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EXHIBIT 10.8
GREYROCK
BUSINESS
CREDIT
A NATIONSBANK COMPANY
LOAN AND SECURITY AGREEMENT
BORROWER: FACTORY AUTOMATION & COMPUTER TECHNOLOGIES, INC.
ADDRESS: WATERFORD CENTER
0000 XXXXXXXX XXXXXXX, XXXXX 000
XXXXXXXX, XXXXXXX 00000
DATE: JULY 10, 1996
This Loan and Security Agreement is entered into on the above date between
GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial Corporation
("GBC"), whose address is 000 Xxxxx Xxxxxxxxxxx Xxxx., Xxxxx 000, Xx Xxxxxxx,
Xxxxxxxxxx 00000 and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") being signed concurrently is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1. LOANS. GBC will make loans to Borrower (the "Loans") up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event
of Default has occurred and is continuing. If at any time or for any reason the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, Borrower shall immediately pay the amount of the excess to GBC, without
notice or demand.
1.2. INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement or in another written agreement signed
by GBC and Borrower. Interest shall be payable monthly, on the last day of the
month. Interest may, in GBC's discretion, be charged to Borrower's loan account,
and the same shall thereafter bear interest at the same rate as the other Loans.
1.3. FEES. Borrower shall pay GBC the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to GBC and are not
refundable.
2. SECURITY INTEREST.
2.1. SECURITY INTEREST. To secure the payment and performance of
all of the Obligations when due, Borrower hereby grants to GBC a security
interest in all of Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located (collectively, the "Collateral"): All
Inventory, Equipment, Receivables, and General Intangibles,
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including, without limitation, all of Borrower's Deposit Accounts, all money,
all collateral in which GBC is granted a security interest pursuant to any other
present or future agreement, all property now or at any time in the future in
GBC's possession, and all proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties), all products
of the foregoing, and all books and records related to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants that
the following representations will continue to be true,* and that Borrower will
at all times comply with all of the following covenants:
* (EXCEPT AS EXPRESSLY PROVIDED BELOW FOR CHANGES PURSUANT TO WRITTEN NOTICE BY
BORROWER TO GBC)
3.1. CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation,
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower is
and will continue to be qualified and licensed to do business in all
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a material adverse effect on Borrower. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), (iii) do not violate
Borrower's articles or certificates of incorporation, or Borrower's by-laws, or
any law or any material agreement or instrument which is binding upon Borrower
or its property, and (iv) do not constitute grounds for acceleration of any
material indebtedness or obligation under any material agreement or instrument
which is binding upon Borrower or its property.
3.2. NAME; TRADE NAMES AND STYLES. The name of Borrower set forth
in the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give GBC 30 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3. PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set
forth in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule*. Borrower will give GBC at least 30 days'
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral** other than
Borrower's Address or one of the locations set forth on the Schedule*.
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* (EXCEPT FOR SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF
COLLATERAL IS LOCATED)
** TO ANY NEW LOCATION NOT PREVIOUSLY REPORTED TO GBC
3.4. TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral, except
for items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GBC and the Collateral against all claims of
others*. Borrower is not and will not become a lessee under any real property
lease pursuant to which the lessor may obtain any rights in any of the
Collateral** and no such lease now prohibits, restrains, impairs or will
prohibit, restrain or impair Borrower's right to remove any Collateral from the
leased premises**. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by GBC,
use its*** best efforts to cause such third party to execute and deliver to GBC,
in form acceptable to GBC, such waivers and subordinations as GBC shall specify,
so as to ensure that GBC's rights in the Collateral are, and will continue to
be, superior to the rights of any such third party. Borrower will keep in full
force and effect, and will comply with all the**** terms of, any lease of real
property where any of the Collateral now or in the future may be located+.
* WITH RESPECT TO THE COLLATERAL (EXCEPT FOR THOSE HOLDING PERMITTED
LIENS)
** (UNLESS BORROWER PROVIDES GBC WITH A LANDLORD WAIVER WITH RESPECT
THERETO IN FORM AND SUBSTANCE SATISFACTORY TO GBC, IF SO REQUESTED BY GBC, OR
UNLESS THE SAME IS A SALES OFFICE AT WHICH NOT MORE THAN $50,000 OF COLLATERAL
IS LOCATED)
*** REASONABLE
**** MATERIAL
+ EXCEPT FOR LEASES OF SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF
COLLATERAL IS LOCATED
3.5. MAINTENANCE OF COLLATERAL. Borrower will maintain the
*Collateral in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise GBC in writing of any material loss of damage to the
Collateral.*
* EQUIPMENT AND OTHER TANGIBLE
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* BORROWER WILL MAINTAIN THE VALIDITY OF, AND OTHERWISE MAINTAIN,
PRESERVE AND PROTECT, ITS PATENTS, TRADEMARKS, COPYRIGHTS AND OTHER INTELLECTUAL
PROPERTY IN ACCORDANCE WITH PRUDENT BUSINESS PRACTICES.
3.6. BOOKS AND RECORDS. Borrower has maintained and will maintain
at Borrower's Address books and records,* an accounting system in accordance
with generally accepted accounting principles.
