<PAGE> 1
EXHIBIT 10.20
SENIOR LOAN AND SECURITY AGREEMENT
THIS SENIOR LOAN AND SECURITY AGREEMENT (this "Security Agreement") is dated as
of August 31, 2000 between RESOURCE/PHOENIX, INC., a California corporation
("Borrower") and LEASE MANAGEMENT ASSOCIATES, INC., a Nevada corporation
("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings the
Commitment amount as defined in Section 3(a)(ii) below, and Lender desires to
loan, subject to the terms and conditions herein set forth, such amount to
Borrower (each, a "Loan" and collectively, the "Loans"). Such borrowings shall
be evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
the items described on Exhibit A ( the "Collateral").
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The terms of each Note hereto are subject to all conditions and
provisions of this Security Agreement as it may at any time be amended. Each
Note shall constitute a separate and independent Loan and contractual obligation
of Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees that
its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such monthly payment amounts and other sums, are absolute and unconditional
and are not subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment due or alleged to be due to, or by reason of, any past, present or
future claims which Borrower may have against Lender, any assignee, the
manufacturer or seller of the Collateral, or against any person for any reason
whatsoever.
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
conditions of this Security Agreement, Lender hereby agrees to make one or more
senior secured Loans to Borrower, subject to the following conditions: (i) each
Loan shall be evidenced by a Note; (ii) the total principal amount of the Loans
shall not exceed $7,000,000 in the aggregate (the "Commitment"); (iii) at the
time of each Loan, no Event of Default or event which with the giving of notice
or passage of time, or both, could become an Event of Default shall have
occurred, as reasonably determined by Lender, (iv) at the time of each Loan,
Borrower has reimbursed Lender for all UCC filing costs, inspection and labeling
costs, and appraisal fees, if any; (v) at the time of each Loan, Lender is
satisfied that Borrower's parent, ReSourcePhoenix.com ("RPC"), is performing
according to its business plan attached hereto as Exhibit D, which may be
amended from time to time with Lender's consent; (vi) for each Loan, Borrower
shall
1
<PAGE> 2
have provided Lender with each of the closing documents described in Exhibit B
hereto (which documents shall be in form and substance reasonably acceptable to
Lender); (vii) there shall be no material adverse change in Borrower's or RPC's
financial condition, that would materially impair the ability of Borrower to
meet its payment and other obligations under this Loan (a "Material Adverse
Effect") as reasonably determined by Lender, (viii) Borrower shall use the
proceeds of all Loans hereunder for working capital purposes; (ix) Lender shall
not be required to make further Loans to Borrower after February 28, 2002; (x)
Borrower may borrow the first $3,000,000 of the Commitment at any time in
increments of at least $250,000 and no more frequently that bi-weekly. The
balance of the Commitment may be drawn in increments of at least $250,000 with
an aggregate monthly maximum of $1,000,000; and (xi) Lender has received in form
and substance acceptable to Lender: (a) RPC's interim financial statements
signed by a financial officer, (b) RPC's business plan and/or projections as may
be amended from time to time; and (c) complete copies of RPC's audit reports for
the most recent fiscal year, which shall include at least RPC's balance sheet as
of the close of such year, and RPC's statement of income and retained earnings
and of changes in financial position for such year, prepared on a consolidated
basis and certified by independent public accountants. Such reports shall be
prepared in accordance with generally accepted accounting principles and
practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
(i) bear interest at 12% per annum; and (ii) be payable on an interest-only
basis in arrears in monthly installments, with the entire principal due and
payable on August 30, 2005. Following payment of the Indebtedness related to
each Note, Lender shall return such Note, marked "cancelled," to Borrower.
Borrower may prepay all outstanding Notes in whole or in part; provided that
Borrower provides Lender with at least five (5) days' advance written notice of
its intention to prepay.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i) the
payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender (the "Obligations"). Lender agrees to subordinate its
security interest in any Collateral to the security interest of Pacific Business
Funding and/or Venture Bank, on terms and condition acceptable to Lender.
