SECURITY AGREEMENT (Equipment/Inventory/Accounts Receivable)
Exhibit
10.3
(Equipment/Inventory/Accounts
Receivable)
This
Security Agreement (Equipment/Inventory/Accounts Receivable) (the "Agreement"),
dated June
8, 2006 for
reference purposes only, is executed by and between ASDS
of Orange County, Inc., a Delaware corporation (the
"Borrower"), and First
Republic Bank (the
"Lender"), with reference to the following facts:
A. Lender
and Borrower are entering into an agreement of even date herewith pursuant
to
which Bank will provide credit to, or for the benefit of, Borrower (the "Loan").
The Loan will be evidenced by Borrower's promissory note or notes (collectively,
the "Note"). This Agreement is being provided in connection with the Loan
Agreement to secure Borrower's obligations thereunder.
THEREFORE,
for valuable consideration, the receipt and adequacy of which are acknowledged,
Borrower and the Lender agree as follows:
1. Definitions.
For
purposes of this Agreement, the following terms shall have the following
definitions:
1.1 Account
Debtors. "Account
Debtors" means all persons who now are or hereafter become in any way obligated,
liable, or responsible for any payment of any kind in connection with any or
all
of the Accounts.
1.2 Code.
"Code"
means the California Uniform Commercial Code, as amended from time to
time.
1.3 Collateral.
"Collateral"
means all of Borrower's interest in the following types of property, whether
now
owned or held or hereafter acquired and wherever located:
(a) All
accounts, securities accounts, investment property, securities, contract rights,
instruments, documents, chattel paper and all other obligations now or hereafter
owing to Borrower (collectively, the "Accounts"); all right, title and interest
of Borrower in, and all of Borrower's rights and remedies with respect to,
all
goods, the sale or other disposition of which gives rise to any Account,
including all returned, rejected, rerouted, reclaimed and repossessed goods
and
all rights of stoppage in transit, replevin, reclamation, and all rights as
an
unpaid vendor; all collections and proceeds of any or all of the foregoing;
all
guarantees of, security for, and insurance proceeds attributable to any or
all
of the foregoing; all books and records relating to any or all of the foregoing;
and all equipment containing said books and records.
(b) All
inventory, goods, merchandise, materials, raw materials, goods in process,
finished goods, advertising, packaging and shipping materials, supplies, and
all
other tangible personal property which is held for sale or lease, furnished
under contracts of service, or consumed in Borrower's business, and all
replacements, accessions and additions to any or all of the foregoing, and
all
of the foregoing which are returned, repossessed, reclaimed or stopped in
transit (collectively, the "Inventory"), whether or not the Inventory is in
the
constructive or actual possession or custody of Borrower, the Lender, or any
third person; all negotiable and non-negotiable warehouse receipts and other
documents now or hereafter issued with respect to any or all of the Inventory;
all proceeds, insurance proceeds and products of any or all of the foregoing,
including all now owned and hereafter acquired accounts, instruments, documents,
and chattel paper arising from the sale or other disposition of any or all
of
the Inventory; all books and records pertaining to any or all of the foregoing;
and all equipment containing said books and records.
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(c) All
equipment, goods and other tangible personal property (other than Inventory),
machinery, fixtures, trade fixtures, vehicles, furnishings, furniture, supplies,
molds, materials, motors, tools, machine tools, motor vehicles, office
equipment, appliances, apparatus, parts, dyes, jigs, and chattels, together
with
all attachments, replacements, substitutions, accessions, additions and
improvements to any or all of the foregoing (collectively, the "Equipment"),
whether or not the same is in the constructive or actual possession or custody
of Borrower, Lender, or any third person; all products, proceeds and insurance
proceeds of any or all of the foregoing, including all accounts, instruments,
documents and chattel paper which may arise from the sale or disposition of
any
or all of the Equipment; all books and records pertaining to any or all of
the
foregoing; and all equipment containing said books and records.
(d) All
deposit accounts, money, cash equivalents, and general intangibles [including,
but not limited to, tax refunds, choses in action, causes of action, goodwill,
names, inventions, designs, drawings, plans, specifications, blueprints, trade
names, trade secrets, trade marks and the goodwill of the business symbolized
thereby, service marks, compilations, reports, appraisals, studies, customer
lists, telephone numbers, advertising rights, negatives, prints, brochures,
pamphlets, computer programs, patents, patent applications, copyrights, security
and other deposits, prepaid items, refunds, loan commitment fees, royalties,
registrations, licenses, permits, processes, franchises, rights in all
litigation presently or hereafter pending for any cause of action (whether
in
contract, tort or otherwise) and all judgments now or hereafter arising
therefrom, all claims of Borrower against Lender, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
purchase orders, and all insurance policies and insurance claims (including
life
insurance, key man insurance, credit insurance, liability insurance, property
insurance, and other insurance), claims under guaranties, and all rights to
indemnification and all other intangible property of every kind and nature];
all
proceeds, insurance proceeds and products of, and additions and accessions
to,
any or all of the foregoing; all guarantees of and security for any or all
of
the foregoing; all books and records relating to any or all of the foregoing;
and the equipment containing said books and records.
1.4Event
of Default. "Event
of
Default" shall have the meaning given to such term in Section 6 of this
Agreement.
