Exhibit 10.39 Gateway Acceptance Company Accounts Receivable Factor Agreement
GATEWAY ACCEPTANCE COMPANY
0000 Xxxxxxxx Xxxx., Xxxxx 000. Xxxxx, XX 00000
SECURITY AGREEMENT
Pacific Printing and Embroidery, LLC
DBA Pacific Print Works
0000 XX 000xx Xxxxxx
Xxxxxxxx XX 00000
27th Day of November, 2000
Gentlemen:
We are pleased to submit the terms upon which we shall make loans and
advances to you upon the security set forth below. For ease of reference you are
hereinafter referred to as the "Borrower" and we are hereinafter referred to as
"Gateway" and this Security Agreement shall be referred to as the "Agreement."
1. SECURITY
Borrower desires to borrow money from time to time from Gateway. As
security for all present and future obligations and liabilities (direct or
indirect, absolute or contingent, due or to become due) of Borrower to Gateway,
Borrower hereby grants to Gateway a continuing security interest in the
following collateral whether now owned or hereafter acquired: all of its present
and future accounts (including but not limited to open accounts receivable, book
debts, notes, acceptance, drafts, contracts, contract rights, chooses in action,
and all other rights to the payment of money), goods, equipment (including but
not limited to plant and office equipment, machinery and all attachments
appurtenant thereto, tools, dies, molds, jigs, bores, patterns, appliances,
trade fixtures, furniture and furnishings), fixtures, computers, computer
programs, discs, and tapes and peripheral equipment, purchase orders, insurance
policies of any nature and all proceeds whatsoever thereof, general intangibles
(including, but not Ijinited to, Borrower's name and goodwill, trademarks,
tradenames, copyrights, processes, patents, patent rights, patent applications,
licenses, inventions, royalfies and/or commissions, customer lists), chattel
paper, instruments, documents and deposit accounts, fixtures, and inventory
(including but not limited to (a) raw materials, work in process and finished
goods in all stages of production, and (b) packing and shipping material, books
and records relating to inventory, and (c) property as described in any
schedules attached hereto) as those terms are defmed in the California
Commercial Code, aircraft, motor vehicles (including not limited to automobiles,
trucks, off-road vehicles, and forklifts) and additions, accessions,
attachments, replacements, substitutions, proceeds, products, repossessions and
returns of any of the foregoing and any such other security or Collateral as
shown by written instrument of Borrower which Borrower now or hereafter gives to
Gateway and any and all other property of Borrower 5 coming into the possession
of Gateway or under Gateway's control (all collectively hereafter referred to as
"Collateral").
This Agreement is expressly declared to be a secured transaction as
defmed in the California Commercial Code. In furtherance of the continuing
security interest herein provided for, Borrower will, upon the creation of all
accounts, provide Gateway with confirmatory assignment schedules (1}ereafter
"the schedules") in form satisfactory to Gateway, provided however, Gateway
shall have a security interest in all of Borrower's accounts, without regard to
whether such schedules are provided.
Page 1 of 10
Security Agreement Continued
2. WARRANTIES AND REPRESENTATIONS
The foflowing warranties and representations are made by Borrower to Gateway,
now and at the time of each assignment, with reference to the Collateral,
including each and every account in which Gateway shall have a security interest
whether or not the account is listed in the schedules:
A. The account evidences bona fide sales and deliveries of personal property of
the sort and kind usual and normal to the business of Borrower and usually dealt
in by Borrower.
B. The account is actual, genuine, existing, absolute, bona fide, and
collectible indebtedness of the customers named therein to Borrower and payable
at the time and in the manner set forth in the assignment thereof unto Gateway.
C. No express or implied warranties or representations or guaranties or
agreements have been made to or with any customer, except those extended with
Borrower's product in the ordinary course of business, that the product is fit
for its particular purpose and meets specifications.
D. The property sold or work, labor or services performed will have been
actually delivered into the possession of and accepted before the account is
included on the schedules, by the customer who is and will be liable for and
will make payment of the amount stated in each invoice according to its terms,
without offset, defense or counterclaim of any kind whatever.
