Commercial Security Agreement - City National Bank and Daily Journal Corp.
CITY NATIONAL BANK
COMMERCIAL SECURITY AGREEMENT
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Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$4,000,000.00 01-02-2001 01-31-2002 38058 648112 SST /s/JS
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References in the shaded area 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.
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Borrower: DAILY JOURNAL CORPORATION, Lender: City National Bank, NA
A SOUTH CAROLINA CORPORATION Downtown Los Angeles Commercial Banking Center
SUSTAIN TECHNOLOGIES, INC., #034000
A VIRGINIA CORPORATION 633 West Fifth Street, Tenth Floor
915 EAST 1ST STREET Los Angeles, CA 90071
LOS ANGELES, CA 90012
Grantor: SUSTAIN TECHNOLOGIES, INC.,
A VIRGINIA CORPORATION
915 EAST 1ST STREET
LOS ANGELES, CA 90012
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THIS COMMERCIAL SECURITY AGREEMENT dated January 2, 2001, is made and executed
among DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION ("Grantor"); DAILY
JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION; and SUSTAIN TECHNOLOGIES,
INC., A VIRGINIA CORPORATION ("Borrower"); and City National Bank, NA
("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, Chattel Paper, Accounts, Equipment and General Intangibles
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 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, 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.
Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Property unless and until such
a notice is given.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower 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, absolute or contingent,
liquidated or unliquidated and whether Borrower 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.
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (A) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (B) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (C) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (A) this
Agreement is executed at Borrower's request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Lender; (C) Grantor has established adequate
means of obtaining from Borrower on a continuing basis information about
Borrower's financial condition; and (D) Lender has made no representation to
Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Except as prohibited by applicable law, Grantor waives any
right to require Lender to (A) make any presentment, protest, demand, or notice
of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional
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COMMERCIAL SECURITY AGREEMENT
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Indebtedness; (B) proceed against any person, including Borrower, before
proceeding against Grantor; (C) proceed against any collateral for the
Indebtedness, including Borrower's collateral, before proceeding against
Grantor; (D) apply any payments or proceeds received against the Indebtedness in
any order; (E) give notice of the terms, time, and place of any sale of any
collateral pursuant to the Uniform Commercial Code or any other law governing
such sale; (F) disclose any information about the Indebtedness, the Borrower,
any collateral, or any other guarantor or surety, or about any action or
nonaction of Lender; or (G) pursue any remedy or course of action in Lender's
power whatsoever.
Grantor also waives any and all rights or defenses arising by reason of (A) any
disability or other defense of Borrower, any other guarantor or surety or any
other person; (B) the cessation from any cause whatsoever, other than payment
in full, of the indebtedness; (C) the application of proceeds of the
Indebtedness by Borrower for purposes other than the purposes understood and
intended by Grantor and Lender; (D) any act of omission or commission by Lender
which directly or indirectly results in or contributes to the discharge of
Borrower or any other guarantor or surety, or the Indebtedness, or the loss or
release of any collateral by operation of law or otherwise; (E) any statute of
limitations in any action under this Agreement or on the Indebtedness; or (F)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time payment of the Indebtedness is due and any change in the interest rate.
Until all Indebtedness is paid in full, Grantor shall have no right of
subrogation, and Grantor waives any defense Grantor may have based upon any
election of remedies by Lender which limits or destroys Grantor's subrogation
rights or Grantor's rights to seek reimbursement from Borrower or any other
guarantor or surety, including without limitation, any loss of rights Grantor
may suffer by reason of any rights or protections of Borrower in connection with
any anti-deficiency laws or other laws limiting or discharging the Indebtedness
or Borrower's obligations (including, without limitation, Sections 726, 580b,
and 580d of the California Code of Civil Procedure). Until all Indebtedness is
paid in full, Grantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety, or other person, and further,
Grantor waives any right to participate in any collateral for the Indebtedness
now or hereafter held by Grantor.
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 warrants to Lender that:
Perfection of Security Interest. Grantor agrees to execute financing
statements and to take whatever other 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 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 Borrower may not be indebted to
Lender.
Notices to Lender. Grantor will 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 Grantor, (4) change
in the authorized signer(s), (5) change in Grantor's principal office
address, (6) conversion of Grantor to a new or different type of business
entity, or (7) 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 will take effect until after Lender has been notified.
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.
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.
Grantor shall, whenever requested, advise Lender of the exact location of the
Collateral.
