Exhibit 10.8
SENIOR LOAN AND SECURITY AGREEMENT NO. 6182
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 6182 (this "Security Agreement") is
dated as of October 1, 1998 between SNAP TECHNOLOGIES, INC., a California
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $500,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower
(each, a "Loan" and collectively, the "Loans"). Such borrowings shall be
evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles,
including but not limited to high end computers, peripherals, workstations,
servers, routers, hubs, RAID's, office and phone equipment and furniture and
also certain custom use equipment, installation and delivery costs, purchase
tax, toolings, software and other items generally considered fungible or
expendable "Soft Costs" whether now owned by Borrower or hereafter acquired, and
all substitutions and replacements of and additions, improvements, accessions
and accumulations to said equipment, machinery and fixtures and other items,
together with all rents, issues, income, profits and proceeds therefrom
(collectively, the "Collateral") which is described on the Note attached hereto
or any subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Term and monthly payment amount payable with respect to each item of
Collateral shall be as set forth in and as stated in the respective Note(s). The
terms of each Note hereto are subject to all conditions and provisions of this
Security Agreement as it may at any time be amended. Each Note shall constitute
a separate and independent Loan and contractual obligation of Borrower and shall
incorporate the terms and conditions of this Security Agreement and any
additional provisions contained in such Note. In the event of a conflict between
the terms and conditions of this Security Agreement and any provisions of such
Note, the provisions of such Note shall prevail with respect to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees that
its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such monthly payment amounts and other sums, are absolute and unconditional
and are not subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment due or alleged to be due to, or by reason of, any past, present or
future claims which Borrower may have against Lender, any assignee, the
manufacturer or seller of the Collateral, or against any person for any reason
whatsoever.
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SECTION 3. LENDER COMMITMENT. (a) GENERAL TERMS. Subject to the terms and
conditions of this Security Agreement and so long as no Event of Default or
event which with the giving of notice or passage of time, or both, could become
an Event of Default has occurred, Lender hereby agrees to make one or more
senior secured Loans to Borrower, subject to the following conditions: (i) each
Loan shall be evidenced by a Note; (ii) the total principal amount of the Loans
shall not exceed $500,000 in the aggregate (the "Commitment") provided that no
more than 20% of the amount of the utilized Commitment may be used to finance
Soft Costs; (iii) at the time of each Loan, no Event of Default or event which
with the giving of notice or passage of time, or both, could become an Event of
Default shall have occurred and be continuing, as reasonably determined by
Lender, and certified by Borrower; (iv) the amount of each Loan shall be at
least $25,000 except for a final Loan which may be less than $25,000; (v) Lender
shall not be obligated to make a Loan after July 31, 1999; (vi) for each Loan,
Borrower shall present to lender a list of proposed Collateral for approval by
lender in its sole discretion; (vii) for each Loan, Borrower shall have provided
Lender with each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance reasonably acceptable to Lender);
(viii) Borrower is performing according to its business plan referred to as
"Snap Technologies, Inc. Income and Cash Flow Projections" viable only through
December 31, 1999 and as may be amended from time to time in form and substance
reasonably acceptable to Lender (the "Business Plan"); (ix) there shall be no
material adverse change in Borrower's condition, financial or otherwise, that
would materially impair the ability of borrower to meet its payment and other
obligations under this Loan (a "Material Adverse Effect") as reasonably
determined by Lender, and Borrower so certifies, from (yy) the date of the most
recent financial statements delivered by Borrower to Lender to (zz) the date of
the proposed Loan; (x) Borrower shall use the proceeds of all Loans hereunder to
purchase or reimburse the purchase of Collateral; (xi) at the time of each Loan,
Borrower has reimbursed Lender for all UCC filings and search costs, inspection
and labeling costs, and appraisal fees, if any; (xii) all Collateral has been
marked and labeled by Lender or Lender's agent; and (xiii) Lender has received
in form and substance acceptable to Lender: (a) Borrower's interim financial
statements signed by a financial officer of Borrower, (b) prior to the first
funding, evidence of Borrower's $1,650,000 cash position as of June 30, 1998;
and (c) complete copies of the Borrower's audit reports for its most recent
fiscal year, immediately upon availability, which shall include at least
Borrower's balance sheet as of the close of such year, and Borrower's statement
of income and retained earnings and of changes in financial position for such
year, prepared on a consolidated basis and certified by independent public
accountants. Such certificate shall not be qualified or limited because of
restricted or limited examination by such accountant of any material portion of
the company's records. Such reports shall be prepared in accordance with
generally accepted accounting principles and practices consistently applied.
