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LOAN AND SECURITY AGREEMENT
EXHIBIT 10.29
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LOAN AND SECURITY AGREEMENT
XIRCOM, INC. and
PRIMARY RATE, INC.
This Agreement is between the undersigned Borrower and the
undersigned Lender concerning loans and other credit accommodations to be made
by Lender to Borrower.
SECTION 1. PARTIES
1.1 The "Borrower" is the person, firm, corporation or
other entity identified as the Borrower in Section 10 and its successors and
assigns. If more than one Borrower is specified in Section 10, all references
to Borrower shall mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each.
1.2 The "Lender" is The CIT Group/Credit Finance, Inc.,
and its successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms
and conditions contained herein, make revolving loans to Borrower ("Revolving
Loans") in amounts requested by Borrower from time to time, but not in excess
of the Net Availability existing immediately prior to the making of the
requested Revolving Loan and provided the requested Revolving Loan would not
cause the outstanding Obligations to exceed the Maximum Credit.
(a) The "Maximum Credit" is set forth in Section
10.1(a) hereof.
(b) The "Gross Availability" shall be calculated
at any time as the sum of
(i) the product obtained by multiplying the
then-outstanding amount of Eligible Accounts, net of all
taxes, discounts, allowances and credits given or claimed, by
the Eligible Accounts Percentage set forth in Section 10.1(b),
subject to any applicable sublimit set forth in such Section,
plus: (ii) the product obtained by multiplying the applicable
Eligible Inventory Percentages, if any, set forth in Section
10.1(b) by the values (as determined by Lender based on the
lower of cost or market) of Eligible Inventory, but the amount
so added shall not exceed any sublimits set forth in Section
10.1(c),
minus: (iii) any Reserves.
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(c) The "Net Availability" shall be calculated at
any time as an amount equal to the Gross Availability minus the
aggregate amount of all then-outstanding Obligations of Borrower to
Lender.
(d) "Eligible Accounts" are accounts created by
Borrower in the ordinary course of its business which are and remain
acceptable to Lender for lending purposes. General criteria for
Eligible Accounts are set forth below but may be revised from time to
time by Lender, in its sole judgment, on thirty (30) days' prior
written notice to Borrower. Lender shall, in general, deem accounts
to be Eligible Accounts if: (1) such accounts arise from bona fide
completed transactions and have not remained unpaid for more than the
number of days after the invoice date set forth in Section 10.1(d);
(2) the amounts of the accounts reported to Lender are absolutely
owing to Borrower and do not arise from sales on consignment,
guaranteed sale or other terms under which payment by the account
debtors may be conditional or contingent (other than stock rotation or
stock balancing rights); (3) the account debtor's chief executive
office or principal place of business is located in the United States
or Canada or payment of the account is fully supported by a letter of
credit or insured by FCIA or Exim Bank (at Lender's option) and each
of which is assigned to Lender and in form and substance acceptable to
Lender; (4) such accounts do not arise from progress xxxxxxxx (except
as set forth in Section 10.1(b), consignments, retainages or xxxx and
hold sales (other than stock rotation or stock balancing rights); (5)
there are no contra relationships, setoffs, counterclaims or disputes
existing with respect thereto and, where Lender deems appropriate, it
is furnished with a non-offset letter in form and substance
satisfactory to Lender, and there are no other facts existing or
threatened which would impair or delay the collectability of all or
any portion thereof; (6) the goods giving rise thereto were not at the
time of the sale subject to any liens except those permitted in this
Agreement; (7) such accounts are not accounts with respect to which
the account debtor or any officer or employee thereof is an officer,
employee or agent of or is affiliated with Borrower, directly or
indirectly, whether by virtue of family membership, ownership,
control, management or otherwise; (8) such accounts are not accounts
with respect to which the account debtor is the United States or any
State or political subdivision thereof or any department, agency or
instrumentality of the United States, any State or political
subdivision, unless there has been compliance with the Assignment of
Claims Act or any similar State or local law, if applicable; (9)
Borrower has delivered to Lender or Lender's representative such
documents as Lender may have requested pursuant to Section 5.8 hereof
in connection with such accounts and Lender shall have received a
verification of such account, satisfactory to it, if sent to the
account debtor or any other obligor or any bailee pursuant to Section
5.4 hereof; (10) there are no facts, existing or threatened, which
might result in any adverse change in the account debtor's financial
condition; (11) such accounts owed by a single account debtor or its
affiliates do not represent more than twenty percent (20%) of all
otherwise Eligible Accounts, or in the case of Tech Data or Merisel,
do not represent more than thirty percent (30%) or, in the case of
Xxxxxx Micro, do not represent more than thirty-five percent (35%), of
all otherwise Eligible Accounts (provided that
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accounts excluded from Eligible Accounts solely by reason of this
subsection (11) shall nevertheless be considered Eligible Accounts to
the extent of the amount of such accounts which does not exceed the
applicable limit); (12) such accounts are not owed by an account
debtor whose accounts or whose affiliates' accounts greater than
ninety (90) days past invoice date comprise more than fifty percent
(50%) of the accounts of such account debtor or its affiliates owed to
Borrower; (13) such accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the amount of any customer
credit limits as established, and changed, from time to time by Lender
on 15 days' notice to Borrower (accounts excluded from Eligible
Accounts solely by reason of this subsection (13) shall nevertheless
be considered Eligible Accounts to the extent the amount of such
accounts does not exceed such customer credit limit); and (14) such
accounts are owed by account debtors deemed creditworthy at all times
by Lender.
(e) "Eligible Inventory" is inventory owned by
Borrower which is and remains acceptable to Lender for lending
purposes and is located at one of the addresses set forth in Section
10.6(d).
(f) Lender shall have a continuing right to
deduct reserves in determining the Gross Availability ("Reserves"),
and to increase and decrease such Reserves from time to time, if and
to the extent that, in Lender's reasonable credit judgment, such
Reserves are necessary to protect Lender against any state of facts
which does, or would, with notice or passage of time or both,
constitute an Event of Default or have an adverse effect on any
Collateral. Lender may, at its option, implement Reserves by
designating as ineligible a sufficient amount of accounts or inventory
which would otherwise be Eligible Accounts or Eligible Inventory so as
to reduce Gross Availability by the amount of the intended Reserve.
Without limiting the foregoing, Reserves shall be established for 100%
of the undrawn face amount of standby letters of credit and for 100%
of the undrawn face amount of Accommodations for the purchase of
Eligible Inventory minus the applicable advance rate percentage
multiplied by the cost of the inventory, plus duty and freight.
Additionally, should any of the top eleven account debtors as
referenced in Section 6.1 hereof be carrying more than 2 1/2 months of
inventory, Lender may create a Reserve for the inventory in excess of
a 2 1/2 month supply. The 2 1/2 month supply will be based on the
prior 3 months sales to the account debtor in question.