E. Borrower shall not assign, sell, transfer, pledge, encumber, mortgage,
hypothecate or otherwise create or give any security interest on any of its
property or the Collateral except to Gateway.
F. The terms of sale on the account provide for payment within 30 days of the
date of the invoice, no change of the terms shall be made except with prior
written consent of Gateway, and no account will be past due at the time of
assignment to Gateway.
G. The account is assignable and has not been assigned or transferred to anyone
other than Gateway, and is not subject to any third party claim.
H. All facts, figures, signatures, names, addresses, and representations given,
or caused to be given, by Borrower to Gateway regarding each and every account
are true, complete and correct.
I. Borrower's books and records fully and accurately reflect all of its assets
and liabilities (absolute and contingent), are kept in the ordinary course of
business in accordance with generally accepted accounting principles
consistently applied, and all information contained therein is true and correct.
J. The fair market value of the Collateral is and shall at all times be as
represented to Gateway.
K. All taxes of any governmental or taxing authority due or payable by, or
imposed, levied or assessed against Borrower shall be pald in full before
delinquency.
L. There are no actions or proceedings pending by or against Borrower before any
court or administrative agency, and there are no pending, threatened, or known
to be jaiminent litigation, governmental investigation, or claims, complaints,
or prosecutions involving Borrower except as heretofore disclosed in writing to
Gateway.
M. Borrower has the power and authority to enter into this Agreement and to
perform and discharge its obligations hereunder.
N. If Borrower is a corporation, it will do all things necessary to preserve its
good standing as a corporation under the laws of the State of California and the
state of its incorporation.
0. All Collateral given or caused to be given by Borrower to Gateway is and will
be a fir st security interest on the Collateral, and is and will be kept free
and clear of all liens, encumbrances, security interests and adverse claims
other than those created herein.
P. The Collateral is owned solely by the Borrower.
Q. The Collateral is and shall be in good condition and repair and will not
(except for sales of inventory in the ordinary course of business) be sold,
transferred or assigned or removed from the premises described herein without
first obtairfing Gateway's written consent.
Page 2 of 10
Security Agreement Continued
R. All Collateral not specifically identified by schedules hereto as
fixtures shall remain personal property and not become part of the real estate
regardless of the manner of affixation.
S. Borrower agrees to comply with the requirements of all state and
federal laws in order to grant Gateway a valid lien upon and a security interest
in the Collateral.
T. Borrower agrees to do whatever Gateway may request by way of
executing and obtaining from others warehouse leases, subordinations, filing
financing statements, amendments, renewals and continuations thereof,
cooperating with Gateway's custodian, keeping records, transferring Collateral
to Gateway's possession, obtaining waivers from landlords and mortgagees, and
performing such further acts as Gateway may require in order to effect the
purposes of this Agreement.
U. Borrower shall accept no returns m excess of 3 % of sales in any
given month and shall grant no allowances or credit in excess of that amount to
account debtors without Gateway's prior written approval. If any property
referred to or covered by any account assigned to Gateway shall remain in, or
revert to, Borrower's possession, Borrower will imrnediately set it apart, xxxx
and designate it as Gateway's property, and promptly notify Gateway.
3. ADVANCES AND CHARGES THEREON
A. Upon receipt of the schedule of assignments of accounts, Gateway
will credit Borrower with an amount up to eighty-five percent (8.5%) of the net
face amount of all qualified accounts. Gateway shall determine in its sole and
exclusive discretion the percentage amount of the credit and what accounts
qualify. Gateway will also credit Borrower with the remainder of the face amount
of such assigned accounts on payment thereof to Gateway, less deductions and
plus overpayments by account debtors. All amounts so credited, as adjusted from
time shall be the "amount available for advance."
Gateway will advance to Borrower on request, such amounts so credited
or a part thereof as requested. No advances or payments need be made by Gateway
hereunder if the financial condition of Borrower becomes unsatisfactory to
Gateway or if Borrower is in default in the payment or performance of any of its
obligations to Gateway. Each advance by Gateway to the Borrower is to be
evidenced by a note signed by the Borrower if so request by Gateway.
B. Gateway shall charge the Borrower interest on such advances at the
rate of Prime Plus Eight Percent (P+8%) per annum from the date of each advance.
