<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995, or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ______________.
Commission file number 0-3839
BOOK CENTERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Oregon 93-0508266
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
5600 N.E. Hassalo Street, Portland, Oregon 97213
- ------------------------------------------ ---------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (503) 287-6657
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
------------
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Parts III of this Form 10-K or any amendment to
this Form 10-K. _____
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
----- -----
The Registrant's voting stock is not actively traded and the aggregate market
value is therefore not available.
The number of shares of Registrant's common stock outstanding on June 30, 1995,
was 636,889.
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<PAGE> 2
PART I
------
ITEM 1: BUSINESS
- -----------------
(a) General Development of Business.
-------------------------------
Book Centers, Inc. (formerly known as Industrial Investment Corporation) (the
"Company" or the "Registrant") is an Oregon corporation organized in 1961. Its
principal continuing business is the distribution of books on a wholesale basis
worldwide to college, university, industrial, and other research libraries
either for their own use or for resale. It conducts this business through a
wholly-owned subsidiary corporation, Academic Book Center, Inc., an Oregon
corporation("Academic").
Academic is located in Portland, Oregon, at the same mailing address as the
Company. Academic also operates a separate division under a different name.
Academic, under the assumed business name Professional Book Center, Inc.
("Professional"), sells medical, technical, scientific, and business books.
Academic previously provided marketing, promotional, warehousing order
fulfillment, accounting, and consulting services to publishers of books and
periodicals under the assumed business name International Specialized Book
Services, Inc. ("International"). Academic sold its assets comprising this
division on September 11, 1992, to Chvatel Corporation, and on and after that
date, it no longer provides those services.
The Company also formerly conducted a part of its business through another
wholly-owned subsidiary, Scholarly Book Center, Inc., an Oregon corporation
("Scholarly"). Scholarly, located in New York, New York, distributed books
throughout the Eastern United States, Canada, and Europe. In June, 1991, the
Company's Board of Directors decided to close Scholarly's operations and to
transfer them to Academic, including fulfilling all of the orders of
Scholarly's former customers out of Academic's offices in Portland, Oregon.
The Company completed the transfer of Scholarly's operations to Academic on
October 31, 1991.
The Company, after it was incorporated, engaged principally in the businesses
of agriculture and ownership of real property. It now engages solely in the
business of marketing, warehousing, and distributing books.
(b) Financial Information about Industry Segments.
---------------------------------------------
The Company, through its subsidiaries, markets, warehouses, and distributes
books on a wholesale basis to college, university, industrial, and other
research libraries and to libraries and others (e.g., bookstores) for resale.
Book wholesaling is the only industry segment material to its operations. See
Note 7 to the consolidated financial statements, Item 8 of this Report.
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(c) Narrative Description of Business.
---------------------------------
(i) Principal Products and Services.
-------------------------------
The Company's principal business is to market, warehouse, and distribute books
on a wholesale basis to college, university, industrial, and other research
libraries either for their own use or for resale. It also sells medical,
technical, scientific, and business books. The Company hires sales
representatives to solicit such sales. Such employees solicit these sales from
libraries, government agencies, and the purchasing departments of other
prospective purchasers either in person or by telephone. The Company sells its
products to its customers on credit. Its customers are required to pay for the
products sold within 60 days of the date of the invoice. The Company also
attends all significant trade shows, including trade shows sponsored by the
American Library Association and the American Book Sellers Association.
(ii) New Products.
------------
The Company has nothing to report under this caption.
(iii) Raw Materials.
-------------
Not applicable.
(iv) Patents, Trademarks, Licenses, Franchises, and Concessions.
----------------------------------------------------------
Not applicable.
(v) Seasonality of Business.
-----------------------
The Company's business is not seasonal except that its sales decrease during
the summer months.
(vi) Working Capital Practices.
-------------------------
The Company purchases its inventory on the basis of its customers' projected
requirements. If it does not sell the inventory purchased within a reasonable
time, it returns it to the publisher for credit. It purchases its inventory
from over 50,000 sources. The terms of the Company's purchase of its inventory
varies from publisher to publisher. The Company considers its working capital
practices similar to other wholesale distributors of books.
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<PAGE> 4
(vii) Major Customers.
---------------
The Company and its subsidiaries provide services to more than 2,000 academic
and research libraries worldwide. No one customer accounts for more than 10
percent of consolidated revenues. Sales to customers outside the United States
constitute approximately 41 percent of the total volume for the 12 months ended
June 30, 1995 (see Note 7 to the consolidated financial statements, Item 8 of
this Report).
(viii) Backlog.
-------
The Company does not have any backlog. Customers generally place orders on an
"as needed basis" and expect delivery within a short period of time.
(ix) Renegotiation or Termination of Contracts or Subcontracts at Government's
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Election.
- --------
Not applicable.
(x) Competitive Conditions.
----------------------
The Company is in a highly competitive business. Competition is principally
through customer contacts, price, and service. Adequate service generally
requires delivery of a book 30 to 60 days after receipt of an order.
Publishers also compete against the Company by selling books directly to
consumers. There are approximately 25 significant competitors in this market,
some of whom have resources substantially greater than those of the Company.
(xi) Research and Development.
------------------------
The Company has not spent any material amounts during the last three fiscal
years for company-sponsored research and development or for customer-sponsored
research activities with respect to the development of new products.
(xii) Environment.
-----------
The Company has nothing to report under this caption.
(xiii) Number of Persons Employed.
--------------------------
As of June 30, 1995, the Company (including its subsidiaries) employed
approximately 96 persons. Labor unions do not represent any of the Company's
employees. The Company considers its relationships with its employees
satisfactory.
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(d) Financial Information About Foreign and Domestic Operations and Export
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Sales.
- -----
See Note 7 to the consolidated financial statements, Item 8 of this Report for
information with respect to foreign and domestic operations and export sales.
ITEM 2: PROPERTIES
- -------------------
The Company and its subsidiaries lease offices and warehouses in Portland,
Oregon, and offices in New York, New York. See Note 3 to the consolidated
financial statements, Item 8 of this Report, for obligations under these
leases. The Company considers its facilities suitable and adequate for its
business purposes. The offices and warehouses provide sufficient additional
space for growth.
ITEM 3: LEGAL PROCEEDINGS
- --------------------------
There are no pending legal proceedings to which the Company or any of its
subsidiaries is a party or to which any of their property is subject.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
The Company did not submit any matters to a vote of its shareholders during the
quarter ended June 30, 1995.
PART II
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ITEM 5: MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
----------------------------------------------------------------
MATTERS
- -------
The Company's common stock is not traded on any exchange. An established
public trading market for the stock has not existed for the past ten years.
Carr Securities in New York, New York, serves as the "market maker" for the
Company. It has served in such position since 1985. Carr Securities effected
only two purchases and sales of common stock for the fiscal year ended June 30,
1995 for the purchase and sale of 500 shares in the aggregate at 25 cents per
share. Prospective purchasers and sellers have engaged Carr Securities only
sporadically since 1985 with the stock price ranging from a low bid of 1/8 to a
high bid of 1/2. Information on stock prices on a quarterly basis and for
years prior to 1985 is not available due to the absence of an established
market.
The Company also established an employee stock ownership plan (ESOP) in 1985 to
facilitate the purchase and sale of stock in an inactive market. The ESOP may
purchase stock in the open market or directly from the Company. Purchases from
the Company increase the number of shares outstanding and the Company's equity,
but, depending on the sales price, dilute the interests of existing
shareholders. The ESOP is designated as a retirement program for all qualified
Company employees. At June 30, 1995, the ESOP owned 65,167 shares of the
Company's common stock.
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At June 30, 1995, there were 816 shareholders. The Company has not declared
any dividends since its incorporation. Under Oregon law, the Company may not
pay any dividends if, after the payment of such dividend, the Company would not
be able to pay its debts in the usual course of business or the Company's total
assets would be less than the sum of its total liabilities. At June 30, 1995,
the Company had an accumulated deficit of $1,938,819 and, accordingly, could
not pay dividends. The payment of dividends in the future, if the existing
deficit is eliminated, is subject to the discretion of the Board of Directors.
The Company does not plan to pay dividends in the foreseeable future.
ITEM 6: SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Sales $22,994,555 $21,496,122 $21,906,756
Costs of goods sold $19,380,974 $17,930,209 $18,475,858
Operating and administrative $ 3,417,258 $ 3,443,153 $ 3,501,887
expenses
Reversal of restructuring charge $ -- $ (200,366) $ --
accrual
Interest expense $ 179,577 $ 168,998 $ 173,378
Income (loss) before income taxes $ 47,168 $ 220,900 $ (91,036)
and extraordinary item
Income taxes $ -- $ -- $ --
Net income (loss) $ 47,168 $ 220,900 $ (91,036)
</TABLE>
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<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Income (loss) per share: <F1>
<F2> <F3> <F4>
Net income (loss) per share $ .07 $ .35 $ (.14)
Weighted average number of shares 636,889 636,889 636,889
outstanding
Total assets $ 4,949,235 $ 4,853,868 $ 4,775,929
Long-term debt, less current $ 43,201 $ 60,698 $ 0
portion
Cash dividends <F5> $ 0 $ 0 $ 0
Notes:
- -----
<FN>
<F1>
1. Net income (loss) per common share was computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during each period.
<F2>
2. The net loss in 1993 is due principally to a reduction in products sold
which, in turn, was caused by loss of several of Scholarly's customers and
the reduction in sales of a large corporate customer.
<F3>
3. The net income in 1994 is primarily a result of a reduction the Company's
operating expenses, including a reversal of a part of certain restructuring
charges incurred in 1991 in connection with the closing of Scholarly.
<F4>
4. The net income in 1995 is a result of an increase in the Company's revenues
in the amount of $1,462,083 and a decrease in its operating and
administrative expenses in the amount of $25,895.
<F5>
5. The Company has not declared any dividends since its incorporation.
</FN>
</TABLE>
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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(a) Results of Operations.
---------------------
1995 Compared to 1994
- ---------------------
The Company's sales increased in the fiscal year ended June 30, 1995, in the
amount of $1,498,433, from $21,496,122 to $22,994,555, a 6.5 percent increase.
Sales increased because of an eight percent increase in units sold. Margins
continued to decrease as a percentage of sales because of lower discounts from
publishers and increased competition requiring higher discounts to customers.
Management cannot determine if these trends will continue.
Operating and administrative costs declined by $25,895 from $3,443,153 for the
fiscal year ended June 30, 1994, to $3,417,258 for the fiscal year ended June
30, 1995. Efficiencies of the Company's new Firm Order computer system and
continuous analysis of how various functions are performed caused this
decrease. The Company will continue its efforts to improve the productivity of
its employees through education and training.
Negative pressures on the Company include increased competition from large
competitors, information being produced in electronic formats, increased use of
library materials budgets to purchase journals, and budgetary constraints of
state-supported educational institutions.
1994 Compared to 1993
- ---------------------
The Company experienced a decline in sales in 1994 in the amount of $497,193
due to a reduction in products sold. There were two primary reasons for this
reduction. One was the lower sales to several commercial customers. The other
was in 1993 the Company sold about $125,000 worth of an expensive reference
work to libraries. There were no comparable sales in 1994. The cost of goods
sold declined for the first time, because of efforts to work with major
suppliers to get better terms. It is impossible to tell if this trend will
continue.
Operating and administrative costs declined by $58,734, although as a
percentage of sales they increased by 1/10 of 1 percent. The Company will
continue efforts to improve the productivity of employees and to negotiate
better terms with suppliers of goods and services in an effort to reduce
operating and administrative costs. The Company introduced new software for
its Firm Order operations in June, 1994. It is impossible to predict the
effect on increased sales or lower costs.
As noted in previous years, there are several negative factors affecting the
Company. Libraries continue to spend larger portions of the budgets on non-
book materials such as journals, audio-visual material, and data base access.
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<PAGE> 9
1993 Compared to 1992
- ---------------------
The Company experienced a decline in sales in 1993 in the amount of $1,865,602
due to a reduction in products sold. This was primarily caused by the loss of
several former Scholarly customers and the reduction in sales to a large
corporate customer. The cost of goods sold continued to increase for several
reasons. Publishers continue to lower discounts to the Company in order to
prevent the list price of their material from increasing. Publishers also
switch the mix of trade, technical, and text discounts such that their overall
discounts decline even though their price structure remains the same. The
Company is also actively soliciting orders from its customers for audio-visual
material that carries little, if any, discount. It is impossible to predict
what the future cost of goods will be.
Operating and administrative expenses declined by $221,058 in the fiscal year
ended June 30, 1993. They continue to decline for two reasons: decreasing
volume and attention to all expenditures.
Two negative factors facing the Company are the continued upward spiral in the
cost of serials (the library term for magazines) and the pressure on
governmental agencies and departments at all levels to decrease costs. Serials
are bought from the same materials budget that a library uses to buy books. As
serials absorb a larger portion of the budget, the number of books purchased by
many institutions declines. This trend will not be reversed until the national
economy improves.
The Company continues to work against these trends by reducing staff,
introducing labor-saving technologies, and working with the suppliers of its
goods and services to improve prices and the quality of service provided. The
Company will introduce a newly programmed Firm Order system in late 1993. It
is hoped that this will improve and enhance the quality of the services the
Company provides to its customers. It is impossible, at this point, to predict
the effect on increased sales or lower costs.
(b) Inflation, Market Trends, and Business Factors Beyond Company Control.
---------------------------------------------------------------------
Inflation is not considered to be a factor in the Company's business at this
time.
Negative pressures on the Company, as previously stated, include increased
competition from large competitors, information being produced in electronic
formats, increased use of library materials budgets to purchase journals, and
budgetary constraints of state-supported educational institutions.
(c) Liquidity and Capital Resources.
-------------------------------
It is anticipated that cash flows from financing and operating activities will
be sufficient to meet the Company's liquidity need over the next twelve months
and thereafter. The Company entered into a new line of credit in June 1995
with a bank. The new line of credit, which expires September 1996, permits the
Company to borrow up to $1,400,000 (subject to certain limitations) and bears
interest at a rate of two and one-half percent to four percent above the bank's
reference rate (the "Index"). The Index equaled nine percent at June 30, 1995.
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<PAGE> 10
The new line of credit is secured by all of the Company's assets and is
guaranteed by the present officers of the Company who are also stockholders.
The Company, at the time it entered into the new line of credit with the bank,
terminated its existing line of credit with another lending institution. This
line of credit, which the Company entered into in June 1993, permitted the
Company to borrow up to $1,250,000 and bore interest at the rate of six percent
above the prime rate (15 percent, 13.25 percent, and 12 percent at June 30,
1995, 1994, and 1993, respectively). It was secured by the Company's accounts
receivable, inventory, and equipment and was guaranteed by the present officers
of the Company who are also stockholders. The weighted average interest rate
under this line of credit in 1995 and 1994 was 14.33 and 12.27 percent,
respectively.
The Company does not have any other unused sources of liquid assets. The
Company will continue to improve its working capital situation through
profitable operations.
The Company did not make any material capital expenditures during the fiscal
year ended June 30, 1995.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The financial statements and schedules listed on the Index to Consolidated
Financial Statements and Schedules on page 23 are incorporated herein by
reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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FINANCIAL DISCLOSURE
- --------------------
The Company has nothing to report under this item.
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<PAGE> 11
PART III
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS
- ------------------------------------------
(a) Directors.
---------
<TABLE>
The following table shows, as to each director and executive officer of the
Company, the identified information as of September 22, 1995:
<CAPTION>
Director Term as
and/or Director
Name and Executive and/or
Position Principal Occupation During Officer Executive
with Company Age Past Five Years Since Officer Ends
- --------------- --- -------------------------------- --------- ------------
<S> <C> <C> <C> <C>
Daniel P. 48 President, Chairman of the Board 1985 1995
Halloran of Directors, Chief Financial
Officer, Secretary/Treasurer,
President, and Director of Book Centers,
Chief Financial Inc., and Scholarly Book Center,
Officer, Inc.; previously Executive Vice
Controller, President and Director of
Secretary, Industrial Investment
Treasurer, Corporation and Vice President,
Chairman of the Treasurer, and General Manager
Board of of Scholarly Book Center, Inc.,
Directors, and and Academic Book Center, Inc.
Director
Barry E. Fast 52 Vice President and Director of 1986 1995
Book Centers, Inc., Academic
Vice President Book Center, Inc., and
and Director Scholarly Book Center, Inc.;
President of Taylor Carlisle's
Bookstore, Inc. (book seller);
previously Vice President of
East Woods Press (publisher)
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Frank L. Ford 45 Registered Representative for 1988 1995
Minnesota Mutual and owner of
Director Certified Bookkeeping Services;
Director of S. I. Ford Designs,
Inc.; previously owner of Frank
Ford & Associates (management
consultants)
</TABLE>
Directors are elected to hold office until their successors are elected and
qualified, subject to prior death, resignation, or removal.
(b) Executive Officers.
------------------
Certain of the directors also serve as the executive officers of the Company.
Under the Corporation's Bylaws, executive officers are elected by the Board of
Directors and serve until their successors are elected and qualified, subject
to prior death, resignation, or removal. Those officers are:
Name Position
- ---- --------
Daniel P. Halloran President, Chief Financial Officer, Controller,
Secretary/Treasurer, and Chairman of the Board of
Directors
Barry E. Fast Vice President
(c) Significant Employees.
---------------------
John F. Knapp serves as the manager of systems development for the Company. He
has served in that capacity since January 1, 1987. His responsibilities
include computer systems development for the Company.
Catherine J. Labsch serves as a controller for the Company. She has served in
that position since September, 1989. Prior to working for the Company, she
worked as the assistant controller for Pihas Schmidt Westerdahl, an advertising
agency in Portland, Oregon.
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<PAGE> 13
Robert Schatz is the sales manager for the Company. He has served in that
position since May, 1979. He manages all of the sales for the Company,
including serving as a sales representative himself.
(d) Compliance With Section 16(a) of the Securities Exchange Act of 1934.
--------------------------------------------------------------------
For a company with a class of equity securities registered under Section 12 of
the Securities Exchange Act of 1934 (the "1934 Act"), Section 16(a) of the 1934
Act requires the officers, directors, and persons who hold more than 10 percent
of a registered class of such company's equity securities (the "10 Percent
Holders") to file reports of ownership and changes of ownership with the
Securities and Exchange Commission (the "SEC"). Officers, directors, and 10
Percent Holders are required by the regulations the SEC has promulgated under
Section 16 of the 1934 Act to furnish such company with copies of all forms
they file pursuant to Section 16(a).
Based solely on the Company's review of Forms 3 and 4 and amendments thereto
furnished to the Company during the fiscal year ended June 30, 1995, Forms 5
and amendments thereto furnished to the Company with respect to such fiscal
year, and the written representations from certain of the reporting persons
that no Forms 5 were required to be filed also with respect to such fiscal
year, all required forms were timely filed, except a Form 5 for the fiscal year
ended June 30, 1995, filed by Barry E. Fast on September 5, 1995, was 21 days
late.
ITEM 11: EXECUTIVE COMPENSATION
- --------------------------------
(a) Cash Compensation.
-----------------
The following table sets forth information concerning the compensation for
services to the Company in all capacities, for each of the fiscal years ended
June 30, 1995, June 30, 1994, and June 30, 1993, of the person who was, at June
30, 1995, the Chief Executive Officer of the Company and each other executive
officer of the Company at June 30, 1995 whose compensation for such fiscal year
exceeded $100,000.
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<PAGE> 14
<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation
-------------------
<CAPTION>
(a) (b) (c)<F1> (d) (e)<F2> (f)<F3>
Name and Other Annual All Other
Principal Compensation Compensation
Position Year Salary ($) Bonus $ ($) ($)
- --------- ---- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Daniel P. Halloran, 1995 109,200 -- 22,381 240
Chief Executive 1994 101,600 -- 21,336 224
Officer 1993 99,450 -- 10,014 219
- -------------------------
<FN>
<F1>
1 For the fiscal year ended June 30, 1993, Mr. Halloran elected to defer the
amount of $4,376 of his salary pursuant to the plan the Company established
under Section 401(k) of the Internal Revenue Code, for the fiscal year ended
June 30, 1994, he elected to defer $4,470 of his salary for that fiscal
year, and for the fiscal year ended June 30, 1995, he elected to defer
$4,805 of his salary for that fiscal year. For the fiscal year ended June
30, 1993, Mr. Fast elected to defer the amount of $2,652 of his salary
pursuant to the plan the Company established under Section 401(k) of the
Internal Revenue Code, for the fiscal year ended June 30, 1994, he elected
to defer $2,678 of his salary for that fiscal year, and for the fiscal year
ended June 30, 1995, he elected to defer $2,858 of his salary for that
fiscal year.
<F2>
2 For the fiscal year ended June 30, 1993, the Company paid on behalf of Mr.
Halloran the amount of $5,442 for premiums for life, disability, and medical
insurance and $4,572 for an automobile it provided to him, for the fiscal
year ended June 30, 1994, it paid premiums for such insurance in the amount
of $16,022 and the amount of $5,315 for such automobile, and for the fiscal
year ended June 30, 1995, the Company paid $17,066 in premiums for such
insurance and the amount of $5,315 for such automobile. For the fiscal year
ended June 30, 1993, the Company paid on behalf of Mr. Fast the amount of
$5,442 for premiums for life, disability, and medical insurance and $4,808
for an automobile it provided to him, for the fiscal year ended June 30,
1994, it paid premiums for such insurance in the amount of $12,277 and the
amount of $5,396 for such automobile, and for the fiscal year ended June 30,
1995, the Company paid $13,273 in premiums for such insurance and the amount
of $5,396 for such automobile.
