EXHIBIT 10.29
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
THIS AGREEMENT is entered into on February 21, 2003, between COMERICA
BANK-CALIFORNIA, a California banking corporation ("Bank") as secured party,
whose headquarters office is 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx
and FORMFACTOR, INC., a Delaware corporation ("Borrower"), 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 the address set
forth below its name on the signature page to this Agreement.
Borrower and Bank are parties to (i) that certain Second Amended and Restated
Loan Agreement (Secured), dated March 20, 2001 (as amended from time to time
prior to the date hereof, the "Prior Loan Agreement") pursuant to which Bank has
made certain revolving credit facilities and certain term credit facilities
available to Borrower. Borrower and Bank desire to amend and restate the Prior
Loan Agreement in its entirety in accordance herewith.
In consideration of the mutual covenants and conditions hereof, the parties to
this Agreement hereby agree that the Prior Loan Agreement is hereby amended and
restated in full as follows:
1. DEFINITIONS.
1.1 "Accounts" shall mean and includes all presently existing and
hereafter arising accounts, including without limitation all accounts
receivable, contract rights and other forms of right to payment for monetary
obligations or receivables for property sold or to be sold, leased, licensed,
assigned or otherwise disposed of, or for services rendered or to be rendered
(including without limitation all health-care-insurance receivables) owing to
Borrower, and any supporting obligations, credit insurance, guaranties or
security therefor, irrespective of whether earned by performance.
1.2 "Agreement" shall mean and includes this Third Amended and Restated
Loan and Security Agreement (Accounts and Inventory), any concurrent or
subsequent rider to this Third Amended and Restated Loan and Security Agreement
(Accounts and Inventory) and any extensions, supplements, amendments or
modifications to this Third Amended and Restated Loan and Security Agreement
(Accounts and Inventory) and/or to any such rider.
1.3 "Bank Expenses" shall mean and includes: all 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 Accounts (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
sate 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.
1.4 "Base Rate" shall mean 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 the basis upon which effective rates of
interest are calculated for those loans making reference thereto.
1.5 "Borrower's Books" shall mean and includes all of Borrower's books and
records including but not limited to minute books; ledgers; records Indicating,
summarizing or evidencing Borrower's assets (including, without limitation, the
Accounts), liabilities, business operations or financial condition, 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.
1.6 "Borrowing Base" shall mean:
a. at any time prior to any fiscal quarter in which Borrower's Net
Income shall be less than One and No/100 Dollars ($1.00), the Credit Limit; or
b. following any such occurrence, the period commencing upon
Borrower's achievement of Net Income in excess of One and No/100 Dollars ($1.00)
in each of two (2) consecutive fiscal quarters, the Credit Limit, or
c. commencing upon the end of fiscal quarter in which Borrower's Net
income shall be less than One and No/100 Dollars ($1.00) continuing thereafter
until Borrower shall achieve a positive Net Income in each of two (2)
consecutive fiscal quarters, the sum oft
(1) eighty percent (80%) of the net amount of Eligible
Domestic Accounts after deducting therefrom all payments,
adjustments and credits applicable thereto;
(2) eighty percent (80%) of the net amount of Eligible Foreign
Accounts after deducting therefrom all payments, adjustments and
credits applicable thereto; and
(3) one hundred percent (100%) of the aggregate amount of all
Cash Collateral.
1.7 "Cash Flow shall mean, for any applicable period of determination, the
Net Income (after deduction for income taxes and other taxes of such Person, or
its subsidiaries, determined by reference to income or profits of such Person,
or its subsidiaries) for such period, plus, to the extent deducted in
computation of such Net Income, the amount of depreciation and amortization
expense, the amount of deferred tax liability during such period, and the amount
of all compensation paid in Borrower's capital stock during such period, all as
determined in accordance with GAAP.
1.8 "Cash Flow Coverage Ratio" shall mean the ratio, as of any applicable
period of determination, the numerator of which is Net Income plus depreciation
plus amortization plus (or minus) the increase (or decrease), in the deferred
tax liability minus dividends, and the denominator of which is the current
portion of long term debt plus the current portion of capital lease payments
(but not including any operating or other non-capital lease payments) for the
same period of determination.
1.9 "Cash Collateral" shall mean and includes all cash on deposit with
Comerica Bank, Comerica Securities, Inc. or UBS PaineWebber Inc. which have bean
validly pledged to Bank as Collateral for the Indebtedness and that strictly
comply with all of Borrower's warranties and representations to Bank.
1.10 "Collateral" shall mean and includes all personal property of
Borrower, Including without limitation each and all of the following: the
Accounts; the Inventory; the General Intangibles (excluding, however, the
Intellectual Property Rights); the Negotiable Collateral; Borrower's Books; all
Borrower's deposit accounts; all Borrower's investment property (including
without limitation securities and securities entitlements); all goods,
instruments, documents, policies and certificates of insurance, deposits, money
or other personal property of Borrower in which Bank receives a security
interest and which now or later come into the possession, custody or control of
Bank; all Borrower's equipment and fixtures; all additions, accessions,
attachments, parts, replacements, substitutions, renewals, interest, dividends,
distributions or rights of any kind for or with respect to any of the foregoing
(including without limitation any stock splits, stock rights, voting rights and
preferential rights); any supporting obligations for any of the foregoing; and
the products and proceeds of any of the foregoing, including, but not limited
to, proceeds of insurance covering the Collateral, and any and all Accounts,
General Intangibles, Negotiable Collateral, inventory, equipment, money, deposit
accounts, investment property, equipment, fixtures or other tangible and
intangible property of Borrower resulting from the sale or other disposition of
the Collateral and the proceeds thereof and any supporting obligations or
security therefor and any right to payment thereunder, and including, without
limitation, cash or other property which were proceeds and are recovered by a
bankruptcy trustee or otherwise as a preferential transfer by Borrower.
Notwithstanding anything to the contrary contained herein, Collateral shall not
include any waste or other materials which have been or may be designated as
toxic or hazardous by Bank.
1.11 "Credit" shall mean all indebtedness, except that indebtedness
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.
1.12 "Credit Limit" shall mean Sixteen Million and No/100 Dollars
($16,000,000.00) as the same may be reduced from time to time pursuant to
Section 2.3, Section 3 or Section 8 of this Agreement.
1.13 "Current Assets" shall mean, in respect of a Person and as of any
applicable date of determination; all (a) unrestricted cash, marketable
securities, or certificates of deposit; (b) non-affiliated accounts receivable;
(c) United States government securities; (d) claims against the United States
government; and (e) Inventories (held for sale in the ordinary course of
business) of such Person.
1.14 "Current Liabilities" shall mean, in respect of a Person and as of
any applicable date of determination, (a) all liabilities of such Person that
should be classified as current in accordance with GAAP, including, without
limitation, any portion of the principal of the Indebtedness under this
Agreement classified as current, plus (b) to the extent not otherwise included,
all liabilities of Borrower to any of its affiliates (including officers,
directors, shareholders, subsidiaries and commonly held companies) whether or
not classified as current in accordance with GAAP.
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1.15 "Daily Balance" shall mean 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.
1.16 "Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, in the case of Borrower, the term "Debt" shall include,
without limitation, the Indebtedness.
1.17 "Debt-to-Worth Ratio" shall mean, in respect of a Person and as of
any applicable date of determination, the ratio of (a) the total Debt of such
Person at such time, to (b) the Tangible Effective Net Worth of such Person at
such time.
1.18 "Eligible Accounts" shall mean and includes the Eligible Domestic
Accounts and the Eligible Foreign Accounts.
1.19 "Eligible Domestic Accounts" shall mean and includes those Accounts
of Borrower which were due and payable within sixty (60) 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, joint venturer or agent 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 ninety
(90) days from the date of the invoice; (i) Accounts with respect to which
account debtors dispute liability or make any 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, falls 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 ninety (90) days from the date of the invoice.
1.20 "Eligible Foreign Accounts" shall mean and includes those Accounts
that do not qualify as Eligible Accounts solely because they arise with respect
to an account debtor that does not have its principal place of business in the
United States, but that determined from time to time by Bank, in its sale
discretion, to be eligible, including, without limitation, any Accounts due from
major, publicly owned foreign companies that Bank, in its sale discretion, may
deem eligible, in connection with Bank's determination of the eligibility of any
such foreign Accounts. Bank may, in its sole discretion, require that, as a
condition of eligibility, any such Accounts be (i) subject to credit insurance,
in form and amount, and issued by an insurance company satisfactory to Bank, and
excluding the amount of any deductible(s) that may be applicable thereto, or
(ii) supported by one or more letters of credit in amount(s) and of tenor(s),
and issued, advised and/or confirmed by financial institution(s) acceptable to
Bank.
1.21 "Event of Default" shall mean one or more of those events described
in Section 7 contained herein below.
1.22 "GAAP" shall mean, as of any applicable period, generally accepted
accounting principles in effect during such period.
