Exhibit 10.4
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of AUGUST 4,
1998 between FREMONT FINANCIAL CORPORATION, a California corporation
(FREMONT), with a place of business located at 0000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000-0000 and EIP MICROWAVE, INC., a
Delaware corporation (BORROWER), with its chief executive office located at
0000 XX Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx 00000.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 TERMS. In addition to the terms that are defined within this
Agreement, the following terms shall have the following definitions when used
in this Agreement:
ACCOUNT DEBTOR means any Person who is or who may become obligated under, with
respect to, or on account of an Account.
ACCOUNTS means all presently existing and hereafter arising accounts
receivable, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, whether or not earned by performance, all credit
insurance, guaranties, and other security therefor, as well as all goods
returned to or reclaimed by Borrower, and Borrower's Books relating to any of
the foregoing.
AGREEMENT means this Loan and Security Agreement and any riders, addenda,
extensions, supplements, amendments or modifications to or in connection with
this Loan and Security Agreement.
AUTHORIZED REPRESENTATIVE means any officer, employee or other representative
of Borrower authorized in writing by Borrower to transact business with
Fremont.
BANKRUPTCY CODE means the United States Bankruptcy Code (11 U.S.C. Sections
101 ET SEQ.), as amended, and any successor statute.
BORROWER'S BOOKS means all of Borrower's books and records including all of
the following: ledgers; records indicating, summarizing or evidencing
Borrower's assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs or other computer
prepared information, and the equipment containing such information.
BUSINESS DAY means any day which is not a Saturday, Sunday or other day on
which banks in the State of California are authorized or required to close.
CODE means the California Uniform Commercial Code, as amended from time to
time.
COLLATERAL means all of the following: the Accounts; the Equipment; the
General Intangibles; the Inventory; the Negotiable Collateral; any money or
other assets of Borrower which hereafter come into the possession, custody or
control of Fremont; and all proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts or
other tangible or intangible property resulting from the sale or other
disposition of the Collateral, or any portion thereof or interest therein,
and the proceeds thereof.
ELIGIBLE ACCOUNTS means those Accounts created by Borrower in the ordinary
course of business that arise out of Borrower's sale of goods or rendition of
services, are owing from Account Debtors that are acceptable to Fremont,
strictly comply with all of Borrower's representations and warranties to
Fremont and are, and at all times continue to be, acceptable to Fremont in
all respects; PROVIDED, HOWEVER, that standards of eligibility may be fixed
and revised from time to time by Fremont in Fremont's exclusive judgment. In
determining such eligibility, Fremont may, but is not obligated to, rely on
agings, reports and schedules of Accounts furnished by Borrower, but reliance
by Fremont thereon from time to time shall not be deemed to limit Fremont's
right to revise standards of eligibility at any time as to Borrower's present
and future Accounts. Eligible Accounts shall not include any of the
following: (a) Accounts which he Account Debtor has failed to pay within 90
days after the original invoice date; (b) all Accounts owed by any Account
Debtor that has failed to pay fifty percent (50%) or more of its Accounts
owed to Borrower within 90 days after the original invoice date; (c) Accounts
with respect to which the Account Debtor is an officer, director, employee or
agent of Borrower; (d) Accounts with respect to which the Account Debtor is a
subsidiary of, related to, affiliated with or has common shareholders,
officers or directors with Borrower; (e) Accounts with respect to which goods
are placed on consignment, guaranteed sale, sale or return, sale on approval,
xxxx and hold, or which contain other terms by reason of which payment by the
Account Debtor may be conditional; (f) Accounts with respect to which the
Account Debtor is not a resident of the United States *; (g) Accounts with
respect to which the Account Debtor is the United States or any department,
agency or instrumentality of the United States; (h) Accounts with respect to
which Borrower is or may become liable to the Account Debtor for goods sold
or services rendered by the Account Debtor to Borrower or, for any other
reason, are subject to any right of offset in favor of the Account Debtor **;
(i) Accounts with respect to an Account Debtor whose total obligations to
Borrower exceed fifteen percent (15%) of all Accounts, to the extent such
obligations exceed such percentage ***; (j) Accounts with respect to which
the Account Debtor disputes liability or makes any claim with respect
thereto, or is subject to any Insolvency Proceeding, or becomes insolvent, or
goes out of business; (k) Accounts that represent progress xxxxxxxx or other
advance xxxxxxxx that are due prior to the completion of performance by
Borrower of the subject contract for goods or services; or (l) Accounts that
are payable in currency other than United States dollars.
* AND FOR WHICH BORROWER HAS NOT OBTAINED CREDIT INSURANCE OR A LETTER OF
CREDIT WHICH, IN EITHER CASE, IS SATISFACTORY TO FREMONT IN ITS SOLE
DISCRETION
** PROVIDED THAT SUCH ACCOUNTS SHALL ONLY BE INELIGIBLE TO THE EXTENT OF
SUCH OFFSET OR POTENTIAL OFFSET
*** PROVIDED, HOWEVER, THAT WITH RESPECT TO ACCOUNTS FOR WHICH EITHER
HEWLETT PACKARD OR MANTECH SYSTEMS IS THE ACCOUNT DEBTOR, SUCH PERCENTAGE
SHALL BE 60%
ELIGIBLE INVENTORY means [Not Applicable]
ENVIRONMENTAL LAW means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, the Hazardous Materials Transportation
Act, the Toxic Substances Control Act, the regulations pertaining to such
statutes, and any other safety, health or environmental statutes, laws,
regulations or ordinances of the United States or of any state, county or
municipality in which Borrower conducts its business or the Collateral is
located.
EQUIPMENT means all of Borrower's present and hereafter acquired equipment,
machinery, machine tools, motors, furniture, furnishings, fixtures, motor
vehicles, rolling stock, processors, tools, parts, dies, jigs, goods (other
than consumer goods, farm products or Inventory), wherever located, and any
interest of Borrower in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions and
improvements to any of the foregoing, wherever located.
ERISA means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
ERISA AFFILIATE means each trade or business (whether or not incorporated and
whether or not foreign) which is or may hereafter become a member of a group
of which Borrower is a member and which is treated as a single employer under
ERISA Section 4001(b)(l), or IRC Section 414.
EVENT OF DEFAULT means the events specified in SECTION 8.
FREMONT EXPENSES means all of the following: costs and expenses (including
taxes, assessments and insurance premiums) required to be paid by Borrower
under any of the Loan Documents which are paid or advanced by Fremont;
filing, recording, publication, appraisal (including periodic Collateral
appraisals), real estate survey, environmental audit and search fees
assessed, paid or incurred by Fremont in connection with Fremont's
transactions with Borrower; costs and expenses incurred by Fremont in the
disbursement or collection of funds to or from Borrower; charges resulting
from the dishonor of checks; costs and expenses paid or incurred by Fremont
to correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Fremont that result from third party claims
against Fremont covered by Borrower's indemnification of Fremont in SECTION
11.4; costs and expenses paid or incurred by Fremont in enforcing or
defending the Loan Documents; and Fremont's reasonable attorneys fees and
expenses incurred (including the allocated costs of Fremont's in-house
counsel) in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing, defending or otherwise representing Fremont
in connection with the Loan Documents or the Obligations (including attorneys
fees and expenses incurred in connection with a workout, a restructuring, an
action to lift the automatic stay of Section 362 of the Bankruptcy Code, any
other action or participation by Fremont in an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations or any defense or
participation by Fremont in any lender liability, preference or fraudulent
conveyance actions).
GENERAL INTANGIBLES means all of Borrower's present and future general
intangibles and other personal property (including contract rights, rights
arising under common law, statutes or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, service marks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, monies due under any royalty or licensing
agreements, route lists, infringement claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds and tax refund claims) other than
goods and Accounts, and Borrower's Books relating to any of the foregoing.
HAZARDOUS MATERIAL means any substance, material, emission or waste which is
or hereafter becomes regulated or classified as a hazardous substance,
hazardous material, toxic substance or solid waste under any Environmental
Law, asbestos, petroleum products, urea formaldehyde, polychlorinated
biphenyls (PCBs), radon and any other hazardous or toxic substance, material,
emission or waste.
INSOLVENCY PROCEEDING means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, formal or
informal moratoria, compositions, extensions generally with its creditors or
proceedings seeking reorganization, liquidation, arrangement or other similar
relief.
INVENTORY means all present and future inventory in which Borrower has any
interest, including goods held for sale or lease or to be furnished under a
contract of service, Borrower's present and future raw materials, work in
process, finished goods and materials used in or consumed in Borrower's
business, goods which have been returned to, repossessed by or stopped in
transit by Borrower, packing and shipping materials, wherever located, any
documents of title representing any of the above, and Borrower's Books
relating to any of the foregoing.
