EXHIBIT 10.1
NORTH COUNTY BANK
BUSINESS LOAN AGREEMENT
Principal: $500,000.00
Loan Date:
Maturity: 05-01-1999
Loan No: 110882-2975
Call: 530
Collateral: 03-427
Account: 169728
Officer: 179
Initials
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Borrower: U.S. LABORATORIES, INC. Lender: NORTH COUNTY BANK
0000 XXXXXX XXXXX, XXXXX 00 BUSINESS BANKING ESCONDIDO
XXX XXXXX, XX 00000 000 X. XXXXXXXXX XXXXXXXXX
X.X. XXX 000000
XXXXXXXXX, XX 92046--2990
THIS BUSINESS LOAN AGREEMENT between U.S. LABORATORIES, INC. ("Borrower")
and NORTH COUNTY BANK ("Lender") is made and executed on the following
terms and conditions. Borrower has received prior commercial loans from
Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, Including those which may be described on any
exhibit or schedule attached to this Agreement. All such loans and
financial accommodations, together with all future loans and financial
accommodations from Lender to Borrower, are referred to in this Agreement
individually as the "Loan" and collectively as the "Loans." Borrower
understands and agrees that: (a) in granting, renewing, or extending any
Loan, Lender is relying upon Borrower's representations, warranties, and
agreements, as set forth in this Agreement; (b) the granting, renewing, or
extending of any Loan by Lender at all times shall be subject to Lender's
sole judgment and discretion; and (c) all such Loans shall be and shall
remain subject to the following terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of October 26, 1998, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise detained in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial
Code. All references to dollar amounts shall mean amounts in lawful money
of the United States of America.
Agreement. The word "Agreement" means this Business Loan Agreement,
as this Business Loan Agreement may be amended or modified from
time to time, together with all exhibits and schedules attached to
this Business Loan Agreement from time to time.
Borrower. The word "Borrower" means U.S. LABORATORIES, INC.. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security
for a Loan, whether real or personal property, whether granted
directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, deed
of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt,
lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or
otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in
the section titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation
each and all of the persons or entities granting a Security
Interest in any Collateral for the Indebtedness, including without
limitation all Borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts
and liabilities of Borrower to Lender, or any one or more of them,
as well as all claims by Lender against Borrower, or any one or
more of them; whether now or hereafter existing, voluntary or
involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or
jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such
Indebtedness may be or hereafter may become barred by any statute
of limitations; and whether such Indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means NORTH COUNTY BANK, its successors
and assigns.
Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial
accommodations from Lender to Borrower, whether now or hereafter
existing, and however evidenced, including without limitation those
loans and financial accommodations described herein or described on
any exhibit or schedule attached to this Agreement from time to
time.
Note. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing Borrower's
Loan obligations in favor of Lender, as well as any substitute,
replacement or refinancing note or notes therefor.
-1-
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created
by law, contract, or otherwise, evidencing, governing,
representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment
trust, conditional sale, trust receipt, lien or title retention
contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
XXXX. The word "XXXX" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of California
and is validly existing and in good standing in all states in which
Borrower is doing business. Borrower has the full power and authority to
own its properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly qualified as
a foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "XXXX," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and
Safety Code, Section 25100, et seq., or other applicable state or Federal
laws, rules, or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's ownership
of the properties, there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous waste
or substance by any person on, under, about or from any of the properties.
(b) Borrower has no knowledge of, or reason to believe that there has been
(i) any use, generation, manufacture, storage, treatment, disposal,
release, or threatened release of any hazardous waste or substance on,
under, about or from the properties by any prior owners or occupants of any
of the properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (c) Neither Borrower nor
any tenant, contractor, agent or other authorized user of any of the
properties shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, about or from any of
the properties; and any such activity shall be conducted in compliance with
all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances
described above. Borrower authorizes Lender and its agents to enter upon
the properties to make such inspections and tests as Lender may deem
appropriate to determine compliance of the properties with this section of
the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence in investigating the
properties for hazardous waste and hazardous substances. Borrower hereby
(a) releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties,
and expenses which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release
or threatened release of a hazardous waste or substance on the properties.
The provisions of this section of the Agreement, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected by
Lender's acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally
-2-
enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as deemed in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than those
previously disclosed to Lender in writing.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 0000 XXXXXX XXXXX, XXXXX 00, XXX XXXXX, XX
00000. Unless Borrower has designated otherwise in writing this location is
also the office or offices where Borrower keeps its records concerning the
Collateral.
Year 2000. Borrower warrants and represents that all software utilized in the
conduct of Borrower's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after January
1, 2000, and all information pertaining to such calendar dates, in the same
manner and with the same functionality as the software does respecting calendar
dates falling on or before December 31, 1999. Further, Borrower warrants and
represents that the data--related user interface functions, data--fields, and
data--related program instructions and functions of the software include the
indication of the century.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect
until such time as Borrower's Indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, executed by the guarantor named
below, on Lender's forms, and in the amount and under the conditions
spelled out in those guaranties.
Guarantor Amount
--------- ------
XXXXXXXXX XXXXXX Unlimited
Subordination. Prior to disbursement of any Loan proceeds, deliver to
Lender a subordination agreement on Lender's forms, executed by Borrower's
creditor named below, subordinating all of Borrower's indebtedness to such
creditor, or such lesser amount as may be agreed to by Lender in writing,
and any security interests in collateral securing that indebtedness to the
Loans and security interests of Lender.
Name of Creditor Amount
---------------- ------
XXXXXXXXX XXXXXX $98,000.00
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately In writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, xxxx, xxxx or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
-3-
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws. statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part
of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice,
summons, lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets,
or (c) sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan: or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
ADDITIONAL PROVISIONS.
1. COMPLIANCE CERTIFICATE REQUIREMENT IS WAIVED.
2. PRIMARY SAN DIEGO RELATED DEPOSIT RELATIONSHIP OF U.S. LABORATORIES, INC.
IS TO BE MAINTAINED AT NORTH COUNTY BANK.
3. PERSONAL DEPOSIT RELATIONSHIP OF XXXXXXXXX XXXXXX IS TO BE MAINTAINED AT
NORTH COUNTY BANK.
4. MAXIMUM ADVANCE RATE 75% OF ACCOUNTS RECEIVABLE AGED 30 DAYS OR LESS.
FINANCIAL COVENANTS.
CPA AUDITED FINANCIALS DUE ANNUALLY.
CPA COMPILED (CONSOLIDATED) FINANCIALS DUE QUARTERLY.
PERSONAL FINANCIALS ON GUARANTOR DUE ANNUALLY.
PERSONAL TAX RETURNS ON GUARANTOR DUE ANNUALLY.
COMPANY PREPARED (CONSOLIDATED) FINANCIALS DUE MONTHLY.
AGINGS CONSOLIDATION DUE MONTHLY.
-4-
BORROWING CERTIFICATE DUE MONTHLY.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all XXX and Xxxxx accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time
and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness. Lender, at its option, may, but
shall not be required to, permit the Guarantor's estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure the Event of Default.