2.2 Intentionally Deleted
2.3 Accommodations.
(a) Subject to the terms and conditions contained
herein, Lender may, in its sole discretion, issue or cause to be
issued, from time to time at Borrower's request and on terms and
conditions and for purposes satisfactory to Lender, credit
accommodations consisting of letters of credit, bankers' acceptances,
merchandise
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purchase guaranties or other guaranties or indemnities for Borrower's
account (collectively, "Accommodations"). Borrower shall execute and
perform additional agreements relating to the Accommodations in form
and substance acceptable to Lender and the issuer of any
Accommodations, all of which shall supplement the rights and remedies
granted herein. Any payments made by Lender or any affiliate of
Lender in connection with the Accommodations shall constitute
additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any
issuer in connection with issuing or administering Accommodations,
Borrower shall pay monthly to Lender, on the first day of each month,
a charge on the face amount of all outstanding Accommodations computed
daily from the date of issuance until termination or payment, at the
rate set forth in Section 10.3(a) (the "Accommodation Charges").
(c) No Accommodation will be issued unless the
full amount of the Accommodation requested, plus fees and costs for
issuance, is less than the Net Availability existing immediately prior
to the issuance of the requested Accommodation, or if the requested
Accommodation would cause the sum of the outstanding Obligations to
exceed the Maximum Credit, or cause the sum of the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set
forth in Section 10.3(b).
(d) All indebtedness, liabilities and obligations
of any sort whatsoever, however arising, whether present or future,
fixed or contingent, secured or unsecured, due or to become due, paid
or incurred or otherwise arising in connection with any Accommodation
shall be included in the term "Obligations" as defined herein, and
shall include, without limitation, (i) all amounts due or which may
become due under any Accommodation; (ii) all amounts charged or
chargeable to Borrower or to Lender by any bank, other financial
institution or correspondent bank which opens, issues or is involved
with such Accommodations; (iii) Lender's Accommodation Charges and all
fees, costs and other charges of any issuer of any Accommodation; and
(iv) all duties, freight, taxes, costs, insurance and all such other
charges and expenses which may pertain directly or indirectly to any
Obligations or Accommodations or to the goods or documents relating
thereto.
(e) Borrower unconditionally agrees to indemnify
and hold Lender harmless from any and all loss, claim or liability
(including reasonable attorneys' fees) arising from any transactions
or occurrences relating to any Accommodation established or opened for
Borrower's account, the Collateral relating thereto and any drafts or
acceptance thereunder, including any such loss or claim due to any
action taken by an issuer of any Accommodation. Borrower further
agrees to indemnify and hold Lender harmless for any errors or
omissions in connection with the Accommodations, whether caused by
Lender, by the issuer of any Accommodation or otherwise. Borrower's
unconditional obligation to indemnify and hold Lender harmless under
this provision
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shall not be modified or diminished for any reason or in any manner
whatsoever, except for Lender's gross negligence or wilful misconduct.
Borrower agrees that any charges made to Lender by any issuer of any
Accommodation shall be conclusive on Borrower and may be charged to
Borrower's account.
(f) Lender shall not be responsible for the
conformity of any goods to the documents presented, the validity or
genuineness of any documents or delay, default, or fraud by the
Borrower or shipper and/or anyone else in connection with the
Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by
Lender, if taken in good faith, or any action taken by an issuer of
any Accommodation, under or in connection with any Accommodation,
shall be binding on Borrower and shall not create any resulting
liability to Lender, except in the case of gross negligence or wilful
misconduct. In furtherance thereof Lender shall, upon and during the
continuance of an Event of Default or if Lender is directly collecting
the accounts pursuant to Section 5.4, have the full right and
authority to clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or rejection of
any documents or goods; to execute for Borrower's account any and all
applications for steamship or airway guarantees, indemnitees or
delivery orders; to grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances, or
documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or
conditions of any of the applications or Accommodations. All of the
foregoing actions may be taken in Lender's sole name, and the issuer
thereof shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from Lender,
all without notice to or any consent from Borrower. None of the
foregoing actions described in this subsection 2.3 (g) may be taken by
Borrower after and during the continuance of an Event of Default or if
Lender is directly collecting the accounts, without Lender's express
written consent.
2.4 Obligations In Excess of Limitations. Lender may, in
the exercise of its reasonable credit judgment, make or permit Revolving Loans
and Accommodations or other Obligations in excess of the Maximum Credit, Gross
Availability or applicable sublimits. To the extent such excess is permitted
by Lender, all or any portion of such excess shall become due and payable upon
Lender's demand therefor. To the extent the aggregate amount of Revolving
Loans and Accommodations or other Obligations at any time exceeds, without the
consent of Lender, the Maximum Credit, Gross Availability or applicable
sublimits, all of such excess shall be immediately due and payable, upon
Lender's demand therefor.
SECTION 3. INTEREST AND FEES
3.1 Interest.
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(a) Interest on all Obligations shall be payable
by Borrower on the first day of each month, calculated upon the
closing daily outstanding principal balances in the loan account(s) of
Borrower for each day during the immediately preceding month, at the
per annum rate set forth as the Interest Rate in Section 10.4(a). The
Interest Rate shall increase or decrease by an amount equal to each
increase or decrease, respectively, in the Prime Rate (as defined
below), effective as of the date of each such change. On and after
any Event of Default or termination or non-renewal hereof, at Lender's
option, interest on all due and unpaid Obligations shall accrue at a
rate equal to two percent (2%) per annum in excess of the Interest
Rate otherwise payable until such time as all Obligations are
indefeasibly paid in full in immediately available funds
(notwithstanding entry of any judgment against Borrower or the
exercise of any other right or remedy by Lender), and all such
interest shall be payable on demand. Interest, including interest
charged upon the occurrence of an Event of Default, shall be
calculated on the basis of actual days elapsed over a 360-day year.
In no event shall charges constituting interest exceed the rate
permitted under any applicable law or regulation. However, if any
interest or other charges paid or payable in connection with this
Agreement are ever determined to exceed the maximum amount or rate
permitted by law, Borrower and Lender understand and agree that: (A)
the amount or rate of interest or other charges payable by Borrower
pursuant to this lending transaction shall be reduced to the maximum
amount permitted by law; and (B) any excess amount previously
collected from Borrower in connection with this lending transaction
which exceeded the maximum amount permitted by law will be credited
against the outstanding principal balance. If the outstanding
principal balance has already been paid, the excess amount paid will
be refunded to Borrower.
(b) The "Prime Rate" is the rate of interest
publicly announced by Chemical Bank (or its successor) in New York,
New York as its prime rate or similar such designation (such rate is
not intended to be the lowest rate of interest charged by such bank to
its borrowers).
3.2 Facility Fee. Borrower shall pay Lender on each
anniversary of the date hereof during any Term of this Agreement, a Facility
Fee in the amount set forth in Section 10.4(b), which fee shall be fully earned
and payable as of each anniversary, if any, hereof during any Term of this
Agreement.
3.3 Closing Fee. Borrower shall pay Lender on the date
hereof a Closing Fee in the amount set forth in Section 10.4(c), which fee is
fully earned as of the date hereof.
3.4 Unused Line Fee. Borrower shall pay Lender on the
first day of each month, in arrears, during the initial and any renewal term an
Unused Line Fee at the rate set forth in Section 10.4(d), calculated on the
amount, if any, by which the Maximum Credit exceeds the average outstanding
principal balance of all Revolving Loans and Accommodations made to Borrower
for the preceding month.
