Exhibit 10-18
The Bank of California,
a division of Union Bank of California, N.A.
GENERAL SECURITY AGREEMENT
This General Security Agreement ("Agreement") is made as of June 12, 1996, by
and between Auto-Graphics, Inc., a California corporation ("Debtor") and The
Bank of California, a division of Union Bank of California, N.A. ("Bank").
In consideration of any financial accommodations given. to be given or
continued, Bank and Debtor agree to the following terms and conditions.
1. Grant Of Security Interest. Debtor grants to Bank a security interest in
the following described personal property of Debtor now or hereafter existing
or acquired:
1.1 Any and all tangible and Intangible property in the Bank's possession or
control in any manner or for any purpose; and
1.2 All of the kinds and classes of property indicated below:
Equipment, including without limitation: machinery, furniture, fixtures,
furnishings, fittings, parts, attachments, motor vehicles and farm equipment;
and consumer goods (subject to Section 2").
Accounts, including without limitation: accounts receivable, rights to
payment or performance under invoices or contracts or to payment for goods
sold or leased or for services rendered, whether or not yet earned by Debtor's
performance, and all forms of obligations of and receivables from others.
Chattel paper; Instruments, including notes, drafts and acceptances;
documents; documents of title and receipts, including bills of lading and
warehouse receipts, and the goods relating thereto; money; general
Intangibles, including without limitation: cash value, return premiums; and
other rights under insurance policies, causes of action, judgments, royalty
contracts, contracts relating to the sale, finance or lease of real property,
goodwill, trademarks, trade names, trade styles, patents and applications
therefor; books and records; and demand, time, savings, or any other
accounts maintained with Bank or any other financial institutions; deposit
accounts, including time, savings, passbook or other accounts.
1.3 Any and all proceeds, accessions, replacements, improvements, increases
and products of the personal property specified in Sections 1.1 and 1.2 above,
together with any accounts into which any such proceeds may be placed, and
any and all records (including computer software and hardware, data
processing information, written documents, books, ledgers, and statements.)
The property described in Sections 1.1, 1.2 and 1.3 are Individually and
collectively called "Collateral".
2. Obligations Secured. The security interest granted by Debtor to Bank
secures payment and performance of all of the Debtor's present and future
debts, obligations and liabilities to Bank, whether absolute or contingent,
direct or indirect, liquidated or unliquidated, arising under loans, as
overdrafts or in any other manner, and whether or not secured by assets In
addition to the Collateral, except: any consumer credit indebtedness under
the Federal Truth In Lending Act and regulations thereunder unless the
Collateral and type of security interest granted to Bank under this Agreement
is disclosed at the time incurred if and as then required by such Act and
regulations (the foregoing to be hereinafter collectively called
"Obligations").
3. Ownership; Value. Debtor owns absolutely and has unrestricted power to
encumber all Collateral unless Bank agrees otherwise in writing. No other
person or entity has or claims any title, lien, share arrangement or other
interest in any Collateral except for taxes not yet delinquent, and for any
interest disclosed to and accepted by Bank in writing. Debtor will defend
any proceeding which may affect title to or Bank's security interest in any
Collateral. Copies of all financing statements and all other documents
publicly recorded or filed naming Debtor as debtor or obligor have been
delivered to Bank prior to the date of this Agreement. Debtor shall promptly
give Bank notice of any decrease in the value of any Collateral.
4. Collateral In Debtor's Possession. As to all Collateral now or later in
Debtor's possession (unless specifically otherwise agreed by Bank in writing"),
Debtor will:
4.1 Keep the Collateral at the following location(s") or at such other
locations disclosed in writing to Bank, and will not remove the Collateral
from such location(s") except temporarily for use In Debtor's business or for
repairs: 3201 Temple Ave.. Pomona, CA 91768
4.2 Keep the Collateral separate and Identifiable to the fullest extent
possible.
4.3 Maintain all of Collateral in good and salable condition: repair the
Collateral if necessary: deal with the Collateral in all ways considered good
practice by owners of like property: use the Collateral lawfully, only in
Debtor's business and as permitted by Insurance policies: and permit Bank to
inspect the Collateral at any reasonable time.
4.4 Within 30 days after issuance of any certificate of registration or title
to any Collateral, deliver any such certificate to Bank showing Bank's
security interest noted thereon.
4.5 Keep all Collateral as personal property or trade fixtures and keep it
from becoming part of the real property where located (notwithstanding that
Collateral Includes fixtures"), and at Bank's request obtain and deliver to
Bank a waiver or subordination on Bank's standard form from any owner and
encumbrancer of the real property of any rights in the Collateral, and of any
rights to prevent removal of the Collateral by Bank.