(b) THE NOTES. Each Loan shall be evidenced by a Note. Each Note shall bear
interest and be payable at the times and in the manner provided therein.
Following payment of the Indebtedness related to each Note, Lender shall return
such Note, marked "cancelled," to Borrower. Borrower has the ability to prepay
all, but not fewer than all, outstanding Notes in whole but not in part upon at
least five (5) days prior written notice to Lender of Borrower's intention to
merge into, consolidate with or convey or transfer its properties substantially
as an entirety to any other person or entity, or if Borrower seeks Lender's
consent as required under Section 15, and Lender declines to consent to such
merger, consolidation, conveyance or transfer. The prepayment amount shall be
the sum of (i) and (ii) below, discounting the amounts in (ii) at a rate of 6%
per annum compounded monthly on the basis of a 360 day year: (i) all amounts
which may be then due or accrued to the payment date for all outstanding Notes;
(ii) as of such payment date, an amount equal to: (A) all remaining monthly
payments due under all outstanding Notes, and (B) 12 additional monthly payments
for all outstanding Notes, the amounts of which will be calculated in accordance
with Election No. 2 in Section 30. The prepayment conditions are as follows: (a)
Borrower must provide Lender with at least five (5) days' advance written notice
of its intention to prepay; and (b) the prepayment date must fall on a regular
monthly payment date.
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SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i)
the payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii)
the performance by Borrower of all of its other covenants now or hereafter
existing under the Notes, this Security Agreement and any other obligation owed
by the Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly quality during the
term of each Loan in each state where necessary to carry on its present business
and operations, including the jurisdiction(s) where the Collateral will be
located as specified on each Exhibit A to each Note, except where failure to be
so qualified would not have a Material Adverse Effect; (b) it has full authority
to execute and deliver this Security Agreement and the Notes and perform the
terms hereof and thereof, and this Security Agreement and the Notes have been
duly authorized, executed and delivered and constitute valid and binding
obligations of Borrower enforceable in accordance with their terms; (c) the
execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) to the
best of Borrower's knowledge, there is no action or proceeding pending or
threatened against Borrower before any court or administrative agency which
might have a Material Adverse Effect on the business, financial condition or
operations of Borrower; (f) at the time any Loan is made hereunder, Borrower
owns and will keep all of the Collateral; (g) at the time any Loan is made
hereunder, all Collateral has been received, installed and is ready for use and
is satisfactory in all respects for the purposes of this Security Agreement; (i)
the Collateral is, and will remain at all times under applicable law, removable
personal property, which is free and clear of any lien or encumbrance except in
favor of Lender, notwithstanding the manner in which the Collateral may be
attached to any real property; (j) all credit and financial information
submitted to Lender herewith or at any other time is and will at the time given
be true and correct in all material respects; and (k) the security interest
granted to Lender hereunder is a first priority security interest, and (l) on or
before January 1, 2000, Borrower's computer system shall be Year 2000
performance compliant and will thus be able to accurately process date data
from, into and between the years 1999 and 2000, including leap year
calculations.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be located
at the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent, which consent will
not be unreasonably withheld, which location shall in all events be within the
United States. All of the records regarding the Collateral shall be located at
000 Xxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000, or such other location of which
Borrower has given notice to Lender in accordance with this Security Agreement.