Change In Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable. all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of SAN
DIEGO County, the State of California. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any rights
to privacy it may have with respect to such matters. Borrower
additionally waives any
-5-
and all notices of sale of participation interests, as well as all
notices of any repurchase of such participation interests. Borrower also
agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and
will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower
further waives all rights of offset or counterclaim that it may have now
or later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such purchaser
may enforce Borrower's obligation under the Loans irrespective of the
failure or insolvency of any holder of any interest in the Loans.
Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims
or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any
court costs, in addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise required
by law), and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier or deposited in the United
Stales mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by applicable law,
if there is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower will keep Lender
informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
OCTOBER 26, 1998.
BORROWER:
U.S. LABORATORIES INC
By: /S/ Xxxxxxxxx Xxxxxx
-----------------------------------------
XXXXXXXXX XXXXXX, President/Secretary
LENDER:
NORTH COUNTY BANK
By: /S/ Xxxxx Xxxxxx
----------------------------------------
Authorized Officer
-6-
NORTH COUNTY BANK
CHANGE IN TERMS AGREEMENT
Principal: $500,000.00
Loan Date
Maturity: 05-01-1999
Loan No: 110882-2975
Call: 530
Collateral: 03-427
Account: 169728
Officer: 179
Initials
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Borrower: U.S. LABORATORIES, INC. Lender: NORTH COUNTY BANK
0000 XXXXXX XXXXX, XXXXX 00 BUSINESS BANKING ESCONDIDO
XXX XXXXX, XX 00000 000 X. XXXXXXXXX XXXXXXXXX
X.X. XXX 000000
XXXXXXXXX, XX 92046--2990
Principal Amount: $500,000.00 Date of Agreement: October 26, 1998
DESCRIPTION OF EXISTING INDEBTEDNESS. REVOLVING LINE OF CREDIT DATED MAY 8,
1998 IN THE AMOUNT OF $1,700,000.00 WITH A SUBSEQUENT CHANGE IN TERMS DATED
JUNE 1, 1998.
DESCRIPTION OF COLLATERAL. UCC-1 FINANCING STATEMENT FILED ON MAY 27, 1998
AS FILE #9814861071.
DESCRIPTION OF CHANGE IN TERMS. DECREASE REVOLVING LINE OF CREDIT FROM
$1,700,000.00 TO $500,000.00. ALL OTHER TERMS AND CONDITIONS TO REMAIN
UNCHANGED.
PROMISE TO PAY. U.S. LABORATORIES, INC. ("Borrower") promises to pay to
NORTH COUNTY BANK ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Five Hundred Thousand & 00/100
Dollars ($500,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance.
Interest shall be calculated from the date of each advance until repayment
of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in
one payment of all outstanding principal plus all accrued unpaid interest
on May 1, 1999. In addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning December 1, 1998, and all subsequent
interest payments are due on the same day of each month after that. The
annual interest rate for this Agreement is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender's address shown above or at such other place as
Lender may designate in writing. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest,
then to principal, and any remaining amount to any unpaid collection costs
and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an independent index which is
the WALL STREET JOURNAL PRIME RATE (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that
Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each DAY. The Index currently is
8.000%. The interest rate to be applied to the unpaid principal balance of
this Agreement will be at a rate equal to the Index, resulting in an
Initial rate of 8.000%. NOTICE: Under no circumstances will the interest
rate on this Agreement be more than the maximum rate allowed by applicable
law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full
prepayment of this Agreement, Borrower understands that Lender is entitled
to a minimum interest charge of $100.00. Other than Borrower's obligation
to pay any minimum interest charge, Borrower may pay without penalty all or
a portion of the amount owed earlier than it is due. Early payments will
not, unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest. Rather,
they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $25.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition
contained in this Agreement or any agreement related to this Agreement, or
in any other agreement or loan Borrower has with Lender. (c) Borrower
defaults under any loan, extension of credit, security agreement, purchase
or sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations
under this Note or any of the Related Documents. (d) Any representation or
statement made or furnished to Lender by Borrower or on Borrower's behalf
is false or misleading in any material respect either now or at the time
made or furnished. (e) Borrower becomes insolvent, a receiver is appointed
for any part of Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien
or security interest. This includes a garnishment of any of Borrower's
accounts with Lender. (g) Any guarantor dies or any of the other events
described in this default section occurs with respect to any guarantor of
this Agreement. (h) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this
Agreement within the preceding twelve (12) months, it may be cured (and no
event of default will have occurred) if Borrower, after receiving written
notice from Lender demanding cure of such default: (a) cures the default
within fifteen (15) days; or (b) if the cure requires more than fifteen
(15) days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.
-7-
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Agreement and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that amount.
Upon Borrower's failure to pay all amounts declared due pursuant to this
section, including failure to pay upon final maturity, Lender, at its
option, may also, if permitted under applicable law, increase the variable
interest rate on this Agreement to 5.000 percentage points over the Index.
Lender may hire or pay someone else to help collect this Agreement if
Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower
also will pay any court costs, in addition to all other sums provided by
law. This Agreement has been delivered to Lender and accepted by Lender In
the State of California. If there Is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of SAN DIEGO
County, the State of California. This Agreement shall be governed by and
construed In accordance with the laws of the State of California,
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender
all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all XXX and
Xxxxx accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on
this Agreement against any and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit.
Advances under this Agreement, as well as directions for payment from
Borrower's accounts, may be requested orally or in writing by Borrower or
by an authorized person. Lender may, but need not, require that all oral
requests be confirmed in writing. The following party or parties are
authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: XXXXXXXXX XXXXXX, President/Secretary.
Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to
any of Borrower's accounts with Lender. The unpaid principal balance owing
on this Agreement at any time may be evidenced by endorsements on this
Agreement or by Lender's internal records, including daily computer
print-outs. Lender will have no obligation to advance funds under this
Agreement if: (a) Borrower or any guarantor is in default under the terms
of this Agreement or any agreement that Borrower or any guarantor has with
Lender, including any agreement made in connection with the signing of this
Agreement; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Agreement or any other
loan with Lender; or (d) Borrower has applied funds provided pursuant to
this Agreement for purposes other than those authorized by Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the
terms of the original obligation or obligations, including all agreements
evidenced or securing the obligation(s), remain unchanged and in full force
and effect. Consent by Lender to this Agreement does not waive Lender's
right to strict performance of the obligation(s) as changed, nor obligate
Lender to make any future change in terms. Nothing in this Agreement will
constitute a satisfaction of the obligation(s). It is the intention of
Lender to retain as liable parties all makers and endorsers of the original
obligation(s), including accommodation parties, unless a party is expressly
released by Lender in writing. Any maker or endorser, including
accommodation makers, will not be released by virtue of this Agreement. If
any person who signed the original obligation does not sign this Agreement
below, then all persons signing below acknowledge that this Agreement is
given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement
or otherwise will not be released by it. This waiver applies not only to
any initial extension, modification or release, but also to all such
subsequent actions.
CALIFORNIA VEHICLE CODE WAIVER. The provisions of Section 1808.21 of the
California Vehicle Code are hereby waived. I/we understand that this waiver
will give the Bank authority to receive my/our current residence address at
any time from the Department of Motor Vehicles.
ADDITIONAL PROVISIONS. THIS NOTE IS SECURED BY A COMMERCIAL SECURITY
AGREEMENT DATED OCTOBER 26, 1998.
MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The
inclusion of specific default provisions or rights of Lender shall not
preclude Lender's right to declare payment of this Agreement on its demand.