5. Inventory And Accounts. If Collateral includes inventory or accounts,
Debtor:
5.1 May, until notice from Bank, sell or lease inventory Collateral in the
ordinary course of trade only, and collect cash proceeds of inventory
Collateral.
5.2 At Bank's request, will deposit all cash proceeds as received in a general
account with Bank or at Bank's option an account containing only such
proceeds, and/or deliver statements identifying units or inventory acquired,
disposed of and/or returned, and accounts and names and addresses of account
debtors.
5.3 Will receive in trust, schedule on forms satisfactory to Bank, and
deliver to Bank all non-cash proceeds other than inventory received in trade.
6. Collateral Representing Obligations Of Others. If Collateral includes
accounts, chattel paper, Instruments, documents, general intangibles, rights
to payment, deposit accounts, or proceeds, at and after the time Debtor's
rights under each hem of such Collateral arise:
6.1 All such Collateral is and will be genuine, enforceable in accordance
with its terms, free from default, prepayment, defenses and conditions
precedent (except as disclosed to and accepted by Bank in writing"). Debtor
will supply Bank with invoices or other evidence of Debtor's rights and With
all originals of documents evidencing instruments, chattel paper and general
intangibles on Bank's request.
6.2 All persons appearing to be obligated on such Collateral have authority
and capacity to contract
6.3 All instruments and chattel paper are and will be in compliance with law
as to form, content and manner of preparation and execution, and properly
registered and filed to perfect Debtors interest thereunder.
6.4 Bank shall be under no duty to make or give any presentments, demands
for performance, notices of nonperformance, protests, notices of protest or
notices or dishonor, to collect any Collateral or its proceeds, or to take
any steps to preserve rights against prior parties in connection with the
Collateral whether or not it has possession of the Collateral.
6.5 Debtor will not compromise, settle or adjust any such Collateral or renew
or extend the time of payment thereof without Bank's prior written consent.
7. Payment Of Liens And Taxes. Debtor will pay when due all existing and
future charges, liens or encumbrances on and all taxes and assessments now or
hereafter imposed on or affecting the Collateral, Including taxes on realty
owned by Debtor on or at which Collateral is located.
8. Insurance On Collateral. Debtor, will at all times keep the Collateral
insured naming Bank as loss payee under policies, including such lenders loss
payable and/or additional Insured endorsements as Bank shall require, each in
form and amounts, with companies, and against risks and liability satisfactory
to Bank. In addition to amounts payable by reason of loss or damage to any
Collateral (in which amounts Bank has a security interest as proceeds),
Debtor hereby assigns to Bank as security for the Obligations all rights
under such policies and any other policies constituting Collateral, will
deliver such policies to Bank at Bank's request, and authorizes Bank to make
any claim thereunder, to cancel the insurance on Debtor's default, and to
receive payment of and endorse any instrument in payment of any loss, return
premium or dividend.
9. Information From Debtor. Debtor will give Bank any information it
reasonably requires from time to time regarding Debtors financial condition
or the Collateral and events which could affect either or both, and will
permit Bank access at reasonable times to its records containing such
information. All information received by Bank at any time from Debtor
(including but not limited to the value, condition and ownership of
Collateral, financial statements, financing statements, and statements made
in documentary Collateral) is and will be correct and complete as of the
time such information is supplied whether or not specifically requested by
Bank, and Debtor will notify Bank of any later adverse change in any such
information. Debtor will notify Bank in writing of any change of Debtors
name, residence, chief place of business, chief executive office or mailing
address before such change occurs.
10. Bank's Rights To Protect Collateral. Bank is irrevocably appointed
Debtor's attorney in fact at any time before or after default, without notice
to Debtor, to obtain any insurance, discharge any lien, make any payment and
do any other act which Debtor is obligated to do under this Agreement to
exercise such rights as Debtor might exercise, to use such equipment as
Debtor might use to enter Debtors premises, to give notice of Bank's security
interest to collect Collateral including proceeds to execute and file in
Debtors name any financing statements, other filings and amendments thereto,
or applications for registration or like documents required to perfect Bank's
security interest in any Collateral, and to take any other reasonable action,
all to protect and preserve the Collateral and Bank's rights. No action or
inaction by Bank, nor any term of this Agreement, shall relieve Debtor of the
obligation to do any of the foregoing acts or impose on Bank any such
obligations. Debtor shall, to the extent permitted by applicable law,
reimburse Bank promptly for all costs and expenses incurred by Bank in
performing any agreement of Debtor which Debtor shall fail to perform, or in
taking any other action which Bank deems necessary for the maintenance or
preservation of any Collateral or Bank's interest therein. Without limiting
the Bank in the exercise of any of the foregoing rights, Bank may:
10.1 Endorse, collect and receive delivery or payment of instruments and
documents constituting Collateral;
10.2 Make extension agreements with respect to or affecting Collateral,
exchange it for other Collateral, release persons liable on it or security
for the payment of it, and compromise disputes in connection with it;
10.3 Use or operate Collateral for the purpose of preserving any Collateral
or its value or for preparing and disposing of Collateral, or abandon any
Collateral.