<F3>
3 For fiscal year ended June 30, 1993, the Company contributed to the plan it
established under Section 401(k) of the Internal Revenue Code the amount of
(continued on next page)
</FN>
</TABLE>
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<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C> <C>
Barry E. Fast, 1995 95,256 -- 18,669 143
Vice President 1994 89,280 -- 17,673 134
1993 88,400 -- 10,250 133
(b) Compensation of Directors.
-------------------------
In the fiscal year ending June 30, 1995, the Company did not pay any director's
fees.
(c) Employment Contracts and Termination of Employment and Change-in-Control
------------------------------------------------------------------------
Arrangements.
- ------------
Effective January 1, 1992, Messrs. Halloran and Fast each entered into a four-
year employment agreement with the Company. Each agreement expires on December
31, 1996, and thereafter is automatically extended for additional one-year
terms, unless terminated according to each such employment agreement.
Each employment agreement provides that, upon termination other than for cause,
voluntary termination, permanent disability, death, or retirement, the Company
will pay to the employee as severance compensation his then fixed salary for a
period of 12 months. Each employment agreement also provides that, if within
one year after a change in control (as defined under each such employment
agreement), (a) the Company terminates the employee without cause or (b)(i) if
the employee voluntarily terminates his employment because the Company assigns
to him duties of a nonexecutive nature or for which his skills and experience
do not reasonably equip him, (ii) the Company fails to pay any salary due under
the employment agreement within ten days after written notice from the employee
that it is due, or (iii) the Company defaults in its obligations under certain
security agreements the Company executed and delivered to certain of its
lenders, then the Company will pay to such employee a cash payment equal to one
year's salary at the greater of such employee's salary rate in effect on the
date of the change in control or his salary rate in effect on the date of his
termination of employment. The employee will also, in that event, for one year
following his termination of employment continue to participate in any benefit
plans of the Company which provide health (including medical and dental), life,
or disability insurance or other similar coverage.
- -------------------------
<FN>
(continued from previous page)
$219 on behalf of Mr. Halloran, for the fiscal year ended June 30, 1994, it
contributed the amount of $224 and for the fiscal year ended June 30, 1995,
it contributed the amount of $240. For fiscal year ended June 30, 1993, the
Company contributed to the plan it established under Section 401(k) of the
Internal Revenue Code the amount of $133 on behalf of Mr. Fast, for the
fiscal year ended June 30, 1994, it contributed the amount of $134 and for
the fiscal year ended June 30, 1995, it contributed the amount of $143.
</FN>
</TABLE>
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<PAGE> 16
For purposes of each employment agreement, a change of control is deemed to
occur if a person becomes the beneficial owner of securities of the Company
representing 20 percent or more of the combined voting power of the Company's
then outstanding securities, the persons who at the beginning of any period of
24 consecutive months constitute the Board of Directors of the Company cease
for any reason to constitute a majority thereof (unless the election of each
director who is not a director of the beginning of such period has been
approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period),
the Company is merged or consolidated with another corporation and, as a result
of such merger or consolidation, less than 75 percent of the outstanding voted
securities of the surviving or resulting corporation is owned in the aggregate
by the former shareholders of the Company, or the Company sells all or
substantially all of its assets to another corporation which is not a wholly-
owned subsidiary.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners.
-----------------------------------------------
The following table sets forth information as of September 22, 1995, with
respect to persons known to the Company to be beneficial owners of more than 5
percent of the Company's outstanding shares of common stock. Unless otherwise
indicated, the beneficial ownership of securities includes sole investment and
voting power with respect to such securities.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class<F1>
- -------------- ------------------- ------------ ----------------
<S> <C> <C> <C>
Common Stock Daniel P. Halloran 118,858.815<F2> 18.66%
2538 N.E. 32nd Avenue
Portland, Oregon 97212
- -------------------------
<FN>
<F1>
1 Percentages are calculated based upon the number of total shares outstanding
(636,889).
<F2>
2 The number listed includes 7,584.815 shares held by the Book Centers, Inc.
Employee Stock Ownership Plan ("ESOP") which are allocated to the account of
Mr. Halloran as of December 31, 1994, all of which are vested to Mr.
Halloran's account as of such date. Mr. Halloran has voting and investment
power with respect to such shares in the manner set forth in footnote 4.
</FN>
</TABLE>
- 16 -
<PAGE> 17
<TABLE>
<S> <C> <C> <C>
Common Stock Barry E. Fast 113,655.027<F3> 17.85%
11 Orlando Avenue
Ardsley, New York 10502
Common Stock Book Centers, Inc. 65,167.00<F4> 10.22%
Employee Stock
Ownership Plan
5600 N.E. Hassalo Street
Portland, Oregon 97213
- -------------------------
<FN>
<F3>
3 The number listed includes 1,581.027 shares held by the ESOP which are
allocated to the account of Mr. Fast as of December 31, 1994, all of which
are vested for Mr. Fast's account as of such date. Mr. Fast has voting and
investment power with respect to such shares in the manner set forth in
footnote 4.
<F4>
4 All of the shares of common stock held by the ESOP are generally voted by
the trustee of the ESOP, as directed by the administrator of the ESOP. Each
participant in the ESOP is entitled to direct the trustee as to the exercise
of any and all voting rights attributable to the shares of common stock then
allocated to his or her account. If a participant directs the trustee as to
the voting of the shares of common stock allocated to his or her account,
all allocated shares of common stock as to which such instructions have been
received are voted in accordance with such instructions. The trustee votes
any unallocated shares of common stock held by the ESOP or any allocated
shares of common stock as to which no voting instructions have been
received, in such a manner as directed by the administrator. A participant
may not sell or otherwise transfer any shares of common stock allocated to
his or her account until the ESOP distributes such shares to him or her,
subject to the Company's right of first refusal to purchase any shares the
ESOP distributes to a participant in the manner and subject to the
conditions set forth in the ESOP. At June 30, 1995, all of the shares held
by the ESOP are allocated among the accounts of the participants.
</FN>
</TABLE>
- 17 -
<PAGE> 18
(b) Security Ownership of Management.
--------------------------------
<TABLE>
The following table shows the shares of the Company's common stock owned by all
directors and by all executive officers and directors as a group as of
September 22, 1995. Unless otherwise indicated, beneficial ownership included
sole voting and investment power as to the shares.
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent of
Title of Class of Beneficial Owner Ownership Class<F1>
- -------------- ------------------- ------------ ----------------
<S> <C> <C> <C>
Common Stock Daniel P. Halloran 118,858.815<F2> 18.66%
Common Stock Barry E. Fast 113,655.027<F3> 17.85%
Common Stock Frank L. Ford 10,000.00 1.57%
Common Stock All executive officers
and directors as a
group (3 persons) 242,513.842 38.08%
- ----------------------------
<FN>
<F1>
1 Percentages are calculated based upon the number of total shares outstanding
(636,889).
<F2>
2 The number listed includes 7,584.815 shares held by the ESOP which are
allocated to the account of Mr. Halloran as of December 31, 1994, all of
which are vested to Mr. Halloran's account as of such date. Mr. Halloran
has voting and investment power with respect to such shares in the manner
set forth in footnote 4 on page 17.
<F3>
3 The number listed includes 1,581.027 shares held by the ESOP which are
allocated to the account of Mr. Fast as of December 31, 1994, all of which
are vested for Mr. Fast's account as of such date. Mr. Fast has voting and
investment power with respect to such shares in the manner set forth in
footnote 4 on page 17.
</FN>
</TABLE>
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The Company has nothing to report under this item.
- 18 -
<PAGE> 19
PART IV
-------
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) Financial Statements and Financial Statement Schedules.
------------------------------------------------------
The financial statements and schedules listed in the accompanying Index to
Consolidated Financial Statements and Schedules are filed as part of this
Report.
(b) Reports on Form 8-K.
-------------------
The Company did not file any Reports on Form 8-K during the last quarter of the
fiscal year ended June 30, 1995.
(c) Exhibits.
--------
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession: None.
3. Articles of Incorporation and Bylaws:
(a) Restated Articles of Incorporation and Restated Bylaws
(incorporated herein by reference to Appendices I and II of the
Company's Proxy Statement filed May 24, 1988).
(b) Articles of Amendment to Restated Articles filed with the
Corporation Division of the State of Oregon on October 4, 1990
(incorporated herein by reference to Exhibit "I" to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1990).
4. Instruments defining the rights of security holders, including
indentures: None.
9. Voting trust agreements: None.
10. Material contracts:
10.1 Split Dollar Agreement dated May 1, 1993, between Daniel P. Halloran
and Book Centers, Inc. (incorporated herein by reference to Exhibit
10 to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993).
10.2 Amended and Restated Split Dollar Agreement dated May 1, 1993,
between Daniel P. Halloran and Book Centers, Inc. (incorporated by
reference to Exhibit 10.2 to the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1994).
- 19 -
<PAGE> 20
10.3 Second Amended and Restated Split Dollar Agreement dated May 1,
1994, between Daniel P. Halloran and Book Centers, Inc.(incorporated
by reference to Exhibit 10.3 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994).
10.4 Book Centers, Inc. Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 10.4 to the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1995).
10.5 Loan Agreement dated June 28, 1995, between Academic Book Center,
Inc. and Centennial Bank.
10.6 Promissory Note dated June 28, 1995, in the principal amount of
$750,000, the maker of which is Academic Book Center, Inc. and the
payee of which is Centennial Bank.
10.7 Commercial Security Agreement dated June 28, 1995, between Academic
Book Center, Inc. and Centennial Bank.
10.8 Commercial Security Agreement dated June 28, 1995, among Book
Centers, Inc., Academic Book Center, Inc., and Centennial Bank.
10.9 Commercial Pledge Agreement dated June 28, 1995, between Academic
Book Center, Inc., Centennial Bank, and Daniel P. and Karen M.
Halloran.
10.10 Agreement to Provide Insurance dated June 28, 1995, between Academic
Book Center, Inc. and Centennial Bank.
10.11 Loan Agreement dated June 28, 1995, between Academic Book Center,
Inc. and Centennial Bank.
10.12 Note dated June 28, 1995, in the principal amount of $650,000 the
maker of which is Academic Book Center, Inc. and the payee of which
is Centennial Bank.
10.13 Commercial Security Agreement dated June 28, 1995, between Academic
Book Center, Inc. and Centennial Bank.
10.14 Commercial Security Agreement dated June 28, 1995, between Academic
Book Center, Inc. and Centennial Bank.
10.15 Small Business Administration (SBA) Guaranty dated June 28, 1995,
between Academic Book Center, Inc. and Centennial Bank.
10.16 Assignment of Life Insurance Policy as Collateral dated June 28,
1995, among Book Centers, Inc., Academic Book Center, Inc., and
Centennial Bank.
10.17 Commercial Guaranty dated June 28, 1995, among Book Centers, Inc.,
Academic Book Center, Inc., and Centennial Bank.
10.18 Commercial Guaranty dated June 28, 1995, between Academic Book
Center, Inc., Centennial Bank, and Daniel P. Halloran.
- 20 -
<PAGE> 21
10.19 Landlord's Consent dated June 28, 1995, between Academic Book
Center, Inc. and Centennial Bank.
11. Statement regarding computation of per share earnings: Disclosed in
note 1 to the consolidated financial statements.
12. Statements regarding computation of ratios: Not applicable.
13. Annual report to security holders, Form 10-Q or quarterly report to
security holders: None.
16. Letter regarding change in certifying accountant: None.
18. Letter regarding change in accounting principles: None.
21. Subsidiaries of the registrant: See note 1 to the Consolidated
Financial Statements.
22. Published report regarding matters submitted to vote of security
holders: None.
23. Consents of experts and counsel: None.
24. Power of attorney: None.
27. Financial Data Schedule (filed electronically only).
28. Information from reports to state insurance regulation authorities:
None.
99. Additional Exhibits: None.
(d) Schedules.
---------
The schedules listed in the accompanying Index to Consolidated Financial
Statements and Schedules are filed as part of this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BOOK CENTERS, INC.
Date: September 28, 1995 /s/ Daniel P. Halloran
-------------------------------------
Daniel P. Halloran, President
- 21 -
<PAGE> 22
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Date: September 28, 1995 /s/ Daniel P. Halloran
-------------------------------------
Daniel P. Halloran, President,
Controller/Chief Financial Officer,
Secretary/Treasurer, Chairman of the
Board of Directors, and Director
Date: September 28, 1995 /s/ Frank L. Ford
-------------------------------------
Frank L. Ford, Director
- 22 -
<PAGE> 23
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page
Report of Independent Certified Public Accountants Relating to
the Consolidated Financial Statements and Notes thereto 24
Financial Statements
Consolidated Balance Sheets as of June 30, 1995 and 1994 25
Consolidated Statements of Operations and Accumulated Deficit for
the years ended June 30, 1995, 1994, and 1993 27
Consolidated Statements of Cash Flows for the years ended June 30,
1995, 1994, and 1993 29
Notes to Financial Statements 31
The schedules, other than those listed above, have been omitted since they are
either not required, not applicable, or the information has been included in
the aforementioned financial statements.
- 23 -
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
The Stockholders of Book Centers, Inc.
Portland, Oregon
We have audited the accompanying consolidated balance sheets of Book Centers,
Inc. and subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of operations and accumulated deficit and of cash flows
for each of the three years in the period ended June 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Book Centers, Inc. and
subsidiaries at June 30, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1995
in conformity with generally accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, Book Centers,
Inc. and subsidiaries changed their method of accounting for income taxes
effective June 1, 1993 to conform with Statement of Financial Accounting
Standards No. 109.
DELOITTE & TOUCHE LLP
Portland, Oregon
August 24, 1995
- 24 -
<PAGE> 25
<TABLE>
BOOK CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
- -------------------------------------------------------------------------------
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable (less allowance for
doubtful accounts of $24,525 and $12,155
in 1995 and 1994, respectively) $ 3,453,628 $ 3,151,717
Book inventories 1,083,856 1,233,136
Prepaid expenses and other 254,381 282,445
---------- ----------
Total current assets 4,791,865 4,667,298
OFFICE FURNISHINGS AND EQUIPMENT (Less
accumulated depreciation and amortization
of $650,667 and $583,515 in 1995 and 1994,
respectively) 157,370 186,570
---------- ----------
TOTAL $ 4,949,235 $ 4,853,868
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Bank overdraft $ 216,421 $ 738,721
Current portion of long-term debt (Note 5) 16,649 25,729
Accounts payable 3,073,561 3,089,979
Notes payable (Note 4) 1,029,136 752,567
Deferred revenue 1,129,164 725,201
Accrued expenses 262,097 329,135
---------- ----------
Total current liabilities 5,727,028 5,661,332
---------- ----------
LONG-TERM DEBT (Note 5) 43,201 60,698
---------- ----------
COMMITMENTS (Note 3) - -
</TABLE>
- 25 -
<PAGE> 26
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
STOCKHOLDERS' DEFICIT:
Common stock, no par value, 50,000,000
shares authorized, 636,889 shares issued 688,837 688,837
Paid-in capital 428,988 428,988
Accumulated deficit (1,938,819) (1,985,987)
---------- ----------
Total stockholders' deficit (820,994) (868,162)
---------- ----------
TOTAL $ 4,949,235 $ 4,853,868
========== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
- 26 -
<PAGE> 27
<TABLE>
BOOK CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
- -------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Sales $22,994,555 $21,496,122 $21,906,756
Other 30,422 66,772 153,331
---------- ---------- ----------
23,024,977 21,562,894 22,060,087
---------- ---------- ----------
OPERATING EXPENSES:
Cost of goods sold 19,380,974 17,930,209 18,475,858
Operating and administrative 3,417,258 3,443,153 3,501,887
Reversal of restructuring charge
accrual (Note 1) - (200,366) -
Interest 179,577 168,998 173,378
---------- ---------- ----------
22,977,809 21,341,994 22,151,123
---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES 47,168 220,900 (91,036)
INCOME TAXES (Note 6) - - -
---------- ---------- ----------
NET INCOME (LOSS) 47,168 220,900 (91,036)
ACCUMULATED DEFICIT, BEGINNING
OF PERIOD (1,985,987) (2,206,887) (2,115,851)
---------- ---------- ----------
ACCUMULATED DEFICIT, END OF
PERIOD $(1,938,819) $(1,985,987) $(2,206,887)
========== ========== ==========
</TABLE>
- 27 -
<PAGE> 28
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
NET INCOME (LOSS) PER SHARE $ 0.07 $ 0.35 $ (0.14)
========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 636,889 636,889 636,889
========== ========== ==========
- -------------------------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
- 28 -
<PAGE> 29
<TABLE>
BOOK CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
- -------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 47,168 $ 220,900 $ (91,036)
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and amortization 67,152 78,370 81,186
Gain on sale of division - - (16,047)
Loss on disposal of property - 3,306 -
Restructuring charges - (200,366) (13,118)
Change in assets and
liabilities net of effects of
sale of division:
Accounts receivable (301,911) 221,912 777,944
Book inventories 149,280 (338,909) 80,406
Prepaid expenses and other 28,064 32,924 13,448
Other assets - - 15,000
Bank overdraft (522,300) (284,052) 156,517
Accounts payable (16,418) (108,127) (594,402)
Deferred revenue 403,963 210,874 (447,875)
Accrued expenses (67,038) 43,512 (9,649)
---------- ---------- ----------
Net cash used in operating
activities (212,040) (119,656) (47,626)
---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES -
Capital expenditures (37,952) (8,588) (41,369)
---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase in notes payable 276,569 164,394 116,641
Long-term debt:
Borrowings - - 8,100
Repayments (26,577) (36,150) (35,746)
---------- ---------- ----------
</TABLE>
- 29 -
<PAGE> 30
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net cash provided by
financing activities 249,992 128,244 88,995
----------- ----------- -----------
NET INCREASE IN CASH - - -
CASH AT BEGINNING OF YEAR - - -
---------- ---------- ----------
CASH AT END OF YEAR $ - - -
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING ACTIVITIES:
Book value of assets sold $ - $ - $ 32,272
Liabilities assumed by buyer - - 48,319
Capital expenditures financed
by long-term debt - 73,263 -
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
- 30 -
<PAGE> 31
BOOK CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company - Book Centers, Inc. is an Oregon corporation organized in
1961. The Company engages in the business of marketing, warehousing and
distributing books worldwide to research and academic libraries.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its 100%-owned subsidiary, Academic Book
Center, Inc. ("Academic"). All significant intercompany accounts and
transactions have been eliminated upon consolidation.
Restructuring - During 1991, the Company closed its one hundred percent
owned subsidiary Scholarly Book Center, Inc. ("Scholarly"), recording
restructuring charges of $600,000. These charges included loss on
equipment disposal, employee severance liability, lease termination costs
and other incremental costs associated with the closure of these
operations. The remaining accrual at June 30, 1993 and 1992, was for lease
termination costs. These leases substantially expired during the year
ended June 30, 1994 and the remaining restructuring accrual of $200,366 was
reversed against operating expenses.
Statements of Cash Flows - For purposes of the statement of cash flows, the
Company considers interest bearing deposits with maturities of 90 days or
less to be cash. Cash paid for interest was $177,581, $169,711, and
$176,346 for the years ended June 30, 1995, 1994, and 1993, respectively.
Accounts Receivable - Trade receivables are recorded at estimated
collectible value.
Book Inventories - Inventories are valued at lower of cost or market value
using the specific identification method.
Income Taxes - Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income
Taxes, which requires the provision of deferred income taxes based upon an
asset and liability approach and represents the change in deferred income
tax accounts during the year, including the effect of enacted tax rate
changes. A consolidated federal income tax return is filed by the Company
for the consolidated group. Federal tax credits are accounted for, when
applicable, under the flow-through method whereby the credit is reflected
as a reduction of federal income tax expense in the year in which the
credit is used.
Deferred Revenue - The subsidiary companies receive advance payments from
certain customers. These amounts are recognized as revenue when the
related books are shipped.
Office Furnishings and Equipment and Depreciation - Office furnishings and
equipment are stated at cost. Maintenance and repairs are charged to
expenses as incurred, and improvements are capitalized. Depreciation is
computed on a straight-line method over the estimated useful lives
- 31 -
<PAGE> 32
(generally three to ten years) of the related assets. Upon disposal of
property subject to depreciation, the accounts are relieved of the related
costs and accumulated depreciation and resulting gains and losses are
reflected in operations.
Net Income (Loss) Per Share - Net income (loss) per share of common stock
is computed based on the weighted average number of shares of common stock
outstanding during each year. The weighted average number of shares for
each of the three years ended June 30, 1995 was 636,889.
Reclassifications - Certain amounts from prior periods have been
reclassified in order to conform to the 1995 presentation.
2. EMPLOYEE STOCK OWNERSHIP PLAN
During 1985, the Company adopted a qualified Employee Stock Ownership Plan.
