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Exhibit 10.14
COMMERCIAL SECURITY AGREEMENT
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Principal Loan Date Maturity Loan No.
$150,000.00 06-23-2008 06-09-2009 930610000
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Call / Coll Account Officer Initials
RK /s/ RK
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References in the boxes above are for Lender's use only and
do not limit the applicability of this document
to any particular loan or item. Any item above
containing "***" has been omitted due to text
length limitations.
Borrower: Lender:
Amexdrug Corporation; Dermagen, Inc.; National Bank of California
Biorx Pharmaceuticals, Inc.; Royal Corporate Banking Department
Health Care, Inc.; and Allied Med Inc. 145 South Fairfax Avenue
8909 West Olympic Boulevard, Suite 208 Los Angeles, CA 90036
Beverly Hills, CA 90211
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THIS COMMERCIAL SECURITY AGREEMENT dated June 23, 2008, is made and executed
among Amexdrug Corporation; Dermagen, Inc.; Biorx Pharmaceuticals, Inc. Royal
Health Care, Inc.; and Allied Med Inc. ("Grantor") and National Bank of
California ("Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:
All inventory, equipment, accounts (including but not limited to all
health-care-insurance receivables), chattel paper, instruments
(including but not limited to all promissory notes), letter-of-credit
rights, letters of credit, documents, deposit accounts, investment
property, money, other rights to payment and performance, and general
intangibles (including but not limited to all software and all payment
intangibles); all oil, gas and other minerals before extraction; all
oil, gas, other minerals and accounts constituting as-extracted
collateral; all fixtures; all timber to be cut; all attachments,
accessions, accessories, fittings, increases, tools, parts, repairs,
supplies, and commingled goods relating to the foregoing property, and
all additions, replacements of and substitutions for all or any part of
the foregoing property; all insurance refunds relating to the foregoing
property; all good will relating to the foregoing property; all records
and data and embedded software relating to the foregoing property, and
all equipment, inventory and software to utilize, create, maintain and
process any such records and data on electronic media; and all
supporting obligations relating to the foregoing property; all whether
now existing or hereafter arising, whether now owned or hereafter
acquired or whether now or hereafter subject to any rights in the
foregoing property; and all products and proceeds (including but not
limited to all insurance payments) of or relating to the foregoing
property.
In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described
herein, whether added now or later.
(B) All products and produce of any of the property described in this
Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease,
consignment or other disposition of any of the property described in
this Collateral section.
(D) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
-described in this Collateral section, and sums due from a third party
who has damaged or destroyed the Collateral or from that party's
insurer, whether due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures 'all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated, whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such amounts may be
or hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise
unenforceable.
FUTURE ADVANCES. In addition to the Note, this Agreement secures all future
advances made by Lender to Grantor regardless of whether the advances are made
a) pursuant to a commitment or b) for the same purposes.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:
Organization. Amexdrug Corporation is a corporation for profit which
is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Nevada.
Amexdrug Corporation is duly authorized to transact business in all
other states in which Amexdrug Corporation is doing business, having
obtained all necessary filings, governmental licenses and approvals for
each state in which Amexdrug Corporation is doing business.
Specifically, Amexdrug Corporation is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. Amexdrug Corporation has the full power and
authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Amexdrug
Corporation maintains an office at 8909 West Olympic Boulevard, Suite
208, Beverly Hills, CA 90211. Unless Amexdrug Corporation has
designated otherwise in writing, the principal office is the office at
which Amexdrug Corporation keeps its books and records including its
records concerning the Collateral. Amexdrug Corporation will notify
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COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 2
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Lender prior to any change in the location of Amesdrug Corporation's
state of organization or any change in Amexdrug Corporation's name.
Amexdrug Corporation shall do all things necessary to preserve and to
keep in full force and effect its existence, rights and privileges, and
shall comply with all regulations, rules, ordinances, statutes, orders
and decrees of any governmental or quasi-governmental authority or
court applicable to Amexdrug Corporation and Amexdrug Corporation's
business activities.
Dermagen, Inc. is a corporation for profit which is, and at all times
shall be, duly organized, validly existing, and in good standing under
and by virtue of the laws of the State of California. Dermagen, Inc. is
duly authorized to transact business in all other states in which
Dermagen, Inc. is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Dermagen, Inc. is doing business, Specifically, Dermagen, Inc. is, and
at all times shall be, duly qualified as a foreign corporation in all
states in which the failure to so qualify would have a material adverse
effect on its business or financial condition. Dermagen, Inc. has the
full power and authority to own its properties and to transact the
business in which it is presently engaged or presently proposes to
engage. Dermagen, Inc. maintains an office at 2500 East Fender Avenue,
Suite J, Fullerton, CA 92831. Unless Dermagen, Inc. has designated
otherwise in writing, the principal office is the office at which
Dermagen, Inc. keeps its books and records including its records
concerning the Collateral. Dermagen, Inc. will notify Lender prior to
any change in the location of Dermagen, Inc.'s state of organization or
any change in Dermagen, Inc.'s name. Dermagen, Inc. shall do all things
necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to
Dermagen, Inc. and Dermagen, Inc.'s business activities.