1.23 "General Intangibles" shall mean and includes all of Borrower's
present and future general intangibles and other personal property (including
without limitation all payment Intangibles, electronic chattel paper, contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, plans, diagrams, schematics, purchase orders,
customer flats, monies due or recoverable from pension funds, route lists,
rights to payment (including without limitation, rights to payment evidenced by
chattel paper, documents or instruments) and other rights under any royalty or
licensing agreements, infringement claims, software (including without
limitation any computer program that is embedded in goads that consist solely of
the medium in which the program is embedded), information contained on computer
disks or tapes, literature, reports, catalogs, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, Inventory,
Negotiable Collateral, and Borrower's Books.
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1.24 "Indebtedness" shall mean and includes any and all loans, advances,
Letter of Credit Obligations, overdrafts, debts, liabilities (including, without
limitation, any and all amounts charged, to Borrower's loan account pursuant to
any agreement authorizing Bank to charge Borrower's loan 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, including, without limitation, any interest, fees, expenses, costs and
other amounts owed to Bank that but for the provisions of the United States
Bankruptcy Code would have accrued after the commencement of any Insolvency
Proceeding, and including, without limitation, any debt, liability, or
obligations 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.
1.25 "Insolvency Proceeding" shall mean and includes any proceeding or
case commenced by or against Borrower, or any guarantor of Borrower's
Indebtedness, or any of 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 a reorganization, arrangement or any other relief under
the Bankruptcy Code, as amended, or any other bankruptcy or insolvency law.
1.26 "Intellectual Property Rights" shall mean and includes all of
Borrower's right, title, and interest in and to any and all (a) inventions
(whether patentable or otherwise), patents, copyrights or trademarks; (b) trade
secrets or any intellectual property rights in computer software and computer
software products now or hereafter existing, created, acquired or held; (c)
design rights which may be available to Borrower now or hereafter existing,
created, acquired or held; (d) claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above; (e) licenses or other
rights to use any of the patents, copyrights, or trademarks, and all license
fees and royalties arising from such use to the extent permitted by such license
or rights; (f) amendments, renewals and extensions of any of the patents,
copyrights or trademarks; and (g) proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
1.27 "Inventory" shall mean and includes all present and future inventory
in which Borrower has any interest, including, but not limited to, goods held 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 (including without limitation any computer program embedded in any of the
foregoing goods and any supporting information provided in connection therewith
that (i) is associated with the goods in such a manner that the program
customarily is considered part of the goods or that (ii) by becoming the owner
of the goods, a person acquires a right to use the program in connection with
the goods, together with any 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.
1.28 "Judicial Officer or Assignee" shall mean 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.
1.29 "Letter of Credit Obligations" shall mean, as of any applicable date
of determination, the sum of the undrawn amount of any letter(s) of credit
issued by Bank upon the application of and/or for the account of Borrower, plus
any unpaid reimbursement obligations owing by Borrower to Bank in respect of any
such letter(s) of credit.
1.30 "Liquid Assets" shall mean and includes all unrestricted cash,
unrestricted marketable securities, FDIC insured certificates of deposit, and
United States government securities.
1.31 "Loan Documents" shall mean and includes this Agreement, and any
other documents, instruments or agreements entered into by Borrower with or in
favor of Bank from time to time in connection with this Agreement or otherwise,
including without limitation any documents, instruments or agreements set forth
on Exhibit 5.1, to this Agreement.
1.32 "Maturity Date" shall mean October 30, 2004.
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1.33 "Negotiable Collateral" shall mean and include all of Borrower's
present and future letters of credit, advises of credit, letter-of-credit
rights, certificates of deposit, notes, drafts, money, documents (including
without limitation all negotiable documents), instruments (including without
limitation all promissory notes), tangible chattel paper or any other similar
property.
1.34 "Net Income" shall mean the net income (or loss) of a person for any
period of determination, 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 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.
1.35 "New Facility" shall mean borrower's new campus facility to be
located at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, 0000 Xxxxxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, and 000 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx
00000.
1.36 "Permitted Indebtedness" means and includes all (a) Debt to trade
creditors incurred in the ordinary course of Borrower's business; (b)
Indebtedness of Borrower in favor of Bank arising under this Agreement, any
document, instrument or agreement entered into in connection herewith or
otherwise; (c) Indebtedness existing on the date of this Agreement and disclosed
in Schedule P-1; (d) Debt to any other Person secured by a lien described in
clause (e) of the defined term "Permitted Liens," provided such Debt does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Debt; (f) unsecured Debt to any other Person in an aggregate amount
not to exceed Ten Million and No/100 Dollars ($10,000,000.00) incurred by
Borrower in connection with Borrower's construction of tenant Improvements on
the New Facility; and (g) Subordinated Debt.
1.37 "Permitted Investments" means and includes all (a) investments
existing on the date of this Agreement including without limitation any common
stock of the Subsidiaries owned by Borrower on the date of this Agreement; and
(b) investments in (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within two (2) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than two (2) years from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, and (ii) money market
accounts or certificates of deposit maturing no more then two (2) year from the
date of investment therein issued by Bank or any other commercial bank with
capital, surplus and undivided profits in excess of One Hundred Million Dollars
($100,000,000).
1.38 "Permitted Liens" means and includes any: (a) liens existing on the
date of this Agreement and disclosed in Schedule P-2 or arising under this
Agreement, any document, instrument or agreement entered into in connection
herewith or otherwise in favor of Bank; (b) liens for taxes, fees, assessments
or other governmental charges or levies, either not delinquent or being
contested in good faith by appropriate proceedings, provided the same have no
priority over any of Bank's security interests; (c) liens (i) upon or in any
equipment acquired or held by Borrower or any of its subsidiaries to secure the
purchase price of such equipment or Debt Incurred solely for the purpose of
financing the acquisition of such equipment, or (ii) existing on such equipment
at the time of its acquisition, provided that the lien is confined solely to the
equipment so acquired and improvements and additions thereto, and the proceeds
of such equipment to the extent that the acquisition of such equipment is
permitted otherwise permitted under this Agreement; (d) liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of Borrower and not in connection with the borrowing of money, and which liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests; (e) liens incurred in connection with the extension, renewal
or refinancing of the Debt secured by liens of the type described in clauses (a)
through (c) above, provided that any extension, renewal or replacement lien
shall be limited to the property encumbered by the existing lien and the
principal amount of the Debt being extended, renewed or refinanced does not
increase.
1.39 "Permitted Protest" means the right of Borrower to protest liens
other then liens that secure the Indebtedness, provided that (a) a reserve with
respect to such obligation is established on the books of Borrower in an amount
that is reasonably satisfactory to Bank, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Bank is satisfied that,
while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the liens of Bank in and to the
Collateral.
1.40 "Person" or "person" shall mean and includes any individual,
corporation, partnership, joint venture, firm, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.
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1.41 "Quick Assets" shall mean, as of any applicable date of
determination, unrestricted cash, certificates of deposit or marketable
securities and net accounts receivable arising from the sale of goods and
services, and United States government securities and/or claims against the
United States government of Borrower and its subsidiaries.
1.42 "Revolving Loan" and "Revolving Loans" shall have the meaning set
forth in Section 2.1, of this Agreement.
1.43 "Subordinated Debt" shall mean indebtedness of Borrower to third
parties which has been subordinated to the Indebtedness pursuant to a
subordination agreement in form and content satisfactory to Bank.
1.44 "Subordination Agreement" shall mean a subordination agreement in
form satisfactory to Bank making all present and future indebtedness of Borrower
to any Person entering into any such subordination agreement subordinate to the
Indebtedness.
1.45 "Tangible Effective Net Worth" shall mean, with respect to any Person
and as of any applicable date of determination, Tangible Net Worth plus
Subordinated Debt.
1.46 "Tangible Net Worth" shall mean, with respect to any Person, and
including any consolidated affiliates thereof, if any, and as of any applicable
date of determination, the excess of:
a. the net book value of all assets of such Person (excluding any
non-consolidated affiliate receivables, patents, patent rights, trademarks,
trade names, franchises, copyrights, licenses, goodwill, and all other
intangible assets of such Person) after all appropriate deductions in accordance
with GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization); over
b. all Debt of such Person at such time.
1.47 "Term Loan" shall have the meaning set forth in Section 2.3 of this
Agreement.
1.48 "Working Capital" shall mean, as of any applicable date of
determination, Current Assets less Current Liabilities.
Any and all terms used in the foregoing definitions and elsewhere 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 "Uniform Commercial Code") as amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the Uniform
Commercial Code have, at all times, the broadest and most inclusive meanings
possible. Accordingly, if the Uniform Commercial Code shall in the future be,
amended or held by a court to define any term used herein more broadly or
inclusively than the Uniform Commercial Code in effect on the date of this
Agreement, then such term, as used herein, shall be given such broadened
meaning. If the Uniform Commercial Code shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the Uniform Commercial Code in effect on the date of this Agreement, such
amendment or holding shall be disregarded in defining terms used in this
Agreement.
