EXHIBIT 10.3
SECURITY AGREEMENT
This Agreement is made as of February 29, 1996 by EMCON, a California
corporation ("Debtor"), in favor of THE BANK OF CALIFORNIA, N.A. ("Bank").
Recitals
Debtor and Bank have executed a Credit Agreement of even dated
herewith (as the same may be amended or supplemented from time to time, the
"Credit Agreement"), pursuant to which Bank has agreed to extend certain credit
facilities to Borrower on the condition, among others, that Borrower grant to
Bank a continuing security interest in certain now owned and after-acquired
personal property of Borrower as security for Borrower's obligations under the
Credit Agreement. All capitalized terms used in this Agreement that are not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement.
ARTICLE 1 - DEFINITIONS
The following definitions shall be applicable to both the singular and
plural forms of the defined terms:
"Account" means a right to payment for goods sold or leased by
Debtor or for services rendered by Debtor, which right is not evidenced by an
instrument or chattel paper, whether or not earned by performance.
"Agreement" means this Security Agreement, as it may be amended
from time to time.
"Collateral" means all Debtor's Accounts, Deposit Accounts,
Equipment, Fixtures, General Intangibles, Goods, Inventory and Rights to Payment
now owned or hereafter acquired, wherever located, and whether held by Debtor or
any third party, and all royalties, proceeds and products thereof, including all
insurance and condemnation proceeds ("Proceeds"), and all Records. "Collateral"
shall include the separate property of any married individual who signs this
Agreement if such property is otherwise covered by this definition.
"Deposit Accounts" means all Debtor's demand, time, savings,
passbook or similar accounts maintained with a financial institution or credit
union, other than accounts evidenced by a negotiable certificate of deposit.
"Equipment" means all of Debtor's equipment now owned or
hereafter acquired, including but not limited to machinery, machine parts,
furniture, furnishings and all tangible personal property used in the business
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of Debtor and all such property which is or is to become fixtures on real
property, and all improvements, replacements, accessions and additions thereto,
wherever located, and all proceeds thereof arising from the sale, lease, rental
or other use or disposition of any such property, including all rights to
payment with respect to insurance or condemnation, returned premiums, or any
cause of action relating to any of the foregoing.
"Event of Default" means an event described in Article 6.
"Fixtures" means all items of personal property of Debtor that
are so related to the real property upon which they are located that an interest
in them arises under real property law, and improvements, replacements, parts,
accessions and additions thereto, and substitutions therefor.
"General Intangibles" means all personal property of Debtor,
other than Goods, not otherwise defined as Collateral, including without
limitation all interests or claims in insurance policies; literary property;
tradenames, tradename rights; trademarks, trademark rights, copyrights, patents,
and all applications therefor; licenses, permits, franchises and like privileges
or rights issued by any governmental or regulatory authority; income tax
refunds; customer lists; claims and causes of action and all guaranty claims,
co-op memberships, leasehold interests in personal property, security interests
or other security held by or guaranteed to the Debtor to secure the payment by
an account debtor of any of the Accounts.
"Goods" means all money and other personal property of Debtor,
other than General Intangibles, not otherwise defined as Collateral.
"Indebtedness" means all debts, obligations and liabilities of
Debtor to Bank currently existing or now or hereafter made, incurred or created,
whether voluntary or involuntary and however arising or evidenced, whether
direct or acquired by Bank by assignment or succession, 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 debt may be or become barred by any statute of limitations or
otherwise unenforceable; and all renewals, extensions and modifications thereof;
and all attorneys' fees and costs incurred by Bank in connection with the
collection and enforcement thereof.
"Inventory" means all Debtor's raw materials, work in process,
finished goods and goods held for sale or lease or furnished under contracts of
service, and all returned and repossessed goods, and all goods covered by
documents of title, including warehouse receipts, bills of lading and all other
documents of every type covering all or any part of the Collateral.
"Lien" means any voluntary or involuntary security interest,
mortgage, pledge, claim, charge, encumbrance, title retention agreement, or
third party interest covering all or any part of the property of Debtor or any
other Person.
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"Loan Documents" means this Agreement, any evidence of
Indebtedness, any guaranty, security or pledge agreement, deed of trust, and all
other contracts, instruments, addenda and documents executed in connection
therewith.