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it has full
authority to execute and deliver this Security Agreement and the Notes and
perform the terms hereof and thereof, and this Security Agreement and the Notes
have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) there is
no action or proceeding pending or threatened against Borrower before any court
or administrative agency which might have a Material Adverse Effect on the
business, financial condition or operations of Borrower; (f) at the time any
Loan is made hereunder, Borrower owns and will keep all of the Collateral free
and clear of all liens,
2
<PAGE> 3
claims and encumbrances, and, except for this Security Agreement, there is no
deed of trust, mortgage, security agreement or other third party interest
against any of the Collateral other than Permitted Liens (as defined below); (g)
at the time any Loan is made hereunder, Borrower has good and marketable title
to the Collateral; (h) at the time any Loan is made hereunder, all Collateral
has been received, installed and is ready for use and is satisfactory in all
respects for the purposes of this Security Agreement; (i) the Collateral is, and
will remain at all times under applicable law, removable personal property,
which is free and clear of any lien or encumbrance except in favor of Lender
other than Permitted Liens (as defined below), notwithstanding the manner in
which the Collateral may be attached to any real property; (j) all credit and
financial information submitted to Lender herewith or at any other time is and
will at the time given be true and correct in all material respects; and (k)
subject to Section 4, the security interest granted to Lender hereunder is a
first priority security interest. "Permitted Liens" shall mean and include: (i)
liens for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith; and (ii)
liens of carriers, warehousemen, mechanics, materialmen, vendors, landlords and
other liens arising by operation of law incurred in the ordinary course of
business.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION. All of the Collateral shall be located at the
address (the "Collateral Location") shown on Exhibit A hereto and shall not be
moved without Lender's prior written consent which location shall in all events
be within the United States. All of the records regarding the Collateral shall
be located at Borrower's primary operating office, or such other location of
which Borrower has given notice to Lender in accordance with this Security
Agreement. Lender shall have the right to inspect Collateral, including records
relating thereto, and Borrower's books and records at any time (upon reasonable
notification) during regular business hours, such books and records to be
maintained in accordance with generally accepted accounting principles. Borrower
shall be responsible for all labor, material and freight charges incurred in
connection with any removal or relocation of Collateral which is requested by
Borrower and consented to by Lender, as well as for any charges due to the
installation or moving of the Collateral. Payments under the Notes and under
this Security Agreement shall continue during any period in which the Collateral
is in transit during a relocation.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Upon reasonable notice, Borrower
will permit Lender to inspect each item of Collateral and its maintenance
records during Borrower's regular business hours. Borrower will at its sole
expense comply with all applicable laws, rules, regulations, requirements and
orders with respect to the use, maintenance, repair, condition, storage and
operation of each item of Collateral. Any addition or improvement that is so
required or cannot be so removed will immediately become Collateral of Lender.
(b) Service and Repair. Borrower will at its sole expense maintain and service
and repair any damage to each item of Collateral in a manner consistent with
prudent industry practice and Borrower's own practice so that such item of
Collateral is at all times (i) in the same condition as when delivered to
Borrower, except for ordinary wear and tear, and (ii) in good operating order
for the function intended by its manufacturer's warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." Notwithstanding any Casualty Occurrence, the Loan to
which such casualtied item of
3
<PAGE> 4
Collateral is subject shall continue in full force and effect without any
abatement in the monthly payment due. Borrower shall, at its election, (a) no
later than thirty (30) days after such Casualty Occurrence repair the Collateral
returning it to good operating condition, and (b) no later than thirty (30) days
after such Casualty Occurrence replace the Collateral with Collateral acceptable
to Lender in its reasonable discretion, in good condition and repair taking all
steps required by Lender to perfect Lender's first priority security interest
therein, which replacement Collateral shall be subject to the terms of this
Security Agreement.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured
against all risks of physical loss for at least the replacement value of the
Collateral and in no event for less than the amount payable following a Casualty
Occurrence (as provided in Section 9). Such insurance shall provide for a loss
payable endorsement to Lender and/or any assignee of Lender. Borrower shall
maintain commercial general liability insurance, including products liability
and completed operations coverage, with respect to loss or damage for personal
injury, death or property damage in an amount not less than $2,000,000 in the
aggregate, naming Lender and/or Lender's assignee as additional insured. Such