2. LOAN AND TERMS OF PAYMENT.
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 (each a "Revolving
Loan," and collectively, the "Revolving Loans"); provided, however, that the
Daily Balance shall not exceed the lesser of either the Credit Limit or the
Borrowing Base, minus all Letter of Credit Obligations. If at any time for any
reason, the amount of indebtedness owed by Borrower to Bank pursuant to this
Section 2.1 and Section 2.2 of this Agreement is greater than the aggregate
amount available to be drawn under this Section 2.1, Borrower shall immediately
pay to Bank, in cash, the amount of such excess. Any commitment of Bank,
pursuant to the terms of this Agreement, to make Revolving Loans to Borrower
shall expire on the Maturity Date, subject to Bank's right to renew said
commitment in its sole and absolute discretion at Borrower's request. Any such
renewal of said commitment shall not be binding upon Bank unless it is in
writing and signed by an officer of Bank. Provided that no Event of Default has
occurred and is continuing, all or any portion of the Revolving Loans which are
repaid by Borrower shall be available for reborrowing in accordance with the
LIBOR Addendum (as hereinafter defined) and the terms hereof. Borrower promises
to pay to Bank the entire outstanding unpaid principal balance (and all accrued
unpaid interest thereon) of the Revolving Loans on the Maturity Date.
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2.2 Subject to the terms and conditions of this Agreement, and so long as
no Event of Default has occurred, Bank agrees to issue or cause to be issued
letters of credit for the account of Borrower during the term of this Agreement
in the aggregate outstanding face amount not to exceed (i) the lesser of the
Credit Limit or the Borrowing Base, minus (ii) the then outstanding Daily
Balance, provided that the Letter of Credit Obligations shall not in any case
exceed Three Million and No/100 Dollars ($3,000,000.00). All letters of credit
shall be in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form of standard Letter
of Credit Application and Agreement. All Letter of Credit Obligations issued
under this Agreement shall expire on or before the Maturity Date.
The obligation of Borrower to Immediately reimburse Bank for drawings made under
letters of credit shall be absolute, unconditional and irrevocable in accordance
with the terms of this Agreement and the Letter of Credit Application and
Agreement with respect to each such letter of credit. Borrower shall indemnify,
defend, protect and hold Bank harmless from any loss, cost. expense, or
liability, including, without limitation, reasonable attorney's fees incurred by
Bank, whether in-house or outside counsel is used, arising out of or in
connection with any letters of credit.
2.3 Subject to the terms and conditions of this Agreement, and so long as
no Event of Default has occurred (including, without limitation, any Event of
Default that would occur as of such date under the minimum Cash Flow Coverage
Ratio set forth in Section 6.16.d of this Agreement), if on any anniversary date
of this Agreement Bank shall decline to extend the Maturity Date by one (1)
additional year, then Bank shall make available to Borrower a term loan (the
"Term Loan") in the amount of up to Five Million and No/100 Dollars
($5,000,000.00), the proceeds of which shall be used only for the repayment of
the outstanding principal balance of the Revolving Loans; provided, however,
that upon the making of the Term Loan hereunder, the amount of the Credit Limit
shall be permanently reduced by the amount of the Term Loan. If, following any
election by Bank to decline to extend the Maturity Date on any anniversary date
hereof Borrower shall not elect to request the Term Loan on or before the
Maturity Date, then Bank's commitment to make the Term Loan shall expire on the
Maturity Date.
The principal amount of the Term Loan, together with accrued interest thereon,
shall be payable on the last day of each month, beginning on the last day of the
first calendar month immediately following the making of the Term Loan, in
monthly principal payments in an amount sufficient to amortize the principal
balance of the Term Loan over the amortization period of forty-eight (48)
months. The interest rate, payment terms, maturity date and certain other terms
of the Term Loan shall be contained in a promissory note dated the date of the
making of the Term Loan, as such may be amended or replaced from time to time,
but which shall be substantially in the form attached hereto me Exhibit 2.3.
2.4 Except as hereinbelow provided or as otherwise provided in any
promissory note entered into with respect to any portion of the Indebtedness,
the Credit shall bear interest on the Daily Balance owing, at a fluctuating rate
of interest equal to the Base Rate plus Zero (-0-%) percentage points per annum,
or at the rate applicable thereto in accordance with the LIBOR Addendum to this
Agreement, attached hereto and Incorporated herein by this reference.
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
four and three quarters ( 4.75% ) per annum, in the event that the Bass Rate
announced is, from time to time hereafter, changed, adjustment in the Base Rate
shall be made and based on the Base Rate in effect on the date of such change.
The Base 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 this Agreement. A late
payment charge equal to five percent (5%) of each late payment may be charged on
any payment not received by Bank within ten (10) calendar days after the payment
due date, but acceptance of payment of this charge shall not waive any Event of
Default under this Agreement. Upon the occurrence of an Event of Default
hereunder, and without constituting a waiver of any such Event of Default, then
during the continuation thereof, at Bank's option, the Credit shall bear
interest, on the Daily Balance owing at a rate equal to three percent (3%) per
year in excess of the rate applicable immediately prior to the occurrence of the
Event of Default, and such rate of interest shall fluctuate thereafter from time
to time at the same time and in the same amount as any fluctuation in the rate
of interest applicable immediately prior to any such occurrence.
2.5 To the extent that any Indebtedness, loans or other obligations made
or incurred by Bank to or on behalf of Borrower prior to the date of this
Agreement remain outstanding on the date hereof or if any obligation by Bank to
make additional loans or otherwise extend financing to Borrower, exists or
remains in effect on the date hereof, all such Indebtedness, loans or
obligations, and any such commitments to make loans or extend financing shall be
subject to the terms and conditions of this Agreement and the interest rate,
payments of principal and Interest and other the terms contained in any note(s)
evidencing any such prior loan(s) shall remain in full force and effect, and
Borrower hereby ratifies and reaffirms the continuing effectiveness of any such
prior note(s) and agrees to continue to make payments in accordance with the
terms thereof.
7
2.6 In addition to any other amounts due or to become due under this
Agreement, Borrower shall pay to Bank the following fees:
a. In connection with the financial accommodations provided under
this Agreement, on the date hereof, and on each anniversary date hereof, an
annual commitment fee in an amount equal to one half percent (0.50% ) of the
Credit Limit, which shall be fully earned and non-refundable on the date of
payment thereof.
b. In connection with the financial accommodations provided under
this Agreement, an annual unused commitment fee in an amount equal to one
quarter percent (0.25%) per annum on the unused portion of the Credit Limit
available under Section 2.1 hereof, minus the then outstanding amount of all
Letter of Credit Obligations under Section 2.2 hereof, which shall be due and
payable in arrears on the test day of each calendar quarter during the
effectiveness of this agreement, and which shall be fully earned and
non-refundable on the date of payment thereof.
c. In addition to all Bank's customary charges, commissions, fees
and costs payable to Bank in connection with the letters of credit in accordance
with Letter of Credit Application and Agreement, Borrower shall pay Bank a fee
equal to one and one quarter percentage points (1.25%) per annum, computed on
the basis of a three hundred sixty (360) day year for actual days elapsed, of
the aggregate amount of all Letter of Credit obligations outstanding hereunder;
provided, however, that the forgoing fee shall be reduced to one percentage
point (1.00%) per annum with respect to all Letter of Credit Obligations secured
in full by Cash Collateral.
d. In addition to any other amounts due, or to become due,
concurrently with the execution hereof, Borrower agrees to pay to Bank a legal
documentation fee in the amount of Five Thousand Two Hundred Fifty and No/100
Dollars ($5,250) and all other coats and expenses incurred by Bank in the
preparation of this Agreement, the other documents, instruments and agreements
entered into in connection herewith, and the perfection of any security interest
granted to Bank by Borrower.
3. TERM.
3.1 This Agreement shall remain in full force and effect until the
Maturity Date or until terminated by notice, by either party in accordance with
the terms and conditions hereof. Notice of such termination shall be effectuated
by mailing of a registered or certified letter not less then thirty (30) days
prior to the effective date of such termination, addressed to Bank at the
address set forth herein and the termination shall be effective as of the date
so fixed in such notice. Any commitment of Bank, pursuant to the terms of this
Agreement, to make Loans shall expire on the Maturity Date, subject to Bank's
right to renew said commitment in its sole and absolute discretion at Borrower's
request. Any such renewal of said commitment shall not be binding upon Bank
unless it is in writing and signed by an officer of Bank.
3.2 Notwithstanding the foregoing, should Borrower be in default of one or
more of the provisions of this Agreement, Bank may terminate this Agreement at
any time without notice. Notwithstanding the foregoing, should either Bank or
Borrower become Insolvent or unable to most its debts as they mature, or fall,
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 indebtedness shall become immediately due and payable without notice or
demand; provided, however, that no such notice of termination by Borrower shall
be effective until the payment in full in cash of all indebtedness to Bank
(including without limitation the expiration or cash collateralization of all of
all Letter of Credit Obligations in accordance with the terms and conditions of
this Agreement). Any notice of termination given by Borrower shall be
irrevocable unless Bank otherwise agrees in writing, and Bank shall have no
obligation to make any loans or issue any letters of credit on or after the
termination date stated in such notice. Borrower may elect to terminate this
Agreement in its entirely only. No section of this Agreement or type of loan
available hereunder may be terminated singly.