This Plan was initially funded with a $25,000 contribution and is available
to all eligible personnel who have been employed by the Company for a least
one year. As of June 30, 1995, 65,167 shares of the Company's outstanding
common stock had been acquired by the Plan. There were no contributions to
the Plan for the years ended June 30, 1995, 1994, and 1993.
3. LEASE COMMITMENTS
The Company and one of its subsidiaries are lessees under noncancelable
real property leases through 1996. Other leases shown are for automobiles
and office equipment. In September 1992, the Company sold certain assets
related to an operating division of its wholly-owned subsidiary, Academic.
In addition to the purchase of assets, the buyer assumed responsibility for
certain liabilities, including the lease for the operating division's
primary facility. The sale agreement provided that the Company would
guarantee this lease until the expiration of its original term at
October 31, 1995.
Minimum future rentals under capital and operating leases having initial or
remaining terms of one year or more as of June 30, 1995 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1996 $12,284 $37,556
1997 12,419 1,776
1998 12,419 888
</TABLE>
- 32 -
<PAGE> 33
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1999 4,677 -
2000 - -
------ ------
Total 41,799 $40,220
======
Less amount representing interest 9,227
------
Present value of minimum lease payments $32,572
======
</TABLE>
Total rent expense was $129,640, $116,210, and $114,830 for the years ended
June 30, 1995, 1994, and 1993, respectively.
4. NOTES PAYABLE
In June 1991, the Company entered into a new line of credit with a lending
institution. Beginning July 1, 1993, the line renewed annually unless the
Company elected to terminate the agreement. Under this agreement, the
Company could borrow up to a capacity of $1,250,000. The line bore
interest at 6% above the prime rate (15%, 13.25%, and 12% at June 30, 1995,
1994, and 1993, respectively), was secured by accounts receivable,
inventory and equipment and was personally guaranteed by present officers
who are stockholders of the Company. The weighted average interest rate in
1995 and 1994 was 14.33% and 12.27%, respectively. In June 1995, the
Company paid off their line of credit with this lending institution, and
entered into a new line of credit with a bank. This new agreement expires
September 1996, and bears interest at a rate of 2.5% to 4% above the bank's
reference rate (the "Index"). The Index was at 9% at June 30, 1995. The
Company may borrow up to a capacity of $1,400,000 subject to certain
limitations. These borrowings are secured by assets of the Company and are
guaranteed by stockholders of the Company who are also officers.
- 33 -
<PAGE> 34
5. LONG-TERM DEBT
Long-term debt at June 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Note payable to related parties at 12% interest,
payable monthly through June 1995
collateralized by computer equipment $ - $ 8,483
Note payable to related parties at 12% interest,
payable monthly through November 1998,
collateralized by computer equipment 22,138 27,079
Note payable to a bank, at 8.9% interest,
payable monthly through February 1997,
collateralized by an automobile 5,140 7,879
Capital lease obligations (Note 3) 32,572 42,986
---------- ----------
Total 59,850 86,427
Less current portion 16,649 25,729
---------- ----------
Total long-term debt $ 43,201 $ 60,698
========== ==========
</TABLE>
Maturities of long-term debt, including minimum capital lease payments, net
of interest portion, at June 30, 1995 were as follows:
1996 $ 16,649
1997 17,738
1998 17,868
1999 7,595
2000 -
----------
Total $ 59,850
==========
The above notes payable to related parties are to individuals who are
present officers and stockholders of the Company.
6. INCOME TAXES
The Company adopted SFAS No. 109, Accounting for Income Taxes, effective
July 1, 1993. The statement requires the provision of deferred income
taxes based upon an asset and liability approach and represents the change
in deferred income tax accounts during the year, including the effect of
enacted tax rate changes. The statement also provides for the recognition
of net operating loss ("NOL") carryforwards as a deferred tax asset.
- 34 -
<PAGE> 35
Income tax expenses attributable to operations consisted of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ - $ - $ -
State - - -
Deferred:
Federal - - -
State - - -
---------- ---------- ----------
Total income tax expense $ - - -
========== ========== ==========
</TABLE>
Reconciliation between the statutory federal income tax rate and the
effective tax is as follows:
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Computed federal income taxes $ 16,000 $ 75,000 $ -
State taxes, net of federal
benefit 2,000 9,000 -
Nondeductible expenses 10,000 13,000 -
Operating loss carryforwards (28,000) (97,000) -
---------- ---------- ----------
Total income tax expense $ - $ - $ -
========== ========== ==========
</TABLE>
The tax effort of temporary differences that give rise to significant
deferred tax assets and deferred tax liabilities at June 30, 1995 and 1994
are presented below:
- 35 -
<PAGE> 36
<TABLE>
<CAPTION>
June 30, June 30,
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
Depreciation $ 70,000 $ 62,000
Accrued expenses 100,000 90,000
NOL carryforwards 254,000 297,000
Investment tax and jobs credit carryforward 21,000 51,000
---------- ----------
445,000 500,000
Valuation allowance (445,000) (500,000)
---------- ----------
Net deferred tax asset $ - $ -
========== ==========
</TABLE>
There were no deferred tax liabilities at June 30, 1995. Deferred tax
assets have been reduced by a valuation allowance as realization of some
portion of these future tax benefits is subject to significant
uncertainties. The net change in the valuation allowance for the year
ended June 30, 1995, was $55,000.
At June 30, 1995, the Company's net operating loss carryforwards totaled
approximately $1,220,000 for financial reporting purposes expiring through
2008. Net operating loss carryforwards totaled approximately $649,000 for
tax purposes and expire as follows:
<TABLE>
<CAPTION>
Amount of
Year of Loss
Expiration Carryforward
---------- ------------
<S> <C>
2002 $ 67,000
2003 224,000
2006 65,000
2007 238,000
2008 55,000
-------
Total $649,000
=======
</TABLE>
- 36 -
<PAGE> 37
Investment tax and new jobs credit carryovers approximate $21,000 at June
30, 1995 and expire at various dates through 2000.
7. BUSINESS SEGMENT INFORMATION
The Company's principal industry segment is book wholesaling. Other
segments and transfers between segments are immaterial. Export sales were
$9,524,537, $8,344,825, and $7,181,519 for the years ended June 30, 1995,
1994, and 1993, respectively, and were made to various countries. In
addition, accounts receivable from export sales were $1,726,442,
$1,418,251, and $1,529,259 at June 30, 1995, 1994, and 1993, respectively.
- 37 -
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
EX-10.5 Loan Agreement dated June 28, 1995, between Academic
Book Center, Inc. and Centennial Bank
EX-10.6 Promissory Note dated June 28, 1995, in the principal
amount of $750,000, the maker of which is Academic
Book Center, Inc. and the payee of which is Centennial
Bank
EX-10.7 Commercial Security Agreement dated June 28, 1995,
between Academic Book Center, Inc. and Centennial Bank
EX-10.8 Commercial Security Agreement dated June 28, 1995,
among Book Centers, Inc., Academic Book Center, Inc.,
and Centennial Bank
EX-10.9 Commercial Pledge Agreement dated June 28, 1995,
between Academic Book Center, Inc., Centennial Bank,
and Daniel P. and Karen M. Halloran.
EX-10.10 Agreement to Provide Insurance dated June 28, 1995,
between Academic Book Center, Inc. and Centennial Bank
EX-10.11 Loan Agreement dated June 28, 1995, between Academic
Book Center, Inc. and Centennial Bank
EX-10.12 Note dated June 28, 1995, in the principal amount of
$650,000, the maker of which is Academic Book Center,
Inc. and the payee of which is Centennial Bank
EX-10.13 Commercial Security Agreement dated June 28, 1995,
between Academic Book Center, Inc. and Centennial Bank
EX-10.14 Commercial Security Agreement dated June 28, 1995,
between Academic Book Center, Inc. and Centennial Bank
EX-10.15 Small Business Administration (SBA) Guaranty dated
June 28, 1995, between Academic Book Center, Inc. and
Centennial Bank
EX-10.16 Assignment of Life Insurance Policy as Collateral
dated June 28, 1995, among Book Centers, Inc., Academic
Book Center, Inc., and Centennial Bank
</TABLE>
- 38 -
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
EX-10.17 Commercial Guaranty dated June 28, 1995, among Book
Centers, Inc., Academic Book Center, Inc., and
Centennial
EX-10.18 Commercial Guaranty dated June 28, 1995, between
Academic Book Center, Inc., Centennial Bank, and
Daniel P. Halloran
EX-10.19 Landlord's Consent dated June 28, 1995, between
Academic Book Center, Inc. and Centennial Bank
EX-27 Financial Data Schedule (filing electronically only)
</TABLE>
- 39 -
<PAGE> 1
LOAN AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$750,000.00 06-28-1995 09-01-1996 145255 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
THIS LOAN AGREEMENT between Academic Book Center, Inc. ("Borrower") and
Centennial Bank ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of June 28, 1995, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
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 terms 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 this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
Account. The word "Account" means a trade account, account receivable, or
other right to payment for goods sold or services rendered owing to
Borrower (or to a third party grantor acceptable to Lender).
Account Debtor. The words "Account Debtor" mean the person or entity
obligated upon an Account.
Advance. The word "Advance" means a disbursement of Loan funds under this
Agreement.
Borrower. The word "Borrower" means Academic Book Center, Inc. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
Borrowing Base. The words "Borrowing Base" mean , as determined by Lender
from time to time, the lesser of (a) $750,000.00; or (b) 60.000% of the
aggregate amount of Eligible Domestic Accounts.
Business Day. The words "Business Day" mean a day on which commercial
banks are open for business in the State of Oregon.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Row. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise. The
word "Collateral" includes without limitation all collateral described
below in the section titled "COLLATERAL."
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable
to Lender. The net amount of any Eligible Account against which Borrower
may borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by Lender in writing, Eligible
Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer,
an employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders,
officers, or directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
(d) Accounts with respect to which Borrower is or may become liable to
the Account Debtor for goods sold or services rendered by the Account
Debtor to Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account
Debtor.
(g) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account Debtor
to be unsatisfactory.
(h) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under
any provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian,
or receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or
fails generally to pay its debts (including its payrolls) as such debts
become due.
(i) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(j) Accounts over 90 days from date of invoice. The entire balance of
any single Account Debtor will be ineligible whenever the portion of
the Account past due 90 days is in excess of 25.00% of the total amount
on the Account.
<PAGE> 2
06-28-1995 LOAN AGREEMENT Page 2
(Continued)
===============================================================================
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
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."
Expiration Date. The words "Expiration Date" mean the date of termination
of Lender's commitment to lend under this Agreement.
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surety, 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 Centennial Bank, its successors and
assigns.
Line of Credit. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(d) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled
"Indebtedness and Liens"; (e) liens and security interests which, as of the
date of this Agreement, have been disclosed to and approved by the Lender
in writing; and (f) these liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower's assets.
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 with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
Conditions Precedent to Each Advance. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall
be in full force and effect.
(d) All guaranties required by Lender for the Line of Credit shall
have been executed by each Guarantor, delivered to Lender, and be in
full force and effect.
(e) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, books, records, and
operations, and Lender shall be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due
and payable.
(g) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement, and Borrower
shall have delivered to Lender the compliance certificate called for in
the paragraph below titled "Compliance Certificate."
<PAGE> 3
06-28-1995 LOAN AGREEMENT Page 3
(Continued)
===============================================================================
Making Loan Advances. Advances under the Line of Credit may be requested
only in writing by authorized persons. Each Advance shall be conclusively
deemed to have been made at the request of and for the benefit of Borrower
(a) when credited to any deposit account of Borrower maintained with Lender
or (b) when advanced in accordance with the instructions of an authorized
person. Lender, at its option, may set a cutoff time, after which all
requests for Advances will be treated as having been requested on the next
succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. On the Expiration Date,
Borrower shall pay to Lender in full the aggregate unpaid principal amount
of all Advances then outstanding and all accrued unpaid interest, together
with all other applicable fees, costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower's receipt of any such
statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require (the "Collateral"), including without
limitation Borrower's present and future Accounts and general intangibles.
Lender's Security Interests in the Collateral shall be continuing liens and
shall include the proceeds and products of the Collateral, including without
limitation the proceeds of any insurance. With respect to the Collateral,
Borrower agrees and represents and warrants to Lender:
Perfection of Security Interests. Borrower agrees to execute such
financing statements and to take whatever other actions are requested by
Lender to perfect and continue Lender's Security Interests in the
Collateral upon request of Lender, Borrower will deliver to Lender any and
all of the documents evidencing or constituting the Collateral, and
Borrower will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender. Contemporaneous with the
execution of this Agreement, Borrower will execute one or more UCC
financing statements and any similar statements as may be required by
applicable law, and will file such financing statements and all such
similar statements in the appropriate location or locations. Borrower
hereby appoints Lender as its irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to continue any Security
Interest. Lender may at any time, and without further authorization from
Borrower, file a carbon, photograph, facsimile, or other reproduction of
any financing statement for use as a financing statement. Borrower will
reimburse Lender for all expenses for the perfection, termination, and the
continuation of the perfection of Lender's security interest in the
Collateral. Borrower promptly will notify Lender of any change in
Borrower's name including any change to the assumed business names of
Borrower. Borrower also promptly will notify Lender of any change in
Borrower's Social Security Number or Employer Identification Number.
Borrower further agrees to notify Lender in writing prior to any change in
address or location of Borrower's principal governance office or should
Borrower merge or consolidate with any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of
Accounts and Eligible Accounts, in form and substance satisfactory to the
Lender. Thereafter and at such frequency as Lender shall require, Borrower
shall execute and deliver to Lender such supplemental schedules of Eligible
Accounts and such other matters and Information relating to Borrower's
Accounts as Lender may request.
Representations and Warranties Concerning Accounts. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each
Account represented by Borrower to be an Eligible Account for purposes of
this Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account information listed on schedules delivered
to Lender will be true and correct, subject to immaterial variance; and
(c) Lender, its assigns, or agents shall have the right at any time and at
Borrower's expense to inspect, examine, and audit Borrower's records and
to confirm with Account Debtors the accuracy of such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Oregon and is
validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except for Permitted Liens, Borrower owns and has good title
to all of Borrower's properties free and clear of all Security Interests,
and has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," 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., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). Except as disclosed to
and acknowledged by Lender in writing, Borrower represents and warrants
that: (a) During the period of Borrower's ownership of the properties,
there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or substance
by any person on, under, about or from any of the properties. (b) Borrower
has no knowledge of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on,
<PAGE> 4
06-28-1995 LOAN AGREEMENT Page 4
(Continued)
===============================================================================
under, about or from the properties by any prior owners or occupants of any
of the properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (c) Neither Borrower nor
any tenant, contractor, agent or other authorized user of any of the
properties shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, about or from any of
the properties; and any such activity shall be conducted in compliance with
all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation Environmental Laws. Borrower authorizes
Lender and its agents to enter upon the properties to make such inspections
and tests as Lender may deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspections or tests
made by Lender shall be at Borrower's expense and for Lender's purposes
only and shall not be construed to create any responsibility or liability
on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's due
diligence in investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower 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, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's
ownership or interest in the properties, whether or not the same was or
should have been known to Borrower, or as a result of a violation of any
Environmental Laws. The provisions of this section of the Agreement,
including the obligation to indemnify, shall survive the payment of the
Indebtedness and the termination or expiration of this Agreement and shall
not be affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable Event
nor Prohibited Transaction (as defined in ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to terminate
any such plan.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 5600 NE Hassalo Street, Portland, OR 97213.
Unless Borrower has designated otherwise in writing this location is also
the office or offices where Borrower keeps its records concerning the
Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than one hundred five (105) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than twenty five (25) days after
the end of each month, Borrower's balance sheet and profit and loss
statement for the period ended, prepared and certified as correct to the
best knowledge and belief by Borrower's chief financial officer or other
officer or person acceptable to Lender. All financial reports required to
be provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios: Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph shall be made
in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, 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. 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
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
<PAGE> 5
06-28-1995 LOAN AGREEMENT Page 5
(Continued)
===============================================================================
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in the
amounts and by the guarantors named below:
Guarantors Amounts
---------- -------
Karen M. Halloran Unlimited
Carol A. Fast Unlimited
Book Centers, Inc. Unlimited
Daniel P. Halloran Unlimited
Barry E. Fast Unlimited
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part or
on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Capital Expenditures. Make or contract to make capital expenditures,
including leasehold improvements, in any fiscal year in excess of
$50,000.00 or incur liability for rentals of property (including both real
and personal property) in an amount which, together with capital
expenditures, shall in any fiscal year exceed such sum.
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume Indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1988, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes
<PAGE> 6
06-28-1995 LOAN AGREEMENT Page 6
(Continued)
===============================================================================
and make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders
of a Subchapter S Corporation because of their ownership of shares of stock
of Borrower, or (d) purchase or retire any of Borrower's outstanding shares
or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course bf business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender; or (e) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.
COLLECTION PROCEDURES. All payments, whether in cash or by check or other
instrument received by Borrower from the Account Debtors shall be deposited in
a separate account maintained only for the deposit of such funds ("Cash
Collateral Account") at the Lender's designated branch. The Cash Collateral
Account will be under the control of the Lender. Lender will, from time to
time, withdraw the entire collected balance in the Cash Collateral Account and
apply the same to the Borrower's indebtedness. In addition to the Cash
Collateral Account, Borrower shall maintain an Operating Account at the
designated branch. Items deposited into the Cash Collateral Account, which are
returned unpaid for any reason, will be charged against the Operating Account.
COLLATERAL EXAMS. Lender shall conduct semi-annual collateral exams at
Borrower's expense.
FINANCIAL COVENANTS AND RATIOS. Book Centers, Inc. shall comply with the
following covenants and ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less than
($775,000.00) until June 30, 1995. Achieve a minimum Tangible Net
Worth of not less than ($763,000.00) between July 1, 1995 and September 30,
1995. Achieve a minimum Tangible Net Worth of not less than ($726,000.00)
between October 1, 1995 and December 31, 1995. Achieve a minimum Tangible Net
Worth of not less than ($688,000.00) between January 1, 1996 and March 31,
1996. Achieve a minimum Tangible Net Worth of not less than ($650,000.00)
between April 1, 1996 and June 30, 1996.
Working Capital. Maintain Working Capital in excess of ($875,000.00) until
June 30, 1995. Achieve Working Capital in excess of ($863,000.00) between July
1, 1995 and September 30, 1995. Achieve Working Capital in excess of
($826,000.00) between October 1, 1995 and December 31, 1995. Achieve Working
Capital in excess of ($788,000.00) between January 1, 1996 and March 31, 1996.
Achieve Working Capital in excess of ($750,000.00) between April 1, 1996 and
June 30, 1996.
ADDITIONAL FINANCIAL STATEMENTS. Guarantors agree to furnish Lender with
annual personal financial statements and supporting tax returns.
ADDITIONAL FINANCIAL REPORTING. Borrower will furnish Lender with the
following:
Daily reporting of cash receipts and sales.
Monthly Accounts Receivable and Accounts Payable agings within 15 days of month
end.
Monthly inventory listing.
Monthly reconcilement by Cascade Lender Service of the following: Accounts
Receivable Aging; Cash Receipts and Sales; Customer Deposit Report and
Cross-Aging of Borrower and affiliated companies. All service provisions to be
paid by Borrower.
ADDITIONAL COVENANTS.
The personal guaranty of Daniel P. Halloran shall be supported by a pledge of
$100,000.00 in publicly traded stock (exclusive of borrower).
The personal guaranty of Barry E. Fast shall be supported by a pledge of
$100,000.00 in publicly traded stock (exclusive of borrower).
RIGHT OF SETOFF. 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 IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on the Indebtedness against any and all
such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
Default In Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collaterization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time
and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on
or of any of Borrower's deposit accounts with Lender. However, this Event
of Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
<PAGE> 7
06-28-1995 LOAN AGREEMENT Page 7
(Continued)
===============================================================================
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. 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.
Change In Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower'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.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, 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 compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all Indebtedness immediately will become due and payable, all without notice of
any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies 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 Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights and 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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of
Washington County, the State of Oregon. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of
the American Arbitration Association, upon request of either party. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order: foreclosing by notice and sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Agreement shall preclude
any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the Borrowers
signing below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will
have all the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest
and unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may enforce
its interests irrespective of any personal claims or defenses that Borrower
may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay 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' fees for bankruptcy proceedings (1nciuding 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.
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
Borrower, notice to any Borrower will constitute notice to all Borrowers.
For notice purposes, Borrower agrees to keep Lender informed at all times
of Borrower's current address(es).
<PAGE> 8
06-28-1995 LOAN AGREEMENT Page 8
(Continued)
===============================================================================
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.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Borrower, or between Lender and
any Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor 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 in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
UNDER OREGON LAW MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE
NOT FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
US TO BE ENFORCEABLE.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT,
AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JUNE 28, 1995.
