Exhibit 10.27
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
OBLIGOR # NOTE# AGREEMENT DATE
August 4,1997
CREDIT LIMIT INTEREST RATE OFFICER NO./INITIALS
$5,000,000 B + 0.00% 487O3 Mary Beth Suhr
8.50%
THIS AGREEMENT is entered into on August 4, 1997, between Comerica Bank-
California ("Bank") as secured party, whose Headquarter Office is 333 West Santa
Clara Street, San Jose, California and Pointcast Incorporated ("Borrower"), a
California corporation whose sole place of business (if it has only one), chief
executive office (if it has more than one place of business) or residence (if an
individual) is located at 501 Macara Avenue, Sunnyvale, California.
The parties agree as follows:
1. DEFINITIONS.
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1.1 "Agreement" as used in this Agreement means and includes this
Revolving Credit Loan & Security Agreement (Accounts and Inventory), any
concurrent or subsequent rider to this Revolving Credit Loan & Security
Agreement (Accounts and Inventory) and any extensions, supplements, amendments
or modifications to this Revolving Credit Loan & Security Agreement (Accounts
and Inventory) and to any such rider.
1.2 "Bank Expenses" as used in this Agreement means and includes: all
reasonable costs or expenses required to be paid by Borrower under this
Agreement which are paid or advanced by Bank; taxes and insurance premiums of
every nature and kind of Borrower paid by Bank; filing, recording, publication
and search fees, appraiser fees, auditor fees and costs, and title insurance
premiums paid or incurred by Bank in connection with Bank's transactions with
Borrower; costs and expenses incurred by Bank in collecting the Receivables
(with or without suit) to correct any default or enforce any provision of this
Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, disposing of, preparing for sale and/or advertising
to sell the Collateral, whether or not a sale is consummated; costs and expenses
of suit incurred by Bank in enforcing or defending this Agreement or any portion
hereof, including, but not limited to, expenses incurred by Bank in attempting
to obtain relief from any stay, restraining order, injunction or similar process
which prohibits Bank from exercising any of its rights or remedies; and
reasonable attorneys' fees and expenses incurred by Bank in advising,
structuring, drafting, reviewing, amending, terminating, enforcing, defending or
concerning this Agreement, or any portion hereof or any agreement related
hereto, whether or not suit is brought. Bank Expenses shall include Bank's in-
house legal charges at reasonable rates.
1.3 "Base Rate" as used in this Agreement means that variable rate of
interest so announced by Bank at its headquarters office in San Jose, California
as its "Base Rate" from time to time and which serves as a basis upon which
effective rates of interest are calculated for those loans making reference
thereto.
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1.4 "Borrower's Books" as used in this Agreement means and includes all of
the Borrower's books and records including but not limited to: minute books;
ledgers; records indicating, summarizing or evidencing Borrower's assets,
liabilities, Receivables, business operations or financial conditions, and all
information relating thereto, computer programs; computer disk or tape files;
computer printouts; computer runs; and other computer prepared information and
equipment of any kind.
1.5 "Borrowing Base" as used in this Agreement means the greater of (i)
$2,000,000, or (ii) the sum of (1) eighty percent (80%) of the net amount of
Eligible Accounts after deducting therefrom all payments, adjustments and
credits applicable thereto ("Accounts Receivable Borrowing Base"); and (2) the
amount, if any, of the advances against Inventory agreed to be made pursuant to
any Inventory Rider ("Inventory Borrowing Base"), or other, rider, amendment or
modification to this Agreement, that may now or hereafter be entered into by
Bank and Borrower.
1.6 "Cash Flow" as used in this Agreement means, for any applicable period
of determination, the Net Income (after deduction for income taxes and other
taxes of such person determined by reference to income or profits of such
person) for such period, plus, to the extent deducted in computation of such Net
Income, the amount of depreciation and amortization expenses and the amount of
deferred tax liability during such period, all as determined in accordance with
GAAP.
1.7 "Collateral" as used in this Agreement means and includes each and all
of the following: the Receivables; the Intangibles; the negotiable collateral,
the Inventory; all money, deposit accounts and all other assets of Borrower in
which Bank receives a security interest or which hereafter come into the
possession, custody or control of Bank; and the proceeds of any of the
foregoing, including, but not limited to, proceeds of insurance covering the
collateral and any and all Receivables, Intangibles, negotiable collateral,
Inventory, equipment, money, deposit accounts or other tangible and intangible
property of borrower resulting from the sale or other disposition of the
collateral, and the proceeds thereof. Notwithstanding anything to the contrary
contained herein, collateral shall not include (i) any waste or other materials
which have been or may be designated as toxic or hazardous by Bank (ii) any
equipment or other fixed assets of the Borrower leased from or financed by third
parties to the extent the contracts evidencing such lease or financing prohibit
the granting by Borrower of any security interest therein, provided such
equipment shall automatically be included in the Collateral upon the termination
of such contracts or the consent to such security interest by such third party.
Notwithstanding the foregoing, the term "Collateral" shall not include any
general intangibles or rights under licenses or other contracts of Borrower
(whether owned or held as licensee or lessee, or otherwise) to the extent that
(i) such general intangibles or rights under licenses or other contracts are not
assignable or capable of being encumbered as a matter of law or under the terms
of the license, lease or other agreement applicable thereto (but solely to the
extent that such restriction shall be enforceable under applicable law) without
the consent of the licensor or lessor thereof or other applicable party thereto
and (ii) such consent has not been obtained: provided, however, that the
foregoing grant of security interest shall extend to, and the term "Collateral"
shall include, (A) any general intangible which is an account or a proceed of,
or otherwise related to the
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enforcement or collection of, any account or goods which are the subject of any
account, and (B) any and all proceeds of any general intangibles which are
otherwise excluded to the extent that the assignment or encumbrance of such
proceeds is not so restricted, and (C) upon obtaining the consent of any such
licensor, lessor or other applicable party with respect to any such otherwise
excluded general intangibles, such general intangibles as well as any and all
proceeds thereof that might theretofore have been excluded from such grant of a
security interest and the term "Collateral".
1.8 "Credit" as used in this Agreement means all Obligations, except those
obligations arising pursuant to any other separate contract, instrument, note,
or other separate agreement which, by its terms, provides for a specified
interest rate and term.
1.9 "Current Assets" as used in this Agreement means, as of any applicable
date of determination, all cash, non-affiliated customer receivables, United
States government securities, claims against the United States government, and
inventories.
1.10 "Current Liabilities" as used in this Agreement means, as of any
applicable date of determination (i) all liabilities of a person that should be
classified as current in accordance with GAAP, including without limitation any
portion of the principal of the Indebtedness classified as current, plus (ii) to
the extent not otherwise included, all liabilities of the Borrower to any of its
affiliates whether or not classified as current in accordance with
GAAP.
1.11 "Daily Balance" as used in this Agreement means the amount determined
by taking the amount of the Credit owed at the beginning of a given day, adding
any new Credit advanced or incurred on such date, and subtracting any payments
or collections which are deemed to be paid and are applied by Bank in reduction
of the Credit on that date under the provisions of this Agreement.