Lender may delay or forgo enforcing any of its rights or remedies under
this Agreement without losing them. Borrower and any other person who
signs, guarantees or endorses this Agreement, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for
payment, protest and notice of dishonor. Upon any change in the terms of
this Agreement, and unless otherwise expressly stated in writing, no party
who signs this Agreement, whether as maker, guarantor, accommodation maker
or endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this
loan, or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the party with
whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
U.S. LABORATORIES C.
By: /S/ Xxxxxxxxx Xxxxxx
---------------------------------------
XXXXXXXXX XXXXXX, President/Secretary
-8-
COMMERCIAL GUARANTY
Principal:
Loan Date:
Maturity:
Loan No.:
Call: 530
Collateral: 03-427
Account: 169728
Officer: 179
Initials:
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: U.S. LABORATORIES, INC. Lender: NORTH COUNTY BANK
0000 XXXXXX XXXXX, XXXXX 00 BUSINESS BANKING ESCONDIDO
XXX XXXXX, XX 00000 000 X. XXXXXXXXX XXXXXXXXX
X.X. XXX 000000
XXXXXXXXX, XX 00000-0000
Guarantor: XXXXXXXXX XXXXXX
00000 XXXXXXX XXXXXX XXXX
XXXXX, XX 00000
AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration,
XXXXXXXXX XXXXXX ("Guarantor") absolutely and unconditionally guarantees
and promises to pay to NORTH COUNTY BANK ("Lender") or Its order, on
demand, in legal tender of the United States of America, the Indebtedness
(as that term is defined below) of U.S. LABORATORIES, INC. ("Borrower") to
Lender on the terms and conditions set forth in this Guaranty. Under this
Guaranty, the liability of Guarantor is unlimited and the obligations of
Guarantor are continuing.
DEFINITIONS. The following words shall have the following meanings when
used in this Guaranty:
Borrower. The word "Borrower" means U.S. LABORATORIES, INC.
Guarantor. The word "Guarantor" means XXXXXXXXX XXXXXX.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor
for the benefit of Lender dated October 26, 1998.
Indebtedness. The word "Indebtedness" is used in its most
comprehensive sense and means and includes any and all of
Borrower's liabilities, obligations, debts, and indebtedness to
Lender, now existing or hereinafter incurred or created, including,
without limitation, all loans, advances, interest, costs, debts,
overdraft indebtedness, credit card indebtedness, lease
obligations, other obligations, and liabilities of Borrower, or any
of them, and any present or future judgments against Borrower, or
any of them; and whether any such indebtedness is voluntarily or
involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined; whether
Borrower may be liable individually or jointly with others, or
primarily or secondarily, or as guarantor or surety; whether
recovery on the indebtedness may be or may become barred or
unenforceable against Borrower for any reason whatsoever; and
whether the Indebtedness arises from transactions which may be
voidable on account of infancy, insanity, ultra virus, or otherwise.
Lender. The word "Lender" means NORTH COUNTY BANK, its successors
and assigns.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when
due, whether at maturity or earlier by reason of acceleration or otherwise,
of all Indebtedness. Accordingly, no payments made upon the Indebtedness
will discharge or diminish the continuing liability of Guarantor in
connection with any remaining portions of the Indebtedness or any of the
Indebtedness which subsequently arises or is thereafter incurred or
contracted. Any married person who signs this Guaranty hereby expressly
agrees that recourse may be had against both his or her separate property
and community property.
DURATION OF GUARANTY. This Guaranty will take effect when received by
Lender without the necessity of any acceptance by Lender, or any notice to
Guarantor or to Borrower, and will continue in full force until all
Indebtedness incurred or contracted before receipt by Lender of any notice
of revocation shall have been fully and finally paid and satisfied and all
other obligations of Guarantor under this Guaranty shall have been
performed in full. If Guarantor elects to revoke this Guaranty, Guarantor
may only do so in writing. Guarantor's written notice of revocation must be
mailed to Lender, by certified mail, at the address of Lender listed above
or such other place as Lender may designate in writing. Written revocation
of this Guaranty will apply only to advances or new indebtedness created
after actual receipt by Lender of Guarantor's written revocation. For this
purpose and without limitation, the term "new Indebtedness" does not
include Indebtedness which at the time of notice of revocation is
contingent, unliquidated, undetermined or not due and which later becomes
absolute, liquidated, determined or due. This Guaranty will continue to
bind Guarantor for all Indebtedness incurred by Borrower or committed by
Lender prior to receipt of Guarantor's written notice of revocation,
including any extensions, renewals, substitutions or modifications of the
Indebtedness. All renewals, extensions, substitutions, and modifications of
the Indebtedness granted after Guarantor's revocation, are contemplated
under this Guaranty and, specifically will not be considered to be new
Indebtedness. This Guaranty shall bind the estate of Guarantor as to
Indebtedness created both before and after the death or incapacity of
Guarantor, regardless of Lender's actual notice of Guarantor's death.
Subject to the foregoing, Guarantor's executor or administrator or other
legal representative may terminate this Guaranty in the same manner in
which Guarantor might have terminated it and with the same effect. Release
of any other guarantor or termination of any other guaranty of the
indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors
shall not affect the liability of any remaining Guarantors under this
Guaranty. The obligations of Guarantor under this Guaranty shall be in
addition to any obligations of Guarantor, or any of them, under any other
guaranties of the Indebtedness of Borrower or any other person heretofore
or hereafter given to Lender unless such other guaranties are modified or
revoked in writing; and this Guaranty shall not, unless herein provided,
affect, invalidate, or supersede any such other guaranty. It is anticipated
that fluctuations may occur in the aggregate amount of indebtedness covered
by this Guaranty, and it is specifically acknowledged and agreed by
Guarantor that reductions in the amount of Indebtedness, even to zero
dollars ($0.00), prior to written revocation of this Guaranty by Guarantor
shall not constitute a termination of this Guaranty. This Guaranty is
binding upon Guarantor and Guarantor's heirs, successors and assigns so
long as any of the guaranteed Indebtedness remains unpaid and even though
the Indebtedness guaranteed may from time to time be zero dollars ($0.00).