11. Prohibited Transfers. Debtor will not sell, lease, contract to sell or
lease, transfer or create any encumbrance, purchase money or other security
interest in any Collateral (other than to sell or lease inventory Collateral
as permitted by Section 5.1) until all Obligations have been paid, even
though Bank has a security interest in proceeds of such Collateral and
regardless of whether any sale, lease, encumbrance or transfer is to an
organization or person controlled by Debtor or its then principals. If
Debtor is an organization, Debtor will not without Bank's prior written
consent change the legal form of its organization or its business structure
in any way which Bank in good faith decides might adversely affect the
prospect of repayment of any of the Obligations, impair the continuing
validity or perfection of its security interest as to any Collateral
(including later-acquired property), or make a filed financing statement
misleading.
12. Events Of Default. The occurrence of any of the following shall
constitute an Event of Default:
12.1 Debtor shall fail to pay any fees or other charges when due under this
Agreement, or Debtor or any other person or entity ("Person") shall fail to
perform any obligation under, this Agreement or any document or instrument
executed in connection herewith or in connection with the Obligations ("Loan
Documents"), or any default shall occur under any Loan Document
12.2 Any representation or warranty made, or financial statement, certificate
or other document provided, by Debtor or any guarantor of the Obligations
("Guarantor") to Bank shall prove to have been false or misleading.
12.3 Debtor or any Guarantor shall fail to pay its debts generally as they
become due or shall file any petition or action for relief under any
bankruptcy, insolvency, reorganization, moratorium, creditor composition law,
or any other law for the relief of or relating to debtors: an involuntary
petition shall be filed under any such law against Debtor or any Guarantor,
or a custodian, receiver, trustee, assignee for the benefit of creditors or
other similar official shall be appointed to take possession, custody or
control of the properties of Debtor or any Guarantor; or the death,
incapacity, dissolution or termination of the business of Debtor or any
Guarantor.
12.4 Debtor or any Guarantor shall fail to perform under any other agreement
involving the borrowing of money, the purchase of property, the advance of
credit or any other monetary liability of any kind to any Person; or any
guaranty of the indebtedness shall be revoked or terminated.
12.5 Any governmental authority shall take any action, any defined benefit
pension plan maintained by Debtor or any Guarantor shall have any unfunded
liabilities, or any other event shall occur, any of which, in the judgment of
Bank, might have a material adverse effect on the financial condition or
business of Debtor or any Guarantor.
12.6 Any sale, transfer or other disposition of all or a substantial or
material part of the assets of Debtor or any Guarantor. Including without
limitation to any trust or similar entity, shall occur.
12.7 Any Person shall fall to perform its obligations under the terms of any
promissory note contract or other obligation that is held by Bank as
Collateral; or Bank shall not have a first-priority perfected security
interest in, or shall deem itself insecure with respect to the value of, any
Collateral.
12.8 Any judgment shall be entered against Debtor or any Guarantor, or any
involuntary lien of any kind or character shall attach to any assets or
property of Debtor or any Guarantor, any of which, in the judgment of Bank,
will have a material adverse effect on the financial condition or business of
Debtor or any Guarantor.
12.9 If Debtor is a business organization, without Bank's prior written
consent, Debtor's equity holders as of the date of this Agreement shall cease
to own a majority of the equity interest in Debtor any change shall occur in
the executive management of Debtor, or any change shall occur in the legal
structure of Debtor.
12.10 Any deterioration or impairment of any of the Collateral or any decline
or depreciation in the value or the market price thereof (whether actual or
reasonably anticipated"), which causes the Collateral in Bank's judgment. to
become unsatisfactory as to character or value.
12.11 Bank reasonably determines, in good faith, that its security interest
in the Collateral or the prospect of payment or performance under this
Agreement or any Loan Document secured hereby is materially impaired.