1.5Loan
Agreement. "Loan
Agreement" means the loan agreement dated the same date as this agreement
executed by Borrower in connection with the Loan.
1.6Obligations.
"Obligations"
means all debts, obligations, and liabilities of Borrower to the Lender
currently existing or hereafter made, incurred or created, whether voluntary
or
involuntary, and however arising or evidenced, whether direct or acquired by
the
Lender by assignment or succession, whether due or not due, absolute or
continent, liquidated or unliquidated, determined or undetermined, whether
under
this Agreement, the Note, any of the other Loan Documents, or otherwise, and
whether Borrower may be liable individually or jointly, or whether recovery
upon
such debt may be or become barred by any statute of limitations or otherwise
unenforceable, including all attorneys' fees and costs now or hereafter payable
by Borrower to the Lender under the Loan Documents or in connection with the
collection and enforcement of such debts, obligations and liabilities.
Notwithstanding anything to the contrary contained in this Agreement, this
Agreement shall not secure and the term "Obligations shall not include any
debts
that are or may hereafter constitute "consumer credit" which is subject to
the
disclosure requirements of the federal Truth-In Lending Act (15 U.S.C. Section
1601, et seq.)
or
any
similar state law in effect from time to time, unless the Lender and Borrower
shall otherwise agree in a separate written agreement.
1.7
Other
Terms. All
terms
with an initial capital letter that are used but not defined in this Agreement
shall have the respective meanings given to such terms in the Loan Agreement
and
in Divisions 8 and 9 of the Code, respectively, as applicable.
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2. Grant
of Security Interest. To
secure
the Obligations, Borrower grants and assigns to the Lender a security interest
in the Collateral.
3. Equipment,
Inventory and Accounts Receivable.
3.1 Sale
or Transfer of Equipment. Borrower
shall not exchange, trade, sell, lease, or otherwise dispose of the Equipment
without the Lender's prior written consent, except for obsolete equipment which
is sold for fair market value and is immediately replaced with equipment of
equal or greater value in which the Lender has a perfected first priority
security interest.
3.2 Condition
of Equipment. Borrower
shall at all times maintain the Equipment in good operating condition and
repair.
3.3 Use
of Equipment. Borrower
shall take all reasonable actions to not permit or cause the Equipment to be
misused, used for any purpose other than that for which the Equipment was
designed, or utilized in any illegal or negligent manner. Borrower shall use
the
Equipment only in the ordinary course of its business as conducted prior to
the
date of this Agreement and in a manner consistent with the terms of all
insurance policies relating to the Equipment.
3.4 Equipment
Records and Schedules. Without
limiting the generality of Section 4.5 below, Borrower shall maintain complete
and accurate books and records regarding the Equipment, including records
describing the dates of acquisition, acquisition costs, and serial numbers
of
the Equipment. Upon the Lender's request, Borrower shall provide the Lender
with
complete and accurate schedules containing (a) a description of each item of
Equipment; (b) the serial number, if any, of each item of Equipment, and (c)
such other information regarding the Equipment as the Lender may reasonably
require. Borrower shall notify the Lender in writing within five (5) business
days of all material pieces of Equipment which Borrower purchases, leases or
otherwise acquires after the date of this Agreement.
3.5 Certificates
of Ownership. Upon
Borrower's execution of this Agreement, Borrower shall deliver to the Lender
the
originals of all certificates of title, certificates of ownership, evidences
of
ownership, and all other similar documents and instruments (collectively, the
"Certificates of Ownership") relating to all Equipment in which Borrower now
has
an interest. Upon Borrower's acquisition of an interest in any item of Equipment
following the date of this Agreement, Borrower shall deliver within five (5)
business days to the Lender the Certificate of Ownership, if any, relating
to
such item of Equipment. Each such Certificate of Ownership delivered to the
Lender under this Section shall be properly endorsed to the Lender.
3.6 No
Fixtures.
(a) Borrower
shall not permit or cause any or all of the Collateral to become affixed to
any
real property in such a manner, or with such intent, so as to result in such
Collateral becoming a fixture or otherwise becoming part of any real
property.
(b) Borrower
shall not become a lessee under a real property lease pursuant to which the
lessor has obtained or may obtain any rights in or to any or all of the
Collateral, nor shall any such lease prohibit, restrain, or impair Borrower's
right to remove any Collateral from any leased premises, whether such removal
is
accomplished prior or subsequent to any default by Borrower under any such
lease
or prior or subsequent to any termination, cancellation or forfeiture of any
such lease.
(c) Prior
to
causing or permitting any of the Collateral to be located on any premises in
which any third party has an interest (whether as owner, mortgagee, beneficiary
under a deed of trust, lien holder, or otherwise), Borrower shall cause such
third party to execute and deliver to the Lender such
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consents,
waivers and subordinations as may be reasonably necessary or appropriate, in
the
Lender's discretion, to insure the Lender that its security interest and rights
in and to the Collateral are and shall at all times continue to be prior and
superior to the rights of any such third party.
(d) Borrower
shall not cause or permit any event to occur which would result in an early
termination of any real property lease for any premises on which all or part
of
the Collateral now is or hereafter may be located.
