LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), entered into as of
August 20, 1999 by and between XxXxx.xxx, Inc., a Delaware corporation
("Lender") and Xxxxxxxxxx.xxx, Inc., a Pennsylvania corporation ("Borrower").
RECITALS:
WHEREAS, Lender desires to lend to Borrower and Borrower desires to borrow
from Lender the sum of $500,000.00 (the "Loan") on the terms and conditions
provided for herein; and
WHEREAS, Borrower intends hereby to pledge 200,000 shares of Lender's
common stock (the "Common Stock") and other proceeds and interests as defined
herein, as secured collateral for payment of the Loan and performance of all of
Borrower's obligations under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises made herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
SECTION 1. Loan. Lender agrees to lend to Borrower the sum of $500,000 to
be evidenced by a one year, non-interest bearing Promissory Note of even date
herewith in the form of Exhibit A hereto (the "Note"). As provided in the Note,
the Note may be repaid at any time without premium or penalty and further may be
repaid in full at any time prior to or on the Due Date, as defined therein, by
the delivery to Lender of that number of shares of XxXxx.xxx, Inc. common stock
determined as follows: The amount to be repaid divided by the greater of (i) the
average closing price of a share of XxXxx.xxx, Inc. common stock on the ten
trading days immediately prior to the date of payment, or (ii) $2.50.
SECTION 2. Pledge of Security Interest; Collateral Borrower hereby pledges
and grants to the Lender a first priority lien on and security interest in the
Collateral, as hereinafter defined. The term Collateral means, collectively: (i)
the Common Stock; and (ii) all products, proceeds and revenues of and from the
Common Stock, together with all substitutions therefor and additions thereto
including without limitation stock rights, rights to subscribe, liquidating
dividends, stock dividends, cash dividends, interest, new securities and other
property to which Borrower is or may hereafter become entitled to receive on
account of such Common Stock.
SECTION 3. Security for Obligations. This Agreement secures the payment
and/or performance of all obligations of Borrower to the Lender, now or
hereafter existing under the Note, whether for principal, interest, fees,
expenses or otherwise, and all obligations of Borrower now or hereafter existing
under this Agreement (all such obligations of Borrower to the Lender hereinafter
referred to as the "Obligations"). SECTION 4. Delivery of Collateral. All
certificates or instruments representing the Collateral shall be delivered to
and held by or on behalf of the Lender by Bank of San Francisco, as Escrow
Agent, pursuant to an Escrow Agreement of even date herewith (the `Escrow
Agent") and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Lender. The Lender shall have the
right, in the event of a default under the Note or this Agreement, in its sole
discretion and without notice to Borrower, to transfer to or to register in the
name of the Lender or any of its nominees any or all of the Collateral. In
addition, the Lender shall have the right at any time to exchange certificates
or instruments representing or evidencing the Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties. Borrower represents and warrants
as follows:
(a) Borrower is the legal and beneficial owner of the Collateral free and
clear of any lien, security interest, option or other charges or encumbrance
except for the security interest created by this Agreement and by the Asset
Purchase Agreement between Borrower and Lender of even date herewith; and
(b) The pledge of the Collateral pursuant to this Agreement creates a valid
and perfected first priority security interest in the Collateral, securing the
payment and/or performance of the Obligations.
SECTION 6. Further Assurances. Borrower agrees that at any time, and from
time to time, Borrower will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that the Lender may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Lender to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.
SECTION 7. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as hereinafter defined) or event which,
with the giving of notice or the lapse of time, or both, would become an Event
of Default, shall have occurred and be continuing:
(i) Borrower shall have the right to exercise all voting and other
corporate rights with respect to the Collateral; and
(ii) Borrower shall be entitled to receive and retain any and all
dividends paid in respect of the Collateral; provided, however that any and
all
(A) dividends paid or payable other than in cash in respect of,
and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total
liquidation or dissolution of Lender or in connection with a reduction
of capital, capital surplus or paid-in-surplus of Lender, and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Collateral,
shall forthwith be delivered to the Lender to hold as Collateral, or as may
otherwise be agreed between Borrower and the Lender, and shall, if received
by Borrower, be received in trust for the benefit of the Lender, be
segregated from the other property or funds of Borrower, and be forthwith
delivered to the Lender as Collateral in the same form as so received (with
any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default
under the Note or hereunder:
(i) All rights of Borrower to exercise the voting and other consensual
rights which the Borrower would otherwise be entitled to exercise pursuant
to Section 7(a)(i) of this Agreement and to receive the dividend payments
which the Borrower would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) of this Agreement shall cease, and Lender
shall thereupon have the sole right to exercise such voting and other
consensual rights and to receive and hold as Collateral such dividend
payments.
(ii) All dividend payments which are received by Borrower contrary to
the provisions of Section 7(b)(i) shall be received in trust for the
benefit of the Lender, shall be segregated from other funds of Borrower and
shall be forthwith paid over to the Lender as Collateral in the same form
as so received (with any necessary endorsement).
(c) The term "Event of Default" shall mean (1) failure of Borrower to pay
the unpaid principal due under the Note within fifteen (15) days after the date
when due; or (2) the insolvency, bankruptcy (which is not stayed within 60 days
after its commencement), or dissolution of Borrower, or (3) any material default
by Borrower in the performance of any covenant or agreement pursuant to this
Agreement which default is not cured within ten (10) days following written
notice by Lender.
SECTION 8. Transfers and Other Liens; Additional Shares.
(a) Borrower agrees that it will not (i) sell or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, or other charge or encumbrance upon
or with respect to any of the Collateral, except for the security interest under
this Agreement and under the Asset Purchase Agreement of even date herewith
between Borrower and Lender.