insurance shall contain insurer's agreement to give thirty (30) days' advance
written notice to Lender before cancellation or material change of any policy of
insurance. Borrower will provide Lender and any assignee of Lender with a
certificate of insurance from the insurer evidencing Lender's or such assignee's
interest in the policy of insurance. Such insurance shall cover any Casualty
Occurrence to any unit of Collateral. Notwithstanding anything in Section 9 or
this Section 10 to the contrary, this Security Agreement and Borrower's
obligations hereunder shall remain in full force and effect with respect to any
unit of Collateral which is not subject to a Casualty Occurrence. If Borrower
fails to provide or maintain insurance as required herein, Lender shall have the
right, but shall not be obligated, to obtain such insurance. In that event,
Borrower shall pay to Lender the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual audited
financial statements within ninety (90) days following the end of Borrower's
fiscal year and unaudited quarterly financial statements within forty-five (45)
days after the end of each fiscal quarter, and such other information as Lender
may reasonably request; and (e) promptly (but in no event more than five (5)
days after the occurrence of such event) notify Lender of any change in
Borrower's condition during the commitment period which constitutes a Material
Adverse Effect, and of the occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort
4
<PAGE> 5
and excluding only those based on Lender's gross negligence or willful
misconduct. In the event that any action, suit or proceeding is brought against
Lender by reason of any such occurrence, Borrower, upon Lender's request, will,
at Borrower's expense, resist and defend such action, suit or proceeding or
cause the same to be resisted and defended by counsel designated and approved by
Lender. Borrower's obligations under this Section 12 shall survive the payment
in full of all the Indebtedness and the performance of all Obligations with
respect to acts or events occurring or alleged to have occurred prior to the
payment in full of all the Indebtedness and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to Lender's income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement, the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY.
LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY
INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN
PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If
Borrower is given notice of such assignment it agrees to acknowledge receipt
thereof in writing and Borrower shall execute such additional documentation as
Lender's assignee and/or secured party shall reasonably require at Lender's
expense. Each such assignee and/or secured party shall have all of the rights,
but (except as provided in this Section 15) none of the obligations, of Lender
under this Security Agreement, unless such assignee or secured party expressly
agrees to assume such obligations in writing. Borrower shall not assert against
any assignee and/or secured party any defense, counterclaim or offset that
Borrower may have against Lender. Notwithstanding any such assignment, and
providing no Event of Default has occurred and is continuing, Lender, or its
assignees, secured parties, or their agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the terms and
conditions of this Security Agreement. Subject to the foregoing, the Notes and
this Security Agreement shall inure to
5
<PAGE> 6
the benefit of, and are binding upon, the successors and assignees of the
parties hereto. Borrower acknowledges that any such assignment by Lender will
not change Borrower's duties or obligations under this Security Agreement and
the Notes or increase any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes shall prove to
have been incorrect in any material respect when made or given; (iv) Borrower's
failure to comply with or perform any material term, covenant or condition of
this Security Agreement or any Note or under any other agreement between
Borrower and Lender or under any lease or mortgage of real property covering the
location of the Collateral if such failure to comply or perform is not cured by
Borrower within thirty (30) days after Borrower knows of the noncompliance or
nonperformance or notice from Lender or such longer period that Borrower is
diligently attempting to effect such cure; (v) seizure of any of the Collateral
under legal process; (vi) the filing by or against Borrower or any guarantor
under any guaranty executed in connection with this Security Agreement
("Guarantor") of a petition for reorganization or liquidation under the
Bankruptcy Code or any amendment thereto or under any other insolvency law
providing for the relief of debtors; (vii) the voluntary or involuntary making
of an assignment of a substantial portion of its assets by Borrower or by any
Guarantor for the benefit of its creditors, the appointment of a receiver or
trustee for Borrower or any Guarantor or for any of Borrower's or Guarantor's
assets, the institution by or against Borrower or any Guarantor of any formal or
informal proceeding for dissolution, liquidation, settlement of claims against
or winding up of the affairs of Borrower or any Guarantor provided that in the
case of all such involuntary proceedings, same are not dismissed within sixty
(60) days after commencement; (viii) the making by Borrower or by any Guarantor
of a transfer of all or a material portion of Borrower's or Guarantor's assets
or inventory not in the ordinary course of business; or (ix) any default or
breach by any Guarantor of any of the terms of its guaranty to Lender in
connection with this Security Agreement.
