CREDIT AGREEMENT
THIS AGREEMENT is entered into as of December 18, 1997, by and between FCG
ENTERPRISES, INC., a California corporation ("Borrower"), and XXXXX FARGO BANK,
NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described below
(each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including December 1, 1998, not to exceed at any time the aggregate
principal amount of Six Million Dollars ($6,000,000.00) ("Line of Credit"), the
proceeds of which shall be used for working capital requirements. Borrower's
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note substantially in the form of Exhibit A attached hereto ("Line of
Credit Note"), all terms of which are incorporated herein by this reference.
(b) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above. Notwithstanding the foregoing, Borrower shall maintain a zero balance on
advances under the Line of Credit for a period of at least thirty (30)
consecutive days during the term of the Line of Credit.
SECTION 1.2. TERM LOAN A.
(a) TERM LOAN A. Bank has made a loan to Borrower in the original
principal amount of Three Hundred Five Thousand Dollars ($305,000.00) ("Term
Loan A"), on which the outstanding principal balance as of the date hereof is
$292,292.00. Borrower's obligation to repay Term Loan A is evidenced by a
promissory note substantially in the form of Exhibit B attached hereto ("Term
Note A"), all terms of which are incorporated herein by this reference. Any
reference in Term Note A to any prior loan agreement between Bank and Borrower
shall be deemed a reference to this Agreement. Subject to the terms and
conditions of this Agreement, Bank hereby confirms that Term Loan A remains in
full force and effect.
(b) REPAYMENT. The principal amount of Term Loan A shall be repaid in
accordance with the provisions of Term Note A.
(c) PREPAYMENT. Borrower may prepay principal on Term Loan A at any time,
in any amount and without penalty. All prepayments of principal shall be
applied on the most remote principal installment or installments then unpaid.
SECTION 1.3. TERM LOAN B.
(a) TERM LOAN B. Bank has made a loan to Borrower in the original
principal amount of Four Million Dollars ($4,000,000.00) ("Term Loan B"), on
which the outstanding principal balance as of the date hereof is $2,777,768.00.
Borrower's obligation to repay Term Loan B is evidenced by a promissory note
substantially in the form of Exhibit C attached hereto ("Term Note B"), all
terms of which are incorporated herein by this reference. Any reference in Term
Note B to any prior loan agreement between Bank and Borrower shall be deemed a
reference to this Agreement. Subject to the terms and conditions of this
Agreement, Bank hereby confirms that Term Loan B remains in full force and
effect.
(b) REPAYMENT. The principal amount of Term Loan B shall be repaid in
accordance with the provisions of Term Note B.
(c) PREPAYMENT. Borrower may prepay principal on Term Loan B at any time,
in any amount and without penalty. All prepayments of principal shall be
applied on the most remote principal installment or installments then unpaid.
SECTION 1.4. STANDBY LETTER OF CREDIT.
(a) STANDBY LETTER OF CREDIT. Bank has issued a standby letter of credit
for the account of Borrower and for the benefit of Metropolitan Transportation
Authority as security for Borrower's office location in New York (the "Standby
Letter of
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Credit") in the principal amount of Seventeen Thousand Three Hundred Forty-three
and 75/100 Dollars ($17,343.75). The Standby Letter of Credit has an expiration
date of March 2, 1998, and is subject to the additional terms of the Application
and Agreement for Standby Letter of Credit required by Bank in connection with
the issuance thereof (the "Letter of Credit Agreement"). Subject to the terms
and conditions of this Agreement, Bank hereby confirms that the Standby Letter
of Credit remains in full force and effect.
(b) REPAYMENT OF DRAFTS. Each draft paid by Bank under the Standby Letter
of Credit shall be repaid by Borrower in accordance with the provisions of the
Letter of Credit Agreement.
SECTION 1.5. INTEREST/FEES.
(a) INTEREST. The outstanding principal balances of the Line of Credit,
Term Loan A and Term Loan B shall bear interest at the rates of interest set
forth in the Line of Credit Note, Term Note A and Term Note B (collectively, the
"Notes").
The amount of each draft paid by Bank under the Standby Letter of
Credit shall bear interest from the date such draft is paid by Bank to the date
such amount is fully repaid by Borrower at a rate per annum equal to the Prime
Rate in effect from time to time.
(b) PRIME RATE. The term "Prime Rate" shall mean at any time the rate of
interest most recently announced within Bank at its principal office as its
Prime Rate, with the understanding that the Prime Rate is one of Bank's base
rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof in such internal publication or publications as Bank may
designate. Each change in the rate of interest shall become effective on the
date each Prime Rate change is announced within Bank.
(c) COMPUTATION AND PAYMENT. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Notes.
(d) COMMITMENT FEE. Borrower shall pay to Bank a non-refundable
commitment fee for the Line of Credit equal to $500.00, which fee shall be due
and payable in full upon execution of this Agreement.
(e) UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee equal to
one-quarter percent (.25%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
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payable by Borrower in arrears on the last day of each calendar quarter.
(f) LETTER OF CREDIT FEES. Borrower shall pay to Bank (i) fees upon the
issuance of the Standby Letter of Credit equal to two percent (2.0%) per annum
(computed on the basis of a 360-day year, actual days elapsed) of the face
amount thereof, and (ii) fees upon the payment or negotiation by Bank of each
draft under the Standby Letter of Credit and fees upon the occurrence of any
other activity with respect to the Standby Letter of Credit (including without
limitation, the transfer, amendment or cancellation of the Standby Letter of
Credit) determined in accordance with Bank's standard fees and charges then in
effect for such activity.
SECTION 1.6. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each Credit by charging Borrower's
demand deposit account number 4624-028767 with Bank, for the full amount
thereof. Should there be insufficient funds in any such demand deposit account
to pay all such sums when due, the full amount of such deficiency shall be
immediately due and payable by Borrower.
SECTION 1.7. COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, general intangibles
and equipment.