Biorx Pharmaceuticals, Inc. is a corporation for profit which is, and
at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Nevada. Biorx
Pharmaceuticals, Inc. is duly authorized to transact business in all
other states in which Biorx Pharmaceuticals, Inc. is doing business,
having obtained all necessary filings, governmental licenses and
approvals for each state in which Biorx Pharmaceuticals, Inc. is doing
business. Specifically, Biorx Pharmaceuticals, Inc. is, and at all
times shall be, duly qualified as a foreign corporation in all states
in which the failure to so qualify would have a material adverse effect
on its business or financial condition. Biorx Pharmaceuticals, Inc. has
the full power and authority to own its properties and to transact the
business in which it is presently engaged or presently proposes to
engage. Biorx Pharmaceuticals, Inc. maintains an office at 318 North
Carson #208, Carson City, NV 89701. Unless Biorx Pharmaceuticals, Inc.
has designated otherwise in writing, the principal office is the office
at which Biorx Pharmaceuticals, Inc. keeps its books and records
including its records concerning the Collateral. Biorx Pharmaceuticals,
Inc. will notify Lender prior to any change in the location of Biorx
Pharmaceuticals, Inc.'s state of organization or any change in Biorx
Pharmaceuticals, Inc.'s name. Biorx Pharmaceuticals, Inc. shall do all
things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to
Biorx Pharmaceuticals, Inc. and Biorx Pharmaceuticals, Inc.'s business
activities.
Royal Health Care, Inc. is a corporation for profit which is, and at
all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Nevada. Royal
Health Care, Inc. is duly authorized to transact business in all other
states in which Royal Health Care, Inc. is doing business, having
obtained all necessary filings, governmental licenses and approvals for
each state in which Royal Health Care, Inc. is doing business.
Specifically, Royal Health Care, Inc. is, and at all times shall be,
duly qualified as a foreign corporation in all states in which the
failure to so qualify would have a material adverse effect on its
business or financial condition. Royal Health Care, Inc. has the full
power and authority to own its properties and to transact the business
in which it is presently engaged or presently proposes to engage. Royal
Health Care, Inc. maintains an office at 318 North Carson #208, Carson
City, NV 89701. Unless Royal Health Care, Inc. has designated otherwise
in writing, the principal office is the office at which Royal Health
Care, Inc. keeps its books and records including its records concerning
the Collateral. Royal Health Care, Inc. will notify Lender prior to any
change in the location of Royal Health Care, Inc.'s state of
organization or any change in Royal Health Care, Inc.'s name. Royal
Health Care, Inc. shall do all things necessary to preserve and to keep
in full force and effect its existence, rights and privileges, and
shall comply with all regulations, rules, ordinances, statutes, orders
and decrees of any governmental or quasi-governmental authority or
court applicable to Royal Health Care, Inc. and Royal Health Care,
Inc.'s business activities.
Allied Med Inc. is a corporation for profit which is, and at all times
shall be, duly organized, validly existing, and in good standing under
and by virtue of the laws of the State of Oregon. Allied Med Inc. is
duly authorized to transact business in all other states in which
Allied Med Inc. is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Allied Med Inc. is doing business. Specifically, Allied Med Inc. is,
and at all times shall be, duly qualified as a foreign corporation in
all states in which the failure to so qualify would have a material
adverse effect on its business or financial condition. Allied Med Inc.
has the full power and authority to own its properties and to transact
the business in which it is presently engaged or presently proposes to
engage. Allied Med Inc. maintains an office at 6312 SW Capitol Highway
#226, Portland, OR 97201. Unless Allied Med Inc. has designated
otherwise in writing, the principal office is the office at which
Allied Med Inc. keeps its books and records including its records
concerning the Collateral. Allied Med Inc. will notify Lender prior to
any change in the location of Allied Med Inc.'s state of organization
or any change in Allied Med Inc.'s name. Allied Med Inc. shall do all
things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all
regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to
Allied Med Inc. and Allied Med Inc.'s business activities.
Authorization. Grantor's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by
all necessary action by Grantor, do not require the consent or approval
of any other person, regulatory authority, or governmental body, and do
not conflict with, result in a violation of, or constitute a default
under (1) any provision of (a) Grantor's articles of incorporation or
organization, or bylaws, or (b) any agreement or other instrument
binding upon Grantor or (2) any law, governmental regulation, court
decree, or order applicable to Grantor or to Grantor's properties.
Grantor has the power and authority to enter into the Note and the
Related Documents and to grant collateral as security for the
Indebtedness. Grantor has the further power and authority to own and to
hold all of Grantor's assets and properties, and to carry on Grantor's
business as presently conducted.
Perfection of Security Interest. Grantor agrees to take whatever
actions are requested by Lender to perfect and continue Lender's
security interest in the Collateral. Upon request of Lender, Grantor
will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and 'Grantor will note Lender's interest
upon any and all chattel paper and instruments if not delivered to
Lender for possession by Lender. This is a continuing Security
Agreement and will continue in effect even though all or any part of
the Indebtedness is paid in full and even though for a period of time
Grantor may not be indebted to Lender.
Notices to Lender. Grantor will promptly notify Lender in writing at
Lender's address shown above or such other addresses as Lender may
designate from time to time) prior to any (1) change in Grantor's name;
(2) change in Grantor's assumed business name(s); (3) change in the
management of any Corporation Grantor; (4) change in the authorized
signer(s); (5) change in Grantor's principal office address; (6) change
in Grantor's state of organization; (7) conversion of Grantor to a new
or different type of business entity; or (8) change in any other aspect
of Grantor that directly or indirectly relates to any agreements
between Grantor and Lender. No change in Grantor's name or state of
organization will take effect until after Lender has received notice.
Grantor represents and warrants to Lender that Grantor has provided
Lender with Grantor's correct Employer Identification Number. Grantor
promptly shall notify Lender should Grantor apply for or obtain a new
Employer Identification Number.