3.7Possession
and Use of Inventory. Borrower
shall not sell, lease, transfer or otherwise dispose of any or all of the
Inventory, except for the sale or lease of finished Inventory in the ordinary
course of Borrower's business. Borrower shall use and deal with the Inventory
only in a manner consistent with the terms of all insurance policies relating
to
the Inventory. Borrower shall not sell, lease, transfer, or otherwise dispose
of
any or all of the Inventory in partial or complete satisfaction of any debt
owed
by Borrower. Borrower shall keep all Inventory separate from Borrower's other
property and assets and clearly identified or marked.
3.8Inventory
Records. Without
limiting the generality of Section 4.5 below, Borrower shall maintain complete
and accurate books and records containing entries of all transactions relating
to the Inventory, including accurate records showing (a) the current Inventory
stock held by Borrower; (b) the cost and sales records of the Inventory; (c)
the
kinds, types, qualities and quantities of the Inventory; and (d) the daily
withdrawals from and additions to the Inventory.
3.9No
Warehousing of Inventory. No
Inventory shall be stored with any warehouse operator or other third person
without the Lender's prior written consent.
3.10No
Liability by Lender for Inventory. The
Lender shall not be directly or indirectly liable or responsible in any way
or
under any circumstances to Borrower or any other party (a) for the safe keeping
of the Inventory; (b) any loss or damage to the Inventory occurring or arising
in any manner from any cause; (c) any decrease in the value of the Inventory;
or
(d) any act or omission by any carrier, warehouse operator, bailee, forwarding
agent, or other party dealing with all or part of the Inventory. Borrower shall
bear the entire risk of loss for all damage to and destruction of the
Inventory.
3.11Schedule
of Accounts. Upon
the
Lender's request exercised no more often than three times during any period
of
twelve (12) consecutive months, Borrower shall furnish the Lender with copies
of
all contracts, orders, invoices, shipping instructions, delivery receipts,
bills
of lading, and other similar documents for any goods, the sale or disposition
of
which gives rise to an Account (collectively the "Accounts Receivable
Documentation"). Upon the Lender's request, Borrower shall also furnish the
Lender with an aged accounts receivable report in such form as the Lender may
specify. The Lender shall have the right from time to time to verify the
validity, amount and any other matters relating to any or all of the Accounts
directly with the respective Account Debtors by mail, telephone or otherwise,
either in the Lender's or Borrower's name. Upon an Event of Default by Borrower
under this Agreement, Borrower shall deliver to the Lender the originals of
all
Accounts Receivable Documentation together with the originals of all
instruments, chattel paper, security agreements, guaranties, and other documents
and property evidencing or securing the Accounts in the same form as received
by
Borrower, each of which shall be properly endorsed by Borrower to the Lender,
with recourse.
3.12Collection
of Accounts. Prior
to
the occurrence of an Event of Default, Borrower shall have the privilege of
collecting the Accounts, at Borrower's sole cost and expense. Upon the
occurrence of an Event of Default, Borrower's privilege of collecting the
Accounts shall immediately and automatically be revoked without notice to
Borrower. Following such revocation, the Lender shall have the exclusive right
to make all collections on the Accounts.
3.13Notice
to Account Borrowers. Upon
the
Lender's reasonable request, Borrower shall give notice, in form and substance
reasonably acceptable to the Lender, to the Account Debtors of Borrower's grant
of a security interest in the Accounts to the Lender.
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3.14Additional
Notices. From
time
to time upon the Lender's reasonable request, Borrower shall give written notice
to any Account Borrower designated by the Lender containing such additional
information and instructions concerning the Lender's rights under this Agreement
as may be specified by the Lender. Such notices shall be satisfactory in form
and substance to the Lender. From time to time and coincident with notice to
Borrower, the Lender shall have the right to give notice to any Account Borrower
containing such information and instructions concerning the Lender's rights
under this Agreement as the Lender in its good faith business judgment
determines to be necessary or appropriate.
3.15No
Liability by Lender for Accounts. The
Lender shall not be directly or indirectly liable or responsible in any way
or
under any circumstances to Borrower or any other party for (a) any shortage
or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account; (b) any act, omission,
error or delay of any kind by the Lender in settling, failing to settle,
collecting, or failing to collect any Account, including any act or omission
which results in the loss or impairment of the Borrower's rights against any
third person; (c) settling any Account for less than the full amount thereof;
(d) any failure or delay by the Lender in enforcing or collecting any payment
under any Account; or (e) the performance or observance of any or all of
Borrower's duties, obligations, representations, or warranties under any other
agreement or document relating to any or all of the Collateral, including the
Accounts.
3.16Receipt
of Account Collections by Borrower. If
for
any reason Borrower receives any payment in connection with any of the Accounts
following the occurrence of an Event of Default, Borrower (a) shall immediately
pay or deliver such payment to the Lender in the original form in which received
by Borrower; (b) shall endorse to the Lender, with recourse, all checks, drafts,
money orders, notes, and other instruments or documents representing such
payment, (c) shall not commingle such payment with any of Borrower's other
funds
or property; and (d) shall hold such payment separate and apart from Borrower's
other funds and property in an express trust for the Lender until paid or
delivered to the Lender.
3.17Application
of Account Proceeds. The
Lender shall apply all payments received by the Lender in connection with the
Accounts in the order of priority described in Section 7.16 below. All checks,
drafts, money orders, notes, instruments, documents, and other noncash proceeds
of the Accounts delivered to the Lender in payment or on account of the
Obligations shall not constitute payment until such items are actually paid
in
cash or other immediately available funds to the Lender.