All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds of trust and other documents as
Bank shall reasonably require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank within five (5) days of Bank's demand, therefor,
for all reasonable costs and expenses incurred by Bank in connection with any of
the foregoing security, including without limitation, filing and recording fees
and costs of appraisals, audits and title insurance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
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SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of it's state of incorporation, and
is qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required, reasonably be expected to, or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower, enforceable in accordance with their
respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any material provision of
any law or regulation, or contravene any provision of the Articles of
Incorporation or By-Laws of Borrower, or result in any breach of or default
under any contract, obligation, indenture or other instrument to which Borrower
is a party or by which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could reasonably be expected to have a material
adverse effect on the financial condition or operation of Borrower other than
those disclosed by Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated September 30, 1997, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower as of that date, (b)
discloses all liabilities of Borrower that are required to be reflected or
reserved against under generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) has been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of such financial statement there has been no material adverse
change in the financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise encumbered any of its
assets or properties except in favor of Bank or as otherwise permitted by Bank
in writing.
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SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending penalty assessments or adjustments of its income tax payable with
respect to any prior year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all material permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA).
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
material obligation for borrowed money, any purchase money obligation or any
other material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, to the best of Borrower's knowledge,
Borrower is in compliance in all material respects with all applicable federal
or state environmental, hazardous waste, health and safety statutes, and any
rules or regulations adopted pursuant thereto, which govern or affect any of
Borrower's operations and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to
time. To the best of Borrower's knowledge, none of the operations of Borrower
is the subject of any federal or state investigation evaluating whether any
remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.12. LEGAL STATUS OF THE ASOP. ASOP is a plan qualified under
Sections 401 (a) and (k) of the Internal Revenue Code ("Code") and an employee
stock ownership plan as
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described in Section 4975 (e) (7) of the Code and Section 407 (d) (6) of
ERISA and has been duly established by the Board of Directors of Borrower.
SECTION 2.13. EXEMPT TRANSACTIONS. Neither the sale of stock to ASOP
under the Associate Profit Sharing 401 (k) and Stock Ownership Plan dated
December 1, 1995, ("ASOP Agreement"), nor the financing of such purchase
pursuant to ASOP Loan Agreement ("ASOP Loan Agreement"), dated December 18,
1995, by and between Borrower and ASOP and the related promissory note ("ASOP
Note") constitute prohibited transactions under Section 4975 (c) of the Code,
Sections 406 and 407 of ERISA, or the regulations thereunder. The loan
evidenced by the ASOP Loan Agreement will constitute an "exempt loan" under
Treasury Reg. Section 54.4975-7 (b)(1)(iii). The use of the proceeds of the
Term Loan by Borrower will not violate any federal or state tax, labor,
securities or other law, including, but not limited to, the provisions of the
Code or ERISA or any regulations thereunder.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) DOCUMENTATION. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) Corporate Resolution: Borrowing.
(iii) Certificate of Incumbency.
(iv) Articles of Incorporation.
(v) Continuing Security Agreement Rights to Payment.
(vi) Security Agreement Equipment.
(vii) UCC-1 Financing Statements.
(viii) ASOP Loan Agreement and Stock Purchase Agreement.
(ix) Resolution of the ASOP's ASOP Committee approving the transactions
involving ASOP described herein.
(x) Financial opinion from ASOP's valuation adviser.
(xi) Such other documents as Bank may reasonably require under any other
Section of this Agreement.
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(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.
(d) INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's reasonable satisfaction of each of the
following conditions:
(a) COMPLIANCE. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, except as disclosed to Bank in writing or except to the extent
that such represetatives and warranties expressly refer to an earlier date, in
which case they shall be true and correct as of such earlier date, with the same
effect as though such representations and warranties had been made on and as of
each such date, and on each such date, no Event of Default as defined herein,
and no condition, event or act which with the giving of notice or the passage of
time or both would constitute such an Event of Default, shall have occurred and
be continuing or shall exist.
(b) DOCUMENTATION. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner
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specified therein, and immediately upon demand by Bank, the amount by which the
outstanding principal balance of any of the Credits at any time exceeds any
limitation on borrowings applicable thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time during business
hours, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the
following, in form and detail reasonably satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal year, an
audited financial statement of Borrower, prepared by an independent certified
public accountant reasonably acceptable to Bank, to include balance sheet,
income statement, statement of cash flow and source and application of funds
statement;
(b) not later than 45 days after and as of the end of each fiscal quarter,
a financial statement of Borrower, prepared by Borrower, to include balance
sheet and income statement;
(c) if Borrower is a public company, not later than 5 days of filing,
copies of all report on Form 10-K, 10-Q and 8K filed with Securities and
Exchange Commission;
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all material licenses,
permits, governmental approvals, rights, privileges and franchises necessary for
the conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, property damage and worker's compensation, with all such insurance
carried with companies and in amounts reasonably satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
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SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may reasonably arise, and (b) for
which Borrower has made provision, to Bank's satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or to Borrower's knowledge threatened against Borrower.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Current Ratio not less than 1.5 to 1.0, determined as of each fiscal
quarter end, with "Current Ratio" defined as total current assets divided by
total current liabilities.
(b) Tangible Net Worth not less than $10,000,000.00, determined as of each
fiscal quarter end, with "Tangible Net Worth" defined as the aggregate of total
stockholders' equity plus subordinated debt less any intangible assets.
(c) Total Senior Liabilities divided by Tangible Net Worth not greater
than 2.0 to 1.0, determined as of each fiscal quarter end, with "Total
Liabilities" defined as the aggregate of current liabilities and non-current
liabilities less subordinated debt, and with "Tangible Net Worth" as defined
above.
(d) (i) Net income after taxes, plus compensation expenses related to
stock issuance, not less than $2,500,000.00, for the fiscal year ending December
31, 1997, (ii) net income after taxes not less than $2,500,000.00 on an annual
basis thereafter, determined as of each fiscal year end, and (iii) net income
before taxes and vice president bonuses not less than $1,000,000.00 on a
quarterly basis, determined as of each fiscal quarter end.