BORROWER:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
LENDER:
Centennial Bank
By: /s/ David Miller
---------------------------------------
Authorized Officer
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.20(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-C40 ACADEMIC.LN C4.OVL]
<PAGE> 1
PROMISSORY NOTE
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$750,000.00 06-28-1995 09-01-1996 145255 55 0010 089
Initials
/s/ DM
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
Principal Amount: $750,000.00 Initial Rate: 12.500%
Date of Note: June 28, 1995
PROMISE TO PAY. Academic Book Center, Inc. ("Borrower") promises to pay to
Centennial Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of Seven Hundred Fifty Thousand & 00/100 Dollars
($750,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in
one payment of all outstanding principal plus all accrued unpaid interest on
September 1, 1996. In addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning July 1, 1995, and all subsequent interest
payments are due on the same day of each month after that. Interest on this
Note is computed on a 365/360 simple interest basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied 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 writing. 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 index which is the Centennial Bank
Reference Rate (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion. If
the index becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender will tell
Borrower the current index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The interest rate
change will not occur more often than each day the Bank's Reference Rate
changes. The Index currently is 9.000% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 3.500
percentage points over the Index, adjusted if necessary for the minimum and
maximum rate limitations described below, resulting in an initial rate of
12.500% per annum. Notwithstanding any other provision of this Note, the
variable interest rate or rates provided for in this Note will be subject to
the following minimum and maximum rates. NOTICE: Under no circumstances will
the interest rate on this Note be less than 11.000% per annum or more than the
maximum rate allowed by applicable law.
PREPAYMENT PENALTY. 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. Upon prepayment of this Note,
Lender is entitled to the following prepayment privilege penalty: 1/2 of 1% of
Note amount ($750,000.00). There shall be no prepayment premium if the note is
paid in accordance with its original terms. The prepayment premium also does
not apply should Centennial Bank exercise its option to call the loan. Except
for the foregoing, Borrower may pay 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
of accrued unpaid interest. Rather, they will reduce the principal balance
due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $5.00, 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) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d)
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 the time made or furnished. (e) 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. (f) 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. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Note. (h) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the indebtedness is impaired. (i) Lender in good
faith deems 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 compliance 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 default, 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 8.500 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law. 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' fees and legal expenses for
bankruptcy proceedings (1ncluding efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, 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 Oregon. If there is
a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction
of the courts of Washington County, the State of Oregon. Subject to the
provisions on arbitration, this Note shall be governed by and construed in
accordance with the laws of the State of Oregon.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $17.50 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and
<PAGE> 2
06-28-95 PROMISSORY NOTE Page 2
(Continued)
===============================================================================
transfers to Lender all Borrower's right, title and interest in and to,
Borrower's accounts with Lender (whether checking, savings, or same other
account), including without limitation all accounts held jointly with someone
else and all accounts Borrower may open in the future, excluding however all
IRA, Keogh, and trust accounts. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested only in writing by Borrower or by an
authorized person. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address
shown above written notice of revocation of their authority: Daniel P.
Halloran, President/Secretary; and Barry E. Fast, Vice President. 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, regardless of the fact that persons other than those
authorized to borrow have authority to draw against the accounts. 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 faith deems itself insecure under
this Note or any other agreement between Lender and Borrower.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Note or otherwise, including without limitation contract and
tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association, upon request of either party. No act to take or
dispose of any collateral securing this Note shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to Article
9 of the Uniform Commercial Code. Any disputes, claims, or controversies
concerning the lawfulness or reasonableness of any act, or exercise of any
right, concerning any collateral securing this Note, including any claim to
rescind, reform, or otherwise modify any agreement relating to the collateral
securing this Note, shall also be arbitrated, provided however that no
arbitrator shall have the right or the power to enjoin or restrain any act of
any party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Note shall preclude any
party from seeking equitable relief from a court of competent jurisdiction.
The statute of limitations, estoppel, waiver, laches, and similar doctrines
which would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for these
purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
REFERENCE RATE. The Reference Rate is a benchmark which Centennial Bank
establishes from time to time and uses to compute an appropriate rate of
interest for a particular loan contract. Generally, this benchmark rate is
based on numerous factors, including the Bank's supply of funds, its cost of
funds, its administration costs and competition from other suppliers of credit.
THE REFERENCE RATE, THEREFORE, IS ONLY ONE REFERENCE DEVICE OF SEVERAL USED BY
CENTENNIAL BANK TO PRICE LOANS. The interest rate actually charged to a
customer for a specific loan may be above or below Centennial Bank's reference
Rate; that actual rate will be determined based on several variables, including
perceived risks, nature of collateral, length and size of loan, competition and
the overall customer relationship.
FINANCIAL INFORMATION. Borrower promises to provide such current financial
information as Lender, from time to time, requests.
GENERAL PROVISIONS. This 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 this 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 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.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE
NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
US TO BE ENFORCEABLE.
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:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
LENDER:
Centennial Bank
By: /s/ David Miller
---------------------------------------
Authorized Officer
===============================================================================
Variable Rate. Line of credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., 3.20
1995 CFI ProServices, Inc. All rights reserved. [OR-D20 ACADEMIC.LN C4.OVL]
<PAGE> 1
COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$750,000.00 06-28-1995 09-01-1996 145255 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between Academic Book
Center, Inc. (referred to below as "Grantor"); and Centennial 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 terms 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 this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, contract rights, equipment and
general intangibles, together with the following specifically described
property: including but not limited to all export inventory.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether 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
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right title, and interest in and to all Computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
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 Academic Book Center, Inc., 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 addition, 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 Centennial Bank, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated June 28,
28, 1995, in the principal amount of $750,000.00 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 with the Indebtedness.
RIGHT OF SETOFF. 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, excluding however all IRA, Keogh, and trust accounts.
Grantor authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
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
<PAGE> 2
06-28-1995 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
===============================================================================
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 this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, contract rights, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with is terms, is genuine, and
complies 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 account
shall be a good and valid account representing an undisputed, bona fide
indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or 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 its business, Grantor shall not remove the
Collateral from its existing locations without the prior written 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 locations 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 Oregon, 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 part 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 affecting 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 Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used 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 Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901,
et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof of and
asbestos. The representations 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 Environmental Laws and
(b) agrees to indemnify and hold harmless Lender against any and all claims
and losses resulting from a breach of
<PAGE> 3
06-28-1995 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
===============================================================================
this provision of this Agreement, or as a result of a violation of any
Environmental Laws. 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 Lender's
interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before 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 determine, as applicable,
the cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts and above in the
paragraph titled "Transactions Involving Collateral", 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 paid 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 part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against 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.
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.
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 all the rights of
<PAGE> 4
06-28-1995 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
===============================================================================
a secured party under the Oregon 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 certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in 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 unless Grantor has signed, after an Event of Default occurs, a
statement renouncing or modifying Grantor's right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given
at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. 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, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage
of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Clackamas County, State of Oregon. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Grantor agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of
the American Arbitration Association, upon request of either party. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Agreement shall preclude
any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including 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 for 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 this 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
<PAGE> 5
06-28-1995 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
===============================================================================
shall mean each and every Grantor. This means that each of the persons
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 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. 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, sue 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 institute 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. This 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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
Waiver of Co-Obligor's Rights. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes
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.
POWER OF ATTORNEY. Borrower does hereby make, constitute and appoint Bank its
irrevocable, true and lawful attorney with power: (a) to receive, open and
dispose of all mail addressed to Borrower; (b) to endorse the name of Borrower
upon all checks or other evidences of payment that may come into possession of
Bank upon the Collateral; (c) to endorse the name of the undersigned upon any
document or instrument relating to the Collateral; (d) in its name or otherwise
to demand, sue for, collect and give acquittances for any and all monies due or
to become due upon the Collateral; (e) to compromise, prosecute, or defend any
action, claim or proceeding with respect thereto, and (f) to do any and all
things necessary and proper to carry out the purpose herein contemplated.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 28,
1995.
GRANTOR:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.19(c) 1985 CFI ProServices, Inc.
All rights reserved. [OR-E40 ACADEMIC.LN C4.OVL]
<PAGE> 1
COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$750,000.00 06-28-1995 09-01-1996 145255 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
Grantor: Book Centers, Inc.
5600 NE Hassalo Street
Portland, OR 97213
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into among Academic Book Center,
Inc. (referred to below as "Borrower"); Book Centers, Inc. (referred to below
as "Grantor"); and Centennial 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 terms 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 this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation Academic Book Center, Inc.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All accounts and general intangibles, together with the following
specifically described property: Including but not limited to the Life
Insurance Policy issued by Minnesota Mutual Life Insurance Company
#1-960-243 insuring the life of Daniel P. Halloran.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All accessions, accessories, 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
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
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 Book Centers, Inc. Any Grantor who
signs this Agreement, but does not sign the Note, is signing this Agreement
only to grant a security interest in Grantor's Interest in the Collateral
to Lender and is not personally liable under the Note except as otherwise
provided by contract or law (e.g., personal liability under a guaranty or
as a surety).
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 or Borrower is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" includes all other obligations, debts and
liabilities, plus interest thereon, of Borrower, or any one or more of
them, to Lender, as well as all claims by Lender against Borrower, 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 Borrower may be liable
individually or jointly with others; whether Borrower 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 Centennial Bank, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated June 28,
1995, in the principal amount of $750,000.00 from Borrower 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 with the Indebtedness.
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (a) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (b) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (c) Borrower waives any defenses that may
arise because of any action or inaction of Lender including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the
<PAGE> 2
06-28-1995 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
===============================================================================
Collateral; and Borrower agrees to remain liable under the Note no matter what
action Lender takes or fails to take under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Agreement is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender; (c) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (d) Lender has made no representation
to Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or non-payment to Grantor, Borrower, or any
other party to the Indebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without first
obtaining the consent of Grantor: (a) grant any extension of time for any
payment, (b) grant any renewal, (c) permit any modification of payment terms or
other terms, or (d) exchange or release any Collateral or other security. No
such act or failure to act shall affect Lender's rights against Grantor or the
Collateral.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Grantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Grantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Grantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal bankruptcy laws.
RIGHT OF SETOFF. 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, excluding however all IRA, Keogh, and trust accounts.
Grantor authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
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 Borrower 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 this 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 complies 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 account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
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.
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 locations 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 Oregon, 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.
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. 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 part 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 affecting 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 Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that
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could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obligee under any surety bond furnished in the
contest proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used 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 Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901,
et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos.
The representations 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 Environmental 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, or as a
result of a violation of any Environmental Laws. 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 Lender's
interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before 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 determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts and above in the
paragraph titled "Transactions Involving Collateral", 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 Borrower to make any payment when due
on the Indebtedness.
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Other Defaults. Failure of Grantor or Borrower 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 failure of Borrower to
comply with or to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower.
Insolvency. The dissolution or termination of Grantor or Borrower's
existence as a going business, the insolvency of Grantor or Borrower, the
appointment of a receiver for any part of Grantor or Borrower'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 or Borrower.
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 Borrower or
by any governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of Grantor
or Borrower's deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Grantor or Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor or Borrower gives Lender
written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding,
In an amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to 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 Borrower'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 all the rights of a
secured party under the Oregon Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Borrower would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in 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 unless Grantor has signed, after an Event of Default occurs, a
statement renouncing or modifying Grantor's right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given
at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. 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, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not Indebtedness or Collateral is then due. For those purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage
of any Collateral to facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Borrower for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Borrower shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
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 or Borrower under this
Agreement, after Grantor or Borrower'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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Grantor and
Borrower agree upon Lender's request to submit to the jurisdiction of the
courts of Washington County, State of Oregon. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Grantor and Borrower agree that all disputes,
claims and controversies between them, whether individual, joint, or class
in nature, arising from this Agreement or otherwise, including without
limitation contract and tort disputes, shall be arbitrated
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pursuant to the Rules of the American Arbitration Association, upon request
of either party. No act to take or dispose of any Collateral shall
constitute a waiver of this arbitration agreement or be prohibited by this
arbitration agreement. This includes, without limitation, obtaining
injunctive relief or a temporary restraining order; foreclosing by notice
and sale under any deed of trust or mortgage; obtaining a writ of
attachment or imposition of a receiver; or exercising any rights relating
to personal property, including taking or disposing of such property with
or without judicial process pursuant to Article 9 of the Uniform Commercial
Code. Any disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any
Collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the Collateral, shall also be arbitrated, provided
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of any party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. Nothing in
this Agreement shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable
in an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
Attorneys' Fees; Expenses. Grantor and Borrower agree to pay upon demand
all of Lender's costs and expenses, including 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 and Borrower shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor and Borrower also shall pay all
court costs and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor and
Borrower under this Agreement shall be joint and several, and all
references to Borrower shall mean each and every Borrower, 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 or Borrower, notice to any Grantor or Borrower will constitute
notice to all Grantor and Borrowers. For notice purposes, Grantor or
Borrower agrees to keep Lender informed at all times of Grantor or
Borrower'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, sue 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 institute 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. This 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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
Waiver of Co-Obliger's Rights. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes
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.
<PAGE> 6
06-28-1995 COMMERCIAL SECURITY AGREEMENT Page 6
(Continued)
===============================================================================
BORROWER AND GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND BORROWER AND GRANTOR AGREE TO ITS TERMS.
THIS AGREEMENT IS DATED JUNE 28, 1995.
BORROWER:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
GRANTOR:
Book Centers, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.20(c) l995 CFI ProServices, Inc.
All rights reserved. [OR-E40 ACADEMIC.LN C4.OVL]
<PAGE> 1
COMMERCIAL PLEDGE AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$750,000.00 06-28-1995 09-01-1996 145255 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
Grantor: Book Centers, Inc.
5600 NE Hassalo Street
Portland, OR 97213
===============================================================================
THIS COMMERCIAL PLEDGE AGREEMENT is entered into among Academic Book Center,
Inc. (referred to below as "Borrower"); Daniel P. Halloran and Karen M.
Halloran (referred to below as "Grantor"); and Centennial Bank (referred to
below as "Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by
law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement:
Agreement. The word "Agreement" means this Commercial Pledge Agreement, as
this Commercial Pledge Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Pledge Agreement from time to time.
Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation Academic Book Center, Inc.
Collateral. The word "Collateral" means the following specifically
described property, which Grantor has delivered or agrees to deliver (or
cause to be delivered or appropriate book-entries made) immediately to
Lender, together with all Income and Proceeds as described below:
$110247.72 of The Vanguard Group, consisting of the following Account
Numbers; 986757941, 9874211398, 9866757501 as of March 31, 1995
In addition, the word "Collateral" includes all property of Grantor
(however owned), in the possession of Lender (or in the possession of a
third party subject to the control of Lender), whether now or hereafter
existing and whether tangible or intangible in character, including without
limitation each of the following:
(a) All property to which Lender acquires title or documents of title.
(b) All property assigned to Lender.
(c) All promissory notes, bills of exchange, stock certificates,
bonds, savings passbooks, time certificates of deposit, insurance
policies, and all other instruments and evidences of an obligation.
(d) All records relating to any of the property described in this
Collateral section, whether in the form of a writing, microfilm,
microfiche, or 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 Daniel P. Halloran and Karen M.
Halloran. Any Grantor who signs this Agreement, but does not sign the
Note, is signing this Agreement only to grant a security interest in
Grantor's interest in the Collateral to Lender and is not personally liable
under the Note except as otherwise provided by contract or law (e.g.,
personal liability under a guaranty or as a surety).
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
Income and Proceeds. The words "Income and Proceeds" mean all present and
future income, proceeds, earnings, increases, and substitutions from or for
the Collateral of every kind and nature, including without limitation all
payments, interest, profits, distributions, benefits, rights, options,
warrants, dividends, stock dividends, stock splits, stock rights,
regulatory dividends, distributions, subscriptions, monies, claims for
money due and to become due, proceeds of any insurance on the Collateral,
shares of stock of different par value or no par value issued in
substitution or exchange for shares included in the Collateral, whether
voluntary or involuntary, by agreement or by operation of law, and all
other property Grantor is entitled to receive on account of such
Collateral, including accounts, contract rights, documents, instruments,
chattel paper, and general intangibles.
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 Borrower or Grantor is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" includes all other obligations, debts
and liabilities, plus interest thereon, of Borrower, or any one or more of
them, to Lender, as well as all claims by Lender against Borrower, 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 Borrower may be liable
individually or jointly with others; whether Borrower 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 Centennial Bank, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated June 28,
1995, in the principal amount of $750,000.00 from Borrower to Lender,
together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
Obligor. The word "Obliger" means and includes without limitation any and
all persons or entities obligated to pay money or to perform some other act
under the Collateral.
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 with the Indebtedness.
<PAGE> 2
06-28-1995 COMMERCIAL PLEDGE AGREEMENT Page 2
(Continued)
===============================================================================
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (a) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (b) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (c) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Agreement is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender; (c) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (d) Lender has made no representation
to Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or non-payment to Grantor, Borrower, or any
other party to the Indebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without first
obtaining the consent of Grantor: (a) grant any extension of time for any
payment, (b) grant any renewal, (c) permit any modification of payment terms or
other terms, or (d) exchange or release any Collateral or other security. No
such act or failure to act shall affect Lender's rights against Grantor or the
Collateral.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Grantor hereby forever waives and relinquishes in favor of
Lender and Borrower, and their respective successors, any claim or right to
payment Grantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Grantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal bankruptcy laws.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.
Grantor represents and warrants to Lender that:
Ownership. Grantor is the lawful owner of the Collateral free and clear of
all security interests, liens, encumbrances, registered pledges, adverse
claims, and any other claims of others except as disclosed to and accepted
by Lender in writing prior to execution of this Agreement.
Right to Pledge. Grantor has the full right, power and authority to enter
into this Agreement and to pledge the Collateral.
Binding Effect. This Agreement is binding upon Grantor, as well as
Grantor's heirs, successors, representatives and assigns, and is legally
enforceable in accordance with its terms.
No Further Assignment. Grantor has not, and will not, sell, assign,
transfer, encumber or otherwise dispose of any of Grantor's rights in the
Collateral except as provided in this Agreement.
No Defaults. There are no defaults existing under the Collateral, and
there are no offsets or counterclaims to the same. Grantor will strictly
and promptly perform each of the terms, conditions, covenants and
agreements contained in the Collateral which are to be performed by
Grantor, if any.
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.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO COLLATERAL. Lender may hold
the Collateral until all the Indebtedness has been paid and satisfied and
thereafter may deliver the Collateral to any Grantor. Lender shall have the
following rights in addition to all other rights it may have by law:
Maintenance and Protection of Collateral. Lender may, but shall not be
obligated to, take such steps as it deems necessary or desirable to
protect, maintain, insure, control, receive, or manage the Collateral,
including payment of any liens or claims against the Collateral. Lender
may charge any cost incurred in so doing to Grantor.
Income and Proceeds from the Collateral. Lender may receive all Income and
Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender
immediately upon receipt, in the exact form received and without
commingling with other property, all Income and Proceeds from the
Collateral which may be received by, paid, or delivered to Grantor or for
Grantor's account, whether as an addition to, in discharge of, in
substitution of, or in exchange for any of the Collateral.
Application of Cash. At Lender's option, Lender may apply any cash,
whether included in the Collateral or received as Income and Proceeds or
through liquidation, sale, retirement, split up, dividend, distribution, or
other disposition of the Collateral, to the satisfaction of the
Indebtedness or such portion thereof as Lender shall choose, whether or not
matured.
Transactions with Others. Lender may (a) extend time for payment or other
performance, (b) grant a renewal or change in terms or conditions, or (c)
compromise, compound or release any obligation, with any one or more
Obligors, endorsers, or Guarantors of the Indebtedness as Lender deems
advisable, without obtaining the prior written consent of Grantor, and no
such act or failure to act shall affect Lender's rights against Grantor or
the Collateral.
All Collateral Secures Indebtedness. All Collateral shall be security for
the Indebtedness, whether the Collateral is located at one or more offices
or branches of Lender and whether or not the office or branch where the
Indebtedness is created is aware of or relies upon the Collateral.
Collection of Collateral. Lender, at Lender's option may, but need not,
collect directly from the Obligors on any of the Collateral all Income and
Proceeds or other sums of money and other property due and to become due
under the Collateral, and Grantor authorizes and directs the Obligors, if
Lender exercises such option, to pay and deliver to Lender all Income and
Proceeds and other sums of money and other property payable by the terms of
the Collateral and to accept Lender's receipt for the payments.
Power of Attorney. Grantor irrevocably appoints Lender as Grantor's
attorney-in-fact, with full power of substitution, (a) to demand, collect,
receive, receipt for, sue and recover all Income and Proceeds and other
sums of money and other property which may now or hereafter become due,
owing or payable from the Obligors in accordance with the terms of the
Collateral; (b) to execute, sign and endorse any and all instruments,
receipts, checks, drafts and 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, execute and deliver
Grantor's release and acquittance for Grantor; (d) to file any claim or
claims or to take any action or institute or take part in any proceedings,
either in Lender's own name or in the name of Grantor, or otherwise, which
in the discretion of Lender may seem to be necessary or advisable; and (e)
to execute in Grantor's name and to deliver to the Obligors on Grantor's
behalf, at the time and in the manner specified by the Collateral, any
necessary instruments or document.
Perfection of Security Interest. Upon request of Lender, Grantor will
deliver to Lender any and all of the documents evidencing or constituting
the Collateral. If the Collateral consists of securities for which no
certificate has been issued, Grantor agrees, at Lender's option, either to
request issuance of an appropriate certificate or to execute appropriate
instructions on Lender's forms instructing the issuer, transfer agent,
mutual fund company, or broker, as the case may be, to record on its books
or records, by book-entry, initial transaction statement, registered
pledge, or otherwise, Lender's security interest in the Collateral.
Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect or to
continue the security interest granted in this Agreement. This is a
continuing Security Agreement and will continue in effect even though all
or any part of the Indebtedness is paid in full and even though for a
period of time Borrower may not be indebted to Lender.
<PAGE> 3
06-28-1995 COMMERCIAL PLEDGE AGREEMENT Page 3
(Continued)
===============================================================================
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.
LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable
care in the physical preservation and custody of the Collateral in Lender's
possession, but shall have no other obligation to protect the Collateral or its
value. In particular, but without limitation, Lender shall have no
responsibility for (a) any depreciation in value of the Collateral or for the
collection or protection of any Income and Proceeds from the Collateral, (b)
preservation of rights against parties to the Collateral or against third
persons, (c) ascertaining any maturities, calls, conversions, exchanges,
offers, tenders, or similar matters relating to any of the Collateral, or (d)
informing Grantor about any of the above, whether or not Lender has or is
deemed to have knowledge of such matters. Except as provided above, Lender
shall have no liability for depreciation or deterioration of the Collateral.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Indebtedness.
Other Defaults. Failure of Borrower or 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 failure of Borrower to
comply with or to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower.
Insolvency. The dissolution or termination of Borrower or Grantor's
existence as a going business, the insolvency of Borrower or Grantor, the
appointment of a receiver for any part of Borrower or Grantor's property,
any assignment for the benefit of creditors, any type of creditor workout,
or the commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower or Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help
repossession or any other method, by any creditor of Borrower or Grantor or
by any governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of Borrower
or Grantor's deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Borrower or Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower or Grantor gives Lender
written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding,
in an amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to 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 chance occurs in Borrower'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.
Failure To Register. Failure of the issuer, transfer agent, mutual fund
company, or broker, as the case may be, to furnish a written statement to
Lender recording Lender's security interest to the security, or the
identification of any adverse claim that may interfere with Lender's
security interest in the Collateral.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender may exercise any one or more of the
following rights and remedies:
Accelerate Indebtedness. Declare all Indebtedness, including any
prepayment penalty which Borrower would be required to pay, immediately due
and payable, without notice of any kind to Borrower or Grantor.
Collect the Collateral. Collect any of the Collateral and, at Lender's
option and to the extent permitted by applicable law, retain possession of
the Collateral while suing on the Indebtedness.
Sell the Collateral. Sell the Collateral, at Lender's discretion, as a
unit or in parcels, at one or more public or private sales. Unless the
Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market, Lender shall give or mail
to Grantor, or any of them, notice at least ten (10) days in advance of the
time and place of any public sale, or of the date after which any private
sale may be made unless Grantor has signed after an Event of Default
occurs, a statement renouncing or modifying Grantor's right to notification
of sale. Grantor agrees that any requirement of reasonable notice is
satisfied if Lender mails notice by ordinary mail addressed to Grantor, or
any of them, at the last address Grantor has given Lender in writing. If a
public sale is held, there shall be sufficient compliance with all
requirements of notice to the public by a single publication in any
newspaper of general circulation in the county where the Lender is located,
setting forth the time and place of sale and a brief description of the
property to be sold. Lender may be a purchaser at any public sale.
Register Securities. Register any securities included in the Collateral in
Lender's name and exercise any rights normally incident to the ownership of
securities.
Sell Securities. Sell any securities included in the Collateral in a
manner consistent with applicable federal and state securities laws,
notwithstanding any other provision of this or any other agreement. If,
because of restrictions under such laws, Lender is or believes it is unable
to sell the securities in an open market transaction, Grantor agrees that
Lender shall have no obligation to delay sale until the securities can be
registered, and may make a private sale to one or more persons or to a
restricted group of persons, even though such sale may result in a price
that is less favorable than might be obtained in an open market
transaction, and such a sale shall be considered commercially reasonable.
If any securities held as Collateral are "restricted securities" as defined
in the Rules of the Securities and Exchange Commission (such as Regulation
D or Rule 144) or state securities departments under state "Blue Sky" laws,
or if Borrower or Grantor is an affiliate of the issuer of the securities,
Borrower and Grantor agree that neither Grantor nor any member of Grantor's
family will sell or dispose of any securities of such issuer without
obtaining Lender's prior written consent.
Foreclosure. Maintain a judicial suit for foreclosure and sale of the
Collateral.
Transfer Title. Effect transfer of title upon sale of all or part of the
Collateral. For this purpose, Grantor irrevocably appoints Lender as its
attorney-in-fact to execute endorsements, assignments and instruments in
the name of Grantor and each of them (if more than one) as shall be
necessary or reasonable.
Other Rights and Remedies. Have and exercise any or all of the rights and
remedies of a secured creditor under the provisions of the Uniform
<PAGE> 4
06-28-1995 COMMERCIAL PLEDGE AGREEMENT Page 4
(Continued)
===============================================================================
Commercial Code, at law, in equity, or otherwise.
Application of Proceeds. Apply any cash which is part of the Collateral,
or which Is received from the collection or sale of the Collateral, to
reimbursement of any expenses, including any costs for registration of
securities, commissions incurred in connection with a sale, attorney fees
as provided below, and court costs, whether or not there is a lawsuit and
including any fees on appeal, incurred by Lender in connection with the
collection and sale of such Collateral and to the payment of the
Indebtedness of Borrower to Lender, with any excess funds to be paid to
Grantor as the interests of Grantor may appear. Borrower agrees, to the
extent permitted by law, to pay any deficiency after application of the
proceeds of the Collateral to the Indebtedness.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement 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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Borrower and
Grantor agree upon Lender's request to submit to the Jurisdiction of the
courts of Washington County, the State of Oregon subject to the provisions
on arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Borrower and Grantor agree that all disputes,
claims and controversies between them, whether individual, joint, or class
in nature, arising from this Agreement or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to the
Rules of the American Arbitration Association, upon request of either
party. No act to take or dispose of any Collateral shall constitute a
waiver of this arbitration agreement or be prohibited by this arbitration
agreement. This includes, without limitation, obtaining injunctive relief
or a temporary restraining order; foreclosing by notice and sale under any
deed of trust or mortgage; obtaining a writ of attachment or imposition of
a receiver; or exercising any rights relating to personal property,
including taking or disposing of such property with or without judicial
process pursuant to Article 9 of the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any
Collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the Collateral, shall also be arbitrated, provided
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of any party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. Nothing in
this Agreement shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable
in an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
Attorneys' Fees; Expenses. Borrower and Grantor agree to pay upon demand
all of Lender's costs and expenses, including 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
Borrower and Grantor shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower and Grantor also shall pay all
court costs and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower and
Grantor under this Agreement shall be joint and several, and all references
to Borrower shall mean each and every Borrower, 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
Borrower or Grantor, notice to any Borrower or Grantor will constitute
notice to all Borrower and Grantors. For notice purposes, Borrower or
Grantor agrees to keep Lender informed at all times of Borrower or
Grantor's current address(es).
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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
<PAGE> 5
06-28-1995 COMMERCIAL PLEDGE AGREEMENT Page 5
(Continued)
===============================================================================
BORROWER AND EACH GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
PLEDGE AGREEMENT, AND BORROWER AND EACH GRANTOR AGREE TO ITS TERMS. THIS
AGREEMENT IS DATED JUNE 28, 1995.
BORROWER:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
GRANTOR:
X /s/ Daniel P. Halloran X
--------------------------------------- ---------------------------
Daniel P. Halloran Karen M. Halloran
===============================================================================
LASER PRO, Reg. U.S. Pat & T.M. Off. Ver. 320(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E60 ACADEMIC.LN C4.OVL]
<PAGE> 1
AGREEMENT TO PROVIDE INSURANCE
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$750,000.00 06-28-1995 09-01-1996 145255 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
INSURANCE REQUIREMENTS. Academic Book Center, Inc. ("Grantor") understands
that insurance coverage is required in connection with the extending of a loan
or the providing of other financial accommodations to Grantor by Lender. These
requirements are set forth in the security documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory and Equipment, including but not limited to all
export inventory.
Type. All risks, including fire, theft and liability.
Amount. Full insurable value.
Basis. Replacement value.
Endorsements. Lender's loss payable cause with stipulation that coverage
will not be cancelled or diminished without a minimum of ten (10) days'
prior written notice to Lender.
Deductibles. $1,000.00.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, ten (10)
days from the date of this Agreement, evidence of the required insurance as
provided above, with an effective date of June 28, 1995, or earlier. Grantor
acknowledges and agrees that if Grantor fails to provide any required insurance
or fails to continue such insurance in force, Lender may do so at Grantor's
expense as provided in the applicable security document. The cost of any such
insurance, at the option of Lender, shall be payable on demand or shall be
added to the indebtedness as provided in the security document. GRANTOR
ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL
PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE
BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE
INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR
PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 28,
1995.
GRANTOR:
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
FOR LENDER USE ONLY
INSURANCE VERIFICATION
DATE: _________________ PHONE: ____________________
AGENT'S NAME: ____________________________________________________________
INSURANCE COMPANY: _______________________________________________________
POLICY NUMBER: __________________________________________________________
EFFECTIVE DATES: ________________________________________________________
COMMENTS: _______________________________________________________________
===============================================================================
LASER PRO, Reg. U.S. Pat & T.M. Off., Ver. 3.19(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-I10 ACADEMIC.LN C4.OVL]
<PAGE> 1
LOAN AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$650,000.00 06-28-1995 06-28-1996 145450 55 0010 089
Initials
/s/ DM
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
THIS LOAN AGREEMENT between Academic Book Center, Inc. ("Borrower") and
Centennial Bank ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of June 28, 1995, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
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 terms 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 this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement from time to time.
Account. The word "Account" means a trade account, account receivable, or
other right to payment for goods sold or services rendered owing to
Borrower (or to a third party grantor acceptable to Lender).
Account Debtor. The words "Account Debtor" mean the person or entity
obligated upon an Account Advance. The word "Advance" means a disbursement
of Loan funds under this Agreement.
Borrower. The word "Borrower" means Academic Book Center, Inc. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
Borrowing Base. The words "Borrowing Base" mean, as determined by Lender
from time to time, the lesser of (a) $650,000.00; or (b) 60.000% of the
aggregate amount of Eligible Foreign Accounts.
Business Day. The words "Business Day" mean a day on which commercial
banks are open for business in the State of Oregon.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise. The
word "Collateral" includes without limitation all collateral described
below in the section titled "COLLATERAL."
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable
to Lender. The net amount of any Eligible Account against which Borrower
may borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by Lender in writing, Eligible
Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer,
an employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders,
officers, or directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
(d) [omitted].
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account
Debtor.
(g) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account Debtor
to be unsatisfactory.
(h) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under
any provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian,
or receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or
fails generally to pay its debts (including its payrolls) as such debts
become due.
(i) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(j) Accounts over 90 days from date of invoice. The entire balance of
any single Account Debtor will be ineligible whenever the portion of
the Account past due 90 days is in excess of 25.00% of the total amount
on the Account.
<PAGE> 2
06-28-1995 LOAN AGREEMENT Page 2
(Continued)
===============================================================================
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
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."
Expiration Date. The words "Expiration Date" mean the date of termination
of Lender's commitment to lend under this Agreement.
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surety, 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 Centennial Bank, its successors and
assigns.
Line of Credit. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
Indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets.
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 with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1988 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean Indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to Indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
Conditions Precedent to Each Advance. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is subject
to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in
form and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall
be in full force and effect.
(d) All guaranties required by Lender for the Line of Credit shall
have been executed by each Guarantor, delivered to Lender, and be in
full force and effect.
(e) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, books, records, and
operations, and Lender shall be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due
and payable.
(g) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement, and Borrower
shall have delivered to Lender the compliance certificate called for in
the paragraph below titled "Compliance Certificate."
<PAGE> 3
06-28-1995 LOAN AGREEMENT Page 3
(Continued)
===============================================================================
Making Loan Advances. Advances under the Line of Credit may be requested
only in writing by authorized persons. Each Advance shall be conclusively
deemed to have been made at the request of and for the benefit of Borrower
(a) when credited to any deposit account of Borrower maintained with Lender
or (b) when advanced in accordance with the instructions of an authorized
person. Lender, at its option, may set a cutoff time, after which all
requests for Advances will be treated as having been requested on the next
succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount
of the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. On the Expiration Date,
Borrower shall pay to Lender in full the aggregate unpaid principal amount
of all Advances then outstanding and all accrued unpaid interest, together
with all other applicable fees, costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the credit facility.
Lender shall provide Borrower with periodic statements of Borrower's
account, which statements shall be considered to be correct and
conclusively binding on Borrower unless Borrower notifies Lender to the
contrary within thirty (30) days after Borrower's receipt of any such
statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require (the "Collateral"), including without
limitation Borrower's present and future Accounts and general intangibles.
Lender's Security Interests in the Collateral shall be continuing liens and
shall include the proceeds and products of the Collateral, including without
limitation the proceeds of any insurance. With respect to the Collateral,
Borrower agrees and represents and warrants to Lender:
Perfection of Security Interests. Borrower agrees to execute such
financing statements and to take whatever other actions are requested by
Lender to perfect and continue Lender's Security Interests in the
Collateral. Upon request of Lender, Borrower will deliver to Lender any
and all of the documents evidencing or constituting the Collateral, and
Borrower will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender. Contemporaneous with the
execution of this Agreement, Borrower will execute one or more UCC
financing statements and any similar statements as may be required by
applicable law, and will file such financing statements and all such
similar statements in the appropriate location or locations. Borrower
hereby appoints Lender as its irrevocable attorney-in-fact for the purpose
of executing any documents necessary to perfect or to continue any Security
Interest. Lender may at any time, and without further authorization from
Borrower, file a carbon, photograph, facsimile, or other reproduction of
any financing statement for use as a financing statement. Borrower will
reimburse Lender for all expenses for the perfection, termination, and the
continuation of the perfection of Lender's Security Interest in the
Collateral. Borrower promptly will notify Lender of any change in
Borrower's name including any change to the assumed business names of
Borrower. Borrower also promptly will notify Lender of any change in
Borrower's Social Security Number or Employer Identification Number.
Borrower further agrees to notify Lender in writing prior to any change in
address or location of Borrower's principal governance office or should
Borrower merge or consolidate with any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. With respect to the
Accounts, Borrower agrees to keep and maintain such records as Lender may
require, including without limitation information concerning Eligible
Accounts and Account balances and agings.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of
Accounts and Eligible Accounts, in form and substance satisfactory to the
Lender. Thereafter and at such frequency as Lender shall require, Borrower
shall execute and deliver to Lender such supplemental schedules of Eligible
Accounts and such other matters and information relating to Borrower's
Accounts as Lender may request.
Representations and Warranties Concerning Accounts. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account information listed on schedules delivered
to Lender will be true and correct, subject to immaterial variance; and
(c) Lender, its assigns, or agents shall have the right at any time and at
Borrower's expense to inspect, examine, and audit Borrower's records and
to confirm with Account Debtors the accuracy of such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Oregon and is
validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except for Permitted Liens, Borrower owns and has good title
to all of Borrower's properties free and clear of all Security Interests,
and has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," 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., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). Except as disclosed to
and acknowledged by Lender in writing, Borrower represents and warrants
that: (a) During the period of Borrower's ownership of the properties,
there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or substance
by any person on, under, about or from any of the properties. (b) Borrower
has no knowledge of, or reason to believe that there has been (i) any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on,
<PAGE> 4
06-28-1995 LOAN AGREEMENT Page 4
(Continued)
===============================================================================
under, about or from the properties by any prior owners or occupants of any
of the properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (c) Neither Borrower nor
any tenant, contractor, agent or other authorized user of any of the
properties shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, about or from any of
the properties; and any such activity shall be conducted in compliance with
all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation Environmental Laws. Borrower authorizes
Lender and its agents to enter upon the properties to make such inspections
and tests as Lender may deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspections or tests
made by Lender shall be at Borrower's expense and for Lender's purposes
only and shall not be construed to create any responsibility or liability
on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's due
diligence in investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower 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, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's
ownership or interest in the properties, whether or not the same was or
should have been known to Borrower, or as a result of a violation of any
Environmental Laws. The provisions of this section of the Agreement,
including the obligation to indemnify, shall survive the payment of the
Indebtedness and the termination or expiration of this Agreement and shall
not be affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable Event
nor Prohibited Transaction (as defined In ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to terminate
any such plan.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 5600 NE Hassalo Street, Portland, OR 97213.
Unless Borrower has designated otherwise in writing this location is also
the office or offices where Borrower keeps its records concerning the
Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full force and
effect until such time as Borrower's Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than one hundred five (105) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than twenty five (25) days after
the end of each month. Borrower's balance sheet and profit and loss
statement for the period ended, prepared and certified as correct to the
best knowledge and belief by Borrower's chief financial officer or other
officer or person acceptable to Lender. All financial reports required to
be provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other
reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios: Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph shall be made
in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, 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. 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
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a Security Interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
<PAGE> 5
06-28-1995 LOAN AGREEMENT Page 5
(Continued)
===============================================================================
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Guaranties. Prior to disbursement of any Loan proceeds, furnish executed
guaranties of the Loans in favor of Lender, on Lender's forms, and in the
amounts and by the guarantors named below:
Guarantors Amounts
---------- -------
Karen M. Halloran Unlimited
Carol A. Fast Unlimited
Book Centers, Inc. Unlimited
Daniel P. Halloran Unlimited
Barry E. Fast Unlimited
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties.
income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances; not cause or permit to exist, as a
result of an intentional or unintentional action or omission on its part or
on the part of any third party, on property owned and/or occupied by
Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Lender
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage
to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Capital Expenditures. Make or contract to make capital expenditures,
including leasehold improvements, in any fiscal year in excess of
$50,000.00 or incur liability for rentals of property (including both real
and personal property) in an amount which, together with capital
expenditures, shall in any fiscal year exceed such sum.
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume Indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a Security Interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes
<PAGE> 6
06-28-1995 LOAN AGREEMENT Page 6
(Continued)
===============================================================================
and make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders
of a Subchapter S Corporation because of their ownership of shares of stock
of Borrower, or (d) purchase or retire any of Borrower's outstanding shares
or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b)Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender; or (e) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.
COLLECTION PROCEDURES. All payments, whether in cash or by check or other
instrument received by Borrower from the Account Debtors shall be deposited in
a separate account maintained only for the deposit of such funds ("Cash
Collateral Account") at the Lender's designated branch. The Cash Collateral
Account will be under the control of the Lender. Lender will, from time to
time, withdraw the entire collected balance in the Cash Collateral Account and
apply the same to the Borrower's indebtedness. In the event payments received
by the Borrower are in denominations other than U.S. Dollars, these funds shall
not be applied to the Borrower's indebtedness until such time as these funds
have been converted to U.S. Dollars. In addition to the Cash Collateral
Account, Borrower shall maintain an Operating Account at the designated branch.
Items deposited into the Cash Collateral Account, which are returned unpaid for
any reason, will be charged against the Operating Account.
COLLATERAL EXAMS. Lender shall conduct semi-annual collateral exams at
Borrower's expense.
FINANCIAL COVENANTS AND RATIOS. Book Centers, Inc. shall comply with the
following covenants and ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less than
($775,000.00) until June 30, 1995. Achieve a minimum Tangible Net
Worth of not less than ($763,000.00) between July 1, 1995 and September 30,
1995. Achieve a minimum Tangible Net Worth of not less than ($726,000.00)
between October 1, 1995 and December 31, 1995. Achieve a minimum Tangible Net
Worth of not less than ($688,000.00) between January 1, 1996 and March 31,
1996. Achieve a minimum Tangible Net Worth of not less than ($650,000.00)
between April 1, 1996 and June 30, 1996.
Working Capital. Maintain Working Capital in excess of ($875,000.00) until
June 30, 1995. Achieve Working Capital in excess of ($863,000.00) between July
1, 1995 and September 30, 1995. Achieve Working Capital in excess of
($826,000.00) between October 1, 1996 and December 31, 1995. Achieve Working
Capital in excess of ($788,000.00) between January 1, 1996 and March 31, 1996.
Achieve Working Capital in excess of ($750,000.00) between April 1, 1996 and
June 30, 1996.
ADDITIONAL FINANCIAL STATEMENTS. Guarantors agree to furnish Lender with
annual personal financial statements and supporting tax returns.
ADDITIONAL FINANCIAL REPORTING. Borrower will furnish Lender with the
following:
Daily reporting of cash receipts and sales.
Monthly Accounts Receivable and Accounts Payable agings within 15 days of month
end.
Monthly Inventory listing.
Monthly reconcilement by Cascade Lender Service of the following: Accounts
Receivable Aging; Cash Receipts and Sales; Customer Deposit Report and
Cross-Aging of Borrower and affiliated companies. All service provisions to be
paid by Borrower.
ADDITIONAL COVENANTS.
The personal guaranty of Daniel P. Halloran shall be supported by a pledge of
$100,000.00 in publicly traded stock (exclusive of borrower).
The personal guaranty of Barry E. Fast shall be supported by a pledge of
$100,000.00 in publicly traded stock (exclusive of borrower).
