Exhibit 10.4

 

 

 

CONTINUING SECURITY AGREEMENT

WELLS FARGO

 

RIGHTS TO PAYMENT AND INVENTORY

 

1.                          GRANT OF SECURITY INTEREST. For valuable
consideration, the undersigned Willdan Group, Inc., or any of them (“Debtor”),
hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) a
security interest in all accounts, deposit accounts, chattel paper (whether
electronic or tangible), instruments, promissory notes, documents, general
intangibles, payment intangibles, software, letter of credit rights, health-care
insurance receivables and other rights to payment (collectively called “Rights
to Payments”), now existing or at any time hereafter, and prior to the
termination hereof, arising (whether they arise from the sale, lease or other
disposition of inventory or from performance of contracts for service,
manufacture. construction, repair or otherwise or from any other source
whatsoever), including all securities, guaranties, warranties, indemnity
agreements, insurance policies, supporting obligations and other agreements
pertaining to the same or the property described therein, and in all goods
returned by or repossessed from Debtor’s customers, together with a security
interest in all inventory, goods held for sale or lease or to be furnished under
contracts for service, goods so leased or furnished, raw materials, component
parts and embedded software, work in process or materials used or consumed in
Debtor’s business and all warehouse receipts, bills of lading and other
documents evidencing goods owned or acquired by Debtor, and all goods covered
thereby, now or at any time hereafter, and prior to the termination hereof,
owned or acquired by Debtor, wherever located, and all products thereof
(collectively called “Inventory”), whether in the possession of Debtor,
warehousemen, bailees or any other person, or in process of delivery and whether
located at Debtor’s places of business or elsewhere (with all Rights to Payment
and Inventory referred to herein collectively as the “Collateral”), together
with whatever is receivable or received when any of the Collateral or proceeds
thereof are sold, leased, collected, exchanged or otherwise disposed of, whether
such disposition is voluntary or involuntary, including without limitation, all
rights to payment, including returned premiums, with respect to any insurance
relating to any of the foregoing, and all rights to payment with respect to any
claim or cause of action affecting or relating to any of the foregoing
(hereinafter called “Proceeds”).

 

2.                          OBLIGATIONS SECURED. The obligations secured hereby
are the payment and performance of: (a) all present and future Indebtedness of
Debtor to Bank; (b) all obligations of Debtor and rights of Bank under this
Agreement; and (c) all present and future obligations of Debtor to Bank of other
kinds. The word “Indebtedness” is used herein in its most comprehensive sense
and includes any and all advances, debts, obligations and liabilities of Debtor,
or any of them, heretofore, now or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, including
under any swap, derivative, foreign exchange, hedge, deposit, treasury
management or other similar transaction or arrangement, and whether Debtor
may be liable individually or jointly, or whether recovery upon such
Indebtedness may be or hereafter becomes unenforceable.

 

3.                          TERMINATION. This Agreement will terminate upon the
performance of all obligations of Debtor to Bank, including without limitation,
the payment of all Indebtedness of Debtor to Bank, and the termination of all
commitments of Bank to extend credit to Debtor, existing at the time Bank
receives written notice from Debtor of the termination of this Agreement.

 

4.                          OBLIGATIONS OF BANK. Bank has no obligation to make
any loans hereunder. Any money received by Bank in respect of the Collateral
may be deposited, at Bank’s option, into a non-interest bearing account over
which Debtor shall have no control, and the same shall, for all purposes, be
deemed Collateral hereunder.

 

5.                          REPRESENTATIONS AND WARRANTIES. Debtor represents
and warrants to Bank that: (a) Debtor’s legal name is exactly as set forth on
the first page of this Agreement, and all of Debtor’s organizational documents
or agreements delivered to Bank are complete and accurate in every respect;
(b) Debtor is the owner and has possession or control of the Collateral and
Proceeds; (c) Debtor has the exclusive right to grant a security interest in the
Collateral and Proceeds; (d) all Collateral and Proceeds are genuine, free from
liens, adverse claims, setoffs, default, prepayment, defenses and conditions
precedent of any kind or character, except

 

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the lien created hereby or as otherwise agreed to by Bank, or heretofore
disclosed by Debtor to Bank, in writing; (e) all statements contained herein
and, where applicable, in the Collateral are true and complete in all material
respects; (f) no financing statement covering any of the Collateral or Proceeds,
and naming any secured party other than Bank, is on file in any public office;
(g) all persons appearing to be obligated on Rights to Payment and Proceeds have
authority and capacity to contract and are bound as they appear to be; (h) all
property subject to chattel paper has been properly registered and filed in
compliance with law and to perfect the interest of Debtor in such property; and
(i) all Rights to Payment and Proceeds comply with all applicable laws
concerning form, content and manner of preparation and execution, including
where applicable Federal Reserve Regulation Z and any State consumer credit
laws.