12.12 Bank, in good faith, believes any or all of the Collateral, including
any proceeds, to be in danger of misuse, dissipation, commingling, loss,
theft, damage or destruction, or otherwise in jeopardy.
12.13 Any employee benefit plan of Borrower ("Plan"") subject to the Employee
Retirement Income Security Act of 1974 ("ERISA"") or any successor thereto
shall be terminated pursuant to ERISA, a trustee shall be appointed to
administer any Plan, the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any Plan, or any Plan shall fail to satisfy the
minimum funding standard for such Plan for a plan year as established by the
Internal Revenue Code, as amended from time to time.
12.14 Debtor shall fail to perform any of its duties or obligations under
this Agreement not specifically referenced in this Section 12.
13. Bank's Rights On Default. Upon the occurrence of an Event of Default,
Bank shall be entitled to declare any of the Obligations immediately due and
payable, and Bank shall have all rights provided in the California Uniform
Commercial Code and otherwise available by law, may take possession of any
Collateral and enter any premises where any Collateral is kept, with or
without judicial process, may sue for the full amount of any or all of the
Obligations without proceeding against any or all of the Collateral or sue
for any deficiency remaining after disposition of any or all of the
Collateral, may without notice or demand setoff and apply toward payment of
any Obligations any and all demand, time, savings or any other deposit
accounts, instruments, or other property under Bank's possession or control,
and may sell or lease in any commercially reasonable manner in one or more
transactions any or all of the Collateral in its then condition or following
any commercially reasonable preparation or processing. Sales for cash or on
credit to any wholesaler, retailer or user of the Collateral, or at public
auction or private sale, are all commercially reasonable. Bank may require
Debtor to assemble any or all of the Collateral and make it available to Bank
at the entrance to the location of the Collateral, or at any office of Bank
in the county where the Collateral is or should have been located under the
terms of this Agreement. Bank may sell or lease any or all of the Collateral
without having it present at the place of the transaction. Whenever any
Collateral is in the Bank's possession, Bank may use, operate and consume it
in any commercially reasonable manner or as it deems appropriate for paying
or performing the Obligations. Bank shall have no liability to the Debtor
for any damage to real or personal property which is not Collateral caused by
acts or omissions of Bank or its agents done in good faith in the course of
removing, storing, processing, maintaining, preserving, protecting or
disposing of Collateral nor for any such damage to Collateral except as a
result of Bank's failure to sell or lease Collateral in a commercially
reasonable manner. Bank is not obligated to collect, take possession of, or
otherwise realize on any Collateral.
14. Multiple Debtors. If more than one Debtor signs this Agreement, their
liability under this Agreement is joint and several. Any Debtor who is a
married person agrees to recourse against his or her separate property for
all Obligations. The breach of any provisions of this Agreement by any
Debtor shall be a breach by all Debtors unless waived by Bank. Any release
or substitution of Collateral or any impairment or suspension of Bank's
rights against a Debtor, or any transfer of a Debtor's interest to another,
shall not affect the liability of any other Debtor. All Debtors waive to the
extent permitted by law: (a) any right to require Bank to proceed against any
Debtor before any other, or to pursue any other remedy; (b) presentment
protest and notice of protest, demand and notice of nonpayment demand of
performance, notice of sale, and advertisement of sale; (c) any right to the
benefit of or to direct the application of any Collateral until all
Obligations shall have been paid; and (d) any right of subrogation to Bank
until all Obligations shall have been paid or performed in full.
15. Modification And Waiver. Any forbearance or failure or delay by Bank In
exercising any right, power or remedy hereunder, or acceptance of partial or
delinquent payments, shall not be deemed a waiver thereof or of any other
right hereunder, and any single or partial exercise of any right, power or
remedy shall not preclude the further exercise thereof. No waiver or consent
shall be effective unless it is in writing and signed by an officer of Bank.
No waiver of a current breach shall be deemed a waiver of a future breach.
Bank may cure any Event of Default at Debtor's expense.
16. Assignment. Debtor may not assign or transfer Debtor's obligations
hereunder without Bank's prior written consent Bank reserves the right to
sell, assign or transfer its rights and duties under this Agreement, in whole
or in part, notice to Debtor. In that connection, Bank may disclose all
documents and information which Bank may have pertaining to this Agreement
Debtor or Debtors business. On transfer of all or any part of the
Obligations or a participation Interest therein, Bank may transfer all or any
part of or interest in the Collateral. Bank may deliver all or any part of
the Collateral to any Debtor at any time. Any such transfer or delivery
shall discharge Bank from all liability and responsibility with respect to
such Collateral transferred or delivered. This Agreement benefits Bank's
successors and assigns and binds Debtors heirs, legatees, personal
representatives, successors and assigns. Debtor agrees not to assert against
any assignee of Bank any claim or defense Debtor may have against Bank.