* WHICH ARE COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS AND WHICH
COMPRISE
3.7. FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GBC have been, and will be,
prepared in conformity with generally accepted accounting principles and now and
in the future will fairly reflect the financial condition of Borrower, at the
times and for the periods therein stated. Between the last date covered by any
such statement provided to GBC and the date hereof, there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
now and will continue to be solvent*.
* AS USED HEREIN, "SOLVENT" MEANS, AS TO ANY PERSON AT ANY TIME, THAT
(A) THE FAIR VALUE OF THE PROPERTY OF SUCH PERSON IS GREATER THAN THE AMOUNT OF
SUCH PERSON'S LIABILITIES AS SUCH VALUE IS ESTABLISHED AND LIABILITIES EVALUATED
FOR PURPOSES OF SECTION 101(31) OF THE BANKRUPTCY REFORM ACT OF 1978 AND, IN THE
ALTERNATIVE, FOR PURPOSES OF THE APPLICABLE FRAUDULENT TRANSFER OR CONVEYANCE
STATUTE IN EFFECT IN THE STATE OF GEORGIA; (B) THE PRESENT FAIR SALEABLE VALUE
OF THE PROPERTY OF SUCH PERSON IS NOT LESS THAN THE AMOUNT THAT WILL BE REQUIRED
TO PAY THE PROBABLE LIABILITY OF SUCH PERSON ON ITS DEBTS AS THEY BECOME
ABSOLUTE AND MATURED; (C) SUCH PERSON IS ABLE TO REALIZE UPON ITS PROPERTY AND
PAY ITS DEBTS AND OTHER LIABILITIES (INCLUDING DISPUTED, CONTINGENT AND
UNLIQUIDATED LIABILITIES) AS THEY MATURE IN THE NORMAL COURSE OF BUSINESS; (D)
SUCH PERSON DOES NOT INTEND TO, AND DOES NOT BELIEVE THAT IT WILL, INCUR DEBTS
OR LIABILITIES BEYOND SUCH PERSON'S ABILITY TO PAY AS SUCH DEBTS AND LIABILITIES
BEYOND SUCH PERSON'S ABILITY TO PAY AS SUCH DEBTS AND LIABILITIES MATURE; AND
(E) SUCH PERSON IS NOT ENGAGED IN BUSINESS OR A TRANSACTION, AND IS NOT ABOUT TO
ENGAGE IN BUSINESS OR A TRANSACTION, AND IS NOT ABOUT TO ENGAGE IN BUSINESS OR A
TRANSACTION, FOR WHICH SUCH PERSON'S PROPERTY WOULD CONSTITUTE UNREASONABLY
SMALL CAPITAL.
3.8. TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
applicable law, and Borrower has timely paid, and will timely pay, all
applicable taxes, assessments, deposits and contributions now or in the future
owed by Borrower*. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower's obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies GBC in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw
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from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
* (EXCEPT WHERE FAILURE TO DO SO WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT ON BORROWER AND WOULD NOT RESULT IN A LIEN ON ANY OF THE COLLATERAL, BUT
ONLY SO LONG AS BORROWER MAINTAINS ADEQUATE RESERVES WITH RESPECT TO SUCH
LIABILITIES IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CONSISTENTLY APPLIED)
3.9. COMPLIANCE WITH LAW. Borrower has complied, and will comply,
in all material respects, with all provisions of all applicable laws and
regulations, including, but not limited to, those relating to Borrower's
ownership of real or personal property, the conduct and licensing of Borrower's
business, and all environmental matters.
3.10. LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which* result, either separately or in the aggregate, in any material
adverse change in the financial condition or business of Borrower, or in any
material impairment in the ability of Borrower to carry on its business in
substantially the same manner as it is now being conducted. Borrower will
promptly inform GBC in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower.**
* IS REASONABLY LIKELY TO
** WHICH, IF DETERMINED ADVERSELY TO THE BORROWER, WOULD BE REASONABLY
LIKELY TO RESULT IN (I) A JUDGMENT, LOSS OR PAYMENT OF $50,000 OR MORE, OR
$100,000 OR MORE IN THE AGGREGATE, OR (II) A MATERIAL ADVERSE CHANGE IN THE
BUSINESS OR CONDITION OF BORROWER, OR A MATERIAL IMPAIRMENT IN THE ABILITY OF
BORROWER TO CARRY ON ITS BUSINESS IN SUBSTANTIALLY THE SAME MANNER AS IT IS NOW
BEING CONDUCTED.
3.11. USE OF PROCEEDS. All proceeds of all Loans shall be used
solely for lawful business purposes.