(e) EBITDA Coverage Ratio not less than 3.5 to 1.0 as of each fiscal year
end, with "EBITDA" defined as net profit before
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tax plus interest expense (net of capitalized interest expense), depreciation
expense and amortization expense, and with "EBITDA Coverage Ratio" defined as
EBITDA divided by the aggregate of total interest expense plus the prior period
current maturity of long-term debt and the prior period current maturity of
subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5)
business days after the occurrence of each such event or matter) give written
notice to Bank in reasonable detail of: (a) the occurrence of any Event of
Default, or any condition, event or act which with the giving of notice or the
passage of time or both would constitute an Event of Default; (b) any change in
the name or the organizational structure of Borrower; (c) the occurrence and
nature of any Reportable Event or Prohibited Transaction, each as defined in
ERISA, or any funding deficiency with respect to any Plan, or any investigation
or audit of the ASOP by the Department of Labor or the Internal Revenue Service;
or (d) any termination or cancellation of any insurance policy which Borrower is
required to maintain, or any uninsured or partially uninsured loss exceeding
$50,000.00 through liability or property damage, or through fire, theft or any
other cause affecting Borrower's property. For purposes of this Agreement,
"Business Day" means any day except a Saturday, Sunday or any other day
designated as a holiday under Federal or California statute or regulation.
SECTION 4.11. EXISTENCE AND QUALIFICATION OF ASOP. Preserve and maintain
the existence and qualified status of the ASOP under Sections 401(a) and (k) and
4975(e)(7) of the Code, and comply in all material respects with the applicable
requirements of ERISA. Borrower shall file complete Applications for
Determination (on Forms 5300 and 5309) with the Internal Revenue Service ("IRS")
on or before the due date for filing Borrower's tax return (including
extensions) for the fiscal year ending December 31, 1996, and, with respect to
ASOP shall amend the provisions of the ASOP in such manner as the IRS may
require in order to obtain a favorable determination letter. Borrower shall
supply Bank with a copy of such determination letter within ten days of receipt
by Borrower.
SECTION 4.12. ASOP CONTRIBUTIONS. Borrower shall cause the ASOP to promptly
use all cash contributed to the ASOP to make payments on the loan under the ASOP
Loan Agreement, unless Borrower shall have first obtained Bank's written consent
which shall not be unreasonably withheld.
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ARTICLE V
NEGATIVE COVENANTS
Borrower, further covenants that so long as Bank remains Committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the Credits
except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, and (b) any
other liabilities of Borrower existing as of, and disclosed to Bank prior to,
the date hereof, (c) trade payables incurred in the ordinary course of business,
and (d) other indebtedness or liabilities not to exceed $100,000.00 in the
aggregate outstanding at any time.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity where the Borrower is not the surviving
entity, or unless such other surviving entity (a) is reasonably acceptable to
Bank, (b) assumes all of Borrower's liabilities in connection herewith, and
executes any documents, and (c) takes all further actions reasonably required by
Bank to effect such assumption; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity in an aggregate amount
exceeding $1,000,000.00; nor sell, lease, transfer or otherwise dispose of all
or a substantial or material portion of Borrower's assets except in the ordinary
course of its business.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.
SECTION 5.5. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any
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class of Borrower's stock now or hereafter outstanding except in connection with
Borrower's 1994 Restricted Stock Bonus Plan and Agreement, the FCG/JAR Buy-Sell
and Redemption Agreement, and transactions with the ASOP established by Borrower
on or about December 5, 1995.
SECTION 5.6 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets
pledged to Bank under this Agreement, except any of the foregoing in favor of
Bank or which is existing as of, and disclosed to Bank in writing prior to, the
date hereof.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of thirty (30) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, where the total of such obligations
and/or face amount of such contracts or instruments exceeds an aggregate of
$1,000,000.00.
(e) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to Bank, except where a bonafide dispute exists.
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(f) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower; or the entry of a judgment against Borrower; in each case
when the total amount involved in any of the foregoing exceeds an aggregate of
$500,000.00.
(g) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as
they become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time ("Bankruptcy Code"),
or under any state or Federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to
the Bankruptcy Code or any other applicable state or Federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower and is not dismissed within 60 days following date of filing
thereof, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered
against Borrower by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or Federal law relating to bankruptcy,
reorganization or other relief for debtors which such adjudication or order
for relief is not reversed, vacated or dismissed within 60 days following the
date of filing thereof.
(h) There shall exist or occur any event or condition which Bank in good
faith believes materially impairs, or is substantially likely to materially
impair, the prospect of payment or performance by Borrower of its obligations
under any of the Loan Documents.
(i) The dissolution or liquidation of Borrower; or any of its directors,
stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower.
(i) Any change in ownership during the term of this Agreement of an
aggregate of fifty percent (50%) or more of the common stock of Borrower other
than in connection with an intitial public offering of Borrower's stock.
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(k) Any violation of the Code, ERISA, any regulations thereunder or any
laws or regulations applicable to the ASOP which is deemed by Bank, in the good
faith exercise of its discretion, to have a material adverse effect upon
Borrower or ASOP, including, but not limited to, the occurrence of a prohibited
transaction within the meaning of Section 4975(c) of the Code or Sections 406 or
407 of ERISA.
(l) The determination by any court or governmental agency or authority
that ASOP is not a qualified plan under Sections 401 (a) or (k) of the Code or
an ESOP under Section 4975 (e) (7) of the Code or that the Term Loan or any of
the related transactions violate the Code, ERISA or any regulation thereunder,
or constitute a prohibited transaction within the meaning of Section 4975(c) of
the Code or Section 406 or 407 of ERISA.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any of the Credits and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other
-15-
party under any provision of this Agreement must be in writing delivered to each
party at the following address:
BORROWER: FCG ENTERPRISES, INC.
000 X. XXXXX XXXX., XXXXX 000
XXXX XXXXX, XX 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
SOUTH BAY REGIONAL COMMERCIAL BANKING XXXXXX
000 X. XXXXX XXXX., XXXXX 000
XXXX XXXXX, XX 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) Business days after
deposit in the U.S. mail, certified return receipt requested; and (c) if sent by
telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
-16-
acquire relating to any of the Credits, Borrower or its business, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the Credits and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by each party
hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
-17-
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. Section 91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE.
No provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
-18-
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state
of California, and (iii) the parties shall have in addition to the grounds
referred to in the Federal Arbitration Act for vacating, modifying or correcting
an award the right to judicial review of (A) whether the findings of fact
rendered by the arbitrators are supported by substantial evidence, and
(B) whether the conclusions of law are erroneous under the substantive law of
the state of California. Judgment confirming an award in such a proceeding may
be entered only if a court determines the award is supported by substantial
evidence and not based on legal error under the substantive law of the state of
California.
(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in
-19-
accordance with California Code of Civil Procedure Section 638 et seq., and
this general reference agreement is intended to be specifically enforceable in
accordance with said Section 638. A referee with the qualifications required
herein for arbitrators shall be selected pursuant to the AAA's selection
procedures. Judgment upon the decision rendered by a referee shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
(g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO BANK,
FCG ENTERPRISES, INC. NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE] for
--------------------------- ---------------------------
Xxxxxx Xxxxxx
Title: Vice President, Finance Relationship Manager
------------------------
-20-
XXXXX FARGO BANK REVOLVING LINE OF CREDIT NOTE
--------------------------------------------------------------------------------
$6,000,000.00 LONG BEACH, CALIFORNIA
DECEMBER 18, 1997
FOR VALUE RECEIVED, the undersigned FCG ENTERPRISES, INC. ("Borrower")
promises to pay to the order of XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at SOUTH BAY RCBO, 000 XXXX XXXXX XXXX XXXXX 000, XXXX XXXXX, XX
00000, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of $6,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
INTEREST:
(a) INTEREST. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) at a
rate per annum equal to the prime rate in effect from time to time. The "Prime
Rate" is a base rate that Bank from time to time establishes and which serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto. Each change in the rate of interest hereunder shall
become effective on the date each Prime Rate change is announced within Bank.
(b) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable on
the 6TH day of each month, commencing JANUARY 6, 1998.
(c) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of the Credit Agreement between Borrower and Bank
defined below; provided however, that the total outstanding borrowings under
this Note shall not at any time exceed the principal amount stated above. The
unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on JULY 6, 1998.
(b) ADVANCES. Advances hereunder, to the total amount of the principal
sum available hereunder, may be made by the holder at the oral or written
request of (1) XXXXX X. XXXX OR XXXXXX X. XXXX OR XXXXXX X. XXXXXXXX, any one
acting alone, who are authorized to request advances and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii)
any person, with respect to advances deposited to the credit of any account
of any Borrower with the holder, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of each
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an
advance is or has been authorized by any Borrower.
(c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of DECEMBER 18,
1997, as amended from time to time (the "Credit Agreement"). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an "Event of Default"
under this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default as defined in
the Credit Agreement, the holder of this Note, at the holder's option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of
nonperformance, notice of protest, protest or notice of dishonor, all of
which are expressly waived by each Borrower, and the obligation, if any, of
the holder to extend any further credit hereunder shall immediately cease and
terminate. Each Borrower shall pay to the holder immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of the holder's in-house counsel), expended or incurred by the holder
in connection with the enforcement of the holder's rights and/or the
collection of any amounts which become due to the holder under this Note, and
the prosecution or defense of any action in any
Revolving Line of Credit Note (08/96), Page 1
way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower of any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the state of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
FCG ENTEPRISES, INC.
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Title: Vice President, Finance
--------------------------------
Revolving Line of Credit Note (08/96), Page 2
CONTINUING SECURITY AGREEMENT
XXXXX FARGO BANK RIGHTS TO PAYMENT
-------------------------------------------------------------------------------
1. GRANT OF SECURITY INTEREST. For valuable consideration, the
undersigned FCG ENTERPRISES, INC., or any of them ("Debtor"), hereby grants and
transfers to XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank") a security interest
in all accounts, deposit accounts, chattel paper, instruments, documents and
general intangibles (collectively called "Collateral"), now existing or at any
time hereafter, and prior to the termination hereof, arising (whether they arise
from the sale, lease or other disposition of inventory or from performance of
contracts for service, manufacture, construction, repair or otherwise or from
any other source whatsoever), including all securities, guaranties, warranties,
indemnity agreements, insurance policies and other agreements pertaining to the
same or the properly described therein, and in all goods returned by or
repossessed from Debtor's customers, together with whatever is receivable or
received when any of the Collateral or proceeds thereof are sold, collected,
exchanged or otherwise disposed of, whether such disposition is voluntary or
involuntary, including without limitation, all rights to payment, including
returned premiums, with respect to any insurance relating to any of the
foregoing, and all rights to payment with respect to any cause of action
affecting or relating to any of the foregoing (hereinafter called "Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment
and performance of: (a) all present and future Indebtedness of Debtor to Bank;
(b) all obligations of Debtor and rights of Bank under this Agreement; and (c)
all present and future obligations of Debtor to Bank of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, or any of them,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such Indebtedness
may be or hereafter becomes unenforceable.
3. TERMINATION. This agreement will terminate upon the performance of all
obligations of Debtor to Bank, including without limitation, the payment of all
Indebtedness of Debtor to Bank, and the termination of all commitments of Bank
to extend credit to Debtor, existing at the time Bank receives written notice
from Debtor of the termination of this Agreement.
4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans
hereunder. Any money received by Bank in respect of the Collateral may be
deposited, at Bank's option, into a non-interest bearing account over which
Debtor shall have no control, and the same shall, for all purposes, be deemed
Collateral hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Bank that: (a) Debtor is the owner and has possession or control of the
Collateral and Proceeds: (b) Debtor has the right to grant a security
interest in the Collateral and Proceeds; (c) all Collateral and Proceeds are
genuine. free from liens, adverse claims, setoffs, default, prepayment,
defenses and conditions precedent of any kind or character, except the lien
created hereby or as otherwise agreed to by Bank, or heretofore disclosed by
Debtor to Bank, in writing; (d) all statements contained herein and, where
applicable, in the Collateral are true and complete in all materials
respects; (e) no financing statement covering any of the Collateral or
Proceeds, and naming any secured party other than Bank, is on file in any
public office; (f) all persons appearing to be obligated on Collateral and
Proceeds have authority and capacity to contract and are bound as they appear
to be; (g) all property subject to chattel paper has been properly registered
and filed in compliance with law and to perfect the interest of Debtor in
such property; and (h) all Collateral and Proceeds comply with all applicable
laws concerning form, content and manner of preparation and execution,
including where applicable Federal Reserve Regulation Z and any State
consumer credit laws.