-9-
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and
without lessening Guarantor's liability under this Guaranty, from time
to time: (a) prior to revocation as set forth above, to make one or more
additional secured or unsecured loans to Borrower, to lease equipment or
other goods to Borrower, or otherwise to extend additional credit to
Borrower; (b) to alter, compromise, renew, extend, accelerate, or
otherwise change one or more times the time for payment or other terms
of the Indebtedness or any part of the Indebtedness, including increases
and decreases of the rate of interest on the Indebtedness; extensions
may be repeated and may be for longer than the original loan term; (c)
to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or. decide
not to perfect, and release any such security, with or without the
substitution of new collateral; (d) to release, substitute, agree not to
xxx, or deal with any one or more of Borrower's sureties, endorsers, or
other guarantors on any terms or in any manner Lender may choose; (e) to
determine how, when and what application of payments and credits shall
be made on the indebtedness; (f) to apply such security and direct the
order or manner of sale thereof, including without limitation, any
nonjudicial sale permitted by the terms of the controlling security
agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations In all or any
part of the Indebtedness; and (h) to assign or transfer this Guaranty in
whole or In part,
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that (a) no representations or agreements of any kind
have been made to Guarantor which would limit or qualify in any way the
terms of this Guaranty; (b) this Guaranty is executed at Borrower's
request and not at the request of Lender; (c) Guarantor has full power,
right and authority to enter into this Guaranty; (d) the provisions of
this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result
in a violation of any law, regulation, court decree or order applicable
to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer, or otherwise dispose of all or substantially all of
Guarantor's assets, or any interest therein; (f) upon Lender's request,
Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which
currently has been, and all future financial information which will be
provided to Lender is and will be true and correct in all material
respects and fairly present the financial condition of Guarantor as of
the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the date of
the most recent financial statements provided to Lender and no event has
occurred which may materially adversely affect Guarantor's financial
condition; (h) no litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Guarantor is pending or threatened; (i) Lender has made no
representation to Guarantor as to the creditworthiness of Borrower; and
(j) Guarantor has established adequate means of obtaining from Borrower
on a continuing basis information regarding Borrower's financial
condition. Guarantor agrees to keep adequately informed from such means
of any facts, events, or circumstances which might in any way affect
Guarantor's risks under this Guaranty, and Guarantor further agrees
that, absent a request for information, Lender shall have no obligation
to disclose to Guarantor any information or documents acquired by Lender
in the course of its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor
waives any right to require Lender to (a) make any presentment, protest,
demand, or notice of any kind, including notice of change of any terms
of repayment of the Indebtedness, default by Borrower or any other
guarantor or surety, any action or nonaction taken by Borrower, Lender,
or any other guarantor or surety of Borrower, or the creation of new or
additional Indebtedness; (b) proceed against any person, including
Borrower, before proceeding against Guarantor; (c) proceed against any
collateral for the Indebtedness, including Borrower's collateral, before
proceeding against Guarantor; (d) apply any payments or proceeds
received against the Indebtedness in any order; (e) give notice of the
terms, time, and place of any sale of the collateral pursuant to the
Uniform Commercial Code or any other law governing such sale; (f)
disclose any information about the Indebtedness, the Borrower, the
collateral, or any other guarantor or surety, or about any action or
nonaction of Lender; or (g) pursue any remedy or course of action in
Lender's power whatsoever.
Guarantor also waives any and all rights or defenses arising by reason
of (h) any disability or other defense of Borrower, any other guarantor
or surety or any other person; (i) the cessation from any cause
whatsoever, other than payment in full, of the Indebtedness; (j) the
application of proceeds of the Indebtedness by Borrower for purposes
other than the purposes understood and intended by Guarantor and Lender;
(k) any act of omission or commission by Lender which directly or
indirectly results in or contributes to the discharge of Borrower or any
other guarantor or surety, or the Indebtedness, or the loss or release
of any collateral by operation of law or otherwise; (I) any statute of
limitations in any action under this Guaranty or on the Indebtedness; or
(m) any modification or change in terms of the indebtedness, whatsoever,
including without limitation, the renewal, extension, acceleration, or
other change in the time payment of the Indebtedness is due and any
change in the interest rate, and including any such modification or
change in terms after revocation of this Guaranty on Indebtedness
incurred prior to such revocation.
Guarantor waives all rights and any defenses arising out of an election
of remedies by Lender even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower by operation of Section 580d of the
California Code of Civil Procedure or otherwise.
Guarantor waives all rights and defenses that Guarantor may have because
Borrower's obligation is secured by real property. This means among
other things: (1) Lender may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by
Borrower. (2) If Lender forecloses on any real property collateral
pledged by Borrower: (A) The amount of Borrower's obligation may be
reduced only by the price for which the collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale
price. (B) Lender may collect from Guarantor even if Lender, by
foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Borrower. This is an unconditional
waiver of any rights and defenses Guarantor may have because Borrower's
obligation is secured by real property. These rights and defenses
include, but are not limited to, any rights and defenses based upon
Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.
Guarantor understands and agrees that the foregoing waivers are waivers
of substantive rights and defenses to which Guarantor might otherwise be
entitled under state and federal law. The rights and defenses waived
include, without limitation, those provided by California laws of
suretyship and guaranty, anti-deficiency laws, and the Uniform
Commercial Code. Guarantor acknowledges that Guarantor has provided
these waivers of rights and defenses with the intention that they be
fully relied upon by Lender. Until all Indebtedness is paid in full,
Guarantor waives any right to enforce any remedy Lender may have against
Borrower or any other guarantor, surety, or other person, and further,
Guarantor waives any right to participate in any collateral for the
Indebtedness now or hereafter held by Lender.
If now or hereafter (a) Borrower shall be or become insolvent, and (b)
the Indebtedness shall not at all times until paid be fully secured by
collateral pledged by Borrower, Guarantor hereby forever waives and
relinquishes in favor of Lender and Borrower, and their respective
successors, any claim or right to payment Guarantor may now have or
hereafter have or acquire against Borrower, by subrogation or otherwise,
so that at no time shall Guarantor be or become a "creditor" of Borrower
within the meaning of 11 U.S.C. section 547(b), or any successor
provision of the Federal bankruptcy laws.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants
and agrees that each of the waivers set forth above is made with
Guarantor's full knowledge of its significance and consequences and
that, under the circumstances, the waivers are reasonable and not
contrary to public policy or law. If any such waiver is determined to be
contrary to any applicable law or public policy, such waiver shall be
effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of
setoff against the moneys, securities or other property of Guarantor
given to Lender by law, Lender shall have, with respect to Guarantor's
obligations to Lender under this Guaranty and to the extent permitted
by law, a contractual security interest in and a right of setoff
against, and Guarantor hereby assigns, conveys, delivers, pledges, and
transfers to Lender all of Guarantor's right, title and interest in and
to, all deposits, moneys, securities and other property of Guarantor now
or hereafter in the possession of or on deposit with Lender, whether
held in a general or special account or deposit, whether held jointly
with someone else, or whether held for safekeeping or otherwise,
excluding however all XXX, Xxxxx, and trust accounts. Every such
security interest and right of setoff may be exercised without demand
upon or notice
-10-
to Guarantor. No security interest or right of setoff shall be deemed to
have been waived by any act or conduct on the part of Lender or by any
neglect to exercise such right of setoff or to enforce such security
interest or by any delay in so doing. Every right of setoff and security
interest shall continue in full force and effect until such right of
setoff or security interest is specifically waived or released by an
instrument in writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter
created, shall be prior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes
insolvent. Guarantor hereby expressly subordinates any claim Guarantor may
have against Borrower, upon any account whatsoever, to any claim that
Lender may now or hereafter have against Borrower. In the event of
insolvency and consequent liquidation of the assets of Borrower, through
bankruptcy, by an assignment for the benefit of creditors, by voluntary
liquidation, or otherwise, the assets of Borrower applicable to the payment
of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or
acquire against Borrower or against any assignee or trustee in bankruptcy
of Borrower; provided however, that such assignment shall be effective only
for the purpose of assuring to Lender full payment in legal tender of the
Indebtedness. If Lender so requests, any notes or credit agreements now or
hereafter evidencing any debts or obligations of Borrower to Guarantor
shall be marked with a legend that the same are subject to this Guaranty
and shall be delivered to Lender. Guarantor agrees, and Lender hereby is
authorized, in the name of Guarantor, from time to time to execute and file
financing statements and continuation statements and to execute such other
documents and to take such other actions as Lender deems necessary or
appropriate to perfect, preserve and enforce its rights under this
Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Guaranty:
Integration, Amendment. Guarantor warrants, represents and agrees
that this Guaranty, together with any exhibits or schedules
incorporated herein, fully incorporates the agreements and
understandings of Guarantor with Lender with respect to the subject
matter hereof and all prior negotiations, drafts, and other
extrinsic communications between Guarantor and Lender shall have no
evidentiary effect whatsoever. Guarantor further agrees that
Guarantor has read and fully understands the terms of this
Guaranty; Guarantor has had the opportunity to be advised by
Guarantor's attorney with respect to this Guaranty; the Guaranty
fully reflects Guarantor's intentions and parole evidence is not
required to interpret the terms of this Guaranty. Guarantor hereby
indemnities and holds Lender harmless from all losses, claims,
damages, and costs (including Lender's attorneys' fees) suffered or
incurred by Lender as a result of any breach by Guarantor of the
warranties, representations and agreements of this paragraph. No
alteration or amendment to this Guaranty shall be effective unless
given in writing and signed by the parties sought to be charged or
bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and
accepted by Lender in the State of California. If there is a
lawsuit, Guarantor agrees upon Lender's request to submit to the
jurisdiction of the courts of SAN DIEGO County, State of
California. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all
of Lender's costs and expenses, including attorneys' fees and
Lender's legal expenses, incurred in connection with the
enforcement of this Guaranty. Lender may pay someone else to help
enforce this Guaranty, and Guarantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
attorneys' fees and legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Guarantor also shall pay all
court costs and such additional fees as may be directed by the
court.