Transactions Involving Collateral. Except for inventory sold, licenses
granted or accounts collected in the ordinary course of Grantor's business,
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 and
any other security interests or liens granted by Grantor to Lender or any
affiliate of Lender, 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
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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 and any other security
interests or liens granted by Grantor to Lender or any affiliate of Lender.
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.
Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and
condition at all times while this Agreement remains in effect. Grantor
further agrees to pay when due all claims for work done on, or services
rendered or material furnished in connection with the Collateral so that no
lien or encumbrance may ever attach to or be filed against the Collateral.
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 other than a lien in
favor of Lender or one or more of its affiliates 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 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. 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. 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.
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) agree to indemnify 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 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 seven (7) 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. 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.
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 the payment is due, the reserve funds are
insufficient, 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
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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.
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.
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) 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 Collateral 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. Borrower fails to make any payment when due under the
Indebtedness.
Other Defaults. Borrower or 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 Borrower or Grantor.
Default in Favor of Third Parties. Should Borrower or any Grantor default
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 Borrower's property or Borrower's or any
Grantor's ability to repay the Indebtedness or 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 Borrower or Grantor or on Borrower's or Grantor's
behalf under this Agreement, the Note, or the Related Documents 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 Borrower's or Grantor's
existence as a going business, the insolvency of Borrower or Grantor, the
appointment of a receiver for any part of Borrower's or 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 Borrower or 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 Borrower or Grantor or
by any governmental agency against any collateral securing the Indebtedness.
This includes a garnishment of any of Borrower's or Grantor's accounts,
including deposit accounts, with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Borrower or Grantor as to
the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower or 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.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or guarantor, endorser, surety, or accommodation party dies or
becomes incompetent.
Adverse Change. A material adverse change occurs in Borrower's or Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
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 Borrower would be required to pay,
immediately due and payable, without notice of any kind to Borrower or
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 Collateral. If
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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 reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The requirements
of reasonable notice shall be met if such notice is given at least fifteen
(15) days, or such lesser time as required by state law, 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 rights 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 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 Borrower 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. Borrower 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 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 will not bar 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.
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, construed and enforced in
accordance with federal law and the laws of the State of California. 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 Borrower and Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor, and all references to Borrower shall mean
each and every Borrower. This means that each Borrower and 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.
Preference Payments. Any monies Lender pays because of an asserted
preference claim in Borrower's or Grantor's bankruptcy will become a part of
the Indebtedness and, at Lender's option, shall be payable by Borrower and
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
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COMMERCIAL SECURITY AGREEMENT
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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 with 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 or to continue the security interest granted in this Agreement.
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
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other 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.
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 Borrower's Indebtedness
shall be paid in full.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
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 used 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:
Account. The word "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered
owing to Grantor (or to a third party grantor acceptable to Lender).
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 DAILY JOURNAL CORPORATION, A SOUTH
CAROLINA CORPORATION; and SUSTAIN TECHNOLOGIES, INC., A VIRGINIA CORPORATION,
and all other persons and entities signing the Note in whatever capacity.
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".
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, et 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 any of the Events of
Default set forth in this Agreement in the Default section of this Agreement.
Grantor. The word "Grantor" means DAILY JOURNAL CORPORATION, A SOUTH
CAROLINA CORPORATION.
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.
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COMMERCIAL SECURITY AGREEMENT
(Continued)
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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 Borrower is
responsible under this Agreement or under any of the Related Documents.
Lender. The word "Lender" means City National Bank, NA, its successors and
assigns.
Note. The word "Note" means the Note executed by Borrower in the principal
amount of $4,000,000.00 dated January 2, 2001, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
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
(Continued)
Page 8
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BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS DATED
JANUARY 2, 2001.
GRANTOR:
SUSTAIN TECHNOLOGIES, INC., A VIRGINIA CORPORATION
By: /s/ Gerald L. Salzman
------------------------------------------
GERALD L. SALZMAN, Secretary of SUSTAIN
TECHNOLOGIES, INC., A VIRGINIA CORPORATION
BORROWER:
DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION
By: /s/ Gerald L. Salzman
---------------------
GERALD L. SALZMAN, President/CFO/Treasurer of
DAILY JOURNAL CORPORATION, A SOUTH
CAROLINA CORPORATION
SUSTAIN TECHNOLOGIES, INC., A VIRGINA CORPORATION
By: /s/ Gerald L. Salzman
---------------------
GERALD L. SALZMAN, Secretary of SUSTAIN
TECHNOLOGIES, INC., A VIRGINIA CORPORATION