Said interest will be computed the last day of each month upon the average daily
balance of advances outstanding during said month, based on a 365-day year for
days actually elapsed. Said interest will be paid by the Borrower no later than
the first day of the following month. Amounts not paid when due shall be added
to principal and shall bear interest at the above rate, and shall be deducted
from the amount available for advance. Payments received by Gateway, unless in
cash, will not be credited for 3 business days to allow for, and subject to
collection of the payment.
Borrower has represented and does represent that it will generate, in
the regular course of its business, accounts receivable which will aggregate
some $1,000,000.00 quarterly.
Each monthly accounting rendered by Gateway to Borrower of interest
charges, other charges, advances, and payments shall be deemed correct and
binding unless borrower notifies Gateway in writing to the contrary within 30
days after the date that said accounting is delivered to Borrower.
C. Prime Rate is deEmed for purposes of this Agreement as the prime or
base or reference rate on prime commercial loans as announced from time to time
by the Bank of America. In the event the Bank of America ceases to announce a
prime rate, Gateway may substitute any sintiar index published in the Wall
Street Journal or other newspaper, or the prime or base rate published by the
Federal Reserve Bank in San Francisco, or any similar published prime or base
rate, including that of any commercial bank, or any other reasonable index
commorily used by financial institutions, provided that such substitute index is
readily verifiable by Borrower and is beyond the control of Gateway, and
Borrower is notified within a reasonable time which index is being used. The
prime or base rate is not necessarily a rate commonly charged to any class of
borrowers, nor is it necessarily the lowest rate offered by any lender (e.g.,
Bank of America's lowest rates may be lower or higher than Prime Rate).
Page 3 of 10
Security Agreement - Continued
D. Prime Rate as of the date of this Agreement is 9.5% per annum. If
the Prime Rate as announced by Bank of America from time to time increases, the
Daily Loan Rate shall increase by an amount equal to 100 percent of such
increases calculated on a daily basis using a 365-day year as of the date of
such increase. Decreases in Bank of America's Prime Rate shall reduce the Daily
Loan Rate by an amount equal to 100 percent of such decreases as of the date of
such decreases calculated on a daily basis using a 365-day year.
E. The minimum charge by Gateway to the Borrower shall be $3,000.00 per
month for the term of this Agreement and during any extension or renewals
thereof. This charge shall be paid by borrower even if Borrower has no
outstanding obligations to Gateway during that month, and even if the account is
terminated by Gateway pursuant to Paragraph 15, until the end of the term set
forth in Paragraph 15B.
F. The interest charges and other charges provided for herein may be
added to the principal of Borrower's account. Past due accrued interest may, at
Gateway's option, and without notice to Borrower, be added to principal and
shall bear interest at the above rate thereafter, as adjusted from time to time.
Borrower acknowledges that this constitutes compounding of interest and
expressly consents and agrees thereto.
4. ASSIGNMENT AND PLEDGE; POWER OF ATTORNEY; AUTHORIZ~ON RE THIRD PARTIES
A. Contemporaneously with the making of each loan by Gateway to
Borrower and in addition to the assignment contained herein and in confirmation
thereof, Borrower will, upon demand by Gateway, assign in writing to Gateway
with full recourse as security for the loan and for all obligations of Borrower
to Gateway, accounts created by Borrower in the ordinary and normal course of
its business, and accounts will conform to all of the warranties set forth in
Paragraph 2 of this Agreement; provided, however, Gateway shall have a security
interest in such accounts without regard to whether such assignment is requested
by or delivered to Gateway. All documents to be delivered by Borrower shall
contain such terms and be in such form as Gateway may from time to time require.
Gateway shall have a security interest in all of Borrower's books and records,
including; but not limited to: minute books, ledgers, records indicating,
summarizing or evidencing Borrower's assets, accounts, business operations or
financial condition; computer programs, computer cards, discs or tape files,
computer printouts, computer runs, and other computer-prepared information and
equipment of any kind, whether in Borrower's possession or in a third party's
possession. Gateway shall have access during business hours to all of such
records and may at any time remove from Borrower's premises or the premises of
any third person who holds such records all such records relating to the
Collateral given hereunder or in any other agreement between Gateway and
Borrower. Gateway may demand of any third person access and possession to such
records in their control in Borrower's name. Borrower will prepare and deliver
to Gateway balance sheets, profit and loss statements, and such other reports,
analyses and operating data as Gateway may from time to time reasonably request.