"Person" means any individual or entity, including without
limitation Bank where the context so permits and in Bank's sole discretion.
"Records" means all Debtor's computer programs, software,
hardware, source codes and data processing information, all written documents,
books, invoices, ledger sheets, financial information and statements, and all
other writings concerning Debtor's business.
"Rights to Payment" means all Debtor's accounts, instruments,
contract rights, documents, chattel paper and all other rights to payment,
including without limitation the Accounts, all negotiable certificates of
deposit and all rights to payment under any commercial or standby letter of
credit.
"Uniform Commercial Code" means the Uniform Commercial Code of
the State referred to in Article Eight, as amended from time to time.
Terms not specifically defined in this Agreement have the meanings proscribed in
the Uniform Commercial Code.
ARTICLE 2 - GRANT OF SECURITY INTEREST
To secure the timely payment of the Indebtedness and
performance of all obligations of Debtor to Bank, Debtor grants to Bank a
security interest in the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants that, at all times during the
term of this Agreement:
3.1 Authorization, Validity and Enforceability. The execution,
delivery and performance of this Agreement are within Debtor's powers, have been
duly authorized, and are not in conflict with Debtor's articles of incorporation
or by-laws, or the terms of any charter or other organizational document of
Debtor; and this Agreement constitutes a valid and binding obligation of Debtor,
enforceable in accordance with its terms, and creates a security interest which
is enforceable against the Collateral.
3.2 No Conflict. The execution, delivery, and performance by
Debtor of this Agreement are not in conflict with any law, rule, regulation,
order or directive, or any indenture, agreement, or undertaking to which Debtor
is a party or by which Debtor may be bound or affected and will not result in
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the creation or imposition of any Lien pursuant to the terms of any such
indenture, agreement, or undertaking.
3.3 Governmental Actions. Debtor has obtained all consents and
actions of, and has performed all filings with, any governmental or regulatory
authority that are required to authorize the execution, delivery or performance
of this Agreement or the granting or perfecting of Bank's security interest in
the Collateral.
3.4 Title. Except as permitted under Section 6.2 of the Credit
Agreement, Debtor is and will be the unconditional legal and beneficial owner of
the Collateral, and the Collateral is genuine and subject to no Liens, rights or
defenses of others. Except for Inventory under documents duly negotiated to Bank
or showing Bank as secured party, no bill of lading, warehouse receipt or other
document of title is outstanding with respect to any of the Collateral.
3.5 Rights to Payment. The names of the obligors, amount owing
to Debtor, due dates and all other information with respect to the Rights to
Payment are and will be correctly stated in all Records relating to the Rights
to Payment. Debtor further represents and warrants that each Person appearing to
be obligated on a Right to Payment has authority and capacity to contract and is
bound as it appears to be; and that all chattel paper is in compliance with law
as to form, content and manner of preparation and execution and all property
subject to chattel paper has been properly registered and filed to perfect
Debtor's interest.
3.6 Retail Merchant. Bank's security interest in any Collateral
consisting of Inventory is not restricted by Uniform Commercial Code Section
9102 in effect from time to time.
3.7 No Misrepresentation. No representation, warranty or
statement by Debtor contained in this Agreement, in any Record or certificate or
other writing furnished by Debtor to Bank (including without limitation any made
or given concerning the genuineness, value and condition of the Collateral,
financial statements and statements made in documentary Collateral) at any time
contains any untrue statement of material fact, or omits to state a material
fact.
3.8 Chief Executive Office. Debtor's chief executive office is
located at:
Address City County State Zip
-------- ---- ------ ----- ---
400 South El Camino Real
Suite 1200 San Mateo San Mateo CA 94402
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3.9 Inventory Location. Other than as set forth in Section 3.8,
Inventory is located at:
Address City County State Zip
-------- ---- ------ ----- ---
See Schedule 3.9 attached hereto.
3.10 Records Location. Other than as set forth in Section 3.8,
Records are maintained at:
Address City County State Zip
-------- ---- ------ ----- ---
See Schedule 3.9 attached hereto.
3.11 Equipment or Fixtures Location. Other than as set forth in
Section 3.8, Equipment or Fixtures are located at:
Address City County State Zip
-------- ---- ------ ----- ---
See Schedule 3.9 attached hereto.