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3.5 Charges to Loan Account. At Lender's option, all
payments of principal, interest, fees, costs, expenses and other charges
provided for in this Agreement, or in any other agreement now or hereafter
existing between Lender and Borrower, may be charged on the date when due as
principal to any loan account of Borrower maintained by Lender, and shall
thereafter bear interest at the rate and payable in the manner provided herein
for the accrual and payment of interest on outstanding Obligations. No portion
of any fees or charges payable by Borrower hereunder shall be refundable for
any reason including, without limitation, termination of this Agreement.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment
and performance in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of setoff against,
and Borrower hereby assigns and pledges to Lender, all of the Collateral,
including any Collateral not deemed eligible for lending purposes.
4.2 Obligations. "Obligations" shall mean any and all
Revolving Loans, Accommodations and all other indebtedness, liabilities and
obligations of every kind, nature and description owing by Borrower to Lender,
including principal, interest, charges, fees and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal Term or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute, whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, original, renewed or extended
and whether arising directly or howsoever acquired by Lender including from any
other entity outright, conditionally or as collateral security, by assignment,
merger with any other entity, participations or interests of Lender in the
obligations of Borrower to others, assumption, operation of law, subrogation or
otherwise and shall also include all amounts chargeable to Borrower under this
Agreement or in connection with any of the foregoing.
4.3 Collateral. "Collateral" shall mean all of the
following property of Borrower:
(a) All now owned and hereafter acquired right,
title and interest of Borrower in, to and in respect of all: accounts,
including without limitation all interests in goods represented by
accounts, returned, reclaimed or repossessed goods with respect
thereto and rights as an unpaid vendor; chattel paper; general
intangibles (including, but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade
secrets, goodwill, processes, drawings, blueprints, customer lists,
license agreements and licenses, whether as licensor or licensee,
computer software programs and systems, choses in action and other
claims, and existing and
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future leasehold interests in equipment, real estate and fixtures);
documents; instruments; letters of credit, bankers' acceptances or
guaranties; cash monies, deposits, securities, bank accounts, deposit
accounts, credits and other property now or hereafter held in any
capacity by Lender, its affiliates or any entity which, at any time,
participates in Lender's financing of Borrower or at any other
depository or other institution; and agreements or property securing
or relating to any of the items referred to above;
(b) All now owned and hereafter acquired right,
title and interest of Borrower in, to and in respect of goods,
including, but not limited to:
(i) All inventory, wherever located,
whether now owned or hereafter acquired, of whatever kind,
nature or description, including all raw materials,
work-in-process, finished goods and materials to be used or
consumed in Borrower's business; and all names or marks
affixed to or to be affixed thereto for purposes of selling
same by the seller, manufacturer, lessor or licensor thereof;
(ii) All equipment and fixtures, wherever
located, whether now owned or hereafter acquired, including,
without limitation, all machinery, equipment, motor vehicles,
furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts) and
accessions thereof and thereto;
(iii) All consumer goods, farm products,
crops, timber, minerals or the like (including oil and gas),
wherever located, whether now owned or hereafter acquired, of
whatever kind, nature or description;
(c) All now owned and hereafter acquired right,
title and interest of Borrower in, to and in respect of any other
personal property or any fixtures in or upon which Lender has or may
hereafter have a security interest, lien or right of setoff;
(d) All present and future books and records
relating to any of the above, including, without limitation, all
computer programs, printed output and computer readable data, in any
media, in the possession or control of the Borrower, any computer
service bureau or other third party;
(e) All notes, security interests and deeds of
trust or mortgages in favor of Borrower; and
(f) All products and proceeds of the foregoing in
whatever form and wherever located, including, without limitation, all
insurance proceeds and all claims against third parties for loss or
destruction of or damage to any of the foregoing.
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SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower shall, at Borrower's expense
and in the manner requested by Lender from time to time, direct that
remittances and all other proceeds of accounts and other Collateral shall be
sent to a lock box designated by and/or maintained in the name of Lender, and
deposited into a bank account maintained in the name of Lender under
arrangements with the depository bank under which all funds deposited to such
bank account are required to be transferred solely to Lender. Borrower shall
bear all risk of loss of any funds deposited into such account. In connection
therewith, Borrower shall execute such lock box and bank account agreements as
Lender shall specify. Any collections or other proceeds received by Borrower
shall be held in trust for Lender and immediately remitted to Lender, in kind.
5.2 Payments. All Obligations shall be payable at
Lender's office set forth below or at Bank of America, NT & SA, in Los Angeles,
California, or such substitute bank as Lender may determine ("Lender's Bank")
or such other place as Lender may designate from time to time. For purposes of
determining Gross and Net Availability, remittances and other payments with
respect to the Collateral and Obligations will be treated as credited to the
loan account of Borrower maintained by Lender and Collateral balances to which
they relate, upon the date of Lender's receipt of advice from Lender's Bank
that such remittances or other payments have been credited to Lender's account
or in the case of remittances or other payments, received directly in kind by
Lender, upon the date of Lender's deposit thereof at Lender's Bank, subject to
final payment and collection. In computing interest charges, the loan account
of Borrower maintained by Lender will be credited with remittances and other
payments two (2) Business Days after Lender has received advice of receipt of
remittances in Lender's account at Lender's Bank. For purposes of this
Agreement, "Business Day" shall mean any day other than a Saturday, Sunday or
any other day on which either Lender or banks located in Los Angeles,
California, or New York, New York are authorized to close.
5.3 Loan Account Statements. Lender shall deliver to
Borrower monthly a loan account statement. Each statement shall be considered
correct and binding upon Borrower as an account stated, except to the extent
that Lender receives, within sixty (60) days after the mailing of such
statement, written notice from Borrower of any specific exceptions by Borrower
to that statement.
5.4 Direct Collections. Lender may, at any time, whether
or not an Event of Default has occurred, without notice to or consent of
Borrower, in Lender's reasonable credit judgment, (a) notify any account debtor
that the accounts and other Collateral which includes a monetary obligation
have been assigned to Lender by Borrower and that payment thereof is to be made
to the order of and directly to Lender; (b) send, or cause to be sent by its
designee, requests (which may identify the sender by a pseudonym) for
verification of accounts and other Collateral directly to any account debtor or
any other obligor or any bailee with respect thereto; and (c) demand, collect
or enforce payment of any accounts or such other
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Collateral, but without any duty to do so, and Lender shall not be liable for
any failure to collect or enforce payment thereof. At Lender's reasonable
request, all invoices and statements sent to any account debtor, other obligor
or bailee, shall state that the accounts and such other Collateral have been
assigned to Lender and are payable directly and only to Lender.
5.5 Attorney-in-Fact. Borrower hereby appoints Lender
and any designee of Lender as Borrower's attorney-in-fact and authorizes Lender
or such designee, at Borrower's sole expense, to exercise at any time in
Lender's or such designee's discretion all or any of the following powers,
which powers of attorney, being coupled with an interest, shall be irrevocable
until all Obligations have been paid in full: (a) receive, take, endorse,
assign, deliver, accept and deposit, in the name of Lender or Borrower, any and
all cash, checks, commercial paper, drafts, remittances and other instruments
and documents relating to the Collateral or the proceeds thereof; (b) transmit
to account debtors, other obligors or any bailee's notice of the interest of
Lender in the Collateral or request from account debtors or such other obligors
or bailees at any time, in the name of Borrower or Lender or any designee of
Lender, information concerning the Collateral and any amounts owing with
respect thereto; (c) notify account debtors or other obligors to make payment
directly to Lender, or notify bailees as to the disposition of Collateral; (d)
take or bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral; (e) after and during
the continuance of an Event of Default change the address for delivery of mail
to Borrower and to receive and open mail addressed to Borrower; (f) after and
during the continuance of an Event of Default, extend the time of payment of,
compromise or settle for cash, credit, return of merchandise, and upon any
terms or conditions, any and all accounts or other Collateral which includes a
monetary obligation and discharge or release the account debtor or other
obligor, without affecting any of the Obligations; and (g) execute in the name
of Borrower and file against Borrower in favor of Lender financing statements
or amendments with respect to the Collateral.