3.18Borrowers
Account Obligations. Borrower
shall at all times in all material respects perform and discharge all
obligations of Borrower to each Account Debtor in accordance with the terms
of
all documents, contracts, invoices, and other agreements between Borrower and
such Account Debtor.
3.19Returned
Goods. From
and
after the occurrence of an Event of Default:
(a) Any
goods
which are returned by an Account Debtor or otherwise recovered by or for the
benefit of Borrower shall be physically segregated from Borrower's other
property, posted with written notice that such goods are subject to the Lender's
security interest, and held in trust for the Lender for disposition by the
Lender. Borrower shall promptly notify the Lender of all such returns and
recoveries; and
(b) Borrower
shall not accept the return of any goods and shall not sell any previously
returned goods without the Lender's prior written consent. The Lender shall
have
the right to accept the return of any goods directly from an Account Debtor,
without notice to or the consent of Borrower, and neither a delivery by Borrower
of returned or recovered goods to the Lender, nor the acceptance by the Lender
of returns directly from any Account Debtor, shall in any way effect Borrower's
liability to the Lender under this Agreement or on account of the
Obligations.
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3.20Disputed
Accounts. Borrower
shall promptly notify the Lender of all material disputes and claims with
respect to any of the Accounts. From and after the occurrence of an Event of
Default, (a) the Lender shall have the right to settle, accept reduced amounts,
adjust disputes and claims directly with, and give releases on behalf of
Borrower to Account Debtors, upon such terms as the Lender, in its good faith
business judgment, determines to be appropriate; and (b) without the Lender's
prior written consent, Borrower shall not compromise, adjust, or grant any
discount, credit, allowance, or extension of time for payment to any Account
Debtors.
4. Borrowers
Covenants.
4.1 Liens.
Borrower
shall at all times keep the Collateral free of all liens, encumbrances and
claims of any kind or nature other than the security interest of the
Lender.
4.2 Transfers.
Borrower
will not sell, transfer, lease or otherwise dispose of any or all of the
Collateral or any interest therein to any Person other than Lender, except
as
otherwise expressly permitted in this Agreement.
4.3 Taxes.
Borrower
will pay when due and prior to delinquency all foreign, federal, state and
local
taxes, assessments, and governmental charges now or hereafter levied on or
which
are or may become liens against the Collateral.
4.4 Location
of Tangible Collateral. Without
the Lender's prior written consent, which consent will not be unreasonably
withheld, Borrower shall not remove any of the existing tangible Collateral
from
the present locations of such Collateral, except finished Inventory sold or
leased in the ordinary course of Borrower's business.
4.5 Books
and Records. Borrower
shall maintain complete and accurate books and records which contain full and
correct entries of all transactions relating to the Collateral and Borrower's
business.
4.6 Inspection
of Collateral. The
Lender shall have access to the Collateral and all other property of the
Borrower, wherever located, during normal business hours upon not less than
two
(2) Business Days prior written notice for the purposes of examination,
inspection, verification, audit, testing, and any other reasonable purpose.
For
such purposes, the Lender, at no charge or cost, shall have the right to enter
and remain upon the Borrower's premises as often during normal business hours
and for such periods as the Lender reasonably determines to be necessary or
appropriate.
4.7 Reports.
Upon
the
Lender's request, Borrower shall deliver to the Lender such reports and
information available to Borrower's management concerning the Collateral and
Borrower's business and affairs as the Lender may reasonably request. Such
reports shall be in such form, for such periods, contain such information,
and
shall be rendered with such frequency as the Lender may reasonably designate.
All reports and information provided to the Lender by Borrower shall be complete
and accurate in all material respects at the time provided.
4.8 Further
Assurances. Borrower
shall take all actions which may be reasonably necessary or appropriate to
maintain, preserve, protect, and defend the Collateral and the Lender's security
interest therein, including all such actions as may be reasonably requested
by
the Lender. Upon the Lender's request, Borrower shall execute and deliver to
the
Lender such further documents and agreements, in form and substance satisfactory
to the Lender, as the Lender may reasonably require to effectuate this Agreement
or to evidence, perfect, maintain, preserve or protect the Lender's security
interest in the Collateral, including financing statements, continuation
financing statements, financing statement amendments, security agreements,
and
assignments.
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4.9
Maintenance
of Collateral. Borrower
(a) shall maintain the Collateral and all of Borrower's other assets in good
operating and repair condition; (b) shall not use the Collateral or any of
Borrower's other assets in any unlawful business or for any unlawful purpose;
and (c) shall not abandon the Collateral or any of Borrower's other
assets.
5.Warranties
and Representations by Borrower.
5.1 Warranties
and Representations. Borrower
warrants and represents to the Lender as follows:
(a) Ownership
of Collateral. Borrower
is the sole legal and beneficial owner of the Collateral, free and clear of
all
liens, encumbrances and security interests, except for the security interest
in
favor of the Lender under this Agreement.
(b) Compliance
With Laws. The
Collateral complies with all applicable Governmental Requirements.
(c) Equipment.
The
Equipment is in good operating condition and repair, normal wear and tear
excepted, free from material latent and patent defects, and not
obsolete.
(d) Inventory.