IRC means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
LOAN DOCUMENTS means, collectively, this Agreement, any Notes, any security
agreements, pledge agreements, deeds of trust, mortgages or other
encumbrances or agreements which secure the Obligations, any guaranties of
the Obligations, any lock box or blocked account agreements and any other
agreement entered into between Borrower or any guarantor of the Obligations
and Fremont relating to or in connection with this Agreement.
MULTIEMPLOYER PLAN means a MULTIEMPLOYER PLAN as defined in ERISA Sections
3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower
or any ERISA Affiliate.
NEGOTIABLE COLLATERAL means all of Borrower's present and future letters of
credit, notes, drafts, instruments, certificated and uncertificated
securities, securities entitlements, securities accounts, documents, leases
and chattel paper, and Borrower's Books relating to any of the foregoing.
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NOTE means any promissory note made by Borrower to the order of Fremont
concurrently herewith or at any time hereafter.
OBLIGATIONS means all loans, advances, debts, liabilities (including all
amounts charged to Borrower's loan account pursuant to any agreement
authorizing Fremont to charge Borrower's loan account), obligations, fees,
lease payments, guaranties, covenants and duties owing by Borrower to Fremont
of any kind and description (whether pursuant to or evidenced by the Loan
Documents, by any note or other instrument or by any other agreement between
Fremont and Borrower, and irrespective of whether for the payment of money),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, including any debt, liability or obligation
owing from Borrower to others which Fremont may obtain by assignment or
otherwise, and all interest thereon, including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued, and all Fremont
Expenses which Borrower is required to pay or reimburse pursuant to the Loan
Documents, by law or otherwise.
PERSON means and includes natural persons, corporations, limited
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts or other organizations, irrespective of whether they are
legal entities, and governments and agencies and political subdivisions
thereof.
PLAN means any plan described in ERISA Section 3(2) maintained for employees
of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
REFERENCE RATE means the variable rate of interest, per annum, published by
The Wall Street Journal as the "Prime Rate" and based on "the base rate on
corporate loans posted by at least 75% of the nation's 30 largest banks". The
Reference Rate is nothing more nor less than an index for determining the
interest rate payable under the terms of this Agreement. The Reference Rate
is not necessarily the best rate, or any other definition of rates, offered
by the banks that establish the rate or by Fremont. In the event The Wall
Street Journal ceases to publish the "Prime Rate", Fremont may substitute any
similar index for the Reference Rate.
TERM LOAN means any term loan made by Fremont to Borrower, evidenced by and
repayable in accordance with the terms and conditions of a Note.
1.2 CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting and the
term "or" has the inclusive meaning generally represented by the phrase
"and/or". The weeds HEREOF HEREIN, HEREBY, HEREUNDER, and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, subsection, clause, exhibit and
schedule references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in any of the other Loan Documents to this
Agreement or any of the other Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions and supplements thereto and thereof.
1.3 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles (GAAP) as in effect from time to time. When used herein, the term
FINANCIAL STATEMENTS shall include the notes and schedules thereto.
1.4 RIDERS, EXHIBITS, ETC. The Conditions Precedent Rider to this
Agreement and all of the other riders, exhibits, addenda and schedules to
this Agreement shall be deemed incorporated herein by reference.
1.5 CODE. Any terms used in this Agreement which are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
2. ADVANCES AND TERMS OF PAYMENT
2.1 LOANS.
A. REVOLVING ADVANCES; REVOLVING ADVANCE LIMIT. Upon the request
of Borrower, made at any time or from time to time during the term hereof,
and so long as no Event of Default has occurred and is continuing, Fremont
shall, in its sole and absolute discretion, make advances (the REVOLVING
ADVANCES) to Borrower in an amount up to 85% of the aggregate outstanding
amount of Eligible Accounts; PROVIDED, HOWEVER, that in no event shall the
aggregate amount of the outstanding Revolving Advances be greater than, at
any time, the sum of $1,000,000 (the REVOLVING ADVANCE LIMIT). Fremont may
reduce its advance rates on Eligible Accounts, reduce the Revolving Advance
Limit or establish reserves with respect to borrowing availability if Fremont
determines, in its sole discretion, that there has occurred, or is likely to
occur, an impairment of the prospect of repayment of all or any portion of
the Obligations, the value of the Collateral or the validity or priority of
Fremont's security interests in the Collateral. Without limiting the
foregoing, a permanent reserve against borrowing availability shall exist in
the amount of Fifty Thousand Dollars ($50,000).
B. TERM LOAN. Concurrently with the funding of the initial
Revolving Advance, Fremont will make a Term Loan to Borrower in the original
principal amount of $500,000, to be evidenced by and repayable in accordance
with the terms and conditions of a Note of even date herewith. Such Term Loan
and any other Term Loan subsequently made by Fremont to Borrower shall
constitute Obligations and shall be secured by the Collateral. The
occurrence of a default under such Note or under any Note made in respect of
any subsequent Term Loan shall constitute an Event of Default hereunder.
C. ADVANCE LIMIT. The sum of the Revolving Advance Limit -- the
principal amount of all Term Loans outstanding from time to time, if any, is
referred to herein as the ADVANCE LIMIT.
2.2 OVERADVANCES. All Revolving Advances made hereunder shall be
added to and deemed part of the Obligations when made. If, at any time and
for any reason, the aggregate amount of the outstanding Revolving Advances
exceeds the dollar or percentage limitations contained in SECTION 0.XX (an
OVERADVANCE), then Borrower shall, upon demand by Fremont, immediately pay to
Fremont, in cash, the amount of such excess.
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2.3 OVERADVANCE FEE. Without affecting Borrower's obligation to
immediately repay to Fremont the amount of each Overadvance in accordance
with the provisions of SECTION 2.2, in the event Fremont agrees to permit any
Overadvance to exist and continue and in consideration for permitting such
Overadvance to exist and continue, Fremont shall be entitled, in its sole
discretion, to charge Borrower a fee in an amount equal to Four Hundred Fifty
Dollars ($450) per day for each day any Overadvance exists or, alternatively,
such other fee as Fremont and Borrower may agree to at the time the
Overadvance is made or discovered.
2.4 AUTHORIZATION TO MAKE REVOLVING ADVANCES. Borrower hereby
authorizes Fremont to make Revolving Advances based upon telephonic or other
instructions received from anyone purporting to be an Authorized
Representative, or, at the discretion of Fremont without instructions from or
notice to Borrower, if such Revolving Advances are necessary to satisfy any
Obligations. All requests for Revolving Advances hereunder shall specify the
date on which the requested Revolving Advance is to be made (which day shall
be a day that Fremont is open for business) and the amount of the requested
Revolving Advance. Requests received after 11:00 a.m. Pacific time on any day
shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Revolving Advances made under this
Agreement shall be conclusively presumed to have been made to, at the request
of, and for the benefit of Borrower when deposited to the credit of Borrower
or otherwise disbursed in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
2.5 INTEREST.
A. BASIC RATE; DEFAULT RATE. Except where specified to the
contrary in any Loan Document, the aggregate outstanding amount of all
Obligations shall bear interest at the rate of 3.5% per annum above the
Reference Rate. The aggregate outstanding amount of all Obligations shall
bear interest, from and after written notice by Fremont to Borrower of the
occurrence of an Event of Default and without constituting a waiver of any
such Event of Default, at the rate of 6.75% per annum above the Reference
Rate; PROVIDED HOWEVER, that in the event an Insolvency Proceeding is
commenced by or against Borrower, Fremont may charge such default rate of
interest without providing written notice thereof to Borrower. All interest
payable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed, based on
the aggregate amount of the Obligations that are outstanding on each day.
Interest shall continue to accrue until all of the Obligations are paid in
full.
B. INITIAL RATE. The Reference Rate as of the date of this
Agreement is 8.5% per annum, and. therefore, the effective rate of interest
hereunder as of the date of this Agreement is 12.0% per annum. The interest
rate payable by Borrower under the terms of this Agreement shall be adjusted
in accordance with any change in the Reference Rate from time to time on the
date of any such change. All interest payable by Borrower shall be due and
payable on the first day of each calendar month during the term of this
Agreement.
C. MINIMUM INTEREST. Notwithstanding anything to the contrary
contained in the Loan Documents, Borrower shall pay Fremont a minimum annual
interest charge in respect of the Obligations equal to: $90,000 per Contract
Year. *
* FOR THE PURPOSES OF THIS PARAGRAPH, "CONTRACT YEAR" SHALL MEAN THAT
CERTAIN 12-MONTH PERIOD BEGINNING WITH THE DATE ON WHICH FREMONT FIRST
ADVANCES FUNDS TO BORROWER HEREUNDER (THE "INITIAL FUNDING DATE") AND ENDING
ON THE DATE IMMEDIATELY PRECEDING THE ONE-YEAR ANNIVERSARY OF THE INITIAL
FUNDING DATE. NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH, MINIMUM
INTEREST SHALL NOT APPLY IN ANY CONTRACT YEAR DURING WHICH AN EARLY
TERMINATION FEE IS PAID PURSUANT TO THE TERMS OF THIS AGREEMENT.