6. COVENANTS OF DEBTOR.
(a) Debtor Agrees in general: (i) to pay Indebtedness secured hereby when
due; (ii) to indemnify Bank against all losses, claims, demands, liabilities and
expenses of every kind caused by property subject hereto: (iii) to pay all costs
and expenses, including reasonable attorneys' fees, incurred by Bank in the
perfection and preservation of the Collateral or Bank's interest therein and/or
the realization, enforcement and exercise of Bank's rights, powers and remedies
hereunder; (iv) to permit Bank to exercise its powers; (v) to execute and
deliver such documents as Bank deems necessary to create, perfect and continue
the security interests contemplated hereby; and (vi) not to change its chief
place of business (or personal residence, if applicable) or the places where
Debtor keeps any of the Collateral or Debtor's records concerning the Collateral
and Proceeds without first giving Bank written notice of the address to which
Debtor is moving same.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank
agrees otherwise in writing: (i) where applicable, to insure the Collateral with
Bank as loss payee, in form, substance and amounts, under agreements, against
risks and liabilities, and with insurance companies satisfactory to Bank; (ii)
not to permit any security interest in or lien on the Collateral or Proceeds,
except in favor of Bank; (iii) not to sell, hypothecate or otherwise dispose of,
nor permit the transfer by operation of law of, any of the Collateral or
Proceeds or any interest therein; (iv) to keep, in accordance with generally
accepted accounting principles, complete and accurate records regarding all
Collateral and Proceeds, and to permit Bank to inspect the same and make copies
thereof at any reasonable time; (v) if requested by Bank, to receive and use
reasonable diligence to collect Proceeds, in trust and as the property of Bank,
and to immediately endorse as appropriate and deliver such Proceeds to Bank
daily in the exact form in which they are received together with a collection
report in form satisfactory to Bank; (vi) not to commingle Collateral or
Proceeds, or collections thereunder, with other property; (vii) to give only
normal allowances and credits and to advise Bank thereof immediately in writing
if they affect any Collateral or Proceeds in
Continuing Security Agreement (06/97), Page 1
any material respect; (viii) on demand, to deliver to Bank returned property
resulting from, or payment equal to, such allowances or credits on any
Collateral or Proceeds or to execute such documents and do such other things as
Bank may reasonably request for the purpose of perfecting, preserving and
enforcing its security interest in such returned property, (ix) from time to
time, when requested by Bank, to prepare and deliver a schedule of all
Collateral and Proceeds subject to this Agreement and to assign in writing and
deliver to bank all accounts, contracts, leases and other chattel paper,
instruments, documents and other evidences thereof; (x) not to allow any
financing statement covering any of Debtor's inventory or proceeds thereof to be
on file in any public office without Bank's prior written consent; (xi) in the
event Bank elects to receive payments or Collateral or Proceeds hereunder, to
pay all expenses incurred by Bank in connection therewith, including expenses of
accounting, correspondence, collection efforts, reporting to account or
contract debtors, filing, recording, record keeping and expenses incidental
thereto; and (xii) to provide any service and do any other acts which may be
necessary to keep all Collateral and Proceeds free and clear of all defenses,
rights of offset and counterclaims.
7. POWERS OF BANK. Debtor appoints bank its true attorney-in-fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from
time to time by Bank's officers and employees, or any or them, whether or not
Debtor is in default: (a) to perform any obligation of Debtor hereunder in
Debtor's name or otherwise; (b) to give notice to account debtors or others
of Bank's rights in the Collateral and Proceeds, to enforce the same and make
extension agreements with respect thereto; (c) to release persons liable on
Collateral or Proceeds and to give receipts and acquittances and compromise
disputes in connection therewith; (d) to release security; (e) to resort to
security in any order; (f) to prepare, execute, file, record or deliver
notes, assignments, schedules, designation statements, financing statements,
continuation statements, termination statements, statements of assignment,
applications for registration or like papers to perfect, preserve or release
Bank's interest in the Collateral and Proceeds; (g) to receive, open and read
mail addressed to Debtor; (h) to take cash, instruments for the payment of
money and other property to which Bank is entitled; (i) to verify facts
concerning the Collateral and Proceeds by Inquiry of obligors thereon, or
otherwise, in its own name or a fictitious name; (j) to endorse, collect,
deliver and receive payment under instruments for the payment of money
constituting or relating to Proceeds; (k) to prepare, adjust, execute,
deliver and receive payment under insurance claims, and to collect and
receive payment of and endorse any instrument in payment of loss or returned
premiums or any other insurance refund or return, and to apply such amounts
received by Bank, at Bank's sole option, toward repayment of the
Indebtedness: (l) to exercise all rights, powers and remedies which Debtor
would have, but for this Agreement, with respect to all Collateral and
Proceeds subject hereto; and (m) to do all acts and things and execute all
documents in the name of Debtor or otherwise, deemed by Bank as necessary,
proper and convenient in connection with the preservation, perfection or
enforcement of its rights hereunder.
8. PAYMENT OF PREMIUMS, TAKES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Debtor to Bank,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 15 herein, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default,
under (i) any contract or instrument evidencing any Indebtedness, or (ii) any
other agreement between any Debtor and Bank, including without limitation any
loan agreement, relating to or executed in connection with any indebtedness;
(b) any representation or warranty made by any Debtor herein shall prove to
be incorrect in any material respect when made; (c) any Debtor shall fail to
observe or perform any obligation or agreement contained herein; (d) any
attachment or like levy on any property of any Debtor; and (e) Bank, in good
faith, believes any or all of the Collateral and/or Proceeds to be in danger
of misuse, dissipation, commingling, loss, theft, damage or destruction, or
otherwise in jeopardy or unsatisfactory in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall
have the right to declare immediately due and payable all or any indebtedness
secured hereby and to terminate any commitments to make loans or otherwise
extend credit to Debtor. Bank shall have all other rights, powers, privileges
and remedies granted to a secured party upon default under the California
Uniform Commerical Code or otherwise provided by law, including without
limitation, the right to contact all persons obligated to Debtor on any
Collateral or Proceeds and to instruct such persons to deliver all Collateral
and/or Proceeds directly to Bank. All rights, powers, privileges and remedies
of Bank shall be cumulative. No delay, failure or discontinuance of Bank in
exercising any right, power, privilege or remedy hereunder shall affect or
operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or
the exercise of any other right, power, privilege or remedy. Any waiver,
permit, consent or approval of any kind by Bank of any default hereunder, or
any such waiver of any provisions or conditions hereof. must be in writing
and shall be effective only to the extent set forth in writing, It is agreed
that public or private sales, for cash or on credit, to a wholesaler or
retailer or investor, or user of property of the types subject to this
Agreement, or public auction, are all commercially reasonable since
differences in the sales prices generally realized in the different kinds of
sales are ordinarily offset by the differences in the costs and credit risks
of such sales.