B. The foregoing assignment shall confirm the transfer of the accounts
to Gateway as security so as to vest in Gateway the rights of an absolute owner
thereof; and accordingly Gateway shall have the full power to exercise any and
all rights pertaining thereto, including but not limited to stoppages in
transit, replevin and reclamation, repossession and the filing of suit thereon
to enforce payment.
C. Borrower likewise shall xxxx its books and records so as to evidence
the transfer of the accounts as security pursuant to this Agreement.
D. From and after the date of the assignment of such accounts, Borrower
shall neither have nor exercise, nor attempt to exercise, any right to
compromise, compound, settle or adjust any such accounts or renew or extend the
time or time of payment thereof without the consent of Gateway firstt in
writing. Such consent, if given, shall not constitute a waiver of Gateway's
right hereunder as to any other account.
E. Borrower does hereby irrevocably appoint Gateway its
attorney-in-fact and authorizes and empowers Gateway or any of Gateway's duly
authorized agents to endorse and sign its name or names on any and all checks
drafts, money orders, or other media of payment, and endorse any and all
instruments concerning any accounts; and such endorsements shall for all
purposes be considered to have been made by Borrower, and to make demand in
Borrower's name for access and possession on any third parties having
Page 4 of 10
Security Agreement Continued
control of any of Borrower's books and records. Said power-of attorney and
endorsement right is irrevocable and coupled with an interest (that is a
security interest in Borrowerts books and records described above) and shall
also apply to invoices, freight or express bills, or bills of lading, concerning
the accounts or the property or merchandise which is the subject matter of any
of the same, and likewise shall apply to any written instruments or documents
deemed by Gateway necessary for its proper protection to carry out the
intentions of this Agreement. Borrower irrevocably authorizes Gateway to receive
and to open all mail addressed to Borrower and to direct the postal authorities
concerning the transmission or delivery thereof. With reference to all accounts,
Gateway is hereby expresly authorized and empowered with notice to Borrower and
from and after the date hereof and without regard to whether Borrower is in
default hereunder to exercise all rights as the owner thereof including the
right to notify account debtors of this Agreement and to direct account debtors
to make payment directly to Gateway; to renew and/or extend the time of payment
thereon and to compound, compromise, settle or adjust any or all claims due or
to become due on any of the accounts and is likewise authorized and empowered
(but shall not be obligated) to (1) ask, demand, collect and receive and give
acquittance for any and all monies due or thereafter becoming due on any such
accounts, and (2) make and enforce in Gateway's name or in Borrower's name any
and all claims and demands of any of said accounts, and (3) prosecute any and
all suits and proceedings in connection with or to enforce collection of any of
said accounts.
F. Borrower agrees to furnish to Gateway from time to time upon request
written statements and schedules identifying and describing the Collateral and
any additions thereto and substitutions thereof in such detail as Gateway may
require.
5. GUARANTY; FULL RECOURSE
Borrower guarantees the prompt payment of each account when due.
In the event that any account listed in a schedule of assignment of accounts is
not paid by the account debtor from whom the same is due within the period of
time prescribed for payment on the assignment therefor (not to exceed 30 days
from the date of the invoice) plus an additional 60 day period, or in the event
there is any breach of warranty with respect to any such account, then upon
demand Borrower shall pay Gateway cash equal to the net face value of account,
less any payments received thereunder from such account debtor by Gateway. Upon
payment thereof, Gateway will reassign the account to Borrower without recourse
or warranty by Gateway provided Borrower is not in default hereunder. Borrower
agrees that its guaranty shall not be impaired by any modification, alteration,
extension, allowance, compromise, release of (1) any account by Gateway and the
customer thereon, (2) of any obligation herein guaranteed or of any Collateral,
or (3) of any guarantee, or Collateral for any guarantee, and further that the
liability of Borrower on this guaranty is direct and unconditional and may be
enforced without requiring Gateway first to resort to any other right, remedy or
security and that this guaranty shall continue in full force and effect, and
Borrower shall not claim subrogation, until Gateway has received payment in full
of all debts and obligations of every kind, sum, nature and description
whatsoever, due it from Borrower. Borrower further waives notice of acceptance
hereof, presentment, demand, protest of any instrument and notice thereof,
notice of dishonor, notice of default, and all other notices to which Borrower
might otherwise be entitled in connection with its guaranty.