 

6.                          COVENANTS OF DEBTOR.

 

6.1                      Debtor Agrees in general: (a) to pay Indebtedness
secured hereby when due; (b) to indemnify Bank against all losses, claims,
demands, liabilities and expenses of every kind caused by property subject
hereto; (c) to permit Bank to exercise its powers; (d) to execute and deliver
such documents as Bank deems necessary to create, perfect and continue the
security interests contemplated hereby; (e) not to change its name, and as
applicable, its chief executive office, its principal residence or the
jurisdiction in which it is organized and/or registered without giving Bank
prior written notice thereof; (f) not to change the places where Debtor keeps
any Collateral or Debtor’s records concerning the Collateral and Proceeds
without giving Bank prior written notice of the address to which Debtor is
moving same; and (g) to cooperate with Bank in perfecting all security interests
granted herein and in obtaining such agreements from third parties as Bank deems
necessary, proper or convenient in connection with the preservation, perfection
or enforcement of any of its rights hereunder.

 

6.2                      Debtor agrees with regard to the Collateral and
Proceeds, unless Bank agrees otherwise in writing: (a) that Bank is authorized
to file financing statements in the name of Debtor to perfect Bank’s security
interest in Collateral and Proceeds; (b) to insure Inventory and, where
applicable, Rights to Payment with Bank named as loss payee, in form, substance
and amounts, under agreements, against risks and liabilities, and with insurance
companies satisfactory to Bank; (c) not to use any Inventory for any unlawful
purpose or in any way that would void any insurance required to be carried in
connection therewith; (d) not to remove Inventory from Debtor’s premises except
in the ordinary course of Debtor’s business; (e) not to permit any security
interest in or lien on the Collateral or Proceeds, including without limitation,
liens arising from the storage of Inventory, except in favor of Bank; (f) not to
sell, hypothecate or otherwise dispose of, nor permit the transfer by operation
of law of, any of the Collateral or Proceeds or any interest therein, except
sales of Inventory to buyers in the ordinary course of Debtor’s business; (g) to
furnish reports to Bank of all acquisitions, returns, sales and other
dispositions of the Inventory in such form and detail and at such times as Bank
may require; (h) to permit Bank to inspect the Collateral at any time; (i) to
keep, in accordance with generally accepted accounting principles, complete and
accurate records regarding all Collateral and Proceeds, and to permit Bank to
inspect the same and make copies thereof at any reasonable time; (j) if
requested by Bank, to receive and use reasonable diligence to collect Rights to
Payment and Proceeds, in trust and as the property of Bank, and to immediately
endorse as appropriate and deliver such Rights to Payment and Proceeds to Bank
daily in the exact form in which they are received together with a collection
report in form satisfactory to Bank; (k) not to commingle Rights to Payment,
Proceeds or collections thereunder with other property; (l) to give only normal
allowances and credits and to advise Bank thereof immediately in writing if they
affect any Rights to Payment or Proceeds in any material respect; (m) on demand,
to deliver to Bank returned property resulting from, or payment equal to, such
allowances or credits on any Rights to Payment or Proceeds or to execute such
documents and do such other things as Bank may reasonably request for the
purpose of perfecting, preserving and enforcing its security interest in such
returned property; (n) from time to time, when requested by Bank, to prepare and
deliver a schedule of all Collateral and Proceeds subject to this Agreement and
to assign in writing and deliver to Bank all accounts, contracts, leases and
other chattel paper, instruments, documents and other evidences thereof; (o) in
the event Bank elects to receive payments of Rights to Payment or Proceeds
hereunder, to pay all expenses incurred by Bank in connection therewith,
including expenses of accounting, correspondence, collection efforts, reporting
to account or contract debtors, filing, recording, record keeping and expenses
incidental thereto; and (p) to provide any service and do any other acts which
may be necessary to maintain, preserve and protect all Collateral and, as
appropriate and applicable, to keep all Collateral in good and saleable
condition in accordance with the standards and practices adhered to generally by
users and manufacturers of like property, and to keep all Collateral and
Proceeds free and clear of all defenses, rights of offset and counterclaims.