2.6 VERIFICATION AND COLLECTION OF ACCOUNTS. Fremont or Fremont's
designee may, at any time, with or without notice to Borrower, (a) notify
Account Debtors of Borrower that the Accounts have been assigned to Fremont
and that Fremont has a security interest in the Accounts; (b) contact Account
Debtors of Borrower, either in writing or by telephone, for the purpose of
verifying the validity, amount or any other matter relating to any Accounts;
and (c) collect the Accounts directly and charge the collection costs and
expenses to Borrower's loan account. Unless and until Fremont begins direct
collection of the Accounts or gives Borrower other written instructions,
Borrower shall collect all Accounts and the proceeds of other Collateral for
the benefit of Fremont, receive in trust all payments thereon as Fremont's
trustee and immediately deliver said payments to Fremont in their original
form as received by Borrower (subject to the terms of any lockbox, blocked
account or similar agreement entered into for the purpose of collection of
the Accounts).
2.7 CREDITING PAYMENTS. For the purpose of calculating the
availability of Revolving Advances under SECTION 2.1A, the receipt by Fremont
of any wire transfer of funds, check or other item of payment shall be
applied immediately to provisionally reduce the Obligations, but such receipt
shall not be considered a payment on account unless such wire transfer is of
immediately available federal funds and is made to the appropriate deposit
account of Fremont or unless and until such check or other item of payment is
honored when presented for payment. For the purpose of calculating interest
under SECTION 2.5A, the receipt by Fremont of any wire transfer of funds,
check or other item of payment shall be deemed to have occurred five (5)
Business Days after the date Fremont actually receives such item of payment.
In the event any check or other item of payment is not honored when presented
for payment, Borrower shall be deemed not to have made such payment.
Notwithstanding anything to the contrary contained herein, any wire transfer,
check or other item of payment received by Fremont after 11:00 a.m. Pacific
time shall be deemed to have been received by Fremont as of the opening of
business on the immediately following Business Day.
2.8 ANNUAL FACILITY FEE. Borrower shall pay Fremont an annual fee
(the ANNUAL FACILITY FEE) in the amount of $15,000. The Annual Facility Fee
shall be fully earned and is due and payable on the date that the initial
Revolving Advance hereunder and thereafter annually on the anniversary of the
date of this Agreement for the entire term of this Agreement, including all
renewal terms, or so long as any of the Obligations are outstanding.
2.9 LOAN ORIGINATION FEE. [Not Applicable]
2.10 UNUSED LINE FEE. [Not Applicable]
2.11 SERVICING FEE. [Not Applicable].
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2.12 MAINTENANCE FEE. [Not Applicable]
2.13 AUDIT FEE. Borrower shall pay Fremont an audit fee in an
amount equal to $600 per day plus out of-pocket expenses incurred by Fremont
for each audit or examination of Borrower performed by Fremont.
2.14 LATE REPORTING FEE. Borrower shall pay Fremont a fee in an
amount equal to Fifty Dollars ($50.00) per document per day for each Business
Day any report, financial statement or schedule required to be delivered to
Fremont by this Agreement is past due.
2.15 MISCELLANEOUS FEES. Borrower shall pay Fremont its customary
fees for wire transfers (including a premium for early and late transfers),
returned checks, letter of credit guarantees and any other services provided
by Fremont to Borrower that are incidental to this Agreement. Upon Borrower's
request, Fremont shall provide Borrower with a written schedule of the
amounts of all such miscellaneous fees.
2.16 MAXIMUM CHARGES. In no event shall interest on the Obligations
exceed the highest lawful rate in effect from time to time. It is not the
intention of the parties hereto to make an agreement which violates any
applicable state or federal usury laws. In no event shall Borrower pay or
Fremont accept or charge any interest which, together with any other charges
upon the principal or any portion thereof, exceeds the maximum lawful rate of
interest allowable under any applicable state or federal usury laws. Should
any provision of this Agreement or any existing or future Notes or Loan
Documents between the parties be construed to require the payment of interest
which, together with any other charges upon the principal or any portion
thereof, exceeds the maximum lawful rate of interest, then any such excess
shall he applied to the remaining principal balance, if any, and the
remainder refunded to Borrower.
2.17 MONTHLY STATEMENTS. Fremont shall render monthly statements to
Borrower of all Obligations, including statements of all principal, interest,
fees and Fremont Expenses charged, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and Fremont unless, within thirty (30) days after receipt thereof by
Borrower, Borrower shall deliver to Fremont, by registered or certified mail
or overnight courier service, at Fremont's address stated in SECTION 12,
written objection to Fremont's statement specifying the error or errors, if
any, contained in such statements.
2.18 PAYMENT MECHANICS. As an administrative convenience to
Borrower to ensure the timely payment of amounts owing by Borrower to Fremont
under this Agreement, Borrower hereby requests Fremont to advance for the
account of Borrower an amount each month sufficient to pay interest accrued
on the principal amount of the Obligations during the immediately preceding
month and all monthly principal installments or other payments due under a
Note or other Loan Document and amounts from time to time sufficient to pay
all fees and Fremont Expenses owing by Borrower under this Agreement.
Borrower authorizes Fremont, in Fremont's sole discretion, to make a
Revolving Advance for Borrower's account of a sum sufficient each month to
pay, on the due date thereof, all interest accrued on the principal amount of
the Obligations during the immediately preceding month and all monthly
principal installments or other payments due under a Note or other Loan
Document and sums from time to time sufficient to pay, on the due date
thereof, all fees and Fremont Expenses owing by Borrower under this
Agreement, and Fremont may apply the proceeds of each such Revolving Advance
to the payment of such interest, installments, fees and Fremont Expenses.
Each such Revolving Advance shall thereafter accrue interest at the rate then
applicable under this Agreement. Fremont, however, shall not be obligated to
make any such Revolving Advance and Borrower acknowledges that Fremont will
be particularly disinclined to do so if an Event of Default or an Overadvance
exists at the time of, or would result from the making of, such Revolving
Advance.
3. TERM OF AGREEMENT AND EARLY TERMINATION
3.1 TERM. This Agreement shall become effective in accordance with
SECTION 14.1 and shall continue in full force and effect for a term ending
three years after the date hereof and shall be deemed automatically renewed
for successive terms of one (1) year thereafter until terminated as of the
end of the initial term 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.
3.2 EARLY TERMINATION. Borrower, subject to the payment of the
fee described below, may terminate this Agreement other than at the end of
the then current Term by giving Fremont prior written notice of its intention
to effect an early termination of this Agreement. Fremont may terminate this
Agreement at any time upon or after the occurrence of an Event of Default. In
view of the impracticability and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable calculation
of Fremont's lost profits as a result of an early termination of this
Agreement, in either of the instances described in the preceding two
sentences, Borrower shall pay to Fremont, upon the effective date of such
early termination and in addition to all other Obligations, an early
termination fee (the EARLY TERMINATION FEE) in an amount equal to: (a) three
percent (3.0%) of the Advance Limit if such termination occurs at any time
during the first year of the initial Term; (b) two percent (2.0%) of the
Advance Limit if such termination occurs at any time during the second year
of the initial Term; and (c) one percent (1.0%) of the Advance Limit if such
termination occurs during the third year of the initial Term or during any
renewal Term. The Early Termination Fee shall be presumed to be the amount of
damages sustained by Fremont as the result of the early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Fee shall be deemed included in the
Obligations. Notwithstanding anything herein to the contrary, if and to the
extent the Early Termination Fee constitutes interest under applicable law,
the Early Termination Fee, when added to all other interest contracted for,
charged or received under this Agreement or any other Loan Documents, shall
not exceed, and shall be limited to an amount which constitutes, interest at
the maximum lawful rate of interest allowable under applicable law.
3.3 EFFECT OF TERMINATION. Upon termination of this Agreement,
all of the Obligations shall be immediately due and payable in full. No
termination of this Agreement shall relieve or discharge Borrower of
Borrower's duties, obligations and covenants hereunder until all of the
Obligations have been fully and indefeasibly paid and satisfied, and
Fremont's continuing security interest in the Collateral shall remain in
effect until all of the Obligations have been fully and indefeasibly paid and
satisfied.
5
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Fremont
a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each
and all of its covenants and duties under the Loan Documents. Fremont's
security interest in the Collateral shall attach to all Collateral without
further act on the part of Fremont or Borrower. Other than sales of Inventory
to buyers in the ordinary course of business, Borrower has no authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, upon the request of Fremont, immediately endorse and assign
such Negotiable Collateral to Fremont and deliver physical possession of such
Negotiable Collateral to Fremont.