6. NO DUTY OF GATEWAY TO ENFORCE COLLECTION OF ACCOUNTS
No duty is imposed on Gateway hereunder to enforce collection of any
account unless it elects to do so; and, in such event Gateway shall not be
liable to Borrower in connection with suit or collection act or proceedings
except for willful misconduct therein.
7. REMITTANCES RECEIVED IN TRUUST
Borrower agrees that should any monies or remittances or property or
merchandise be received by it on account of any accounts that it will receive
the same in trust for and as the property of Gateway and it will immediately
deliver and transmit the same to Gateway in the original form received by
Borrower. Until so delivered to Gateway, Borrower will not deposit the same with
any other money, fund or property. Borrower will furnish Gateway with all
remittance advices received from account debtors.
Page 5 of 10
Security Agreement - Continued
8. DEFAULT
Upon breach of any warranty contained herein or upon any default by
Borrower in the performance of any of the terms, obligations or provisions of
this Agreement or of any note or other agreement delivered to Gateway pursuant
hereto or upon default in payment and discharge of any of its obligations or
liabilities to Gateway, in whole or in part, or upon termination of any guaranty
of any obligation owing to Gateway, or upon any material adverse change in the
business or financial condition of Borrower or any guarantor, or upon material
loss, secretion, destruction, or decline in value of any of the Collateral,
which causes Gateway to deem itself insecure, or upon termination of this
Agreement, Gateway may at its sole option declare any or all obligations of
Borrower to be immediately due and payable and Gateway may exercise all rights
of a secured party under the California Commercial Code and may without demand,
advertisement or other notice to Borrower, all of which are hereby expressly
waived, commence an action for the recovery of any and all of the obligations,
commence proceedings to sell, lease, assign, transfer, or otherwise dispose, in
lots or in bulk and in whatever order Gateway sees fit, retail or wholesale, any
or all of the accounts or other Collateral for the obligations or any
substitutes therefor or additions thereto or any property or merchandise related
to or connected in any way therewith or, without legal proceedings, enter such
places as any of such Collateral may be found and take possession of such
Collateral and sell the same. Such Collateral may be sold where it is located at
the time of the breach or default, or elsewhere, at public or private sale, for
cash, upon credit or otherwise at Gateway's sole option and discretion. Gateway
may, but is not obligated to ship, reclaim, recover, finish, maintain, repair,
advertise for sale, or otherwise prepare for sale Collateral prior to sale or
other disposition. Borrower hereby further waives all notices of seizure and
sale, and requirements that such property be physically present at the place of
sale; and Gateway shall have the right at any such sale, public or private, to
purchase the whole or any part thereof free form any rights or equity of
redemption in Borrower which equity of redemption is expressly waived.
Gateway shall have no liability by reason of or in connection with any
of the foregoing or for inadequacy of price or irregularities of sale whether
such sale be public or private. In case of any such sale, after deducting all
costs and expenses, including attorneys' fees incurred or expended, in taking,
removing, holding, repairing, and selling the Collateral and including payment
of any liens and claims against the Collateral, Gateway may apply the residue of
the proceeds thereof to pay any one or more of the obligations and liabilities
of Borrower to Gateway, whether then due or thereafter to become due, as Gateway
shall deem proper; and Borrower agrees it shall remain liable for and will pay
Gateway the balance due on all of its obligations to Gateway after crediting the
amount applied thereto as aforesaid. Borrower shall pay the deficiency
forthwith. All rights and remedies of Gateway granted in this Agreement and
other agreements between Borrower and Gateway are cumulative.