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COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 3
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No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do
not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the
Uniform Commercial Code, the Collateral is enforceable in accordance
with its terms, is genuine, and fully complies with all applicable laws
and regulations concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any account becomes
subject to a security interest in favor of Lender, the account shall be
a good and valid account representing an undisputed, bona fide
indebtedness incurred by the account debtor, for merchandise held
subject to delivery instructions or previously shipped or delivered
pursuant to a contract of sale, or for services previously performed by
Grantor with or for the account debtor. So long as this Agreement
remains in effect, Grantor shall not, without Lender's prior written
consent, compromise, settle, adjust, or extend payment under or with
regard to any such Accounts. There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made
under which any deductions or discounts may be claimed concerning the
Collateral except those disclosed to Lender in writing.
Location of the Collateral. Except in the ordinary course of Grantor's
business, Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor's
address shown above or at such other locations .as are acceptable to
Lender. Upon Lender's request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral
locations relating to Grantor's operations, including without
limitation the following: (1) all real property Grantor owns or is
purchasing; (2) all real property Grantor is renting or leasing; (3)
all storage facilities Grantor owns, rents, leases, or uses; and (4)
all other properties where Collateral is or may be located. Collateral
consisting of inventory and other goods is not currently located and,
as long as this Agreement remains in effect, will not be kept in a
field or public warehouse or with a bailee, and shall be kept only at
locations approved by Lender. Grantor will not permit any of the
Collateral to be incorporated in or placed upon any real (immovable)
property in such a way that it becomes immobilized under applicable
California law. Upon Lender's request, Grantor shall cause
any owners or mortgagees of the real property upon which any of of the
Collateral may be located to furnish to Lender waivers with respect to
any rights in or to the Collateral.
Removal of the Collateral. Except in the ordinary course of Grantor's
business, including the sales of inventory, Grantor shall not remove
the Collateral from its existing location without Lender's prior
written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit
any action which would require application for certificates of title
for the vehicles outside the State of California, without Lender's
prior written consent. If Grantor moves from Grantor's address shown
above to another location within the same state, Grantor may move the
Collateral to Grantor's new address, but only if Grantor gives Lender
the new address in writing prior to Grantor's moving. In any event,
Grantor agrees to keep Lender informed at all times of Grantor's
current address. Grantor shall, whenever requested, advise Lender of
the exact location of the Collateral.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, or as
otherwise provided for in this Agreement, Grantor shall not sell, offer
to sell, or otherwise transfer or dispose of the Collateral. While
Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A
sale in the ordinary course of-Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests
granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any other
funds; provided however, this requirement shall not constitute consent
by Lender to any sale or other disposition. Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that Grantor holds
good and marketable title to the Collateral, free and clear of all
liens and encumbrances except for the lien of this Agreement. No
financing statement covering any of the Collateral is on file in any
public office other than those which reflect the security interest
created by this Agreement or to which Lender has specifically
consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. As often as Lender shall require,
and insofar as the Collateral consists of accounts and general
intangibles, Grantor shall deliver to Lender schedules of such
Collateral, including such information as Lender may require, including
without limitation names and addresses of account debtors and agings of
accounts and general intangibles. Insofar as the Collateral consists of
inventory and equipment, Grantor shall deliver to Lender, as often as
Lender shall require, such lists, descriptions, and designations of
such Collateral as Lender may require to identify the nature, extent,
and location of such Collateral. Such information shall be submitted
for Grantor and each of its subsidiaries or related companies.
Inspection of Collateral. Lender and Lender's designated
representatives and agents shall have the right at all reasonable times
to examine and inspect the Collateral wherever located.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as
an additional obligee under any surety bond furnished in the contest
proceedings.
Repairs and Maintenance. Grantor shall keep and maintain and shall
cause others to keep and maintain the Collateral in good order, repair
and merchantable condition. Grantor shall further make and/or cause all
necessary repairs to be made to the Collateral, including the repair
and restoration of any portion of the Collateral that may be damaged,
lost or destroyed. In addition, Grantor shall not, without the prior
written consent of Lender, make or permit to be made any alterations to
any of the Collateral that may reduce or impair the Collateral's use,
value or marketability. Furthermore, Grantor shall not, nor shall
Grantor permit others to abandon, commit waste, or destroy the
Collateral or any part or parts thereof. Grantor further agrees to
furnish Lender with evidence that such taxes, assessments, and
governmental and other charges have been paid in full and in a timely
manner. 'Grantor may withhold any such payment or may elect to contest
any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's
interest in the Collateral is not jeopardized.
Compliance with Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral, including
all laws or regulations relating to the undue erosion of
highly-erodible land or relating to the conversion of wetlands for the
production of an agricultural product or commodity. Grantor may contest
in good faith any such law, ordinance or regulation and withhold
compliance during any proceeding, including appropriate appeals, so
long as Lender's interest in the. Collateral, in Lender's opinion, is
not jeopardized.