1.12 "Eligible Accounts" as used in this Agreement means and includes those
accounts of Borrower which are due an payable within thirty (30) days, or less,
from the date of invoice, have been validly assigned to Bank and strictly comply
with all of Borrower's warranties and representations to Bank; but Eligible
Accounts shall not include the following: (a) accounts with respect to which the
account debtor is an officer, employee, partner, or joint venturer of Borrower;
(b) 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; (c) accounts with respect to which the account debtor is not a
resident of the United States; (d) accounts with respect to which the account
debtor is the United States or any department, agency or instrumentality of the
United States; (e) accounts with respect to which the account debtor is any
State of the United States or any city, county, town municipality or division
thereof, (f) accounts with respect to which the account debtor is a subsidiary
of, related to, affiliated or has common shareholders, officers or directors
with Borrower; (g) 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; (h) accounts not paid by an account debtor within one
hundred twenty (120) days from the date of the invoice; (i) accounts with
respect to which account debtors dispute liability or make any
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claim, or have any defense, crossclaim, counterclaim, or offset; (j) accounts
with respect to which any Insolvency Proceeding is filed by or against the
account debtor, or if an account debtor becomes insolvent, fails or goes out of
business; and (k) accounts owed by any single account debtor which exceed twenty
percent (20%) of all of the Eligible Accounts; and (l) accounts with a
particular account debtor on which over twenty-five percent (25%) of the
aggregate amount owing is greater than one hundred twenty (120) days from the
date of the invoice.
1.13 "Event of Default" as used in this Agreement means those events
described in Section 7 contained herein below.
1.14 "Fixed Charges" as used in this Agreement means and includes, for any
applicable period of determination, the sum, without duplication, of (a) all
interest paid or payable during such period by a person on debt of such person,
plus (b) all payments of principal or other sums paid or payable during such
period by such person with respect to debt of such person having a final
maturity more than one year from the date of creation of such debt, plus (c) all
debt discount and expense amortized or required to be amortized during such
period by such person, plus (d) the maximum amount of all rents and other
payments paid or required to be paid by such person during such period under any
lease or other contract or arrangement providing for use of real or person
property in respect of which such person is obligated as a lessee, use or
obligor, plus (e) all dividends and other distributions paid or payable by such
person or otherwise accumulating during such period on any capital stock of such
person, plus (f) all loans or other advances made by such person during such
period to any Affiliate of such person.
1.15 "GAAP" as used in this Agreement means as of any applicable period,
generally accepted accounting principles in effect during such period.
1.16 "Insolvency Proceeding" as used in this Agreement means and includes
any proceeding or case commenced by or against the Borrower, or any guarantor of
Borrower's Obligations, or any borrower's account debtors, under any provisions
of the Bankruptcy Code, as amended, or any other bankruptcy or insolvency law,
including but not limited to assignments for the benefit of creditors, formal or
informal moratoriums, composition or extensions with some or all creditors, any
proceeding seeking reorganization, arrangement or any other relief under the
Bankruptcy code, as amended, or any other bankruptcy or insolvency law.
1.17 "Intangibles" as used in this Agreement means and includes all
borrower's present and future general Intangibles and other personal property
(including, without limitation, any and all rights in any legal proceeding,
goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings,
purchase orders, computer programs, computer disks, computer tapes, literature,
reports, catalogs and deposit accounts) other than goods and Receivables, as
well as Borrower's Books relating to any of the foregoing.
1.18 "Inventory" as used in this Agreement means and includes all present
and future inventory in which Borrower has any interest, including, but not
limited to, goods held
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by Borrower for sale or lease or to be furnished under a contract of service and
all of Borrower's present and future raw materials, work in process, finished
goods, advertising, materials and packing and shipping materials, wherever
located and any documents of title representing any of the above, and any
equipment, fixtures or other property used in the storing moving preserving,
identifying, accounting for and shipping or preparing for the shipping of
inventory, and any and all other items hereafter acquired by Borrower by way of
substitution, replacement, return, repossession or otherwise, and all additions
and accessions thereto, and the resulting product or mass, and any documents of
title respecting any of the above.
1.19 "Net Income" as used in this Agreement means the net income (or loss)
of a person for any period determined in accordance with GAAP but excluding in
any event:
a. any gains or losses on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital assets, and any
taxes on the excluded gains and any tax deductions or credits on account on any
excluded losses; and
b. in the case of the Borrower, net earnings of any Person in which
Borrower has an ownership interest, unless such net earnings shall have actually
been received by Borrower in the form of cash distributions.
1.20 "Judicial Officer or Assignee" as used in this Agreement means and
includes any trustee, receiver, controller, custodian, assignee for the benefit
of creditors or any other person or entity having powers or duties like or
similar to the powers and duties of trustee, receiver, controller, custodian or
assignee for the benefit of creditors.
1.21 "Obligations" as used in this Agreement means and includes any and all
loans, advances, overdrafts, debts, liabilities (including, without limitation,
any and all amounts Charged to Borrower's account pursuant to any agreement
authorizing Bank to charge Borrower's account), obligations, lease payments,
guaranties, covenants and duties owing by Borrower to Bank of any kind and
description whether advanced pursuant to or evidenced by this Agreement; by any
note or other instrument; or by any other agreement between Bank and Borrower
and whether or not for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including, without limitation, any debt, liability or obligation owing from
Borrower to others which Bank may have obtained by assignment, participation,
purchase or otherwise, and further including, without limitation, all interest
not paid when due and all Bank Expenses which Borrower is required to pay or
reimburse by this Agreement, by law, or otherwise.
1.22 "Person" or "person" as used in this Agreement means and includes any
individual, corporation, partnership, joint venture, association, trust
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
1.23 "Receivables" as used in this Agreement means and includes all
presently existing and hereafter arising accounts, instruments, documents,
chattel paper, general
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intangibles, all other forms of obligations owing to Borrower, all of Borrower's
rights in, to and under all purchase orders heretofore or hereafter received,
all moneys due to Borrower under all contracts or agreements (whether or not yet
earned or due), all merchandise returned to or reclaimed by Borrower and the
Borrower's books (except minutes books) relating to any of the foregoing.
1.24 "Subordinated Debt" as used in this Agreement means indebtedness of
the Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content reasonably
satisfactory to the Bank.
1.25 "Tangible Effective Net Worth" as used in the Agreement means net
worth as determined in accordance with GAAP consistently applied, increased by
Subordinated Debt, if any, and decreased by the following: patents, licenses,
goodwill, subscription lists, organization expenses, trade receivables converted
to notes, money due from affiliates (including officers, directors, subsidiaries
and commonly held companies).
1.26 "Tangible Net Worth" as used in the Agreement means, as of any
applicable date of determination, the excess of
a. the net book value of all assets of a person (other than patents,
patent rights, trademarks, trade names, franchises, copyrights, licenses,
goodwill, and similar tangible assets) after all appropriate deductions in
accordance with GAAP (including, without limitation, reserves for doubtful
receivables, obsolescence, depreciation and amortization), over
b. all Total Liabilities of such person.
1.27 "Total Liabilities" as used in this Agreement means the total of all
items of indebtedness, obligation or liability which, in accordance with GAAP
consistently applied, would be included in determining the total liabilities of
the Borrower as of the date Total Liabilities is to be determined, including
without limitation (a) all obligations secured by any mortgage, pledge, security
interest or other lien on property owned or acquired, whether or not the
obligations secured thereby shall have been assumed; (b) all obligations which
are capitalized lease obligations; and (c) all guaranties, endorsements or other
contingent or surety obligations with respect to the indebtedness of others,
whether or not reflected on the balance sheets of the Borrower, including any
obligation to furnish funds, directly or indirectly through the purchase of
goods, supplies, services, or by way of stock purchase, capital contribution,
advance or loan or any obligation to enter into a contract for any of the
following.
1.28 "Working Capital" as used in this Agreement means, as of any
applicable date of determination, Current Assets less Current Liabilities.
