SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is dated as of the 7th day of
May, 1997, by and between AMERICAN CONSOLIDATED LABORATORIES, INC. ("ACL"), a
Florida corporation; NOVAVISION, INC. ("NovaVision"), a North Carolina
corporation; BIOPOLYMER CORPORATION ("Biopolymer"), a Delaware corporation;
SALVATORI OPHTHALMIC MANUFACTURING CORPORATION ("SOMC"), a Florida corporation;
S-O NEBRASKA, INC. ("S-O"), a Florida corporation; WOLCON LABS, INC. ("Wolcon")
a Michigan corporation and CAROLINA CONTACT LENS, INC. ("CCL"), a North Carolina
corporation (each of the foregoing are individually referred to as "Grantor" and
collectively referred to as "Grantors"), and SIRROM INVESTMENTS, INC.
("Sirrom"), a Tennessee corporation, as agent pursuant to that certain
Intercreditor Agreement of even date herewith by and between TULLIS-DICKERSON
CAPITAL FOCUS, L.P. ("TDCF"), Sirrom and Grantors (the "Intercreditor
Agreement") ("Sirrom" and "TDCF" collectively referred to hereinafter as
"Lenders").
WITNESSETH:
WHEREAS, each Grantor is liable either as borrower or as guarantor on
each of the obligations evidenced by (1) that certain Loan Agreement and Secured
Promissory Note dated December 18, 1996, payable to the order of Sirrom in the
original principal amount of $520,000; and (2) that certain Loan Agreement and
Amended and Restated Promissory Note dated of even date herewith payable to the
order of TDCF in the original principal amount of $550,000; and (3) a loan to be
made by Sirrom (the "Sirrom Loan") in the original principal amount of
$1,575,000 pursuant to that certain Loan Agreement and Secured Promissory Note
of even date herewith (all of the foregoing loan agreements, notes and all other
documents executed in connection with said transactions are collectively
referred to as the "Loan Documents" and all of the obligations evidenced thereby
are collectively referred to as the "Loans"); and
WHEREAS, each Grantor is either a borrower or a wholly-owned subsidiary
of a borrower and will directly benefit from the Sirrom Loan; and
WHEREAS, in connection with the making of the Sirrom Loan, Lenders
desire to obtain from each Grantor, and each Grantor desires to mortgage, pledge
and grant to, Sirrom, as agent pursuant to the Intercreditor Agreement, for the
benefit of Lenders, a security interest in all of its right, title and interest
in, to and under that certain collateral more particularly described below, to
secure the payment and performance of the Loans.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Each Grantor herein hereby grants to
Sirrom, as agent pursuant to the Intercreditor Agreement, for the benefit of
Lenders, a security interest in the following described property and any and all
proceeds and products thereof and accessions thereto (as to an individual
Grantor, "Grantor's Collateral" and as to the Grantors collectively, the
"Collateral"):
(a) Equipment. All equipment of Grantor of any kind and description,
whether now owned or hereafter acquired and wherever located, together
with all parts, accessories and attachments and all replacements
thereof and additions thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper and General
Intangibles. All of Grantor's inventory and any agreements for lease of
same and rentals therefrom, and all of Grantor's accounts, accounts
receivable, contract rights, chattel paper and general intangibles and
the proceeds therefrom, whether now in existence or owned or hereafter
arising or acquired, entered into or created, and wherever located; and
whether held for lease or sale, or furnished or to be furnished under
contracts of service;
(c) Trademarks, Etc. All trademarks and service marks now held or
hereafter acquired by Grantor, both those that are registered with the
United States Patent and Trademark Office and any unregistered marks
used by Grantor in the United States, and trade dress, including logos
and designs, in connection with which any such marks are used, together
with all registrations regarding such marks and the rights to renewals
thereof, and the goodwill of the business of Grantor symbolized by such
marks;
(d) Copyrights. All copyrights now held or hereafter acquired by
Grantor and any applications for U.S. copyrights hereafter made by
Grantor; and
(e) Proprietary Information, Computer Data, Etc. All proprietary
information and trade secrets of Grantor with respect to Grantor's
business and all of Grantor's computer programs and the information
contained therein and all intellectual property rights with respect
thereto.
2. Secured Indebtedness. The obligations secured hereby shall include,
but are not limited to, Grantor's obligations hereunder, Grantor's obligations
under any Loan Document,
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and Grantor's obligations under any Unconditional Guaranty, in connection with
(a) the Loans payable to the order of Lenders that shall be due and payable as
set forth in the Loan Documents, and any renewals or extensions thereof, (b) the
full and prompt payment and performance of any and all other indebtednesses and
other obligations of any Grantor to any Lender, direct or contingent (including
but not limited to obligations incurred as indorser, guarantor or surety),
however evidenced or denominated, and however and whenever incurred, including
but not limited to indebtednesses incurred pursuant to any present or future
commitment of any Lender to any Grantor or any future advance by any Lender to
any Grantor, whether obligatory or non-obligatory, and (c) all future advances
made by Lenders for taxes, levies, insurance and preservation of the Collateral
and all attorney's fees, court costs and expenses of whatever kind incident to
the collection of any of said indebtedness or other obligations and the
enforcement and protection of the security interest created hereby.