Notices. All notices required to be given by either party to the
other under this Guaranty shall be in writing, may be sent by
telefacsimile (unless otherwise required by law), and, except for
revocation notices by Guarantor, shall be effective when actually
delivered or when deposited with a nationally recognized overnight
courier, or when deposited in the United States mail, first class
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above or to such other addresses as
either party may designate to the other in writing. All revocation
notices by Guarantor shall be in writing and shall be effective
only upon delivery to Lender as provided above in the section
titled "DURATION OF GUARANTY." If there is more than one Guarantor,
notice to any Guarantor will constitute notice to all Guarantors.
For notice purposes, Guarantor agrees to keep Lender informed at
all times of Guarantor's current address.
Interpretation. In all cases where there is more than one Borrower
or Guarantor, then all words used in this Guaranty in the singular
shall be deemed to have been used in the plural where the context
and construction so require; and where there is more than one
Borrower named in this Guaranty or when this Guaranty is executed
by more than one Guarantor, the words "Borrower" and "Guarantor"
respectively shall mean all and any one or more of them. The words
"Guarantor," "Borrower," and "Lender" include the heirs,
successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are
not to be used to interpret or define the provisions of this
Guaranty. If a court of competent jurisdiction finds any provision
of this Guaranty to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid
or unenforceable as to any other persons or circumstances, and all
provisions of this Guaranty in all other respects shall remain
valid and enforceable. If any one or more of Borrower or Guarantor
are corporations or partnerships, it is not necessary for Lender to
inquire into the powers of Borrower or Guarantor or of the
officers, directors, partners, or agents acting or purporting to
act on their behalf, and any Indebtedness made or created In
reliance upon the professed exercise of such powers shall be
guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under
this Guaranty unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising
any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Guaranty shall not
prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision
of this Guaranty. No prior waiver by Lender, nor any course of
dealing between Lender and Guarantor, shall constitute a waiver of
any of Lender's rights or of any of Guarantor's obligations as to
any future transactions. Whenever the consent of Lender is required
under this Guaranty, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF
THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED "DURATION OF
GUARANTY." NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS
GUARANTY EFFECTIVE. THIS GUARANTY IS DATED OCTOBER 26, 1998.
GUARANTOR
X /S/ Xxxxxxxxx Xxxxxx
----------------------------------
XXXXXXXXX XXXXXX
-11-
NORTH COUNTY BANK
COMMERCIAL SECURITY AGREEMENT
Principal: $500,000.00
Loan Date:
Maturity: 05-01-1999
Loan No.: 110882-2975
Call: 530
Collateral: 03-427
Account: 169728
Officer: 179
Initials
References in the shaded area are for Lender's use only and do not limit
the applicability of this document to any particular loan or item.
Borrower: U.S. LABORATORIES, INC. Lender: NORTH COUNTY BANK
0000 XXXXXX XXXXX, XXXXX 00 BUSINESS BANKING ESCONDIDO
XXX XXXXX, XX 00000 000 X. XXXXXXXXX XXXXXXXXX
X.X. XXX 000000
XXXXXXXXX, XX 00000-0000
THIS COMMERCIAL SECURITY AGREEMENT is entered into between U.S.
LABORATORIES, INC. (referred to below as "Grantor"); and NORTH COUNTY BANK
(referred to below as "Lender"). For valuable consideration, Grantor grants
to Lender a security interest in the Collateral to secure the Indebtedness
and agrees that Lender shall have the rights stated in this Agreement with
respect to the Collateral, in addition to all other rights which Lender may
have by law.
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement shall
have the meanings attributed to such terms in the Uniform Commercial Code.
All references to dollar amounts shall mean amounts in lawful money of the
United States of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and
schedules attached to this Commercial Security Agreement from time
to time.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment, general
intangibles and fixtures, together with the following
specifically described property: THIS COMMERCIAL SECURITY
AGREEMENT COVERS A UCC-1 FINANCING STATEMENT FILED ON
MAY 27, 1998 AS FILE #9814861071.
In addition, the word "Collateral" includes all the following,
whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of
and substitutions for any property described above.
(b) All products and produce of any of the property described
in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described
in this Collateral section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the
property described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic
media, together with all of Grantor's right, title, and
interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on
electronic media.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in
the section titled "Events of Default."
Grantor. The word "Grantor" means U.S. LABORATORIES, INC., its
successors and assigns
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest,
together with all other indebtedness and costs and expenses for
which Grantor is responsible under this Agreement or under any of
the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them, to
Lender, as well as all claims by Lender against Grantor, or any one
or more of them, whether existing now or later; whether they are
voluntary or involuntary, due or not due, direct or indirect,
absolute or contingent, liquidated or unliquidated; whether Grantor
may be liable individually or jointly with others; whether Grantor
may be obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such indebtedness may be or
hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means NORTH COUNTY BANK, its successors
and assigns.
Note. The word "Note" means the Change in Terms Agreement between
Borrower and Lender dated October 26, 1998, which modifies the
following described existing indebtedness: REVOLVING LINE OF CREDIT
DATED MAY 8, 1998 IN THE AMOUNT OF $1,700,000.00 WITH A SUBSEQUENT
CHANGE IN TERMS DATED JUNE 1, 1998.