5.6 Liability. Borrower hereby releases and exculpates
Lender, its officers, employees and designees, from any liability arising from
any acts under this Agreement or in furtherance thereof, whether as
attorney-in-fact or otherwise, whether of omission or commission, and whether
based upon any error of judgment or mistake of law or fact, except for gross
negligence or wilful misconduct. In no event will Lender have any liability to
Borrower for lost profits or other special or consequential damages.
5.7 Administration of Accounts. After written notice by
Lender to Borrower prior to an Event of Default and automatically, without
notice, after an Event of Default, Borrower shall not, without the prior
written consent of Lender in each instance, which consent shall not be
unreasonably withheld, (a) grant any extension of time of payment of any of the
accounts or any other Collateral which includes a monetary obligation; (b)
compromise or settle any of the accounts or any such other Collateral for less
than the full amount thereof; (c) release in whole or in part any account
debtor or other person liable for the payment of any
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of the accounts or any such other Collateral; or (d) grant any credits,
discounts, allowances, deductions, return authorizations or the like with
respect to any of the accounts or any such other Collateral.
5.8 Documents. At such times as Lender may reasonably
request and in the manner reasonably specified by Lender, Borrower shall
deliver to Lender or Lender's representative, as Lender shall designate, copies
or originals of invoices, agreements, proofs of rendition of services and
delivery of goods and other documents evidencing or relating to the
transactions which gave rise to accounts or other Collateral, together with
customer statements, schedules describing the accounts or other Collateral
and/or statements of account and confirmatory assignments to Lender of the
accounts or other Collateral, in form and substance satisfactory to Lender and
duly executed by Borrower. Without limiting the provisions of Section 5.7,
Borrower's issuance of credits, discounts, allowances, deductions, return
authorizations or the like will promptly be reported to Lender in writing;
provided that Borrower further agrees to issue the foregoing in a timely and
prompt manner and to advise Lender of the granting of any credits (whether or
not issued) arising or in an amount outside the ordinary course of business of
Borrower as presently conducted or not customary in Borrower's ordinary
business practice. In no event shall any such schedule or confirmatory
assignment (or the absence thereof or omission of any of the accounts or other
Collateral therefrom) limit or in any way be construed as a waiver, limitation
or modification of the security interests or rights of Lender or the
warranties, representations and covenants of Borrower under this Agreement.
Any documents, schedules, invoices or other paper delivered to Lender by
Borrower may be destroyed or otherwise disposed of by Lender six (6) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return, at its expense.
5.9 Access. From time to time as reasonably requested by
Lender, at the sole expense of Borrower (but subject to Section 6.13(d), Lender
or its designee shall have complete access to all of the premises where
Collateral is located for the purposes of inspecting the Collateral, including
Borrower's books and records, and Borrower shall permit Lender or its designee
to make such copies of such books and records or extracts therefrom as Lender
may request. Without expense to Lender, Lender may use such of Borrower's
personnel, equipment, including computer equipment, programs, printed output
and computer readable media, supplies and premises as Lender shall request for
the collection of accounts and realization on other Collateral. Borrower
hereby irrevocably authorizes all accountants and third parties, with the
exception of Borrower's attorneys with respect to information for which a
privilege is asserted, to disclose and deliver to Lender at Borrower's expense
all financial information, books and records, work papers, management reports
and other information in their possession regarding Borrower.
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5.10 Environmental Audits. From time to time, as
reasonably requested by Lender, at the sole expense of Borrower, Borrower shall
provide Lender, or its designee, complete access to all of Borrower's
facilities for the purpose of conducting an environmental audit of such
facilities as Lender or its designees may deem necessary. Borrower agrees to
cooperate with Lender with respect to any environmental audit conducted by
Lender or its designee pursuant to this Section 5.10.
5.11 Primary Rate. Xircom, Inc. and Primary Rate, Inc.
have jointly informed Lender that all accounts and inventory are initially
recorded on the books of Xircom, Inc. even though some of the accounts and
inventory belong to Primary Rate, Inc. Once each fiscal quarter, Xircom, Inc.
reflects the assets of Primary Rate, Inc. by shifting certain accounts on
Xircom, Inc.'s books and records and inventory to Primary Rate, Inc. In
addition to the foregoing, Lender is informed by Xircom, Inc. and Primary Rate,
Inc. that Xircom, Inc. pays the accounts payable and other obligations of
Primary Rate, Inc. Therefore, Lender's advances to Xircom, Inc. will be used,
in part, to pay the liabilities of Primary Rate, Inc. In connection with the
foregoing, Borrower agrees as follows:
(a) At the end of each fiscal quarter, Xircom,
Inc. will report to Lender in writing any reallocation of accounts or
inventory to Primary Rate, Inc. Lender reserves the right to
reallocate its loans to Primary Rate, Inc. based on such information.
(b) At the end of each fiscal quarter, Xircom,
Inc. will report to Lender in writing the amount of liabilities of
Primary Rate, Inc. paid by Xircom, Inc. during such fiscal quarter.
(c) Subject to Lender's right to reallocate loans
pursuant to Section 5.11(a), Borrower directs Lender to make all
advances to Xircom, Inc.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender
the following, the truth and accuracy of which, and compliance with which,
shall be continuing conditions of the making of loans or other credit
accommodations by Lender to Borrower:
6.1 Financial and Other Reports. Borrower shall keep and
maintain its books and records in a manner sufficient to permit the preparation
of financial statements, in accordance with generally accepted accounting
principles, consistently applied. Borrower shall, at its sole expense, deliver
to Lender (a) weekly, on or before Tuesday of each week, accurate and complete
perpetual inventory reports; (b) monthly, on or before the tenth (10th) day of
each month, accurate and complete accounts receivable and accounts and notes
payable agings and a monthly inventory report; (c) monthly, on or before the
twentieth (20th) day of
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each month, internally prepared interim financial statements and the "Top 11
Report" with supporting schedules for each of the top eleven account debtors
measured by volume of sales; (d) annually, as soon as available, but in no
event later than ninety (90) days after the end of Borrower's fiscal year,
audited financial statements of Borrower accompanied by the report and opinion
thereon of independent certified public accountants acceptable to Lender; and
(e) with such frequency as Lender shall reasonably request, cash flow
projections in a form reasonably acceptable to Lender. All of the foregoing
shall be in such form and together with such information with respect to the
business of Borrower or any guarantor, as Lender may in each case request.
Borrower shall also provide Lender, upon Lender's request, with accurate and
complete copies of any reports, forms or other documents prepared or delivered
by Borrower to any agency or authority pursuant to the requirements of any
governmental statutes, regulations or ordinances and, without the necessity of
Lender's request, copies of all filings with the Securities and Exchange
Commission.