3. Representations, Warranties and Agreements of Grantors. Each Grantor
represents, warrants and agrees, on its own behalf, as follows:
(a) Except as set forth on Schedule 3(a)(i) hereto (the
"Permitted Encumbrances"), Grantor is the owner of Grantor's
Collateral, free and clear of any liens and security interests and that
it will defend Grantor's Collateral against the claims and demands of
all persons other than Permitted Encumbrances. All of Grantor's
collateral is presently located in the states and counties set forth on
Schedule 3(a)(ii).
(b) Grantor will promptly notify Lenders, in writing, of any
new place or places of business if Grantor's Collateral is used in
business, or of any change in it's residence if Grantor's Collateral is
not used in business, and regardless of use, of any change in the
location of Grantor's Collateral or any records pertaining thereto.
(c) Grantor will pay to Lenders all amounts secured hereby as
and when the same shall be due and payable, whether at maturity, by
acceleration or otherwise, and will promptly perform all terms of said
indebtedness and this or any other security or loan agreement between
any Grantor and any Lender, and will promptly discharge all said
liabilities.
(d) Grantor will at all times keep Grantor's Collateral
insured against all insurable hazards in amounts equal to the full cash
value of the Grantor's Collateral. Such insurance shall be in such
companies as may be acceptable to Lenders, with provisions satisfactory
to Lenders for payment of all losses thereunder to Lenders as their
interests may appear. If required by Lenders, Grantor shall deposit the
policies with Lenders. So long as there exists no event of default
hereunder or under and Loan Document and the proceeds received under
any policy are less than $50,000, Lenders shall deliver said proceeds
to Grantor for the purpose of repairing or restoring
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Grantor's Collateral. If there exists an event of default hereunder or
under any Loan Document or if the proceeds received under any policy
exceed $50,000, at Lenders' option, said proceeds may be applied to the
payment of any indebtedness secured hereby, whether or not due and
payable, or at Lenders' option may be delivered by Lenders to Grantor
for the purpose of repairing or restoring Grantor's Collateral. Grantor
assigns to Lenders all right to receive proceeds of insurance not
exceeding the amounts secured hereby, directs any insurer to pay all
proceeds directly to Lenders as their interests may appear, and
appoints each Lender as Grantor's attorney in fact to endorse any draft
or check made payable to Grantor in order to collect the benefits of
such insurance; provided, however, that so long as no event of default
exists hereunder or under any Loan Document, Grantor shall be entitled
to settle and compromise all claims under its casualty policies and, if
the proceeds of such settlement or compromise are less than $50,000,
Lenders shall disburse said proceeds to Grantor upon receipt of
satisfactory evidence that the proceeds shall be used to repair or
replace Grantors's damaged or destroyed Collateral. If Grantor fails to
keep Grantor's Collateral insured as required by Lenders, Lenders shall
have the right to obtain such insurance at Grantor's expense and add
the cost thereof to the other amounts secured hereby.
(e) Grantor will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lenders are authorized to do all things
that they deem reasonably necessary to perfect and continue perfection
of the security interests created hereby and to protect the Collateral.
(f) The address set forth after Grantor's signature on this
Agreement is Grantor's principal place of business and the place where
the records concerning all intangible Grantor's Collateral are kept
and/or maintained.
4. Default. Grantor shall be in default upon failure to observe or
perform any of Grantor's agreements herein contained, or upon the occurrence of
a default or Event of Default under the Loan Agreements or any other Loan
Document that has not been cured during the applicable grace period, or if any
warranty or statement by Grantor herein or furnished in connection herewith is
materially false or misleading in any material respect.
5. Remedies Upon Default. Upon default hereunder, all sums secured
hereby shall immediately become due and payable at Lenders' option without
notice to Grantor, and Lenders may proceed to enforce payment of same and to
exercise any and all rights and remedies provided by the Uniform Commercial Code
(Tennessee) or other applicable law, as well as all other rights and remedies
possessed by Lenders, all of which shall be cumulative. Whenever Grantor is in
default hereunder, and upon demand by Lenders, Grantor shall assemble Grantor's
Collateral and make it available to Lenders at a place reasonably
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convenient to Lenders and Grantor. Any notice of sale, lease or other intended
disposition of Grantor's Collateral by Lenders sent to Grantor at the address
hereinafter set forth, or at such other address of Grantor as may be shown on
Lender's records, at least five (5) days prior to such action, shall constitute
reasonable notice to Grantor.