3.12 Other Places of Business. In addition to the locations set
forth in Sections 3.8 through 3.11, Debtor maintains the following place(s) of
business:
Address City County State Zip
-------- ---- ------ ----- ---
See Schedule 3.9 attached hereto.
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3.13 Business Names. Debtor has conducted business in the
following names other than the name stated in the preamble to this Agreement:
EMCON, Inc.
EMCON Consulting, Inc.
EMCON Associates
EMCON Southwest, Inc.
EMCON Northwest, Inc.
EMCON Southeast, Inc.
EMCON Baker-Shiflett, Inc.
Baker-Shiflett/EMCON, Inc.
Baker-Shiflett, Inc.
Texas EMCON, Inc.
Sweet Edwards/EMCON, Inc.
Sweet Edwards, Inc.
GWL Environmental, Inc.
G. Warren Levy, Inc.
Special Environmental Services, Inc.
Chattahoochie Geotechnical Consultants, Inc.
Wehran/EMCON Northeast, Inc.
Wehran Envirotech, Inc.
Wehran Engineering Corporation
Wehran Technological Services, Inc.
Wecon Services Corporation
Eldredge Engineering Associates, Inc.
Aquila Construction Company
Resource Recovery Services
Aquila Construction
EMCON/United Field Services LLC
Wehran-New York Inc.
Wehran Puerto Rico
ET Environmental Corp.
Yolo Landfill Gas Corp.
Monterey Landfill Gas Corporation
Columbia Analytical Services Inc.
Performance Analytical
ET Environmental Corporation
EOC Corporation
3.14 No Litigation. There is no litigation, tax claim,
proceeding or dispute pending, or to the knowledge of Debtor, threatened against
or affecting Debtor or its property, except as disclosed in writing to Bank
prior to the date of this Agreement.
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3.15 Financing Statements. 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.
3.16 Hazardous Substances. Except in compliance with applicable
laws, Debtor's property never has been, and never will be, used for the
generation, manufacture, storage, treatment, disposal, release or threatened
release of any 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. Section 9601, et seq. ("CERCLA") any regulation
promulgated thereunder, or any state or local law, rule, regulation or order.
Debtor hereby agrees to indemnify and hold harmless Bank against any and all
claims and losses resulting from a breach of this provision.
3.17 No Default. No Event of Default has occurred or exists.
ARTICLE 4 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until payment of all the
Indebtedness and performance of all obligations to Bank under the Loan
Documents, Debtor will, unless Bank otherwise consents in writing:
4.1 Use of Proceeds. Use the proceeds of any credit extended
by Bank to Debtor only in accordance with the terms of any evidence of the
Indebtedness and for the purpose indicated on any application for such credit.
4.2 Delivery of Certain Items. Deliver to Bank promptly (a)
upon Bank's request, duplicate invoices with respect to each Account bearing
such language of assignment as Bank shall specify; (b) the originals of all
commercial and standby letters of credit, instruments, documents and chattel
paper constituting Collateral, endorsed and assigned as Bank shall specify; (c)
after an Event of Default, all Proceeds; (d) upon Bank's request, returned
property resulting from, or payment equal to such allowance or credit on, Rights
to Payment; (e) such specific acknowledgments, assignments or other agreements
as Bank may request relating to the Collateral; and (f) such Records and other
reports in such form and detail and at such times as Bank may require relating
to the Collateral, including without limitation reports of acquisition, and
disposition, agings, and collection of any Collateral. If any of the Rights to
Payment become evidenced by an instrument, Debtor will notify Bank thereof and,
upon request by Bank promptly deliver such instrument to Bank appropriately
endorsed to the order of Bank as further security for the satisfaction in full
of the Indebtedness.
4.3 Maintenance of Collateral; Inspection. Do all things
necessary to maintain, preserve, protect and keep all Collateral in good working
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order and salable condition, dealing with the Collateral in all ways as are
considered good practice by owners of like property, and use the Collateral
lawfully and only as permitted by Debtor's insurance policies. Debtor hereby
authorizes Bank's officers, employees, representatives and agents to inspect the
Collateral and to discuss the Collateral and the Records relating thereto with
Debtor's officers and employees, and, in the case of any Right to Payment after
the occurrence of an Event of Default, with any Person which is or may be
obligated thereon.
