EXHIBIT 10.13
BUSINESS SECURITY AGREEMENT
This Business Security Agreement ("AGREEMENT") is made and entered into by the
undersigned borrower, guarantor and/or other obligor/pledgor (the "DEBTOR") in
favor of U. S. BANK N.A., 000 XX XXX, XXXXXXXX, XX 00000 (the "BANK") as of the
date set forth on the last page of this Agreement.
ARTICLE I. SECURITY INTEREST
1.1 GRANT OF SECURITY INTEREST. Debtor hereby grants a security
interest in and collaterally assigns the Collateral (defined below) to
Bank to secure all of Debtor's Obligations (defined below) to Bank. The
intent of the parties hereto is that the Collateral secures all
Obligations of Debtor to Bank, whether or not such Obligations exist
under this Agreement or any other agreements, whether now or hereafter
existing, between Debtor and Bank or in favor of Bank, including,
without limitation, any note, any loan or security agreement, any lease,
any mortgage, deed of trust or other pledge of an interest in real or
personal property, any guaranty, any letter of credit or banker's
acceptance, any agreement for any other services or credit extended by
Bank to Debtor even though not specifically enumerated herein, and any
other agreement with Bank (together and individually, the "LOAN
DOCUMENTS').
1.2 "COLLATERAL "means all of the following whether now, owned or
existing or hereafter acquired by Debtor (or by Debtor with spouse),
wherever located (including all documents, general intangibles,
additions and accessions, spare and repair parts, special tools,
replacements, returned or repossessed goods and books and records
relating to the following; and all proceeds, supporting obligations and
products of the following) [CHECK ALL THAT APPLY]:
|X| All accounts, instruments, documents, chattel paper, general
intangibles, contract rights, investment property (including any
securities entitlements and/or securities accounts held by Debtor),
securities and certificates of deposit, deposit accounts, and letter of
credit rights;
|X| All inventory;
|X| All equipment;
[ ] All fixtures; and
[ ] Specific Collateral (the following, whether constituting equipment,
inventory, fixtures, or (other collateral):
---------------------------------------------------------------------
---------------------------------------------------------------------
In the event the first four boxes are checked, Debtor acknowledges and
agrees that, in applying the law of any jurisdiction that at any time
enacts all or substantially all of the uniform provisions of Revised
Article 9 of the Uniform Commercial Code (1999 Official Text), the
foregoing collateral description covers all assets of Debtor. Bank may
at any time and from time to time file financing and continuation
statements and amendments thereto reflecting the same. Unless otherwise
defined, the terms set forth in this Agreement shall have the meanings
set forth in the Uniform Commercial Code as adopted in the Loan
Documents and as amended from time to time. The defined terms hereunder
shall be interpreted in a manner most favorable to Bank.
1.3 "OBLIGATIONS" means all Debtor's debts (except for consumer credit
if Debtor is a natural person), liabilities, obligations, covenants,
warranties, and duties to Bank (plus its affiliates including any credit
card debt, but specifically excluding any type of consumer credit),
whether now or hereafter existing or incurred, whether liquidated or
unliquidated, whether absolute or contingent, whether arising out of the
Loan Documents or otherwise, and all other debts and obligations due
Bank under any lease, agricultural, real estate or other financing
transaction and regardless of whether such financing is related in time
or type to the financing provided at the time of grant of this security
interest, and regardless of whether such Obligations arise out of
existing or future credit granted by Bank to any Debtor, to any Debtor
and others, to others guaranteed, endorsed or otherwise secured by' any
Debtor or to any debtor-in-possession or other successor-in-Interest of
any Debtor, and including principal, interest, fees, expenses and
charges relating to any of the foregoing.