4. RECEIVABLES.
4.1. REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents
and warrants to GBC as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed, bona fide, existing, unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods* or the
rendition of services, in the ordinary course of Borrower's business**, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
* , THE LICENSING OF SOFTWARE,
** (EXCEPT AS DISCLOSED TO AND APPROVED BY GBC)
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4.2. REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to GBC as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall comply
with all applicable laws and governmental rules and regulations. All signatures
and endorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3. SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower
shall deliver to GBC transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on GBC's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit GBC `s security interest and other
rights in all of Borrower's Receivables, nor shall GBC's failure to advance or
lend against a specific Receivable affect or limit GBC's security interest and
other rights therein. Together with each such schedule and assignment, or later
if requested by GBC, Borrower shall furnish GBC with copies (or, at GBC's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all original shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Receivables, and Borrower warrants the genuineness of
all of the foregoing. Borrower shall also furnish to GBC an aged accounts
receivable trial balance in such form and at such intervals as GBC shall*
request**. In addition, Borrower shall deliver to GBC the originals of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Receivables, immediately upon receipt
thereof and in the same form as received, with all necessary endorsements.
* REASONABLY
**, PROVIDED THAT IF NO EVENT OF DEFAULT EXISTS, GBC MAY NOT REQUEST
THE FOREGOING MORE THAN TWICE IN ONE MONTH
4.4. COLLECTION OF RECEIVABLES. Borrower shall have the right to
collect all Receivables, unless and until a Default or an Event of Default has
occurred. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for GBC, and Borrower shall deliver all such payments and proceeds to GBC,
within one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as GBC shall determine.
4.5. DISPUTES. Borrower shall notify GBC promptly of all disputes*
or claims relating to Receivables on the regular reports to GBC. Borrower shall
not forgive, or settle any Receivable for less than payment in full, or agree to
do any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on the regular reports provided to GBC; (ii) no Default or Event
of Default
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has occurred and is continuing; and (iii) taking into account all such
settlements and forgiveness, the total outstanding Loans and other Obligations
will not exceed the Credit Limit.
* IN EXCESS OF $50,000
4.6. RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to GBC). In the event any attempted
return occurs after the occurrence of any Event of Default, Borrower shall (i)
not accept any return without GBC's prior written consent, (ii) hold the
returned Inventory in trust for GBC, (iii) segregate all returned Inventory from
all of Borrower's other property, (iv) conspicuously label the returned
Inventory as GBC's property, and (v) immediately notify GBC of the return, the
location and condition of the returned Inventory, and on GBC's request deliver
such returned Inventory to GBC.
4.7. VERIFICATION. GBC may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or GBC or such other name as GBC may choose, and GBC or its designee
may, at any time, notify Account Debtors that it has a security interest in the
Receivables.*
** IF NO EVENT OF DEFAULT EXISTS, GBC WILL PROVIDE BORROWER WITH ONE
WEEK'S PRIOR WRITTEN NOTICE OF ANY SUCH VERIFICATION.
4.8. NO LIABILITY. GBC shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall GBC be deemed to be responsible for any of Borrower's
obligations under any contract or agreement giving rise to a Receivable. Nothing
herein shall, however, relieve GBC from liability for its own gross negligence
or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1. INSURANCE. Borrower shall, at all times, insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to GBC, in such form and amounts as GBC may
reasonably require, and Borrower shall provide evidence of such insurance to
GBC, so that GBC is satisfied that such insurance is, at all time, in full force
and effect. All such insurance policies shall name GBC as an additional loss
payee, and shall contain a lenders loss payee endorsement in form reasonably
acceptable to GBC. Upon receipt of the proceeds of any such insurance, GBC shall
apply such proceeds in reduction of the Obligations as GBC shall determine in
its sole discretion, except that, provided no Default or Event of Default has
occurred and is continuing, GBC shall release to Borrower* insurance proceeds
with respect to Equipment totaling less than $100,000, which shall be utilized
by Borrower for the replacement of the Equipment with respect to which the
insurance proceeds
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were paid**. GBC may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
GBC may, but is not obligated to, obtain the same at Borrower's expense.
Borrower shall promptly deliver to GBC copies of all*** reports made to
insurance companies.
* (I)
** AND (II) INSURANCE PROCEEDS WITH RESPECT TO INVENTORY TOTALING LESS
THAN $100,000, WHICH SHALL BE UTILIZED BY BORROWER FOR THE REPLACEMENT OF THE
INVENTORY WITH RESPECT TO WHICH THE INSURANCE PROCEEDS WERE PAID.
*** MATERIAL
5.2. REPORTS. Borrower, at its expense, shall provide GBC with the
written reports set forth in the Schedule, and such other written reports set
forth in the Schedule, and such other written reports with respect to Borrower
(including budgets, sales projections, operating plans and other financial
documentation), as GBC shall from time to time reasonably specify.
5.3. ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times,
and on one business day's notice, GBC, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records*. GBC shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but GBC shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $600 per person per day (or such higher amount as shall represent GBC's
then current standard charge for the same), plus reasonable out-of-pockets
expenses. Borrower shall not be charged more than $3,000 per audit (plus
reasonable out-of-pocket expenses), nor shall audits be done more frequently
than four times per calendar year**, provided that the foregoing limits shall
not apply after the occurrence of a Default or Event of Default, nor shall they
restrict GBC's right to conduct audits at its own expense (whether or not a
Default or Event of Default has occurred). Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first obtaining GBC's written consent, which may be conditioned upon
such accounting firm, service bureau or other third party agreeing to give GBC
the same rights with respect to access to books and records and related rights
as GBC has under this Agreement.