RIGHT OF SETOFF. 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 IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on the Indebtedness against any and all
such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default On Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
Default In Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Borrower's property or Borrower's
or any Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on
or of any of Borrower's deposit accounts with Lender. However, this Event
of Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
<PAGE> 7
06-28-1995 LOAN AGREEMENT Page 7
(Continued)
===============================================================================
forfeiture proceeding and furnishes reserves or a surety bond for the
creditor or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes Incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. 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.
Change In Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower'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.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, 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 compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all Indebtedness immediately will become due and payable, all without notice of
any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies 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 Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights and 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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the Jurisdiction of the courts of
Washington County, the State of Oregon. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of
the American Arbitration Association, upon request of either party. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Agreement shall preclude
any party from seeking equitable relief from a court of competent
Jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the Borrowers
signing below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loan, and Borrower hereby waives any rights to
privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will
have all the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest
and unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may enforce
its interests irrespective of any personal claims or defenses that Borrower
may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant
to this Agreement. Lender may pay someone else to help collect the Loans
and to enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lenders legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy 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.
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
Borrower, notice to any Borrower will constitute notice to all Borrowers.
For
<PAGE> 8
06-28-1995 LOAN AGREEMENT Page 8
(Continued)
===============================================================================
notice purposes, Borrower agrees to keep Lender informed at all times of
Borrower's current address(es).
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.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Borrower, or between Lender and
any Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor 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 in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US (LENDER)
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE
NOT FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
US TO BE ENFORCEABLE.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT,
AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JUNE 28, 1995.
BORROWER:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
LENDER:
Centennial Bank
By: /s/ David Miller
---------------------------------------
Authorized Officer
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.20(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-C40 ACADEMIC.LN C4.OVL]
<PAGE> 1
U.S. Small Business Administration
SBA LOAN NUMBER
GP-EWCP 838500 30 06
NOTE
Tigard, Oregon
--------------------
(City and State)
$650,000.00 (Date) June 28, 1995
For value received, the undersigned promises to pay to the order of
Centennial Bank (Payee) at its office in the city of Tigard, State of Oregon or
at holder's option, at such other place as may be designated from time to time
by the holder Six Hundred Fifty Thousand and No/1OO dollars, with interest on
unpaid principal computed from the date of each advance to the undersigned at
the rate of (See page 4) percent per annum, payment to be made in installments
as follows:
See page 4.
If this Note contains a fluctuating interest rate, the notice provision is
not a pre-condition for fluctuation (which shall take place regardless of
notice). Payment of any installment of principal or interest owing on this
Note may be made prior to the maturity date thereof without penalty. Borrower
shall provide lender with written notice of intent to prepay part or all of
this loan at least three (3) weeks prior to the anticipated prepayment date. A
prepayment is any payment made ahead of schedule that exceeds twenty (20)
percent of the then outstanding principal balance. If borrower makes a
prepayment and fails to give at least three weeks advance notice of intent to
prepay, then, notwithstanding any other provision to the contrary in this note
or other document, borrower shall be required to pay lender three weeks
interest on the unpaid principal as of the date preceding such prepayment.
SBA Form 147 (5-87) Previous editions obsolete Page 1
<PAGE> 2
The term "Indebtedness" as used herein shall mean the indebtedness
evidenced by this Note, including principal, interest, and expenses, whether
contingent, now due or hereafter to become due and whether heretofore or
contemporaneously herewith or hereafter contracted. The term "Collateral" as
used in this Note shall mean any funds, guaranties, or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are, or hereafter may be, hypothecated, directly or indirectly by the
undersigned or others, in connection with, or as security for, the Indebtedness
or any part thereof. The Collateral, and each part thereof, shall secure the
Indebtedness and each part thereof. The covenants and conditions set forth or
referred to in any and all instruments of hypothecation constituting the
Collateral are hereby incorporated in this Note as covenants and conditions of
the undersigned with the same force and effect as though such covenants and
conditions were fully set forth herein.
The Indebtedness shall immediately become due and payable, without notice
or demand, upon the appointment of a receiver or liquidator, whether voluntary
or involuntary, for the undersigned or for any of its property, or upon the
filing of a petition by or against the undersigned under the provisions of any
State insolvency law or under the provisions of the Bankruptcy Reform Act of
1978, as amended, or upon the making by the undersigned of an assignment for
the benefit of its creditors. Holder is authorized to declare all or any part
of the Indebtedness immediately due and payable upon the happening of any of
the following events: (1) Failure to pay any part of the Indebtedness when
due; (2) nonperformance by the undersigned of any agreement with, or any
condition imposed by, Holder or Small Business Administration (hereinafter
called "SBA") with respect to the Indebtedness; (3) Holder's discovery of the
undersigned's failure in any application of the undersigned to Holder or SBA to
disclose any fact deemed by Holder to be material or of the making therein or
in any of the said agreements, or in any affidavit or other documents submitted
in connection with said application or the indebtedness, of any
misrepresentation by, on behalf of, or for the benefit of the undersigned; (4)
the reorganization (other than a reorganization pursuant to any of the
provisions of the Bankruptcy Reform Act of 1978, as amended) or merger or
consolidation of the undersigned (or the making of any agreement therefor)
without the prior written consent of Holder; (5) the undersigned's failure duly
to account, to Holder's satisfaction, at such time or times as Holder may
require, for any of the Collateral, or proceeds thereof, coming into the
control of the undersigned; or (6) the institution of any suit affecting the
undersigned deemed by Holder to affect adversely its interest hereunder in the
Collateral or otherwise. Holder's failure to exercise its rights under this
paragraph shall not constitute a waiver thereof.
Upon the nonpayment of the Indebtedness, or any part thereof, when due,
whether by acceleration or otherwise, Holder is empowered to sell, assign, and
deliver the whole or any part of the Collateral at public or private sale,
without demand, advertisement or notice of the time or place of sale or of any
adjournment thereof, which are hereby expressly waived. After deducting all
expenses incidental to or arising from such sale or sales, Holder may apply the
residue of the proceeds thereof to the payment of the Indebtedness, as it shall
deem proper, returning the excess, if any, to the undersigned. The undersigned
hereby waives all right of redemption or appraisement whether before or after
sale.
Holder is further empowered to collect or cause to be collected or
otherwise to be converted into money all or any part of the Collateral, by suit
or otherwise, and to surrender, compromise, release, renew, extend, exchange,
or substitute any item of the Collateral in transactions with the undersigned
or any third party, irrespective of any assignment thereof by the undersigned,
and without prior notice to or consent of the undersigned or any assignee.
Whenever any item of the Collateral shall not be paid when due, or otherwise
shall be in default, whether or not the indebtedness, or any part thereof, has
become due, Holder shall have the same rights and powers with respect to such
item of the Collateral as are granted in this paragraph in case of nonpayment
of the Indebtedness, or any part thereof, when due. None of the rights,
remedies, privileges, or powers of Holder expressly provided for herein shall
be exclusive, but each of them shall be cumulative with and in addition to
every other right, remedy, privilege, and power now or hereafter existing in
favor of Holder, whether at law or equity, by statute or otherwise.
The undersigned agrees to take all necessary steps to administer,
supervise, preserve, and protect the Collateral; and regardless of any action
taken by Holder, there shall be no duty upon Holder in this respect. The
undersigned shall pay all expenses of any nature, whether incurred in or out of
court, and whether incurred before or after this Note shall become due at its
maturity date or otherwise, including but not limited to reasonable attorney's
fees and costs, which Holder may deem necessary or proper in connection the
with the satisfaction of the Indebtedness or the administration, supervision,
preservation, protection of (including, but not limited to, the maintenance of
adequate insurance) or the realization upon the Collateral. Holder is
authorized to pay at any time and from time to time any or all of such
expenses, add the amount of such payment to the amount of the Indebtedness, and
charge interest thereon at the rate specified herein with respect to the
principal amount of this Note.
The security rights of Holder and its assigns hereunder shall not be
impaired by Holder's sale, hypothecation or rehypothecation of any note of the
undersigned or any item of the Collateral, or by any indulgence, including but
not limited to (a) any renewal, extension, or modification which Holder may
grant with respect to the Indebtedness or any part thereof, or (b) any
surrender, compromise, release, renewal, extension, exchange. or substitution
which Holder may grant in respect of the Collateral, or (c) any indulgence
granted in respect of any endorser, guarantor, or surety. The purchaser,
assignee, transferee, or pledgee of this Note, the Collateral, and guaranty,
and any other document (or any of them), sold, assigned, transferred, pledged,
or repledged, shall forthwith become vested with and entitled to exercise all
the powers and rights given by this Note and all applications of the
undersigned to Holder or SBA as if said purchaser, assignee, transferee, or
pledgee were originally named as Payee in this Note and in said application or
applications.
SBA Form 147 (5-87) Page 2
Page 4.
<PAGE> 3
This promissory note is given to secure a loan which SBA is making or in
which it is participating and, pursuant to Part 101 of the Rules and
Regulations of SBA (13 C.F.R. 1O1.1(d)), this instrument is to be construed and
(when SBA is the Holder or a party in interest) enforced in accordance with
applicable Federal law.
Academic Book Center, Inc.
/s/ Daniel P. Halloran
- -------------------------------------------
By: Daniel P. Halloran, President/Secretary
- -------------------------------------------
Note. -- Corporate applicants must execute Note, in corporate name, by
duly authorized officer, and seal must be affixed and duly attested;
partnership applicants must execute Note in firm name, together with signature
of a general partner.
SBA Form 147 (5-87) Page 3
U.S. GOVERNMENT PRINTING OFFICE : 1993 0 - 348-951
<PAGE> 4
1. The undersigned will pay regular monthly payments of accrued unpaid
interest, beginning ONE (1) month from date hereof.
2. The undersigned shall pay (from proceeds of financed transactions) ON
DEMAND, or if no demand, then on or before TWELVE (12) months from the
date of this Note the total principal amounts advanced by Lender from time
to time, plus interest as herein provided. No advance shall be made under
this Note if, as a result of such advance, the total principal amount
outstanding hereunder would exceed the sum of $650,000.00.
3. THIS IS A VARIABLE INTEREST RATE NOTE. Interest on each principal advance
shall accrue at the initial rate of ELEVEN AND ONE HALF percent (11.5%)
per annum. The interest rate will be adjusted in accordance with the
prime published in the Money Rate Section of the Western Edition of the
Wall Street Journal. The prime rate published as of May 12, 1995 in that
publication was nine percent (9%). The interest rate (spread) to be added
to the prime rate at the beginning of the adjustment period will be two
and one half percent (2.5%).
4. Each adjustment period will be 24 hours or less after the prime rate
change.
5. The Lender should give the undersigned and SBA written notice of any
change in the interest rate of this Note within thirty (30) days after the
effective date of any such change. The fluctuation of the interest rate
is not contingent on whether or not notice is given.
6. If the undersigned shall be in default in payment due on the indebtedness
herein and the Small Business Administration (SBA) purchases its
guaranteed portion of said indebtedness, the rate of interest on both the
guaranteed and unguaranteed portionless herein shall become fixed at the
rate in effect as of the first date of uncured default. If the
undersigned shall not be in default in payment when SBA purchases its
guaranteed portion, the rate of interest on both the guaranteed and
unguaranteed portion shall be fixed at the rate in effect as of the date
of purchase by SBA.
7. Upon prepayment of this Note, Lender is entitled to the following
prepayment privilege penalty: 1/2 of 1% of Note amount ($650,000.00).
There shall be no prepayment premium if the Note is paid in accordance
with its original terms.
Page 4
<PAGE> 1
COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$650,000.00 06-28-1995 06-28-1996 145450 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between Academic Book
Center, Inc. (referred to below as "Grantor"); and Centennial 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 terms 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 this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, contract rights, equipment and
general intangibles, together with the following specifically described
property: including but not limited to all export inventory.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether 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
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
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 Academic Book Center, Inc., 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 addition, 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 Centennial Bank, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated June 28,
1995, in the principal amount of $650,000.00 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 with the Indebtedness.
RIGHT OF SETOFF. 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, excluding however all IRA, Keogh, and trust accounts.
Grantor authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all Indebtedness against any and all such 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 Grantor's
incorporation. Grantor has its chief executive office at 5600 NE Hassalo
Street, Portland, OR 97213. 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.
<PAGE> 2
06-28-95 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 this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, contract rights, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with is terms, is genuine, and
complies 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 account
shall be a good and valid account representing an undisputed, bona fide
Indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or 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 its business, Grantor shall not remove the Collateral
from its existing locations without the prior written 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 agreeable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations 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 Oregon, 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 part 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 affecting 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 Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used 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 Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L No.
<PAGE> 3
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
===============================================================================
99-499 ("SARA"), 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., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing or intended
to protect human health or the environment ("Environmental Laws"). The
terms "hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any fraction
thereof and asbestos. The representations 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 Environmental
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, or as a result of a violation of any Environmental Laws. 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 polices 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 Lender's
interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before 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 determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts and above in the
paragraph titled "Transactions Involving Collateral", 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 part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against 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
<PAGE> 4
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
===============================================================================
dispute.
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.
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 all the rights of a
secured party under the Oregon 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 certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in 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 unless Grantor has signed, after an Event of Default occurs, a
statement renouncing or modifying Grantor's right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given
at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. 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, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage
of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Clackamas County, State of Oregon. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Grantor agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of
the American Arbitration Association, upon request of either party. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Agreement shall preclude
any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including 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
<PAGE> 5
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
===============================================================================
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for 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 this 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 persons
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 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. 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, sue 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 institute 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. This 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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated for
the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes
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.
POWER OF ATTORNEY. Borrower does hereby make, constitute and appoint Bank its
irrevocable, true and lawful attorney with power: (a) to receive, open and
dispose of all mail addressed to Borrower; (b) to endorse the name of Borrower
upon all checks or other evidences of payment that may come into possession of
Bank upon the Collateral; (c) to endorse the name of the undersigned upon any
document or instrument relating to the Collateral; (d) in its name or otherwise
to demand, sue for, collect and give acquittances for any and all monies due or
to become due upon the Collateral; (e) to compromise, prosecute, or defend any
action, claim or proceeding with respect thereto, and (f) to do any and all
things necessary and proper to carry out the purpose herein contemplated.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 28,
1995.
GRANTOR:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.19(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E40 ACADEMI2.LN]
<PAGE> 1
COMMERCIAL SECURITY AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$650,000.00 06-28-1995 06-28-1996 145450 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
Grantor: Book Centers, Inc.
5600 NE Hassalo Street
Portland, OR 97213
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between Academic Book
Center, Inc. (referred to below as "Borrower"); Book Centers, Inc. (referred to
below as "Grantor"); and Centennial 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 terms 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 this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
Borrower. The word "Borrower" means each and every person or entity
signing the Note, including without limitation Academic Book Center, Inc.
Collateral. The word "Collateral" means the following described property
of Grantor, whether now owned or hereafter acquired, whether now existing
or hereafter arising, and wherever located:
All accounts and general intangibles, together with the following
specifically described property: including but not limited to the Life
Insurance Policy Issued by Minnesota Mutual Life Insurance Company #1-
960-243 insuring the life of Daniel P. Halloran.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether 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
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
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 Academic Book Center, Inc., its
successors and assigns. Any Grantor who signs this Agreement, but does not
sign the Note, is signing this Agreement only to grant a security interest
in Grantor's interest in the Collateral to Lender and is not personally
liable under the Note except as otherwise provided by contract or law
(e.g., personal liability under a guaranty or as a surety).
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 addition, 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 Centennial Bank, its successors and
assigns.
Note. The word "Note" means the note or credit agreement dated June 28,
1995, in the principal amount of $650,000.00 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 with the Indebtedness.
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (a) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (b) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (c) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the
<PAGE> 2
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
===============================================================================
Collateral; and Borrower agrees to remain liable under the Note no matter what
action Lender takes or fails to take under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this
Agreement is executed at Borrower's request and not at the request of Lender;
(b) Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender; (c) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (d) Lender has made no representation
to Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or nonpayment to Grantor, Borrower, or any other
party to the Indebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without first
obtaining the consent of Grantor: (a) grant any extension of time for any
payment, (b) grant any renewal, (c) permit any modification of payment terms or
other terms, or (d) exchange or release any Collateral or other security. No
such act or failure to act shall affect Lender's rights against Grantor or the
Collateral.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Grantor hereby forever waives and relinquishes in favor of
Lender and Borrower, and their respective successors, any claim or right to
payment Grantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that at no time shall Grantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal bankruptcy laws.
RIGHT OF SETOFF. 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, excluding however all IRA, Keogh, and trust accounts.
Grantor authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all Indebtedness against any and all such 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 Oregon.
Grantor has its chief executive office at 5600 NE Hassalo Portland, OR
97213. 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.
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 Borrower 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 this 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 complies 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 account shall be a good and valid
account representing an undisputed, bona fide Indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
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.
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 locations 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 Oregon, 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.
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. 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 part 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
<PAGE> 3
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 3
(Continued)
===============================================================================
other dispute arising with respect to the Collateral; and generally of all
happenings and events affecting 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 Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used 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 Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA'),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901,
et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing or intended to protect human
health or the environment ("Environmental Laws"). The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos.
The representations 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 Environmental 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, or as a
result of a violation of any Environmental Laws. 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 Lender's
interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which
have not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before 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 determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts and above in the
paragraph titled "Transactions Involving Collateral", 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
<PAGE> 4
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 4
(Continued)
===============================================================================
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 Borrower to make any payment when due
on the Indebtedness.
Other Defaults. Failure of Grantor or Borrower 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 failure of Borrower to
comply with or to perform any term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower.
Insolvency. The dissolution or termination of Grantor or Borrower's
existence as a going business, the insolvency of Grantor or Borrower, the
appointment of a receiver for any part of Grantor or Borrower'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 or Borrower.
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 Borrower or
by any governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any of Grantor
or Borrower's deposit accounts with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Grantor or Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor or Borrower gives Lender
written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding,
in an amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to 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 Borrower'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 all the rights of a
secured party under the Oregon Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Borrower would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in 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 unless Grantor has signed, after an Event of Default occurs, a
statement renouncing or modifying Grantor's right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given
at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.
Appoint Receiver. 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, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage
of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Borrower for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this Agreement. Borrower shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
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 or Borrower under this
Agreement, after Grantor or Borrower'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:
<PAGE> 5
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
===============================================================================
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.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Oregon. If there is a lawsuit, Grantor and
Borrower agree upon Lender's request to submit to the jurisdiction of the
courts of Washington County, State of Oregon. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
Arbitration. Lender and Grantor and Borrower agree that all disputes,
claims and controversies between them, whether individual, joint, or class
in nature, arising from this Agreement or otherwise, including without
limitation contract and tort disputes, shall be arbitrated pursuant to the
Rules of the American Arbitration Association, upon request of either
party. No act to take or dispose of any Collateral shall constitute a
waiver of this arbitration agreement or be prohibited by this arbitration
agreement. This includes, without limitation, obtaining injunctive relief
or a temporary restraining order; foreclosing by notice and sale under any
deed of trust or mortgage; obtaining a writ of attachment or imposition of
a receiver; or exercising any rights relating to personal property,
including taking or disposing of such property with or without judicial
process pursuant to Article 9 of the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any
Collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the Collateral, shall also be arbitrated, provided
however that no arbitrator shall have the right or the power to enjoin or
restrain any act of any party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction. Nothing in
this Agreement shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel,
waiver, laches, and similar doctrines which would otherwise be applicable
in an action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall be
deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
Attorneys' Fees; Expenses. Grantor and Borrower agree to pay upon demand
all of Lender's costs and expenses, including 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 and Borrower shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor and Borrower also shall pay all
court costs and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor and
Borrower under this Agreement shall be joint and several, and all
references to Borrower shall mean each and every Borrower, 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 or Borrower, notice to any Grantor or Borrower will constitute
notice to all Grantor and Borrowers. For notice purposes, Grantor or
Borrower agrees to keep Lender informed at all times of Grantor or
Borrower'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, sue 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 institute 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. This 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 this Agreement shall not prejudice or constitute a waiver
of Lender's right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and Grantor, shall constitute a waiver
of any of Lender's rights or of any of Grantor's obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated for
the indebtedness, Borrower irrevocably waives, disclaims and relinquishes
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.
<PAGE> 6
06-28-95 COMMERCIAL SECURITY AGREEMENT Page 6
(Continued)
===============================================================================
BORROWER AND GRANTOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND BORROWER AND GRANTOR AGREE TO ITS TERMS.
THIS AGREEMENT IS DATED JUNE 28,1995.
BORROWER:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
GRANTOR:
Book Centers, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off. Ver. 3.20(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E40 ACADEMI2.LN]
<PAGE> 1
SBA LOAN NO.