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Loan No: 930610000 (Continued) Page 4
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Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used in violation of any Environmental
Laws or for the generation, manufacture, storage, transportation,
treatment, disposal, release or threatened release of any Hazardous
Substance. The representations and warranties contained herein are based
on Grantor's due diligence in investigating the Collateral for Hazardous
Substances. Grantor hereby (1) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor
becomes liable for cleanup or other costs under any Environmental Laws,
and (2) agrees to indemnify, defend, and hold harmless Lender against
any and all claims and losses resulting from a breach of this provision
of this Agreement. This obligation to indemnify and defend shall survive
the payment of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without
at least ten (10) days' prior written notice to Lender and not including
any disclaimer of the insurer's liability for failure to give such a
notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any
time fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated ,to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses
"single interest insurance," which will cover only Lender's interest in
the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender
of any loss or damage to the Collateral if the estimated cost of repair
or replacement exceeds 10,000.00, whether or not such casualty or loss
is covered by insurance. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any
insurance on the Collateral, including accrued proceeds thereon, shall
be held by Lender as part of the Collateral. If Lender consents to
repair or replacement of the damaged or destroyed Collateral, Lender
shall, upon satisfactory proof of expenditure, pay or reimburse Grantor
from the proceeds for the reasonable cost of repair or restoration. If
Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of
the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt
and which Grantor has not committed to the repair or restoration of the
Collateral shall be used to prepay the Indebtedness.
Required Insurance. So long as this Agreement remains in effect,
Grantor shall, at its sole cost, keep and/or cause others, at their
expense, to keep the Collateral constantly insured against loss by
fire, by hazards included (degree)within the term "extended coverage,"
and by such other hazards (including flood insurance where applicable)
as may be required by Lender.
Insurance Proceeds. Lender shall have the right to directly receive the
proceeds of all insurance protecting the Collateral. In the event that
Grantor should receive any such insurance proceeds, Grantor agrees to
immediately turn over and to pay such proceeds directly to tender. All
insurance proceeds may be applied, at its sole option and discretion,
and in such a manner as Lender may determine (after payment of all
reasonable costs, expenses and attorneys' fees necessarily paid or fees
necessarily paid or incurred by Lender in this 'connection), for the
purpose of: (1) repairing or restoring the lost, damaged or destroyed
Collateral; or (2) reducing the then outstanding balance of Grantor's
Indebtedness.
Lender's receipt of such insurance proceeds and the application of such
proceeds as provided herein shall not, however, affect the lien of this
Agreement. Nothing under this section shall be deemed to excuse Grantor
from its obligations promptly to repair, replace or restore any lost or
damaged Collateral, whether or not the same may be covered by
insurance, and whether or not such proceeds of insurance are available,
and whether such proceeds are sufficient in amount to complete such
repair,. replacement or restoration to the satisfaction of Lender.
Furthermore, unless otherwise confirmed by Lender in writing, the
application or release of any insurance proceeds by Lender shall not be
deemed to cure or waive any Event of Default under this Agreement. Any
proceeds which have not been disbursed within six (6) months after
their receipt and which Grantor has not committed to the repair or
restoration of the Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender
to be sufficient to produce, at least fifteen (15) days before the
premium due date, amounts at least equal to the insurance premiums to
be paid. If fifteen (15) days before payment is due, the reserve funds
are insufficien. Grantor shall upon demand pay any deficiency to
Lender. The reserve funds shall be held by Lender as a general deposit
and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by
Grantor as they become due. Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment
of the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's sole
responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(1) the name of the insurer; (2) the risks insured; (3) the amount of
the policy; (4) the property insured; (5) the then current value on the
basis of which insurance has been obtained and the manner of
determining that value; and (6) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to -Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
Prior Encumbrances. To the extent applicable, Grantor shall fully and
timely perform any and all of Grantor's obligations under any prior
Encumbrances affecting the Collateral. Without limiting the foregoing,
Grantor shall not commit or permit to exist any breach of or default
under any such prior Encumbrances. Grantor shall further promptly
notify Lender in writing upon the occurrence of any event or
circumstances that would, or that might, result in a breach of or
default under any such prior Encumbrance. Grantor shall further not
modify or extend any of the terms of any prior Encumbrance or any
indebtedness secured thereby, or request or obtain any additional loans
or other extensions of credit from any third party creditor or
creditors whenever such additional loan advances or other extensions of
credit may be directly or indirectly secured, whether by
cross-collateralization or otherwise, by the Collateral, or any part or
parts thereof, with possible preference and priority over Lender's
security interest. Grantor additionally agrees to obtain, upon Lender's
request, and in form and substance as may then be satisfactory to
Lender, appropriate waivers and subordinations of any lessor's liens or
privileges, vendor's liens or privileges, purchase money security
interests, and any other Encumbrances that may affect the Collateral at
any time.
4
COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 5
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Future Encumbrances. Grantor shall not, without the prior written
consent of Lender, grant any Encumbrance that may' affect the
Collateral, or any part or parts thereof, nor shall -Grantor permit or
consent to any Encumbrance attaching to or being filed against any of
the Collateral in favor of anyone other than Lender. Grantor shall
further promptly pay when due all statements and charges of mechanics,
materialmen, laborers and others incurred in connection with the
alteration, improvement, repair and maintenance of the Collateral, or
otherwise furnish appropriate security or bond, so that no future
Encumbrance may ever attach to or be filed against any Collateral. In
the event that the Collateral or any part or parts thereof is and/or
may be located. in and/or on leased premises, Grantor shall promptly
pay the full amount of such rental or lease payments whenever the same
shall be due so that no lessor's lien or privilege may ever attach to
or affect any of the Collateral with possible preference and priority
over the lien of this Agreement. In the event that any of the
Collateral is purchased or otherwise acquired by Grantor on a credit or
deferred payment sales basis, Grantor shall promptly pay the full
amount of the purchase or acquisition price of such Collateral so that
no vendor's lien or privilege, or purchase money security interest, may
ever attach to or be asserted against any of the Collateral with
possible preference and priority over the lien of this Agreement.