ARTICLE II. WARRANTIES AND COVENANTS
In addition to all other warranties and covenants of Debtor under the
Loan Documents which are expressly incorporated herein as part of this
Agreement and while any part of the credit granted Debtor under the Loan
Documents is available or any Obligations of Debtor to Bank are unpaid
or outstanding, Debtor continuously warrants and agrees as follows:
2.1 DEBTOR'S NAME, LOCATION; NOTICE OF LOCATION CHANGES. Except as
indicated in the ARTICLE 9 CERTIFICATE executed by Debtor and made a
part hereof, Debtor's name and organizational structure has remained the
same during the past five (5) years. Debtor will continue to use only
the name set forth with Debtor's signature unless Debtor gives Bank
prior written notice of any change. Furthermore, Debtor shall not do
business under another name nor use any trade name without giving ten
(10) days prior written notice to Bank. Debtor will not change its
status or organizational structure without the prior written consent of
Bank. Debtor will not change its location or registration (if Debtor is
a registered organization) to another state without prior written notice
to Bank. The address appearing in the ARTICLE 9 CERTIFICAte is Debtor's
chief executive office (or residence if Debtor is a sole proprietor).
2.2 STATUS OF COLLATERAL. All Collateral is genuine and validly
existing. Except for items of insignificant value or as otherwise
reflected in writing by Debtor to Bank under a borrowing base or
otherwise, (i) Collateral constituting inventory, equipment and fixtures
is in good condition, not obsolete and is either currently saleable or
usable; and (ii) Collateral constituting accounts, contract rights,
notes, chattel paper and other third-party obligations to pay is fully
enforceable in accordance with its terms and not subject to return,
dispute, setoff, credit allowance or adjustment, except for discounts
for prompt payment. Unless Debtor provides Bank with written notice to
the contrary, Debtor has no notice or knowledge of anything that would
impair the ability of any third-party obligor to pay any debt to Debtor
when due.
1150A(C)us bancorp 2001 Page 1 of 4
3/02
Page 12 of 19
2.3 OWNERSHIP; MAINTENANCE OF COLLATERAL; RESTRICTIONS ON LIENS AND
DISPOSITIONS. Debtor is the sole owner of the Collateral free of all
liens, claims, other encumbrances and security interests except as
permitted in writing by Bank. Debtor shall: (i) maintain the Collateral
in good condition and repair (reasonable wear and tear excepted), and
not permit its value to be impaired; (ii) not permit waste, removal or
loss of identity of the Collateral; (iii) keep the Collateral freeform
all liens, executions, attachments, claims, encumbrances and security
interests (other than Bank's paramount security interest and those
permitted in writing by Bank); (iv) defend the Collateral against all
claims and legal proceedings by persons other than Bank; (v) pay and
discharge when due all taxes, levies and other charges or fees upon the
Collateral except for payment of taxes contested by Debtor in good faith
by appropriate proceedings so long as no levy or lien has been imposed
upon the Collateral; (vi) not lease, sell or transfer the Collateral to
any party nor move it to any new location outside of the ordinary course
of business; (vii) not permit the Collateral, without the consent of
Bank, to become a fixture or an accession to other goods; (viii) not
permit the Collateral to be used in violation of any applicable law,
regulation or policy of insurance; and, (ix) as to the Collateral
consisting of instruments and chattel paper, preserve Bank's rights in
it against all other parties. Notwithstanding the above, Debtor may
sell, lease or transfer inventory in the ordinary course of its business
provided that no sale, lease or transfer shall include any transferor
sale in satisfaction (partial or complete) of a debt owed by Debtor;
title will not pass to buyer until Debtor physically delivers the goods
to buyer or Debtor ships the goods F.O.B. to buyer's destination; and
sales and/or leases to Debtor's affiliates shall be for fair market
value, cash on delivery, with the proceeds remitted to Bank.
2.4 MAINTENANCE OF SECURITY INTEREST; PURCHASE MONEY SECURITY
INTERESTS. Debtor shall take any action requested by Bank to preserve
the Collateral and to establish the value of, the priority of, to
perfect, to continue the perfection of or to enforce Bank's interest in
the Collateral and Bank's rights under this Agreement; and shall pay all
costs and expenses related thereto. Debtor-shall also cooperate with
Bank in obtaining control (for purposes of perfection under the Uniform
Commercial Code) of Collateral consisting of deposit accounts,
investment property, letter of credit rights, electronic chattel paper
and any other collateral where Bank may obtain perfection through
control. Debtor hereby authorizes Bank to take any and all actions
described above and in place of Debtor with respect to the Collateral
and hereby ratifies any such actions Bank has taken prior to the date of
this Agreement and hereafter, which actions may include, without
limitation, filing UCC financing statements and obtaining or attempting
to obtain control agreements from holders of the Collateral. Debtor and
Bank intend to maintain the full effect of any purchase money security
interest granted in favor of Bank notwithstanding the fact that the
Collateral so purchased is also pledged as security for other
Obligations under the Loan Documents.