1.29 Any and all terms used in this Agreement shall be construed and
defined in accordance with the meaning and definition of such terms under and
pursuant to the California Uniform Commercial Code (hereinafter referred to as
the "Code") as amended.
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2. LOAN AND TERMS OF PAYMENTS.
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For value received, Borrower promises to pay to the order of Bank such
amount, as provided for below, together with interest, as provided for below.
2.1 Upon the request of Borrower, made at any time and from time to time
during the term hereof, and so long as no Event of Default has occurred, Bank
shall lend to Borrower an amount equal to the Borrowing Base; provided, however,
that in no event shall Bank be obligated to make advances to Borrower under this
Section 2.1 whenever the Daily Balance exceeds, at any time, either the
Borrowing Base or the sum of Five Million and no/100 Dollars ($5,000,000), such
amount being referred to herein as an "Overadvance".
2.2 Except as hereinbelow provided, the Credit shall bear interest, on the
Daily Balance owing, at a rate of no (0.00) percentage points per annum above
the Base Rate (the "Rate"). The Credit shall bear interest, from and after the
occurrence of an Event of Default and without constituting a waiver of any such
Event of Default, on the Daily Balance owing, at a rate of three (3) percentage
points per annum above the Rate. All interest chargeable under this Agreement
that is based upon a per annum calculation shall be computed on the basis of a
three hundred sixty (360) day year for actual days elapsed.
The Base Rate as of the date of this Agreement is eight and 500/1000
percent (8.50%) per annum. In the event that the Base Rate announced is, from
time to time hereafter changed, adjustment in the Rate shall be made and based
on the Base Rate in effect on the date of such change. The Rate, as adjusted,
shall apply to the Credit until the Base Rate is adjusted again. All interest
payable by Borrower under the Credit shall be due and payable on the first day
of each calendar month during the term of the Agreement and Bank may, at its
option, elect to treat such interest and any and all Bank Expenses as advances
under the Credit, which amounts shall thereupon constitute Obligations and shall
thereafter accrue interest at the rate applicable to the Credit under the terms
of the Agreement.
3. TERM.
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3.1 This Agreement shall remain in full force and effect until March 31,
1999, or until terminated by notice by Borrower. Notice of such termination by
Borrower shall be effectuated by providing Bank written notice not less than
three (3) days prior to the effective date of such termination, addressed to the
Bank at the address set forth herein and the termination shall be effective as
of the date so fixed in such notice. Notwithstanding the foregoing, while an
Event of Default is continuing, Bank may terminate this Agreement at any time
without notice. Notwithstanding the foregoing, should either Bank or Borrower
become insolvent or unable to meet its debts as they mature, or fail, suspend,
or go out of business, the other party shall have the right to terminate this
Agreement at any time without notice. On the date of termination all Obligations
shall become immediately due and payable without notice or demand; no notice of
termination by Borrower shall be effective until Borrower shall have paid all
Obligations (other than inchoate indemnity obligations) to Bank in full.
Notwithstanding termination, until all Obligations (other than inchoate
indemnity obligations) have been fully satisfied, Bank shall retain its security
interest in all existing
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Collateral and Collateral arising thereafter, and Borrower shall continue to
perform all of its Obligations.
3.2 After termination and when Bank has received payment in full of
Borrower's Obligations to Bank, Bank shall reassign to Borrower all Collateral
held by Bank, and shall execute a termination of all security agreements and
security interests given by Borrower to Bank, upon the execution and delivery of
mutual general releases.
4. CREATION OF SECURITY INTEREST.
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4.1 Borrower hereby grants to Bank a continuing security interest in all
presently existing and hereafter arising Collateral in order to secure prompt
repayment of any and all Obligations owed by Borrower to Bank and in order to
secure prompt performance by Borrower of each and all of its covenants and
Obligations under the Agreement and otherwise created. Bank's security interest
in the Collateral shall attach to all Collateral without further act on the part
of Bank or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of a letter of credit, advice of credit, instrument,
money, negotiable documents, chattel paper or similar property (collectively
"Negotiable Collateral"), Borrower shall, immediately upon receipt thereof,
endorse and assign such Negotiable Collateral over to Bank and deliver actual
physical possession of the Negotiable Collateral to Bank.
4.2 Bank's security interest in Receivables shall attach to all
Receivables without further act on the part of Bank or Borrower. Upon request
from Bank, Borrower shall provide Bank with schedules describing all Receivables
created or acquired by Borrower (including without limitation agings listing the
names and addresses of, and amounts owing by date by account debtors), provided,
however, Borrower's failure to execute and deliver such schedules shall not
affect or limit Bank's security interest and other rights in and to the
Receivables. Together with each schedule, Borrower shall furnish Bank with
copies of Borrower's customers' invoices or the equivalent, and original
shipping or delivery receipts for all merchandise sold, and Borrower warrants
the genuineness thereof. Upon the occurrence and during the continuance of an
Event of Default, Bank or Bank's designee may notify customers or account
debtors of collection costs and expenses to Borrower's account but, unless and
until Bank does so or gives Borrower other written instructions, Borrower shall
collect all Receivables for Bank, receive in trust all payments thereon as
Bank's trustee, and, if so requested to do so from Bank, Borrower shall
immediately deliver said payments to Bank in their original form as received
from the account debtor and all letters of credit, advices of credit,
instruments, documents, chattel paper or any similar property evidencing or
constituting Collateral. The receipt of any check or other item of payment by
Bank shall not be considered a payment on account until such check is honored
when presented for payment.
4.3 Bank's security interest in Inventory shall attach to all Inventory
without further act on the part of Bank or Borrower. Upon Bank's request
following the occurrence and during the continuance of an Event of Default
Borrower will from time to time at Borrower's expense pledge, assemble and
deliver such Inventory to Bank or to a third party
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as Bank's bailee; or hold the same in trust for Bank's account or store the same
in a warehouse in Bank's name; or deliver to Bank documents of title
representing said Inventory; or evidence of Bank's security interest in some
other manner acceptable to Bank.
4.4 Borrower shall execute and deliver to Bank concurrently with
Borrower's execution of this Agreement, and at any time or times hereafter at
the request of Bank, all financing statements, continuation financing
statements, security agreements, mortgages, assignments, certificates of title,
affidavits, reports, notices, schedules of accounts, letters of authority and
all other documents that Bank may request, in form satisfactory to Bank, to
perfect and maintain perfected Bank's security interest in the Collateral and in
order to fully consummate all of the transactions contemplated under this
Agreement. Effective upon the occurrence and during the continuance of an Event
of Default, Borrower hereby irrevocably makes, constitutes and appoints Bank
(and any of Bank's officers, employees or agents designated by Bank) as
Borrower's true and lawful attorney-in-fact with owner to sign the name of
Borrower on any financing statements, continuation financing statements,
security agreement, mortgage, assignment, certificate of title, affidavit,
letter of authority, notice of other similar documents which must be executed
and/or filed in order to perfect or continue perfected Bank's security interest
in the Collateral.
Borrower shall make appropriate entries in Borrower's Books disclosing
Bank's security interest in the Receivables. Bank (through any of its officers,
employees or agents) all have the right at any time or times hereafter during
Borrower's usual business hours, or during the usual business hours of any third
party having control over the records of Borrower, to inspect and verify
Borrower's Books in order to verify the amount or condition of, or any other
matter, relating to, said Collateral and Borrower's financial condition.