 

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7.                          POWERS OF BANK. Debtor appoints Bank its true
attorney-in-fact to perform any of the following powers, which are coupled with
an interest, are irrevocable until termination of this Agreement and may be
exercised from time to time by Bank’s officers and employees, or any of them,
whether or not Debtor is in default: (a) to perform any obligation of Debtor
hereunder in Debtor’s name or otherwise; (b) to give notice to account debtors
or others of Bank’s rights in the Collateral and Proceeds, to enforce or
forebear from enforcing the same and make extension or modification agreements
with respect thereto: (c) to release persons liable on Proceeds and to give
receipts and acquittances and compromise disputes in connection therewith;
(d) to release or substitute security; (e) to resort to security in any order;
(f) to prepare, execute, file, record or deliver notes, assignments, schedules,
designation statements, financing statements, continuation statements,
termination statements, statements of assignment, applications for registration
or like papers to perfect, preserve or release Bank’s interest in the Collateral
and Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to
take cash, instruments for the payment of money and other property to which Bank
is entitled; (i) to verify facts concerning the Collateral and Proceeds by
inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;
(j) to endorse, collect, deliver and receive payment under instruments for the
payment of money constituting or relating to Proceeds; (k) to prepare, adjust,
execute, deliver and receive payment under insurance claims, and to collect and
receive payment of and endorse any instrument in payment of loss or returned
premiums or any other insurance refund or return, and to apply such amounts
received by Bank, at Bank’s sole option, toward repayment of the Indebtedness or
replacement of the Collateral; (l) to exercise all rights, powers and remedies
which Debtor would have, but for this Agreement, with respect to all Collateral
and Proceeds subject hereto; (m) to enter onto Debtor’s premises in inspecting
the Collateral; (n) to make withdrawals from and to close deposit accounts or
other accounts with any financial institution, wherever located, into which
Proceeds may have been deposited, and to apply funds so withdrawn to payment of
the Indebtedness; (o) to preserve or release the interest evidenced by chattel
paper to which Bank is entitled hereunder and to endorse and deliver any
evidence of title incidental thereto; and (p) to do all acts and things and
execute all documents in the name of Debtor or otherwise, deemed by Bank as
necessary, proper and convenient in connection with the preservation, perfection
or enforcement of its rights hereunder.

 

8.                          PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND
ASSESSMENTS. Debtor agrees to pay, prior to delinquency, all insurance premiums,
taxes, charges, liens and assessments against the Collateral and Proceeds, and
upon the failure of Debtor to do so, Bank at its option may pay any of them and
shall be the sole judge of the legality or validity thereof and the amount
necessary to discharge the same. Any such payments made by Bank shall be
obligations of Debtor to Bank, due and payable immediately upon demand, together
with interest at a rate determined in accordance with the provisions of this
Agreement, and shall be secured by the Collateral and Proceeds, subject to all
terms and conditions of this Agreement.

 

9.                          EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an “Event of Default” under this Agreement; (a) any
default in the payment or performance of any obligation, or any defined event of
default, under (i) any contract or instrument evidencing any Indebtedness, or
(ii) any other agreement between Debtor and Bank, including without limitation
any loan agreement, relating to or executed in connection with any Indebtedness;
(b) any representation or warranty made by Debtor herein shall prove to be
incorrect, false or misleading in any material respect when made; (c) Debtor
shall fail to observe or perform any obligation or agreement contained herein;
(d) any impairment of the rights of Bank in any Collateral or Proceeds or any
attachment or like levy on any property of Debtor; and (e) Bank, in good faith,
believes any or all of the Collateral and/or Proceeds to be in danger of misuse,
dissipation, commingling, loss, theft, damage or destruction, or otherwise in
jeopardy or unsatisfactory in character or value.

 

10.                    REMEDIES. Upon the occurrence of any Event of Default,
Bank shall have the right to declare immediately due and payable all or any
Indebtedness secured hereby and to terminate any commitments to make loans or
otherwise extend credit to Debtor. Bank shall have all other rights, powers,
privileges and remedies granted to a secured party upon default under the
California Uniform Commerical Code or otherwise provided by law, including
without limitation, the right (a) to contact all persons obligated to Debtor on
any

 

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Collateral or Proceeds and to instruct such persons to deliver all Collateral
and/or Proceeds directly to Bank, and (b) to sell, lease, license or otherwise
dispose of any or all Collateral. All rights, powers, privileges and remedies of
Bank shall be cumulative. No delay, failure or discontinuance of Bank in
exercising any right, power, privilege or remedy hereunder shall affect or
operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. Any waiver, permit,
consent or approval of any kind by Bank of any default hereunder, or any such
waiver of any provisions or conditions hereof, must be in writing and shall be
effective only to the extent set forth in writing. It is agreed that public or
private sales or other dispositions, for cash or on credit, to a wholesaler or
retailer or investor, or user of property of the types subject to this
Agreement, or public auctions, are all commercially reasonable since differences
in the prices generally realized in the different kinds of dispositions are
ordinarily offset by the differences in the costs and credit risks of such
dispositions.

 

While an Event of Default exists: (a) Debtor will deliver to Bank from time to
time, as requested by Bank, current lists of all Collateral and Proceeds;
(b) Debtor will not dispose of any Collateral or Proceeds except on terms
approved by Bank; (c) at Bank’s request, Debtor will assemble and deliver all
Collateral and Proceeds, and books and records pertaining thereto, to Bank at a
reasonably convenient place designated by Bank; and (d) Bank may, without notice
to Debtor, enter onto Debtor’s premises and take possession of the Collateral.
With respect to any sale by Bank of any Collateral subject to this Agreement,
Debtor hereby expressly grants to Bank the right to sell such Collateral using
any or all of Debtor’s trademarks, trade names, trade name rights and/or
proprietary labels or marks. Debtor further agrees that Bank shall have no
obligation to process or prepare any Collateral for sale or other disposition.