* ANY SUCH INSPECTION SHALL BE CONDUCTED BY GBC, OR ITS AGENTS, WITHOUT
MATERIAL HINDRANCE OR INTERRUPTION OF BORROWER'S BUSINESS.
** OR MORE THAN ONCE DURING ANY TWO MONTH PERIOD IN ANY CALENDAR YEAR
5.4. REMITTANCE OF PROCEEDS. All proceeds arising from the sale or
other disposition of any Collateral shall be delivered, in kind, by Borrower to
GBC* in the original form in which received by Borrower not later than the
following business day after receipt by Borrower**, to be applied to the
Obligations in such order as GBC shall determine; provided that, if no Default
or Event of Default has occurred and is continuing, then Borrower shall not be
obligated to remit to GBC the proceeds of the sale of Equipment which is sold in
the ordinary course of business, in
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a good-faith arm's length transaction***. Except for the proceeds of the sale of
Equipment as set forth above, Borrower shall not commingle proceeds of
Collateral with any of Borrower's other funds or property, and shall hold such
proceeds separate and apart from such other funds and property and in an express
trust for GBC. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
* (OR, AT GBC'S REQUEST, INTO A LOCKBOX ACCOUNT, OR OTHER BLOCKED ACCOUNT,
ESTABLISHED PURSUANT TO AN AGREEMENT ACCEPTABLE TO GBC, AND WITH A BANK SELECTED
BY BORROWER WHICH IS ACCEPTABLE TO GBC)
** (EXCEPT WIRE TRANSFER REMITTANCES RECEIVED BY BORROWER SHALL BE
TRANSMITTED TO GBC IN TOTAL THE DAY FOLLOWING POSTING TO BORROWER'S BANK
ACCOUNT)
*** NOR SHALL BORROWER BE OBLIGATED TO REMIT TO GBC ANY SUCH PROCEEDS
UNLESS THE AGGREGATE AMOUNT THEREOF RECEIVED AND HELD BY THE BORROWER EQUALS OR
EXCEEDS $25,000
5.5. NEGATIVE COVENANTS. Except as may be permitted in the
Schedule, Borrower shall not, without GBC's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity*; (ii)
acquire any assets, except in the ordinary course of business**; (iii) enter
into any***(iv) sell or transfer any Collateral, except that, provided no
Default or Event of Default has occurred and is continuing, Borrower may (a)
sell finished Inventory in the ordinary course of Borrower's business, (b) sell
Equipment in the ordinary course of business, in good-faith arm's length
transactions****; (v) store any Inventory or other Collateral with any
warehouseman or other third party*****; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets+, (viii) incur any debts, outside
the ordinary course of business, which would have a material, adverse effect on
Borrower or on the prospect of repayment of the Obligations++; (ix) guaranty or
otherwise become liable with respect to the obligations of another party or
entity+++; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower)++++; (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock+++++; (xii) make any change in Borrower's capital structure which would
have a material adverse effect on Borrower or on the prospect of repayment of
the Obligations; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do
any of the foregoing.
* (EXCEPT IN A TRANSACTION IN WHICH (A) THE CURRENT MAJORITY
SHAREHOLDERS OF THE BORROWER HOLD AT LEAST 51% OF THE COMMON STOCK AND ALL OTHER
CAPITAL STOCK OF THE SURVIVING CORPORATION IMMEDIATELY AFTER SUCH MERGER OR
CONSOLIDATION, (B) THE BORROWER IS THE SURVIVING CORPORATION AND (C) NO DEFAULT
OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER GIVING
EFFECT TO THE TRANSACTION, AND EXCEPT THAT BORROWER MAY MERGE INTO ANOTHER
CORPORATION FOR PURPOSES OF EFFECTING A REINCORPORATION INTO ANOTHER STATE AFTER
GBC HAS NOTIFIED BORROWER IN WRITING THAT ALL STEPS NECESSARY TO PROTECT THE
VALIDITY AND PERFECTION OF GBC'S FIRST-PRIORITY SECURITY INTEREST IN THE
COLLATERAL, SUBJECT TO PERMITTED LIENS, HAVE BEEN TAKEN)
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** (EXCEPT IN A TRANSACTION OR A SERIES OF TRANSACTIONS NOT INVOLVING
THE PAYMENT OF AN AGGREGATE AMOUNT IN EXCESS OF $100,000, PROVIDED THAT NO
DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER
GIVING EFFECT TO THE TRANSACTION)
*** BUSINESS SUBSTANTIALLY DIFFERENT FROM THAT PRESENTLY ENGAGED IN
**** AND (C) LICENSE OR SUBLICENSE INTELLECTUAL PROPERTY IN THE
ORDINARY COURSE OF BORROWER'S BUSINESS
***** , UNLESS SUCH WAREHOUSEMAN OR OTHER THIRD PARTY ENTERS INTO A
BAILEE AGREEMENT WITH GBC ON TERMS SATISFACTORY TO GBC IN ITS SOLE DISCRETION