Grantor additionally agrees to obtain, upon request by Lender, and in
form and substance as may then be satisfactory to Lender, appropriate
waivers and/or subordinations of any lessor's liens or privileges,
vendor's liens or privileges, purchase money security interests, and
any other Encumbrances that may affect the Collateral at any time.
As long as this Agreement remains in effect, Grantor will not permit
any levy, attachment or restraint to be made affecting any of the
Collateral, or permit any notice of lien to be filed with respect to
the Collateral or any part or parts thereof, or permit any receiver,
trustee, custodian or assignee for the benefit of creditors to be
appointed to take possession of any of the Collateral. Notwithstanding
the foregoing, Grantor may, at its sole expense, contest in good faith
by appropriate proceedings the validity or amount of any levy,
attachment, restraint or lien filed against or affecting the
Collateral, or any part or parts thereof; provided that (1) Grantor
notifies Lender in advance of Grantor's intent to contest such a levy,
attachment, restraint or lien, and (2) Grantor provides additional
security to Lender, in form and amount satisfactory to Lender.
Notice of Encumbrances. Grantor shall immediately notify Lender in
writing upon the filing of any attachment, lien, judicial process,
claim, or other Encumbrance. Grantor additionally agrees td notify
Lender immediately in writing upon the occurrence of any default, or
event that with the passage of time, failure to cure, or giving of
notice, might result in a default under any of Grantor's obligations
that may be secured by any presently existing or future Encumbrance, or
that might result in an Encumbrance affecting the Collateral, or should
any of the Collateral be seized or attached or levied upon, or
threatened by seizure or attachment or levy, by any person other than
Lender.
Books and Records. Grantor will keep proper books and records with
regard to Grantor's business activities and the Collateral in which a
security interest is granted hereunder, in accordance with GAAP,
applied on a consistent basis throughout, which books and records shall
at all reasonable times be open to inspection and copying by Lender or
Lender's designated agents. Lender shall also have the right to inspect
Grantor's books and records, and to discuss Grantor's affairs and
finances with Grantor's officers and representatives, at such
reasonable times as Lender may designate.
Financing Statements. Grantor authorizes Lender to file a UCC financing
statement, or alternatively, a copy of this Agreement to perfect
Lender's security interest. At Lender's request, Grantor additionally
agrees to sign all other documents that are necessary to perfect,
protect, and continue Lender's security interest in the Property.
Grantor will pay all filing fees, title transfer fees, and other fees
and costs involved unless prohibited by law or unless Lender is
required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if
there is a default. Lender may file a copy of this Agreement as a
financing statement. If Grantor changes Grantor's name or address, or
the name or address of any person granting a security interest under
this Agreement changes, Grantor will promptly notify the Lender of such
change.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. -Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.
ADDITIONAL COVENANTS. Grantor additionally agrees:
No Settlement or Compromise. Grantor will not, without the prior
written consent of Lender, compromise, settle, adjust or extend payment
under any of the Collateral.
Books and Records. Grantor will keep proper books and records with
regard to Grantor's business activities and the Collateral, which books
and records shall at all times be open to inspection and copying by
Lender or its designated agent. Lender shall also have the right to
inspect Grantor's books and records, and to discuss Grantor's affairs
and finances with Grantor at such reasonable times as Lender may
designate.
Aging of Accounts. Grantor will periodically, at such intervals
requested by Lender, furnish Lender with an aging of that part of the
Collateral consisting of accounts, together with a certificate executed
by an officer of Grantor, in such form and containing such
representations and warranties regarding the accounts as Lender may
reasonably require.
Lock Box. Grantor agrees that Lender may at any time require Grantor to
institute procedures whereby the proceeds and/or payments of any
accounts subject to this Agreement shall be paid by the debtors thereof
under a lock box arrangement to Lender, or to Lender's agent, or to one
or more financial institutions designated by Lender. Grantor further
agrees that, if no Event of Default exists under this Agreement, any
and all of such funds received under such a lock box arrangement shall,
at Lender's sole election and discretion, either be: (a) paid and/or
turned over to Grantor; (b) deposited into one or more accounts for the
benefit of Grantor (which deposit accounts shall be subject to
collateral assignment and pledge in favor of Lender as provided under
this Agreement); (c) deposited into one or more accounts for the joint
benefit of Grantor and Lender (which deposit accounts shall likewise be
subject to assignment and pledge in favor of Lender as provided under
this Agreement); (d) paid and/or turned over to Lender to be applied to
the Indebtedness in such order and priority as Lender may determine
within its sole discretion; or (e) any combination of the foregoing as
Lender shall determine from time to time. Grantor further agrees that,
should one or more Events of Default exist under this Agreement, any
and all funds received under such a lock box arrangement shall be paid
and/or turned over to Lender to be applied to principal, accrued
interest, costs, expenses, attorneys' fees and other fees and charges
under the Indebtedness, again in such order and priority as Lender may
determine within its sole discretion.
Notice to Obligors. Upon request by Lender, Grantor immediately will
notify individual obligors with regard to the Collateral, advising such
obligors of the fact that Lender has been granted a security interest
in their obligations. In the event that Grantor should fail to provide
such notices for any reason upon Lender's request, Grantor agrees that
Lender may forward appropriate notices to such obligors and debtors
5
COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 6
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either in Lender's name or in Grantor's name. Additional Documents.
Grantor shall at any time, from time to time, one or more times, upon
Lender's written request, execute and deliver such further documents
and do any and all such further acts and things as Lender may
reasonably request, within Lender's sole discretion, to effect the
purposes of this Agreement.