4.5 Effective only while an Event of Default is continuing, Borrower
appoints Bank or any other person whom Bank may designate as Borrower's
attorney-in-fact, with power to endorse Borrower's name on any checks, notes,
acceptances, money order, drafts or other forms of payment or security that may
come into Bank's possession; to sign Borrower's name on any invoice or bill of
lading relating to any Receivables, on drafts against account debtors, on
schedules and assignments of Receivables, on verifications of Receivables and on
notices to account debtors; to establish a lock box arrangement and/or to notify
the post office authorities to change the address for delivery of Borrower's
mail addressed to Borrower to an address designated by Bank, to receive and open
all mail addressed to Borrower, and to retain all mail related to the Collateral
and forward all other mail to Borrower; to send, whether in writing or by
telephone, requests for verification of Receivables; and to do all things
necessary to carry out this Agreement. Borrower ratifies and approves all acts
of the attorney-in-fact. Neither Bank nor its attorney-in-fact will be liable
for any acts or omissions or for any error of judgement or mistake of fact or
law. This power being coupled with an interest, is irrevocable so long as any
Receivables in which Bank has a security interest remain unpaid and until the
Obligations have been fully satisfied.
4.6 Effective only while an Event of Default is continuing, in order to
protect or prefect any security interest which Borrower is granted hereunder,
Borrower may, in its sole discretion, discharge any lien or encumbrance or bond
the same, pay any insurance, maintain
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guards, warehousemen, or any personnel to protect the Collateral, pay any
service bureau, or, obtain any records, and all costs for the same shall be
added to the Obligations and shall be payable on demand.
4.7 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and
services providers.
Notwithstanding any provision of this Agreement to the contrary, prior to
the occurrence of an Event of Default, Borrower shall not be required to
disclose, permit inspection, examination, copying or making extracts of, or
discuss, any document, information or other matter that (i) constitutes non-
financial trade secrets or non-financial proprietary information, or (ii) the
disclosure of which to Bank, or their designated representative, is then
prohibited by (a) law, or (b) an agreement binding on the Borrower that was not
entered into by the Borrower for the primary purpose of concealing information
from the Bank.
In handling any confidential information Bank and all employees and agents
of Bank, including but not limited to accountants, shall exercise the same
degree of care that it exercises with respect to its own proprietary information
of the same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the subsidiaries or affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the
Obligations, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Bank and (v) as Bank may determine in connection with
the enforcement of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
5. CONDITIONS PRECEDENT.
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5.1 Conditions precedent to the making of the loans and the extension of
the financial accommodations hereunder, Borrower shall execute, or cause to be
executed, and deliver to Bank, in form and substance satisfactory to Bank and
its counsel, the following:
a. This Agreement and other documents required by Bank;
b. Financing statements (Form UCC-1) in form satisfactory to Bank
for filing and recording with the appropriate governmental authorities;
c. If Borrower is a corporation, the certified extracts from the
minutes of the meeting of its board of directors, authorizing the borrowings and
the granting of the
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
security interest provided for herein and authorizing specific officers to
execute and deliver the agreements provided for herein;
d. If Borrower is a corporation, then a certificate of good standing
showing that Borrower is in good standing under the laws of the state of its
incorporation and certificates indicating that Borrower is qualified to transact
business and is in good standing in any other state in which it conducts
business where the failure to be so qualified could reasonably be expected to
have a material adverse effect;
e. If Borrower is a partnership, then a copy of Borrower's
partnership agreement certified by each general partner of Borrower;
f. UCC searches, tax lien and litigation searches, fictitious
business statement filings, insurance certificates, notices or other similar
documents which Bank may require and in such form as Bank may require, in order
to reflect, perfect or protect Bank's first priority security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement;
g. Evidence that Borrower has obtained insurance and acceptable
endorsements; and
h. Warranties and representations of officers.
6. WARRANTIES REPRESENTATIONS AND COVENANTS.
----------------------------------------
6.1 If so requested by Bank, Borrower shall, at such intervals designated
by Bank, during the term hereof execute and deliver a Report of Accounts
Receivable or similar report, in form customarily used by Bank. Borrower's
Borrowing Base at all times pertinent hereto shall not be less than the advances
made hereunder. Bank shall have the right to recompute Borrower's Borrowing
Base in conformity with this Agreement.
6.2 If any warranty is breached as to any account, or any account is not
paid in full by an account debtor within ninety (90) days from the date of
invoice, or an account debtor disputes liability or makes any claim with respect
thereto, or a petition in bankruptcy or other application for relief under the
Bankruptcy Code or any other insolvency law is filed by or against an account
debtor, or an account debtor makes an assignment for the benefit of creditors,
becomes insolvent, fails or goes out of business, then Bank may deem ineligible
any and all accounts owing by that account debtor, and reduce Borrower's
Borrowing Base by the amount thereof. Bank may retain its security interest in
all Receivables and accounts, whether eligible or ineligible, until all
Obligations (other than inchoate indemnity obligations) have been fully paid and
satisfied. Returns and allowances, if any, as between Borrower and its
customers, will be on the same basis and in accordance with the usual customary
practices of the Borrower, as they exist at this time. After the occurrence of
an Event of Default and during the continuance thereof, Borrower hereunder, no
discount, credit or allowance shall be granted to any account debtor by Borrower
and no return of merchandise shall be accepted by Borrower without Bank's
consent. Bank may, after default by Borrower, settle or adjust
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
disputes and claims directly with account debtors for amounts and upon terms
which Bank considers advisable, and in such cases Bank will credit Borrower's
account with only the net amounts received by Bank in payment of the accounts,
after deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
a. Borrower has good and marketable title to the Collateral. Bank
has and shall continue to have a first priority perfected security interest in
and to the Collateral. The Collateral shall at all times remain free and clear
of all liens, encumbrances and security interests (a "Lien") (except those in
favor of Bank except for Permitted Liens). "Permitted Liens" shall mean (i) the
Lien in favor of Bank, (ii) any Liens existing on the date of this Agreement and
disclosed to Bank prior to signing this Loan and Security Agreement, (iii) Liens
for taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings and as to
which adequate reserves are maintained on Borrower's Books in accordance with
GAAP, provided the same have no priority over any of Bank's security interests;
(iv) Liens (a) upon or in any equipment acquired or held by Borrower or any of
its Subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such equipment,
or (b) existing on such equipment at the time of its acquisition, provided that
--------
the Lien is confined solely to the property so acquired and improvements
thereon, accessions and additions thereto, replacements and proceeds thereof;
(v) leases or subleases and licenses or sublicenses granted to others in the
ordinary course of Borrower's business not interfering in any material respect
with the business of Borrower, and any interest or title of a lessor, licensor
or under any lease or license provided that such leases, subleases, licenses and
sublicenses do not prohibit the grant of a security interest to Bank; (vi)
easements, reservations rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances affecting real
property; (vii) workman's courier's or materialmen's Liens or other similar
statutory or common law Liens incurred in the ordinary course of Borrower's
business; (viii) Liens that are not prior to the Lien of Bank which constitute
rights of set-off of a customary nature or bankers' Liens with respect to
amounts of deposit, whether arising by operation of law or by contract, in
connection with arrangements entered into with banks in the ordinary course of
business; (ix) earn-out and royalty obligations existing on the date hereof or
entered into in connection with an acquisition permitted by this addendum.
b. All accounts are and will, at all times pertinent hereto, be bona
fide existing obligations created by the sale and delivery of merchandise or the
rendition of services to account debtors in the ordinary course of business,
free of liens, claims, encumbrances and security interests (except as held by
Bank and except as may be consented to, in writing, by Bank) and are
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, rights of return or cancellation, except in the ordinary course
of business, and Borrower shall have received no notice of actual or imminent
bankruptcy or insolvency of any account debtor at the time an account due from
such account debtor is included in the Borrowing Base.