+ , EXCEPT (A) ADVANCES TO SUBSIDIARIES OF THE BORROWER AND CUSTOMERS
OR SUPPLIERS, IN EACH CASE, IF CREATED, ACQUIRED OR MADE IN THE ORDINARY COURSE
OF BUSINESS, OB) TRAVEL ADVANCES IN THE ORDINARY COURSE OF BUSINESS, (C)
EMPLOYEE RELOCATION LOANS IN THE ORDINARY COURSE OF BUSINESS, (D) OTHER EMPLOYEE
LOANS AND ADVANCES IN THE ORDINARY COURSE OF BUSINESS, (E) LOANS TO EMPLOYEES,
OFFICERS AND DIRECTORS FOR THE PURPOSE OF PURCHASING EQUITY SECURITIES OF THE
BORROWER, (F) OTHER LOANS TO OFFICERS AND EMPLOYEES APPROVED BY THE BOARD OF
DIRECTORS OF THE BORROWER AND (G) OTHER LOANS OR EXTENSIONS OF CREDIT NOT
OTHERWISE PERMITTED HEREUNDER, PROVIDED THAT THE AGGREGATE AMOUNT OF ALL OF THE
FOREGOING ITEMS SET FORTH IN (A), (B), (D), (E), (F) AND (G) SHALL NOT EXCEED
$1,000,000 AT ANY ONE TIME OUTSTANDING EXCEPT THAT ANY LOANS MADE PRIOR TO THE
DATE HEREOF PURSUANT TO ITEM (A) SHALL NOT BE INCLUDED IN SAID $1,000,000 LIMIT,
AND PROVIDED, FURTHER, THAT NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER
IMMEDIATELY PRIOR TO OR AFTER GIVING EFFECT TO THE MAKING OF ANY OF THE
FOREGOING ADVANCES, LOANS OR OTHER EXTENSIONS OF CREDIT IN CLAUSES (A) THROUGH
(G)
++ ; PROVIDED THAT BORROWER MAY IN ANY CASE INCUR DEBT IN THE FORM OF
EQUIPMENT LEASES IN AN AMOUNT NOT TO EXCEED $350,000 IN ANY FISCAL YEAR
+++ EXCEPT THAT BORROWER MAY ISSUE GUARANTEES OF ITS SUBSIDIARIES'
OBLIGATIONS IN THE ORDINARY COURSE OF ITS BUSINESS IN AN AGGREGATE AMOUNT AT ANY
ONE TIME OUTSTANDING NOT TO EXCEED $250,000
++++ AND EXCEPT THAT BORROWER MAY PAY AND DECLARE DIVIDENDS UPON THE
BORROWER'S PREFERRED STOCK IN ACCORDANCE WITH THE PROVISIONS OF SAID PREFERRED
STOCK
+++++ (EXCEPT THAT BORROWER MAY REPURCHASE OR REDEEM SHARES OF ITS
CAPITAL STOCK (A) PURSUANT TO EMPLOYEE OPTION PLANS FOR AN AGGREGATE PURCHASE
PRICE NOT TO EXCEED $100,000 PER FISCAL YEAR, ON A NON-CUMULATIVE BASIS AND OB)
IF A CAPITAL CONTRIBUTION TO BORROWER HAS BEEN MADE PRIOR TO ANY SUCH PURCHASE
OR REDEMPTION IN AN AGGREGATE AMOUNT AT LEAST EQUAL TO THE AMOUNT OF THE
PURCHASE OR REDEMPTION)
5.6. LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against GBC with respect to any Collateral or in
any manner relating to Borrower, Borrower shall, without expense to GBC, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that GBC may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
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5.7. NOTIFICATION OF CHANGES. Borrower will promptly notify GBC in
writing of any change in its* directors, the opening of any new bank account or
other deposit account, and any material adverse change in the business or
financial affairs of Borrower.
* EXECUTIVE OFFICERS OR
5.8. FURTHER ASSURANCES. Borrower agrees, at its expense, on
request by GBC, to execute all documents and take all actions, as GBC may deem
reasonably necessary or useful in order to perfect and maintain GBC's perfected
security interest in the Collateral, and in order to fully consummate the
transactions contemplated by this Agreement.
5.9. INDEMNITY. Borrower hereby agrees to indemnify GBC and hold
GBC harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
attorneys' fees), of every nature, character and description, which GBC may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Borrower or its employees, any relationship or agreement between GBC and
Borrower, any actual or alleged failure of GBC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GBC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GBC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GBC).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
6. TERM.
6.1. MATURITY DATE. This Agreement shall continue in effect until
the maturity date set forth on the Schedule (the `Maturity Date"); provided that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2. EARLY TERMINATION. This Agreement may be terminated prior to
the Maturity Date as follows: (i) by Borrower, effective three business days
after written notice of termination is given to GBC; or (ii) by GBC at any time
after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower OR BY GBC under this
Section 6.2, Borrower shall pay to GBC a termination fee (the "Termination Fee")
in the amount shown on the Schedule. The Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.