4.4 Maintenance of Records; Inspection. Maintain, or cause to
be maintained, complete and accurate Records relating to the Collateral. Bank,
its officers, employees, agents and representatives shall have the right, from
time to time, to examine the Records and to make copies or extracts therefrom.
4.5 Insurance. Maintain and keep in force in adequate amounts
such insurance on the Collateral with companies acceptable to Bank as is usual
in the business carried on by Debtor, including fire and extended coverage
insurance, with loss payable to Bank, as Bank may from time to time reasonably
request. Furnish to Bank upon request the original of all policies, or
certificates of insurance on the Collateral. Each policy shall be in form and
substance satisfactory to Bank.
4.6 Taxes and Other Liabilities. Pay all Debtor's obligations
when due; pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Debtor shall maintain
appropriate reserves; and timely file all required tax returns. Any taxes
(excluding income taxes) payable or ruled payable by any governmental or
regulatory authority arising out of or in connection with this Agreement shall
be paid by Debtor, together with interest and penalties, if any.
4.7 Debtor's Duty to Give Notice. Give prompt notice to Bank
of: (a) any material discount, credit, rebate or other reduction in the amount
owing on a Right to Payment; (b) any material threatened or asserted dispute,
setoff, claim, counterclaim or defense with respect to a Right to Payment; (c)
any material decrease in the value of any Collateral and the amount of such
decrease (other than depreciation calculated in the ordinary course of business
under applicable tax laws and regulations and in accordance with generally
accepted accounting principles); and(d) any change in the ownership of any
property on which any Collateral is located.
4.8 Financing Statements and Other Actions. Execute and deliver
to Bank, and file or record at Debtor's expense, all financing statements,
notices and other documents from time to time requested by Bank to maintain a
first perfected security interest in the Collateral in favor of Bank, all in
form and substance satisfactory to Bank; perform such other acts, and execute
and deliver to Bank such additional conveyances, assignments, agreements and
instruments, as Bank may at any time request in connection with the
administration and enforcement of this Agreement or Bank's rights, powers and
remedies hereunder.
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4.9 Agreement With Real Property Owner/Landlord. Obtain and
maintain such acknowledgments, consents, waivers and agreements from the owner,
lienholder, mortgagee and landlord with respect to any real property on which
Collateral is located as Bank may require, all in form and substance
satisfactory to Bank.
ARTICLE 5 - NEGATIVE COVENANTS
During the term of this Agreement and until payment of all the
Indebtedness and performance of all obligations to Bank, Debtor will not,
without the prior written consent of Bank:
5.1 Liens. Create, incur, assume or permit to exist any Lien
or grant any other Person a negative pledge on any Collateral, except Liens
permitted under Section 6.2 of the Credit Agreement.
5.2 Documents of Title. Sign or authorize the signing of any
financing statement or other document naming Debtor as debtor or obligor, or
acquiesce or cooperate in the issuance of any bill of lading, warehouse receipt
or other document or instrument of title with respect to any Collateral, except
those negotiated to Bank or those naming Bank as secured party.
5.3 Disposition of Collateral. Sell, transfer, lease or
otherwise dispose of any Collateral except as permitted under Section 6.5 of the
Credit Agreement. Prior to the occurrence of an Event of Default, unless
otherwise agreed between Debtor and Bank, Debtor may use cash Proceeds collected
in the ordinary course of business.
5.4 Change in Location, Name, Legal Structure. (a) Unless at
least 30 days' prior notice shall have been given to Bank, change its name or
mailing address, or maintain Records, its chief executive office, or a place of
business at a location other than as specified in Article 3; or (b) change the
nature of its business, or its legal structure.
5.5 Certain Agreements on Rights to Payment. Make or arrange to
make any material discount, credit, rebate or other material reduction in the
original amount owing on a Right to Payment or accept in satisfaction of a Right
to Payment an amount materially less than the original amount thereof, except as
disclosed to Bank in writing from time to time.
ARTICLE 6 - EVENTS OF DEFAULT
6.1 Event of Default. The occurrence of any Event of Default
under the Credit Agreement shall constitute an "Event of Default" under this
Agreement.