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REVOLVING CREDIT
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(Accounts & Inventory)
c. At the time an account is included as an Eligible Receivable, all
property giving rise to such account shall have been delivered to the account
debtor or to the agent for the account debtor for immediate shipment to, and
unconditional acceptance by, the account debtor. Borrower shall deliver to
Bank, as Bank may from time to time require, delivery receipts, customer's
purchase orders, shipping instruction, bills of lading and any other evidence of
shipping arrangements. Absent such a request by Bank, copies of all such
documentation shall be held by Borrower as custodian of Bank.
6.4 At the time an eligible account is included as an Eligible Receivable,
all such eligible accounts will be due and payable on terms set forth in Section
1.12, or on such other terms approved in writing by Bank in advance of the
creation of such accounts and which are expressly set forth on the face of all
invoices, copies of which shall be held by Borrower as custodian for Bank, and
no such eligible account will then be past due.
6.5 a. Borrower, immediately upon demand by Bank therefor, shall now and
from time to time hereafter, at such intervals as are requested by Bank, deliver
to Bank, designations of Inventory specifying Borrower's cost of Inventory, the
wholesale market value thereof and such other matters and information relating
to the Inventory as Bank may request;
b. All of the Inventory is and shall remain free from all purchase
money or other security interests, liens or encumbrances, except as held by
Bank, other than Permitted Liens.
c. Borrower does now keep and hereafter at all times shall keep
correct and accurate records itemizing and describing the kind, type, quality
and quantity of the Inventory, its cost therefor and selling price thereof, and
the daily withdrawals therefrom and additions thereto, all of which records
shall be available upon demand to any of Bank's officers, agents and employees
for inspection and copying.
d. All Inventory, now and hereafter at all times, shall be new
Inventory of good and merchantable quality free from material defects.
e. Inventory is not now and shall not at any time or times hereafter
be located or stored with a bailee, warehouseman or other third party without
Bank's prior written consent, and, in such event, Borrower will concurrently
therewith cause any such bailee, warehouseman or other third party to issue and
deliver to Bank, in a form acceptable to Bank, warehouse receipts in Bank's name
evidencing the storage of Inventory or other evidence of Bank's prior rights in
the Inventory. In any event, Bank shall instruct any third party to hold all
such Inventory for Bank's account subject to Borrower's security interests and
its instructions; and
f. Bank shall have the right upon demand now and/or at all times
hereafter, during Borrower's usual business hours, to inspect and examine the
Inventory and to check and test the same as to quality, quantity, value and
condition and Borrower agrees to reimburse Bank for Bank's reasonable costs and
expenses in so doing.
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REVOLVING CREDIT
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(Accounts & Inventory)
6.6 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:
a. Grant a security interest in or permit a lien, claim or
encumbrance upon any of the Collateral to any person, association, firm,
corporation, entity or governmental agency or instrumentality, other than
Permitted Liens;
b. Permit any levy, attachment or restraint to be made affecting any
of Borrower's assets;
c. Permit any Judicial Officer or Assignee to be appointed or to
take possession of any or all of Borrower's assets;
d. Change its name or corporate identity or add any new fictitious
names, without providing Bank at least ten (10) days prior written notice, or
liquidate, merge or consolidate with or into any other business organization;
e. Move or relocate any Collateral outside the ordinary course of
business without providing Bank with prior written notice thereof;
f. Prior to Borrower's initial public offering, acquire any other
business organization in any transactions involving aggregate cash consideration
in excess of Five Million Dollars ($5,000,000) and, after Borrower's initial
public offering, any transactions involving aggregate cash consideration in
excess of Fifteen Million Dollars ($15,000,000); provided that Borrower may
acquire any other business organization in any transactions involving stock
consideration where such transaction does not result in a material reduction of
Borrower's tangible net worth, provided an Event of Default does not exist
before or after giving effect to such transaction.
g. Make any change in Borrower's financial structure or in any of
its business objectives, purposes or operations which would materially adversely
affect the ability of Borrower to repay Borrower's Obligations;
h. Incur any debts outside the ordinary course of Borrower's
business except (i) renewals or extensions of existing debts and interest
thereon (ii) debts consisting of capital leases or entered into for the purpose
of financing equipment, real property (including improvements thereon) and other
property, (iii) indebtedness subordinated to the obligations of Borrower to Bank
on customary terms and conditions, and (iv) other indebtedness not to exceed One
Million Dollars ($1,000,000);
i. Make any advance or loan except in the ordinary course of
Borrower's business as currently conducted;
j. Guarantee or otherwise, directly or indirectly, in any way be or
become responsible for obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person, agreement for the furnishing of
funds to any other Person
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
through the furnishing of goods, supplies or services, by way of stock purchase,
capital contribution, advance or loan, for the purpose of paying or discharging
(or causing the payment or discharge of) the indebtedness of any other Person,
or otherwise, except for the endorsement of negotiable instruments by the
Borrower in the ordinary course of business for deposit or collection,
k. (a) Sell, lease, transfer or otherwise dispose of properties and
assets having an aggregate book value of more than Five Hundred Thousand Dollars
($500,000), provided that Borrower may not dispose of its accounts (whether in
one transaction or in a series of transactions) except as to the sale of
inventory in the ordinary course of business; (b) consolidate with or merge into
any other corporation, permit another corporation to merge into it, acquire all
or substantially all the properties or assets of any other Person; or (c) enter
into any sale-leaseback transaction;
l. Purchase or hold beneficially any stock or other securities of,
or make any investment or acquire any interest whatsoever in, any other Person,
except for the common stock of the Subsidiaries owned by the Borrower on the
date of this Agreement and except for certificates of deposit with maturities of
one year or less of United States commercial banks with capital, surplus and
undivided profits in excess of $100,000,000 and direct obligations of the United
States Government maturing within one year from the date of acquisition thereof
and other short term investments consistent with the investment policy; provided
that nothing in this Section 6.6(o) shall be construed to preclude (i)
Borrower's acquiring or holding shares of its consolidated subsidiaries or
making investments therein, and (ii) Borrower's acquiring or holding interests
in joint ventures or making investments therein; or
m. Allow any fact, condition or event to occur or exist with respect
to any employee pension or profit sharing plans established or maintained by it
which might constitute grounds for termination of any such plan or for the court
appointment of a trustee to administer any such plan.
6.7 Borrower's sole place of business or chief executive office or
residence is located at the address indicated above and Borrower covenants and
agrees that it will not, during the term of this Agreement, without prior
written notification to Bank, relocate said sole place of business or chief
executive office or residence.
6.8 If Borrower is a corporation, Borrower represents, warrants and
covenants as follows:
a. Borrower will not make any distribution or declare or pay any
dividend (in stock or in cash) to any shareholder or on any of its capital
stock, of any class, whether now or hereafter outstanding, or purchase, acquire,
repurchase, redeem or retire any such capital stock other than (i) repurchases
of equity security owned by any employee, consultant, officer or director upon
termination of their relationship with Borrower (as long as an Event of Default
is not continuing or would not exist after giving effect to such repurchase),
and (ii)
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
repurchases of equity securities with the proceeds of the sale of other equity
securities or Subordinated Debt;
b. Borrower is and shall at all times hereafter be a corporation
duly organized and existing in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in California or any
other state in which it conducts its business unless the failure to do so would
not reasonably be expected to have a Material Adverse Effect;
c. Borrower has the right and power and is duly authorized to enter
into this Agreement; and
d. The execution by Borrower of this Agreement shall not constitute
a breach of any provision contained in Borrower's articles of incorporation or
by-laws.