6.2 Trade Names. Borrower may from time to time render
invoices to account debtors under its trade name(s) set forth in Section
10.6(f) after Lender has received prior written notice from Borrower of the use
of such trade name(s) and as to which, Borrower agrees that: (a) such trade
name does not refer to another corporation or other legal entity; (b) all
accounts and proceeds thereof (including any returned merchandise) invoiced
under any such trade names are owned exclusively by Borrower and are subject to
the security interest of Lender and the other terms of this Agreement; and (c)
all schedules of accounts and confirmatory assignments including any sales made
or services rendered using the trade name shall show Borrower's name as
assignor and Lender is authorized to receive, endorse and deposit to any loan
account of Borrower maintained by Lender all checks or other remittances made
payable to any trade name of Borrower representing payment with respect to such
sales or services.
6.3 Losses. Borrower shall promptly notify Lender in
writing of any loss, damage, investigation, action, suit, proceeding or claim
relating to a material portion of the Collateral or which may result in any
material adverse change in Borrower's business, assets, liabilities or
condition, financial or otherwise.
6.4 Books and Records. Borrower's books and records
concerning accounts and its chief executive office are and shall be maintained
only at the address set forth in Section 10.6(c). Borrower's only other places
of business and the only other locations of Collateral having an aggregate
value in excess of $50,000, if any, are and shall be the addresses set forth in
Sections 10.6(d) and 10.6(e) hereof, provided that Borrower may change such
locations or open a new place of business upon thirty (30) days' prior written
notice to Lender; provided that Borrower shall not be required to give any such
notice with respect to a location at which Collateral with a value of less than
$50,000 in the aggregate will be located. Prior to any change in location or
opening of any new place of business, Borrower shall execute and deliver or
cause to be executed and delivered to Lender such financing statements,
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financing documents and security and other agreements as Lender may reasonably
require, including, without limitation, those described in Section 6.14.
6.5 Title. Borrower has and at all times will continue
to have good and marketable title, free from defects, to all of the Collateral,
free and clear of all liens, security interests, claims or encumbrances of any
kind except in favor of Lender and except, if any, those set forth on Schedule
A hereto.
6.6 Disposition of Assets. Borrower shall not directly
or indirectly: (a) sell, lease, transfer, assign, abandon or otherwise dispose
of (each a "Transfer") any part of the Collateral or any material portion of
its other assets, other than (i) Transfers consisting of sales of inventory to
buyers in the ordinary course of business, (ii) Transfers consisting of sales
of worn-out or obsolete equipment in the ordinary course of business, (iii)
Transfers consisting of the disposal of furniture in connection with the
leasing of Borrower's previous headquarters facility, (iv) Transfers of
non-exclusive licenses and similar arrangements for the use of proprietary
rights of Borrower; (v) Transfers which constitute liquidation of cash
equivalent investments; (vi) Transfers from Borrower to its subsidiaries which
are permitted under Section 6.12 hereof, and (vii) other Transfers not
otherwise permitted by this Section 6.6 not exceeding $1,000,000 in the
aggregate in any fiscal year if written notice is given to Lender and the
proceeds are remitted to Lender in kind to Lender's lock box; or (b)
consolidate with or merge with or into any other entity, or permit any other
entity to consolidate with or merge with or into Borrower (except that any
existing subsidiary of Borrower may merge with and into Borrower so long as
Borrower is the surviving corporation); or (c) form or acquire any interest in
any firm, corporation or other entity.
6.7 Insurance. Borrower shall at all times maintain,
with financially sound and reputable insurers, casualty insurance with respect
to the Collateral and other assets. All such insurance policies shall be in
such form, substance, amounts and coverage as may be satisfactory to Lender and
shall provide for thirty (30) days' prior written notice to Lender of
cancellation or reduction of coverage. Borrower hereby irrevocably appoints
Lender and any designee of Lender as attorney-in-fact for Borrower to obtain
such insurance at Borrower's expense, if Borrower does not do so, and, after an
Event of Default, to adjust or settle any claim or other matter under or
arising pursuant to such insurance or to amend or replace such insurance.
Borrower shall deliver to Lender evidence of such insurance and a lender's loss
payable endorsement satisfactory to Lender as to all existing and future
insurance policies with respect to the Collateral. Borrower shall deliver to
Lender, in kind, all instruments representing proceeds of insurance received by
Borrower. Lender may apply any insurance proceeds received at any time to the
cost of repairs to or replacement of any portion of the Collateral and/or, at
Lender's option, to payment of or as security for any of the Obligations,
whether or not due, in any order or manner as Lender determines; provided,
however, that so long as no Event of Default has occurred and is continuing and
the loss is under $500,000, Lender shall disburse the proceeds of insurance for
casualty losses to Borrower to replace or repair the damaged or destroyed
items.
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6.8 Compliance With Laws. Borrower is and at all times
will continue to be in compliance with the requirements of all material laws,
rules, regulations and orders of any governmental authority relating to its
business (including laws, rules, regulations and orders relating to taxes,
payment and withholding of payroll taxes, employer and employee contributions
and similar items, securities, employee retirement and welfare benefits,
employee health and safety or environmental matters) and all material
agreements or other instruments binding on Borrower or its property. All of
Borrower's inventory shall be produced in accordance with the requirements of
the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders related thereto. Borrower shall pay and discharge all
taxes, assessments and governmental charges against Borrower or any Collateral
prior to the date on which penalties are imposed or liens attach with respect
thereto, unless the same are being contested in good faith and, at Lender's
option in the exercise of Lender's reasonable credit judgment. Reserves are
established for the amount contested and penalties which may accrue thereon.
6.9 Accounts. With respect to each account deemed an
Eligible Account, except as reported in writing to Lender, Borrower has no
knowledge that any of the criteria for eligibility are not or are no longer
satisfied. As to each account, except as disclosed in writing to Lender prior
to or at the time such account arises (a) each is valid and legally enforceable
and represents an undisputed bona fide indebtedness incurred by the account
debtor for the sum reported to Lender; (b) each arises from an absolute and
unconditional sale of goods, without any right of return or consignment (except
for stock rotation or stock balancing rights), or from a completed rendition of
services; (c) each is not, at the time such account arises, subject to any
defense, offset, dispute, contra relationship, counterclaim, or any given or
claimed credit, allowance or discount, except as specified on the invoice; and
(d) all statements made and all unpaid balances and other information appearing
in the invoices, agreements, proofs of rendition of services and delivery of
goods and other documentation relating to the accounts, and all confirmatory
assignments, schedules, statements of account and books and records with
respect thereto, are true and correct and in all respects what they purport to
be; provided, that so long as Borrower promptly notifies Lender after
Borrower's knowledge thereof that an account no longer meets the criteria set
forth in the foregoing representations and warranties and the account is
removed from Borrower's Gross Availability, no Event of Default shall rise from
the falsity of these representations and warranties.
6.10 Equipment. With respect to Borrower's equipment,
Borrower shall keep the equipment in good order and repair, and in running and
marketable condition, except for obsolete or worn out equipment replaced in the
ordinary course of business.
