations, including those pertaining to all accounts and contract rights,
shall be kept at the above address of Debtor unless prior written consent of
Bank is obtained to a change of location.
(b) Debtor shall [i] pay punctually all Obligations when due as
required by the terms of any notes or agreements, and if any Obligation is now
evidenced by a writing specifying a due date, pay the same upon demand, all
Obligations being payable to the Bank at its address shown above, and [ii] pay
on demand any and all taxes, charges and
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expenses of every kind or description paid or incurred by Bank under or with
respect to loans made under the CRLA or any Collateral therefor or the
collection of or realization upon the same, including costs of collection,
attorneys fees, expenses of litigation and otherwise. Debtor hereby authorizes
the Bank to charge any and all liabilities owing to the Bank, including, without
limitation, the aforesaid interest, charges, taxes and expenses, to any of their
accounts with the Bank after and during the continuance of any Event of Default
as defined in the CRLA.
(c) Debtor shall [i] preserve the Collateral in good condition
and order and not permit it to be abused or misused, [ii] insure the Collateral
for such hazards and in such amounts as the Bank reasonably directs, policies to
be satisfactory to and payable to Bank and providing a minimum of ten (10) days
written cancellation notice to the Bank, [iii] until contrary instructions from
Bank, collect the accounts, contracts, rights, chattel paper and other debts,
[iv] when and to the extent required by the Bank after and during the
continuance of an Event of Default as defined in the CRLA, notify other debtors
and obligors that their accounts, contract rights, instruments, documents and/or
chattel paper have been assigned to the Bank and shall be paid directly to the
Bank, [v] take necessary steps to preserve the liability of account debtors,
obligors and secondary parties whose liabilities are part of the Collateral,
[vi] take any action required by the Bank with reference to the Federal
Assignment of Claims Act, [vii] allow the Bank to inspect the Collateral and to
inspect and copy all records relating to the Collateral and Obligations, [viii]
upon request by the Bank and subject to the rights of the other secured lenders
listed on Exhibit C hereto, if any, sign any papers necessary to obtain,
preserve and enforce this security interest in any jurisdiction; transfer
possession of and assign all instruments, documents, patents and chattel paper,
which are part of the Collateral to the Bank immediately, or as to those
hereafter acquired, immediately following acquisition, [ix] perfect a security
interest (using a method satisfactory to Bank) in goods covered by any
instrument, document or chattel paper in the Collateral, [x] notify the Bank of
any change occurring in or any of the Collateral, or in any fact or circumstance
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warranted or represented by Debtor herein, or furnished to the Bank, or if any
such Event of Default occurs, [xi] pay all costs necessary to perform any act or
duty required by this Agreement, including, but not limited to, attorneys fees,
insurance premiums, taxes and assessments. The Bank shall have the right to
execute any financing statement or other document necessary or advisable to
perfect an interest granted hereunder.
(4) CERTAIN RIGHTS OF BANK.
The Bank shall, in addition to any other rights it may have by
law or under this Agreement, have the following rights:
(a) At its option, after an Event of Default as defined in the
CRLA occurs, the Bank may, subject to the rights of the other Secured Parties
listed on Exhibit C hereto, if any: [i] take, and require Debtor to give to it,
possession or control of any of the Collateral and proceeds thereof, and apply
the same to payment of any of the Obligations, [ii] apply to any Obligations the
balance of Debtor's accounts, of whatever type, at the Bank, [iii] endorse as
Debtor's agent any instruments, documents, chattel paper in the Collateral, [iv]
notify account debtors and obligors of Debtor to pay directly to Bank, or to
verify information supplied by Debtor, [v] discharge any lien or encumbrance on
Collateral and exercise any other rights which an owner of the Collateral may
exercise and, [vii] take any of the foregoing actions, or any action Debtor is
required to take by this Agreement, without notice to Debtor, and add the costs
of the same to the Obligations, but Bank is under no duty to take any such
action.
(b) Debtor hereby gives Bank a lien and right of setoff for all
Debtor's Liabilities upon or against all the deposits, credits, collateral and
property of Debtor now or hereafter in the possession or control of the Bank or
in transit to it. The Bank may at any time upon and during the continuance of
any Event of Default as defined in the CRLA apply or setoff the same, or any
part thereof, to any of Debtor's Liabilities even though unmatured.
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(5) EVENTS OF DEFAULT: ACCELERATION.
Any and all of the Liabilities of Debtor to the Bank shall, at
the sole option of the Bank and notwithstanding any time or credit allowed by
any instrument evidencing a Liability, be immediately due and payable, without
notice or demand, upon the occurrence of any of the following events of default:
[i] the occurrence of an Event of Default under the CRLA and/or the Note; [ii]
loss, theft, damage, destruction (for which there is inadequate insurance
coverage), unauthorized sale or encumbrance to or of any of the Collateral, or
the making or issuance of any levy, seizure, attachment or injunction upon or
against any of the Collateral or any other property of Debtor; [iii] dissolution
or other termination of existence or (iv) if Bank in good faith determines the
prospect of payment or performance by Debtor under the CRLA and/or the Note is
impaired.