The
Inventory is new, in good condition, of merchantable quality, free from material
latent and patent defects, and not obsolete. Borrower's retail sales of
Inventory were less than twenty-five percent (25%) in dollar volume of
Borrower's total sales of all goods during the twelve (12) months preceding
the
attachment of the security interest granted under this Agreement. Borrower's
retail sales of Inventory shall be less than twenty-five percent (25%) in dollar
volume of Borrower's total sales of goods during each consecutive twelve (12)
month period during the term of this Agreement.
(e) Accounts.
Each
and
all of the Accounts shall at all times comply with the following provisions:
(i)
each Account represents an undisputed bona fide existing unconditional
obligation of the Account Debtor created by the sale, delivery, and acceptance
of goods or the rendition of services in the ordinary course of Borrower's
business; (ii) the Account Debtor on each Account has not asserted and to the
best of Borrower's knowledge will not assert any defense, offset, counterclaim,
right of return or cancellation, or other right or claim relating to such
Account; (iii) each Account will be paid in full on the maturity date of the
Account; (iv) no petition under the federal bankruptcy laws or any other
applicable federal or state bankruptcy, insolvency, or similar law has been
or
will be filed by or against the Account Debtor on any Account, and no Account
Debtor has made or to the best of Borrower's knowledge will make an assignment
for the benefit of creditors, become insolvent, fail or go out of business,
nor
does Borrower have notice that any of the foregoing is threatened or is about
to
occur with respect to any Account Debtor; (v) no Account is or will be impaired
or reduced in value; (vi) no Account Debtor on any Account is a shareholder,
director, partner or agent of Borrower, or a person controlling, controlled
by,
or under common control with Borrower; (vii) no Account is owed by an Account
Debtor to whom Borrower is or may become liable in connection with goods sold
or
services rendered by the Account Debtor to Borrower or any other transaction
or
dealing between the Account Debtor and Borrower; and (viii) all documents,
instruments and agreements relating to all Accounts are and shall be legally
enforceable in accordance with their respective terms provided, however, that
Borrower shall not be in breach of the representation and warranty of this
Section 5.1(e) if the aggregate amount of all Accounts outstanding at any time
that fail to satisfy any of clauses (i) through (vii) above do not exceed five
percent (5%) of the aggregate amount of all outstanding Accounts. All statements
made and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Accounts are and shall be at all times true and
correct. All sales and other transactions underlying or giving rise to each
Account shall fully comply in all material respects with all applicable laws,
ordinances, governmental rules and regulations.
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5.2 Borrower's
Warranties. Borrower's
warranties and representations set forth in Section 5.1 above shall be true
and
correct at the time of execution of this Agreement by Borrower and shall
constitute continuing representations and warranties as long as any of the
Obligations remain outstanding.
0.Xxxxxx
of Default. The
occurrence of any of the following shall constitute an Event of Default under
this Agreement, at the option of the Lender:
6.1 Default
Under Loan Agreement. The
occurrence of any "Event of Default" (as such term is defined in the Loan
Agreement) under the terms of the Loan Agreement;
6.2 Impairment
of Collateral. The
Lender reasonably and in good xxxxx xxxxx itself to be insecure because of
any
or all of the following: (i) any person fails to perform any of its obligations
under the terms of any document that is part of, or is held by the Lender as,
Collateral; or (ii) the validity or priority of the Lender's security interest
in the Collateral is impaired for any reason;
6.3 Decline
in Collateral Value. Any
deterioration or impairment of the Collateral or any decline or depreciation
in
the value of the Collateral (whether actual or reasonably anticipated by the
Lender) which, in the Lender's discretion, causes the character or value of
the
Collateral to become unsatisfactory to the Lender; or
6.4 Loss
of Collateral. The
Lender reasonably and in good faith believes that the Collateral is in danger
of
misuse, dissipation, commingling, loss, theft, damage or destruction, or is
otherwise impaired or at risk of being impaired.
7. Remedies
Upon Default. Upon
the
occurrence of any Event of Default, the Lender shall have the following rights
and remedies:
7.1 Rights
of Secured Party. The
Lender shall have all of the rights and remedies of a secured party under the
California Uniform Commercial Code and under all other applicable
laws.
7.2 Acceleration.
The
Lender may declare any or all of the Obligations to be immediately due and
payable, including the indebtedness evidenced by the Note.
7.3 Extensions
of Credit. The
Lender may discontinue advancing money or extending credit to or for the benefit
of Borrower in connection with the Loan or under any other document or agreement
between the Lender and Borrower.
7.4 Assembly
of Collateral. The
Lender may require Borrower to assemble the Collateral and make it available
to
the Lender at a place designated by the Lender.
7.5 Possession
of Collateral. The
Lender, without a breach of the peace, may enter any of the premises of Borrower
and search for, take possession of, remove, keep or store any or all of the
Collateral. If the Lender seeks to take possession of any or all of the
Collateral by court process, Borrower irrevocably and unconditionally agrees
that a receiver may be appointed by a court for such purpose without regard
to
the adequacy of the security for the Obligations. The Lender shall have the
right to remain on Borrower's premises or cause a custodian to remain thereon
in
exclusive control of such premises without charge for as long as the Lender
deems necessary in order to complete the enforcement of its rights under this
Agreement. If the Lender seeks possession of any or all of the Collateral by
court process, Borrower irrevocably waives (a) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise
as an
incident or condition to such possession; (b) any demand for possession prior
to
the commencement of any suit or action to recover possession; and (c) any
requirement that the Lender retain possession of and not dispose of such
Collateral until after trial or final judgment.