Gateway shall have the right to exercise any one or more of the rights
and remedies at the same time or otherwise, and any choice made by Gateway of
any such right or remedy shall not constitute or be deemed to be a wavier of any
other remedy to which it might otherwise be entitled hereunder. In any and all
events, Gateway shall have the right to proceed directly against the Borrower
without the necessity of prior recourse to any of the Collateral.
9. REIMBURSEMENT OF EXPENSES; ATTORNEYS' FEES
Borrower shall promptly pay upon demand any and all expenses incurred
by Gateway in connection with the transactions contemplated herein as follows:
A. All of Gateway's out-of-pocket expenses incurred in entering into
this transaction, including, without limitation, the cost of title searches,
title reports, recording fees, and attorneys' fees actually incurred in the
preparation of the documentation and review of this transaction, fees charged
for the searching of liens against the property being given as Collateral
hereunder, and all other expenses similar to the foregoing;
Page 6 of 10
Security Agreement - Continued
B. any expenses incurred by Gateway in the storing, warehousing,
insuring, handling and shipping of the Collateral, and any and all excise,
property, sales and other taxes, encumbrances and liens, levied or imposed by
any governmental or taxing authority on Borrower or on any of Borrower's
property or any property caused to be given to Gateway as Collateral, any and
all sums expended by Gateway in connection with the filing of any third party
claims as to the Collateral or any part thereof which Gateway may deem necessary
or desirable, and any attorneys' fees incurred by Gateway in connection
therewith~,
C. all office and other expenses and costs, including, without
limitation, fees for third party experts, appraisers, trustees, receivers,
keepers, masters, arbitrators, investigators, and documents search, recording,
publication, service of process and filing fees, court and court reporter costs,
and the cost of any bonds, whether otherwise taxable or not, the expenses and
costs in enforcing any judgment which may be obtained, or any appeal that might
be prosecuted, reasonable attorneys' fees, whether suit is brought or not,
incurred by Gateway in enforcing or defending any of Gateway's rights under this
Agreement or the Collateral given to Gateway.
If Borrower fails to promptly pay when due, whether to Gateway or any
other person, monies which Borrower is required to pay under any portion of this
Agreement, Gateway may, but need not, pay the same and charge Borrower's account
therefor, and such charge shall become an additional advance. Borrower agrees to
promptly reimburse Gateway for any such advances, and any and all such sums
shall become additional indebtedness owing to Gateway and shall bear interest
charges at the rate provided in Paragraph 3 hereof and shall be secured by all
of the Collateral now or hereafter given by Borrower or which Borrower causes to
be given to Gateway. In the payment of any expenses as provided hereunder,
Gateway need not inquire as to, or contest the validity, or any such expense,
tax, encumbrance or lien, and the receipt of the usual official for the payment
thereof shall be conclusive evidence that the same was validly due and owing.
10. TIME OF THE ESSENCE.
Time is expressly made of the essence in this Agreement.
11. TAXES AND ASSESSMENTS
Borrower will pay when due all taxes, assessments and other charges
lawfully levied or assessed upon the Collateral. Borrower shall promptly pay and
discharge in full its liability for federal and state payroll taxes and all
other taxes. If any such taxes or other assessments remain unpaid after the date
fixed for the payment of the same, or if any lien shall be claimed which in
Gateway's opinion might possibly create a valid obligation having priority over
the rights granted to Gateway herein, Gateway may, but is not obligated, without
notice to Borrower, pay such taxes, assessments, charges and any fees, costs and
expenses, of whatever kind or nature, including any taxes of any kind, which
Gateway may incur in filing public notices, and the reasonable attorneys' fees
incurred by Gateway in protecting, maintaining, preserving, enforcing or
foreclosing the security interest granted to Gateway hereunder, whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or related to Gateway's transactions with Borrower
shall be borne and paid for by Borrower and until paid by Borrower shall be
added to the Obligations hereby secured, and shall bear interest at the agreed
rate.