Verifications. Grantor additionally agrees that Lender or Lender's
agents may periodically contact individual debtors whose notes,
instruments and chattel paper have been assigned and pledged under this
Agreement in order to verify the amounts then owing under such
obligations, to determine whether such debtors have any offsets or
counterclaims against Grantor, and with respect to such other matters
about which Lender may inquire.
Notification of Lender. Grantor will promptly deliver to Lender all
written notices, and will promptly give Lender written notice of any
other notices received by Grantor with respect to the Collateral and
Rights, and Lender will promptly give like notice to Grantor of any
such notices received by Lender or its nominee.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the Indebtedness and, at Lender's option, will (A) J be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Grantor fails to make any payment when due under the
Indebtedness.
Other Defaults. Grantor fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any
term, obligation, covenant or condition contained in any other
agreement between Lender and Grantor.
Default in Favor of Third Parties. Any guarantor or Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of any guarantor's or
Grantor's property or ability to perform their respective obligations
under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Grantor or on Grantor's behalf, or made by
Guarantor, or any other guarantor, endorser, surety, or accommodation
party, under this Agreement or the Related Documents in connection with
the obtaining of the Indebtedness evidenced by the Note or any security
document directly or indirectly securing repayment of the Note is false
or misleading in any material respect, either now or at the time made
or furnished or becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against any collateral securing the Indebtedness.
This includes a garnishment of any of Grantor's accounts, including
deposit accounts, with Lender. However, this Event of Default shall not
apply if there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.
Execution; Attachment. Any execution or attachment is levied against
the Collateral, and such execution or attachment is not set aside
discharged or stayed within thirty {30) days after the same is levied.
Change in Zoning or Public Restriction. Any change in any zoning
ordinance or regulation or any other public restriction is enacted,
adopted or implemented, that limits or defines the uses which may be
made of the Collateral such that the present or intended use of the
Collateral, as specified in the Related Documents, would be in
violation of such zoning ordinance or regulation or public restriction,
as changed.
Default Under Other Lien Documents. A default occurs under any other
mortgage, deed of trust or security agreement covering all or any
portion of the Collateral.
Judgment. Unless adequately covered by insurance in the opinion of
Lender, the entry of a final judgment for the payment of money
involving more than ten thousand dollars {$10,000.00) against Grantor
and the failure by Grantor to discharge the same, or cause it to be
discharged, or bonded off to Lender's satisfaction, within thirty {30)
days from the date of the order, decree or process under which or
pursuant to which such judgment was entered.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor, or any other guarantor, endorser, surety,or
accommodation party of any of the Indebtedness or Guarantor, or any
other guarantor, endorser, surety, or accommodation party dies or
becomes incompetent or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
Insecurity. Lender in good faith believes itself insecure.
Cure Provisions. If any default, other than a default in payment is
curable and if Grantor has not been given a notice of a breach of the
same provision of this Agreement within the preceding twelve (12)
months, it may be cured if Grantor, after receiving written notice from
Lender demanding cure of such default: (1) cures the default within
fifteen (15) days; or (2) if the cure requires more than fifteen (15)
days, immediately iinitiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
6
COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 7
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RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this,
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice of any kind to
Grantor.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession of
and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
Lender's own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor, and other persons as
required by law, reasonable notice of the time and place of any public
sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to
any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that person's right to notification
of sale. The requirements of reasonable notice shall be met if such
notice is given at least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking,
holding, insuring, preparing for sale and selling the Collateral, shall
become a part of the Indebtedness secured by this Agreement and shall
be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Collateral, with
the power to protect and preserve the Collateral, to operate the
Collateral preceding foreclosure or sale, and to collect the Rents from
the Collateral and apply the proceeds, over and above the cost of the
receivership, against the Indebtedness. The receiver may serve without
bond if permitted by law. Lender's right to the appointment of a
receiver shall exist whether or not the apparent value of the
Collateral exceeds the Indebtedness by a substantial amount. Employment
by Lender shall not disqualify a person from serving as a receiver.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in Lender's discretion transfer
any Collateral into Lender's own name or that of Lender's nominee and
receive the payments, rents, income,. and revenues therefrom and hold
the same as security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then
due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change
any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments
and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Grantor shall be liable for a deficiency
even if the transaction described in this subsection is a sale of
accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies
it may have available at law; in equity, or otherwise.
Election of Remedies. Except as may be prohibited by applicable -law,
all of Lender's rights and remedies, whether evidenced by this
Agreement, the Related Documents, or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to
perform an obligation of Grantor under this Agreement, after Grantor's
failure to perform, shall not affect Lender's right to declare a
default and exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing. and
signed by the party or parties sought to be charged or bound by the
alteration or amendment.
Arbitration. Grantor and tender agree that all disputes, claims and
controversies between them whether individual, joint, or class in
nature, arising from this Agreement or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to
the Rules of the American Arbitration Association in effect at the time
the claim is filed, upon request of either party. No act to take or
dispose of any Collateral shall constitute a waiver of this arbitration
agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a
temporary restraining order; invoking a power of sale under any deed of
trust or mortgage; obtaining a writ of attachment or imposition of a
receiver; or exercising any rights relating to personal property,
including taking or disposing of such property with or without judicial
process pursuant to Article 9 of the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any
Collateral, including any claim to rescind, reform, or otherwise modify
any agreement relating to the Collateral, shall also be arbitrated,
provided however that no arbitrator shall have the right or the power
to enjoin or restrain any act of any party. Grantor and Lender agree
that in the event of an action for judicial foreclosure pursuant to
California Code of Civil Procedure Section 726, or any similar
provision in any other state, the commencement of such an action will
not constitute a waiver of the right to arbitrate and the court shall
refer to arbitration as much of such action, including counterclaims,
as lawfully may be referred to arbitration. Judgment upon any award
rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this Agreement shall preclude any party from
seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches, and similar doctrines
which would otherwise be applicable in an action brought by a party
shall be applicable in any arbitration proceeding, and the commencement
of an arbitration proceeding shall be deemed the commencement of an
action for these purposes. The Federal Arbitration Act shall apply to
the construction, interpretation, and enforcement of this arbitration
provision.
