DESCRIPTION - Continuing Security Agreement Rights to Payment and
Inventory between ▇▇▇▇▇ Fargo Bank and Auto-Graphics, Inc. dated May 12,
1997.
CONTINUING SECURITY AGREEMENT
▇▇▇▇▇ FARGO BANK
RIGHTS TO PAYMENT AND INVENTORY
1. GRANT OF SECURITY INTEREST. For valuable consideration, the
undersigned AUTO-GRAPHMS, INC., or any of them ("Debtor"), hereby
grants and transfers to ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION("Bank")a
security interest in all accounts, deposit accounts, chattel paper,
instruments, documents and general intangibles (collectively called
"Rights to Payment") ' 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 property described therein, and in all goods returned
by or repossessed from Debtor's customers, together with a security
interest in all inventory, goods held for sale or lease or to be furnished
under contracts for service, goods so leased or furnished, raw materials,
component parts, work in process or materials used or consumed in Debtor's
business and all warehouse receipts, bills of lading and other documents
evidencing goods owned or acquired by Debtor, and all goods covered
thereby, now or at any time thereafter, and prior to the termination
hereof, owned or acquired by Debtor, wherever located, and all products
thereof (Collectively called "Inventory"), whether in the possession of
Debtor, warehousemen, bailees or any other person, or in process of
delivery and whether located at Debtor's places of business or elsewhere
(with all Rights to Payment and Inventory referred to herein collectively
as the '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, 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 material respects; (a) 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 Rights to Payment 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
Rights to Payment 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: (1) 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
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 inventory and, where
applicable, Rights to Payment 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 use any inventory
for any unlawful purpose or in any. way that would void any insurance
required to be carried in connection therewith; (iii) in not to remove
inventory from Debtor's premises, except for deliveries to buyers in the
ordinary course of Debtors business and except inventory which consists of
mobile goods as defined in the California Uniform Commercial Code, in
which case Debtor agrees not to remove or permit the removal of the
inventory from its state of domicile for a period in excess, of 30
calendar days; (iv) not to permit any lien on the Collateral or Proceeds,
including without limitation, liens arising from the storage of
inventory. except in favor of Bank; (v) 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, except sales of
inventory to buyers in the ordinary course of Debtors business; (vi) to
furnish reports to Bank of all acquisitions, returns. sales and other
dispositions of the inventory in such form and detail and at such times as
Bank may require; (vii) to permit Bank to inspect the Collateral at any
time; (viii) 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; (ix) if requested by Bank to receive and use
reasonable diligence to collect Rights to Payment and Proceeds, in trust
and as the property of Bank, and to immediately endorse as appropriate and
deliver such Rights to Payment and Proceeds to Bank daily in the exact
form in which they are received together with a collection report in form
satisfactory to Bank; (x) not to commingle Rights to Payment, Proceeds or
collections thereunder with other property; (xi) to give only normal
allowances and credits, and to advise, Bank thereof immediately in writing
if they affect any Rights to Payment or Proceeds in any material respect:
(xii) on demand, to deliver to Bank returned property resulting from, or
payment equal to. such allowances or credits on any Rights to Payment 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; (xiii) 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; (xiv) in the
event Bank elects to receive payments of Rights to Payment 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 (xv) 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 all
Collateral in good and saleable condition in accordance with the standards
and practices adhered to generally by users and manufacturers 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
acceptances and compromise disputes in connection therewith; (d) to
release security; (a) 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; (n) to make
withdrawals from and to close deposit accounts or other accounts with any
financial institution, wherever located, into which Proceeds may have been
deposited, and to apply funds so withdrawn to payment of the indebtedness;
(o) to preserve or release the interest evidenced by chattel paper to
which Bank is entitled hereunder and to endorse and deliver evidences of
title incidental thereto; and (p) 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 fall 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 an 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; (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. With respect to any sale
by Bank of any Collateral subject to this Agreement, Debtor hereby
expressly grants to Bank the right to sell such Collateral using any or
all of Debtor's trademarks. trade names, trade name rights and/or
proprietary labels or marks.
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, forbearance's 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), expanded 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: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Debtor warrants that the Collateral (except goods in transit) is located
or domiciled at the following additional addresses: NONE
IN WITNESS WHEREOF, this Agreement has been duly executed as of May
12,1997.
AUTO-GRAPHICS, INC
By: Ss/▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President