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7.6 Preparation
of Collateral. The
Lender may complete processing, manufacturing or repair all or any part of
the
Collateral prior to a disposition and, for such purpose and for the purpose
of
removal, the Lender shall have the right to use Borrower's premises, vehicles,
hoists, lifts, cranes, equipment and all other property without charge. The
Lender may sell, ship, reclaim, lease or otherwise dispose of all or any part
of
the Collateral in its condition at the time the Lender obtains possession of
such Collateral or after further manufacturing, processing, or
repair.
7.7 Foreclose
on Collateral. The
Lender may sell or dispose of the Collateral at public or private sale, in
one
or more sales, as a unit or in parcels, at wholesale or retail, and at such
time
and place and on such terms as the Lender may determine. The Lender may be
the
purchaser of any or all of the Collateral at any public sale and, if permitted
under applicable law, any private sale.
7.8Accounts.
With
respect to the Accounts, and without limiting the Lender's rights under Section
3 above, the Lender may:
(a) Direct
any or all Account Debtors to make payment directly to the Lender or to a
specified agent of the Lender; and
(b) (i)
Demand, collect, receive and give receipts for any and all money and other
property due or to become due in connection with the Accounts, in the Lender's
or Borrower's name; (ii) take possession of and endorse and collect any or
all
notes, checks, drafts, money orders, or other instruments of payment relating
to
the Collateral (including payments made under or with respect to any policy
of
insurance); and (iii) file any claim and take any other action in any court
of
law or equity which the Lender determines to be appropriate for the purpose
of
collecting any or all of the Accounts; provided, however, that the Lender shall
not be obligated in any manner to make any demand or to make any inquiry as
to
the nature or sufficiency of any payment received by it, or to present or file
any claim or take any action to collect or enforce the payment of any or all
of
the Accounts.
7.9Postponement.
Any
public sale of any or all of the Collateral may be postponed from time to time
by public announcement at the time and place last scheduled for the
sale.
7.10Discharge
of Other Claims. The
Lender's sale or disposition of any or all of the Collateral shall transfer
to
the purchaser all of the Borrower's rights in such Collateral and discharge
all
security interests and liens subordinate to the Lender's security interest
in
the Collateral, and the purchaser shall acquire such Collateral free of all
such
subordinate interests and liens.
7.11Time
of Sale. Without
limiting the generality of this Section 7.11, the Lender shall conclusively
be
deemed to have made a commercially reasonable disposition of any or all of
the
Collateral if (a) the Lender holds a public or private sale of such Collateral
at least five (5) days after notice is given to Borrower of the date fixed
for
any public sale or the date on or after which any private sale or other
disposition of the Collateral is to be made by the Lender; (b) with respect
to
any public sale, the sale is held at least five days after notice is published
in a newspaper of general circulation in the county in which such Collateral
is
located; and (c) respect to any public disposition, the sale is held any time
between the hours of 8 a.m. and 5 p.m. in the county in which such Collateral
is
located at any place designated by the Lender.
7.12Information.
Without
limiting the generality of this Section 7.12, it shall conclusively be deemed
to
be commercially reasonable for the Lender to direct any prospective purchaser
of
any or all of the Collateral to Borrower to ascertain all information concerning
the status of the Collateral.
7.13
Other
Disposition. The
Lender's disposition of any or all of the Collateral in any manner which differs
from the procedures specified in Section 7.11 or 7.12 above shall not be deemed
to be commercially unreasonable.
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7.14Judicial
Action. The
Lender may reduce its claims for breach of any of the Obligations to judgment
and foreclose or otherwise enforce its security interest in any or all of the
Collateral by any available judicial procedure. If the Lender has reduced its
claims for breach of any of the obligations to judgment, the lien of any levy
which may be made on any or all of the Collateral by virtue of any execution
based upon such judgment shall relate back to the date of the Lender's
perfection of its security interest in such Collateral. A judicial sale pursuant
to such execution shall constitute a foreclosure of the Lender's security
interest by judicial procedure, and the Lender may purchase at such sale and
thereafter hold the Collateral free of all rights of Borrower
therein.
7.15 Discharge
Claims. The
Lender may discharge claims, demands, liens, security interests, encumbrances
and taxes affecting any or all of the Collateral and take such other actions
as
the Lender determines to be necessary or appropriate to protect the Collateral
and the Lender's security interest therein. The Lender, without releasing
Borrower or any other party from any of the Obligations, may perform any of
the
Obligations in such manner and to such extent as the Lender determines to be
necessary or appropriate to protect the Collateral and the Lender's security
interest therein.