Lenders may waive any default before or after the same has been
declared without impairing its right to declare a subsequent default hereunder,
this right being a continuing one.
6. Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of
Lenders' successors and assigns and shall bind Grantors' heirs, representatives,
successors and assigns. If Grantor is composed of more than one person, firm
and/or entity, their obligations hereunder shall be joint and several.
8. Financial Reporting. Grantor has no undisclosed or contingent
liabilities that are not reflected in the financial statements on file with
Lenders at the execution of this Agreement. Lenders shall have the right, at any
time, by its own auditors, accountants or other agents, to examine or audit any
of the books and records of Grantor, or Grantor's Collateral, all of which will
be made available upon request. Such accountants or other representatives of
Lenders will be permitted to make any verification of the existence of Grantor's
Collateral or accuracy of the records that Lenders deem necessary or proper. Any
reasonable expenses incurred by Lenders in making such examination, inspection,
verification or audit shall be paid by said Grantor promptly on demand and shall
be secured by the security interest granted hereby.
9. Termination Statement. Grantor agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lenders to make future advances, Lenders shall not
be required to send Grantor a termination statement with respect to any
financing statement filed to perfect Lenders' security interest(s) in any of
Grantor's Collateral, unless and until Grantor shall have made written demand
therefor. Upon receipt of proper written demand, Lenders may at their option, in
lieu of sending a termination statement to Grantor, cause said termination
statement to be filed with the appropriate filing officer(s).
10. Protection of Collateral. Grantor will not permit any liens or
security interests other than those created by this Agreement and the Permitted
Encumbrances to attach to any of Grantor's Collateral, nor permit any of
Grantor's Collateral to be levied upon under any legal process, nor permit
anything to be done that may impair the security intended to be afforded by this
Agreement, nor permit any tangible Grantor's Collateral to become attached to or
commingled with other goods without the prior written consent of Lenders.
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11. Special Agreements With Respect to Certain Tangible Collateral.
Each Grantor additionally agrees and warrants as follows:
(a) Grantor will not permit any of Grantor's Collateral to be
removed from the location specified herein, except for temporary
periods in the normal and customary use thereof, without the prior
written consent of Lenders, and will permit Lenders to inspect
Grantor's Collateral at any time.
(b) If any of Grantor's Collateral is equipment or goods of a
type normally used in more than one state (whether or not actually so
used), Grantor will contemporaneously herewith furnish Lenders a list
of the states wherein such equipment or goods are or will be used, and
hereafter will notify Lenders in writing (i) of any other states in
which such equipment or goods are so used, and (ii) of any change in
the location of Grantor's chief place of business.
(c) Grantor will not sell, exchange, lease or otherwise
dispose of any of Grantor's Collateral or any interest therein without
the prior written consent of Lenders; provided, however, so long is
there exists no default, Grantor may sell, exchange, lease or otherwise
dispose of (i) inventory in the ordinary course of business and (ii)
obsolete equipment.
(d) Grantor will keep Grantor's Collateral in good condition
and repair, ordinary wear and tear excepted, and will pay and discharge
all taxes, levies and other impositions levied thereon as well as the
cost of repairs to or maintenance of same, and will not permit anything
to be done that may impair the value of any of Grantor's Collateral in
any material respect. If Grantor fails to pay such sums, Lenders may do
so for Grantor's account and add the amount thereof to the other
amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of
any indebtedness secured hereby, Grantor shall be entitled to
possession of Grantor's Collateral and to use the same in any lawful
manner, provided that such use does not cause excessive wear and tear
to Grantor's Collateral, cause it to decline in value at an excessive
rate, or violate the terms of any policy of insurance thereon.
(f) Grantor will not allow any material portion of Grantor's
Collateral to be attached to real estate in such manner as to become a
fixture or a part of any real estate.
12. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Each Grantor additionally warrants and agrees as follows:
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(a) So long as Grantor is not in default hereunder, Grantor
shall have the right to process and sell Grantor's inventory in the
regular course of business. Lenders' security interest hereunder shall
attach to all proceeds of all sales or other dispositions of Grantor's
Collateral. If at any time any such proceeds shall be represented by
any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to Lenders and subject to the security interest granted
hereby. If at any time any of Grantor's inventory is represented by any
document of title, such document of title will be delivered promptly to
Lenders and subject to the security interest granted hereby.
(b) By the execution of this Agreement, Lenders shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Grantor,
but if there is a default by Grantor in the payment of any amount due
in respect of any indebtedness secured hereby, then Lenders may, at
their election, perform some or all of the obligations provided in said
contracts to be performed by Grantor, and if Lenders incur any
liability or expenses by reason thereof, the same shall be payable by
Grantor upon demand and shall also be secured by this Agreement.