17. Miscellaneous. Time is of the essence of this Agreement and all its
provisions. Debtor will execute any additional agreements, assignments,
notices, filings or documents reasonably required by Bank to effectuate this
Agreement or to preserve and protect any Collateral and Bank's rights. This
Agreement shall be governed by the laws of the State of California and,
unless otherwise defined or provided herein, all words used in this Agreement
have the meanings given them in the California Uniform Commercial Code.
Titles preceding any paragraph of this Agreement are for convenience only and
are not a part of this Agreement. All rights herein are cumulative and in
addition to all fights available under law or contract Any notices or other
communications provided for or allowed hereunder shall be effective only when
given by one of the following methods and addressed to the respective party
at Its address given with the signatures at the end of this Agreement and
shall be considered to have been validly given (a) upon delivery, if
delivered personally, or (b) upon receipt, if mailed upon placement in the
United States mail, first class postage prepaid or if sent by overnight
courier service of recognized standing, and (c) upon telephoned confirmation
of receipt, if sent by telecopy or facsimile. Unless separate notice is
requested in writing by any Debtor, notice given to any Debtor shall
constitute notice to all Debtors. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. Except for the Loan Documents and documents
and instruments referenced herein, this Agreement and any exhibits, schedules
and addenda constitute the entire agreement between Bank and Debtor in
connection with the Collateral and supersede all prior understandings or
agreements concerning the subject matter hereof.
18. Indemnification. Debtor shall pay and protect, defend and indemnify
Bank and Bank's employees, officers, directors, shareholders, affiliates,
correspondents, agents and representatives (other than Bank, collectively
"Agents") against, and hold Bank and each Agent harmless from, all claims,
actions, proceedings, liabilities, damages, losses, expenses (including
without limitation attorneys fees and costs) and other amounts incurred by
Bank and each Agent arising from the matters contemplated by this Agreement
or by any Loan Document; provided, however, that this indemnification shall
not apply to any of the foregoing incurred solely as the result of Bank's or
any Agent's gross negligence or willful misconduct. This indemnification
shall survive the payment and satisfaction of all of the Obligations.
19. Reimbursement. Debtor shall reimburse Bank for all costs and expenses,
including without limitation reasonable attorneys' fees and disbursements
(and fees and disbursements of Bank's in-house counsel) expended or incurred
by Bank in any arbitration, mediation, judicial reference, legal action or
otherwise in connection with (a) the negotiation, preparation, amendment,
interpretation and enforcement of this Agreement (b) any workout or attempted
workout, (c) the rendering of legal advice as to Bank's rights, remedies and
obligations under this Agreement or any of the Loan Documents, (d) collecting
any sum which becomes due Bank under this Agreement or any Loan Document (e)
any proceeding for declaratory relief, counterclaim to any proceeding, appeal,
contempt proceeding, discovery, or post-judgment motions and proceedings of
any kind, including without limitation any action taken to collect or enforce
any judgment, (f) the protection, preservation or enforcement of any rights
of Bank, (g) any motion, proceeding or other activity i connection with a
case under Title 11 of the United States Code or any similar law, or (h)
garnishment, levy and third party examinations.
20. Hazardous Substances. Except as disclosed in writing to Bank, Debtor's
propert never has been and never will be used for the generation. manufacture,
storage, treatment, disposal, release or threatened release of any flammable
explosives, radioactive materials, asbestos or any other hazardous substance,
as those or any similar terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss
9601 et seq. ("CERCLA"), any regulation promulgated thereunder, or any state
or local law, rule, regulation. or order in effect from time to time. Debtor
hereby agrees to indemnify and hold harmless Bank against any and all claims
and losses resulting from a breach of this provision.
21. Copy. Each Debtor acknowledges receipt of a copy of this Agreement
22. N/A Designation. Whenever "N/A" appears in this Agreement it means that
the space or section in which it appears is deemed deleted from this
Agreement.
DEBTOR:
Auto-Graphics, Inc., a California corporation
ss/Robert S. Cope
Robert S. Cope
President
This General Security Agreement Is a replacement of that certain Security
Agreement-Accounts dated June 13, 1994 and that certain Security
Agreement-Equipment dated May 31, 1989
Address(es) of chief place(s) of business and chief executive office, or if
none, residence:
3201 Temple Ave.
Pomona, CA 91768