4.3 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
execute and deliver to Fremont, concurrently with Borrower's execution and
delivery of this Agreement and at any time thereafter at the request of
Fremont, all financing statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Fremont may reasonably request, in form satisfactory to
Fremont, to perfect and continue perfected Fremont's security interest in the
Collateral and in order to fully consummate all of the transactions
contemplated hereunder and under the other Loan Documents.
4.4 POWER OF ATTORNEY. Borrower hereby irrevocably designates,
makes, constitutes and appoints Fremont (and any of Fremont's officers,
employees or agents designated by Fremont) as Borrower's true and lawful
attorney-in-fact, and Fremont, or Fremont's agent, may, without notice to
Borrower and in either Borrower's or Fremont's name, but at the cost and
expense of Borrower, at such time or times as Fremont in its sole discretion
may determine: (a) demand payment of the Accounts from the Account Debtors,
enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts; (b) take control, in any manner, of any item of
payment or proceeds relating to any Collateral; (c) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of
lien or similar document in connection with any of the Collateral; (d) sign
Borrower's name on any of documents described in SECTION 4.3 or on any other
similar documents to be executed, recorded or filed in order to perfect or
continue perfected Fremont's security interest in the Collateral; (e) sign
Borrower's name on any invoices, bills of lading, freight bills, chattel
paper, documents, instruments or similar documents or agreements relating to
the Accounts, Inventory or other Collateral, drafts against Account Debtors,
schedules and assignments of Accounts, verifications of Accounts and notices
to Account Debtors; (f) send requests for verification of Accounts; (g)
endorse Borrower's name on any checks, notes, acceptances, money orders,
drafts or other items of payment or proceeds relating to any Collateral that
may come into Fremont's possession and deposit the same to the account of
Fremont for application to the Obligations; (h) do all other acts and things
necessary, in Fremont's determination, to fulfill Borrower's obligations
under this Agreement or any of the other Loan Documents; (i) at any time that
an Event of Default has occurred and is continuing, notify the post office
authorities to change the address for delivery of Borrower's mail to an
address designated by Fremont, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower; (j) at any time that an Event of Default has occurred
and is continuing, use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, Equipment and any other Collateral and to which Borrower
has access; (k) at any time that an Event of Default has occurred and is
continuing, make, settle and adjust all claims under Borrower's policies of
insurance, make all determinations and decisions with respect to such
policies of insurance and endorse the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance; (l) at any time that an Event of Default has occurred and is
continuing, sll or assign any of the Accounts and other Collateral upon such
terms, for such amounts and at such time or times as Fremont deems advisable;
and (m) at any time that an Event of Default has occurred and is continuing,
settle, adjust or compromise disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms that Fremont
determines to be reasonable, and, in furtherance thereof, execute and deliver
any documents and releases that Fremont determines to be necessary. The
appointment of Fremont as Borrower's attorney-in-fact and each and every one
of Fremont's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been hilly repaid and performed
and this Agreement has been terminated.
4.5 RIGHT TO INSPECT. Fremont, through any of its officers,
employees or agents, shall have the right at any time or times during
Borrower's usual business hours, or during the usual business hours of any
third party having control over any of Borrower's Books, to inspect
Borrower's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral or Borrower's financial condition. Fremont
also shall have the right at any time or times during Borrower's usual
business hours to inspect and examine the Inventory and the Equipment and to
check and test the same as to quality, quantity, value and condition. If an
Event of Default has occurred or if Fremont reasonably believes that an Event
of Default has occurred, Fremont may conduct any of the inspections
referenced in this SECTION 4.5 at any time without regard to Borrower's or
any third party's usual business hours.
5. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Fremont and
each such representation and warranty shall be deemed to be repeated with
each Revolving Advance made by Fremont and shall be conclusively presumed to
have been relied on by Fremont regardless of any investigation made or
information possessed by Fremont. The following representations and
warranties shall be cumulative and in addition to any and all other
representations and warranties which Borrower shall now or hereafter give, or
cause to be given, to Fremont.
5.1 NO PRIOR ENCUMBRANCES; SECURITY INTERESTS. Borrower has good
and indefeasible title to the Collateral, free and clear of liens, claims,
security interests or encumbrances, except for those permitted under SECTION
7.2.
5.2 ACCOUNTS. All of Borrower's Accounts constitute bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, and, in the case of Accounts created by the sale and delivery of
Inventory, the Inventory giving rise to such Accounts
6
has been delivered to the Account Debtor. At the time of the creation of each
Eligible Account or the assignment thereof to Fremont, each such Eligible
Account is unconditionally owed to Borrower without defense, dispute, offset,
counterclaim or right of return or cancellation and Borrower has not received
notice of actual or imminent bankruptcy, insolvency or material impairment of
the financial condition of the Account Debtor regarding such Eligible Account.
5.3 ELIGIBLE INVENTORY. [Not Applicable]
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, processor or similar
party unless Fremont has consented thereto in writing and are located only at
the following locations:
0000 XX Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx 00000; and
0000 XxXxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
5.5 INVENTORY RECORDS. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality and quantity of the
Inventory and Borrower's cost therefor.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE. The chief executive
office of Borrower is located at the address stated in the first paragraph of
this Agreement.
5.7 DUE INCORPORATION AND QUALIFICATION. Borrower is a
corporation duly organized and existing and in good standing under the laws
of the state of its incorporation and is qualified or licensed to do business
in, and is in good standing in, any state in which the failure to be
qualified or licensed and in good standing could have a material adverse
effect on Borrower's business or the Collateral.
5.8 FICTITIOUS NAME(S). Borrower is not conducting its business
at the present time under any trade or fictitious name(s). During the five
(5) years prior to the date of this Agreement, Borrower did not conduct
business under any trade or fictitious name(s).
5.9 PERMITS AND LICENSES. Borrower holds all licenses, permits,
franchises, approvals and consents as are required in the conduct of its
business and the ownership and operation of its properties.
5.10 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of the Loan Documents to which Borrower is a party are within
Borrower's corporate powers, have been duly authorized and are not in
conflict with nor constitute a breach of any provision contained in
Borrower's Articles or Certificate of Incorporation or Bylaws, nor will they
create a default under any material agreement to which Borrower is a party.
5.11 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower has
no knowledge or notice of any pending, threatened or imminent litigation,
governmental investigations, or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of the Obligations, except for ongoing
collection matters in which Borrower is the plaintiff and such matters as
have been disclosed to Fremont in writing.
5.12 TAXES. All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against Borrower
or any of its property or in connection with Borrower's business have been
paid in full prior to delinquency or the expiration of any extension period.
5.13 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. All
financial statements relating to Borrower which have been or may hereafter be
delivered by Borrower to Fremont have been prepared in accordance with GAAP
and fairly present Borrower's financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has been no
material adverse change in the financial condition of Borrower since the date
of the most recent of such financial statements submitted to Fremont.
5.14 SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature. No transfer of property is being made
by Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan
Documents with the intent to hinder, delay or defer either present or future
creditors of Borrower.
5.15 ERISA. Neither Borrower, nor any ERISA Affiliate nor any Plan
is or has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a), or any of the published
interpretations thereof. No lien upon the assets of Borrower has arisen with
respect to any Plan. No PROHIBITED TRANSACTION within the meaning of ERISA
Section 406 or IRC Section 4975(c) has occurred with respect to any Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any Plan
or Multiemployer Plan when due. There is no accumulated funding deficiency in
any Plan, whether or not waived.
5.16 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS. Borrower has
complied with all Environmental Laws. Except as previously disclosed to
Fremont in writing, Borrower has not caused or permitted any Hazardous
Materials to be located, incorporated, generated, stored, manufactured,
transported to or from, released, disposed of or used at, upon, under or
within any premises at which Borrower conducts its business, or in connection
with Borrower's business. To the best of Borrower's knowledge, no prior owner
or operator of any premises at which Borrower conducts its business has
caused or permitted any of the above to occur at, upon, under or within any
of such premises.
5.17 INTELLECTUAL PROPERTY. Borrower does not own or have rights as
licensee in or to any trademarks or patents or have any trademark or patent
applications pending, except as has been disclosed in writing to Fremont.
5.18 LABOR AND EMPLOYMENT DISPUTES. There are no pending
grievances, disputes or controversies with any union or other organization of
Borrower's employees, or pending threats of strikes or work stoppages, or
demands for collective bargaining by any union or other organization of
Borrower's employees.
7
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that during the term of this Agreement and until
payment in full of the Obligations, and unless Fremont shall otherwise consent
in writing, Borrower shall do all of the following:
6.1 ACCOUNTING SYSTEM. Borrower at all times shall maintain a
standard and modern system of accounting in accordance with GAAP with ledger
and account cards or computer tapes, disks, printouts and records pertaining
to the Collateral which contain information as may from time to time be
requested by Fremont. Borrower also shall keep proper books of account
showing all sales, claims and allowances on its Inventory.