(b) Remedies. If any Event of Default has occurred, Lender may in its
sole discretion exercise one or more of the following remedies with respect to
any or all of the Collateral: (i) declare due the principal amount the Notes;
(ii) proceed by appropriate court action or actions either at law or in equity
to enforce Borrower's performance of the applicable covenants of the Notes and
this Security Agreement or to recover all damages and expenses incurred by
Lender by reason of an Event of Default; (iii) except as provided by law,
without court order or prior demand, enter upon the premises where the
Collateral is located and take immediate possession of and remove it without
liability of Lender to Borrower or any other person or entity; (iv) terminate
this Security Agreement and sell the Collateral at public or private sale, or
otherwise dispose of, hold, use or lease any or all of the Collateral in a
commercially reasonable manner; or (v) exercise any other right or remedy
available to it under applicable law. The net proceeds of any sale or lease of
such Collateral will be credited against any amounts due Lender hereunder. The
net proceeds of a sale of the Collateral pursuant to this Section 16(b) is
defined as the sales price of the Collateral less selling expenses, including,
without limitation, costs of remarketing the Collateral and all refurbishing
costs and commissions paid with respect to such remarketing. The net proceeds of
a lease of the Collateral pursuant to this Section 16(b) is defined as the
amount equal to the monthly payments due under such lease (discounted to present
value at 12% per annum) plus the residual value of the Collateral at the end of
the basic term of such lease, as reasonably determined by Lender, and discounted
at 12% per annum.
6
<PAGE> 7
At Lender's request, Borrower shall assemble the Collateral and make it
available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Collateral shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part
of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First, to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
Second, to the payment of all other amounts not described in item
Third below due under this Security Agreement and all Notes;
Third, to the payment of any surplus to Borrower or to whomever
may lawfully be entitled to receive it.
(d) Effect of Delay; Waiver; Foreclosure on Collateral. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies exercised hereunder or thereunder.
Lender shall not be required first to foreclose on the Collateral prior to
bringing an action against Borrower for sums owed to Lender under this Security
Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 5% of any
payment owed Lender by Borrower which is not paid when due (taking into account
applicable grace periods), for every month such payment is not paid when due. If
such amounts have not been received by Lender at Lender's place of business or
by Lender's designated agent by the date such amounts are due under this
Security Agreement or the Notes, Lender shall bill Borrower for such charges.
Borrower acknowledges that invoices for amounts due hereunder or under the Notes
are sent by Lender for Borrower's convenience only. Borrower's non-receipt of an
invoice will not relieve Borrower of its obligation to make payments hereunder
or under the Notes.
7
<PAGE> 8
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 20. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs and
expenses including reasonable attorney's fees, litigation expenses and the fees
of collection agencies, incurred by Lender (a) in enforcing any of the terms,
conditions or provisions hereof and related to the exercise of its remedies
("Remedy Expenses"), and (b) in connection with any bankruptcy or post-judgment
proceeding, whether or not suit is filed and, in each and every action, suit or
proceeding, including any and all appeals and petitions therefrom.
SECTION 21. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
SECTION 22. STOCK WARRANT. Borrower agrees that it will cause RPC to issue to
Lender upon execution of this Security Agreement a Warrant in the form of the
Warrant Agreement attached hereto as Exhibit C.
SECTION 23. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at 2401 Kerner Boulevard,
San Rafael, California 94901, Attention: Gus Constantin, President and to
Borrower at 2401 Kerner Boulevard, San Rafael, California 94901, Attention:
Gregory Thornton, Chief Financial Officer, or at such other address as the
parties may notify one another of in writing from time to time.