3.3 All undertakings, agreements, covenants, warranties, and
representations of Borrower contained in the Loan Documents shall survive any
such termination, and Bank shall retain its security interest in and to all
existing Collateral and Collateral arising thereafter, any and all liens
thereon, and all of its rights and remedies under the Loan Documents
notwithstanding such termination until the payment in full in cash of all
Indebtedness to Bank (including, without limitation, the expiration or cash
collateralization of all of all Letter of Credit Obligations in accordance with
the terms and conditions of this Agreement and the payment in full of all
applicable termination charges, if any). Notwithstanding the satisfaction in
full of the Indebtedness. Bank shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or damage Bank may
incur as a result of dishonored checks or other items of payment received by
Bank and applied to the Indebtedness. Bank shall, at its option, (a) have
received a written agreement, executed by Borrower and by any Person whose loans
or other advances to Borrower are used in whole or in part to satisfy the
Indebtedness, indemnifying Bank from any such loss or damage, or (b) have
retained such monetary reserves and liens on the Collateral for such period of
time as Bank, in its reasonable discretion, may deem necessary to protect Bank
from any such loss or damage. After termination and when Bank has received
payment in full in cash of Borrower's Indebtedness 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.
8
3.4 Borrower hereby authorizes Bank to collect all principal, interest,
fees, costs, or Bank Expenses due under this Agreement as follows:
a. Borrower authorizes Bank to automatically deduct from Borrower's
account number 1891457133 with Bank, or any other account maintained by Borrower
with Bank, the full amount of all principal and interest due under this
Agreement or the other Loan Documents when due and payable. Should there be
insufficient funds in any such account to pay all such sums when due, the full
amount of such deficiency shall be immediately due and payable by Borrower;
provided, however, that Bank shall not be obligated to advance funds to cover
any such payment.
b. Any such amounts not collected in accordance with the forgoing
instructions may be paid in cash or deducted from loan proceeds; provided,
however, that Bank shall not be obligated to advance funds to cover payment of
any such amounts.
c. Anything contained in herein to the contrary notwithstanding,
Bank agrees that it shall endeavor to provide prior notice to Borrower of any
such interest and principal payments to be deducted from Borrower's account in
accordance with its customary notice and billing procedures for such charges or
payments; provided, however, that the failure of Bank to provide any such notice
to Borrower shall have no effect on Bank's rights or remedies under this
Agreement, including without limitation Bank's rights to deduct the full amount
of any such interest, principal, fees or Bank Expenses from Borrower's account
in accordance with the terms and conditions of this Section or as otherwise
provided in accordance with the provisions of this Agreement.
d. All other fees, costs or other Bank Expenses shall be due and
payable upon demand by Bank, and Borrower shall pay all such amounts promptly
upon demand by Bank. Any such amounts not paid in full in cash upon demand by
Bank may be deduct from Borrower's account number 1891457133 with Bank, or from
any other account maintained by Borrower with Bank, or if no funds are available
in such accounts, from loan proceeds; provided, however, that Bank shall not be
obligated to advance funds to cover payment of any such amounts.
4. CREATION OF SECURITY INTEREST.
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 Indebtedness owed by Borrower to Bank and in order to
secure prompt performance by Borrower of each and all of its covenants and
obligations under this 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 Negotiable Collateral, Borrower, immediately upon
the request of Bank, shall (a) endorse or assign such Negotiable Collateral to
Bank, (b) deliver actual physical possession of such Negotiable Collateral to
Bank, and (c) xxxx conspicuously all of its records pertaining to such
Negotiable Collateral with a legend, in form and substance satisfactory to Bank
(and in the case of Negotiable Collateral consisting of tangible chattel paper,
immediately xxxx all such tangible chattel paper with a conspicuous legend in
form and substance satisfactory to Bank), indicating that the Negotiable
Collateral is subject to the security interest granted to Bank hereunder.
4.2 Bank's security interest in the Accounts shall attach to all Accounts
without further act on the part of Bank or Borrower. Upon request from Bank,
Borrower shall provide Bank with schedules describing all Accounts created or
acquired by Borrower (including without limitation agings listing the names and
addresses of, and amounts owing by date by account debtors), and shall execute
and deliver written assignments of all Accounts to Bank all in a form acceptable
to Bank; provided, however, Borrower's failure to execute and deliver such
schedules and/or assignments shall not affect or limit Bank's security interest
and other rights in and to the Accounts. Together with each schedule, upon
request from Bank, 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 of an Event of Default, Bank or Bank's designee may
notify customers or account debtors of Bank's security interest in the
Collateral and direct such customers or account debtors to make payments
directly to Bank, but unless and until Bank does so or gives Borrower other
written instructions, Borrower shall collect all Accounts 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, advises of
credit, instruments, documents, chattel paper or any similar property evidencing
or constituting Collateral. Notwithstanding anything to the contrary contained
herein, if sales of inventory are made for cash, Borrower shall immediately
deliver to Bank, in identical form, all such cash, checks, or other forms of
payment which Borrower receives. The receipt of any check or other item of
payment by Bank shall not be considered a payment on account until such check or
other item of payment is honored when presented for payment, in which event said
check or other item of payment shall be deemed to have been paid to Bank two (2)
calendar days after the date Bank actually receives such check or other item of
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 request from Bank on
or after the occurrence of an Event of Default, Borrower will at Borrower's
expense
9
pledge, assemble and deliver such Inventory to Bank or to a third party 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 Banks security interest in some other manner
acceptable to Bank. Until a default by Borrower under this Agreement or any
other Agreement between Borrower and Bank, Borrower may, subject to the
provisions hereof and consistent herewith, sell the Inventory, but only in the
ordinary course of Borrower's business. A sale of Inventory in Borrower's
ordinary course of business does not include an exchange or a transfer in
partial or total satisfaction of a debt owing by Borrower.
4.4 Concurrently with Borrower's execution of this Agreement, and at any
time or times hereafter at the request of Bank, Borrower shall (a) execute and
deliver to Bank security agreements, mortgages, assignments, certificates of
title, affidavits, reports, notices, schedules of accounts; letters of authority
and all other documents that Bank may reasonably request, in form satisfactory
to Bank, to perfect and maintain perfected Banks security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement, (b) cooperate with Bank in obtaining a control agreement
in form and substance satisfactory to Bank with respect to all deposit accounts,
electronic chattel paper, Investment property, and letter-of-credit rights, and
(c) in the event that any Collateral is in the possession of a third party,
Borrower shall join with Bank in notifying such third party of Bank's security
interest and obtaining an acknowledgment from such third party that it is
holding such Collateral for the benefit of Bank. By authenticating or becoming
bound by this Agreement, Borrower authorizes the filing of initial financing
statement(s), and any amendment(s) covering the Collateral to perfect and
maintain perfected Bank's security interest in the Collateral. Upon the
occurrence of an Event of Default, Borrower hereby irrevocably makes,
constitutes and appoints Bank (and any of Banks officers, employees or agents
designated by Bank) as Borrower's true and lawful attorney-in-fact with power to
sign the name of Borrower on any 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, and to take such actions
in its own name or in Borrower's name as Bank, in its sole discretion, deems
necessary or appropriate to establish exclusive possession or control (as
defined in the Uniform Commercial Code) over any Collateral of such nature that
perfection of Bank's security interest may be accomplished by possession or
control.
4.5 Borrower shall make appropriate entries in Borrower's Books disclosing
Bank's security interest in the Accounts. Bank (through any of its officers,
employees or agents) shall have the right at any time or times hereafter,
provided that reasonable notice is provided, 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.
4.6 Effective only upon the occurrence of an Event of Default, 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 xxxx of
lading relating to any Accounts, on drafts against account debtors, on schedules
and assignments of Accounts, on verifications of Accounts 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 relating to the Collateral
and forward all other mail to Borrower; to send, whether in writing or by
telephone, requests for verification of Accounts; 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 judgment or mistake of fact or law. This
power being coupled with an interest. is irrevocable so long as any Accounts in
which Bank has a security interest remain unpaid and until the indebtedness has
been fully satisfied.
4.7 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, pay any service bureau, or
obtain any records on the Collateral, and, under any circumstances where Bank
reasonably believes that the physical security of the Collateral is presently
in, or eminently will fall into, physical jeopardy or otherwise at risk, then
Bank may maintain guards, warehousemen, or any personnel to protect the
Collateral, and all costs for the same shall be added to the Indebtedness and
shall be payable on demand.
4.8 Borrower agrees that Bank may provide Information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and
service providers.