Lender shall have the right to inspect Collateral, including records relating
thereto, and Borrower's books and records at any time (upon reasonable
notification) during regular business hours, such books and records to be
maintained in accordance with
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generally accepted accounting principles. Borrower shall be responsible for all
labor, material and freight charges incurred in connection with any removal or
relocation of Collateral which is requested by Borrower and consented to by
Lender, as well as for any charges due to the installation or moving of the
Collateral. Payments under the Notes and under this Security Agreement shall
continue during any period in which the Collateral is in transit during a
relocation. During Borrower's regular business hours and upon at least two days'
notice to Borrower, Lender or its agent shall xxxx and label Collateral, which
labels (to be provided by Lender) shall state that such Collateral is subject to
a security interest of Lender, and Borrower shall keep such labels on the
Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) GENERAL. Borrower will reasonably permit
Lender to inspect each item of Collateral and its maintenance records during
Borrower's regular business hours. Borrower will at its sole expense comply with
all applicable laws, rules, regulations, requirements and orders with respect to
the use, maintenance, repair, condition, storage and operation of each item of
Collateral. Any addition or improvement that is so required or cannot be so
removed will immediate become Collateral of Lender. (b) SERVICE AND REPAIR. With
respect to the Collateral, Borrower will at its sole expense maintain and
service and repair any damage to each items of Collateral in a manner consistent
with prudent industry practice and Borrower's own practice so that such item of
Collateral is at all times (i) in the same condition as when delivered to
Borrower, except for ordinary wear and tear, and (ii) in good operating order
for the function intended by its manufacturer's warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." No later than the first payment date following such
Casualty Occurrence, or, if there is no such payment date, no later than thirty
(30) days after such Casualty Occurrence, Borrower, shall, at its election,
either: (a) repair the Collateral returning it to good operating condition, or
(b) replace the Collateral with Collateral acceptable to Lender in its
reasonable discretion, in good condition and repair taking all steps required by
Lender to perfect Lender's first priority security interest therein, which
replacement Collateral shall be subject to the terms of this Security Agreement,
or (c) on the first day payment is due on any Note following the Casualty
Occurrence, or if there is no such payment date, thirty (30) days after such
Casualty Occurrence, pay to Lender an amount equal to the Balance Due (as
defined below) for each lost or damaged item of Collateral. The Balance Due for
each such item is the sum of : (I) all amounts for each item which may be then
due or accrued to the payment date, plus (ii) as of such payment date, an amount
equal to the product of the fraction specified below times the sum of all
remaining payments under the respective Note, including the amount of any
mandatory or optional payment required or permitted to be paid by Borrower to
Lender at the maturity of the Note. The numerator of the fraction shall be the
collateral value (as set forth on the applicable Note) of the item and the
denominator shall be the aggregate collateral value of all items under the Note.
Upon the making of such payments, Lender shall release such item of Collateral
from its lien hereunder.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured
against all risks of physical loss for at least the replacement value of the
Collateral (including, in the case of Collateral which is vehicles,
comprehensive and collision coverage) and in no event for less than the amount
payable following a Casualty Occurrence (as provided in Section 9). Such
insurance shall provide for a loss payable endorsement to Lender and/or any
assignee of Lender. Borrower shall maintain commercial general liability
insurance, including products liability and completed operations coverage, with
respect to loss or damage for personal injury, death or property damage in an
amount not less than $1,000,000 in the aggregate, (and in the case of Collateral
which is vehicles, in an amount of not less than $1,000,000 covering
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bodily injury and property damage in a combined single limit) naming Lender
and/or Lender's assignee as additional insured. Such insurance shall contain
insurer's agreement to give thirty (30) days' advance written notice to Lender
before cancellation or material change of any policy of insurance. Borrower will
provide Lender and any assignee of Lender with a certificate of insurance from
the insurer evidencing Lender's or such assignee's interest in the policy of
insurance. Such insurance shall cover any Casualty Occurrence to any unit of
Collateral. Notwithstanding anything in Section 9 or this Section 10 to the
contrary, this Security Agreement and Borrower's obligations hereunder shall
remain in full force and effect with respect to any unit of Collateral which is
not subject to a Casualty Occurrence. If Borrower fails to provide or maintain
insurance as required herein, Lender shall have the right, but shall not be
obligated, to obtain such insurance. In that event, Borrower shall pay to Lender
the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first a prior perfected
security interest; (d) furnish Lender with its annual audited financial
statements, when such reports are available, within one hundred twenty (120)
days following the end of Borrower's fiscal year, unaudited quarterly financial
statements within forty-five (45) days after the end of each fiscal quarter, and
which thirty (30) days of the end of each month a financial statement for that
month prepared by Borrower, and including an income statement and balance sheet,
all of which shall be certified by an officer of Borrower as true and correct
and shall be prepared in accordance with generally accepted accounting
principles consistently applied, and such other information as Lender may
reasonably request; and (e) promptly (but in no event more than (5) days after
the occurrence of such event) notify Lender of any change in Borrower's