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6.2 Acceleration and Remedies. Upon the occurrence of an Event
of Default, Bank shall be entitled to, at Bank's option, without notice or
demand of any kind (a) declare all or any part of the Indebtedness immediately
due and payable; (b) exercise any or all of the rights and remedies available to
a secured party under the Uniform Commercial Code or any other applicable law;
and (c) exercise any or all of Bank's rights and remedies provided for in this
Agreement and in any other Loan Document. The obligations of Debtor under this
Agreement shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any Indebtedness is rescinded or must otherwise be
returned by Bank upon, on account of, or in connection with, the insolvency,
bankruptcy or reorganization of Debtor or otherwise, all as though such payment
had not been made.
6.3 Sale of Collateral. Bank may sell all or any part of the
Collateral, at public or private sales, to itself, a wholesaler, retailer or
investor, for cash, upon credit or for future delivery, and at such price or
prices as Bank may deem commercially reasonable. To the extent permitted by law,
Debtor hereby specifically waives all rights of redemption and any rights of
stay or appraisal which it has or may have under any applicable law in effect
from time to time. Any such public or private sales shall be held at such times
and at such place(s) as Bank may determine. In case of the sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by Bank until the selling price is paid by the purchaser, but
Bank shall not incur any liability in case of the failure of such purchaser to
pay for the Collateral and, in case of any such failure, such Collateral may be
resold. Bank may, instead of exercising its power of sale, proceed to enforce
its security interest in the Collateral by seeking a judgment or decree of a
court of competent jurisdiction.
6.4 Debtor's Obligations Upon Default. Upon the request of Bank
after the occurrence of an Event of Default, Debtor will:
(a) Assemble and make available to Bank the Collateral at such
place(s) as Bank shall designate, segregating all Collateral so that each
item is capable of identification; and
(b) Permit Bank, by Bank's officers, employees, agents and
representatives, to enter any premises where any Collateral is located, to
take possession of the Collateral, and to remove the Collateral, or to
conduct any public or private sale of the Collateral, all without any
liability of Bank for rent or other compensation for the use of Debtor's
premises.
ARTICLE 7 - SPECIAL COLLATERAL PROVISIONS
7.1 Cash Collateral Account. All cash Proceeds received by Bank
pursuant to any provisions of this Agreement shall be deposited in a special
non-interest bearing collateral account established with Bank, and will be
applied in accordance with Section 7.7. This account shall be held by Bank as
Collateral.
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7.2 Notification to Certain Obligors and Possession of
Proceeds. Bank may in its sole discretion at any time after the occurrence of an
Event of Default or an event which with the giving of notice or the passage of
time or both would constitute an Event of Default (a) notify or cause Debtor to
notify the obligors on the Rights to Payment to make payment to Bank; and (b)
take possession of any or all Proceeds, which Bank will apply in accordance with
Section 7.7.
7.3 Compromise and Collection. Debtor and Bank recognize that
setoffs, counterclaims, defenses and other claims may be asserted by obligors
with respect to certain of the Rights to Payment; that certain of the Rights to
Payment may be or become uncollectible in whole or in part; and that the expense
and probability of success of litigating a disputed Right to Payment may exceed
the amount that reasonably may be expected to be recovered with respect to such
Right to Payment. Debtor hereby authorizes Bank, effective upon the occurrence
of an Event of Default, to compromise with the obligor, accept in full payment
of any Right to Payment such amount as Bank shall negotiate with the obligor, or
abandon any Right to Payment. Any such action by Bank shall be considered
commercially reasonable so long as Bank acts in good faith based on information
known to it at the time it takes any such action.
7.4 Bank Performance of Debtor's Obligations. Without having
any obligation to do so, Bank may perform or pay any obligation which Debtor has
agreed to perform or pay under this Agreement including without limitation the
payment or discharge of taxes or Liens levied or placed on or threatened against
the Collateral. In so performing or paying, Bank shall determine the action to
be taken and the amount necessary to discharge such obligations. Debtor shall
reimburse Bank on demand for any amounts paid by Bank pursuant to this Section,
which amounts shall constitute Indebtedness secured by the Collateral.