6.9 The execution of and performance by Borrower of all of the terms and
provisions contained in this Agreement shall not result in a breach of or
constitute an event of default under any agreement to which Borrower is now or
hereafter becomes a party.
6.10 Borrower shall promptly notify Bank in writing of its acquisition by
purchase, lease or otherwise of any after acquired property of the type included
in the Collateral, with the exception of purchase of Inventory in the ordinary
course of business.
6.11 All assessments and taxes, whether real, personal or otherwise, due or
payable by, or imposed, levied or assessed against, Borrower or any of its
property have been paid, and shall hereafter be paid in full, before
delinquency. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof. Borrower will make timely payment
or deposit of all F.I.C.A. payments and withholding taxes required of it by
applicable laws, and will upon request furnish Bank with proof satisfactory to
it that Borrower has made such payments or deposit. If Borrower fails to pay any
such assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in its sole and absolute discretion, and without
notice to Borrower, (i) make payment of the same or any part thereof; or (ii)
set up such reserves in Borrower's account as Bank deems necessary to satisfy
the liability therefor, or both. Bank may conclusively rely on the usual
statements of the amount owing or other official statements issued by the
appropriate governmental agency. Each amount so paid or deposited by Banks shall
constitute a Bank Expense and an additional advance to Borrower.
6.12 There are no actions or proceedings pending by or against Borrower or
any guarantor of Borrower before any court or administrative agency and Borrower
has no knowledge of any pending, threatened or imminent litigation, governmental
investigations or claims, complaints, actions or prosecutions involving Borrower
or any guarantor of Borrower, except as heretofore specifically disclosed in
writing to Bank. If any of the foregoing arise during the term of the
Agreement, Borrower shall immediately notify Bank in writing.
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
6.13 a. Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use such
properties in similar businesses for the full insurable value thereof; provided
that the foregoing shall not preclude Borrower from having reasonable
deductibles on any such policies. Borrower shall also keep and maintain public
liability and property damage insurance relating to Borrower's ownership and use
of the Collateral and its other assets. All such policies of insurance shall be
in such form, with such companies, in such amounts and upon terms and conditions
standard to Borrower's industry. Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor at Bank's request. All such policies of insurance (except those of
public liability and property damage) shall contain an endorsement in a form
satisfactory to Bank showing Bank as a loss payee thereof, with a waiver of
warranties (Form 438-BFU), and all proceeds payable thereunder shall be payable
to Bank (other than on proceeds in respect of property financed by third
parties) and, upon receipt by Bank, shall be applied on account of the
Obligations owing to Bank. To secure the payment of the Obligations, Borrower
grants Bank a security interest in and to all such policies of insurance (except
those of public liability and property damage) and the proceeds thereof.
b. Upon the occurrence and during the continuance of an Event of
Default, Borrower hereby irrevocably appoints Bank (and any of Bank's officers,
employees or agents designated by Bank) as Borrower's attorney for the purpose
of making, selling and adjusting claims under such policies of insurance,
endorsing the name of Borrower or any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance.
Borrower will not cancel any of such policies without Bank's prior written
consent. Each such insurer shall agree by endorsement upon the policy or
policies of insurance issued by it to Borrower as required above, or by
independent instruments furnished to Bank, that it will give Bank at least ten
(10) days written notice before any such policy or policies of insurance shall
be altered or canceled, and that no act or default of Borrower, or any other
person, shall affect the right of Bank to recover under such policy or policies
of insurance required above or to pay any premium in whole or in part relating
thereto. Bank, without waiving or releasing any Obligations or any Event of
Default, may, but shall have no obligation to do so, obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect to such policies which Bank deems advisable. All sums so disbursed by
Bank, as well as reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall constitute Bank Expenses and are payable on
demand.
6.14 All financial statements and information relating to Borrower
which have been or may hereafter be delivered by Borrower to Bank are true and
correct in au material respects and have been prepared in accordance with GAAP
consistently applied and there has been no material adverse change in the
financial condition of Borrower since the submission of such financial
information to Bank.
6.15 a. Borrower at all times hereafter shall maintain a standard and
Modern system of accounting in accordance with GAAP consistently applied with
ledger and account
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
cards and/or computer tapes and computer disks, computer printouts and computer
records pertaining to the Collateral which contain information as may from time
to time be requested by Bank; permit Bank and any of its employees, officers or
agents, upon demand, during Borrower's usual business hours, or the usual
business hour of third persons having control thereof, to have access to and
examine all of the Borrower's Books relating to the Collateral, Borrower's
Obligations to Bank, Borrower's financial condition and the results of
Borrower's operations and in connection therewith, permit Bank or any of its
agents, employees or officers to copy and make extracts therefrom.
b. Borrower shall deliver to Bank within thirty (30) days after the
end of each month, a company prepared balance sheet and profit and loss
statement covering Borrower's operations and deliver to Bank within one hundred
twenty (120) days after the end of each of Borrower's fiscal year an audited CPA
statement of the financial condition of the Borrower for each such fiscal year,
including but not limited to, a balance sheet and profit and loss statement and
any other report requested by Bank relating to the Collateral and the financial
condition of Borrower, and a certificate signed by an authorized employee of
Borrower to the effect that all reports, statements, computer disk or tape
files, computer printouts, computer runs, or other computer prepared information
of any kind or nature relating to the foregoing or documents delivered or caused
to be delivered to Bank under this subparagraph are complete, correct and
thoroughly present the financial condition of Borrower and that there exists on
the date of delivery to Bank no condition or event which constitutes a breach or
Event of Default under this Agreement.
c. In addition to the financial statements requested above, the
Borrower agrees to provide Bank with the following schedules:
X Accounts Receivable and Accounts Payable Agings within 15 days of
-
the last day of each month.
6.16 Borrower shall maintain the following financial ratios and covenants
on a consolidated and non-consolidated basis:
a. Tangible Effective Net Worth in an amount not less than Six
Million Dollars ($6,000,000) to increase by seventy-five percent (75%) of
quarterly net profit after tax plus fifty percent (50%) of new equity raised
excluding the sale of the Company's Series E Preferred Stock on or before
December 31, 1997.
b. A quick ratio of cash plus securities plus Receivables to Current
Liabilities not less than 1.15 to 1.00 to increase to 1.25 to 1.00 upon
completion of new equity. Quick Ratio to include outstandings.
c. Borrower shall not without Bank's prior written consent acquire
or expend for or commit itself to acquire or expend for fixed assets by lease,
purchase or otherwise in an aggregate amount that exceeds Seven Million and
no/100 Dollars ($7,000,000) in any fiscal year; and
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REVOLVING CREDIT
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(Accounts & Inventory)
d. Semi-annual A/R audits.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.
6.17 Borrower shall promptly supply Bank (and cause any guarantor to
supply Bank) with such other information (including tax returns) concerning its
financial affairs (or that of any guarantor) as Bank may request from time to
time hereafter, and shall promptly notify Bank of any material adverse change in
Borrower's financial condition and of any condition or event which constitutes
an Event of Default under this Agreement.
6.18 Borrower is now and shall be at all times hereafter solvent and able
to pay its debts (including trade debts) as they mature.