6.11 Intentionally Deleted.
6.12 Affiliate Transactions. Borrower will not, directly
or indirectly: (a) lend or advance money or property to, guarantee or assume
indebtedness of, or invest (by capital contribution or otherwise) in any
person, firm, corporation or other entity (except for (i) advances in the
ordinary course of business to suppliers in respect of the purchase of
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supplies or equipment, (ii) endorsement of negotiable instruments for deposit
or collection in the ordinary course of business, (iii) investments in
obligations of the United States Government, deposit accounts, certificates of
deposit, commercial paper, money market funds or other permitted by Borrower's
investment policy which has been approved by the Board of Directors of Borrower
and Lender (which consent shall not be unreasonably withheld), (iv) investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of business, (v) extensions of credit which arise as a result
of sales by Borrower to its subsidiaries to the extent that the sales do not
result in loans in excess of Gross Availability or any applicable sublimits,
(vi) investments in Primary Rate, Inc. and investments in other subsidiaries,
and (vii) other investments aggregating not in excess of $1,000,000 in any
fiscal year of Borrower; or (b) declare, pay or make any dividend or other
distribution on account of any shares of any class of stock of Borrower now or
hereafter outstanding except, if Borrower is an "S corporation" as defined in
the Internal Revenue Code of 1986, as amended, for dividends to shareholders in
an amount equal to their state and federal tax liabilities associated with such
status from time to time; or (c) except as set forth in any subordination
agreement between Lender and the applicable party or as otherwise permitted
herein, make any payment of the principal amount of or interest on any
indebtedness owing to any officer, director, shareholder or affiliate
(excluding any subsidiary) of Borrower; or (d) make any loans or advances to
any officer, director, employee, shareholder or affiliate of Borrower other
than travel and other advances and relocation and similar loans in the ordinary
course of business or any other loans not in the ordinary course of business in
an aggregate amount not to exceed $500,000 in any fiscal year of Borrower; or
(e) enter into any sale, lease or other transaction with any officer, director,
employee, shareholder or affiliate of Borrower on terms that are less favorable
to Borrower than those which might be obtained at the time from persons who are
not an officer, director, employee, shareholder or affiliate of Borrower (other
than loans to employees at below market interest rates which are otherwise
permitted under this Section 6.12).
6.13 Fees and Expenses. Borrower shall pay, on Lender's
demand, all costs, expenses, fees, filing fees and taxes payable in connection
with the preparation, execution, delivery, recording, administration (including
Lender's standard wire transfer and returned check fees as Lender shall, from
time to time, advise Borrower), collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this Agreement
and all other existing and future agreements or documents contemplated herein
or related hereto, including any amendments, waivers, supplements or consents
which may hereafter be made or entered into in respect hereof, or in any way
involving claims by or against Lender directly or indirectly arising out of or
related to the relationship between Borrower and Lender or any guarantor and
Lender, including, but not limited to, the following, whether incurred before,
during or after the initial or any renewal Term or after the commencement of
any case with respect to Borrower or any guarantor under the United States
Bankruptcy Code or any similar statute: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all title insurance and other
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insurance premiums, appraisal fees, search fees and fees incurred in connection
with any environmental report, audit, survey, or remediation; (c) all fees as
then in effect relating to the wire transfer of loan proceeds and all other
funds and fees then in effect for returned checks and credit reports; (d) all
expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic, field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the then prevailing rate
(currently $650.00 per person per day, not to exceed $16,000 per year so long
as there is no Event of Default) for Lender's examiners in the field and
office; and (e) the reasonable costs, fees and disbursements of in-house and
outside counsel to Lender, including but not limited to such fees and
disbursements incurred as a result of litigation between the parties hereto,
any third party and in any appeals arising therefrom.
6.14 Further Assurances. At the request of Lender, at any
time and from time to time, at Borrower's sole expense, Borrower shall execute
and deliver or cause to be executed and delivered to Lender, such agreements,
documents and instruments, including waivers, consents and subordination
agreements from landlords, bailees, mortgagees or other holders of property of
Borrower or of loans due from Borrower or security interests or liens in the
Collateral, and do or cause to be done such further acts as Lender, in its
discretion, reasonably exercised, deems necessary or desirable to create,
preserve, perfect or validate any security interest of Lender or the priority
thereof in the Collateral and otherwise to effectuate the provisions and
purposes of this Agreement. Borrower hereby authorizes Lender to file
financing statements or amendments against Borrower in favor of Lender with
respect to the Collateral, without Borrower's signature and to file as
financing statements any carbon, photographic or other reproductions of this
Agreement or any financing statements signed by Borrower.
6.15 Inventory. At Borrower's expense (but no more often
than twice per year while no Event of Default is outstanding), Lender may
conduct appraisals of Borrower's inventory from time to time. If the
outstanding loan against Eligible Inventory exceeds 70% of the appraised
liquidation value of the Eligible Inventory, Borrower will pay the difference
thereof to Lender in three equal monthly installments.
6.16 Environmental Condition. None of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower. Borrower has not received a summons, citation,
notice, or directive from the Environmental Protection Agency or any other
federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment. Borrower is in compliance in all
material respects with all statutes, regulations, ordinances and other legal
requirements pertaining to the production, storage, handling, treatment,
release, transportation or disposal of any hazardous waste or hazardous
substance.
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SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be
immediately due and payable, without notice or demand, and any provisions of
this Agreement as to future loans and credit accommodations by Lender shall
terminate automatically, upon the termination or non-renewal of this Agreement
or, at Lender's option, upon or at any time after the occurrence or existence
of any one or more of the following (each, an "Event of Default"):
(a) Borrower fails to pay when due any of the
Obligations;
(b) Borrower fails to perform, keep or observe
any covenant contained in Sections 6.1(a) or 6.1(b) within three (3)
Business Days, or in Sections 6.1(c), 6.1(d), 6.1(e), 6.3, 6.5, 6.7 or
6.8 within five (5) Business Days, in each case of the date that
Borrower is required to perform, keep or observe such
covenant;provided that such 3 and 5 Business Day cure periods, as
applicable, shall only be available to Borrower twice in any fiscal
year with respect to each covenant;
(c) Any representation, warranty or statement of
fact made by Borrower to Lender in this Agreement or any other
agreement, schedule, confirmatory assignment or otherwise, or to any
affiliate of Lender, shall prove inaccurate or misleading in any
material respect;
(d) Any guarantor or subordinated creditor of
Borrower revokes, terminates or fails to perform any of the material
terms of any guaranty, endorsement, subordination agreement or other
agreement of such party with or in favor of Lender or any affiliate of
Lender;
(e) Any judgment(s) in excess of $500,000 in the
aggregate or any injunction or attachment is obtained against Borrower
or any guarantor and is either enforced or remains unstayed for a
period of fifteen (15) days;
(f) Any guarantor which is a natural person dies,
or Borrower or any guarantor which is a partnership or corporation is
dissolved, or Borrower or any guarantor which is a corporation fails
to maintain its corporate existence in good standing, or the usual
business of Borrower or any guarantor ceases or is suspended;
(g) Borrower or any guarantor becomes insolvent,
makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a general meeting of its creditors
or principal creditors;
(h) Any petition or application for any relief
under the bankruptcy laws of the United States now or hereafter in
effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity)
is
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filed by or against Borrower or any guarantor and in the case of an
involuntary petition in bankruptcy, is not dismissed within thirty
(30) days from the date of the filing thereof;
(i) Any indictment of Borrower or any guarantor
occurs under any criminal statute, or criminal or civil proceedings
are commenced or threatened against Borrower or any guarantor,
pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any material portion of the
property of Borrower or any guarantor;
(j) Borrower shall enter into any business other
than that in which it is engaged as of the date hereof or businesses
related or incidental thereto; or
(k) Any default or event of default occurs on the
part of Borrower under any agreement, document or instrument to which
Borrower is a party or by which Borrower or any of its property is
bound, creating or relating to any indebtedness of Borrower to any
person or entity other than Lender in a principal amount exceeding
$250,000, if the effect of such default is to accelerate, or to permit
the acceleration of, the maturity of all or any part of such
indebtedness, or all or any part of any such indebtedness shall be
declared to be due and payable or required to be prepaid for any other
reason, in either event prior to the stated maturity thereof.