While an Event of Default exists: (a) Debtor will deliver to Bank from time to
time, as requested by Bank, current lists of all Collateral and Proceeds; (b)
Debtor will not dispose of any of the Collateral or Proceeds except on terms
approved by Bank; and (c) at Bank's request, Debtor will assemble and deliver
all Collateral and Proceeds, and books and records pertaining thereto, to Bank
at a reasonably convenient place designated by Bank.
Continuing Security Agreement (06/97), Page 2
11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or
any part of the Indebtedness, Bank may transfer all or any part of the
Collateral or Proceeds and shall be fully discharged thereafter from all
liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred; but with
respect to any Collateral or Proceeds not so transferred Bank shall retain all
rights, powers, privileges and remedies herein given. Any proceeds of any
disposition of any of the Collateral or Proceeds, or any part thereof, may be
applied by Bank to the payment of expenses incurred by Bank in connection with
the foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect.
12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid
in full and all commitments by Bank to extend credit to Debtor have been
terminated, the power of sale and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be
exercised by Bank at any time and from time to time irrespective of the fact
that the Indebtedness or any part thereof may have become barred by any
statute of limitations, or that the personal liability of Debtor may have
ceased, unless such liability shall have ceased due to the payment in full of
all Indebtedness secured hereunder.
13. MISCELLANEOUS. (a) The obligations of Debtor are joint and several;
(b) Debtor hereby waives any right (i) to require Bank to make any
presentment or demand, or give any notice of nonpayment or nonperformance,
protest, notice of protest or notice of dishonor hereunder, (ii) to direct
the application of payments or security for Indebtedness of Debtor or
Indebtedness of customers of Debtor, or (iii) to require proceedings against
others or to require exhaustion of security; and (c) Debtor hereby consents
to extensions, forbearances or alterations of the terms of Indebtedness, the
release or substitution of security, and the release of any guarantors;
provided however, that in each instance, Bank believes in good faith that the
action in question is commercially reasonable in that it does not
unreasonably increase the risk of nonpayment of the Indebtedness to which the
action applies. Until all Indebtedness shall have been paid in full, no
Debtor shall have any right of subrogation or contribution, and each Debtor
hereby waives any benefit of or right to participate in any of the Collateral
or Proceeds or any other security now or hereafter held by Bank.
14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Bank at the address specified in
any other loan documents entered into between Debtor and Bank and to Debtor
at the address of its chief executive office (or personal residence, if
applicable) specified below or to such other address as any party may
designate by written notice to each other party, and shall be deemed to have
been given or made as follows: (a) if personally delivered, upon delivery:
(b) if sent by mail, upon the earlier of the date of receipt or 3 days after
deposit in the U. S., mail, first class and postage prepaid; and (c) if sent
by telecopy, upon receipt.
15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in exercising any right, power, privilege or remedy
conferred by this Agreement or in the enforcement thereof, whether incurred
at the trial or appellate level, in an arbitration proceeding or otherwise,
and including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to Debtor or
in any way affecting any of the Collateral or Bank's ability to exercise any
of its rights or remedies with respect thereto. All of the foregoing shall be
paid by Debtor with interest from the date of demand until paid in full at a
rate per annum equal to the greater of ten percent (10%) or the Prime Rate in
effect from time to time. The "Prime Rate" is a base rate that Bank from time
to time establishes and which serves as the basis upon which effective rates
of interest are calculated for those loans making reference thereto.
16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by Bank and Debtor.
17. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Agreement as Debtor hereby expressly agrees that recourse may be had against his
or her separate property for all his or her Indebtedness to Bank secured by the
Collateral and Proceeds under this Agreement.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California.
Debtor warrants that its chief executive office (or personal residence, if
applicable) is located at the following address: 000 X. XXXXX XXXX., XXXXX 000,
XXXX XXXXX, XX 00000
Continuing Security Agreement (06/97), Page 3
SECURITY AGREEMENT
XXXXX FARGO BANK EQUIPMENT
--------------------------------------------------------------------------------
1. GRANT OF SECURITY INTEREST. For valuable consideration, the
undersigned FCG ENTERPRISES, INC., or any of them ("Debtor"), hereby grants and
transfers to XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank") a security interest
in all goods, tools, machinery, furnishings, furniture and other equipment, now
or at any time hereafter, and prior to the termination hereof, owned or acquired
by Debtor, wherever located, whether in the possession of Debtor or any other
person and whether located an Debtor's property or elsewhere, and all
improvements, replacements, accessions and additions thereto (collectively
called "Collateral"), together with whatever is receivable or received when any
of the Collateral or proceeds thereof are sold, leased, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary,
including without limitation, (a) all accounts, contract rights, chattel paper,
instruments, documents, general intangibles and rights to payment of every kind
now or at any time hereafter arising from any such sale, lease, collection,
exchange or other disposition of any of the foregoing, (b) all rights to
payment, including returned premiums, with respect to any insurance relating to
any of the foregoing, and (c) all rights to payment with respect to any cause
of action affecting or relating to any of the foregoing (hereinafter called
"Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment
and performance of: (a) all present and future Indebtedness of Debtor to Bank,
(b) all obligations of Debtor and rights of Bank under this Agreement; and (c)
all present and future obligations of Debtor to Bank of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, or any of them,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such Indebtedness
may be or hereafter becomes unenforceable.