(6) POWER TO SELL OR COLLECT COLLATERAL.
Upon the occurrence of any Event of Default as defined in the
CRLA, all Obligations shall, at Bank's sole option, become immediately due and
payable, anything in any note evidencing any such Obligation or in this
Agreement or in any other agreement to the contrary notwithstanding, without
notice to Debtor, and Bank shall have, in any jurisdiction where enforcement
hereof is sought, in addition to any other rights and remedies which Bank may
have under law, the following rights and remedies, all of which may be exercised
with or without further notice to Debtor but subject to the rights of the other
secured lenders as set forth in Exhibit C hereto, if any: [i] to notify any and
all obligors on accounts receivable that the same have been assigned to the Bank
and that all payments thereon are to be made directly to the Bank, [ii] to
settle, compromise or release on terms acceptable to the Bank, in whole or in
part, any amounts owing on accounts receivable and to enforce payment and
prosecute any action or proceeding with respect to any and all accounts
receivable, [iii] to extend the time of payment, make allowances and adjustments
and to issue credits in the Bank's name or in the name of Debtor, [iv] to
foreclose the liens and security interests created under this Agreement or under
any other agreement relating to Collateral by any available judicial
procedure or without judicial process, to enter any premises where any of the
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Collateral may be located for the purpose of taking possession of or removing
the same, [v] to sell, assign, lease or otherwise dispose of the Collateral or
any part thereof, either at public or private sale or at any broker's board, in
lots or in bulk, for cash, on credit or otherwise, with or without
representations or warranties and upon such terms as shall be acceptable to the
Bank, all at the Bank's sole option and as the Bank, in its sole discretion, may
deem advisable and the Bank may bid or become purchaser at any such sale if
public, free from any right of redemption which is hereby expressly waived by
Debtor, and the Bank shall have the right, at its option, to apply or be
credited with the amount of all or any part of the Liabilities owing to the Bank
against the purchase price bid by the Bank at any such sale. Subject to the
right of the other secured lenders as set forth in Exhibit C hereto, if any, The
net cash proceeds resulting from the collection, liquidation, sale, lease or
other disposition of Collateral shall be applied first to the expenses
(including all attorneys fees) or retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Liabilities, application as the particular Liabilities
or against principal or interest to be in the Bank's discretion. Debtor shall be
liable to the Bank and shall pay the Bank on demand any deficiency which may
remain after such sale, disposition, collection or liquidation of Collateral,
and the Bank in turn agrees to remit to Debtor any surplus remaining after all
Liabilities have been paid in full. If any of the Collateral shall require
repairing, maintenance, preparation, or the like, or is in the process or other
unfinished state, the Bank shall have the right, but shall not be obligated, to
do such repairing, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable form as the
Bank shall deem appropriate, but the Bank shall have the right to sell or
dispose of such Collateral without such processing. Subject to the rights of the
other secured lenders as set forth in Exhibit C hereto, if any, Debtor will, at
the Bank's request, assemble all Collateral and make it available to the Bank at
places which the Bank may select whether at premises of Debtor or
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elsewhere, and will make available to the Bank all premises and facilities of
Debtor for the purpose of Bank's taking possession of Collateral or of removing
or putting the Collateral in saleable form. In the event any goods called for in
any sales order, contract, invoice or other instrument or agreement evidencing
or purporting to give rise to any accounts receivable included in any assignment
submitted to the Bank for Collateral purposes shall not have been delivered or
shall be claimed to be defective by any customer, the Bank shall have the right,
in its sole discretion, to use and deliver to such customer any goods of Debtor
to fulfill such order, contract, or the like, so as to make good any such
accounts receivable. To facilitate the exercise by the Bank of the rights and
remedies set forth in this Paragraph, Debtor hereby constitutes Bank or its
agents, or any other person whom Bank may designate, as attorney-in-fact for
Debtor at Debtor's own cost and expense, to exercise all or any of the following
powers subject to the rights of the other secured lenders as set forth in
Exhibit C hereto, if any, which being coupled with an interest, shall be
irrevocable, shall continue until all Liabilities have been paid in full and
shall be in addition to any other rights and remedies that the Bank may have:
[i] to remove from any premises where the same may be located, any all
documents, instruments, files and records, and any receptacles and cabinets
containing the same, relating to Collateral, and the Bank may, at Debtor's cost
and expense, use such of the personnel, supplies and space of Debtor at its
place of business as may be necessary to properly administer and control the
Collateral or the handling of collections and realizations thereon; [ii] to
receive, open and dispose of all mail addressed to Debtor and to notify postal
authorities to change the address for delivery thereof to such address as the
Bank may designate; [iii] to take or bring, in the Bank's name or in the name of
Debtor, all steps, actions, suits or proceedings deemed by the Bank necessary or
desirable to effect collection of or to realize upon the Collateral; and [iv] to
collect or withdraw all sums of money or other solvent credits Debtor may have
to its credit with any banking institution.