7.2 Remedies. Upon the occurrence of an Event of Default
and at any time thereafter, Lender shall have all the default rights and
remedies provided in this Agreement, any other agreements between Borrower and
Lender, the Uniform Commercial Code or other applicable law, all of which
rights and remedies may be exercised without notice to Borrower, all such
notices being hereby waived, except such notice as is expressly provided for
hereunder or is not waivable under applicable law. All rights and remedies of
Lender are cumulative and not exclusive and are enforceable, in Lender's
discretion, alternatively, successively or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the
foregoing, Lender may (a) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender; (b) with or without judicial process or
the aid or assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral;
(c) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender; (d) collect, foreclose, receive, appropriate, set off and realize upon
any and all Collateral; (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations; and (f) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for
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cash, upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5) days' prior notice by
Lender to Borrower designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral
is to be made shall be deemed to be reasonable notice thereof and Borrower
waives any other notice. If Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
Borrower waives the posting of any bond which might otherwise be required.
7.3 Application of Proceeds. Lender may apply the cash
proceeds of Collateral actually received by Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of any of the
Obligations, in whole or in part (including reasonable attorneys' fees and
legal expenses incurred by Lender with respect thereto or otherwise chargeable
to Borrower) and in such order as Lender may elect, whether or not then due.
Borrower shall remain liable to Lender for the payment of any deficiency
together with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including reasonable attorneys' fees
and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default.
Lender may, at its option, cure any default by Borrower under any agreement
with a third party or pay or bond on appeal any judgment entered against
Borrower, discharge taxes, liens, security interests or other encumbrances at
any time levied on or existing with respect to the Collateral and pay any
amount, incur any expense or perform any act which, in Lender's sole judgment,
is necessary or appropriate to preserve, protect, insure, maintain or realize
upon the Collateral. Lender may charge Borrower's loan account for any amounts
so expended, such amounts to be repayable by Borrower on demand. Lender shall
be under no obligation to effect such cure, payment, bonding or discharge, and
shall not, by doing so, be deemed to have assumed any obligation or liability
of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 Jury Trial Waiver. BORROWER AND LENDER EACH WAIVE
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF
THEM AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR
LENDER, OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
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8.2 Counterclaims. Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any kind, nature
or description in any action or proceeding instituted by Lender with respect to
this Agreement, the Obligations, the Collateral or any matter arising therefrom
or relating thereto, except compulsory counterclaims.
8.3 Jurisdiction. Borrower hereby irrevocably submits
and consents to the non-exclusive jurisdiction of the State and Federal Courts
located in the State of California and any other State where any Collateral is
located, with respect to any action or proceeding arising out of this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating thereto. In any such action or proceeding, Borrower waives personal
service of the summons and complaint or other process and papers therein and
agrees that the service thereof may be made by mail directed to Borrower at its
chief executive office set forth herein or other address thereof of which
Lender has received notice as provided herein or as otherwise permitted by law,
service to be deemed complete five (5) days after mailing return receipt
requested, or as permitted under the rules of either of said Courts. Any such
action or proceeding commenced by Borrower against Lender will be litigated
only in a federal court located in the Central District of California, or a
state court in the County of Los Angeles, California.
8.4 No Waiver by Lender. Lender shall not, by any act,
delay, omission or otherwise be deemed to have expressly or impliedly waived
any of its rights or remedies unless such waiver shall be in writing and signed
by an authorized officer of Lender. A waiver by Lender of any right or remedy
on any one occasion shall not be construed as a bar to or waiver of any such
right or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective
upon execution and delivery by Borrower and Lender and shall continue in full
force and effect for a term of one (1) year from the date hereof and shall be
deemed automatically renewed for successive terms of one (1) year thereafter
unless terminated as of the end of the initial or any renewal term (each a
"Term") by either party giving the other written notice at least sixty (60)
days prior to the end of the then-current Term.
9.2 Early Termination. Borrower may also terminate this
Agreement by giving Lender at least thirty (30) days' prior written notice at
any time upon payment in full of all of the Obligations as provided herein,
including the early termination fee provided below. Lender shall also have the
right to terminate this Agreement at any time upon or after the occurrence and
during the continuance of an Event of Default. If Lender terminates this
Agreement upon or after the occurrence of an Event of Default, or if Borrower
shall terminate this Agreement as permitted herein effective prior to the end
of the Initial Term, in addition to all other Obligations, Borrower shall pay
to Lender, upon the effective date of termination, in
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view of the impracticality and extreme difficulty of ascertaining actual
damages, an early termination fee equal to 3% of the Maximum Credit.
9.3 Additional Cash Collateral. Upon any termination of
this Agreement by Borrower as permitted herein, in addition to payment of all
Obligations which are not contingent, Borrower shall deposit such amount of
cash collateral as Lender reasonably determines is necessary to secure Lender
from loss, cost, damage or expense, including reasonable attorneys' fees, in
connection with any open Accommodations or remittance items or other payments
provisionally credited to the Obligations or with respect to which Lender has
not yet received final and indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices,
requests and demands hereunder shall be (a) made to Lender at its address set
forth in Section 10.6(a) and to Borrower to the attention of Vice President
Finance with a copy to General Counsel, at its chief executive office set forth
in Section 10.6(c), or to such other address as either party may designate by
written notice to the other in accordance with this provision; and (b) deemed
to have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or facsimile, immediately upon receipt; if by overnight delivery
service, one (1) day after dispatch; and if by first class or certified mail,
three (3) days after deposit in the U.S. Mail, postage prepaid and addressed as
set forth herein.
9.5 Severability. If any provision of this Agreement is
held to be invalid or unenforceable, such provision shall not affect this
Agreement as a whole, but this Agreement shall be construed as though it did
not contain the particular provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This
Agreement contains the entire agreement of the parties as to the subject matter
hereof, all prior commitments, proposals and negotiations concerning the
subject matter hereof being merged herein. Neither this Agreement nor any
provision hereof shall be amended, modified or discharged orally or by course
of conduct, but only by a written agreement signed by an authorized officer of
Lender. This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and their respective successors and assigns, except that
any obligation of Lender under this Agreement shall not be assignable or inure
to the successors and assigns of Borrower.
9.7 Discharge of Borrower. No termination of this
Agreement shall relieve or discharge Borrower of its obligations, grants of
Collateral, duties and covenants hereunder or otherwise until such time as all
Obligations to Lender have been indefeasibly paid and satisfied in full,
including, without limitation, the continuation and survival in full force and
effect of all security interests and liens of Lender in and upon all then
existing and thereafter-arising or acquired Collateral and all warranties and
waivers of Borrower.
