COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No Call Collateral
----------- ----------- ---------- -------- ------ ----------
$140,000.00 12-06-1995
Account Officer Initials
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103
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.
Borrower: PENN OCTANE CORPORATION Lender: Bay Area Bank
000 XXXXXXXX XXXX XXXXX 000 000 Xxxxxxxx Xxxx.
XXXXXXX XXXX, XX 00000 X.X. Xxx 0000
Xxxxxxx Xxxx, XX 00000
THIS COMMERCIAL SECURITY AGREEMENT is entered into between
PENN OCTANE CORPORATION (referred to below " Grantor"); and
Bay Area Bank (Referred to below as "Lender"). 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.
DEFINITIONS. The following words shall have the following meanings
when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terrns in the
Uniform Commercial Code. All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
Agreement. The word "Agreement" means the 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.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired,
whether now existng or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment and general intangibles
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, wheather now existing or hereafter
arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of
and substitutions for any property described above.
(b) All products and produce of any of the property described in
this Collateral section.
(c) All accounts, contract rights, 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.
(e) All records and data relating to any of the property described
in the 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.
Event of Default. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below
in the section titled "Events of Default."
Grantor. The word "Grantor" means PENN OCTANE CORPORATION, its
successors and assigns.
Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced
by the Note, 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. In addtion, the word "Indebtedness"
Includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them,
to Lender, as well as all claims by Lender against Grantor,
or any one or more of them, whether existing now or later;
whether they are voluntary or involuntary, due or not due,
direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually
or jointly with others; whether Grantor may be
obligated as guarantor, surety, accommodation
party or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter
may become otherwise unenforceable.
Lender. The word "Lender" means Bay Area Bank, its successors
and assigns.
Note. The word "Note" means the note or credit agreement dated
December 8, 1995, in the principal amount of $140,000.00
from Grantor to Lender, 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 and include
without limitation all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, and all
other instruments, agreements and documents, whether now or
hereafter existing, executed in connection wHh the Indebtedness.
DEPOSIT ACCOUNTS. Grantor hereby grants Lender a contractual
possessory security interest in and hereby assigns, conveys,
delivers, pledges, and transfers all of Grantor's right, title
and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all
accounts held jointly with someone else and all accounts
Grantor may open in the future, exduding however all XXX,
Xxxxx, and trust accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to
Lender as follows:
Organization. Grantor is a corporation which is duly organized,
validly existing, and in good standing under the laws of
the State of Delaware. Grantor has its chief executive office
at 000 XXXXXXXX XXXX XXXXX 000, XXXXXXX XXXX, XX 00000.
Grantor will notify Lender of any change in the location of
Grantor's chief executive office.
Authorization. The execution, delivery, and performance of this
Agreement by Grantor have been duly authorized by all
necessary action by Grantor and do not conflict with, result
in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization,
or bylaws, or any agreement or other instrument binding upon
Grantor or (b) any law, governmental regulation, court
decree, or order applicable to Grantor.
12-06-1995 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
Perfection of Security Interest. Grantor agrees to execute
such 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. Grantor hereby
appoints Lender as its 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.
Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business
names of Grantor. 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.
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 the Agreement.
Enforceability of Collateral. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles,
the Collateral is enforceable in accordance with its terms,
is genuine, and compiles with applicable laws 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 accounts
shall be a good and valik account representing an undisputed,
bona fide indebtedness incurred by the account
debtor, for merchandise held subject to delivery instructions
or theretofore shipped or delivered pursuant to a contract of
sale, or for services theretofore performed by Grantor with or
for the account debtor; there shall be no setoffs or counterclaims
against any such account; and no agreement under which any
deductions or discounts may be claimed shall have been made with
the account debtor except those disclosed to Lender in writing.