5. CONDITIONS PRECEDENT.
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:
10
a. This Agreement and other documents, instruments and agreements
required by Bank and identified in Exhibit 5.1 to this Agreement:
b. If Borrower is a corporation, limited liability company, limited
partnership or other such entity, certified copies of all actions taken by
Borrower, any grantor of a security interest to Bank to secure the Indebtedness,
and any guarantor of the Indebtedness, authorizing the execution, delivery and
performance of this Agreement and any other documents, instruments or agreements
entered into in connection herewith, and authorizing specific officers to
execute and deliver any such documents, instruments and agreements;
c. If Borrower is a corporation, limited liability company, limited
partnership or other such entity, then a certificate of good standing showing
that Borrower is in good standing under the laws of the state of its
incorporation or formation and certificates indicating that Borrower is
qualified to transact business and is in good standing in any other state in
which it conducts business;
d. It Borrower is a partnership, then a copy of Borrower's
partnership agreement certified by each general partner of Borrower;
e. UCC searches and financing statements, 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;
f. Bank shall have completed a audit of Borrower's Books relating to
the Accounts and other Collateral, the results of which shall be satisfactory to
Bank;
g. Evidence that Borrower has obtained insurance and acceptable
endorsements;
h. Such control agreements from each Person as Bank may require, if
any;
i. Duly executed certificates of title with respect to that portion
of the Collateral that is subject to certificates of title, if any;
j. Such collateral access agreements from each lessor, warehouseman,
bailee, and other Person as Bank may require, duly executed by each such Person;
and
k. 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. The aggregate
amount of the Borrowing Base at all times during the effectiveness of this
Agreement shall not be less than the advances made hereunder. Bank shall have
the right to recompute the 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 the Borrowing Base
by the amount thereof. Bank shall retain its security interest in all Accounts,
whether eligible or ineligible, until all Indebtedness has 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 Borrower, as they exist at this time. Any merchandise which is
returned by an account debtor or otherwise recovered shall be set aside, marked
with Bank's name, and Bank shall retain a security interest therein. Borrower
shall promptly notify Bank of all disputes and claims and settle or adjust them
on terms approved by Bank. After default by 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 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 loan 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:
11
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 (except for any permitted
Liens);
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 Permitted
Liens 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, 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 assigned to Bank;
and
c. At the time each Account is pledged and assigned to Bank as
Collateral 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, customers
purchase orders, shipping instructions, 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 for Bank.
6.4 At the time each eligible Account is assigned to Bank, all such
Eligible Accounts will be due and payable on terms set forth in Section 1.19 and
1.20, 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 Borrower shall keep the inventory only at the locations set forth on
Schedule 6.5 to this Agreement, attached hereto and Incorporated herein by this
reference. The owner or mortgagees of the respective locations are as set forth
in Schedule 6.5.
a. Borrower, promptly upon demand by Bank therefor, but in any event
within ten (10) business days of any such demand therefor, shall now and from
time to time hereafter, at such intervals as are reasonably 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 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 promptly upon demand by Bank therefor, but in any event
within ten (10) business days of any such demand therefor, to any of Bank's
officers, agents and employees for inspection and copying;
d. Except for any work-in-process, 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, warehouse receipts in Bank's name evidencing the storage of
inventory and/or an acknowledgment by such bailee of Bank's prior rights in the
Inventory, in each case in form and substance acceptable to Bank. In any event,
Borrower shall instruct any third party to hold all such inventory for Bank's
account subject to Bank'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, after reasonable notice, to
inspect and examine the Inventory and to check and test the same as to quality,
quantity, value and condition and, subject to the limitations set forth in
Section 6.24, Borrower agrees to reimburse Bank for Bank's reasonable costs and
expenses in so doing; provided, however, that Bank agrees to reimburse Borrower
for physical damage to any item of inventory tested by Bank that results from
Bank's gross negligence or intentional misconduct.
6.6 At all times during the effectiveness of this Agreement, any Cash
Collateral not on deposit with Bank shall be subject to a control agreement with
the depository Institution or securities Intermediary at which any such Cash
Collateral is on deposit, in form and substance satisfactory to Bank.
12
6.7 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:
x. Xxxxx 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 (except for any
Permitted Liens);
b. Permit any levy, attachment or restraint in an aggregate amount
in excess of Five Hundred Thousand and No/100 Dollars ($500,000.00) 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. Other then sales or transfers of inventory in the ordinary course
of Borrower's business, to sell, lease, or otherwise dispose of, move, or
transfer, whether by sale or otherwise, any of Borrower's assets;
e. Change its name, the location of its sole place of business,
chief executive office or residence, business structure, corporate identity or
structure, form of organization or the state in which it has been formed or
organized; add any new fictitious names; provided, however, that prior to the
occurrence of an Event of Default, and subject to (i) Borrower's delivery to
Bank of not less than ninety (90) days prior notice thereof and (ii) Borrower's
execution of any document, instrument or agreement as Bank shall require, 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 continue the
effectiveness of this Agreement and the other Loan Documents. Borrower may
change its name, the location of its sole place of business, chief executive
office or residence, business structure, corporate identity or structure, form
of organization or the state in which it has been formed or organized or add any
new fictitious names.
f. Move or relocate any Collateral to any location not set forth on
Schedule 6.5 to this Agreement; provided, however, that anything contained in
the forgoing to the contrary notwithstanding, Borrower shall not move any
material portion of the Collateral to any location outside the United States of
America without the prior written consent of Bank;
g. Enter into any transaction not in the usual course of Borrower's
business;
h. 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 Indebtedness;
i. Incur any Debts except for Permitted Indebtedness and renewals or
extensions thereof and Interest thereon in excess of Seven Hundred Fifty
Thousand and No/100 Dollars ($750,000.00) in any one year,
j. Except for Permitted Investments and loans to employees of
Borrower in an aggregate amount not to exceed Eight Hundred Fifty Thousand and
No/100 Dollars ($850,000.00) per employee or Five Million and No/100 Dollars
($5,000,000.00) in the aggregate, or short term loans to employees from time to
time to facilitate the exercise of such employee's options on Borrower's capital
stock granted to such employee by Borrower, make loans, advances or extensions
of credit to any other Person except in the ordinary course of business, or
purchase or hold beneficially any stock or other securities of, or make any
Investment or acquire any securities or other interest whatsoever in, any other
Person;
k. 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 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 Borrower in the ordinary course of business for
deposit or collection;
l. Make any payment on account of any Subordinated Debt except for
regularly scheduled payments of interest and principal in accordance with the
provisions of any Subordination Agreement executed by Bank and the subordinated
debt holder, or amend any provision contained in any documentation relating to
any such Subordinated Debt without Bank's prior written consent: and
m. Liquidate, dissolve, merge or consolidate with or into any other
business organization, permit another corporation to liquidate, dissolve, merge
or consolidate into it; purchase or otherwise acquire all or substantially all
the properties, assets or business of any third Person or entity; enter into any
reorganization or recapitalization or
13
reclassify its capital stock; sell, lease, assign, or transfer any substantial
part of its business or fixed assets, or any property or other assets necessary
for the continuance of its business as now conducted, including without
limitation the selling of any property or other asset accompanied by the leasing
back of the same, in each case to any third Person; or commence any proceedings
with respect to any of the forgoing other then (1) sales and transfers of
inventory in the ordinary course of Borrower's business; (2) transfers of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower or its subsidiaries; (3) transfers of surplus, worn-out or obsolete
Equipment; (4) sales and transfers of any assets other than Intellectual
Property Rights in an aggregate amount not to exceed One Million and No/100
Dollars ($1,000,000.00) in each calendar year; (5) sales and transfers of any
assets consisting of Intellectual Property Rights in an aggregate amount not to
exceed Two Million and No/100 Dollars ($2,000,000.00) in each calendar year; or
(6) the transfer of any assets assigned in connection with Borrower's exercise
of its rights under clause (i) above.
6.8 Borrower represents, warrants, covenants and agrees that:
a. Borrower's true and correct legal name is that set forth on the
signature page to this Agreement. Except as disclosed in writing to Bank on or
before the date of this Agreement, Borrower has not done business under any name
other than that set forth on the signature page to this Agreement;
b. If Borrower is an individual, the location (as determined
pursuant to the Uniform Commercial Code) of Borrower's principal residence is
that set forth following Borrower's name on the signature page to this
Agreement;
c. If Borrower is a registered organization that is organized under
the laws of any one of the states comprising the United States (e.g.
corporation, limited partnership, registered limited liability partnership or
limited liability company), and is located (as determined pursuant to the
Uniform Commercial Code) in the state under the laws of which it was organized,
Borrower's form of organization and the state in which it has been organized are
those set forth immediately following Borrower's name on the signature page to
this Agreement;
d. If Borrower is a registered organization organized under the laws
of the United States, and Borrower is located in the state that United States
law designates as its location or, if United States law authorizes Borrower to
designate the state for its location, the state designated by Borrower, or if
neither of the foregoing are applicable, at the District of Columbia (in each
case as determined in accordance with the Uniform Commercial Code), Borrower's
form of organization and the state or district in which it is located are those
set forth Immediately following Borrower's name on the signature page to this
Agreement;
e. If Borrower is a domestic organization that is not a registered
organization under the laws of the United States or any state thereof (e.g.
general partnership, joint venture, trust, estate or association), and Borrower
is located (as determined pursuant to the Uniform Commercial Code) at its sole
place of business or, if it has more than one place of business, at its chief
executive office, Borrower's form of organization and the address of that
location are those set forth on the signature page to this Agreement; and
f. If Borrower is a foreign individual or foreign organization or a
branch or agency of a bank that is not organized under the laws of the United
States or a state thereof, Borrower is located (as determined pursuant to the
Uniform Commercial Code) at the address set forth following Borrower's name on
the signature page to this Agreement.