SECTION 9. Lender May Perform. If Borrower fails to perform any agreement
contained herein, the Lender may itself perform, or cause the performance of,
such agreement, and the expenses the Lender incurs in connection therewith shall
be payable by Borrower under Section 13.
SECTION 10. Reasonable Care. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Lender accords its own property, it being understood that the Lender
shall not have responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Collateral, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
any parties with respect to any Collateral.
SECTION 11. Remedies upon Default. If any Event of Default shall have
occurred and continues uncured for five (5) consecutive days, upon written
notice to Borrower, subject to and limited by the provisions of Sections 3 and 4
of the Escrow Agreement, the Lender may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to them, all the rights and remedies of a secured party on default
under the Uniform Commercial Code (the "Code") in effect in the State of
California at that time.
SECTION 12. Expenses. Borrower will, upon demand, pay, to the Lender, the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of Lender's counsel and of any experts and agents, which the Lender may
reasonably incur in connection with the exercise of enforcement of any of the
rights of the Lender hereunder, or the failure by Borrower to perform or observe
any of the provisions hereof.
SECTION 13. Security Interest Absolute. All rights of the Lender and
security interests hereunder, and all obligations of Borrower hereunder, shall
be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Note or any other
agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Note;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, Borrower in respect of the Obligations or
Borrower in respect of this Agreement, other than the payment in full of
the Obligations.
SECTION 14. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Borrower herefrom shall in any
event be effective unless the same shall be in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 15. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Borrower:
Xxxxxxxxxx.xxx, Inc.
000 Xxxx Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxx, President
If to Lender:
XxXxx.xxx, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxx, Chief Financial Officer
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are sent.
SECTION 16. Continuing Security Interest; Transfer of Note. This Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until payment in full of the Obligations, (b) be
binding upon Borrower, and its successors and (c) inure , together with the
rights and remedies of the Lender hereunder, to the benefit of the Lender, its
legal representatives, successors and assigns. Without limiting the generality
of the foregoing clause (c), Lender may assign or otherwise transfer the Note
held by it to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to the
Lender herein or otherwise. Upon the payment in full of the Obligations,
Borrower shall be entitled to the return, upon his request and at his expense,
of such of the Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof.
SECTION 17. OMITTED
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding
conflict of laws provisions. Unless otherwise defined herein or in the Note,
terms defined in Article 9 of the Uniform Commercial Code in the State of
California are used herein as therein defined.
SECTION 19. Counterparts. This Agreement may be executed in counterparts.
SECTION 20. Definitions. Any defined term not defined herein shall have the
meaning ascribed to such term in the Note.
IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed
and delivered as of date first above written.
Lender:
XxXxx.xxx, Inc.
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Its: Chairman and CEO
By:
---------------------------------
Its:
Borrower:
Xxxxxxxxxx.xxx, Inc.
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Its:President
EXHIBIT A
PROMISSORY NOTE
$500,000.00 August 20, 0000
Xxxxxx Xxxxx, Xxxxxxxxxx
FOR VALUE RECEIVED, the undersigned, Xxxxxxxxxx.xxx, Inc., a Pennsylvania
corporation, hereby promises to pay on August 21, 2000 ("Due Date") to the order
of XxXxx.xxx, Inc., Delaware corporation, at such place as the holder of this
note (the "Note") may direct in writing, the principal sum of Five Hundred
Thousand Dollars ($500,000.00). This Note shall not bear interest. This Note may
be prepaid at any time without premium or penalty. The undersigned may pay this
Note in full at any time on or prior to the Due Date by the delivery to the
holder hereof of that number of shares of common stock of XxXxx.xxx, Inc.
determined as follows: The amount to be repaid divided by the greater of (i) the
average closing price of a share of common stock of XxXxx.xxx, Inc. on the ten
trading days immediately prior to the date of payment, or (ii) $2.50.
This Note and all instruments securing same shall be deemed to be a
contract entered into and made pursuant to the laws of the State of California
and shall in all respects be governed, construed, and enforced in accordance
with the laws of said State.
The undersigned agrees, if this Note is placed in the hands of an attorney
for collection, to pay reasonable legal costs as permitted by law.
The undersigned waives demand, presentment for payment, notice of
non-payment or dishonor, notice of protest, and protest of this Note. No delay
on the part of the holder in exercising any right, power or privilege pursuant
to this Note shall operate as a waiver of the same, and no single or partial
exercise of any right, power or privilege shall constitute an exhaustion or
waiver of any of them, all of which shall continue for the benefit of the
holder.
This Note is secured pursuant to a Loan and Security Agreement of even date
herewith.
Dated: August 20, 1999
Xxxxxxxxxx.xxx, Inc.
By____________________________
Its ________________
By____________________________
Its ________________
GUARANTY
The undersigned guarantees the performance of Xxxxxxxxxx.xxx, Inc. pursuant
to the above Promissory Note; provided however, the undersigned's liability
hereunder may be satisfied in full, at the undersigned's option, by the delivery
to the holder hereof of that number of shares of XxXxx.xxx, Inc. Common Stock
determined as follows: The amount of the unpaid principal due under the
Promissory Note divided by the greater of (i) the average closing price of a
share of common stock of XxXxx.xxx, Inc. on the ten trading days immediately
prior to the date of payment, or (ii) $2.50.
The undersigned's obligations pursuant to this guaranty shall terminate
upon payment in full of the principal amount of the Promissory Note.
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Xxxxxx X. Xxxx