7.16 Proceeds
of Sale. The
proceeds of any sale or disposition of the Collateral by the Lender shall be
applied in the following order of priority:
(a) First,
to
all liabilities, obligations, costs, and expenses, including reasonable
attorneys' fees and costs, incurred by the Lender in exercising any of its
rights or remedies under this Agreement, including the costs and expenses of
retaking, holding, and selling any or all of the Collateral and the costs and
expenses of enforcing and collecting upon any or all of the
Accounts;
(b) Second,
to the payment of the Obligations in such order and amounts as the Lender may
determine in its discretion;
(c) Third,
to
(i) the satisfaction of indebtedness secured by any subordinate security
interest in the Collateral if written demand therefor is received by the Lender
before distribution of any such proceeds; and (ii) to the satisfaction of any
subordinate attachment lien or execution lien pursuant to subdivision (b) of
Section 701.040 of the Code of Civil Procedure if notice of the levy of
attachment or execution is received by the Lender before distribution of any
such proceeds. If requested by the Lender, the holder of a subordinate security
interest in the Collateral shall furnish the Lender with proof of its interest
in the Collateral acceptable to the Lender, and unless such holder does so,
the
Lender shall have no obligation to comply with such holder's demand;
and
(d) Fourth,
the surplus, if any, shall be paid to Borrower.
8. Liability
for Deficiency. Borrower
shall at all times remain liable for any deficiency remaining on the Obligations
for which Borrower is liable after any disposition of any or all of the
Collateral and after the Lender's application of any proceeds to the
Obligations.
9. Power
of Attorney. Borrower
irrevocably appoints the Lender, with full power of substitution, as Borrower's
attorney-in-fact, coupled with an interest, with full power, in the Lender's
own
name or in the name of Borrower:
9.1 At
any
time after the occurrence of any Event of Default, to do any or all of the
following:
(a) Endorse
any checks, drafts, money orders, notes, and other instruments or documents
representing or evidencing the Collateral, or proceeds of the
Collateral;
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(b) Pay
or
discharge claims, demands, liens, security interests, encumbrances, or taxes
affecting or threatened against any or all of the Collateral;
(c) Receive
payment of all Accounts;
(d) Execute
any invoices relating to any Account, any draft against any Account Debtor,
any
notice to any Account Debtor, any proof of claim in bankruptcy, any notice
of
lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien;
(e) Grant
any
extension of time to pay any Account, compromise claims and settle Accounts
for
less than face value thereof, and execute all releases and other documents
in
connection therewith;
(f) Commence,
prosecute or defend any suit, action or proceeding relating to any or all of
the
Collateral;
(g) Receive
and open all mail addressed to Borrower and, in the exercise of such right,
the
Lender shall have the right, in Borrower's name, to notify the Post Office
authorities to change the address for the delivery of mail addressed to Borrower
to such other address as the Lender may designate, including the Lender's own
address. The Lender shall promptly turn over to Borrower all of such mail not
relating to the Collateral;
(h) Direct
any financial institution which is a participant with the Lender in extensions
of credit to or for the benefit of Borrower, or which is an institution with
which any deposit account is maintained, to pay to the Lender all monies on
deposit by Borrower with said financial institution which are payable by said
financial institution to Borrower, regardless of any loss of interest, charge
or
penalty as a result of payment before maturity;
(i) Settle
and adjust, and give releases of, any insurance claim that relates to any of
the
Collateral, obtain payment of claim, and make all determinations and decisions
with respect to any such policy of insurance, and endorse Borrower's name on
any
check, draft, instrument or other item of payment or the proceeds of such
policies of insurance;
(j) Instruct
any accountant or other third person having custody or control of any books
or
records belonging or relating to the Collateral to give the Lender full rights
of access with respect thereto;
(k) Execute
on behalf of Borrower any document exercising, transferring or assigning any
option to purchase, sell or otherwise dispose of or to lease, as lessor or
lessee, any real or personal property;
(l) Sell,
transfer, pledge, make any agreement with respect to, or otherwise deal with
any
or all of the Collateral as though the Lender were the owner thereof for all
purposes; and
(m) Execute
on behalf of Borrower any and all documents and instruments (including notices
of assignment) required under the Federal Assignment of Claims Act for the
direct payment of Accounts to the Lender.
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9.2 To
execute any financing statement, continuation financing statement, financing
statement amendment, security agreement, assignment, notice, Certificate of
Ownership, application for a Certificate of Ownership, and all other documents
which the Lender, in its discretion, determines to be necessary or appropriate
in order to (a) perfect or maintain the Lender's security interest in the
Collateral; (b) exercise any or all of the Lender's rights under this Agreement;
or (c) to consummate or effectuate any of the transactions contemplated by
this
Agreement.
10. Waivers.
Borrower
hereby waives presentment, demand for payment, protest, notice of demand,
dishonor, protest and nonpayment, and all other notices and demands in
connection with the delivery, acceptance, performance, default under, and
enforcement of the Obligations. Borrower waives the right to assert any statute
of limitations as a defense to the enforcement of any of the Obligations to
the
fullest extent permitted by law.
11. Cumulative
Remedies. The
Lender's rights and remedies under this Agreement are cumulative with and in
addition to all other rights and remedies which the Lender may have in
connection with the Loan The Lender may exercise any one or more of its rights
and remedies under this Agreement at the Lender's option and in such order
as
the Lender may determine in its discretion. The Lender may exercise its rights
under this Agreement from time to time and at such times as the Lender may
determine.