6.9 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, or redeem or retire any such capital stock;
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;
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.
6.10 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.
14
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 loan account as Bank deems necessary to satisfy site
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 Bank shall constitute a
Bank Expense and an additional advance to Borrower.
6.12 Except as set forth on Schedule 6.12, to the best of Borrower's
knowledge, after due inquiry, 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 or asset forth on Schedule
6.12. If any of the foregoing arise during the term of the Agreement, Borrower
shall immediately notify Bank in writing.
6.13 Insurance.
a. Borrower, at its expense, shall keep and maintain its assets
insured against toss 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. Borrower
shall also keep and maintain business Interruption insurance and 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, and to such amounts as may be satisfactory to
Bank. Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. 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 satisfactory to Bank, and all
proceeds payable thereunder shall be payable to Bank and, upon receipt by Bank,
shall be applied on account of the Indebtedness owing to Bank. To secure the
payment of the indebtedness, 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, and Borrower shall direct all insurers under
such policies of insurance to pay all proceeds thereof directly to Bank.
b. 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 on 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 indebtedness 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 incurred by Bank, whether in-house
or outside counsel is used, 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
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 Financial Reporting.
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 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, not modify or change
its method of accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any third party
accounting firm and/or service bureau for the
15
preparation and/or storage of Borrower's accounting records without the written
consent of Bank first obtained (except for changes in the preparation of
Borrower's accounting records made in accordance with changes in any
corresponding GAAP standards or applicable regulatory standards) and without
said accounting firm and/or service bureau agreeing to provide information
regarding the Accounts and Inventory and Borrower's financial condition to Bank,
and Bank agrees that it shall not unreasonably withhold its consent to any such
change; 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 Borrower's
Books relating to the Collateral, Borrower's indebtedness 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 (1) within thirty (30) days after
the end of each calendar month, a company prepared balance sheet and profit and
loss statement covering Borrower's operations in the summary form presented to
Borrower's board of directors, and including without limitation a summary
balance sheet and profit and loss statement and statement of Borrower's
financial ratios, (2) within forty five (45) days after the end of each calendar
quarter, a company prepared balance sheet and profit and loss statement covering
Borrower's operations in complete GAAP form, and (3) deliver to Bank within one
hundred twenty (120) days after the end of each of Borrower's fiscal years the
annual audited statement of the financial condition of 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, audited by a certified public accountant
selected by Borrower and acceptable to Bank, together with 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 the event that Borrower's capital stock or Debt shall be
offered and/or traded on any national securities exchange located in the United
States and Borrower shall be required to file periodic financial reports with
the Securities and Exchange Commission or any governmental authority at any time
substituted therefor in connection with such publicly traded capital stock or
Debt, then, in lieu of the financial statements required under Section 6.15.b,
above, promptly after the same are available, copies of any and all proxy
statements, financial statements and reports as Borrower or any subsidiary or
affiliate of Borrower shall send to its members or stockholders, or to any
holders of any such Debt, as applicable, if any, and copies of all reports on
Forms 10-K, 10-Q, and 8-Q or otherwise filed by Borrower or any subsidiary or
affiliate of Borrower with the Securities and Exchange Commission or any
governmental authority at any time substituted therefor.
d. In addition to the financial statements requested above, Borrower
agrees to provide Bank with the following schedules:
(1) Accounts Receivable Agings on a monthly basis within
twenty (20) days of Borrower's month end;
(2) Accounts Payable Agings on a monthly basis within twenty
(20) days of Borrower's month end;
(3) Borrowing Base Certificate on a monthly basis within
twenty (20) days of Borrower's month end at all times that the
Revolving Loans are subject to a Borrowing Base calculated on the
basis of Eligible Accounts; and
(4) Compliance Certification on a monthly basis (including,
without limitation a calculation of Borrower's compliance with each
of the financial covenants set forth in, Section 6.16 of this
Agreement) within twenty (20) days of Borrower's month and together
with each request for the making of each Revolving Loan advance
under Section 2.1 hereof,
6.16 Borrower shall maintain the following financial ratios and covenants
on a consolidated basis, which shall be monitored on a monthly basis, except as
noted below:
a. Tangible Effective Net Worth in an amount not less than
Thirty-Five Million and No/100 Dollars ($35,000,000.00);
b. a ratio of Quick Assets to Current Liabilities (inclusive of the
outstanding amount of all Indebtedness) of not less then 1.75:1.00;
16
c. a Debt-to-Worth Ratio of not more than .90:1.00;
d. As of the making of the Term Loan and at all times thereafter, a
Cash Flow Coverage Ratio of not less then 2.00:1.00;
e. Net Income after taxes of not less than One and No/100 Dollars
($1.00), measured as of the end of each fiscal year of Borrower, provided,
however, that Borrower shall not experience Net Income after taxes of less than
One and No/100 Dollars ($1.00) as of the end of more than any two (2)
consecutive fiscal quarters during any such fiscal year,
f. Borrower shall not without Bank's prior written consent acquire
or expend for or commit itself to acquire or expand for fixed assets by lease,
purchase or otherwise in an aggregate amount that exceeds Thirty Million and
No/100 Dollars ($30,000,000.00) in any fiscal year, and
g. Borrower shall be and remain the owner at all times of
unencumbered Liquid Assets having a value (as such value is determined by Bank)
of not less then Three Million and No/100 Dollars ($3,000,000.00). Borrower
shall within thirty (30) days after and as of the end of each calendar month,
deliver to Bank such schedules, certificates, reports, documents and other
information respecting all or any of Borrower's Liquid Assets as Bank may
request any such schedule, certificate, report or other document identifying any
Liquid Asset shall be accompanied if so requested by Bank) by satisfactory
evidence of Borrower's ownership of any such Liquid Asset, evidence that any
such Liquid Asset is unencumbered, and evidence of the current value of any such
Liquid Asset.
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 a
breach of or an 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
sums expanded by Bank in connection with any action brought by Bank to correct
any Event of Default or enforce any provision of this Agreement, including all
Bank Expenses; Borrower authorizes and approves all advances and payments by
Bank for items described in this Agreement as Bank Expenses. Anything contained
in herein to the contrary notwithstanding, prior to the occurrence of any Event
of Default, Bank agrees that it shall endeavor to provide prior notice to
Borrower of out-of-pocket Bank Expenses to be incurred by Bank in an estimated
aggregate amount in excess of Two Thousand Five Hundred and No/100 Dollars
($2,500.00); provided, however, that the failure of Bank to provide any such
notice to Borrower shall have no affect on Bank's rights or remedies under this
Agreement, including without limitation Bank's rights to reimbursement for the
full amount of any such Bank Expenses in accordance with the terms and
conditions of this Section or as otherwise provided in accordance with the
provisions of this Agreement.
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 Bank immediately in writing of the existence of any and all other
bank account, deposit account, or any other account into which money can be
deposited that may exist or be established from time to time that contain
deposits in an aggregate amount in excess of One Hundred Thousand and No/100
Dollars ($100,000.00).
6.22 Borrower shall not (i) permit 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, or (ii) with respect to any defined benefit pension plan as defined
in the Employees Retirement Income Security Act of 1974, as amended ("ERISA"),
fail to meet the minimum funding standards of Section 302 of ERISA, permit any
Reportable Event or Prohibited Transaction as defined in
17
ERISA to occur with respect to any such plan, or permit any other material
failure to comply with ERISA to occur with respect to any such plan. Borrower
shall furnish to 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 or prohibited transaction with respect to any deferred compensation or
defined benefit pension plan has occurred, a statement of the chief financial
officer of Borrower setting forth the details concerning such reportable event
or prohibited transaction and the action which Borrower proposes to take with
respect thereto, together with a copy of the notice of such reportable event or
prohibited transaction 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 or
defined benefit pension 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 or defined benefit
pension plan, all notices and other forms of information from time to time
disseminated to the participants by the administrator of the deferred
compensation plan or defined benefit pension plan.
6.23 Borrower is now and shall at all times hereafter remain in compliance
in all material respects 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.