-12-
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual security
interest in and hereby assigns, conveys, delivers, pledges, and transfers
all of Grantor's right, title and interest in and to Grantor's accounts
with Lender (whether checking, savings, or some other account), including
all accounts held jointly with someone else and all accounts Grantor may
open in the future, excluding, however, all XXX and Xxxxx accounts, and all
trust accounts for which the grant of a security Interest would be
prohibited by law. Grantor authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all Indebtedness against any and all
such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of
Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of the Indebtedness is paid in full and
even though for a period of time Grantor may not be Indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles. the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account; and no
agreement under which any deductions or discounts may be claimed shall have
been made with the account debtor except those disclosed to Lender in
writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business. Grantor shall not remove the Collateral
from its existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles,
or other titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles
outside the State of California, without the prior written consent of
Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale in
the ordinary course of Grantor's business does not include a transfer in
partial or total satisfaction of a debt or any bulk sale. Grantor shall not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right
to the security interests granted under this Agreement. Unless waived by
Lender, all proceeds from any disposition of the Collateral (for whatever
reason) shall be held in trust for Lender and shall not be commingled with
any other funds; provided however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including
such information as Lender may require, including without limitation names
and addresses of account debtors and agings of accounts and general
intangibles. Insofar as the Collateral consists of inventory and equipment,
Grantor shall deliver to Lender, as often as Lender shall require, such
lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral.
Such information shall be submitted for Grantor and each of its
subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or damage of or
to any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount
of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs,, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
-13-
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("XXXX"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health
and Safety Code, Section 25100, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms "hazardous waste" and "hazardous substance" shall also
include, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the Collateral
for hazardous wastes and substances. Grantor hereby (a) releases and waives
any future claims against Lender for indemnity or contribution in the event
Grantor becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all claims
and losses resulting from a breach of this provision of this Agreement.
This obligation to indemnify shall survive the payment of the Indebtedness
and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written
notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor
or any other person. in connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require.
In no event shall the insurance be in an amount less than the amount agreed
upon in the Agreement to Provide Insurance. If Grantor at any time fails to
obtain or maintain any insurance as required under this Agreement, Lender
may (but shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if it so chooses "single interest insurance," which
will cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which have
not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the payment
of premiums shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (e) the then current value on the basis of which
insurance has been obtained and the manner of determining that value; and
(f) the expiration date of the policy. In addition, Grantor shall upon
request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or alter an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due on
the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
-14-
Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of
any other creditor or person that may materially affect any of
Borrower's property or Borrower's or any Grantor's ability to repay
the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement, the
Note or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or
lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent. Lender, at its option, may, but shall not be required
to, permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure the Event of Default.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within fifteen (15) days; or
(b), if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time
of repossession, Grantor agrees Lender may take such other goods, provided
that Lender makes reasonable efforts to return them to Grantor after
repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name
or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender will give
Grantor reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The
requirements of reasonable notice shall be met if such notice is given at
least ten (10) days, or such lesser time as required by state law, before
the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling the Collateral,
shall become a part of the Indebtedness secured by this Agreement and shall
be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the Indebtedness secured by this Agreement and shall be payable on
demand, until interest at the Note rate from date of expenditure until
repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the indebtedness or apply it to payment of the Indebtedness in
such order of preference as Lender may determine. Insofar as the Collateral
consists of accounts, general intangibles, insurance policies, instruments,
chattel paper, chooses in action, or similar property, Lender may demand,
collect, receipt for, settle, compromise, adjust, xxx for, foreclose, or
realize on the Collateral as Lender may determine, whether or not
Indebtedness or Collateral is then due. For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor; change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to
exercise its remedies.
-15-
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of the
State of California. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all
of Lender's costs and expenses, including attorneys' fees and
Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to help
enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
attorneys' fees and legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court
costs and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Notices. All notices required to be given under this Agreement
shall be given in writing, may be sent by telefacsimile (unless
otherwise required by law), and shall be effective when actually
delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address
for notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable
law, if there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of Grantor's current
address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of
substitution to do the following: (a) to demand, collect, receive,
receipt for, xxx and recover all sums of money or other property
which may now or hereafter become due, owing or payable from the
Collateral; (b) to execute, sign and endorse any and all claims,
instruments, receipts, checks, drafts or warrants issued in payment
for the Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of
Grantor, to execute and deliver its release and settlement for the
claim; and (d) to file any claim or claims or to take any action or
institute or take part in any proceedings, either in its own name
or in the name of Grantor, or otherwise, which in the discretion of
Lender may seem to be necessary or advisable. This power is given
as security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in full
force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
Indebtedness and, at Lender's option, shall be payable by Borrower
as provided above in the "EXPENDITURES BY LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or
validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon
and inure to the benefit of the parties, their successors and
assigns.
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising
any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required
under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated
for the Indebtedness, Borrower irrevocably waives, disclaims and
relinquishes all claims against such other person which Borrower
has or would otherwise have by virtue of payment of the
indebtedness or any part thereof, specifically including but not
limited to all rights of indemnity, contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS
DATED OCTOBER 26, 1998,
GRANTOR:
U.S. LABORATORIES INC.
By: /S/ Xxxxxxxxx Xxxxxx
-------------------------------------
XXXXXXXXX XXXXXX, President
-16-
SUBORDINATION AGREEMENT
Principal: $500,000.00
Loan Date:
Maturity: 05-01-1999
Loan No.: 110882-2975
Call: 530
Collateral: 03-427
Account: 169728
Officer: 179
Initials
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to an particular loan or item.
Borrower: U.S. LABORATORIES, INC. Lender: NORTH COUNTY BANK
0000 XXXXXX XXXXX, XXXXX 00 BUSINESS BANKING ESCONDIDO
XXX XXXXX, XX 00000 000 X. XXXXXXXXX XXXXXXXXX
X.X. XXX 000000
XXXXXXXXX, XX 00000-0000
Creditor: XXXXXXXXX XXXXXX
00000 XXXXXXX XXXXXX XXXX
XXXXX, XX 00000
THIS SUBORDINATION AGREEMENT is entered into among U.S. LABORATORIES, INC.
("Borrower"), whose address is 0000 XXXXXX XXXXX, XXXXX 00, XXX XXXXX, XX
00000; NORTH COUNTY BANK ("Lender"), whose address Is 000 X. XXXXXXXXX
XXXXXXXXX, X.X. XXX 000000, XXXXXXXXX, XX 00000-0000; and XXXXXXXXX XXXXXX
("Creditor"), whose address is 00000 XXXXXXX XXXXXX XXXX, XXXXX, XX 00000.
As of this date, October 26, 1998, Borrower is indebted to Creditor in the
aggregate amount of Ninety Eight Thousand & 00/100 Dollars ($98,000.00).
This amount is the total indebtedness of every kind from Borrower to
Creditor. Borrower and Creditor each want Lender to provide financial
accommodations to Borrower in the form of (a) new credit or loan advances,
(b) an extension of time to pay or other compromises regarding all or part
of Borrower's present indebtedness to Lender, or (c) other benefits to
Borrower. Borrower and Creditor each represent and acknowledge to Lender
that Creditor will benefit as a result of these financial accommodations
from Lender to Borrower, and Creditor acknowledges receipt of valuable
consideration for entering into this Agreement. Based on the
representations and acknowledgments contained in this Agreement, Creditor
and Borrower agree with Lender as follows:
DEFINITIONS. The following words shall have the following meanings when
used in this Agreement. Terms not otherwise defined in this Agreement shall
have the meanings attributed to such terms in the Uniform Commercial Code.
All references to dollar amounts shall mean amounts in lawful money of the
United States of America.