7.5 Power of Attorney. For the purpose of protecting and
preserving the Collateral and Bank's rights under this Agreement, Debtor hereby
irrevocably appoints Bank, with full power of substitution, as its
attorney-in-fact with full power and authority to do any act which Debtor is
obligated to do hereunder; to exercise such rights with respect to the
Collateral as Debtor might exercise; to use such Inventory, Equipment, Fixtures
or other property as Debtor might use; to enter Debtor's premises; following the
occurrence of an Event of Default, to give notice of Bank's security interest
in, and to collect the Collateral and the Proceeds; and to execute and file in
Debtor's name any financing statements, amendments and continuation statements
necessary or desirable to perfect or continue the perfection of Bank's security
interests in the Collateral. Debtor hereby ratifies all that Bank shall lawfully
do or cause to be done by virtue of this appointment.
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7.6 Authorization for Bank to Take Certain Action. The power of
attorney created in Section 7.5 is a power coupled with an interest and shall be
irrevocable. The powers conferred on Bank hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Bank to exercise
such powers. Bank shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and in no event shall Bank
or any of its directors, officers, employees, agents or representatives be
responsible to Debtor for any act or failure to act, except for gross negligence
or willful misconduct. Bank may exercise this power of attorney without notice
to or assent of Debtor, in the name of Debtor, or in Bank's own name, from time
to time in Bank's sole discretion and at Debtor's expense. To further carry out
the terms of this Agreement, Bank may:
(a) Execute any statements or documents or take possession of,
and endorse and collect and receive delivery or payment of, any checks,
drafts, notes, acceptances or other instruments and documents constituting
Collateral, or constituting the payment of amounts due and to become due or
any performance to be rendered with respect to the Collateral.
(b) Sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts; drafts, certificates and
statements under any commercial or standby letter of credit; assignments,
verifications and notices in connection with Accounts; or any other
documents relating to the Collateral, including without limitation the
Records.
(c) Use or operate Collateral or any other property of Debtor
for the purpose of preserving or liquidating Collateral.
(d) File any claim or take any other action or proceeding in
any court of law or equity or as otherwise deemed appropriate by Bank for
the purpose of collecting any and all monies due or securing any
performance to be rendered with respect to the Collateral.
(e) Commence, prosecute or defend any suits, actions or
proceedings or as otherwise deemed appropriate by Bank for the purpose of
protecting or collecting the Collateral. In furtherance of this right, upon
the occurrence of an Event of Default, Bank may apply for the appointment
of a receiver or similar official to operate Debtor's business, and, to the
fullest extent permitted by law, Debtor hereby waives any right to oppose
such appointment.
(f) Prepare, adjust, execute, deliver and receive payment under
insurance claims, and collect and receive payment of and endorse any
instrument in payment of loss or returned premiums or any other insurance
refund or return, and apply such amounts at Bank's sole discretion, toward
repayment of the Indebtedness or replacement of the Collateral.
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7.7 Application of Proceeds. Any Proceeds and other monies or
property received by Bank pursuant to the terms of this Agreement or any Loan
Document may be applied by Bank first to the payment of expenses of collection,
including without limitation reasonable attorneys' fees, and then to the payment
of the Indebtedness in such order of application as Bank may elect.
Notwithstanding the rights given to Debtor pursuant to California Civil Code
sections 1479 and 2822 or equivalent provisions in the laws of the state
specified in the governing law clause of this document (and any amendments or
successors thereto), to designate how payments will be applied, Debtor hereby
waives such rights and Bank shall have the right in its sole discretion to
determine the order and method of the application of payments received from
Debtor or from the sale or disposition of the Collateral and to revise such
application prospectively or retroactively at its discretion. The provisions of
this Section 7.7 are subject to the provisions of Section 2.5(b) of the Credit
Agreement.
7.8 Deficiency. If the Proceeds of any disposition of the
Collateral are insufficient to cover all costs and expenses of such sale and the
payment in full of all the Indebtedness, plus all other sums required to be
expended or distributed by Bank, then Debtor shall be liable for any such
deficiency.
7.9 Bank Transfer. Upon the transfer of all or any part of the
Indebtedness, Bank may transfer all or any part of the Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Bank hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Bank shall
retain all rights and powers hereby given.