3, TERMINATION. This Agreement will terminate upon the performance of all
obligations of Debtor to Bank, including without limitation, the payment of all
Indebtedness of Debtor to Bank, and the termination of all commitments of Bank
to extend credit to Debtor, existing at the time Bank receives written notice
from Debtor of the termination of this Agreement.
4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans
hereunder. Any money received by Bank in respect of the Collateral may be
deposited, at Bank's option, into a non-interest bearing account over which
Debtor shall have no control, and the same shall, for all purposes, be deemed
Collateral hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Bank that: (a) Debtor is the owner and has possession or control of the
Collateral and Proceeds; (b) Debtor has the right to grant a security
interest in the Collateral and Proceeds; (c) all Collateral and Proceeds are
genuine, free from liens, adverse claims, setoffs, default, prepayment,
defenses and conditions precedent of any kind or character, except the lien
created hereby or as otherwise agreed to by Bank, or heretofore disclosed by
Debtor to Bank, in writing; (d) all statements contained herein are true and
complete in all material respects; (e) no financing statement covering any of
the Collateral or Proceeds, and naming any secured party other than Bank, is
on file in any public office; and (f) Debtor is not in the business of
selling goods of the kind included within the Collateral subject to this
Agreement, and Debtor acknowledges that no sale of any Collateral, including
without limitation, any Collateral which Debtor may deem to be surplus, has
been or shall be consented to or acquiesced in by Bank, except as
specifically set forth in writing by Bank.
6. COVENANTS OF DEBTOR.
(a) Debtor Agrees in general: (i) to pay Indebtedness secured hereby when
due; (ii) to indemnify Bank against all losses, claims, demands, liabilities and
expenses of every kind caused by property subject hereto; (iii) to pay all costs
and expenses, including reasonable attorneys' fees, incurred by Bank in the
perfection and preservation of the Collateral or Bank's interest therein and/or
the realization, enforcement and exercise of Bank's rights, powers and remedies
hereunder; (iv) to permit Bank to exercise its powers; (v) to execute and
deliver such documents as Bank deems necessary to create, perfect and continue
the security interests contemplated hereby; and (vi) not to change its chief
place of business (or personal residence, if applicable) or the places where
Debtor keeps any of the Collateral or Debtor's records concerning the Collateral
and Proceeds without first giving Bank written notice of the address to which
Debtor is moving same.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank
agrees otherwise in writing: (i) to insure the Collateral with Bank as loss
payee, in form, substance and amounts, under agreements, against risks and
liabilities, and with insurance companies satisfactory to Bank; (ii) to operate
the Collateral in accordance with all applicable statutes, rules and regulations
relating to the use and control thereof, and not to use the Collateral for any
unlawful purpose or in any way that would void any insurance required to be
carried in connection therewith: (iii) not to permit any security interest in or
lien on the Collateral or Proceeds, including without limitation, liens arising
from repairs to or storage of the Collateral, except in favor of Bank; (iv) to
pay when due all license fees, registration fees and other charges in connection
with any Collateral; (v) not to remove the Collateral from Debtor's premises
unless the Collateral consists of mobile goods as defined in the California
Uniform Commerical Code, in which case Debtor agrees not to remove or permit the
removal of the Collateral from its state of domicile for a period in excess
of 30 calendar days; (vi) not to sell, hypothecate or otherwise dispose of, nor
permit the transfer by operation of law of, any of the Collateral or Proceeds or
any interest therein; (vii) not to rent, lease or charter the Collateral; (viii)
to permit Bank to inspect the Collateral at any time; (ix) to keep, in
accordance with generally accepted accounting
Security Agreement (06/97), Page 1
principles, complete and accurate records regarding all Collateral and Proceeds,
and to permit Bank to inspect the same and make copies thereof at any reasonable
time; (x) if requested by Bank, to receive and use reasonable diligence to
collect Proceeds, in trust and as the property of Bank, and to immediately
endorse as appropriate and deliver such Proceeds to Bank daily in the exact form
in which they are received together with a collections report in form
satisfactory to Bank; (xi) not to commingle Proceeds or collections thereunder
with other property; (xii) to give only normal allowances and credits and to
advise Bank thereof immediately in writing if they affect any Collateral or
Proceeds in any material respect; (xiii) in the event Bank elects to receive
payments of Proceeds hereunder, to pay all expenses incurred by Bank in
connection therewith, including expenses of accounting, correspondence,
collection efforts, reporting to account or contract debtors, filing, recording,
record keeping and expenses incidental thereto; and (xiv) to provide any service
and do any other acts which may be necessary to maintain, preserve and protect
all Collateral and, as appropriate and applicable, to keep the Collateral in
good and saleable condition and repair, to deal with the Collateral in
accordance with the standards and practices adhered to generally by owners of
like property, and to keep all Collateral and Proceeds free and clear of all
defenses, rights of offset and counterclaims.