(c) At any time after Grantor is in default hereunder or under
the Loan Agreement, Lenders shall have the right to notify the account
debtors obligated on any or all of Grantor's accounts receivable to
make payment thereof directly to Lenders, and to take control of all
proceeds of any such accounts receivable. Until such time as Lenders
elect to exercise such right by mailing to Grantor written notice
thereof, Grantor is authorized, as agent of the Lenders, to collect and
enforce said accounts receivable.
13. Power of Attorney. Grantor hereby constitutes the Lenders or their
designees, as Grantor's attorneys-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Grantor's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lenders' possession;
to sign the name of Grantor on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Grantor to such address as the Lenders may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Grantor to the Lenders; to do all other acts and things necessary to carry
out this Security Agreement. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of commission or omission (other than acts of gross negligence or willful
misconduct), nor for any error of judgment or mistake of fact or law; this power
being coupled with an interest is irrevocable
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until all of the obligations secured hereby are paid in full and any and all
promissory notes executed in connection therewith are terminated and satisfied.
14. Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
15. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of the Grantors in
connection herewith shall survive the execution and delivery of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
17. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Grantors, Lenders and their respective agents have participated in the
preparation hereof.
18. Restatement of Prior Agreements. NovaVision is party to a Security
Agreement dated December 18, 1996, by and between NovaVision and Sirrom.
Biopolymer is party to a Security Agreement dated December 18, 1996, by and
between Biopolymer and Sirrom. This Agreement shall amend and restate in full
each of the foregoing Security Agreements (the "Prior Security Agreements") and
the security interest granted herein is a continuation of the security interest
granted in the Prior Security Agreements, with no impairment of the attachment
or perfection of said security interest.
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IN WITNESS WHEREOF, Grantors and Lenders have executed this Agreement,
or have caused this Agreement to be executed as of the date first above written.
Grantor:
AMERICAN CONSOLIDATED
LABORATORIES, INC.
By: /s/ Joseph A. Arena
Title: CEO
Address: 1648 E. North Market Drive
Raleigh, North Carolina 27609
NOVAVISION, INC.
By: /s/ Bart C. Gutekunst
Title: President
Address:
BIOPOLYMER CORPORATION
BY: /s/ Bart C. Gutekunst
Title: President
Address:
SALVATORI OPHTHALMIC
MANUFACTURING CORPORATION
By: /s/ Joseph A. Arena
Title: Vice President
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Address: 6416 Parklane Drive
Sarasota, Florida 34243
S-O NEBRASKA, INC.
By: /s/ Joseph A. Arena
Title: Vice President
Address:
WOLCON LABS, INC
By: /s/ Joseph A. Arena
Title: Vice President
Address:
CAROLINA CONTACT LENS, INC. ("CCL"),
By: /s/ Joseph A. Arena
Title: Vice President
Address: 1640 N. Market Drive
Raleigh, North Carolina 27609
AGENT:
SIRROM INVESTMENTS, INC.
By: /s/ Donald F. Barrickman
Title: Vice President
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Schedule 3(a)(i)
Permitted Encumbrances
(a) liens of carriers, warehousemen, mechanics and materialmen imposed
by mandatory provisions of law pursuant to operation in the ordinary course of
business for sums not yet due and payable or which are being contested in good
faith by appropriate proceedings by Grantor;
(b) liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits or in respect of pledges or deposits to
secure bids, tenders, contracts, leases or statutory obligations or to secure
obligations on surety or appeal bonds;
(c) encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property by Grantor in the operation of its business, and none of
which is violated in any material respect by existing or proposed structures or
land uses;
(d) statutory liens of banks and other financial institutions arising
during the collection of instruments in the ordinary course of business;
(e) Note payable to the Oncologic Foundation, Inc. secured by a lien on
two lathes in the Sarasota facility;
(g) TDCF $550,00 secured debt, secured by receivables, inventory and
fixed assets. Priority of liens are pari passu with liens in favor of Sirrom.
Schedule 3(a)(ii)
LOCATION OF COLLATERAL
1. ACL's collateral is located as follows:
(a) Manattee County, Florida
(b) Wake County, North Carolina
2. NovaVision's collateral is located in Wake County, North Carolina.
3. Biopolymer's collateral is located in Wake County, North Carolina
4. CCL's collateral is located as follows:
(a) Wake County, North Carolina
(b) Montogmery County, Pennsylvania (Philcon Laboratory, an
operating division of CCL
5. SOMC's collateral is located in Sarasota, Manattee County, Florida.
6. Wolcon presently has no collateral.
7. S-O presently has no collateral.