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9.8 Usage. All terms used herein which are defined in
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement and all references to the singular or
plural herein shall also mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
9.10 Confidentiality. In handling any confidential
information of Borrower, Lender shall use reasonable care to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement, except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Lender or to Lender's attorneys
or agents in connection with present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest of
Lender under this Agreement, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order; provided that Borrower is given notice; and
(iv) as may be required in connection with the examination, audit or similar
investigation of Lender. Notwithstanding any provision of this Agreement to
the contrary, prior to the occurrence of an Event of Default, Borrower will not
be required to disclose, permit the inspection, examination, copying or making
extracts of, or discussions of, any document, information or other matter (i)
that constitutes non-financial trade secrets or non-financial proprietary
information that does not constitute or relate to the Collateral, or (ii) in
respect to which disclosure to Lender (or designated representative) is then
prohibited by law.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: the lesser of $15,000,000
or (1) 33 1/3% plus
$2,000,000 from the date
hereof through December 31,
1995, (2) 33 1/3% plus
$1,000,000 from January 1,
1996 through March 31, 1996
and (3) 33 1/3% thereafter,
of the prior three months'
collections, to be
determined by Lender on a
monthly basis (aggregate for
both Borrowers)
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(b) Gross Availability Formulas:
Eligible Accounts Percentage: 75%(1)(subject
to a sublimit of
$250,000 against
progress-billed
Accounts)
Eligible Inventory
Percentages
Finished Goods: 40%; provided that
advances against
eligible finished
goods inventory
shall at no
time exceed 70% of
the appraised
orderly liquidation
value (as determined
by Lender) of the
eligible finished
goods inventory and
finished subassemblies
(top level assemblies).(2)
____________________
(1) So long as dilution does not exceed 15%. If dilution exceeds
15%, the advance percentage shall be reduced by 1% for each
percent of dilution in excess of 15%. For purposes of
determining dilution, Lender will make that determination based
on its audits but, in general, Lender will not include in the
computation of dilution accounts which were never Eligible
Accounts or any account to the extent a Reserve has been
established for that account.
(2) The Eligible Inventory Percentage shall be reduced to 20%
immediately upon any determination by Lender that Borrower has
recorded cumulative net losses, exclusive of non-cash, non-
recurring restructure charges, in excess of the following levels
for the given periods:
Period Cumulative Net Loss
------ -------------------
Quarter ended 12/31/95 $4,000,000
Quarter ended 03/31/96 4,000,000
Quarter ended 06/30/96 4,000,000
Quarter ended 09/30/96 4,000,000
The Eligible Inventory Percentage will be increased to the
original 40% if the Cumulative Net Loss in a calendar quarter
subsequent to a reduction in the Eligible Inventory Percentage
meets
(continued...)
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(c) Inventory Sublimit: $4,500,000 (aggregate
for both Borrowers)
(d) Maximum days after Invoice
Date for Eligible Accounts: 90
10.2 Intentionally Deleted
10.3 Accommodations:
(a) Lender's Charge for
Accommodations: 1.25% over a 360-day
year
(b) Sublimit for Accommodations: $1,000,000 (aggregate
for both Borrowers)
10.4 Fees:
(a) Interest Rate: Prime Rate plus 1.25% over a 360-day
year
(b) Facility Fee: 1.0% of the Maximum
Credit (due only
at anniversary)
(c) Closing Fee: 1.0% of the Maximum
Credit
(d) Unused Line Fee: 0.25%; provided no
Unused Line Fee
will be payable so
long as Borrower
maintains a minimum
monthly average loan
of $2,500,000.
10.5 Intentionally Deleted.
10.6 (a) Lender's Office: 000 Xxxxx Xxxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
(b) Borrower: Xircom, Inc.
Primary Rate, Inc.
---------------
(2) (...continued)
the financial test above and no Event of Default has occurred and is continuing.
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(c) Borrower's Chief
Executive Office: 0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
(d) Locations of
Eligible Inventory
Collateral: See Schedule "B".
(e) Borrower's Other
Offices and
Locations of
Collateral: See Schedule "C".
(f) Borrower's Trade
Names for
Invoicing: See Schedule "D".
IN WITNESS WHEREOF, Borrower and Lender have duly executed
this Agreement this 8 day of November 1995.
LENDER: BORROWER:
------ --------
THE CIT GROUP/CREDIT XIRCOM, INC.
FINANCE, INC.
By: Xxxxxx Xxxxx By: X. Xxxxxxxx
---------------------------- ------------------------
Title: Vice President Title: Secretary
------------------------- ---------------------
PRIMARY RATE, INC.
By: X. Xxxxxxxx
------------------------
Title: Secretary
---------------------
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SCHEDULE A
Permitted Liens
(a) Encumbrances consisting of easements, zoning restrictions, or other
restrictions on the use of real property or, imperfections to title to real
property that could not reasonably be expected to have a material adverse
effect on Borrower or its assets;
(b) Liens for taxes, assessments, or other governmental charges that are not
delinquent or which are being contested in good faith and for which adequate
Reserves have been established;
(c) Liens of mechanics, materialmen, warehousemen, carriers, landlords or
other similar statutory liens securing obligations that are not yet due and are
incurred in the ordinary course of business or which are being contested in
good faith and for which adequate Reserves have been established;
(d) Liens resulting from good faith deposits to secure payment of workmen's
compensation or other social security programs or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, contracts (other
than for payment of debt), or leases, all in the ordinary course of business;
(e) The following existing liens:
Secured Party Filing No.
------------- ----------
1) LEASTEC CORPORATION 91-257180
2) LEASTEC INCOME FUND 85-1 91-269053
3) XEROX CORPORATION 91-257825
4) PITNEY XXXXX CREDIT CORPORATION 92-002700
5) LEASTEC INCOME FUND III 92-024699
(*ASSIGNED TO FLEET CREDIT)
6) AMPLICON, INC. 92-045540
(*ASSIGNED TO CONCORD COMMERCIAL)
7) LEASTEC CORPORATION 92-071115
(*ASSIGNED TO FLEET CREDIT)
A-1
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8) BUSINESS CREDIT LEASING 92-153167
9) AMPLICON, INC. 91-240224
(*ASSIGNED TO CONCORD COMMERCIAL)
10) MASTER LEASE DIVISION OF TOKAI 91-149449
FINANCIAL
11) SIEMENS CREDIT CORPORATION 91-220146
12) SIEMENS CREDIT CORPORATION 91-220147
13) LEASTEC INCOME FUND III 91-257179
(f) Liens arising from judgments, decrees or attachments not constituting an
Event of Default under Section 7 hereof and for which adequate Reserves have
been established;
(g) Liens which constitute rights of setoff of an ordinary nature or banker's
liens for amounts on deposit whether arising by operation of law or by contract
in connection with with arrangements with banks in the ordinary course of
business; and
(h) liens not to exceed in the aggregate $250,000 for the purchase or lease of
equipment.
X-0
00
XXXXXXXX X
Locations of Eligible Inventory Collateral
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
00 Xxxxx Xxxxxxx
Xxxxx, Xxx Xxxxxxxxx 00000
B-1
31
SCHEDULE C
Borrower's Other Offices and Locations of Collateral
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
C-1
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SCHEDULE D
Borrower's Trade Names for Invoicing
PRI
Xircom Systems Division
Xircom ISDN Products Division
D-1