6.3. PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are
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otherwise then due and payable. Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of
termination, there are any outstanding letters of credit issued based upon an
application, guarantee, indemnity or similar agreement on the part of GBC, then
on such date Borrower shall provide to GBC cash collateral in an amount equal to
110% of the face amount of all such letters of credit plus all interest, fees
and costs due or (in GBC's estimation) likely to become due in connection
therewith, to secure all of the Obligations relating to said letters of credit,
pursuant to GBC's then standard form cash pledge agreement. Notwithstanding any
termination of this Agreement, all of GBC's security interests in all of the
Collateral and all of the terms and provisions of this Agreement shall continue
in full force and effect until all Obligations have been paid and performed in
full; provided that, without limiting the fact that Loans are subject to the
discretion of GBC, GBC may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair any
right or remedy of GBC, nor shall any such termination relieve Borrower of any
Obligation to GBC, until all of the Obligations have been paid and performed in
full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, GBC shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be reasonably required to terminate GBC's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default' under this Agreement, and Borrower
shall give GBC immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to GBC by
Borrower or any of Borrower's officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (c) the total Loans and other Obligations outstanding at
any time shall exceed the Credit Limit; or (d) Borrower shall fail to perform
any non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within* business days after the date performance is due; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within 10
days after the occurrence of the same; or (g) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured
within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or (h) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a material adverse effect on
Borrower's business or financial condition; or (i) dissolution, termination of
existence, insolvency Or business failure of Borrower or any Guarantor; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by Borrower or any Guarantor under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (j) the commencement of any proceeding against Borrower or any Guarantor
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, now or in
the future in effect, which is not cured by the dismissal thereof within 45 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing; or (1) revocation or termination of, or limitation or
denial of liability upon,
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any pledge of any certificate of deposit, securities or other property or asset
pledged by any third party to secure any or `all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligation* other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits or terminates its subordination
agreement; or (n) there shall be a change in the record or beneficial
ownership**; or (o) Borrower shall generally not pay its debts as they become
duo, or Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (p) there shall be a material adverse
change in Borrower's business or financial condition. GBC may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an Event
of Default has occurred.
* 10
** (WITHIN THE MEANING OF RULE 13D-3 UNDER THE SECURITIES AND EXCHANGE
ACT OF 1934) OF SECURITIES OF THE BORROWER REPRESENTING EFFECTIVE CONTROL OVER
THE ELECTION OF A MAJORITY OF THE BOARD OF DIRECTORS OF THE BORROWER;
7.2. REMEDIES. Upon the occurrence of any Event of Default, and at
any time thereafter*, GBC, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one or
more of the following**: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes GBC without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as GBC deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should GBC seek to take possession of any of
the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that GBC retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to GBC
at places designated by GBC which are reasonably convenient to GBC and Borrower,
and to remove the Collateral to such locations as GBC may deem advisable; (e)
Complete the processing, manufacturing or repair of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal, GBC
shall have the right to use Borrower's premises, vehicles, hoists, lifts,
cranes, equipment and all other property without charge; (f) Sell, lease or
otherwise dispose of any of the Collateral, in its condition at the time GBC
obtains possession of it or after further manufacturing, processing or repair,
at one or
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more public and/or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale. GBC
shall have the right to conduct such disposition on Borrower's premises without
charge, for such time or times as GBC deems reasonable, or on GBC's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
GBC may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition. Any sale or other disposition of Collateral
shall not relieve Borrower of any liability Borrower may have if any Collateral
is defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes GBC to endorse or sign Borrower's name on all collection, receipts,
instruments and other documents, to take possession of and open mail addressed
to Borrower and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in GBC's sole discretion, to grant
extensions of time to pay, compromise claims and settle Receivables, General
Intangibles and the like for less than face value; and (h) Demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto. All
reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by GBC with respect to the foregoing shall be added to and become part
of the Obligations, shall be due on demand, and shall bear interest at a rate
equal to the highest interest rate applicable to any of the Obligations. Without
limiting any of GBC's rights and remedies, from and after the occurrence of any
Event of Default, the interest rate applicable to the Obligations shall be
increased by an additional four percent per annum.