CP-EWCP 838500 30 06
SMALL BUSINESS ADMINISTRATION (SBA)
GUARANTY
June 28, 1995
In order to induce Centennial Bank (SBA or other Lending Institution),
(hereinafter called "Lender") to make a loan or loans, or renewal or extension
thereof, to Academic Book Center. Inc. (hereinafter called "Debtor"), the
Undersigned hereby unconditionally guarantees to Lender, its successors and
assigns, the due and punctual payment when due, whether by acceleration or
otherwise, in accordance with the terms thereof, of the principal of and
interest on and all other sums payable, or stated to be payable, with respect
to the note of the Debtor, made by the Debtor to Lender, dated June 28, 1995 in
the principal amount of $650,O00.00, with interest at the rate of Wall Street
Journal prime plus 2.50 per cent per annum. Such note, and the interest
thereon and all other sums payable with respect thereto are hereinafter
collectively called "Liabilities." As security for the performance of this
guaranty the Undersigned hereby mortgages, pledges, assigns, transfers and
delivers to Lender certain collateral (if any), listed in the schedule on the
reverse side hereof. The term "collateral" as used herein shall mean any
funds, guaranties, agreements or other property or rights or interests of any
nature whatsoever, or the proceeds thereof, which may have been, are, or
hereafter may be, mortgaged, pledged, assigned, transferred or delivered
directly or indirectly by or on behalf of the Debtor or the Undersigned or any
other party to Lender or to the holder of the aforesaid note of the Debtor, or
which may have been, are, or hereafter may be held by any party as trustee or
otherwise, as security, whether immediate or underlying, for the performance of
this guaranty or the payment of the Liabilities or any of them or any security
therefor.
The Undersigned waives any notice of the incurring by the Debtor at any
time of any of the Liabilities, and waives any and all presentment, demand,
protest or notice of dishonor, nonpayment, or other default with respect to any
of the Liabilities and any obligation of any party at any time comprised in the
collateral. The Undersigned hereby grants to Lender full power, in its
uncontrolled discretion and without notice to the undersigned, but subject to
the provisions of any agreement between the Debtor or any other party and
Lender at the time in force, to deal in any manner with the Liabilities and the
collateral, including, but without limiting the generality of the foregoing,
the following powers:
(a) To modify or otherwise change any terms of all or any part of the
Liabilities or the rate of interest thereon (but not to increase the
principal amount of the note of the Debtor to Lender), to grant any
extension or renewal thereof and any other indulgence with respect
thereto, and to effect any release, compromise or settlement with
respect thereto;
(b) To enter into any agreement of forbearance with respect to all or any
part of the Liabilities, or with respect to all or any part of the
collateral, and to change the terms of any such agreement;
(c) To forbear from calling for additional collateral to secure any of the
Liabilities or to secure any obligation comprised in the collateral;
(d) To consent to the substitution, exchange, or release of all or any
part of the collateral, whether or not the collateral, if any,
received by Lender upon any such substitution, exchange, or release
shall be of the same or of a different character or value than the
collateral surrendered by Lender;
(e) In the event of the nonpayment when due, whether by acceleration or
otherwise, of any of the Liabilities, or in the event of default in
the performance of any obligation comprised in the collateral, to
realize on the collateral or any part thereof, as a whole or in
such parcels or subdivided interests as Lender may elect, at any
public or private sale or sales, for cash or on credit or for future
delivery, without demand, advertisement or notice of the time or place
of sale or any adjournment thereof (the Undersigned hereby waiving any
such demand, advertisement and notice to the extent permitted by law),
or by foreclosure or otherwise, or to forbear from realizing thereon,
all as Lender in its uncontrolled discretion may deem proper, and to
purchase all or any part of the collateral for its own account at any
such sale or foreclosure, such powers to be exercised only to the
extent permitted by law.
The obligations of the Undersigned hereunder shall not be released,
discharged or in any way affected, nor shall the Undersigned have any rights or
recourse against Lender, by reason of any action Lender may take or omit to
take under the foregoing powers.
In case the Debtor shall fail to pay all or any part of the Liabilities
when due, whether by acceleration or otherwise, according to the terms of said
note, the Undersigned, immediately upon the written demand of Lender, will pay
to Lender the amount due and unpaid by the Debtor as aforesaid, in like manner
as if such amount constituted the direct and primary obligation of the
Undersigned. Lender shall not be required, prior to any such demand on, or
payment by, the Undersigned, to make any demand upon or pursue or exhaust any
of its rights or remedies against the Debtor or others with respect to the
payment of any of the Liabilities, or to pursue or exhaust any of its rights or
remedies with respect to any part of the collateral. The Undersigned shall
have no right of subrogation whatsoever with respect to the Liabilities or the
collateral unless and until Lender shall have received full payment of all of
the Liabilities.
<PAGE> 2
The obligations of the Undersigned hereunder, and the rights of Lender in
the collateral shall not be released, discharged or in any way affected, nor
shall the undersigned have any rights against Lender; by reason of the
fact that any of the collateral may be in default at the time of acceptance
thereof by Lender or later; nor by reason of the fact that a valid lien in any
of the collateral may not be conveyed to or created in favor of, Lender; nor by
reason of the fact that any of the collateral may be subject to equities or
defenses or claims in favor of others or may be invalid or defective in any
way; nor by reason of the fact that any of the Liabilities may be invalid for
any reason whatsoever; nor by reason of the fact that the value of any of the
collateral, or the financial condition of the Debtor or of any obligor under or
guarantor of any of the collateral, may not have been correctly estimated or
may have changed or may hereafter change; nor by reason of any deterioration,
waste, or loss by fire, theft, or otherwise of any of the collateral, unless
such deterioration, waste, or loss be caused by the willful act or willful
failure to act of Lender.
The Undersigned agrees to furnish Lender, or the holder of the aforesaid
note of the Debtor, upon demand, but not more often than semiannually, so long
as any part of the indebtedness under such note remains unpaid, a financial
statement setting forth, in reasonable detail, the assets, liabilities, and net
worth of the Undersigned.
The Undersigned acknowledges and understands that if the Small Business
Administration (SBA) enters into, has entered into, or will enter into, a
Guaranty Agreement, with Lender or any other lending institution, guaranteeing
a portion of Debtor's Liabilities, the Undersigned agrees that it is not a
coguarantor with SBA and shall have no right of contribution against SBA. The
Undersigned further agrees that all liability hereunder shall continue
notwithstanding payment by SBA under its Guaranty Agreement to the other
lending institution.
The term "Undersigned" as used in this agreement shall mean the signer or
signers of this agreement; and such signers, if more than one, shall be jointly
and severally liable hereunder. The Undersigned further agrees that all
liability hereunder shall continue notwithstanding the incapacity, lack of
authority, death, or disability of any one or more of the Undersigned, and that
any failure by Lender or its assigns to file or enforce a claim against the
estate of any of the Undersigned shall not operate to release any other of the
Undersigned from liability hereunder. The failure of any other person to sign
this guaranty shall not release or affect the liability of any signer hereof.
Book Centers, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
NOTE. -- Corporate guarantors must execute guaranty in corporate name, by duly
authorized officer, and seal must be affixed and duly attested; partnership
guarantors must execute guaranty in firm name, together with signature of a
general partner. Formally executed guaranty is to be delivered at the time of
disbursement of loan.
(LIST COLLATERAL SECURING THE GUARANTY)
SBA FORM 148 (4-91) REF. SOP 70-50 USE 5-87 EDITION
U.S. Government Printing Office: 1991 - 524-616/40181
<PAGE> 1
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
$650,000.00 06-28-1995 06-28-1996 145450 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
Grantor: Book Centers, Inc.
5600 NE Hassalo Street
Portland, OR 97213
===============================================================================
A. For Value Received the undersigned hereby pledges, collaterally assigns,
transfers, delivers and sets over to and in favor of Centennial Bank of Eugene,
Oregon, its successors and assigns, (herein called the "Assignee") in Life
Insurance Policy Number 1-960-243 issued by Minnesota Mutual Life Insurance
Company (herein called the "Insurer") and any supplementary contracts issued in
connection therewith (said policy and contracts herein called the "Policy'),
upon the life of Daniel P. Halloran, and all claims, options, privileges,
rights, title and interest therein and thereunder (except as provided in
Paragraph C hereof), subject to all the terms and conditions of the Policy and
to all superior liens, if any, which the Insurer may have against the Policy.
The undersigned by this instrument jointly and severally agree, and the
Assignee by the acceptance of this assignment agrees, to the conditions and
provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of the
foregoing, the following specific rights are included in this assignment and
pass by virtue hereof:
1. The sole right to collect from the Insurer the net proceeds of the
Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the surrender value
thereof at any time provided by the terms of the Policy and at such other
times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the Policy at
any time, either from the Insurer or from other persons, and to pledge or
assign the Policy as security for such loans or advances;
4. The sole right to collect and receive all distributions or shares of
surplus, dividend deposits or additions to the Policy, now or hereafter
made or apportioned thereto, and to exercise any and all options contained
in the Policy with respect thereto; provided that, unless and until the
Assignee shall notify the Insurer in writing to the contrary, the
distributions or shares of surplus, dividend deposits and additions shall
continue on the plan in force at the time of this assignment; and
5. The sole right to exercise all nonforfeiture rights permitted by the
terms of the Policy or allowed by the Insurer and to receive all benefits
and advantages derived therefrom.
C. It is expressly agreed that the following specific rights, so long as the
Policy has not been surrendered, are reserved and excluded from this assignment
and do not pass by virtue hereof:
1. The right to collect from the Insurer any disability benefit payable in
cash that does not reduce the amount of insurance;
2. The right to designate and change the beneficiary; and
3. The right to elect any optional mode of settlement permitted by the
Policy or allowed by the Insurer;
however, the reservation of these rights shall in no way impair the right
of the Assignee to surrender the Policy completely with all its incidents
or impair any other right of the Assignee hereunder, and any designation or
change of beneficiary or election of a mode of settlement shall be made
subject to this assignment and to the rights of the Assignee hereunder.
D. This assignment is made and the Policy is to be held as collateral security
for any and all present and future liabilities of the above referenced
Borrower, or any of them, to the Assignee, of every nature and kind, whether
now existing or that may hereafter arise in the ordinary course of business
between any of the above referenced Borrower and the Assignee, together with
interest, costs, expenses, attorneys' fees, and other fees and charges (all of
which liabilities secured or to become secured are herein individually,
collectively and interchangeably called "Liabilities").
E. The Assignee covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from the Insurer remaining
after payment of the then existing Liabilities, matured or unmatured, shall
be paid by the Assignee to the persons who would have been entitled thereto
under the terms of the Policy had this assignment not been executed;
2. That the Assignee will not exercise either the right to surrender the
Policy or (except for the purpose of paying premiums) the right to obtain
policy loans from the Insurer, until there has been default in any of the
Liabilities or a failure to pay any premium when due, nor until twenty days
after the Assignee shall have mailed, by first-class mail, to the
undersigned at the address last supplied in writing to the Assignee
specifically referring to this assignment, notice of intention to exercise
such right; and
3. That the Assignee will upon request forward the Policy without
unreasonable delay to the Insurer for endorsement of any designation or
change of beneficiary or any election of an optional mode of settlement.
F. The Insurer is hereby authorized to recognize the Assignee's claims to
rights hereunder without investigating the reason for any action taken by the
Assignee, or the validity or the amount of the Liabilities or the existence of
any default therein, or the giving of any notice under Paragraph E(2) above or
otherwise, or the application to be made by the Assignee of any amounts to be
paid to the Assignee. The sole signature of the Assignee shall be sufficient
for the exercise of any rights under the Policy assigned hereby and the sole
receipt of the Assignee for any sums received shall be a full discharge and
release therefor to the insurer. Checks for all or any part of the sums
payable under the Policy and assigned herein shall be drawn to the exclusive
order of the Assignee if, when, and in such amounts, as may be requested by the
Assignee.
G. The Assignee shall be under no obligation to pay any premium, or the
principal of or interest on any loans or advances on the Policy whether or not
obtained by the Assignee, or any other charges on the Policy, but any such
amounts so paid by the Assignee from its own funds shall become a part of the
Liabilities hereby secured, shall be due immediately, and shall bear interest
at the lower of (a) 11.500% per annum or (b) the highest rate permitted by
applicable law, from the date of each such advance until Assignee is repaid in
full.
H. The exercise of any right, option, privilege, or power given herein to the
Assignee shall be at the option of the Assignee, but (except as restricted by
<PAGE> 2
06-28-1995 ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL Page 2
(Continued)
===============================================================================
Paragraph E(2) above) the Assignee may exercise any such right, option,
privilege, or power without notice to, or assent by, or affecting the liability
of, or releasing any interest hereby assigned by, the undersigned, or any of
them.
I. The Assignee may take or release other security, may release any party
primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or may
apply to the Liabilities in such order as the Assignee shall determine, the
proceeds of the Policy assigned or any amount received on account of the Policy
by the exercise of any right permitted under this assignment, without resorting
or regard to other security.
J. In the event of any conflict between the provisions of this assignment and
provisions of the note or other evidence of any Liability, with respect to the
Policy or rights of collateral security therein, the provisions of this
assignment shall prevail.
K. Each of the undersigned declares that no proceedings in bankruptcy are
pending against him or her and that his or her property is not subject to any
assignment for the benefit of creditors.
SIGNED AND SEALED THIS 28Th DAY OF JUNE 1995.
/s/ Daniel P. Halloran
- --------------------------------- --------------------------------(L.S.)
Witness Insured or Owner
- --------------------------------- --------------------------------------
/s/ Daniel P. Halloran
- --------------------------------- --------------------------------(L.S.)
Witness The Book Center, Inc. - Beneficiary
5600 NE Hassalo, Portland, OR 97213
- --------------------------------- --------------------------------------
Address
===============================================================================
CORPORATE ACKNOWLEDGMENT
STATE OF OREGON )
) ss.
COUNTY OF Washington)
On this 29th day of June, 1995, before me, the undersigned Notary Public,
personally appeared Daniel P. Halloran, President/Secretary of Book Centers,
Inc., and known to me to be an authorized agent of the corporation that
executed the Assignment of Life Insurance Policy as Collateral and acknowledged
the assignment to be the free and voluntary act and deed of the corporation, by
authority of its Bylaws or by resolution of its board of directors, for the
uses and purposes therein mentioned, and on oath stated that he or she is
authorized to execute this assignment and in fact executed the assignment on
behalf of the corporation.
By /s/ Laura A. Schaeffer Residing at Portland, OR
---------------------------------- --------------------
Notary Public in and for the My commission expires 10/31/95
State of Oregon -----------
===============================================================================
ACKNOWLEDGMENT OF ASSIGNMENT BY INSURER
Minnesota Mutual Life Insurance Company hereby acknowledges receipt of a
duplicate of this Assignment of Life Insurance Policy Number 1-960-243, which
has been filed at the home office of Minnesota Mutual Life Insurance Company on
this ________ day of ___________________, 19____.
Minnesota Mutual Life Insurance Company
By:____________________________________
Authorized Officer
===============================================================================
RELEASE OF ASSIGNMENT OF LIFE INSURANCE POLICY
For Value Received, all right, title and interest of the undersigned assignee
(Centennial Bank) in and to Life Insurance Policy Number 1-960-243 issued by
Minnesota Mutual Life Insurance Company on the life of Daniel P. Halloran is
hereby relinquished and released.
CORPORATE SEAL Centennial Bank
By:______________________________
Attest:________________________________ Signature and Title
Signature and Title
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.19(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E93 ACADEMI2.LN]
<PAGE> 1
COMMERCIAL GUARANTY
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
Guarantor: Book Centers, Inc.
5600 NE Hassalo Street
Portland, OR 97213
===============================================================================
AMOUNT OF GUARANTY. The amount of this Guaranty is unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, Book
Centers, Inc. ("Guarantor") absolutely and unconditionally guarantees and
promises to pay to Centennial Bank ("Lender") or its order, on demand, in legal
tender of the United States of America, the Indebtedness (as that term is
defined below) of Academic Book Center, Inc. ("Borrower") to Lender on the
terms and conditions set forth in this Guaranty. Under this Guaranty, the
liability of Guarantor is unlimited and the obligations of Guarantor are
continuing.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means Academic Book Center, Inc.
Guarantor. The word "Guarantor" means Book Centers, Inc.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated June 28, 1995.
Indebtedness. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and Indebtedness to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
Indebtedness, lease obligations, other obligations, and liabilities of
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them; and whether any such Indebtedness is voluntarily
or involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined; whether Borrower
may be liable individually or jointly with others, or primarily or
secondarily, or as guarantor or surety; whether recovery on the
Indebtedness may be or may become barred or unenforceable against Borrower
for any reason whatsoever; and whether the Indebtedness arises from
transactions which may be voidable on account of infancy, insanity, ultra
vires, or otherwise.
Lender. The word "Lender" means Centennial Bank, its successors and
assigns.
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 with the Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all time's the performance and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection with
any remaining portions of the Indebtedness or any of the indebtedness which
subsequently arises or is thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower, and will continue in full force until all Indebtedness incurred
or contracted before receipt by Lender of any notice of revocation shall have
been fully and finally paid and satisfied and all other obligations of
Guarantor under this Guaranty shall have been performed in full. If Guarantor
elects to revoke this Guaranty, Guarantor may only do so in writing.
Guarantor's written notice of revocation must be delivered to Lender at the
address of Lender listed above or such other place as Lender may designate in
writing. Written revocation of this Guaranty will apply only to advances or
new indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new
indebtedness" does not include Indebtedness which at the time of notice of
revocation is contingent, unliquidated, undetermined or not due and which later
becomes absolute, liquidated, determined or due. This Guaranty will continue
to bind Guarantor for all indebtedness incurred by Borrower or committed by
Lender prior to receipt of Guarantor's written notice of revocation, including
any extensions, renewals, substitutions or modifications of the Indebtedness.
All renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty
shall bind the estate of Guarantor as to Indebtedness created both before and
after the death or incapacity of Guarantor, regardless of Lender's actual
notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors
shall not affect the liability of any remaining Guarantors under this Guaranty.
It is anticipated that fluctuations may occur in the aggregate amount of
Indebtedness covered by this Guaranty, and it is specifically acknowledged and
agreed by Guarantor that reductions in the amount of Indebtedness, even to zero
dollars ($0.00), prior to written revocation of this Guaranty by Guarantor
shall not constitute a termination of this Guaranty. This Guaranty is binding
upon Guarantor and Guarantor's heirs, successors and assigns so long as any of
the guaranteed Indebtedness remains unpaid and even though the Indebtedness
guaranteed may from time to time be zero dollars ($0,00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and without
lessening Guarantor's liability under this Guaranty, from time to time: (a)
prior to revocation as set forth above, to make one or more additional secured
or unsecured loans to Borrower, to lease equipment or other goods to Borrower,
or otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, fail or decide not to perfect, and
release any such security, with or without the substitution of new collateral;
(d) to release, substitute, agree not to sue, or deal with any one or more of
Borrower's sureties, endorsers, or other guarantors on any terms or in any
manner Lender may choose; (e) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of
the Indebtedness; and (h) to assign or transfer this
<PAGE> 2
06-28-1995 COMMERCIAL GUARANTY Page 2
(Continued)
===============================================================================
Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
to Lender that (a) no representations or agreements of any kind have been made
to Guarantor which would limit or qualify in any way the terms of this
Guaranty; (b) this Guaranty is executed at Borrower's request and not at the
request of Lender; (c) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer, or otherwise dispose of all or substantially all of Guarantor's
assets, or any interest therein; (d) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; (e) upon Lender's request,
the Guarantor will provide to Lender financial and credit information in form
acceptable to Lender, and all such financial information provided to Lender is
true and correct in all material respects and fairly presents the financial
condition of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor since the date of the
financial statements; and (f) Guarantor has established adequate means of
obtaining from Borrower on a continuing basis information regarding Borrower's
financial condition. Guarantor agrees to keep adequately informed from such
means of any facts, events, or circumstances which might in any way affect
Guarantor's risks under this Guaranty, and Guarantor further agrees that,
absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of
its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to take any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (e) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to pursue any other
remedy within Lender's power; or (g) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower,
by subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b)
any election of remedies by Lender which destroys or otherwise adversely
affects Guarantor's subrogation rights or Guarantor's rights to proceed against
Borrower for reimbursement, including without limitation, any loss of rights
Guarantor may suffer by reason of any law limiting, qualifying, or discharging
the Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal
tender, of the Indebtedness; (d) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any collateral for the
Indebtedness; (e) any statute of limitations, if at any time any action or suit
brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statute of limitations; or (f) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any third
party, on the Indebtedness and thereafter Lender is forced to remit the amount
of that payment to Borrower's trustee in bankruptcy or to any similar person
under any federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether such
claim, demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender
by law, Lender shall have, with respect to Guarantor's obligations to Lender
under this Guaranty and to the extent permitted by law, a contractual
possessory security interest in and a right of setoff against, and Guarantor
hereby assigns, conveys, delivers, pledges, and transfers to Lender all of
Guarantor's right, titles and interest in and to, all deposits, moneys,
securities and other property of Guarantor now or hereafter in the possession
of or on deposit with Lender, whether held in a general or special account or
deposit, whether held jointly with someone else, or whether held for
safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts.
Every such security interest and right of setoff may be exercised without
demand upon or notice to Guarantor. No security interest or right of setoff
shall be deemed to have been waived by any act or conduct on the part of Lender
or by any neglect to exercise such right of setoff or to enforce such security
interest or by any delay in so doing. Every right of setoff and security
interest shall continue in full force and effect until such right of setoff or
security interest is specifically waived or released by an instrument in
writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of Insolvency and consequent liquidation of the assets
of Borrower, through bankruptcy, by an assignment for the benefit of creditors,
by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender
and shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions
as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Amendments. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Guaranty. No alteration of or amendment to this
Guaranty 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.