7
COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 8
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Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including Lender's attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and
legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. Grantor also shall pay
all court costs and such additional fees as may be directed by the
court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Governing Law. This Agreement will be governed by federal law
applicable to Lender and, to the extent not preempted by federal law,
the laws of the State of California without regard to its conflicts of
law provisions. This Agreement has been accepted by Lender in the State
of California.
Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's
request to submit to the jurisdiction of the courts of Los Angeles
County, State of California.
Joint and Several Liability. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each Grantor signing
below is responsible for all obligations in this Agreement. Where any
one or more of the parties is a corporation, partnership, limited
liability company or similar entity, it is not necessary for Lender to
inquire into the powers of any of the officers, directors, partners,
members, or other agents acting or purporting to act on the entity's
behalf, and any obligations made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this
Agreement.
Non-Liability of Lender. The relationship between Grantor and Lender
created by this Agreement is strictly a debtor and creditor
relationship and not fiduciary in nature, nor is the relationship to be
construed as creating any partnership or joint venture between Lender
and Grantor. Grantor is exercising Grantor's own judgment with respect
to Grantor's business. All information supplied to Lender is for
Lender's protection only and no other party is entitled to rely on such
information. There is no duty for Lender to review, inspect, supervise
or inform Grantor of any matter with respect to Grantor's business.
Lender and Grantor intend that Lender may reasonably rely on all
information supplied by Grantor to Lender, together with all
representations and warranties given by Grantor to Lender, without
investigation or confirmation by Lender and that any investigation or
failure to investigate will not diminish Lender's right to so rely.
Notice of Lender's Breach. Grantor must notify Lender in writing of any
breach of this Agreement or the Related Documents by Lender and any
other claim, cause of action or offset against Lender within thirty
(30) days after the occurrence of such breach or after the accrual of
such claim, cause of action or offset. Grantor waives any claim, cause
of action or offset for which notice is not given in accordance with
this paragraph. Lender is entitled to rely on any failure to give such
notice.
Indemnification of Lender. Grantor agrees to indemnify, to defend and
to save and hold Lender harmless from any and all claims, suits,
obligations, damages, losses, costs and expenses {including, without
limitation, Lender's attorneys' fees), demands, liabilities, penalties,
fines and forfeitures of any nature whatsoever that may be asserted
against or incurred by Lender, its officers, directors, employees, and
agents arising out of, relating to, or in any manner occasioned by this
Agreement and the exercise of the rights and remedies granted Lender
under this, as well as by: (1) the ownership, use, operation,
construction, renovation, demolition, preservation, management, repair,
condition, or maintenance of any part of the Collateral; (2) the
exercise of any of Grantor's rights collaterally assigned and pledged
to Lender hereunder; (3) any failure of Grantor to perform any of its
obligations hereunder; and/or (4) any failure of Grantor to comply with
the environmental and ERISA obligations, representations and warranties
set forth herein. The foregoing indemnity provisions shall survive the
cancellation of this Agreement as to all matters arising or accruing
prior to such cancellation and the foregoing indemnity shall survive in
the event that Lender elects to exercise any of the remedies as
provided under this Agreement following default hereunder. Grantor's
indemnity obligations under this section shall not in any way be
affected by the presence or absence of covering insurance, or by the
amount of such insurance or by the failure or refusal of any insurance
carrier to perform any obligation on its part under any insurance
policy or policies affecting the Collateral and/or Grantor's business
activities. Should any claim, action or proceeding be made or brought
against Lender by reason of any event as to which Grantor's
indemnification obligations apply, then, upon Lender's demand, Grantor,
at its sole cost and expense, shall defend such claim, action or
proceeding in Grantor's name, if necessary, by the attorneys for
Grantor's insurance carrier (if such claim, action or proceeding is
covered by insurance), or otherwise by such attorneys as Lender shall
approve. Lender may also engage its own attorneys at its reasonable
discretion to defend Grantor and to assist in its defense and Grantor
agrees to pay the fees and disbursements of such attorneys.
Preference Payments. Any monies Lender pays because of an asserted
preference claim in Grantor's bankruptcy will become a part of the
Indebtedness and, at Lender's option, shall be payable by Grantor as
provided in this Agreement.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Grantor, shall constitute a waiver of any of
Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its
address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice
is to change the party's address. For notice purposes, Grantor agrees
to keep Lender informed at all times of Grantor's current' address.
Unless otherwise provided or required by law, if there is more than one
Grantor, any notice given by Lender to any Grantor is deemed to be
notice given to all Grantors.
Power of Attorney. Grantor hereby appoints Lender as Grantor's
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect, amend, or to continue the security interest
granted in this Agreement or to demand termination of filings of other
secured parties. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as
a financing statement. Grantor will reimburse Lender for all expenses
for the perfection and the continuation of the perfection of Lender's
security interest in the Collateral.