* WHILE SUCH EVENT OF DEFAULT IS CONTINUING
** (EXCEPT THAT, PRIOR TO OR CONCURRENTLY WITH THE TAKING OF THE FIRST
OF ANY OF THE FOLLOWING ACTIONS, GBC SHALL GIVE BORROWER ONE GENERAL WRITTEN
NOTICE STATING THAT GBC IS "PROCEEDING TO EXERCISE ITS RIGHTS AND REMEDIES" OR
WORDS TO THAT EFFECT)
7.3. STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and GBC agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least* days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least* days before the sale in a newspaper of
general circulation in the county where the sale is to be conducted; (ii) Notice
of the sale describes the collateral in general, non-specific terms; (iii) The
sale is conducted at a place designated by GBC, with or without the Collateral
being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00
p.m; (v) Payment of the purchase price in cash or by cashier's check or wire
transfer is required; (vi) With respect to any sale of any of the Collateral,
GBC may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same. GBC shall be
free to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
*TEN
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7.4. POWER OF ATTORNEY. Upon the occurrence of any Event of
Default, without limiting GBC's other rights and remedies, Borrower grants to
GBC an irrevocable power of attorney coupled with an interest, authorizing and
permitting GBC (acting through any of its employees, attorneys or agents) at any
time*, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but GBC agrees to exercise the following powers in
a commercially reasonable manner: (ii) Execute on behalf of Borrower any
documents that GBC may, in its sole discretion, deem advisable in order to
perfect and maintain GBC's security interest in the Collateral, or in order to
exercise a right of Borrower or GBC, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other present and future
agreements; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
GBC's Collateral or in which GBC has an interest; (c) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any Notice of Lien, claim of mechanic's, materialman's or other lien, or
assignment or satisfaction of mechanic's, materialman's or other lien; (d) Take
control in any manner of any cash or non-cash items of payment or proceeds of
Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into GBC's possession; (e)
Endorse all checks and other forms of remittances received by GBC; (f) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (g) Grant
extensions of time to pay, compromise claims and settle Receivables and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give GBC the same rights of access and other rights with respect
thereto as GBC has under this Agreement; and (k) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other present or future
agreements. Any and all reasonable sums paid and any and all reasonable costs,
expenses, liabilities, obligations and reasonable attorneys' fees incurred by
GBC with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall GBC's rights under the foregoing power of attorney or any of GBC's other
rights under this Agreement be deemed to indicate that GBC is in control of the
business, management or properties of Borrower.
* DURING THE CONTINUANCE OF SUCH EVENT OF DEFAULT
7.5. APPLICATION OF PROCEEDS. All proceeds realized as the result
of any sale or other disposition of the Collateral shall be applied by GBC first
to the reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GBC for any deficiency. If, GBC, in its sole
discretion, directly or indirectly enters into a deferred
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payment or other credit transaction with any purchaser at any sale of
Collateral, GBC shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by GBC of the cash therefor.
7.6. REMEDIES CUMULATIVE. In addition to the rights and remedies
set forth in this Agreement, GBC shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"Account Debtor" means the obligation a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,*
shareholder, director,** officer, of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.
* FIVE PERCENT
** OR
"Agreement" and "this Agreement" means this Loan and Security Agreement
and all modifications and amendments thereto, extensions thereof, and
replacements therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Eligible Receivables" means unconditional Receivables arising in the
ordinary course of Borrower's business from the sale of goods or rendition of
services*, which GBC, in its sole judgment, shall deem eligible for borrowing,
based on such considerations as GBC may from time to time deem appropriate.
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* OR THE LICENSING OF SOFTWARE
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against GBC, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including all raw
materials, work in process, finished goods and goods in transit), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"LIBOR Rate" means (i) the one-month London Interbank Offered Rate for
deposits in U.S. dollars, as shown each day in The Wall Street Journal (Eastern
Edition) under the caption `Money Rates - London Interbank Offered Rates
(LIBOR)"; or (ii) if the Wall Street Journal does not publish such rate, the
offered one-month rate for deposits in U.S. dollars which appears on the Reuters
Screen LIBO Page as of 10:00 a.m., New York time, each day, provided that if at
least two rates appear on the Reuters Screen LIBO Page on any day, the "LIBOR
Rate" for such day shall be the arithmetic mean of such rates; or (`,ii) if the
Wall Street Journal does not publish such rate on a particular day and no such
rate appears on the Reuters Screen LIBO Page on such day, the rate per annum at
which deposits in U.S. dollars are offered to the principal London
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office of The Chase Manhattan Bank, N.A. in the London interbank market at
approximately 11:00 A.M., London time, on such day in an amount approximately
equal to the outstanding principal amount of the Loans, for a period of one
month, in each of the foregoing cases as determined in good faith by GBC, which
determination shall be conclusive absent manifest error.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct Or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, loan fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and GBC.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes*; (iv) additional security interests and liens
which are subordinate to the security interest in favor of GBC and are consented
to in writing by GBC (which consent shall not be unreasonably withheld); (v)
security interests being terminated substantially concurrently with this
Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent**; (vii) liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by liens of
the type described above in clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods***. GBC will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on GBC's then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of GBC, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding, and
that Borrower agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.
* , OR GOVERNMENTAL FEES, ASSESSMENTS OR OTHER GOVERNMENTAL CHARGES OR
LEVIES, EITHER NOT DELINQUENT OR BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS, PROVIDED THE SAME HAVE NO PRIORITY OVER ANY OF GBC'S SECURITY
INTERESTS AND THE BORROWER MAINTAINS ADEQUATE RESERVES THEREFOR IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED.