2.5 COLLATERAL INSPECTIONS; MODIFICATIONS AND CHANGES IN COLLATERAL. At
reasonable times, Bank may examine the Collateral and Debtor's records
pertaining to it, wherever located, and make copies of such records at
Debtor's expense; and Debtor shall assist Bank in so doing. Without
Bank's prior written consent, Debtor shall not alter, modify, discount,
extend, renew or cancel any Collateral, except for ordinary discounts
for prompt payment on accounts, physical modifications to the inventory
occurring in the manufacturing process or alterations to equipment which
do not materially affect its value. Debtor shall promptly notify Bank in
writing of any material change in the condition of the Collateral and of
any change in location of the Collateral.
2.6 COLLATERAL RECORDS, REPORTS AND STATEMENTS. Debtor shall keep
accurate and complete records respecting the Collateral in such form as
Bank may approve. At such times as Bank may require, Debtor shall
furnish to Bank any records/information Bank might require, including,
without limitation, a statement certified by Debtor and in such form and
containing such information as may be prescribed by Bank showing the
current status and value of the Collateral.
2.7 CHATTEL PAPER, INSTRUMENTS, ETC. Chattel paper, instruments,
drafts, notes, acceptances, and other documents, which constitute
Collateral, shall be on forms satisfactory to Bank. Debtor shall
promptly xxxx chattel paper to indicate conspicuously Bank's security
interest therein, shall not deliver any chattel paper or negotiable
instruments to any other entity and, upon request, shall deliver all
original chattel paper, instruments, drafts, notes, acceptances and
other documents which constitute Collateral to Bank.
2.8 UNITED STATES GOVERNMENT CONTRACTS. If any accounts or contract
rights arose out of contracts with the United States or any of its
departments, agencies or instrumentalities, Debtor shall promptly notify
Bank and execute any writings required by Bank so that all money due or
to become due under such contracts shall be assigned to Bank under the
Federal Assignment of Claims Act.
2.9 ENVIRONMENTAL MATTERS. Except as disclosed in a written schedule
attached to this Agreement (if no schedule is attached, there are no
exceptions), there exists no uncorrected violation by Debtor of any
federal, state or local laws (including statutes, regulations,
ordinances or other governmental restrictions and requirements) relating
to the discharge of air pollutants, water pollutants or process waste
water or otherwise relating to the environment or Hazardous Substances
as hereinafter defined, whether such laws currently exist or are enacted
in the future (collectively "ENVIRONMENTAL LAWS'). The term "HAZARDOUS
SUBSTANCES" shall mean any hazardous or toxic wastes, chemicals or other
substances, the generation, possession or existence of which is
prohibited or governed by any Environmental Laws. Debtor is not subject
to any judgment, decree, order or citation, or a party to (or threatened
with) any litigation or administrative proceeding, which asserts that
Debtor (i) has violated any Environmental Laws; (ii) is required to
clean up, remove or take remedial or other action with respect to any
Hazardous Substances (collectively "REMEDIAL ACTION; or (iii) is
required to pay all or a portion of the cost of any Remedial Action, as
a potentially responsible party. There are not now, nor to Debtor's
knowledge after reasonable investigation have there ever been, any
Hazardous Substances (or tanks or other facilities for the storage of
Hazardous Substances) stored, deposited, recycled or disposed of on,
under or at any real estate owned or occupied by Debtor during the
periods that Debtor owned or occupied such real estate, which if present
on the real estate or in soils or ground water, could require Remedial
Action. To Debtor's knowledge, there are no proposed or pending changes
in Environmental Laws which would adversely affect Debtor or its
business, and there are no conditions existing currently or likely to
exist while the Loan Documents are in effect which would subject Debtor
to Remedial Action or other liability. Debtor currently complies with
and will continue to timely comply with all applicable Environmental
Laws; and will provide Bank, immediately upon receipt, copies of any
correspondence, notice, complaint, order or other document from any
source asserting or alleging any circumstance or condition which
requires or may require a financial contribution by Debtor or Remedial
Action or other response by or on the part of Debtor under Environmental
Laws, or which seeks damages or civil, criminal or punitive penalties
from Debtor for an alleged violation of Environmental Laws.