6.19 Borrower shall immediately and without demand reimburse Bank for all
Bank Expenses; Borrower authorizes and approves all advances and payments by
Bank for items described in this Agreement as Bank Expenses.
6.20 Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank either now or hereafter.
6.21 Borrower shall keep all of its principal bank accounts with Bank and
shall notify the Bank immediately in writing of the existence of any other bank
account, deposit account or any other account into which money can be deposited.
6.22 Borrower shall furnish to the Bank: (a) as soon as possible, but in
no event later than thirty (30) days after Borrower knows or has reason to know
that any reportable event with respect to any deferred compensation plan has
occurred, a statement of chief financial officer of Borrower setting forth the
details concerning such reportable event and the action which Borrower proposes
to take with respect thereto, together with a copy of the notice of such
reportable event given to the Pension Benefit Guaranty Corporation, if a copy of
such notice is available to Borrower; (b) promptly after the filing thereof with
the United States Secretary of Labor or the Pension Benefit Guaranty
Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
other forms of in-formation from time to time disseminated to the participants
by the administrator of the deferred compensation plan.
6.23 Borrower is now and shall at all times hereafter remain in compliance
with all federal, state and municipal laws, regulations and ordinances relating
to the handling, treatment and disposal of toxic substances, wastes and
hazardous material and shall maintain all necessary authorizations and permits.
7. EVENTS OF DEFAULT.
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
a. If Borrower fails or neglects to perform, keep or observe any
term, provision, condition, covenant, agreement, warranty or representation
contained in this Agreement, or any other present or future agreement between
Borrower and Bank, provided that, as to any default under this Section 7.a that
can be cured, Borrower shall have a right to cure such default within ten (10)
days after the occurrence thereof;
b. If any representation, report or certificate made or delivered by
Borrower to Bank is not true and correct in any material respect;
c. If Borrower fails to pay when due and payable, or declared due
and payable, any principal or interest; or fails to pay all or any portion of
the Borrower's obligations other than principal or interest within twenty (20)
days of the due date of such obligations;
d. If there is a material impairment of the prospect of repayment of
all or any portion of Borrower's Obligations or a material impairment of the
value or priority of Bank's security interest in the Collateral;
e. If all or any of Borrower's assets are attached, seized, subject
to a writ or distress warrant, or are levied upon, or come into the possession
of any Judicial Officer or Assignee and the same are not released, discharged or
bonded against within thirty (30) days thereafter;
f. If Borrower becomes insolvent, or if an Insolvency Proceeding is
commenced by Borrower, or if an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within thirty (30) days;
g. If any proceeding is filed or commenced by Borrower for its
dissolution or liquidation;
h. If Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts &- Inventory)
i. If a notice of Lien, levy or assessment is filed of record with
respect to any or all of Borrower's assets by the United States Government, or
any department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any or all of the Borrower's assets and the same is not paid on
the payment date thereof;
j. If a judgment or other claim becomes a lien or encumbrance upon
any or all of Borrower's assets and the same is not satisfied, dismissed or
bonded against within ten (10) days thereafter;
k. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result in an acceleration of the
maturity of Borrower's indebtedness to others, whether under any indenture,
agreement or otherwise;
l. If Borrower makes any payment on account of indebtedness which
has been subordinated to Borrower's Obligations to Bank unless permitted by the
terms of the subordination arrangement governing such indebtedness;
m. If any misrepresentation exists now or thereafter in any warranty
or representation made by Bank by any officer or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director;
n. If any guarantor of Borrower's Obligations dies or terminates its
subordination or guaranty, becomes insolvent or an Insolvency Proceeding is
commenced by or against any such subordinating party or guarantor;
o. If Borrower fails to comply with any of the provisions of Section
6.6 or 6.16; or
p. If any reportable event, which the Bank determines constitutes
grounds for the termination of any deferred compensation plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any such plan, shall have
occurred and be continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Bank, or any such Plan shall
be terminated within the meaning of Title IV of the Employment Retirement Income
Security Act ("ERISA"), or a trustee shall be appointed by the appropriate
United States District Court to administer any such plan, or the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any plan and in
case of any event described in this Section 7, the aggregate amount of the
Borrower's liability to the Pension Benefit Guaranty Corporation under Sections
4062, 4063 or 4064 of ERISA shall exceed five percent (5) of Borrower's Tangible
Effective Net Worth.
Notwithstanding anything contained in Section 7 to the contrary, Bank
shall refrain from exercising its rights and remedies and Event of Default shall
thereafter not be deemed to have occurred by reason of the occurrence of any of
the events set forth in
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
Sections 7.e, 7.f or 7.j of this Agreement if, within ten (10) days from the
date thereof, the same is released, discharged, dismissed, bonded against or
satisfied; provided, however, if the event is the institution of Insolvency
Proceedings against Borrower, Bank shall not be obligated to make advances to
Borrower during such cure period.
8. BANK'S RIGHTS AND REMEDIES.
--------------------------
8.1 Upon the occurrence and during the continuance of an Event of Default
by Borrower under this Agreement, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
a. Declare Borrower's Obligations, whether evidenced by this
Agreement, installment notes, demand notes or otherwise, immediately due and
payable to the Bank;
b. Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement, or any other agreement between Borrower and
Bank;
c. Terminate this Agreement as to any future liability or obligation
of Bank, but without affecting Bank's rights and security interests in the
Collateral, and the Obligations of Borrower to Bank;
d. Without notice to or demand upon Borrower or any guarantor, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Bank so requires and to make the Collateral available to Bank
as Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, take and maintain possession of the Collateral and the
premises (at no charge to Bank), or any part thereof, and to pay, purchase,
contest or compromise any encumbrance, charge or lien which in the opinion of
Bank appears to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith;
e. Without limiting Bank's rights under any security interest, Bank
is hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secret, trade
names, trademarks and advertising matter, or any property of a similar nature as
it pertains to the Collateral, in completing production of, advertising for sale
and selling any Collateral and Borrower's rights under all licenses and all
franchise agreement shall inure to Bank's benefit, and Bank shall have the right
and power to enter into sublicense agreements with respect to all such rights
with third parties on terms acceptable to Bank;
f. Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sales and sell (in the manner provided for herein) the
Inventory;
g. Sell or dispose the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
such places (including Borrower's premises) as is commercially reasonable in the
opinion of Bank. It is not necessary that the Collateral be present at any such
sale;
h. Bank shall give notice of the disposition of the Collateral as
follows:
(1) Bank shall give the Borrower and each holder of a security
interest in the Collateral who has filed with Bank a written request for notice,
a notice in writing of the time and place of public sale, or, if the sale is a
private sale or some disposition other than a public sale is to be made of the
Collateral, the time on or after which the private sale or the disposition is to
be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower's address appearing in this Agreement, at least five (5)
calendar days before the date fixed for the sale, or at least five (5) calendar
days before the date on or after which the private sale or other disposition is
to be made, unless the Collateral is perishable or threatens to decline speedily
in value. Notice to persons other than Borrower claiming an interest in the
Collateral shall be sent to such addresses as they have furnished to Bank;
(3) If the sale is to be a public sale, Bank shall also give
notice of the time and place by publishing a notice one time at least five (5)
calendar days before the date of this sale in a newspaper of general circulation
in the county in which the sale is to be held; and
(4) Bank may credit bid and purchase at any public sale.
i. Borrower shall pay all Bank Expenses incurred in connection with
Bank's enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Bank;
j. Any deficiency which exists after disposition of the Collateral
as provided above will be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of third parties, to
Borrower by Bank, or, in Bank's discretion, to any party who Bank believes, in
good faith, is entitled to the excess; and
k. Without constituting a retention of Collateral in satisfaction of
an obligation within the meaning of 9505 of the Uniform Commercial Code or an
action under California Code of Civil Procedure 726, apply any and all amounts
maintained by Borrower as deposit accounts (as that term is defined under 9105
of the Uniform Commercial Code) or other accounts that Borrower maintains with
Bank against the Obligations.