Agreement. The word "Agreement" means this Subordination Agreement,
as this Subordination Agreement may be amended or modified from
time to time, together with all exhibits and schedules attached to
this Subordination Agreement from time to time.
Borrower. The word "Borrower" means U.S. LABORATORIES, INC.
Creditor. The word "Creditor" means XXXXXXXXX XXXXXX.
Lender. The word "Lender" means NORTH COUNTY BANK, its successors and
assigns.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment
trust, conditional sale, trust receipt, lien or title retention
contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
Subordinated Indebtedness, The words "Subordinated Indebtedness"
mean and include without limitation all present and future
indebtedness, obligations, liabilities, claims, rights, and demands
of any kind which may be now or hereafter owing from Borrower to
Creditor. The term "Subordinated Indebtedness" is used in its
broadest sense and includes without limitation all principal, all
interest, all costs and attorneys' fees, all sums paid for the
purpose of protecting the rights of a holder of security (such as a
secured party paying for insurance on collateral if the owner fails
to do so), all contingent obligations of Borrower (such as a
guaranty), and all other obligations, secured or unsecured, of any
nature whatsoever.
Superior Indebtedness. The words "Superior Indebtedness" mean and
include without limitation all present and future indebtedness,
obligations, liabilities, claims, rights, and demands of any kind
which may be now or hereafter owing from Borrower to Lender. The
term "Superior Indebtedness" is used in its broadest sense and
includes without limitation all principal, all interest, all costs
and attorneys' fees, all sums paid for the purpose of protecting
Lender's rights in security (such as paying for insurance on
collateral if the owner fails to do so), all contingent obligations
of Borrower (such as a guaranty), all obligations arising by reason
of Borrower's accounts with Lender (such as an overdraft on a
checking account), and all other obligations of Borrower to Lender,
secured or unsecured, of any nature whatsoever.
SUBORDINATION. All Subordinated Indebtedness of Borrower to Creditor is and
shall be subordinated in all respects to all Superior Indebtedness of
Borrower to Lender. If Creditor holds one or more Security Interests,
whether now existing or hereafter acquired, in any of Borrower's real
property or personal property, Creditor also subordinates all its Security
Interests to all Security Interests held by Lender, whether the Lender's
Security Interest or Interests exist now or are acquired later.
PAYMENTS TO CREDITOR. Except as provided below, Borrower will not make and
Creditor will not accept, at any time while any Superior Indebtedness is
owing to Lender, (a) any payment upon any Subordinated Indebtedness, (b)
any advance, transfer, or assignment of assets to Creditor in any form
whatsoever that would reduce at any time or in any way the amount of
Subordinated Indebtedness, or (c) any transfer of any assets as security
for the Subordinated Indebtedness. Notwithstanding the foregoing, Borrower
may make regularly scheduled payments of interest only to Creditor so long
as Borrower is not in default under any agreement between Lender and
Borrower. Creditor may not accelerate any amounts owed to Creditor without
Lender's prior written consent.
-17-
In the event of any distribution, division, or application, whether partial
or complete, voluntary or involuntary, by operation of law or otherwise, of
all or any part of Borrower's assets, or the proceeds of Borrower's assets,
in whatever form, to creditors of Borrower or upon any indebtedness of
Borrower, whether by reason of the liquidation, dissolution or other
winding-up of Borrower, or by reason of any execution sale, receivership,
insolvency, or bankruptcy proceeding, assignment for the benefit of
creditors, proceedings for reorganization, or readjustment of Borrower or
Borrower's properties, then and in such event, (a) the Superior
Indebtedness shall be paid in full before any payment is made upon the
Subordinated Indebtedness, and (b) all payments and distributions, of any
kind or character and whether in cash, property, or securities, which shall
be payable or deliverable upon or in respect of the Subordinated
Indebtedness shall be paid or delivered directly to Lender for application
in payment of the amounts then due on the Superior Indebtedness until the
Superior Indebtedness shall have been paid in full.
In order that Lender may establish its right to prove claims and recover for its
own account dividends based on the Subordinated Indebtedness, Creditor does
hereby assign all its right, title, and interest in such claims to Lender.
Creditor further agrees to supply such information and evidence, provide access
to and copies of such of Creditor's records as may pertain to the Subordinated
Indebtedness, and execute such instruments as may be required by Lender to
enable Lender to enforce all such claims and collect all dividends, payments, or
other disbursements which may be made on account of the Subordinated
Indebtedness. For such purposes, Creditor hereby irrevocably authorizes Lender
in its discretion to make and present for or on behalf of Creditor such proofs
of claims on account of the Subordinated Indebtedness as Lender may deem
expedient and proper and to vote such claims in any such proceeding and to
receive and collect any and all dividends, payments, or other disbursements made
thereon in whatever form the same may be paid or issued and to apply the same on
account of the Superior Indebtedness.
Should any payment, distribution, security, or proceeds thereof be received by
Creditor at any time on the Subordinated Indebtedness contrary to the terms of
this Agreement, Creditor immediately will deliver the same to Lender in
precisely the form received (except for the endorsement or assignment of
Creditor where necessary), for application on or to secure the Superior
Indebtedness, whether it is due or not due, and until so delivered the same
shall be held in trust by Creditor as property of Lender. In the event Creditor
fails to make any such endorsement or assignment, Lender, or any of its officers
on behalf of Lender, is hereby irrevocably authorized by Creditor to make the
same.
CREDITOR'S NOTES. Creditor agrees to deliver to Lender, at Lender's request, all
notes of Borrower to Creditor, or other evidence of the Subordinated
Indebtedness, now held or hereafter acquired by Creditor, while this Agreement
remains in effect. At Lender's request, Borrower also will execute and deliver
to Creditor a promissory note evidencing any book account or claim now or
hereafter owed by Borrower to Creditor, which note also shall be delivered by
Creditor to Lender. Creditor agrees not to sell, assign, pledge or otherwise
transfer any of such notes except subject to all the terms and conditions of
this Agreement.
CREDITOR'S REPRESENTATIONS AND WARRANTIES. Creditor represents and warrants to
Lender that: (a) no representations or agreements of any kind have been made to
Creditor which would limit or qualify in any way the terms of this Agreement;
(b) this Agreement is executed at Borrower's request and not at the request of
Lender; (c) Lender has made no representation to Creditor as to the
creditworthiness of Borrower; and (d) Creditor has established adequate means of
obtaining from Borrower on a continuing basis information regarding Borrower's
financial condition. Creditor agrees to keep adequately informed from such means
of any facts, events, or circumstances which might in any way affect Creditor's
risks under this Agreement, and Creditor further agrees that Lender shall have
no obligation to disclose to Creditor information or material acquired by Lender
in the course of its relationship with Borrower.
CREDITOR'S WAIVERS. Creditor waives any right to require Lender: (a) to make,
extend, renew, or modify any loan to Borrower or to grant any other financial
accommodations to Borrower whatsoever; (b) to make any presentment, protest,
demand, or notice of any kind, including notice of any nonpayment of the
Superior Indebtedness or of any nonpayment related to any Security Interests, or
notice of any action or nonaction on the part of Borrower, Lender, any surety,
endorser, or other guarantor in connection with the Superior Indebtedness, or in
connection with the creation of new or additional Superior Indebtedness; (c) to
resort for payment or to proceed directly or at once against any person,
including Borrower; (d) to proceed directly against or exhaust any Security
Interests held by Lender from Borrower, any other guarantor, or any other
person; (e) to pursue any other remedy within Lender's power; or (f) to commit
any act or omission of any kind, at any time, with respect to any matter
whatsoever.