2.10 INSURANCE. Debtor will maintain insurance to such extent, covering
such risks and with such insurers as is usual and customary for
businesses operating similar properties, and as is satisfactory to Bank,
including insurance for fire and other risks insured against by extended
or comprehensive coverage, public liability insurance and workers'
compensation insurance; and will designate Bank as loss payee with a
"Lender's Loss Payable" endorsement on any casualty policies and take
such other action as Bank may reasonably request to ensure that Bank
will receive (subject to no other interests) the insurance proceeds of
the Collateral. Debtor hereby assigns all insurance proceeds to and
irrevocably directs, while any Obligations remain unpaid, any insurer to
pay to Bank the proceeds of all such 1150A
PAGE 2 OF 4
Page 13 of 19
insurance and any premium refund; and authorizes Bank to endorse Debtor's
name to effect the same, to make, adjust or settle, in Debtor's name, any
claim on any insurance policy relating to the Collateral; and, at the
option of Bank, to apply such proceeds and refunds to the Obligations or
to restoration of the Collateral, returning any excess to Debtor. In the
event of any failure of the Debtor to obtain or maintain any insurance
required hereunder, the Bank shall have the authority, but not the
obligation, to obtain any such insurance coverage, and the Debtor shall
immediately reimburse the Bank for the cost thereof, together with
interest on such amount at the highest rate of interest then accruing on
any of the Obligations.
ARTICLE III. COLLECTIONS
3.1 DEPOSIT WITH BANK. At any time Bank may require that all proceeds
of Collateral received by Debtor shall be held by Debtor upon an express
trust for Bank, shall not be commingled with any other funds or property
of Debtor and shall be turned over to Bank in precisely the form
received (but endorsed by Debtor, if necessary for collection) not later
than the business day following the day of their receipt. All proceeds
of Collateral received by Bank directly or from Debtor shall be applied
against the Obligations in such order and at such times, as Bank shall
determine.
ARTICLE IV. RIGHTS AND DUTIES OF BANK
In addition to all other rights (including setoff) and duties of Bank
under the Loan Documents, which are expressly incorporated herein as a
part of this Agreement, the following provisions shall also apply:
4.1 AUTHORITY TO PERFORM FOR DEBTOR. Debtor presently appoints any
officer of Bank as Debtor's attorney-in-fact (coupled with an interest
and irrevocable while any Obligations remain unpaid) to do any of the
following upon default by Debtor hereunder (notwithstanding any notice
requirements or grace/cure periods under this or other agreements
between Debtor and Bank): (i) to file, endorse or place the name of
Debtor on any invoice or document of title relating to accounts, drafts
against customers, notices to customers, notes, acceptances, assignments
of government contracts, instruments, financing statements, checks,
drafts, money orders, insurance claims or payments or other documents
evidencing payment or a security interest relating to the Collateral;
(ii) to receive, open and dispose of all mail addressed to Debtor and to
notify the Post Office authorities to change the address for delivery of
mail addressed to Debtor to an address designated by Bank; (iii) to do
all such other acts and things necessary to carry out Debtor's duties
under this Agreement and the other Loan Documents; and (iv) to perfect,
protect and/or realize upon Bank's interest in the Collateral. If the
Collateral includes funds or property in depository accounts, Debtor
authorizes each of its depository institutions to remit to Bank, without
liability to Debtor, all of Debtor's funds on deposit with such
institution upon written direction by Bank after default by Debtor
hereunder. All acts by Bank are hereby ratified and approved, and Bank
shall not be liable for any acts of commission or omission, nor for any
errors of judgment or mistakes of fact or law.