6.24 Borrower shall permit representatives of Bank to conduct audits of
Borrower's Books relating to the Accounts and other Collateral and make extracts
therefrom, with results satisfactory to Bank, provided that Bank shall use its
best efforts to not interfere with the conduct of Borrower's business, and to
the extent possible to arrange for verification of the Accounts directly with
the account debtors obligated thereon or otherwise, all under reasonable
procedures acceptable to Bank and at Borrower's sole expense; provided, however,
that, prior to an Event of Default, Borrower shall not be responsible for
payment or reimbursement of any Bank Expenses incurred by Bank in connection
with more then one (1) such audit of Borrower's Books in each calendar year
provided, provided, further, that anything contained in the forgoing to the
contrary notwithstanding Borrower shall be responsible for the payment or
reimbursement of Bank Expenses incurred in connection with one (1) annual audit
in each such year. Notwithstanding any of the provisions contained in Sections
1.19, 1.20, or 2.1, of this Agreement or otherwise, Borrower hereby acknowledges
and agrees that upon completion of any such audit Bank shall have the right to
adjust the Borrowing Base percentage or the definition of Eligible Accounts, in
its sole and reasonable discretion, based on its review of the results of such
collateral audit.
6.25 In connection with this Agreement, Borrower hereby further
acknowledges and agrees that, except as expressly permitted under this
Agreement, there exists no lien, pledge, encumbrance, security interest, deed of
trust, mortgage or other charge upon, and at all times during the effectiveness
of this Agreement Borrower shall not create, incur, assume, suffer or permit to
exist any lien, pledge, encumbrance, security interest, deed of trust, mortgage
or other charge upon, any of its property or assets, whether now owned or
hereafter acquired, including without limitation any real property or
Intellectual Property Rights. In addition, Borrower further acknowledges and
agrees that it has and at all times during the effectiveness of this Agreement
shall not enter into an agreement with a third party providing financing to
Borrower by which Borrower places an additional negative pledge on any such
property or assets or promises not to hypothecate or transfer any such property
or assets.
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 to pay when due and payable or declared due and
payable, all or any portion of Borrower's Indebtedness (whether of principal,
interest, taxes, reimbursement of Bank Expenses, or otherwise) payable hereunder
or under any other Loan Document within ten (10) days of the due date thereof;
b. If Borrower fails or neglects to perform, keep or observe (i) any
negative term, provision, condition, covenant, agreement, or (ii) any warranty
or representation contained in Section 6 of this Agreement;
c. If Borrower fails or neglects to perform, keep or observe any
other term, provision, condition, affirmative or financial covenant, or
agreement contained in this Agreement, any other Loan Document, or any other
present or future document, instrument or agreement between Borrower and Bank
(other than those terms and conditions described in Sections 7.a. and 7.b
hereof), and such failure continues for ten (10) days after the earlier of (a)
Borrower's discovery of such failure and (b) Bank's dispatch of notice to
Borrower of such failure; provided, however, that if any such Event of Default
is curable and Borrower has not been given a prior notice of a breach of the
same term or condition, it may be cured by Borrower within ten (10) days of the
earlier of discovery or notice thereof, or, if the cure will require more than
ten (10) days, if Borrower immediately initiates steps that Bank deems in its
sole discretion to be sufficient to cure
18
such Event of Default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical;
d. If any representation, statement, report or certificate made or
delivered by Borrower, or any of its officers, employees or agents to Bank is
not true and correct;
e. If there is a material impairment of the prospect of repayment of
all or any portion of Borrower's Indebtedness or a materiel impairment of the
value or priority of Bank's security interest in the Collateral;
f. 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 ten (10) days thereafter;
g. If any Insolvency Proceeding is filed or commenced by or against
Borrower without being dismissed within ten (10) days thereafter;
h. If any proceeding is filed or commenced by or against Borrower
for its dissolution or liquidation;
i. 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;
j. If a notice of lien, levy or assessment in an aggregate amount in
excess of Five Hundred Thousand and No/100 Dollars ($500,000.00) 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 inchoate or otherwise, upon any or all of Borrower's assets and the same
is not paid on the payment date thereof;
k. If a judgment or other claim becomes a lien or encumbrance in an
aggregate amount in excess of Five Hundred Thousand and No/100 Dollars
($500,000.00) upon any or all of Borrower's assets and the same is not
satisfied, dismissed or bonded against within ten (10) days thereafter;
l. If Borrower's records are prepared and kept by an outside
computer service bureau at the time this Agreement is entered into or during the
term of this Agreement such an agreement with an outside service bureau is
entered into, and at any time thereafter, without first obtaining the written
consent of Bank, Borrower terminates, modifies, amends or changes its
contractual relationship with said computer service bureau or said computer
service bureau fails to provide Bank with any requested information or financial
date pertaining to Bank's Collateral, Borrower's financial condition or the
results of Borrower's operations;
m. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties to as to result in an acceleration of the
maturity of Borrower's indebtedness to others, whether under any indenture,
agreement or otherwise;
n. If Borrower makes any payment on account of indebtedness which
has been subordinated to Borrower's Indebtedness to Bank except as otherwise
permitted under the tons of this Agreement;
o. If any misrepresentation exists now or thereafter in any warranty
or representation made to Bank by any officer or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director;
p. If any party subordinating its claims to that of Bank's or any
guarantor of Borrower's Indebtedness dies, terminates its subordination or
guaranty, violates the terms of the subordination or guaranty, becomes
insolvent, or an Insolvency Proceeding is commenced by or against any such
subordinating party or guarantor;
q. If Borrower is an individual and Borrower dies;
r. If any reportable event, which 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
19
Corporation shall institute proceedings to terminate any plan and in case of any
event described in this Section 7, the aggregate amount of Borrower's liability
to the Pension Benefit Guaranty Corporation under Sections 4062, 4083 or 4064 of
ERISA shall exceed five percent (5%) of Borrower's Tangible Effective Not 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 Sections 7.f, 7.g or 7.k 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 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 Indebtedness, whether evidenced by this
Agreement, installment notes, demand notes or otherwise, immediately due and
payable to Bank; provided, however, that upon the occurrence of an Event of
Default described in Section 7.g, all indebtedness shall become immediately due,
owing and payable in full without any action by 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 Indebtedness 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
promises (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 secrets, trade
names, trademarks and advertising matter, or any property or a similar nature as
it pertains to the Collateral (including, without limitation any such property
included in the Intellectual Property Rights) 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 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. At any sale or other disposition of the
Collateral pursuant to this Section, Bank disclaims all warranties which would
otherwise be given under the Uniform Commercial Code, including without
limitation a disclaimer of any warranty relating to title, possession, quiet
enjoyment or the like, and Bank may communicate these disclaimers to a purchaser
at such disposition. This disclaimer of warranties will not render the sale
commercially unreasonable;
h. Bank shall give notice of the disposition of the Collateral as
follows:
(1) Bank shall give 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 other disposition is to be made;
20
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower's address appearing in this Agreement.
at least ten (10) calendar days before the date fixed for the sets,
or at least ten (10) 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 then Borrower claiming an interest in the
Collateral shall be sent to such addresses as have been furnished to
Bank or as otherwise determined in accordance with Section 9811 of
the Uniform Commercial Code; and
(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 ten (10) calendar days before the date of the 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 Banks discretion, to any party who Bank believes, in
good faith, is entitled to the excess;
k. Without constituting a retention of Collateral in satisfaction of
an obligation within the meaning of 9620 of the Uniform Commercial Code or an
action under California Code of Civil Procedure 728, apply any and all amounts
maintained by Borrower as deposit accounts (as that term is defined under 9102
of the Uniform Commercial Code) or other accounts that Borrower maintains with
Bank against the Indebtedness;
l. The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first upon all expenses
authorized by the Uniform Commercial Code and all reasonable attorney fees and
legal expenses incurred by Bank, whether in-house or outside counsel is used,
the balance of the proceeds of the sale or other disposition shall be applied in
the payment of the indebtedness, first to interest, then to principal, then to
remaining Indebtedness and the surplus, if any, shall be paid over to Borrower
or to such other person(s) as may be entitled to it under applicable law.