Location of the Collateral. Grantor, upon request of Lender, 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: (a) all
real property owned or being purchased by Grantor; (b) all real
property being rented or leased by Grantor; (c) all storage
facilities owned, rented, leased, or being used by Grantor;
and (d) all other properties where Collateral is or may be
located. Except in the ordinary course of business, Grantor shall
not remove the Collateral from its existing locations without
without the prior consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or
to the extent the Collateral consists of intangible property
such as accounts, the records concerning the Collateral) at
Grantor's address shown above, or at such other locations as
are acceptable to Lender. Except in the ordinary course of
its business, including the sales of inventory, Grantor shall
not remove the Collateral from its existing loctions without
the prior written consent of Lender. 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 the prior written consent of
Lender.
Transactions Involving Collateral. Except for inventory sold
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,
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 it 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.
Maintenance and Inspection of Collateral. Grantor shall maintain
all tangible Collateral in good condition and repair. Grantor
will not commit or permit damage to or destruction of the
Collateral or any pan of the Collateral. Lender and its
designated representatives and agents shall have the right
at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately
notify Lender of all cases involving the return, rejection,
repossession, loss or damage of or to any Collateral; of any
request for credit or adjustment or of any other dispute arising
with respect to the Collateral; and generally of all happenings
and events anecting the Collateral or the value or the amount
of the Collateral.
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 Lenders 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 forecosure 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.
Compliance With Govemmental 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 for the
generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any hazardous waste
or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liabillty 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.
12-06-1995 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
99-499 ("XXXX"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 49 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 to any
of the foregoing. The terms "hazardous waste" and "hazardous
substance" shall also include, without limitation, petroleum
and petroleum by-products or any fraction thereof and asbestos.
The respresentations and warranties contained herein are based
on Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (a) 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 such laws, and (b) agrees 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
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 it
so chooses "single interest insurance," which will cover only
Lenders 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 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: (a) the name of the insurer;
(b) the risks insured; (c) the amount of the policy;
(d) the property insured; (e) the then current value on the
basis of which insurance has been obtained and the manner
of determining that value; and (f) 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 determin, 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.
EXPENDITURES BY LENDER. If not discharged or paid when due,
Lender may (but shall not be obligated to) discharge or pay
any amounts required to be discharged or paid by Grantor
under this Agreement, including without limitation all
taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral.
Lender also may (but shall not be obligated to) pay 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 shall 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 (i) the term of any applicable insurance
policy or (ii) 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. This 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 the
occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on indebtedness. Failure of Grantor to make any payment
when due on the Indebtedness.
Other Defaults. Failure of Grantor 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 in any other agreement between Lender and Grantor.
Insolvency. The dissolution or termination of Grantor's existence
as a going business, the insolvency of Grantor, the appointment
of a receiver for any put 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 the Collateral
or any other collateral securing the Indebtedness. This
includes a garnishment of any of Grantor's 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.
12-06-1995 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
Events Affecting Guarantor. Any of the preceding events occurs
with respect to any Guarantor of any of the Indebtedness or
such Guarantor dies or becomes incompetent. Lender, at its
option, may, but shall not be required to, permit the
Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
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, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Agreement, at any time thereafter, Lender shall
have at 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.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certifcates
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 the 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 its 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 ten (10) 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. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding
the appointment of a receiver: (a) Lender may have a receiver
appointed as a matter of right, (b) the receiver may be an
employee of Lender and may serve without bond, and (c) all
fees of the receiver and his or her attorney shall become
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.
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 its
discretion transfer any Collateral into its own name or that
of its 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, xxx 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 addtion, Lender shall have and may exercise any or all
other rights and remedies it may have available at law, in
equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or 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 to 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.
Appilcable Law. This Agreement has been delivered to Lender
and accepted by Lender in the State of California. If there
is a lawsuit, Grantor agrees upon Lender's request to submit
to the jurisdicton of the courts of San Mateo County, State
of California. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all
of Lender's costs and expenses, induding attorneys' fees and
Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may 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 or bankruptcy proceedings (and 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 the Agreement are for
convenience purposes only and are not to be used to interpret
or define the provisions of this Agreement.