4.2 VERIFICATION AND NOTIFICATION; BANK'S RIGHTS. Bank may verify
Collateral in any manner, and Debtor shall assist Bank in so doing. Upon
the occurrence of a default hereunder, Bank may at any time and Debtor
shall, upon request of Bank, notify the account debtors to make payment
directly to Bank; and Bank may enforce collection of, sell, settle,
compromise, extend or renew the indebtedness of such account debtors;
all without notice to or the consent of Debtor. Until account debtors
are so notified, Debtor, as agent of Bank, shall make collections on the
Collateral. Bank may at any time notify any bailee possessing Collateral
to turn over the Collateral to Bank.
4.3 COLLATERAL PRESERVATION. Bank shall use reasonable care in the
custody and preservation of any Collateral in its physical possession
but in determining such standard of reasonable care, Debtor expressly
acknowledges that Bank has no duty to: (i) insure the Collateral against
hazards; (ii) ensure that the Collateral will not cause damage to
property or injury to third parties; (iii) protect it from seizure,
theft or conversion by third parties, third parties' claims or acts of
God; (iv) give to Debtor any notices received by Bank regarding the
Collateral; (v) perfect or continue perfection of any security interest
in favor of Debtor; (vi) perform any services, complete any
work-in-process or take any other action in connection with the
management or maintenance of the Collateral; or (vii) xxx or otherwise
effect collection upon any accounts even if Bank shall have made a
demand for payment upon individual account debtors. Notwithstanding any
failure by Bank to use reasonable care in preserving the Collateral,
Debtor agrees that Bank shall not be liable for consequential or special
damages arising therefrom.
ARTICLE V. DEFAULTS AND REMEDIES
Bank may enforce its rights and remedies under this Agreement upon
default. A default shall occur if Debtor fails to comply with the terms
of any Loan Documents (including this Agreement or any guaranty by
Debtor), a demand for payment is made under a demand loan, or any other
obligor fails to comply with the terms of any Loan Documents for which
Debtor has given Bank a guaranty or pledge.
5.1 CUMULATIVE REMEDIES; NOTICE; WAIVER. In addition to the remedies
for default set forth in the Loan Documents, Bank upon default shall
have all other rights and remedies for default provided by the Uniform
Commercial Code, as well as any other applicable law and this Agreement,
INCLUDING, WITHOUT LIMITATION, THE RIGHT TO REPOSSESS, RENDER UNUSABLE
AND/OR DISPOSE OF THE COLLATERAL WITHOUTJUDICIAL PROCESS. The rights and
remedies specified herein are cumulative and are not exclusive of any
rights or remedies, which Bank would otherwise have. With respect to
such rights and remedies:
(a) ASSEMBLING COLLATERAL; STORAGE; USE OF DEBTOR'S NAME/OTHER
PROPERTY. Bank may require Debtor to assemble the Collateral and
to make it available to Bank at any convenient place designated
by Bank. Debtor recognizes that Bank will not have an adequate
remedy in Law if this obligation is breached and accordingly,
Debtor's obligation to assemble the Collateral shall be
specifically enforceable. Bank shall have the right to take
immediate possession of said Collateral and Debtor irrevocably
authorizes Bank to enter any of the premises wherever said
Collateral shall be located, and to store, repair, maintain,
assemble, manufacture, advertise and sell, lease or dispose of
(by public sale or otherwise) the same on said premises until
sold, all without charge or rent to Bank. Bank is hereby granted
an irrevocable license to use, without charge, Debtor's
equipment, inventory, labels, patents, copyrights, franchises,
names, trade secrets, trade names, trademarks and advertising
matter and any property of a similar nature; and Debtor's rights
under all licenses and franchise agreements shall inure to Bank's
benefit. Further, Debtor releases Bank from obtaining a bond or
surety with respect to any repossession and/or disposition of the
Collateral. (b) NOTICE OF DISPOSITION. Written notice, when
required by law, sent to any address of Debtor in this Agreement,
at least five (5)
1150A Page 3 of 4
Page 14 of 19
calendar days (counting the day of sending) before the date of a
proposed disposition of the Collateral is reasonable notice but
less notice may be reasonable under the circumstances.