LENDER'S RIGHTS. Lender may take or omit any and all actions with respect to the
Superior Indebtedness or any Security Interests for the Superior Indebtedness
without affecting whatsoever any of Lender's rights under this Agreement. In
particular, without limitation, Lender may, without notice of any kind to
Creditor, (a) make one or more additional secured or unsecured loans to
Borrower; (b) repeatedly alter, compromise, renew, extend, accelerate, or
otherwise change the time for payment or other terms of the Superior
Indebtedness or any part thereof, including increases and decreases of the rate
of interest on the Superior Indebtedness; extensions may be repeated and may be
for longer than the original loan term; (c) take and hold Security Interests for
the payment of the Superior Indebtedness, and exchange, enforce, waive, and
release any such Security Interests, with or without the substitution of new
collateral; (d) release, substitute, agree not to xxx, or deal with any one or
more of Borrower's sureties, endorsers, or guarantors on any terms or manner
Lender chooses; (e) determine how, when and what application of payments and
credits, shall be made on the Superior Indebtedness; (f) apply such security and
direct the order or manner of sale thereof, as Lender in its discretion may
determine; and (g) assign this Agreement in whole or in part.
DEFAULT BY BORROWER. If Borrower becomes insolvent or bankrupt, this Agreement
shall remain in full force and effect. In the event of a corporate
reorganization or corporate arrangement of Borrower under the provisions of the
Bankruptcy Code, as amended, this Agreement shall remain in full force and
effect and the court having jurisdiction over the reorganization or arrangement
is hereby authorized to preserve such priority and subordination in approving
any such plan of reorganization or arrangement.
DURATION AND TERMINATION, This Agreement will take effect when received by
Lender, without the necessity of any acceptance by Lender, in writing or
otherwise, and will remain in full force and effect until Creditor shall notify
Lender in writing at the address shown above to the contrary. Any such notice
shall not affect the Superior Indebtedness owed Lender by Borrower at the time
of such notice, nor shall such notice affect Superior Indebtedness thereafter
granted in compliance with a commitment made by Lender to Borrower prior to
receipt of such notice, nor shall such notice affect any renewals of or
substitutions for any of the foregoing. Such notice shall affect only
indebtedness of Borrower to Lender arising after receipt of such notice and not
arising from financial assistance granted by Lender to Borrower in compliance
with Lender's obligations under a commitment. Any notes lodged with Lender
pursuant to the section titled "Creditor's Notes" above need not be returned
until this Agreement has no further force or effect.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Creditor and
Borrower agree upon Lender's request to submit to the jurisdiction of the
courts of SAN DIEGO County, State of California. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California. No provision contained in this Agreement shall be construed (a)
as requiring Lender to grant to Borrower or to Creditor any financial
assistance or other accommodations, or (b) as limiting or precluding Lender
from the exercise of Lender's own judgment and discretion about amounts and
times of payment in making loans or extending accommodations to Borrower.
Amendments. This Agreement constitutes the entire understanding and
agreement of the parties as to the matters set forth in this Agreement. No
alteration of or amendment to this Agreement shall be effective unless made
in writing and signed by Lender, Borrower, and Creditor.
Attorneys' Fees; Expenses. Creditor and Borrower agree to pay upon demand
all of Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this
-18-
Agreement, and Creditor and Borrower shall pay the costs and expenses of
such enforcement. Costs and expenses include Lender's attorneys' fees
and legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (and
including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Creditor
and Borrower also shall pay all court costs and such additional fees as
may be directed by the court.
Successors. This Agreement shall extend to and bind the respective heirs,
personal representatives, successors and assigns of the parties to this
Agreement, and the covenants of Borrower and Creditor respecting
subordination of the Subordinated Indebtedness in favor of Lender shall
extend to, include, and be enforceable by any transferee or endorsee to
whom Lender may transfer any or all of the Superior Indebtedness.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Creditor, shall constitute a waiver of any of Lender's rights or of
any of Creditor's obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such consent
by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
BORROWER AND CREDITOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
SUBORDINATION AGREEMENT, AND BORROWER AND CREDITOR AGREE TO ITS TERMS. THIS
AGREEMENT IS DATED AS OF OCTOBER 26,1998.
BORROWER:
U.S. LABORATORIES, INC.
By: /S/ Xxxxxxxxx Xxxxxx
----------------------------------
XXXXXXXXX XXXXXX, President
CREDITOR:
XXXXXXXXX XXXXXX
By: /S/ Xxxxxxxxx Xxxxxx
------------------------------------
-19-
NOTICE OF FINAL AGREEMENT
Principal: $500,000.00
Loan Date:
Maturity: 05-01-1999
Loan No.: 110882-2975
Call: 530
Collateral: 03-427
Account: 169728
Officer: 179
Initials:
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Borrower: U.S. LABORATORIES, INC. Lender: NORTH COUNTY BANK
0000 XXXXXX XXXXX, XXXXX 00 BUSINESS BANKING ESCONDIDO
XXX XXXXX, XX 00000 000 X. XXXXXXXXX XXXXXXXXX
X.X. XXX 000000
XXXXXXXXX, XX 00000-0000
BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THE WRITTEN
LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, (B) THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THE WRITTEN LOAN
AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.
As used in this Notice, the following terms have the following meanings:
Loan. The term "Loan" means the following described loan: a
Variable Rate (at WALL STREET JOURNAL PRIME RATE, making an initial
rate of 8.000%), Nondisclosable Revolving Line of Credit Loan tea
Corporation for $500,000.00 due on May 1,1999.
Parties. The term "Parties" means NORTH COUNTY BANK and any and all
entities or individuals who are obligated to repay the loan or have
pledged property as security for the Loan, including without
limitation the following:
Borrower: U.S. LABORATORIES, INC.
Guarantor: XXXXXXXXX XXXXXX
Loan Agreement. The term "Loan Agreement" means one or more
promises, promissory notes, agreements, undertakings, security
agreements, deeds of trust or other documents, or commitments, or
any combination of those actions or documents, relating to the
Loan, including without limitation the following:
NECESSARY FORMS
Corporate Resolution to Borrow Loan Agreement / Negative Pledge
Promissory Note / Change In Terms Agr. Commercial Guaranty
Security Agreement Subordination Agreement
UCC -- 1 Agreement to Provide Insurance
Disbursement Request and Authorization Notice of Final Agreement
OPTIONAL FORMS
Authorization for Payoff
Each Party who signs below, other than NORTH COUNTY BANK, acknowledges,
represents, and warrants to NORTH COUNTY BANK that it has received, read and
understood this Notice of Final Agreement. This Notice is dated October 26,
1998.
BORROWER:
U.S. LABORATORIES INC.
By: /S/ Xxxxxxxxx Xxxxxx
------------------------------
XXXXXXXXX XXXXXX, President
GUARANTOR:
X /S/ Xxxxxxxxx Xxxxxx
------------------------------------
XXXXXXXXX XXXXXX
LENDER:
NORTH COUNTY BANK
By: /S/ Xxxxx Xxxxxx
------------------------------------
Authorized Officer
-20-