Multiple Parties; Corporate Authority. 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 of the Borrowers signing below is responsible
for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement
shall be given in writing, may be sent by telefacsimile, and shall
be effective when actually delivered or when deposited with a
nationally recognized overnight courier or deposited in the
United States mail, first class, postage prepaid, addressed
to the party to whom the notice is to be given at the address
shown above. 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. To the extent permitted by
applicable law, if there is more than one Grantor, notice to
any Grantor will constitute notice to all Grantors.
12-06-1995 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
For notice purposes, Grantor agrees to keep Lender informed
at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its
true and lawful attorney-in-fact, irrevocably, with full
power of substitution to do the following: (a) to demand,
collect, receive, receipt for, xxx and recover all sums of
money or other property which may now or hereafter become
due, owing or payable from the Collateral; (b) to execute,
sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the
Collateral; (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead
of Grantor, to execute and deliver its release and settlement
for the claim; and (d) to file any claim or claims
or to take any action or istitute or take part in any
proceedings, either in its own name or in the name of
Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. The power is given as
security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in full
force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an
asserted preference claim in Borrower's bankruptcy will become
a part of the Indebtedness and, at Lender's option, shall be
payable by Borrower as provided above in the "EXPENDITURES
BY LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as
to any person or circumstance, such finding shall not render
that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending
provision shall be deemed to be modified to be within the limits
of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects
shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above
on transfer of the Collateral, this Agreement shall be binding
upon and inure to the benefit of the parties, their successors
and assigns.
Waiver. 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
the 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.
Waiver of Co-obligor's Rights. If more than one person is
obligated for the Indebtedness, Borrower irrevocably waives,
disclaims and relinquishs all claims against such other person
which Borrower 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.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS
TERMS. THIS AGREEMENT IS DATED DECEMBER 6, 1995.
GRANTOR:
PENN OCTANE CORPORATION
By: Xxxxxx X. Xxxxxxx
-----------------------
XXXXXX XXXXXXX, EXEC. V.P./CFO
LENDER:
Bay Area Bank
By: signature
-------------------
Authorized Officer
PROMISSORY NOTE
Principal Loan Date Maturity Loan No Call Collateral Account
--------- --------- -------- ------- ---- ---------- -------
$140,000.00 12-06-1995
Officer Initials
------- --------
103
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.
Borrower: PENN OCTANE CORPORATION Lender: Bay Are Bank
000 XXXXXXXX XXXX XXXXX 000 000 Xxxxxxxx Xxxx.
XXXXXXX XXXX, XX 00000 Xxxxxxx, Xxxx XX 00000
Principal Amount: $140,000.00 Initial Rate: 11.750%
Date of Note: December 6, 1995
PROMISE TO PAY. PENN OCTANE CORPORATION ("Borrower") promises
to pay to Bay Area Bank ("Lender"), or order, in lawful money
of the United States of America, the principal amount of One
Hundred Forty Thousand & 00/100 Dollars ($140,000.00), together
with interest on the unpaid principal balance from
December 6, 1995, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes
in the index, Borrower will pay this loan in accordance with
the following payment schedule:
Borrower will repay $40,000.00 (or balance due if less) plus
accrued interest on the 10th of each month; repay $100,000.00
(or balance due if less) plus accrued interest on the 25th
of each month. Line to be at a zero balance from the 25th of
each month to the 1st of the following month. Borrower's final
payment due December 10, 1996 will be for all principal and
accrued interest not yet paid.
Interest on this Note is computed on a 365/365 simple interest
basis; that is, by applying the ratio of the annual interest
rate over the number of days in a year multiplied by the
outstanding principal balance, multipiled by the actual number
of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other
place as Lender may designate in writng. Unless otherwise
agreed or required by applicable law, payments will be applied
first to any unpaid collection costs and any late charges, then
to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is
subject to change from time to time based on changes in an
independent index which is the Rate as listed in The Wall
Street Journal "Money Rates" section, referred to as "Prime Rate".