(7) WAIVERS.
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(a) Debtor waives presentment, demand, notice, protest, notice
of acceptance of this Agreement, notice of loans made, credit extended,
collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect both to
Liabilities and Collateral, Debtor assents to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange, or
release of Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments thereon
and the settlement, compromising or adjusting of any thereof, all in such manner
and at such time or times as the Bank may deem advisable. The Bank shall have no
duty as to the collection or protection of Collateral or any income thereon, nor
as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the safe custody thereof.
The Bank may exercise its rights with respect to Collateral without resorting or
regard to other Collateral or sources of reimbursement for any Liability. The
Bank shall not be deemed to have waived any of its right upon or under
Liabilities or Collateral unless such waiver be in writing and signed by the
Bank. No delay or omission on the part of the Bank in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion. The Bank may revoke any permission or waiver previously granted to
Debtor, such revocation shall be effective whether given orally or in writing.
All rights and remedies of the Bank on Liabilities or Collateral, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly or concurrently.
(b) The Bank shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the liquidation of any Collateral, including the settlement,
collection or payment of any collateral accounts or any instrument received in
payment thereof, or any damage resulting therefrom. Debtor shall indemnify and
hold harmless the Bank against any claim, loss or damage arising out of said
liquidation of any Collateral, including the settlement, collection or payment
of
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any collateral accounts or any instrument received in payment thereof.
(c) DEBTOR ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND HEREBY WAIVES ITS RIGHT TO
NOTICE WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE BANK OR ITS SUCCESSORS
OR ASSIGNS MAY DESIRE TO USE.
(8) MISCELLANEOUS.
This Agreement shall become effective upon execution by the
parties hereto. No modification or amendment hereof shall be effective unless
the same shall be in writing and signed by the parties hereto. Definitions in
the Uniform Commercial Code of Connecticut shall apply to words and phrases
herein; if Code definitions conflict, Article 9 definitions apply. Debtor waives
presentment, demand, notice of dishonor, protest and extension of time without
notice as to any instrument, document or chattel paper in Collateral and notice
of any action taken by the Bank hereunder unless such notice is mandatory under
applicable law. Any notice to the Bank shall be effective only upon its receipt
by the Bank. Any demand upon or notice to Debtor that the Bank may elect to give
shall be effective if deposited in the mails or delivered to a telegraph,
wireless or radio company, addressed to Debtor at the address shown at the
beginning of this Agreement, or if Debtor has notified Bank in writing of a
change of address, to Debtor's last address so notified, or to address to which
the Bank customarily communicates with Debtor. The rights and privileges of the
Bank shall inure to its successors and assigns. This Agreement or any other
agreement or note executed with reference hereto, if signed by or on behalf of
more than one person as Debtor, endorser, guarantor, or surety for Debtor, shall
bind jointly and severally the persons signing or on whose behalf same is
signed, their personal representatives, heirs, successors and assigns. If any
provision of this Agreement is invalid or unenforceable under applicable law,
the provision is and will be totally ineffective to that extent, but the
remaining provisions will be unaffected. As used herein, plural or singular
include each other and pronouns in any gender are to be construed as masculine,
feminine or neuter, as context
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requires. This Agreement has been made in the State of Connecticut and construed
in accordance with the laws of the State. The section headings are for
convenience only and of no substance, and no significance to any section heading
shall be given in construction of interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have hereunto signed this Agreement as
of the day and year first above written.
Signed, Sealed and Delivered in the presence of:
GUNTHER INTERNATIONAL, LTD.
/s/ Frank J. Saccomandi, III
----------------------------
By /s/ Michael M. Vehlies
-------------------------
/s/ Karl-Erik Sternlof Its
---------------------- Duly Authorized
/s/ Frank J. Saccomandi, III PEOPLE'S BANK
----------------------------
/s/ Karl-Erik Sternlof By /s/ Arthur C. Barton
---------------------- ----------------------
Its
Duly Authorized
STATE OF CONNECTICUT:
: ss. Norwich
COUNTY OF NEW LONDON:
On this the 8th day of November, 1999, personally appeared Michael
Vehlies, who acknowledged himself/herself to be the Chief Financial Officer of
GUNTHER INTERNATIONAL, LTD., a Connecticut corporation, and who acknowledged
that as such he/she subscribed the foregoing instrument for the purposes therein
contained, as his/her free act and deed and the free act and deed of said
corporation, before me.
/s/ Frank J. Saccomandi, III
----------------------------
Commissioner of the Superior Court/
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STATE OF CONNECTICUT:
: ss. Norwich October 23, 1999
COUNTY OF NEW LONDON:
Personally appeared Arthur C. Barton, who acknowledged himself/herself
to be an Officer of PEOPLE'S BANK, and who acknowledged that as such he/she
subscribed the foregoing Agreement for the purposes therein contained, as
his/her free act and deed and the free act and deed of said Bank, before me,
/s/ Karl-Erik Sternlof
----------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires:
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