6.2 COLLATERAL REPORTS. Borrower shall deliver to Fremont, no
later than the fifteenth day of each month during the term of this Agreement,
a detailed aging of the Accounts, a reconciliation statement and a summary
aging, by vendor, of all accounts payable and any book overdraft Borrower
shall deliver to Fremont, as Fremont may from time to time require,
collection reports, sales journals, invoices, original delivery receipts,
customers' purchase orders, shipping instructions, bills of lading and other
documentation respecting shipment arrangements. Absent such a request by
Fremont, copies of all such documentation shall be held by Borrower as
custodian for Fremont.
6.3 RETURNS. Returns and allowances, if any, as between Borrower
and its Account Debtors, shall be permitted by Borrower on the same basis and
in accordance with the usual and customary practices of Borrower as they
exist at the time of the execution and delivery of this Agreement. If any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and, if Borrower accepts such return,
issue a credit memorandum (with a copy to be sent to Fremont) in the
appropriate amount to such Account Debtor. Borrower shall promptly notify
Fremont of all returns and recoveries and of all disputes and claims.
6.4 DESIGNATION OF INVENTORY. [Not Applicable]
6.5 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Fremont: (a) as soon as available, but in any event within thirty
(30) days after the end of each month during each of Borrower's fiscal years,
a company prepared balance sheet and profit and loss statement covering
Borrower's operations during such period; and (b) as soon as available, but
in any event within ninety (90) days after the end of each of Borrower's
fiscal years, financial statements of Borrower for each such fiscal year,
certified by independent certified public accountants acceptable to Fremont.
All such annual financial statements shall include a balance sheet and profit
and loss statement, together with the accountants' letter to management.
Borrower shall also deliver Borrower's Form l0-Qs, 10-Ks or 8-Ks, and any
other filings made by Borrower with the Securities and Exchange Commission,
if any, as soon as the same become available, and any other report reasonably
requested by Fremont relating to the Collateral or the financial condition of
Borrower, including financial projections, and a certificate signed by the
chief financial officer of Borrower to the effect that all reports,
statements or computer prepared information of any kind or nature delivered
or caused to be delivered to Fremont under this SECTION 6.5 fairly present
the financial condition of Borrower and that there exists on the date of
delivery of such certificate to Fremont no condition or event which
constitutes an Event of Default. If Borrower is a parent company of one or
more subsidiaries or is a subsidiary of another company, then, in addition to
the financial statements referred to above, Borrower agrees to deliver
financial statements prepared on a consolidating basis so as to present
Borrower and each such related entity separately, and on a consolidated basis.
6.6 LITIGATION. Borrower shall promptly notify Fremont in writing
of any litigation, governmental investigations or criminal prosecutions
involving Borrower, other than collection matters in which Borrower is the
plaintiff.
6.7 TAX RETURNS, RECEIPTS. Borrower shall deliver to Fremont
copies of each of Borrower's federal income tax returns, and any amendments
thereto, within thirty (30) days after the filing thereof with the Internal
Revenue Service. Furthermore, Borrower shall deliver to Fremont, promptly
upon request by Fremont, satisfactory evidence of Borrower's payment of all
federal withholding taxes required to be paid by Borrower.
6.8 GUARANTOR TAX RETURNS. Borrower shall cause each guarantor of
the Obligations to deliver to Fremont copies of such guarantor's federal
income tax returns within thirty (30) days after the filing thereof with the
Internal Revenue Service.
6.9 TITLE TO EQUIPMENT. Upon Fremont's request, Borrower shall
immediately deliver to Fremont, properly endorsed, any and all evidences of
ownership of, or certificates of title or applications for title to, any
items of Equipment.
6.10 MAINTENANCE OF EQUIPMENT. Borrower shall keep and maintain the
Equipment in good operating condition and repair and shall make all necessary
replacements thereto so that the value and operating efficiency thereof shall
at all times be maintained and preserved. Borrower shall not permit any item
of Equipment to become a fixture to real estate or an accession to other
property, and the Equipment is now and shall at all times remain personal
property.
6.11 TAXES. All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against Borrower
or any of its property or in connection with Borrower's business shall be
paid in full prior to delinquency or the expiration of. any extension period.
Borrower shall make due and timely payment or deposit of all federal, state
and local taxes, assessments or contributions required of it by law and will
execute and deliver to Fremont, on demand, appropriate certificates attesting
to the payment or deposit thereof. Borrower shall make timely payment or
deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability and local, state and federal income taxes, and shall, upon
request, furnish Fremont with proof satisfactory to Fremont indicating that
Borrower has made such payments or deposits.
6.12 INSURANCE. Borrower, at its expense, shall keep and maintain
the Collateral insured against all risk of loss or damage from fire, theft,
vandalism, malicious mischief, explosion, sprinklers and all other hazards
and risks of physical damage included within the meaning of the term
"extended coverage" in such amounts as are ordinarily insured against by
other similar businesses. Borrower shall also keep and maintain comprehensive
general public
8
liability insurance and property damage insurance, and insurance against loss
from business interruption, insuring against all risks relating to or arising
from Borrower's ownership and use of the Collateral and Borrower's other
assets and the operation of Borrower's business. All such policies of
insurance shall be in such form, with such companies and in such amounts as
may be satisfactory to Fremont. Borrower shall deliver to Fremont certified
copies of such policies of insurance and evidence of the payments of all
premiums therefor. All such policies of insurance (except those of public
liability and property damage) shall contain a Lender's Loss Payable
endorsement in a form satisfactory to Fremont, naming Fremont as loss payee
thereof (as its interests appear), and shall contain a waiver of warranties.
All proceeds payable under any such policy shall be payable to Fremont to be
applied to the Obligations.
6.13 NO OFFSETS OR COUNTERCLAIMS. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower shall be made
without offset or counterclaim, and Borrower hereby waives any right to
offset, against the repayment of the Obligations, any claims it may have
against Fremont.
6.14 FREMONT EXPENSES. Borrower shall immediately and without
demand reimburse Fremont for all sums expended by Fremont which constitute
Fremont Expenses and Borrower hereby authorizes and approves all Revolving
Advances and payments by Fremont for items constituting Fremont Expenses.
Borrower acknowledges that Fremont Expenses include, among other things, (a)
Fremont's reasonable attorneys fees and expenses incurred in defending or
otherwise representing Fremont concerning the Loan Documents or the
Obligations and (b) charges resulting from the dishonor of checks. Since
Fremont Expenses are a part of the Obligations which are secured by the
Collateral, Fremont shall not be required to discharge any lien or terminate
any security interest in the Collateral unless and until (y) Borrower and
Fremont execute a mutual general release of liability and indemnification in
favor of and acceptable to Fremont and (z) to the extent another financial
institution refinances the Obligations, such financial institution delivers
an agreement, acceptable to Fremont, to indemnify Fremont for loss arising
from checks delivered to Fremont for collection and payment of the
Obligations which are returned for non-payment or for any other reason.
6.15 COMPLIANCE WITH LAW. Borrower shall comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental authorities relating to Borrower and the conduct of Borrower's
business, including the Fair Labor Standards Act and the Americans with
Disabilities Act.
6.16 LOCATION OF INVENTORY AND EQUIPMENT. Borrower shall keep the
Inventory and Equipment only at the locations identified in SECTION 5.4.
6.17 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS. Borrower shall
not permit any lien under any Environmental Law to be filed against any of
the Collateral or any of Borrower's real property in which Fremont holds a
lien, and will promptly notify Fremont of any proceeding, inquiry or claim
relating to any alleged violation of any Environmental Law, or any alleged
loss, damage or injury resulting from any Hazardous Material. Fremont shall
have the right to join and participate in, as a party if it so elects, any
legal or administrative proceeding initiated against Borrower or any
guarantor of the Obligations with respect to any Hazardous Material or in
connection with any Environmental Law.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that during the term of this Agreement and
until payment in full of the Obligations, Borrower will not do any of the
following without Fremont's prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit or otherwise
become liable with respect to any indebtedness outside of the ordinary and
usual course of Borrower's business, except (a) indebtedness set forth in
Borrower's latest financial statements submitted to Fremont prior to the date
of this Agreement and renewals or extensions of such indebtedness and (b) the
Obligations.
7.2 SECURITY INTERESTS. Create, incur, assume or permit to exist
any security interest, lien, pledge, mortgage or encumbrance on any
Collateral or on any of Borrower's real property in which Fremont holds a
lien, except (a) the security interests granted to Fremont by Borrower, (b)
the security interests disclosed in the UCC searches obtained by Fremont
prior to the funding of the initial Revolving Advance hereunder and (c) any
security interest which Borrower has disclosed in writing to Fremont and to
which Fremont has given its prior written consent.