Waiver of Co-Obligor's Rights. If more than one person is obligated for
the Indebtedness, Grantor irrevocably waives, disclaims and
relinquishes all claims against such other person which Grantor has or
would otherwise have by virtue of payment of the Indebtedness or any
part thereof, specifically including but not limited to all rights of
indemnity, contribution or exoneration.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
person or circumstance, that finding shall not make the offending
provision illegal, invalid, or unenforceable as to any other person or
8
COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 9
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circumstance, If feasible, the offending provision shall be considered
modified so that it becomes legal, valid and enforceable. If the
offending provision cannot be so modified, it shall be considered
deleted from this Agreement. Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.
Sole Discretion of Lender. Whenever Lender's consent or approval is
required under this Agreement, the decision as to whether or not to
consent or approve shall be in the sole and exclusive discretion of
Lender and Lender's decision shall be final and conclusive.
Successors and Assigns. Subject to any limitations stated in this
Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors
and assigns. If ownership of the Collateral becomes vested in a person
other than Grantor, Lender, without notice to Grantor, may deal with
Grantor's successors with reference to this Agreement and the
Indebtedness by way of forbearance or extension without releasing
'Grantor from the obligations of this Agreement or liability under the
Indebtedness.
Survival of Representations and Warranties. All representations,
warranties, and agreements made by Grantor in this Agreement shall
survive the execution and delivery of this Agreement, shall be
continuing in nature, and shall remain in full force and effect until
such time as Grantor's Indebtedness shall be paid in full.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waive Jury. To the extent permitted by applicable law, all parties to
this Agreement hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by any party against any other
party.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms . sed in the singular shall
include the plural, and the plural shall include the singular, as the context
may require. Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code:
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
Borrower. The word "Borrower" means Amexdrug Corporation; Dermagen,
Inc.; Biorx Pharmaceuticals, Inc.; Royal Health Care, Inc.; and Allied
Med Inc. and includes all co-signers and co-makers signing the Note and
all their successors and assigns.
Collateral. The word "Collateral" means all of Grantor's right, title
and interest in and to all the Collateral as described in the
Collateral Description section of this Agreement.
Default. The word "Default" means the Default set forth in this
Agreement in the section titled "Default".
Encumbrance. The word "Encumbrance" means any and all presently
existing o"future mortgages, liens, privileges and other contractual
and statutory security interests and rights, of every nature and kind,
whether in admiralty, at law, or in equity, that now and/or in the
future may affect the Collateral or any part or parts thereof.
Environmental Laws. The words "Environmental Laws" mean any and all
state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, at seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7
of Division 20 of the California Health and Safety Code, Section 25100,
et seq., or other applicable state or federal laws, rules, or
regulations adopted pursuant thereto.
Event of Default. The words "Event of Default" mean individually,
collectively, and interchangeably any of the events of default set
forth in this Agreement in the default section of this Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
Grantor. The word "Grantor" means Amexdrug Corporation; Dermagen, Inc.;
Biorx Pharmaceuticals, Inc.; Royal Health Care, Inc.; and Allied Med
Inc.
Guarantor. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the Indebtedness, and, in each
case, Grantor's successors, assigns, heirs, personal representatives,
executors and administrators of any guarantor, surety, or accommodation
party.
Guaranty. The word "Guaranty" means the guaranty from Guarantor, or any
other guarantor, endorser, surety, or accommodation party to Lender,
including without limitation a guaranty of all or part of the Note.
Hazardous Substances. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or
otherwise handled. The words "Hazardous Substances" are used in their
very broadest sense and include without limitation any and all
hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances"
also includes, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
'Grantor is responsible under this Agreement or under any of the
Related Documents. Specifically, without limitation, Indebtedness
includes the future advances set forth in the Future Advances
provision, together with all interest thereon and all amounts that may
be indirectly secured by the Cross-Collateralization provision of this
Agreement.
Lender. The word "Lender" means National Bank of California, its
successors and assigns.
Note. The word "Note" means the Note executed by Amexdrug Corporation;
Dermagen, Inc.; Biorx Pharmaceuticals, Inc.; Royal Health Care, Inc.;
and Allied Med Inc. in the principal amount of $150,000.00 dated June
23, 2008, together with all renewals of, extensions of, modifications
of, refinancings of, consolidations of, and substitutions for the note
or credit agreement.
Property. The word "Property" means all of Grantor's right, title and
interest in and to all the Property as described in the "Collateral
Description" section of this Agreement.
Related Documents. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements - and
documents, whether now or hereafter existing, executed in connection
with the indebtedness.
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COMMERCIAL SECURITY AGREEMENT
Loan No: 930610000 (Continued) Page 10
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Rights. The word "Rights" means individually, collectively and
interchangeably any and all of Grantor's additional rights granted and
pledged to Lender as provided under this Agreement.
GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 23, 2008.
GRANTOR:
AMEXDRUG CORPORATION
By: /s/ Jack N. Amin
---------------------------------
Jack N. Amin, President/Secretary
of Amexdrug Corporation
DERMAGEN, INC.
By: /s/ Jack N. Amin
---------------------------------
Jack N. Amin, President/Secretary
of Dermagen, Inc.
BIORIX PHARMACEUTICALS, INC.
By: /s/ Jack N. Amin
---------------------------------
Jack N. Amin, President/Secretary
of Biorx Pharmaceuticals, Inc.
ROYAL HEALTH CARE, INC.
By: /s/ Jack N. Amin
---------------------------------
Jack N. Amin, President/Secretary
of Royal Health Care, Inc.
ALLIED MED INC.
By: /s/ Jack N. Amin
---------------------------------
Jack N. Amin, President/Secretary
of Allied Med Inc.
10
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