<PAGE> 3
06-28-1995 COMMERCIAL GUARANTY Page 3
(Continued)
===============================================================================
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Oregon. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Clackamas County, State of Oregon. Subject to the provisions on
arbitration, this Guaranty shall be governed by and construed in accordance
with the laws of the State of Oregon.
Arbitration. Lender and Guarantor agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Guaranty or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of
the American Arbitration Association, upon request of either party. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Guaranty shall preclude
any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Guaranty.
Lender may pay someone else to help enforce this Guaranty, and Guarantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
Notices. Except for revocation notices by Guarantor, all notices required
to be given by either party to the other under this Guaranty shall be in
writing and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier, or when 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 or to such other
addresses as either party may designate to the other in writing. All
revocation notices by Guarantor shall be in writing and shall be effective
only upon delivery to Lender as provided above in the section titled
"DURATION OF GUARANTY." If there is more then one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's
current address.
Interpretation. In all cases where there is more then one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one or
more of them. The words "Guarantor," "Borrower," and "Lender" include the
heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty 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, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not necessary
for Lender to inquire into the powers of Borrower or Guarantor or of the
officers, directors, partners, or agents acting or purporting to act on
their behalf, and any Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty 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 Guaranty. No prior waiver by Lender, nor
any course of dealing between Lender and Guarantor, shall constitute a
waiver of any of Lender's rights or of any of Guarantor's obligations as to
any future transactions. Whenever the consent of Lender is required under
this Guaranty, 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.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED JUNE 28, 1995.
GUARANTOR:
Book Centers, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off. Ver. 3.19(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E20 ACADEMIC.LN C4.OVL]
<PAGE> 1
COMMERCIAL GUARANTY
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
Guarantor: Daniel P. Halloran
2366 NE 30th Ave.
Portland, OR 97212
===============================================================================
AMOUNT OF GUARANTY. The amount of this Guaranty is unlimited.
CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, Daniel P.
Halloran ("Guarantor") absolutely and unconditionally guarantees and
promises to pay to Centennial Bank ("Lender") or its order, on demand, in legal
tender of the United States of America, the Indebtedness (as that term is
defined below) of Academic Book Center, Inc. ("Borrower") to Lender on the
terms and conditions set forth in this Guaranty. Under this Guaranty, the
liability of Guarantor is unlimited and the obligations of Guarantor are
continuing.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means Academic Book Center, Inc.
Guarantor. The word "Guarantor" means Book Centers, Inc.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated June 28, 1995.
Indebtedness. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities,
obligations, debts, and Indebtedness to Lender, now existing or
hereinafter incurred or created, including, without limitation, all loans,
advances, interest, costs, debts, overdraft indebtedness, credit card
Indebtedness, lease obligations, other obligations, and liabilities of
Borrower, or any of them, and any present or future judgments against
Borrower, or any of them; and whether any such Indebtedness is voluntarily
or involuntarily incurred, due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined; whether Borrower
may be liable individually or jointly with others, or primarily or
secondarily, or as guarantor or surety; whether recovery on the
Indebtedness may be or may become barred or unenforceable against Borrower
for any reason whatsoever; and whether the Indebtedness arises from
transactions which may be voidable on account of infancy, insanity, ultra
vires, or otherwise.
Lender. The word "Lender" means Centennial Bank, its successors and
assigns.
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 with the Indebtedness.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open
and continuous for so long as this Guaranty remains in force. Guarantor
intends to guarantee at all times the performance and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of all
Indebtedness. Accordingly, no payments made upon the Indebtedness will
discharge or diminish the continuing liability of Guarantor in connection with
any remaining portions of the Indebtedness or any of the indebtedness which
subsequentiy arises or is thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by Lender, or any notice to Guarantor
or to Borrower, and will continue in full force until all Indebtedness incurred
or contracted before receipt by Lender of any notice of revocation shall have
been fully and finally paid and satisfied and all other obligations of
Guarantor under this Guaranty shall have been performed in full. If Guarantor
elects to revoke this Guaranty, Guarantor may only do so in writing.
Guarantor's written notice of revocation must be deliverred to Lender at the
address of Lender listed above or such other place as Lender may designate in
writing. Written revocation of this Guaranty will apply only to advances or
new indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new
indebtedness" does not include Indebtedness which at the time of notice of
revocation is contingent, unliquidated, undetermined or not due and which later
becomes absolute, liquidated, determined or due. This Guaranty will continue
to bind Guarantor for all indebtedness incurred by Borrower or committed by
Lender prior to receipt of Guarantor's written notice of revocation, including
any extensions, renewals, substitutions or modifications of the Indebtedness.
All renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty
shall bind the estate of Guarantor as to Indebtedness created both before and
after the death or incapacity of Guarantor, regardless of Lender's actual
notice of Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty of
the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors
shall not affect the liability of any remaining Guarantors under this Guaranty.
It is anticipated that fluctuations may occur in the aggregate amount of
Indebtedness covered by this Guaranty, and it is specifically acknowledged and
agreed by Guarantor that reductions in the amount of Indebtedness, even to zero
dollars ($0.00), prior to written revocation of this Guaranty by Guarantor
shall not constitute a termination of this Guaranty. This Guaranty is binding
upon Guarantor and Guarantor's heirs, successors and assigns so long as any of
the guaranteed Indebtedness remains unpaid and even though the Indebtedness
guaranteed may from time to time be zero dollars ($0,00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either
before or after any revocation hereof, without notice or demand and without
lessening Guarantor's liability under this Guaranty, from time to time: (a)
prior to revocation as set forth above, to make one or more additional secured
or unsecured loans to Borrower, to lease equipment or other goods to Borrower,
or otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, fail or decide not to perfect, and
release any such security, with or without the substitution of new collateral;
(d) to release, substitute, agree not to sue, or deal with any one or more of
Borrower's sureties, endorsers, or other guarantors on any terms or in any
manner Lender may choose; (e) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of
the Indebtedness; and (h) to assign or transfer this
<PAGE> 2
06-28-1995 COMMERCIAL GUARANTY Page 2
(Continued)
===============================================================================
Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
to Lender that (a) no representations or agreements of any kind have been made
to Guarantor which would limit or qualify in any way the terms of this
Guaranty; (b) this Guaranty is executed at Borrower's request and not at the
request of Lender; (c) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer, or otherwise dispose of all or substantially all of Guarantor's
assets, or any interest therein; (d) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; (e) upon Lender's request,
the Guarantor will provide to Lender financial and credit information in form
acceptable to Lender, and all such financial information provided to Lender is
true and correct in all material respects and fairly presents the financial
condition of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor since the date of the
financial statements; and (f) Guarantor has established adequate means of
obtaining from Borrower on a continuing basis information regarding Borrower's
financial condition. Guarantor agrees to keep adequately informed from such
means of any facts, events, or circumstances which might in any way affect
Guarantor's risks under this Guaranty, and Guarantor further agrees that,
absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of
its relationship with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to continue lending money or to extend other
credit to Borrower; (b) to take any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or nonaction on
the part of Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans or obligations; (c) to resort for payment or to proceed
directly or at once against any person, including Borrower or any other
guarantor; (d) to proceed directly against or exhaust any collateral held by
Lender from Borrower, any other guarantor, or any other person; (e) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (f) to pursue any other
remedy within Lender's power; or (g) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower,
by subrogation or otherwise, so that at no time shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. Section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
any "one action" or "anti-deficiency" law or any other law which may prevent
Lender from bringing any action, including a claim for deficiency, against
Guarantor, before or after Lender's commencement or completion of any
foreclosure action, either judicially or by exercise of a power of sale; (b)
any election of remedies by Lender which destroys or otherwise adversely
affects Guarantor's subrogation rights or Guarantor's rights to proceed against
Borrower for reimbursement, including without limitation, any loss of rights
Guarantor may suffer by reason of any law limiting, qualifying, or discharging
the Indebtedness; (c) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower's
liability from any cause whatsoever, other than payment in full in legal
tender, of the Indebtedness; (d) any right to claim discharge of the
Indebtedness on the basis of unjustified impairment of any collateral for the
Indebtedness; (e) any statute of limitations, if at any time any action or suit
brought by Lender against Guarantor is commenced there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statute of limitations; or (f) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any third
party, on the Indebtedness and thereafter Lender is forced to remit the amount
of that payment to Borrower's trustee in bankruptcy or to any similar person
under any federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of
setoff, counterclaim, counter demand, recoupment or similar right, whether such
claim, demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and
agrees that each of the waivers set forth above is made with Guarantor's full
knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by
law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other property of Guarantor given to Lender
by law, Lender shall have, with respect to Guarantor's obligations to Lender
under this Guaranty and to the extent permitted by law, a contractual
possessory security interest in and a right of setoff against, and Guarantor
hereby assigns, conveys, delivers, pledges, and transfers to Lender all of
Guarantor's right, title and interest in and to, all deposits, moneys,
securities and other property of Guarantor now or hereafter in the possession
of or on deposit with Lender, whether held in a general or special account or
deposit, whether held jointly with someone else, or whether held for
safekeeping or otherwise, excluding however all IRA, Keogh, and trust accounts.
Every such security interest and right of setoff may be exercised without
demand upon or notice to Guarantor. No security interest or right of setoff
shall be deemed to have been waived by any act or conduct on the part of Lender
or by any neglect to exercise such right of setoff or to enforce such security
interest or by any delay in so doing. Every right of setoff and security
interest shall continue in full force and effect until such right of setoff or
security interest is specifically waived or released by an instrument in
writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of Borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of Insolvency and consequent liquidation of the assets
of Borrower, through bankruptcy, by an assignment for the benefit of creditors,
by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender
and shall be first applied by Lender to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions
as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Amendments. This Guaranty, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Guaranty. No alteration of or amendment to this
Guaranty 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.
<PAGE> 3
06-28-1995 COMMERCIAL GUARANTY Page 3
(Continued)
===============================================================================
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender in the State of Oregon. If there is a lawsuit, Guarantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
Clackamas County, State of Oregon. Subject to the provisions on
arbitration, this Guaranty shall be governed by and construed in accordance
with the laws of the State of Oregon.
Arbitration. Lender and Guarantor agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Guaranty or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of
the American Arbitration Association, upon request of either party. No act
to take or dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; foreclosing by notice and sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any Collateral, including any claim to
rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator
shall have the right or the power to enjoin or restrain any act of any
party. Judgment upon any award rendered by any arbitrator may be entered
in any court having jurisdiction. Nothing in this Guaranty shall preclude
any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement
of an action for these purposes. The Federal Arbitration Act shall apply
to the construction, interpretation, and enforcement of this arbitration
provision.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Guaranty.
Lender may pay someone else to help enforce this Guaranty, and Guarantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Guarantor also shall pay all court costs and such additional
fees as may be directed by the court.
Notices. Except for revocation notices by Guarantor, all notices required
to be given by either party to the other under this Guaranty shall be in
writing and shall be effective when actually delivered or when deposited
with a nationally recognized overnight courier, or when 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 or to such other
addresses as either party may designate to the other in writing. All
revocation notices by Guarantor shall be in writing and shall be effective
only upon delivery to Lender as provided above in the section titled
"DURATION OF GUARANTY." If there is more then one Guarantor, notice to any
Guarantor will constitute notice to all Guarantors. For notice purposes,
Guarantor agrees to keep Lender informed at all times of Guarantor's
current address.
Interpretation. In all cases where there is more then one Borrower or
Guarantor, then all words used in this Guaranty in the singular shall be
deemed to have been used in the plural where the context and construction
so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the
words "Borrower" and "Guarantor" respectively shall mean all and any one or
more of them. The words "Guarantor," "Borrower," and "Lender" include the
heirs, successors, assigns, and transferees of each of them. Caption
headings in this Guaranty are for convenience purposes only and are not to
be used to interpret or define the provisions of this Guaranty. If a court
of competent jurisdiction finds any provision of this Guaranty 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, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of
Borrower or Guarantor are corporations or partnerships, it is not necessary
for Lender to inquire into the powers of Borrower or Guarantor or of the
officers, directors, partners, or agents acting or purporting to act on
their behalf, and any Indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed under this Guaranty.
Waiver. Lender shall not be deemed to have waived any rights under this
Guaranty unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender
of a provision of this Guaranty 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 Guaranty. No prior waiver by Lender, nor
any course of dealing between Lender and Guarantor, shall constitute a
waiver of any of Lender's rights or of any of Guarantor's obligations as to
any future transactions. Whenever the consent of Lender is required under
this Guaranty, 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.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED JUNE 28, 1995.
GUARANTOR:
/s/ Daniel P. Halloran
- ----------------------
Daniel P. Halloran
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off. Ver. 3.19(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E20 ACADEMIC.LN C4.OVL]
<PAGE> 1
LANDLORD'S CONSENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer
06-28-1995 09-01-1996 145255 55 0010 089
Initials
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: Academic Book Center, Inc. Lender: Centennial Bank
5600 NE Hassalo Street Pacific Corporate Center Branch
Portland, OR 97213 C/O Loan Services-4th Floor
675 Oak Street; P.O. Box 1849
Eugene, OR 97440
===============================================================================
THIS LANDLORD'S CONSENT is entered into among Academic Book Center, Inc.
("Borrower"), whose address is 5600 NE Hassalo Street, Portland, OR 97213;
Centennial Bank ("Lender"), whose address is C/O Loan Services-4th Floor, 675
Oak Street; P.0. Box 1849, Eugene, OR 97440; and Pacific Realty Associates,
L.P. ("Landlord"), whose address is 1535O SW Sequoia Pkwy. #300, Portland, OR
97224. Borrower and Lender have entered into, or are about to enter into, an
agreement whereby Lender has acquired or will acquire a security interest or
other interest in the Collateral. Some or all of the Collateral may be affixed
or otherwise become located on the Premises. To induce Lender to extend the
Loan to Borrower against such security interest in the Collateral and for other
valuable consideration, Landlord hereby agrees with Lender and Borrower as
follows.
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 terms 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 this Landlord's Consent, as this
Landlord's Consent may be amended or modified from time to time, together
with all exhibits and schedules attached to this Landlord's Consent from
time to time.
Borrower. The word "Borrower" means Academic Book Center, Inc.
Collateral. The word "Collateral" means certain of Borrower's personal
property in which Lender has acquired or will acquire a security interest,
including without limitation the following specific property:
All Inventory, Chattel Paper, Accounts, Contract Rights, Equipment and
General Intangibles, including but not limited to including but not
limited to all export Inventory.
Landlord. The word "Landlord' means Pacific Realty Associates, L.P. The
term "Landlord" is used for convenience purposes only. Landlord's interest
in the Premises may be that of a fee owner, lessor, sublessor or
lienholder, or that of any other holder of an interest in the Premises
which may be, or may become, prior to the interest of Lender.
Lease. The word "Lease" means that certain lease of the Premises, dated
May 24, 1985, between Landlord and Borrower.
Lender. The word "Lender" means Centennial Bank, its successors and
assigns.
Loan. The word "Loan" means the loan, or any other financial
accommodations, Lender has made or is making to Borrower.
Premises. The word "Premises" means the real property located in Multnomah
County, State of Oregon, commonly known as 5600 NE Hassalo Street,
Portland, OR 97213.
BORROWER'S ASSIGNMENT OF LEASE. Borrower hereby assigns to Lender all of
Borrower's rights in the Lease, as partial security for the Loan. The parties
intend that this assignment will be a present transfer to Lender of all of
Borrower's rights under the Lease, subject to Borrower's rights to use the
Premises and enjoy the benefits of the Lease while not in default on the Loan
or Lease. Upon full performance by Borrower under the Loan, this assignment
shall be ended, without the necessity of any further action by any of the
parties. This assignment includes all renewals of and amendments to the Lease
or the Loan, until the Loan is paid in full. No amendments may be made to the
Lease without Lender's prior written consent, which shall not be unreasonably
withheld or delayed.
CONSENT OF LANDLORD. Landlord consents to the above assignment. If Borrower
defaults under the Loan or the Lease, Lender may reassign the Lease, and
Landlord agrees that Landlord's consent to any such reassignment will not be
unreasonably withheld or delayed. So long as Lender has not entered the
Premises for the purpose of operating a business, Lender will have no liability
under the Lease, including without limitation liability for rent. Whether or
not Lender enters into possession of the Premises for any purpose, Borrower
will remain fully liable for all obligations of Borrower as lessee under the
Lease. While Lender is in possession of the Premises, Lender will cause all
payments due under the Lease and attributable to that period of time to be made
to Landlord. If Lender later reassigns the Lease or vacates the Premises,
Lender will have no further obligation to Landlord.
LEASE DEFAULTS. Both Borrower and Landlord agree and represent to Lender that,
to the best of their knowledge, there is no breach or offset existing under the
Lease or under any other agreement between Borrower and Landlord. Landlord
agrees not to terminate the Lease, despite any default by Borrower, without
giving Lender written notice of the default and an opportunity to cure the
default within a period of sixty (60) days from the receipt of the notice. If
the default is one that cannot reasonably be cured by Lender (such as
insolvency, bankruptcy, or other judicial proceedings against Borrower), then
Landlord will not terminate the Lease so long as Landlord receives all sums due
under the Lease for the period during which Lender is in possession of the
Premises, or so long as Lender reassigns the Lease to a new lessee reasonably
satisfactory to Landlord.
DISCLAIMER OF INTEREST. Landlord hereby consents to Lender's security interest
(or other interest) in the Collateral and disclaims all interests, liens and
claims which Landlord now has or may hereafter acquire in the Collateral.
Landlord agrees that any lien or claim it may now have or may hereafter have in
the Collateral will be subject at all times to Lender's security interest (or
other present or future interest) in the Collateral and will be subject to the
rights granted by Landlord to Lender in this Agreement.
ENTRY ONTO PREMISES. Landlord and Borrower grant to Lender the right to enter
upon the Premises for the purpose of removing the Collateral from the Premises
or conducting sales of the Collateral on the Premises. The rights granted to
Lender in this Agreement will continue until a reasonable time after Lender
receives notice in writing from Landlord that Borrower no longer is in lawful
possession of the Premises. If Lender enters onto the Premises and removes the
Collateral, Lender agrees with Landlord not to remove any Collateral in such a
way that the Premises are damaged, without either repairing any such damage or
reimbursing Landlord for the cost of repair.
<PAGE> 2
O6-28-1995 LANDLORDS' CONSENT Page 2
(Continued)
===============================================================================
MISCELLANEOUS PROVISIONS. This Agreement shall extend to and bind the
respective heirs, personal representatives, successors and assigns of the
parties to this Agreement. The covenants of Borrower and Landlord respecting
subordination of the claim or claims of Landlord in favor of Lender shall
extend to, include, and be enforceable by any transferee or endorsee to whom
Lender may transfer any claim or claims to which this Agreement shall apply.
Lender need not accept this Agreement in writing or otherwise to make it
effective. This Agreement shall be governed by and construed in accordance
with the laws of the State of Oregon. If Landlord is other than an individual,
any agent or other person executing this Agreement on behalf of Landlord
represents and warrants to Lender that he or she has full power and authority
to execute this Agreement on Landlord's behalf. Lender shall not be deemed to
have waived any rights under this Agreement unless such waiver is in writing
and signed by Lender. Without notice to Landlord and without affecting the
validity of this Consent, Lender may do or not do anything it deems appropriate
or necessary with respect to the Loan, any obligors on the Loan, or any
Collateral for the Loan; including without limitation extending, renewing,
rearranging, or accelerating any of the Loan indebtedness. No delay or
omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not constitute a waiver of or prejudice Lender's right
otherwise to demand strict compliance with that provision or any other
provision. Whenever consent by Lender is required in this Agreement, the
granting of such consent by Lender in any one instance shall not constitute
continuing consent to subsequent instances where such consent is required.
BORROWER AND LANDLORD ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS
LANDLORD'S CONSENT, AND BORROWER AND LANDLORD AGREE TO ITS TERMS. THIS
AGREEMENT IS DATED JUNE 28, 1995.
BORROWER:
Academic Book Center, Inc.
By: /s/ Daniel P. Halloran
---------------------------------------
Daniel P. Halloran, President/Secretary
LANDLORD: LENDER:
Pacific Realty Associates, L.P. Centennial Bank
By: /s/ By: /s/ David Miller
--------------------------------------- -----------------------------
Landlord's Signature Authorized Officer
===============================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off. Ver. 3.19(c) 1995 CFI ProServices, Inc.
All rights reserved. [OR-E45 ACADEMIC.LN C4.OVL]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1995, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> BOOK CENTERS, INC.
<CIK> 0000050326
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,453,628
<ALLOWANCES> 24,525
<INVENTORY> 1,083,856
<CURRENT-ASSETS> 4,791,865
<PP&E> 808,037
<DEPRECIATION> 650,667
<TOTAL-ASSETS> 4,949,235
<CURRENT-LIABILITIES> 5,727,028
<BONDS> 0
<COMMON> 688,837
0
0
<OTHER-SE> (1,509,831)
<TOTAL-LIABILITY-AND-EQUITY> 4,949,235
<SALES> 22,994,555
<TOTAL-REVENUES> 23,024,977
<CGS> 19,380,974
<TOTAL-COSTS> 22,796,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179,577
<INCOME-PRETAX> 47,168
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,168
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