 

11.                    DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF
INDEBTEDNESS. In disposing of Collateral hereunder, Bank may disclaim all
warranties of title, possession, quiet enjoyment and the like. Any proceeds of
any disposition of any Collateral or Proceeds, or any part thereof, may be
applied by Bank to the payment of expenses incurred by Bank in connection with
the foregoing, including reasonable attorneys’ fees, and the balance of such
proceeds may be applied by Bank toward the payment of the Indebtedness in such
order of application as Bank may from time to time elect. Upon the transfer of
all or any part of the Indebtedness, Bank may transfer all or any part of the
Collateral or Proceeds and shall be fully discharged thereafter from all
liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred; but with
respect to any Collateral or Proceeds not so transferred Bank shall retain all
rights, powers, privileges and remedies herein given.

 

12.                    STATUTE OF LIMITATIONS. Until all Indebtedness shall have
been paid in full and all commitments by Bank to extend credit to Debtor have
been terminated, the power of sale or other disposition and all other rights,
powers, privileges and remedies granted to Bank hereunder shall continue to
exist and may be exercised by Bank at any time and from time to time
irrespective of the fact that the Indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Debtor may have ceased, unless such liability shall have ceased due to the
payment in full of all Indebtedness secured hereunder.

 

13.                    MISCELLANEOUS. When there is more than one Debtor named
herein: (a) the word “Debtor” shall mean all or any one or more of them as the
context requires; (b) the obligations of each Debtor hereunder are joint and
several; and (c) until all Indebtedness shall have been paid in full, no Debtor
shall have any right of subrogation or contribution, and each Debtor hereby
waives any benefit of or right to participate in any of the Collateral or
Proceeds or any other security now or hereafter held by Bank. Debtor hereby
waives any right to require Bank to (i) proceed against Debtor or any other
person, (ii) marshal assets or proceed against or exhaust any security from
Debtor or any other person, (iii) perform any obligation of Debtor with respect
to any Collateral or Proceeds, and (d) make any presentment or demand, or give
any notice of nonpayment or nonperformance, protest, notice of protest or notice
of dishonor hereunder or in connection with any Collateral or Proceeds. Debtor
further waives any right to direct the application of payments or security for
any Indebtedness of Debtor or indebtedness of customers of Debtor.

 

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14.                    NOTICES. All notices, requests and demands required under
this Agreement must be in writing, addressed to Bank at the address specified in
any other loan documents entered into between Debtor and Bank and to Debtor at
the address of its chief executive office (or principal residence, if
applicable) specified below or to such other address as any party may designate
by written notice to each other party, and shall be deemed to have been given or
made as follows: (a) if personally delivered, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or 3 days after deposit in the U.
S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.

 

15.                    COSTS, EXPENSES AND ATTORNEYS’ FEES. Debtor shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of Bank’s in-house counsel), expended or
incurred by Bank in connection with (a) the perfection and preservation of the
Collateral or Bank’s interest therein, and (b) the realization, enforcement and
exercise of any right, power, privilege or remedy conferred by this Agreement,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Debtor or in any way affecting any of the Collateral or Bank’s ability to
exercise any of its rights or remedies with respect thereto. All of the
foregoing shall be paid by Owner with interest from the date of demand until
paid in full at a rate per annum equal to the greater of ten percent (10%) or
Bank’s Prime Rate in effect from time to time.

 

16.                    SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the parties, and may be amended
or modified only in writing signed by Bank and Debtor.

 

17.                    OBLIGATIONS OF MARRIED PERSONS. Any married person who
signs this Agreement as Debtor hereby expressly agrees that recourse may be had
against his or her separate property for all his or her Indebtedness to Bank
secured by the Collateral and Proceeds under this Agreement.

 

18.                    SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.

 

19.                    GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.

 

Debtor warrants that Debtor is an organization registered under the laws of
Delaware.

 

Debtor warrants that its chief executive office (or principal residence, if
applicable) is located at the following address:  2711 Centerville Road,
Suite 400, Wilmington, DE 19808

 

Debtor warrants that the Collateral (except goods in transit) is located or
domiciled at the following additional addresses:  2401 East Katella Avenue,
Suite 300, Anaheim, CA 92806

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of December 28,
2007.

 

 

Willdan Group, Inc.

 

 

 

By:

 /s/ Kimberly D. Gant

 

 

  Kimberly D. Gant

 

Title:

  Chief Financial Officer

 

 

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