** MORE THAN 30 DAYS, OR ARE BEING CONTESTED IN GOOD FAITH (PROVIDED
SUCH LIEN IS NOT FORECLOSED)
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*** ;(IX) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, UNLESS THE JUDGMENT
IT SECURES IS NOT FULLY COVERED BY INSURANCE AND HAS NOT BEEN DISCHARGED OR
EXECUTION THEREOF EFFECTIVELY STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 30
DAYS OF THE ENTRY THEREOF PROVIDED THAT, IF THE JUDGMENT IS NOT FULLY COVERED BY
INSURANCE OR EXECUTION THEREOF HAS NOT BEEN SO STAYED AND BONDED, GBC SHALL NOT
BE REQUIRED TO MAKE ANY LOANS OR OTHERWISE EXTEND CREDIT TO OR FOR THE BENEFIT
OF BORROWER; (X) LICENSES OR SUBLICENSES GRANTED TO OTHERS NOT INTERFERING IN
ANY MATERIAL RESPECT WITH THE BUSINESS OF BORROWER; AND (XI) LIENS WHICH
CONSTITUTE RIGHTS OF SET-OFF OF A CUSTOMARY NATURE OR BANKER'S LIENS ON AMOUNTS
ON DEPOSIT, WHETHER ARISING BY CONTRACT OR BY OPERATION OF LAW, IN CONNECTION
WITH ARRANGEMENTS ENTERED INTO WITH DEPOSITORY INSTITUTIONS IN THE ORDINARY
COURSE OF BUSINESS
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
fights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1. INTEREST COMPUTATION. In computing interest on the
Obligations, all checks, wire transfers and other items of payment received by
GBC (including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by GBC on account of the Obligations three Business Days
after receipt by GBC of immediately available funds. GBC shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to GBC in its discretion, and GBC may charge Borrower's
Loan account for the amount of any item of payment which is returned to GBC
unpaid.
9.2. APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in GBC's sole discretion reversed and reapplied,
to the Obligations, in such order and manner as GBC shall determine in its sole
discretion.
9.3. CHARGES TO ACCOUNT. GBC may, in its discretion, require that
Borrower pay monetary Obligations in cash to GBC, or charge them to Borrower's
Loan account, in which event they will bear interest at the same rate applicable
to the Loans.
9.4. MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with
an account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall
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be deemed correct, accurate and binding on Borrower and an account stated
(except for reverses and reapplications of payments made and corrections of
errors discovered by GBC), unless Borrower notifies GBC in writing to the
contrary within sixty days after each account is rendered, describing the nature
of any alleged errors or admissions.
9.5. NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to GBC or Borrower at the addresses shown in the heading to
this Agreement, or at any other address designated in writing by one party to
the other party. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one business
day following delivery to the private delivery service, or*
* UPON DELIVERY IN THE CASE OF NOTICES SENT BY MAIL
9.6. SEVERABILITY. Should any provision of this Agreement be held
by any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
9.7. INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GBC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8. WAIVERS. The failure of GBC at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and GBC shall not waive or
diminish any right of GBC later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to GBC shall be deemed to have been waived by
any act or knowledge of GBC or its agents or employees, but only by a specific
written waiver signed by an authorized officer of GBC and delivered to Borrower.
Borrower waives demand, protect, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by GBC on which Borrower is or
may in any way be liable, and notice of any action taken by GBC, unless
expressly required by this Agreement.
9.9. AMENDMENT. The terms and provisions of this Agreement may not
be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GBC.
9.10. TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
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9.11. ATTORNEY'S FEES AND COSTS. Borrower shall reimburse GBC for
all reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by GBC,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonable
attorneys' fees and costs GBC incurs in order to do the following: prepare and
negotiate this Agreement and the documents relating to this Agreement; obtain
legal advice in connection with this Agreement or Borrower; enforce, or seek to
enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce GBC's security interest in, the Collateral; and otherwise
represent GBC in any litigation relating to Borrower. If either GBC or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which GBC may
be entitled pursuant to this Paragraph shall immediately become part of
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
9.12. BENEFIT OF AGREEMENT. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GBC; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GBC, and any prohibited assignment shall be
void. No consent by GBC to any assignment shall release Borrower from its
liability for the Obligations.
9.13. JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.14. LIMITATION OF ACTIONS. Any claim or cause of action by
Borrower against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by GBC, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after* the act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of GBC, or on any other person authorized to
accept service on behalf of GBC, within thirty (30) days thereafter. Borrower
agrees that such one-year period is a reasonable and sufficient time for
Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of GBC in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other present or future
agreement.
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* BORROWER LEARNS OF, OR IN THE EXERCISE OF REASONABLE DILIGENCE SHOULD
HAVE LEARNED OF,
9.15. PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and GBC acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including," whenever used in this Agreement, shall mean "including (but not
limited to)." This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against GBC or Borrower under any rule of
construction or otherwise.
9.16. GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all
acts and transactions hereunder and all rights and obligations of GBC and
Borrower shall be governed by the laws of the State of California. As a material
part of the consideration to GBC to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at GBC's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii). consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.17. MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GBC EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
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BORROWER:
FACTORY AUTOMATION & COMPUTER
TECHNOLOGIES, INC.
BY /s/ Xxxxxx X. Xxxxx
---------------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Xxxx X. Xxxxxx
---------------------------------------
SECRETARY OR ASST. SECRETARY
GBC:
GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
BY /s/ Xxxxxxx Xxxx
---------------------------------------
TITLE President
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