7. POWERS OF BANK. Debtor appoints Bank its true attorney-in-fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by Bank's officers and employees, or any of them, whether or not Debtor
is in default: (a) to perform any obligation of Debtor hereunder in Debtor's
name or otherwise; (b) to give notice to account debtors or others of Bank's
rights in the Collateral and Proceeds, to enforce the same and make extension
agreements with respect thereto; (c) to release persons liable on Proceeds and
to give receipts and acquittances and compromise disputes in connection
therewith; (d) to release security; (e) to resort to security in any order; (f)
to prepare, execute, file, record or deliver notes, assignments, schedules,
designation statements, financing statements, continuation statements,
termination statements, statements of assignment, applications for registration
or like papers to perfect, preserve or release Bank's interest in the Collateral
and Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to
take cash, instruments for the payment of money and other property to which Bank
is entitled; (i) to verify facts concerning the Collateral and Proceeds by
inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;
(j) to endorse, collect, deliver and receive payment under instruments for the
payment of money constituting or relating to Proceeds; (k) to prepare, adjust,
execute, deliver and receive payment under insurance claims, and to collect and
receive payment of and endorse any instrument in payment of loss or returned
premiums or any other insurance refund or return, and to apply such amounts
received by Bank, at Bank's sole option, toward repayment of the Indebtedness or
replacement of the Collateral; (l) to exercise all rights, powers and remedies
which Debtor would have, but for this Agreement, with respect to all Collateral
and Proceeds subject hereto; (m) to enter onto Debtor's premises in inspecting
the Collateral; and (n) to do all acts and things and execute all documents in
the name of Debtor or otherwise, deemed by Bank as necessary, proper and
convenient in connection with the preservation, perfection or enforcement of its
rights hereunder.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Debtor to Bank,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of Section 15 herein, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) any contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between any Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any indebtedness; (b) any
representation or warranty made by any Debtor herein shall prove to be incorrect
in any material respect when made; (c) any Debtor shall fail to observe or
perform any obligation or agreement contained herein; (d) any attachment or like
levy on any property of any Debtor; and (e) Bank, in good faith, believes any or
all of the Collateral and/or Proceeds to be in danger of misuse, dissipation,
commingling, loss, theft, damage or destruction, or otherwise in jeopardy or
unsatisfactory in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have
the right to declare immediately due and payable all or any Indebtedness secured
hereby and to terminate any commitments to make loans or otherwise extend credit
to Debtor. Bank shall have all other rights, powers, privileges and remedies
granted to a secured party upon default under the California Uniform Commercial
Code or otherwise provided by law, including without limitation, the right to
contact all persons obligated to Debtor on any Collateral or Proceeds and to
instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank. All rights, powers, privileges and remedies of Bank shall be cumulative.
No delay, failure or discontinuance of Bank in exercising any right, power,
privilege or remedy hereunder shall affect or operate as a waiver of such right,
power, privilege or remedy; nor shall any single or partial exercise of any such
right, power, privilege or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power, privilege
or remedy. Any waiver, permit, consent or approval of any kind by Bank of any
default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in
writing. It is agreed that public or private sales, for cash or on credit, to a
wholesaler or retailer or investor, or user of property of the types subject to
this Agreement, or public auction, are all commercially reasonable since
differences in the sales prices generally realized in the different kinds of
sales are ordinarily offset by the differences in the costs and credit risks of
such sales.
While an Event of Default exists: (a) Debtor will deliver to Bank from time to
time, as requested by Bank, current lists of all Collateral and Proceeds; (b)
Debtor will not dispose of any of the Collateral or Proceeds except on terms
Security Agreement (06/97), Page 2
approved by Bank; (c) at Bank's request, Debtor will assemble and deliver all
Collateral and Proceeds, and books and records pertaining thereto, to Bank at a
reasonably convenient place designated by Bank; and (d) Bank may, without notice
to Debtor, enter onto Debtor's premises and take possession of the Collateral.
11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or
any part of the Indebtedness, Bank may transfer all or any part of the
Collateral or Proceeds and shall be fully discharged thereafter from all
liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred; but with
respect to any Collateral or Proceeds not so transferred Bank shall retain all
rights, powers, privileges and remedies herein given. Any proceeds of any
disposition of any of the Collateral or Proceeds, or any part thereof, may be
applied by Bank to the payment of expenses incurred by Bank in connection with
the foregoing, including reasonable attorneys' fees, and the balance of such
proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect.
12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in
full and all commitments by Bank to extend credit to Debtor have been
terminated, the power of sale and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be exercised
by Bank at any time and from time to time irrespective of the fact that the
Indebtedness or any part thereof may have become barred by any statute of
limitations, or that the personal liability of Debtor may have ceased, unless
such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder.
13. MISCELLANEOUS. (a) The obligations of Debtor are joint and several;
(b) Debtor hereby waives any right (i) to require Bank to make any presentment
or demand, or give any notice of nonpayment or nonperformance, protest, notice
of protest or notice of dishonor hereunder, (ii) to direct the application of
payments or security for Indebtedness of Debtor or indebtedness of customers of
Debtor, or (iii) to require proceedings against others or to require exhaustion
of security; and (c) Debtor hereby consents to extensions, forbearances or
alterations of the terms of Indebtedness, the release or substitution of
security, and the release of any guarantors; provided however, that in each
instance, Bank believes in good faith that the action in question is
commercially reasonable in that it does not unreasonably increase the risk of
nonpayment of the Indebtedness to which the action applies. Until all
Indebtedness shall have been paid in full, no Debtor shall have any right of
subrogation or contribution, and each Debtor hereby waives any benefit of or
right to participate in any of the Collateral or Proceeds or any other security
now or hereafter held by Bank.
14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Bank at the address specified in any
other loan documents entered into between Debtor and Bank and to Debtor at the
address of its chief executive office (or personal residence, if applicable)
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given of made as
follows: (a) if personally delivered, upon delivery; (b) if sent by mail, upon
the earlier of the date of receipt or 3 days after deposit in the U.S. mail,
first class and postage prepaid; and (c) if sent by telecopy, upon receipt.
15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in exercising any right, power, privilege or remedy conferred
by this Agreement or in the enforcement thereof, whether incurred at the trial
or appellate level, in an arbitration proceeding or otherwise, and including any
of the foregoing incurred in connection with any bankruptcy proceeding
(including without limitation, any adversary proceeding, contested matter or
motion brought by Bank or any other person) relating to Debtor or in any way
affecting any of the Collateral or Bank's ability to exercise any of its rights
or remedies with respect thereto. All of the foregoing shall be paid by Debtor
with interest from the date of demand until paid in full at a rate per annum
equal to the greater of ten percent (10%) or the Prime Rate in effect from time
to time. The "Prime Rate" is a base rate that Bank from time to time establishes
and which serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto.
16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by Bank and Debtor.
17. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Agreement as Debtor hereby expressly agrees that recourse may be had against his
or her separate property for all his or her Indebtedness to Bank secured by the
Collateral and Proceeds under this Agreement.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall
be held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California.
Debtor warrants that its chief executive office (or personal residence, if
applicable) is located at the following address: 000 X. XXXXX XXXX., XXXXX 000,
XXXX XXXXX, XX 00000
Debtor warrants that the Collateral (except goods in transit) is located or
domiciled at the following additional addresses: NONE
Security Agreement (06/97), Page 3