8.2 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided by law or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
default on Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election or acquiescence by Bank.
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY.
------------------------------------------------
If Borrower fails to pay promptly when due to another person or entity, monies
which Borrower is required to pay by reason of any provision in this Agreement,
Bank may, but need not, pay the same and charge Borrower's account therefor, and
Borrower shall promptly reimburse Bank. All such sums shall become additional
indebtedness owing to Bank, shall bear interest at the rate hereinabove
provided, and shall be secured by all Collateral. Any payments made by Bank
shall not constitute (i) an agreement by it to make similar payments in the
future; or (ii) a waiver by Bank of any default under this Agreement. Bank need
not inquire as to, or contest the validity of, any such expense, tax security
interest, encumbrance or lien and the receipt of the usual official notice of
the payment thereof shall be conclusive evidence that the same was validly due
and owing. Such payments shall constitute Bank Expenses and additional advances
to Borrower.
10. WAIVERS.
-------
10.1 Borrower agrees that checks and other instruments received by Bank in
payment or on account of Borrower's Obligations constitute only conditional
payment until such items are actually paid to Bank and Borrower waives the right
to direct the application of any and all payments at any time or times hereafter
received by Bank on account of Borrower's Obligations and Borrower agrees that
Bank shall have the continuing exclusive right to apply and reapply such
payments in any manner as Bank may deem advisable, notwithstanding any entry by
Bank upon its books.
10.2 Borrower waives demand, protest, notice of protest, notice of default
or dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10.3 Bank shall not in any way or manner be liable or responsible for (a)
the safekeeping of the Inventory; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever. All risk of loss, damage or
destruction of Inventory shall be borne by Borrower.
10.4 Borrower waives the right and the right to assert a confidential
relationship, if any, it may have with any accountant, accounting firm and/or
service bureau or consultant in connection with any information requested by
Bank pursuant to or in accordance with this Agreement, and agrees that a Bank
may contact directly any such accountants, accounting firm and/or service bureau
or consultant in order to obtain such information.
10.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER, OR
CONTEMPLATED HEREUNDER, OR ANY OTHER
24
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
CLAIM (INCLUDING TORT OR BREACH OF DUTY CLAIMS) OR DISPUTE HOWSOEVER ARISING
BETWEEN BANK AND BORROWER.
10.6 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails to
pursue or enforce any terms, such waiver, delay or failure to pursue or enforce
shall only be effective with respect to that single act and shall not be
construed to affect any subsequent transactions or Bank's right to later pursue
such rights and remedies.
11. ONE CONTINUING LOAN TRANSACTION.
-------------------------------
All loans and advances heretofore, now or at any time or times hereafter
made by Bank to Borrower under this Agreement or any other agreement between
Bank and Borrower, shall constitute one loan secured by Bank's security
interests in the Collateral and by all other security interests, liens,
encumbrances heretofore, now or from time to time hereafter granted by Borrower
to Bank.
Notwithstanding the above, (i) to the extent that any portion of the
Obligations are a consumer loan, that portion shall not be secured by any deed
or trust or mortgage on or other security interest in the Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if the
Borrower (or any of them) has (have) given or give(s) Bank a deed of trust or
mortgage covering real property, that deed of trust or mortgage shall not secure
the loan and any other Obligation of the Borrower (or any of them), unless
expressly provided to the contrary in another place.
12. NOTICES.
-------
Unless otherwise provided in this Agreement, all notices or demands by
either party on the other relating to this Agreement shall be in writing and
sent by regular United States mail, postage prepaid, properly addressed to
Borrower or to Bank at the addresses stated in this Agreement, or to such other
addresses as Borrower or Bank may from time to time specify to the other in
writing. Requests to Borrower by Bank hereunder may be made orally.
13. AUTHORIZATION TO DISBURSE.
-------------------------
Bank is hereby authorized to make loans and advances hereunder upon
telephonic or other instructions received from anyone purporting to be an
officer, employee, or representative of Borrower, or at the discretion of Bank
if said loans and advances are necessary to meet any Obligations of Borrower to
Bank. Bank shall have no duty to make inquiry or verify the authority of any
such party, and Borrower shall hold the Bank harmless from any damage, claims or
Liability by reason of Bank's honor of, or failure to honor, any such
instructions.
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
14. DESTRUCTION OF BORROWER'S DOCUMENTS
-----------------------------------
Any documents, schedules, invoices or other papers delivered to Bank, may
be destroyed or otherwise disposed of by Bank six (6) months after they are
delivered to or received by Bank, unless Borrower requests, in writing, the
return of the said documents, schedules, invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
15. CHOICE OF LAW.
-------------
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder and concerning the
Collateral, shall be determined according to the laws of the State of
California. The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or County of Santa
Clara.
16. GENERAL PROVISIONS.
------------------
16.1 This Agreement shall be binding and deemed effective when executed by
the Borrower and accepted and executed by Bank at its Headquarter Office.
16.2 This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties, provided, however, that Borrower
may not assign this Agreement or any rights hereunder without Bank's prior
written consent and any prohibited assignment shall be absolutely void. No
consent to an assignment by Bank shall release Borrower or any guarantor from
their Obligations to Bank. Bank may assign this Agreement and its rights and
duties hereunder. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in Bank's rights
and benefits hereunder. In connection therewith, Bank may disclose all
documents and information which Bank now or hereafter may have relating to
Borrower or Borrower's business.
16.3 Paragraph headings and paragraph numbers have been set forth herein
for convenience only; unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
16.4 Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against Bank or Borrower, whether under any rule of
construction or otherwise; on the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto. When permitted by the context, the singular includes the
plural and vice versa.
16.5 Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
26
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
16.6 This Agreement cannot be changed or terminated orally. Except as to
currently existing Obligations owing by Borrower to Bank, all prior agreements,
understandings, representations, warranties, and negotiations, if any, with
respect to the subject matter hereof, are merged into this Agreement.
16.7 The parties intend and agree that their respective rights, duties,
powers, liabilities, obligations and discretions shall be performed, carried
out, discharged and exercised reasonably and in good faith.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit
Loan & Security Agreement (Accounts and Inventory) to be executed as of the date
first hereinabove written.
ATTEST: BORROWER:
___________________________________ By:_________________________________
Title Signature of
Accepted and effective as of ______ Title:______________________________
at Bank's Headquarters Office
By:_________________________________
Signature of
Title:_______________________________
BANK:
By:_________________________________
Signature of
Title:_______________________________
By:_________________________________
Signature of
Title:_______________________________
27
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit
Loan & Security Agreement (Accounts and Inventory) to be executed as of the date
fast hereinabove written.
ATTEST: BORROWER:
___________________________________ By: /s/ Philip J. Koen
Title Signature of
Accepted and effective as of ______ Title: Senior VP & CEO
at Bank's Headquarters Office
By:_________________________________
Signature of
Title:_______________________________
BANK:
By:_________________________________
Signature of
Title:_______________________________
By:_________________________________
Signature of
Title:_______________________________
28