7.3 EXTRAORDINARY TRANSACTIONS. Enter into any transaction not in
the ordinary and usual course of Borrower's business, including the sale,
lease or other disposition of, whether by sale or otherwise, any of
Borrower's assets other than sales of Inventory in the ordinary and usual
course of Borrower's business; or make any advance, loan or capital
contribution to any Person except in the ordinary and usual course of
Borrower's business.
7.4 CHANGE NAME. Borrower's name, business structure or identity,
or add any new fictitious name.
7.5 FUNDAMENTAL CHANGES. Enter into any acquisition, merger,
consolidation, reorganization or recapitalization, or reclassify its capital
stock, or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or acquire by purchase or otherwise all or substantially all of
the assets, stock or other beneficial ownership interest of any other Person.
7.6 GUARANTY. Guaranty or otherwise become in any way liable with
respect to the obligations of any third party except by endorsement of
instruments or items of payment for deposit to the account of Borrower for
negotiation and delivery to Fremont.
7.7 RESTRUCTURE. Make any change in Borrower's capital structure
or in the principal nature of Borrower's business operations.
7.8 PREPAYMENTS. Prepay any indebtedness owing to any third party.
7.9 CHANGE OF OWNERSHIP. Cause, permit or suffer any transfer,
whether direct or indirect, of the ownership of * ten percent (10%) or more
of Borrower's outstanding capital stock or other beneficial ownership
interest in any single transaction or series of transactions.
9
* TWENTY-FIVE PERCENT (25%)
7.10 COMPENSATION. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts, management fees or
other payments, whether directly or indirectly, in money or otherwise, during
any fiscal year to all of Borrower's executives, officers, shareholders,
affiliates, and directors (or any relatives thereof) in an aggregate amount
in excess of 110% of those paid in the prior fiscal year. *
* FREMONT HEREBY ACKNOWLEDGES THAT, FOR BORROWER'S FISCAL YEAR ENDING
SEPTEMBER 30, 1999, SUCH AGGREGATE AMOUNT OF TOTAL COMPENSATION SHALL BE
$300,000.
7.11 LOANS TO INSIDERS. Make any loans, advances or extensions of
credit to any officer, director, executive, employee or shareholder of
Borrower, or any relative of any of the foregoing, or to any entity which is
a subsidiary of, related to, affiliated with or has common shareholders,
officers or directors with Borrower, which when aggregated with all other
loans, advances or extensions of credit to any or all of the above Persons at
any time outstanding during the term of this Agreement, exceeds $10,000.
7.12 CAPITAL EXPENDITURES. Make any capital expenditure, or any
commitment therefor, in excess of $300,000 for any individual transaction or
where the aggregate amount of such capital expenditures, made or committed
for in any fiscal year, is in excess of $500,000.
7.13 CONSIGNMENTS. Consign any Inventory; or sell any Inventory
on xxxx and hold, sale on approval or other conditional terms of sale.
7.14 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or in stock) on, or purchase, acquire, redeem or retire
any of Borrower's capital stock, of any class, whether now or hereafter
outstanding.
7.15 ACCOUNTING METHODS. Modify or change its method of accounting
or enter into, modify or terminate any agreement currently existing or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Fremont
information regarding the Collateral or Borrower's financial condition.
Borrower waives the right to assert a confidential relationship, if any, it
may have with any accounting firm or service bureau in connection with any
information requested by Fremont pursuant to or in accordance with this
Agreement, and agrees that Fremont may contact directly any such accounting
firm or service bureau in order to obtain such information.
7.16 SUSPENSION. Suspend or go out of business.
7.17 LOCATION OF CHIEF EXECUTIVE OFFICE. Relocate its chief
executive office to a new location unless Fremont is given thirty (30) days
prior written notice thereof.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall constitute an
"Event of Default" under this Agreement:
8.1 FAILURE TO PAY. Borrower fails to pay when due and payable,
or when declared due and payable, any portion of the Obligations (whether
principal, interest, fees and charges due Fremont, reimbursement of Fremont
Expenses, or other amounts constituting Obligations);
8.2 FAILURE TO PERFORM. Borrower fails or neglects to perform,
keep or observe any term, provision, condition, representation, warranty,
covenant or agreement contained in this Agreement, in any of the other Loan
Documents or in any other present or future agreement between Borrower and
Fremont;
8.3 MISREPRESENTATION. Any misstatement or misrepresentation now
or hereafter exists in any warranty, representation, statement or report made
to Fremont by Borrower or any officer, employee, agent or director of
Borrower, or if any such warranty or representation is withdrawn by any of
them;
8.4 MISREPRESENTATION OF COLLATERAL. Any writing, document,
aging, certificate or other evidence of the Eligible Accounts or Eligible
Inventory shall be incomplete, incorrect or misleading at the time the same
is furnished to Fremont; or Borrower shall fail to immediately remit to
Fremont proceeds of Accounts and other Collateral, pursuant to the terms of
SECTION 2.6;
8.5 MATERIAL ADVERSE CHANGE. There is a material adverse change
in Borrower's business or financial condition;
8.6 MATERIAL IMPAIRMENT. There is a material impairment of the
prospect of repayment of any portion of the Obligations owing to Fremont or a
material impairment of the value or priority of Fremont's security interests
in the Collateral;
8.7 LEVY OR ATTACHMENT. Any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any judicial officer;
8.8 INSOLVENCY BY BORROWER. An Insolvency Proceeding is commenced
by Borrower;
8.9 INSOLVENCY AGAINST BORROWER. An Insolvency Proceeding is
commenced against Borrower;
8.10 INJUNCTION AGAINST BORROWER. Borrower is enjoined, restrained
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.11 GOVERNMENT LIEN. A notice of lien, levy or assessment is
filed of record with respect to any of Borrower's assets by the United States
government, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency, or any taxes or debts
owing at any time hereafter to any one or
10
more of such entities becomes a lien, whether xxxxxx or otherwise, upon any
of Borrower's assets and the same is not paid on the payment date thereof;
8.12 JUDGMENT. A judgment is entered against Borrower;
8.13 CROSS DEFAULT TO MATERIAL AGREEMENTS. There is a default in
any material agreement to which Borrower is a party with one or more third
parties or by which Borrower or Borrower's property or assets are bound;
8.14 SUBORDINATED DEBT PAYMENTS. Borrower makes any payment on
account of indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment
is permitted by the terms of the subordination agreement applicable to such
indebtedness;
8.15 LOSS OF GUARANTOR. Any guarantor of the Obligations dies,
terminates his/her/its guaranty, becomes the subject of an Insolvency
Proceeding, or contests his/her/its obligations under such a guaranty; or if
any such guaranty of the Obligations ceases to be valid or enforceable for
any reason;
8.16 ERISA VIOLATION. A PROHIBITED TRANSACTION within the meaning
of ERISA Section 406 or IRC Section 4975(c) shall occur with respect to a
Plan which could have a material adverse effect on the financial condition of
Borrower; any lien upon the assets of Borrower in connection with any Plan
shall arise; Borrower or any ERISA Affiliate shall completely or partially
withdraw from a Multiemployer Plan and such withdrawal could, in the opinion
of Fremont, have a material adverse effect on the financial condition of
Borrower; Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which Borrower or any of its ERISA Affiliates
may be required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived; the voluntary or involuntary termination of any Plan which
termination could, in the opinion of Fremont, have a material adverse effect
on the financial condition of Borrower; or Borrower shall fail to notify
Fremont promptly and in any event within ten (10) days of the occurrence of
any event which constitutes an Event of Default under this clause or would
constitute such an Event of Default upon the exercise of Fremont's judgment;
or
8.17 CRIMINAL PROCEEDINGS. Criminal proceedings are instituted
against Borrower, any member of Borrower's senior management or any guarantor
of the Obligations that could result in the forfeiture or loss of Collateral
or a material impairment of the financial condition of Borrower or any
guarantor of the Obligations.
Notwithstanding anything contained in this SECTION 8 to the contrary, Fremont
shall refrain from exercising its rights and remedies and an Event of Default
shall not be deemed to have occurred by reason of the occurrence of any of
the events set forth in SECTIONS 8.7, 8.9, 8.11 or 8.12 of this Agreement if,
within ten (10) days from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; PROVIDED, HOWEVER, Fremont shall not
be obligated to make Revolving Advances to Borrower during such period.
9. FREMONT'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default, Fremont may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
any of the other Loan Documents or otherwise, immediately due and payable in
full;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, any of the other Loan Documents or
any other agreement between Borrower and Fremont;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Fremont, but without affecting
Fremont's rights and security interest in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Fremont considers advisable and, in
such cases, Fremont will credit Borrower's loan account with only the net
amounts received by Fremont in payment of such disputed Accounts, after
deducting all Fremont Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Fremont, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory
as the property of Fremont;
(f) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Fremont considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Fremont so requires and to deliver or
make the Collateral available to Fremont at a place designated by Fremont.