12. INSURANCE
Borrower shall bear all risk of loss, damage to, or destruction of the
Collateral. Borrower agrees to maintain insurance at Borrower's expense on the
Collateral under such policies of insurance companies, in such amounts and
covering such risks as are at all times satisfactory to Gateway. All polices
covering the Collateral are to be mad& payable to Gateway, in case of loss,
under a standard non-contributory "Mortgage," "Lender's or secured party" loss
payable clause and are to contain such provisions as Gateway may require to
fully protect Gateway's interest in the Collateral and to payments to be made
under such policies. All policies are to be delivered to Gateway, premium
prepaid, and shall provide for not less than thirty (30) days prior written
notice to Gateway of the exercise of any right of cancellation. Unless Gateway
shall otherwise agree with Borrower in writing, Gateway shall have the sole
right, in Gateway' 5 own name or Borrower's name,
Page 7 of 10
Security Agreement - Continued
to file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. Gateway has the
right, but is not obligated, to place insurance on the Collateral insuring only
Gateway's interest, in the event Borrower fails to maintain insurance. Any
advances by Gateway for this purpose shall bear interest at the note rate.
13. BOOKS AM) RECORDS; EXAMINATION
Borrower agrees that it will at all times herein keep and maintain
proper and sufficient books of account showing and reflecting all sales, claims
and allowances on merchandise and generally describing accurately and completely
all of its business transactions. Gateway shall at all times have the right by
its officers or duly authorized agents to examine from time to time all of such
records during usual and normal business hours and to make abstracts therefrom
including, without limitation, correspondence, bank records and books of
account.
14. GATEWAY'S RIGHT TO ASSIGN AND RIGHTS OF ASSIGNEE
A. Gateway may sell or assign, for security purposes or otherwise, this
Agreement and any and all of the accounts and other Collateral received from
time to time by Gateway from Borrower, together with all notes executed in favor
of Gateway. Upon any such sale or assignment, the assignee shall succeed to all
of the rights of Gateway under this Agreement and under all loans, notes and
security agreements made pursuant hereto including, without limitation, the
right on the part of the assignee to exercise all powers of attorney granted by
the Borrower to Gateway hereunder.
B. Upon notice of any such assignment from such assignee, the Borrower
will make all payments due or to become due hereunder, including all payments on
all notes issued hereunder, directly to the assignee;
15. TERMINATION OF THIS AGREEMENT
A. Gateway may terminate this Agreement:
(1) If the borrower shall fail in or suspend business; or
(2) If Gateway shall for any reason conclude that any of the
rights granted to it under this Agreement are in jeopardy or that its
security is being impaired; or
(3) If Borrower makes an assignment for the benefit of
creditors or applies for an extension or composition from its
creditors, or commits any act of bankruptcy, or insolvency, or a
receiver or trustee of its business is appointed, or if a petition in
bankruptcy or for reorganization under the Bankruptcy Act shall have
been filed by or against it, or in the event the Borrower shall seek
relief under any insolvency statute whatsoever; or
(4) At any time with or without cause upon 10 days notice in
writing to Borrower of an intention to terminate; or
(5) If Borrower shall default hereunder or under any other
agreement with Gateway.
B. This Agreement shall remain in full force and effect on a Month to
Month basis from the date upon which it is executed. Borrower shall give to
Gateway 30 days notice in writing by registered mail of its intention to
terminate this Agreement. Such termination shall not affect or impair the
obligation of the Borrower with respect to accounts pledged to Gateway prior
thereto nor shall such termination effect or impair any of the liabilities of
Borrower to Gateway with respect to any transactions arising prior to the
effective date of the termination of this Agreement;
Page 8 of 10
Security Agreement - Continued
C. Notwithstanding any such termination of this Agreement, all rights,
powers and privileges granted to Gateway herein shall remain in full force and
effect until all of the liabilities, obligations and indebtedness of Borrower to
Gateway shall have been paid and discharged in full. Until such time Borrower
will continue to perform all of the terms and provisions hereof.
16. CONTINUING WARRANTIES AND REPRESENTATIONS
Each warranty, representation and agreement contained herein shall be
automatically deemed repeated with each advance and shall be conclusively
presumed to have been relied on by Gateway regardless of any investigation made,
or information possessed by Gateway. These warranties, representations and
agreements as set forth herein shall be cumulative and continuing and in
addition to any and all other warranties, representations and agreements
contained in any other document or instrument which Borrower shall give or cause
to be given to Gateway, either now or hereafter.