7.10 Bank's Duties.
(a) Bank's sole duty with respect to the Collateral in its
possession shall be to use reasonable care in the custody and preservation
thereof. Bank shall be deemed to have exercised reasonable care in the
custody and preservation of such Collateral if such Collateral is accorded
treatment substantially equal to that which Bank accords its own property,
it being understood that Bank shall not have any responsibility for
ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, declining value, tenders or other matters relative
to any Collateral, regardless of whether Bank has or is deemed to have
knowledge of such matters; or taking any necessary steps to preserve any
rights against any Person with respect to any Collateral. Under no
circumstances shall Bank be responsible for any injury or loss to the
Collateral, or any part thereof, arising from any cause beyond the
reasonable control of Bank.
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(b) Bank may at any time deliver the Collateral or any part
thereof to Debtor and the receipt of Debtor shall be a complete and full
acquittance for the Collateral so delivered, and Bank shall thereafter be
discharged from any liability or responsibility therefor.
ARTICLE 8 - GENERAL PROVISIONS
8.1 Notices. Any notice given or required under this Agreement
shall be given in the manner specified in the Credit Agreement.
8.2 Binding Effect. This Agreement shall be binding upon
Debtor, its permitted successors, representatives and assigns, and shall inure
to the benefit of Bank and its successors, and assigns; provided however that
Debtor may not assign or transfer Debtor's obligations under this Agreement
without the prior written consent of Bank. Bank reserves the right to sell,
assign, or transfer its rights and powers under this Agreement in whole or in
part without notice to Debtor. In that connection, Bank may disclose all
documents and information which Bank now or hereafter may have relating to this
Agreement, Debtor or Debtor's business, provided that any such assignee or
transferee executed a confidentiality agreement reasonably satisfactory to
Debtor.
8.3 No Waiver. Any waiver, consent or approval by Bank of any
Event of Default or breach of any provision, condition or covenant of this
Agreement or any Loan Document must be in writing and shall be effective only to
the extent set forth in writing. No waiver of any breach or default shall be
deemed a waiver of any later breach or default of the same or any other
provision of this Agreement or any of the Loan Documents. Any failure or delay
on the part of Bank in exercising any power, right or privilege under this
Agreement or any Loan Document shall not operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
any further exercise thereof.
8.4 Rights Cumulative. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any other rights or
remedies available under contract or applicable law.
8.5 Unenforceable Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall be so only as to
such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of this Agreement shall
remain valid and enforceable.
8.6 Governing Law/Waiver or Notice. Except as may be otherwise
provided by the Uniform Commercial Code or in any addendum hereto, this
Agreement shall be governed by and construed in accordance with the laws of the
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State of California. Debtor hereby waives presentment, demand, protest, notice
of dishonor and all other notices and demands, as well as any applicable statute
of limitations.
8.7 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 such Agent harmless from,
all claims, actions, proceedings, liabilities, damages, losses, and related
expenses (including, without limitation, attorneys' fees and costs) and other
amounts incurred by Bank and each such Agent, arising from the matters
contemplated by this Agreement; 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 Debtor's obligations and
liabilities to Bank.
8.8 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, including without
limitation during any workout, attempted workout, and/or in connection with the
rendering of legal advice as to Bank's rights, remedies and obligations under
this Agreement, (b) collecting any sum which becomes due Bank under this
Agreement, (c) any proceeding for declaratory relief, any counterclaim to any
proceeding, or any appeal, or (d) the protection, preservation or enforcement of
any rights of Bank. For the purposes of this section, attorneys' fees shall
include, without limitation, fees incurred in connection with the following: (1)
contempt proceedings; (2) discovery; (3) any motion, proceeding or other
activity of any kind in connection with a bankruptcy proceeding or case arising
out of or relating to any petition under Title 11 of the United States Code, as
the same shall be in effect from time to time, or any similar law; (4)
garnishment, levy, and debtor and third party examinations; and (5)
post-judgment motions and proceedings of any kind, including without limitation
any activity taken to collect or enforce any judgment.
8.9 Entire Agreement. This Agreement is intended by Debtor and
Bank as the final expression of Debtor's obligations to Bank in connection with
the Collateral and supersedes all prior understandings or agreements concerning
the subject matter hereof. This Agreement may be amended only by a writing
signed by Debtor and accepted by Bank in writing.
IN WITNESS WHEREOF, Debtor has executed this Agreement as of the date
set forth in the preamble.
EMCON, a California corporation
By: /s/
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Name: R. Michael Momboisse
Title: CFO & V.P. - Legal
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