SECTION 24. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) Borrower represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with respect to
this Security Agreement. (d) Borrower acknowledges that Borrower has read this
Security Agreement and the Notes, understands them and agrees to be bound by
their terms and further agrees that this Security Agreement and the Notes
constitute the entire agreement between Lender and Borrower with respect to the
subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement and the Notes may not be changed,
altered or modified except by an instrument signed by an officer or authorized
representative of Lender and Borrower. (f) Any failure of Lender to require
strict performance by Borrower or any waiver
8
<PAGE> 9
by Lender of any provision herein or in a Note shall not be construed as a
consent or waiver of any other breach of the same or any other provision. (g) If
any provision of this Security Agreement or any Note is held invalid, such
invalidity shall not affect any other provisions hereof or thereof. (h) The
obligations of Borrower to pay the Indebtedness and perform the Obligations
shall survive the expiration or earlier termination of this Security Agreement
and each Note until all Obligations of Borrower to Lender have been met and all
liabilities of Borrower to Lender and any assignee have been paid in full. (i)
Borrower will notify Lender at least 30 days before changing its name, principal
place of business or chief executive office. (j) Borrower will, at its expense,
promptly execute and deliver to Lender such documents and assurances (including
financing statements) and take such further action as Lender may reasonably
request in order to carry out the intent of this Security Agreement and Lender's
rights and remedies.
SECTION 25. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
each Note shall be deemed to have been made under and shall be governed by the
laws of the State of California in all respects, including matters of
construction, validity and performance. At Lender's sole discretion, option and
election, jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement or any Note shall be in
the Superior Court of Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California located in San Francisco, California. BORROWER,
TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN
ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
LEASE MANAGEMENT ASSOCIATES, INC. RESOURCE/PHOENIX, INC.
By: /s/ Andrew Gregson By: /s/ Greg Thornton
--------------------------------- ------------------------------
Name: Andrew Gregson Name (Print): Greg Thornton
------------------------------- --------------------
Title: Vice President & Treasurer Title: Chief Financial Officer
------------------------------ ---------------------------
HEADQUARTERS LOCATION:
2401 Kerner Blvd.
San Rafael, CA 94901
County of Marin
EXHIBITS AND SCHEDULES
Exhibit A -- Collateral Description
Exhibit B -- Closing Memorandum
Exhibit C -- Stock Warrant
Exhibit D -- Business Plan
9
<PAGE> 10
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT
DATED August 31, 2000
All inventory, accounts, contract rights, chattel paper, cash and cash
equivalents, equipment, fixtures, and intangibles, and all proceeds and products
thereof, now owned or hereafter acquired by Borrower, except the same as may be
pledged to Pacific Business Funding pursuant to the Factoring Agreement dated as
of June 7, 2000, including but not limited to the following:
1. "Inventory" means all inventory of Borrower in which Borrower has or
later acquires a right wherever located and whether or not covered by warehouse
receipts and whether or not in Borrower's possession, including contract rights
with respect thereto and documents representing the same and all goods held for
sale or lease or to be furnished under contracts or services, raw materials,
work in progress or materials used or usable in connection with the manufacture,
packing, shipping, advertising or sale of such merchandise.
2. "Accounts," "Contract Rights," and "Chattel Paper" mean all invoices,
deposits, instruments, contracts, insurance policies, indemnities, guarantees,
claims, documents, leases, chattel paper, agreements and accounts, and all other
forms of obligations whether now existing or acquired in the future, evidencing
or representing indebtedness due or to become due to Borrower on account of
goods or other properties or assets sold or to be sold by Borrower, or services
rendered or to be rendered by Borrower or otherwise.
3. "Cash and Cash Equivalents" mean any net positive cash balance in
Borrower's depository accounts and any undeposited checks received from
customers and others and petty cash.
4. "Equipment and Fixtures" mean fixed assets of Borrower, including but
not limited to the equipment and Software described on Exhibit A hereto, and all
equipment, machinery, improvements, office furniture, office equipment, and
fixtures and any products thereof, improvements, additions or accessories
thereto, or replacements therefor.
5. "Intangibles" means general intangibles and includes, without
limitation, choses or things in action, computer software, computer programs,
computer disks, computer tapes, drawings, blueprints, goodwill, patents, trade
names, trademarks, copyrights, trade secrets and registrations of any thereof of
Borrower and approvals, memberships, licenses, distributorships, franchises,
permits and fictitious name rights.
10