(the "Index"). The Index Is not necessarily the lowest rate
charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrowner
understands that Lender may make loans based on other rates as
well. the interest rate change will not occur more often than
each month and is based on the published rate in effect on the
first business day each month. If more than one Prime Rate is
published, the prime rate chosen shall be solely at Banks
option. The Index currently is 8.750% per annum. The interest
rate to be appiled to the unpaid principal balance of this Note
will be at a rate of 3.000 percentage points over the Index,
resulting in a current rate of 11.750% per annum.
NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.
Whenever increases occur in the interest rate, Lender, at its
option, may do one or more of the following: (a) increase
Borrower's payments to ensure Borrower's loan will pay off
by its original final maturity date, (b) increase Borrower's
payments to cover accruing interest, (c) increase the number
of Borrower's payments, and (d) continue Bonrower's payments
at the same amount and increase Borrower's final payment.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that
all loan fees and other prepaid finance charges are earned
fully as of the date of the loan and will not be subject
to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by
law. In any event, even upon full prepayment of this Note,
Borrower understands that Lender is entitled to a minimum
interest charge of S250.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower
may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to
by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments under the payment
schedule. Rather, they will reduce the principal balance
due and may result in Borrower making fewer payments.
LATE CHARGE. If a payment is 10 days or more late, Borrower
will be charged 5.000% of the regularly scheduled payment
or $25.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due.
(b) Borrower breaks any promise Borrower has made to Lender,
or Borrower fails to comply with or to perform when due any
other term, obligation, covenant, or condition contained in
this Note or any agreement related to this Note, or in any
other agreement or loan Borrower has with Lender. (c) Any
representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at any time made or furnished.
(d) Borrower becomes insolvent, a receiver is appointed for
any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy
or insolvency laws. (e) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any of the events
described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs
in Borrower's financial condition, or Lender believes the prospect
of payment or performance of the Indebtedness is impaired. (h) Lender
in good xxxxx xxxxx itself insecure.
If any default, other than a default in payment, is curable
and if Borrower has not been given a notice of a breach of
the same provision of this Note within the preceding twelve
(12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice
from Lender demanding cure of such default: (a) cures the
default within fifteen (15) days; or (b) if the cure requires
more than fifteen (15) days, immediately initiates 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 compilance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower
will pay that amount. Upon Borrower's failure to pay all
amounts declared due pursuant to this section, including
failure to pay upon final maturity, Lender, at its option,
may also, if permitted under applicable law, increase the
variable interest rate on this Note to 8.000 percentage points
over the Index. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will
pay Lender that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys'
gees and legal expenses for banktuptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all
other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of San Mateo County,
the State of California. This Note shall be governed by and
construed in accordance with the laws of the State of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of S12.00
if Borrower makes a payment on Borrower's loan and the check
or preauthorized charge with which Borrower pays is later dishonored.
12-06-1995 PROMISSORY NOTE Page 2
(Continued)
DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual
possessory security interest in, and hereby assigns, conveys,
delivers, pledges, and transfers to Lender all Borrower's right,
title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else
and all accounts Borrower may open in the future, excluding
however all XXX, Xxxxx, and trust accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under the Note, as well as directions for payment
from Borrower's accounts, may be requested orally or in writing
by Borrower or by an authorized person. Lender may, but need
not, require that all requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced
in accordance with the instructions of an authorized person
or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower
or any guarantor is in default under the terms of this Note or
any agreement that Borrower or any guarantor has with Lender,
including any agreement made In connection with the signing
of this Note; (b) Borrower or any guarantor ceases doing
business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower
has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good xxxxx xxxxx
itself insecure under the Note or any other agreement between
Lender and Borrower.
GENERAL PROVISIONS. The Note is payable on demand. The inclusion
of specific default provisions or rights of Lender shall not
preclude Lender's right to declare payment of the Note on
its demand. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for
payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation
maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon
or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without
the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification
is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD
ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE
INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF
THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF
THE NOTE.
BORROWER:
PENN OCTANE CORPORATION
By: Xxxxxx X. Xxxxxxx
---------------------------
XXXXXX X. XXXXXXX, EXEC. V.P./CFO