Borrower authorizes Fremont to enter any premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest or compromise any encumbrance, charge or
lien that in Fremont's determination appears to be prior or superior to its
security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants
Fremont a license to enter into possession of such premises and to occupy the
same, without charge, in order to exercise any of Fremont's rights or
remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived) and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Fremont (including any amounts received in a
lockbox or blocked account), or (ii) indebtedness at any time owing to or for
the credit or the account of Borrower held by Fremont;
11
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by Fremont (including any amounts received in a lockbox or
blocked account) to secure the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale and sell (in the manner provided for
herein) the Collateral. Fremont is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in completing production of, advertising for sale and selling
any Collateral. Borrower's rights under all licenses and all franchise
agreements shall inure to Fremont's benefit;
(j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Fremont
determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Fremont shall give notice of the disposition of the Collateral
as follows:
(1) Fremont shall give the Borrower and each holder of a
security interest in the Collateral who has filed with Fremont a written request
for notice, a notice in writing of the time and place of public sale or, if the
sale is a private sale or some other disposition other than a public sale is
to be made, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 12, at least five (5)
calendar days before the date fixed for the sale, or at least five (5)
calendar days before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is perishable or threatens
to decline speedily in value. Notice to Persons other than Borrower claiming
an interest in the Collateral shall be sent to such addresses as they have
furnished to Fremont;
(3) If the sale is to he a public sale, Fremont shall also
give notice of the time and place by publishing a notice one time at least
five (5) calendar days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Fremont may credit bid and purchase at any public sale;
(m) Any deficiency that exists after disposition of the Collateral
as provided above shall be paid immediately by Borrower. Any excess will be
remitted without interest by Fremont to the party or parties legally entitled
to such excess; and
(n) In addition to the foregoing. Fremont shall have all rights
and remedies provided by law and any rights and remedies contained in any
other Loan Documents. All such rights and remedies shall be cumulative.
9.2 NO WAIVER. No delay on the part of Fremont in exercising any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege under
this Agreement or otherwise, preclude other or further exercise of the right,
power, 0r privilege or the exercise of any other right, power or privilege.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums or otherwise) due to third parties regarding the Collateral, or
fails to make any deposits or furnish any required proof of payment or
deposit, or fails to perform any of Borrower's other covenants under the
terms of this Agreement, then in its discretion and without prior notice to
Borrower, Fremont may do any or all of the following: (a) make any payment
which Borrower has failed to pay or any part thereof; (b) set up such
reserves in Borrower's loan account as Fremont deems necessary to protect
Fremont from the exposure created by such failure; (c) obtain and maintain
insurance policies of the type described in SECTION 6.12 and take any action
with respect to such policies as Fremont deems prudent; or (d) take any other
action deemed necessary by Fremont to preserve and protect its interests and
rights under this Agreement. Any payments made by Fremont shall not
constitute an agreement by Fremont to make similar payments in the future or
a waiver by Fremont of any Event of Default under this Agreement. Fremont
need not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance or lien and the receipt of notice for the
payment thereof shall be conclusive evidence that the same was validly due
and owing.
11. WAIVERS AND INDEMNIFICATIONS
11.1 WAIVERS. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, notice of nonpayment at maturity, notice of intention
to accelerate and notice of acceleration, so that Fremont may exercise any
and all rights and remedies under the Loan Agreement or any other Loan
Documents, or as otherwise provided at law or in equity, immediately upon the
occurrence of any Event of Default, without any further notice, grace or
opportunity to cure whatsoever. Borrower further waives notice prior to
Fremont's taking possession or control of the Collateral, any bond or
security which might be required by any court prior to allowing Fremont to
exercise any of Fremont's remedies, and the benefit of all valuation,
appraisement and exemption laws. Borrower agrees that Fremont may compromise,
settle or release without notice to Borrower any accounts, documents,
instruments, chattel paper or guaranties at any time held by Fremont on which
Borrower may in any way be liable.
11.2 NO MARSHALING. Borrower, on its own behalf and on behalf
of its successors and assigns, hereby expressly waives all rights, if any, to
require a marshaling of assets by Fremont or to require that Fremont first
resort to some or any portion of the Collateral before foreclosing upon,
selling or otherwise realizing on any other portion thereof.
11.3 FREMONT'S LIABILITY FOR COLLATERAL. So long as Fremont
complies with its obligations, if any, under Section 9207 of the Code,
Fremont shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any
12
cause; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency or other Person. All
risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
11.4 INDEMNIFICATION. Borrower shall defend, indemnify and hold
harmless Fremont, its directors, officers, agents, employees, participants
and assigns, from and against any and all claims, suits, actions, causes of
action, debts, liabilities, damages, losses, obligations, charges, judgments
and expenses, including attorneys fees and costs, of any nature whatsoever,
in any way relating to or arising from the transactions contemplated by this
Agreement or any other Loan Document (including those relating to or arising
from any alleged or actual violation of any Environmental Law, or any loss,
damage or injury resulting from any Hazardous Material); PROVIDED that the
foregoing indemnification shall not extend to liabilities, damages, losses,
obligations, judgments and expenses proximately caused by the gross
negligence or willful misconduct of Fremont. This indemnification provision
shall survive the termination of this Agreement.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement, the Loan Documents or any other agreement
entered into in connection herewith shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or
by receipted overnight delivery service to Borrower or to Fremont, as the
case may be, at their addresses set forth below:
IF TO BORROWER: EIP Microwave, Inc.
0000 XX Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attn: Mr. J. Xxxxxxxx Xxxxxx
IF TO FREMONT: FREMONT FINANCIAL CORPORATION
0000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: Regional Credit Manager
The parties hereto may change the address at which they are to receive
notices hereunder by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this SECTION 12, other
than notices by Fremont in connection with Sections 9504 and 9505 of the
Code, shall be deemed received on the earlier of the date of actual receipt
or three (3) calendar days after the deposit thereof in the mail. Borrower
acknowledges and agrees that notices sent by Fremont in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or otherwise sent by Fremont in accordance with the delivery methods set
forth above.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings or other papers delivered to
Fremont may be destroyed or otherwise disposed of by Fremont four (4) months
after they are delivered to or received by Fremont unless Borrower requests,
in writing, the return of said documents, schedules, invoices, agings or
other papers and makes arrangements, at Borrower's expense, for their return.
14. GENERAL PROVISIONS
14.1 EFFECTIVENESS. This Agreement and the other Loan Documents
shall be binding and deemed effective when executed by Borrower and Fremont
14.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or
any rights or duties hereunder without Fremont's prior written consent and
any prohibited assignment shall be void and of no effect as against Fremont.
No consent to an assignment by Fremont shall release Borrower from its
Obligations. Fremont and its successors and assigns may assign this Agreement
and any other Loan Document and its rights and duties hereunder and
thereunder. Fremont reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in Fremont's
rights and benefits hereunder. In connection therewith, Fremont may disclose
all documents and information which Fremont now or hereafter may have
relating to Borrower or Borrower's business. Borrower expressly consents to
any assignment by Fremont to its wholly owned subsidiary, Fremont Funding
Inc., of certain of Fremont's rights hereunder and under the other Loan
Documents, including the beneficial interest in loans made by Fremont, and
any subsequent assignment by Fremont Funding Inc. to LaSalle National Bank
(or any successor trustee), as trustee of the Fremont Small Business Loan
Master Trust, of such rights.
14.3 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire
Agreement.
14.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Fremont or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all pasties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
14.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific provision.
14.6 AMENDMENTS IN WRITING. Neither this Agreement nor any
provision hereof shall be amended, modified, waived or terminated orally or
by course of conduct or pattern of dealing, but only by a written agreement
signed by an authorized officer of Fremont. Any purported amendment,
modification, waiver or termination of this Agreement or any provision hereof
that is not in writing and signed by an authorized officer of Fremont shall
be void and of no effect.
13
14.7 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire agreement between the parties with respect to
the subject matter hereof. This Agreement, together with the other loan
Documents, supersedes all prior agreements, understandings and negotiations,
if any, which are merged into this Agreement and the other Loan Documents.
14.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts each of which,
when executed and delivered, shall be deemed to be an original and all of
which, when taken together, shall constitute but one and the same Agreement.
14.9 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations
or the transfer by either or both of such parties to Fremont of any property
of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences and other voidable or recoverable
payments of money or transfers of property (a VOIDABLE TRANSFER), and if
Fremont is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel. then, as to any such Voidable Transfer, or the amount thereof that
Fremont is required or elects to repay or restore, and as to all reasonable
costs, expenses and attorneys fees of Fremont related thereto, the liability
of Borrower or such guarantor automatically shall be revived, reinstated and
restored and shall exist as though such Voidable Transfer had never been made.
14.10 CONSULTATION WITH COUNSEL. Borrower and Fremont
acknowledge that they have been given the opportunity to consult with counsel
and other advisors of their choice prior to entering into this Agreement.