Notification to account debtors by Bank shall not be deemed a
disposition of the Collateral. Notice of any record shall be
deemed delivered when the record has been (a) deposited in the
United States Mail, postage pre-paid, (b) received by overnight
delivery service, (c) received by telex, (d) received by
telecopy, (e) received through the Internet, or (f) when
personally delivered.
(c) POSSESSION OF COLLATERAL/COMMERCIAL REASONABLENESS. Bank shall
not, at any time, be obligated to either take or retain
possession or control of the Collateral. With respect to
Collateral in the possession or control of Bank, Debtor and Bank
agree that as a standard for determining commercial
reasonableness, Bank need not liquidate, collect, sell or
otherwise dispose of any of the Collateral if Bank believes, in
good faith, that disposition of the Collateral would not be
commercially reasonable, would subject Bank to third-party claims
or liability, that other potential purchasers could be attracted
or that a better price could be obtained if Bank held the
Collateral for up to 2 years. Bank may sell Collateral without
giving any warranties and may specifically disclaim any
warranties of title or the like. Furthermore, Bank may sell the
Collateral on credit (and reduce the Obligations only when
payment is received from the buyer), at wholesale and/or with or
without an agent or broker; and Bank need not complete, process,
repair, clean-up or otherwise prepare the Collateral prior to
disposition. If the purchaser fails to pay for the Collateral,
Bank my resell the Collateral and Debtor shall be credited with
the cash proceeds of the sale. Bank may comply with any
applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be
considered to adversely affect the commercial reasonableness of
any sale of the Collateral.
(d) WAIVER BY DEBTOR. Bank has no obligation and Debtor waives any
obligation to attempt to satisfy the Obligations by 'collecting
the obligations from any third parties and Bank may release,
modify or waive any collateral provided by any third party to
secure any of the Obligations, all without affecting Bank's
rights against Debtor. Debtor further waives any obligation on
the part of Bank to marshal any assets in favor of Debtor or in
payment of the Obligations. Notwithstanding any provisions in
this Agreement or any other agreement between Debtor and Bank,
Debtor does not waive any statutory rights except to the extent
that the waiver thereof is permitted by law.
(e) WAIVER BY BANK. Bank may permit Debtor to attempt to remedy any
default without waiving its rights and -remedies hereunder, and
Bank may waive any default without waiving any other subsequent
or prior default by Debtor. Furthermore, delay on the part of
Bank in exercising any right, power or privilege hereunder or at
law shall not operate as a waiver thereof, nor shall any single
or partial exercise of such right, power or privilege preclude
other exercise thereof or the exercise of any other right, power
or privilege. NO WAIVER OR SUSPENSION SHALL BE DEEMED TO HAVE
OCCURRED UNLESS BANK HAS EXPRESSLY AGREED IN WRITING SPECIFYING
SUCH WAIVER OR SUSPENSION.
ARTICLE VI. MISCELLANEOUS
All other provisions in the Loan Documents are expressly incorporated
as a part of this Agreement.
ALL DOCUMENTS ATTACHED HERETO, INCLUDING ANY APPENDICES, SCHEDULES,
RIDERS, AND EXHIBITS TO THIS AGREEMENT, ARE HEREBY EXPRESSLY
INCORPORATED BY REFERENCE.
IN WITNESS WHEREOF, the undersigned has/have executed this BUSINESS
SECURITY AGREEMENT as NOVEMBER 7, 2002
(Individual Debtor) NUTECH DIGITAL, INC.
-----------------------------------------------
Debtor Name (Organization)
---------------------------------------------(SEAL) a CALIFORNIA CORPORATION
-----------------------------------------------
Debtor Name N/A BY
-------------------------------------- -------------------------------------------
----------------------------------------------(SEAL) Name and Title XXX XXXXXX, PRESIDENT/SECRETARY
-------------------------------
Debtor Name N/A BY
-------------------------------------- -------------------------------------------
Name and Title
--------------------------------
Page 4 of 4