17. MISCELLANEOUS
A. This Agreement is the final and complete Agreement of the parties
and cannot be modified except by a writing signed by both parties. This
Agreement shall run to the benefit of and be binding upon the parties, their
heirs, executors, administrators, successors and assigns, and shall be construed
and governed by the laws of the State where it is accepted by Gateway.
B. All litigation between the parties hereto arising or
connected with this Agreement, or any other agreements between the parties, or
the Collateral shall, to the extent permitted by law, be brought and tried
solely in the Superior Court of Contra Costa County, California. In any such
litigation between the parties, Borrower and Gateway waive any right to trial by
jury under federal and applicable state law in any action or proceeding relating
to this Agreement or any of the transactions hereunder, and upon any event of
default, Gateway shall have the right to have a receiver appointed to take
possession of all the Collateral and to perform any and all of Gateway's rights
with respect thereto, and apply all proceeds of said Collateral first to costs
and expenses of the receivership and then to payment of Borrower's obligations
to Gateway. Gateway may bring all proceedings for collection in Gateway's name
or in Borrower's name and may exercise Borrower's right of stoppage in transit,
replevin and reclamation.
C. All notices or demands hereunder shall be in writing. They shall be
deemed received when deposited postage prepaid in a United States Post Office
Box properly addressed to Gateway or Borrower at the addresses set forth herein
or to such other address as Gateway or Borrower may from time to time specify in
writing. D. If Borrower, the undersigned, are two or more in number, then (i)
regardless of the form of Gateway's check or other papers, Gateway's loan
hereunder (consisting of each and every advance) shall be deemed to be made to
each and all of the undersigned and the undersigned shall be jointly and
severally obligated to repay the same; (II) each of the undersigned jointly and
severally makes, and is liable for, each and every warranty, representation,
obligation, covenant and undertaking under this Agreement; and (iii) when
permitted by the context, the words referring to the undersigned borrower shall
include and mean all, or any one or more of the undersigned.
E. Each and every provision of this Agreement shall be severable from
every other provision for the purposes of determining legal enforceability of
any such provision or provisions.
F. All loans and advances heretofore, now or at any time or times
hereafter made by Gateway to Borrower under this Agreement or any other
agreement between Gateway and Borrower shall constitute one loan secured by
Gateway's security interest in the Collateral and by all other security
interests, liens and encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Gateway.
Page 9 of 10
Security Agreement - Continued
G. Any documents, schedules, invoices or other papers delivered to
Gateway may be destroyed or otherwise disposed of by Gateway five (5) months
after they are delivered to or received by Gateway, unless Borrower requests in
writing the return of said documents, schedules, invoices or other papers and
make such arrangements, at Borrower's expense, for their return.
H. Paragraph numbers and paragraph headings have been set forth herein
for convenience only; unless the contrary is compelled by the contest,
everything contained in each paragraph applied equally to all paragraphs herein.
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against Gateway or Borrower, whether under any rule of
construction or otherwise; on the contrary, this Agreement has been prepared by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so far as to fairly accomplish the purposes and
intention of all parties herein.
I. Borrower and Gateway intend and agree that their respective rights,
duties, powers, liabilities, obligations, and discretions shall be performed,
carried out, discharged, and exercised reasonably and in good faith.
J. The validity of this Agreement, its construction, and interpretation
and enforcement shall be determined under and according to the laws of the State
of California.
K. Interest after breach by borrower shall continue to accrue at the
Daily Loan Rate as adjusted from time to time on all amounts owed to Gateway
without waiving such breach.
If the foregoing is in accordance with your understanding will you
please sign and return to us this Agreement for acceptance by us. This Agreement
shall not be effective until acceptance by Gateway at Alamo, California
following Borrower's signature below.
Very truly yours,
GATEWAY ACCEPTANCE COMPANY
/s/ Xxxxx Xxxx, Senior Credit Officer
Read, Accepted and Agreed to This 27th Day of November, 2000:
Pacific Printing and Embroidery, LLC
DBA Pacific Print Works
0000 XX 000xx Xxxxxx
Xxxxxxxx XX 00000
/s/ Xxxxxxx X. Xxxxxx, President, Pacific Printing and Embroidery, LLC