Borrower shall remain liable for any deficiency, which it shall pay to Bank
immediately upon demand. Borrower agrees that Bank shall be under no obligation
to accept any non-cash proceeds in connection with any sale or disposition of
Collateral unless failure to do so would be commercially unreasonable. If Bank
agrees in its sole discretion to accept noncash proceeds (unless the failure to
do so would be commercially unreasonable), Bank may ascribe any commercially
reasonable value to such proceeds. Without limiting the foregoing, Bank may
apply any discount factor in determining the present value of proceeds to be
received in the future or may elect to apply proceeds to be received in the
future only as and when such proceeds are actually received in cash by Bank; and
m. The following shall be the basis for any finder of facts
determination of the value of any Collateral which is the subject matter of a
disposition giving rise to a calculation of any surplus or deficiency under
Section 9615(f) of the Uniform Commercial Code: (i) The Collateral which is the
subject matter of the disposition shall be valued in an "as is" condition as of
the date of the disposition, without any assumption or expectation that such
Collateral will be repaired or improved in any manner, (ii) the valuation shall
be based upon an assumption that the transferee of such Collateral desires a
resale of the Collateral for cash promptly (but no later than 30 days) following
the disposition; (iii) all reasonable closing costs customarily borne by the
seller in commercial sales transactions relating to property similar to such
Collateral shall be deducted including, without limitation, brokerage
commissions, tax prorations, attorney's fees, whether in-house or outside
counsel is used, and marketing costs; (iv) the value of the Collateral which is
the subject matter of the disposition shall be further discounted to account for
any estimated holding costs associated with maintaining such Collateral pending
sale (to the extent not accounted for in (iii) above), and other maintenance,
operational and ownership expenses; and (v) any expert opinion testimony given
or considered in connection with a determination of the value of such Collateral
must be given by persons having at least 5 years experience in appraising
property similar to the Collateral and who have conducted and prepared a
complete written appraisal of such Collateral taking into consideration the
factors set forth above. The "value" of any such Collateral shall be a factor in
determining the amount of proceeds which would have been realized in a
disposition to a transferee other than a secured party, a person related to a
secured party or a secondary obligor under Section 9615(f) of the Uniform
Commercial Code.
8.2 In addition to any and all other rights and remedies available to Bank
under or pursuant to this Agreement or any other documents, instrument or
agreement contemplated hereby. Borrower acknowledges and agrees that (i) at any
time following the occurrence and during the continuance of any Event of
Default, and/or (ii) termination of Bank's commitment or obligation to make
loans or advances or otherwise extent credit to or in favor of Borrower
hereunder, in the event that and to the extent that there are any Letter of
Credit Obligations outstanding at such time, upon demand of Bank, Borrower shall
deliver to Bank, or cause to be delivered to Bank, cash collateral in an amount
not less
21
then such Letter of Credit Obligations. which cash collateral shall be held and
retained by Bank of Cash collateral for the repayment of such Letter of Credit
Obligations, together with any and all other Indebtedness of Borrower to Bank
remaining unpaid, and Borrower pledges to Bank and grants to Bank a continuing
first priority security interest in such cash collateral so delivered to Bank.
Alternatively, Borrower shall cause to be delivered to Bank an irrevocable
standby latter of credit issued in favor of Bank by a bank acceptable to Bank,
in its sole discretion, in an amount not less than such Letter of Credit
Obligations, and upon terms acceptable to Bank, in is sole discretion.
8.3 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.
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 loan 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 Indebtedness 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 Indebtedness 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. Anything contained in the
foregoing to the contrary notwithstanding, Bank agrees that it shall endeavor to
provide notice to Borrower of any such contact with Borrower's accountants,
accounting firm or service bureau; provided, however, that the failure of Bank
to provide any such notice to Borrower shall have no effect on Bank's rights or
remedies under this Agreement.
10.5 THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
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 term, 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
22
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
Indebtedness is a consumer loan, that portion shall not be secured by any deed
of trust or mortgage on or other security interest in 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 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 indebtedness of 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. Notices
delivered by telefacsimile shall also be delivered by mail in accordance with
the forgoing requirements; provided, however, that all such notices shall be
equally as effective as delivery of a such notice in accordance with the
forgoing requirements, and provided, that the failure of Bank to deliver a copy
of any such notice in accordance with the forgoing shall not effect the
validity, effectiveness and binding effect of any such notice or the
effectiveness or enforceability of any provision of this Agreement or the other
Loan Documents.
13. AUTHORIZATION TO DISBURSE. Bank is hereby authorized to make loans and
advances hereunder upon prior written request (which may include, without
limitation, a written request in the form of an electronic mail transmission)
from a Person purporting to be an authorized officer, employee, or
representative of Borrower, or at the discretion of Bank if sold loans and
advances are necessary to meet any indebtedness of Borrower to Bank. Bank shall
have no duty to make inquiry or verity the authority of any such party, and
Borrower shall hold Bank harmless from any damage, claims or liability by reason
of Bank's honor of, or failure to honor, any such instructions.
14. PAYMENTS. Borrower hereby authorizes Bank to deduct the full amount of any
interest, fees, costs, or Bank Expenses due under this Agreement and not paid or
collected when due in accordance with the terms and conditions hereof from any
account maintained by Borrower with Bank. Should there be insufficient funds in
any such account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower; provided, however,
that Bank shall not be obligated to advance funds to cover any such payment.
15. 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.
16. 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 the County of Santa
Xxxxx.
17. GENERAL PROVISIONS.
17.1 This Agreement shall be binding and deemed affective when executed by
Borrower and accepted and executed by Bank at its headquarters office.
17.2 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 participation 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.
17.3 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.
Unless the context of this Agreement clearly requires otherwise, references to
the plural include the singular, references to the singular include the plural,
and the term "including" is not limiting. The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
23
17.4 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.
17.5 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.
17.6 This Agreement cannot be changed or terminated orally. This Agreement
contains the entire agreement of the parties hereto and supersedes all prior
agreements, understandings, representations, warranties and negotiations, if
any, related to the subject matter hereof, and none of the parties shall be
bound by anything not expressed in writing.
17.7 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.
17.8 In addition, if this Agreement is secured by a deed of trust or
mortgage covering real property, then the trustor or mortgagor shall not
mortgage or pledge the mortgaged premises as security for any other Indebtedness
or obligations. This Agreement, together with all other indebtedness secured by
said deed of trust or mortgage, shall become due and payable immediately,
without, notice, at the option of Bank, (a) if said trustor or mortgagor shall
mortgage or pledge the mortgaged premises for any other Indebtedness or
obligations or shall convey, assign or transfer the mortgaged premises by deed,
installment sale contract or other instrument; (b) if the title to the mortgaged
premises shall become vested in any other person or party in any manner
whatsoever; or (c) if there is any disposition (through one or more
transactions) of legal or beneficial title to a controlling interest of said
trustor or mortgagor.
17.9 Each undersigned Borrower hereby agrees that it is jointly and
severally, directly, and primarily liable to Bank for payment and performance in
full of all duties, obligations and liabilities under this Agreement and each
other document, instrument and agreement entered into by Borrower with or in
favor of Bank in connection herewith, and that such liability is independent of
the duties, obligations and liabilities of any other Borrower or any other
guarantor of the Indebtedness, as applicable. Each reference herein to Borrower
shall mean each and every Borrower party hereto, individually and collectively,
jointly and severally.
17.10 This Agreement maybe executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Agreement,
together with each other document, instrument and agreement entered into with or
in favor of Bank in connection herewith or in connection with the Prior Loan
Agreement, to the extent any such document instrument or agreement is not
amended and restated in connection herewith, constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and, as
applicable amends and restates in full the Prior Loan Agreement and any other
agreement, written or oral, with respect thereto. Borrower ratifies and
reaffirms the continuing effectiveness of all promissory notes, guaranties,
security agreements, mortgages, deeds of trust, environmental agreements, and
all other instruments, documents and agreements entered into in connection with
the Prior Loan Agreement that are not amended and restated in connection with
this Agreement.
17.11 At any time at the request of Bank, Borrower shall execute and
deliver to bank security agreements, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and
Restated Loan and Security Agreement (Accounts and Inventory) to be executed as
of the date first hereinabove written.
24
Accepted and effective as of
3/25/03
-----------------------------
at Bank's Headquarters Office BORROWER:
COMERCIA BANK - CALIFORNIA FORMFACTOR, INC.
a California banking corporation a Delaware corporation
By: /s/ Xxxxxxxx Xxx By: /s/ Xxxx Xxxxxxxxx
------------------------- -----------------------------
Name: Xxxxxxxx Xxx Name: /s/ Xxxx Xxxxxxxxx
----------------------- -----------------------------
Title: Title: CFO
----------------------- -----------------------------
Address for Notices: By:
-----------------------------
00 Xxxx Xxxxxxx Xxxx Name:
Xxx Xxxx, Xxxxxxxxxx 00000 -----------------------------
Attn: Credit Manager Title:
Fax number (000) 000-0000 -----------------------------
With a copy to: Address for Notices:
0000 Xxxxx Xxxxxxxxxx Xxxx., Xxxxx 0000 0000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000-0000 Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx Xxx Attn: Xxxx Xxxxxxxxx
Fax number: (000) 000-0000 Fax number (000) 000-0000
25
Exhibit 2.3
FORM OF TERM NOTE
Exhibit 5.1
LOAN DOCUMENTS
1. LIBOR-Addendum to Third Amended and Restated Loan and Security
Agreement (Accounts and Inventory)
2. Variable Rate - Installment Note
3. LIBOR - Addendum to Variable Rate - Installment Note
4. Environmental Rider
5. Equipment Rider
6. Disbursement Authorization
7. Corporation Resolutions and Incumbency Certification -- Authority to
Procure Loans
8. Borrower's Telephone and Facsimile Authorization
9. Automatic Loan Payment Authorization
10. Landlord's Consents