14.1 1 LIMITATION OF LIABILITY. No claim may be made by Borrower
or any other Person against Fremont or the officers, directors, employees or
agents of Fremont for any special, indirect, punitive or consequential
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith,
and Borrower hereby waives, releases and agrees not to xxx upon any claim for
any such damages.
14.12 TELEFACSIMILE EXECUTION. Delivery of an executed
counterpart of this Agreement or any other Loan Document by telefacsimile
transmission shall be equally as effective as delivery of an executed hard
copy of the same. Any party delivering an executed counterpart of this
Agreement or any other Loan Document by telefacsimile transmission shall also
deliver an executed hard copy of the same, but the failure by such party to
deliver an executed hard copy shall not affect the validity, enforceability
and binding effect of this Agreement or such other Loan Document.
14.13 FINANCE LENDER LICENSE. Fremont is licensed as a Finance
Lender by the California Department of Corporations, file number 603 2362.
15. CHOICE OF LAW AND VENUE
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA; PROVIDED HOWEVER THAT THE LAWS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED SHALL GOVERN WITH RESPECT TO (A) THE CREATION OF LIENS
ON COLLATERAL LOCATED IN SUCH STATE AND (B) THE METHOD, MANNER AND PROCEDURE
FOR FORECLOSURE OF FREMONT'S LIENS UPON ANY PORTION OF THE COLLATERAL LOCATED
IN SUCH STATE AND THE ENFORCEMENT IN SUCH STATE OF FREMONT'S OTHER REMEDIES
WITH RESPECT TO THE COLLATERAL LOCATED IN SUCH STATE.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE TRIED AND LITlGATED ONLY IN THE STATE COURTS LOCATED
IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, THE FEDERAL COURTS WHOSE
VENUE INCLUDES THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE
SOLE OPTION OF FREMONT, IN ANY OTHER COURT IN WHICH FREMONT SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. THE PARTIES EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY
SUCH COURT, AND THE PARTIES HEREBY WAIVE ANY OBJECTION WHICH EITHER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION AND HEREBY CONSENT TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT.
FURTHERMORE, BORROWER AND FREMONT EACH WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 15.
16. WAIVER OF JURY TRIAL
BORROWER AND FREMONT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FREMONT
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Fremont's place of business in Santa Monica, California.
BORROWER: FREMONT:
EIP MICROWAVE, INC., FREMONT FINANCIAL CORPORATION,
a Delaware corporation a California corporation
Signed By: /S/ XXXXXXX X. XXXXXXXX, XX. Signed By: /S/ XXXXX X. XXXXXX
---------------------------- --------------------
Print Name: Xxxxxxx X. Xxxxxxxx, Xx. Print Name: Xxxxx X. Xxxxxx
Title/Capacity: CFO, Assistant Secretary Title/Capacity: Vice President
15
CONDITIONS PRECEDENT RIDER TO LOAN AND SECURITY AGREEMENT
BETWEEN
FREMONT FINANCIAL CORPORATION
AND
EIP MICROWAVE, INC.
This CONDITIONS PRECEDENT RIDER TO LOAN AND SECURITY AGREEMENT
(hereinafter referred to as this "Rider") dated August 4, 1998, is hereby
made a part of and incorporated into that certain Loan and Security Agreement
(hereinafter referred to, together with all supplements and riders thereto
and amendments thereof, as the "Loan Agreement") dated the date hereof
between FREMONT FINANCIAL CORPORATION, a California Corporation (hereinafter
referred to as "Fremont"), and EIP MICROWAVE, INC. a Delaware corporation
(hereinafter referred to as "Borrower").
1. All capitalized terms contained in this Rider, unless otherwise
defined herein, shall have the meanings ascribed to such terms in the Loan
Agreement.
2. At the request of Borrower, certain of the Loan Documents have been
executed as of the date of this Rider even though all conditions precedent to
Fremont's funding have not been satisfied. The execution of the Loan Documents
prior to the satisfaction of all conditions is being done as an accommodation
to Borrower and shall in no way obligate Fremont to make loans or advances to
Borrower unless all conditions precedent are fully and completely satisfied.
3. As used herein, the term "Guarantor" shall refer to the following
person: J. Xxxxxxxx Xxxxxx.
4. As conditions precedent to the making of any of the loans described
in the Loan Documents, each of the following conditions shall be satisfied to
the satisfaction of Fremont unless waived by Fremont in writing:
a. No Event of Default shall exist;
b. Borrower shall have executed and delivered, or caused to be
executed and delivered, each of the Loan Documents and all other
instruments, documents, agreements, waivers, financing statements,
assignments, deeds of trusts mortgages and subordination agreements as in
the opinion of Fremont may be necessary to give effect to the Loan
Agreement, the transactions contemplated thereby or the perfection of
Fremont's security interest in the Collateral;
c. Guarantor shall have executed and delivered, or caused to be
executed and delivered, a Continuing Guaranty, in form and substance
acceptable to Fremont, and all other instruments, documents, agreements,
waivers, financing statements, deeds of trust, mortgages and subordination
agreements as in the opinion of Fremont may be necessary to give effect to
such Continuing Guaranty or the transactions contemplated thereby;
c-1. Fremont and Xx. Xxxxx X. Xxxxxx Xx. shall have entered into a
Subordination and Intercreditor Agreement.
d. Fremont shall have received from Borrower's and Guarantor's
counsel an opinion letter in form and substance acceptable to Fremont in
its sole discretion;
e. Borrower shall have executed, and Fremont shall have filed, all
financing statements deemed necessary or desirable to Fremont to perfect
Fremont's security interest in the Collateral, and Fremont shall have
received assurances satisfactory to it that such security interests are
duly perfected, first priority security interests;
f. Borrower shall have delivered to Fremont evidence satisfactory to
Fremont that the Collateral has been insured in such amounts as may be
acceptable to Fremont, in its sole discretion, and in compliance with the
provisions of the Loan Agreement and that Fremont shall be named as lender
loss payee on endorsements in form and substance satisfactory to Fremont
which shall be issued in conjunction with all such policies of insurance;
g. Borrower shall have caused to be delivered to Fremont a copy of
its Articles or Certificate of Incorporation certified by the Secretary of
State of Delaware and a copy of its By-Laws certified by its corporate
secretary as of the date of the Loan Agreement, together with a Good
Standing Certificate for Borrower issued by the Secretary of State of
California;
h. Since April 30, 1998, there shall not have occurred any material
adverse change in the business, financial condition or results of
operations of Borrower or the existence or value of any of the Collateral;
i. At the time of the initial funding under the Loan Documents, the
amount of the revolving loan availability described in Section 2.1 of the
Loan Agreement shall exceed by an amount of not less than $350,000 the sum
of (a) the amount of Borrower's indebtedness to the Existing Secured
Lender(s) plus (b) the initial Annual Facility Fee of $15,000 described in
Section 2.8 of the Loan Agreement, plus (c) the amount of Borrower's past
due trade payables (past due trade payables being those which are more than
ninety (90) days past the original invoice date) and other past due
obligations of Borrower (including book overdrafts and delinquent payroll
taxes);
j. All financing statements in favor of the following parties with
respect to any of the Collateral shall have been terminated, and Fremont
shall have received assurances satisfactory to it that such parties'
security interests in the Collateral have been terminated: Silicon Valley
Bank, Xxxx X. Xxxxxx, J. Xxxxxxxx Xxxxxx, and Xxxx X. Xxxxxx and Xxx X.
Xxxxxx, Trustees of the Xxxxxx Family Trust;
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k. Fremont shall have received a duly executed landlord waiver
agreement, in form and substance satisfactory to Fremont, with respect to
each leased property where Borrower keeps Inventory or Equipment;
l. Fremont shall have completed its "takeover" audit of Borrower and
the results thereof shall be satisfactory to Fremont, in its sole
discretion.
m. Borrower's failure to fulfill, or cause to be fulfilled, each of
the foregoing conditions precedent to the satisfaction of Fremont on or
before August 31, 1998, shall relieve Fremont of any obligation to
consummate the transactions contemplated by the Loan Documents.
5. The terms and conditions of this Rider are incorporated in
and made a part of the Loan Agreement.
IN WITNESS WHEREOF, this Rider has been executed by the parties hereto
as of the date first written above.
BORROWER: FREMONT:
EIP MICROWAVE, INC., FREMONT FINANCIAL CORPORATION,
A Delaware corporation a California corporation
Signed By: /S/ XXXXXXX X. XXXXXXXX, XX. Signed By: /S/ XXXXX X. XXXXXX
---------------------------- -------------------
Print Name: Xxxxxxx X. Xxxxxxxx, Xx. Print Name: Xxxxx X. Xxxxxx
Title/Capacity: CFO, Assistant Secretary Title/Capacity: Vice President
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