12. Actions.
The
Lender shall have the right, but not the obligation, to commence, appear in,
or
defend any action or proceeding which affects or which the Lender determines
may
affect (a) the Collateral; (b) Borrower's or the Lender's rights or obligations
under the Loan Documents; (c) Borrower's or the Lender's rights under this
Agreement; or (d) the Loan. Whether or not Borrower is in default under the
Loan
Documents, the Lender shall at all times have the right to take any and all
actions which the Lender in its good faith business judgment determines to
be
necessary or appropriate to protect the Lender's interest in connection with
the
Loan.
13. Attorneys'
Fees. Upon
the
Lender's demand, Borrower shall reimburse the Lender for all costs and expenses,
including attorney's fees and costs, which are incurred by the Lender, whether
before or after the commencement of any action or proceeding by the Lender
following an Event of Default under the Loan Documents, in connection with
any
or all of the following: (a) the exercise of any or all of the Lender's rights
and remedies under the Loan Documents based on an Event of Default, whether
or
not any legal proceedings are instituted by the Lender; (b) the protection,
preservation, management, operation, or maintenance of any or all of the
Collateral; (c) the sale or disposition of any or all of the Collateral; (d)
the
commencement and prosecution of any suit, action, or proceeding with respect
to
any or all of the foregoing matters, including an action for relief from the
automatic stay arising under Bankruptcy Code § 362(a), 11 U.S.C. § 362(a); or
(e) the defense of any suit, action or proceeding by Borrower or any other
party
relating to any or all of the Collateral. Borrower's obligation to reimburse
the
Lender under this Section shall include payment of interest on all amounts
expended by the Lender from the date of expenditure at the rate of interest
specified in the Note.
14. Notices.
All
notices under this Agreement shall be given in accordance with the notice
provision contained in the Loan Agreement.
15. Applicable
Law. The
Loan
Documents shall be construed in accordance with and governed by the laws of
the
State of California.
16. Time
of Essence. Time
is
of the essence of each provision of the Loan Documents.
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17. Interpretation.
The
headings to sections of this Agreement are for convenient reference only, and
they do not in any way define limit any of the terms of this Agreement and
shall
not be used in interpreting this Agreement. For purposes of this Agreement,
(a)
the term "including" means "including without limitation"; (b) the term
"document" shall be deemed to include all written contracts, commitments,
agreements, and instruments; and (c) the term "discretion" when applied to
any
determination, consent or approval right by the Lender, shall be deemed to
mean
the Lender's sole but good faith business judgment. Whenever the context of
this
Agreement reasonably requires, all words used in the singular shall be deemed
to
have been used in the plural, and the neuter gender shall be deemed to include
the masculine and feminine gender, and vice versa. For purposes of this
Agreement, (i) all references to the Collateral shall be deemed to refer to
all
or any part of the Collateral; and (ii) all references to the Loan Documents
shall be deemed to refer to any or all of the Loan Documents.
18. Entire
Agreement. The
Loan
Documents contain the entire agreement between the Lender and Borrower
concerning the subject matter of the Loan Documents and supersede all prior
and
contemporaneous agreements, statements, understandings, terms, conditions,
representations and warranties, whether oral or written, made by the Lender
or
Borrower concerning the Loan.
19. Severability.
If
any
provision of the Loan Documents shall be held by any court of competent
jurisdiction to be unlawful, void, voidable, or unenforceable for any reason,
such provision shall be deemed severable from and shall in no way affect the
validity or enforceability of the remaining provisions of the Loan Documents.
Without limiting the generality of the preceding sentence, if the Lender's
security interest in any part of the Collateral is held to be unlawful, void,
voidable or unenforceable for any reason, such defect shall in no way affect
the
validity or enforceability of the remaining terms and conditions of this
Agreement.
20. No
Third Party Beneficiaries. The
Loan
Documents are entered into for the sole protection and benefit of the Lender,
Borrower and Guarantors (if any), as applicable, and their respective permitted
successors and assigns. No other Person shall have any rights or causes of
action under the Loan Documents.
21. Documents.
All
documents and instruments which Borrower is required to deliver to the Lender
under this Agreement shall be acceptable in form and substance to the Lender
acting in good faith.
22. Performance
of Covenants. Borrower
shall perform all of its covenants under this Agreement at its sole cost and
expense.
23. No
Waiver by Lender. No
waiver
by the Lender of any of its rights or remedies in connection with the Loan
Documents shall be effective unless such waiver is in writing and signed by
the
Lender.
24. Term.
This
Agreement shall continue in full force and effect as long as any of the
Obligations are outstanding and until terminated by written agreement of the
Lender.
25. Amendment.
This
Agreement may be modified only by a written agreement signed by Borrower and
the
Lender.
26. Successors.
This
Agreement shall be binding upon and inure to the benefit of Borrower and the
Lender and their respective permitted successors and assigns.
-33-
|
Dated:
|
June
8, 2006
|
|
|
Borrower:
|
||
|
ASDS
of Orange County, Inc.
|
||
|
a
Delaware corporation
|
||
|
By:
|
/s/
Xxxxx X. Xxxxxx
|
|
|
Xxxxx
X. Xxxxxx, President
|
||
|
By:
|
/s/
Xxxxx X. Xxxx
|
|
|
Xxxxx
X. Xxxx, Secretary
|
||
|
Accepted:
|
||
|
First
Republic Bank
|
||
|
By:
|
/s/
Xxxxxxx Xxxxxx
|
|
|
Xxxxxxx
Xxxxxx
|
||
|
Its:
|
Managing
Director
|
-34-