condition during the commitment period which constitutes a Material Adverse
Effect; and of the occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorney's fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon Lender's
request, will, at Borrower's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
and approved by Lender. Borrower's obligations under this Section 12 shall
survive the payment in full of all the Indebtedness and the performance of all
obligations with respect to acts or events occurring or alleged to have occurred
prior to the payment in full of all the Indebtedness and the performance of all
Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender, and to indemnify and hold
Lender and any assignee harmless from, all fees
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(including, but not limited to, license, documentation, recording and
registration fees), and all sales, use, gross receipts, personal property,
occupational, value added or other taxes, levies, imports, duties assessments,
charges, or withholdings of any nature whatsoever, together with any penalties,
fines, additions to tax, or interest thereon (the foregoing collectively
"Impositions"), except same as may be attributable to Lender's income, arising
at any time prior to or during the term of any Notes or of this Security
Agreement, or upon termination or early termination of this Security Agreement
and levied or imposed upon Lender directly or otherwise by any Federal, state or
local government in the United States or by any foreign country or foreign or
international taxing authority upon or with respect to (a) the Collateral, (b)
the exportation, importation, registration, purchase, ownership, delivery,
leasing, financing, possession, use, operation, storage, maintenance, repair,
return, sale, transfer or title, or other disposition thereof, (c) the rentals,
receipts, or earnings arising from the Collateral, or any disposition of the
rights to such rentals, receipts, or earning, (d) any payment pursuant to this
Security Agreement or the Notes, or (e) this Security Agreement, the Notes or
any transaction or any part hereof or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY EXCEPT
TO A SUCCESSOR IS GREATER THAN OR EQUAL TO BORROWER AS DETERMINED IN GOOD FAITH
BY LENDER AND THE SUCCESSOR'S BUSINESS AND ITS MAJOR INVESTORS ARE REASONABLY
ACCEPTABLE TO LENDER. LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY
AGREEMENT OR ITS SECURITY INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF
THE ABOVE, IN WHOLE OR IN PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES
WITHOUT NOTICE TO BORROWER. If Borrower is given notice of such assignment it
agrees to acknowledge receipt thereof in writing and Borrower shall execute such
additional documentation as Lender's assignee and/or secured party shall
reasonably require at Lender's expense. Each such assignee and/or secured party
shall have all of the rights, but (expect as provided in this Section 15) none
of the obligations, of Lender under this Security Agreement, unless such
assignee or secured party expressly agrees to assume such obligations in
writing. Borrower shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Borrower may have against Lender.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lender, or its assignees, secured parties, or their
agents or assigns, shall not interfere with Borrower's right to quietly enjoy
use of Collateral subject to the terms and conditions of this Security
Agreement. Subject to the foregoing, the Notes and this Security Agreement shall
inure to the benefit of, and are binding upon, the successor and assignees of
the parties hereto. Borrower acknowledges that any such assignment by Lender
will not change Borrower's duties or obligations under this Security Agreement
and the Notes or increase any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) EVENTS OF DEFAULT. Any of the following events or
conditions shall constitute and "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender
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hereunder or under any Note beyond the tenth (10th) day after the same is due;
(ii) Borrower's failure to comply with its obligations under Section 10 or
Section 15; (iii) any representation or warranty of Borrower made in this
Security Agreement or the Notes or in any other agreement, statement or
certificate furnished to Lender in connection with this Security Agreement or
the Notes shall prove to have been incorrect in any material respect when made
or given; (iv) Borrower's failure to comply with or perform any material term,
covenant or condition of this Security Agreement or any Note or under any other
agreement between Borrower and Lender or under any lease or mortgage or real
property covering the location of the Collateral if such failure to comply or
perform is not cured by Borrower within thirty (30) days after Borrower knows of
the noncompliance or nonperformance or notice from Lender or such longer period
that Borrower is diligently attempting to effect such cure; (v) seizure of any
of the Collateral under legal process; (vi) the filing by or against Borrower or
any guarantor under any guaranty executed in connection with this Security
Agreement ("Guarantor") of a petition for reorganization or liquidation under
the Bankruptcy Code or any amendment thereto or under any other insolvency law
providing for the relief of debtors; (vii) the voluntary or involuntary making
of an assignment of a substantial portion of its assets by Borrower or by any
Guarantor or for any of Borrower's or Guarantor's assets, the institution by or
against Borrower or any Guarantor of any formal or informal proceeding for
dissolution, liquidation, settlement of claims against or winding up of the
affairs of Borrower or any Guarantor provided that in the case of all such
involuntary proceedings, same are not dismissed within sixty (60) days after
commencement; or (viii) the making by Borrower or by any Guarantor of a transfer
of all or a material portion of Borrower's or Guarantor's assets or inventory
not in the ordinary course of business.
(b) REMEDIES. If any Event of Default has occurred, Lender may in its sole
discretion exercise one or more of the following remedies with respect to any or
all of the Collateral: (i) declare due any or all of the aggregate sum of all
remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by borrower to lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all damages and expenses incurred by Lender by reason of an Event of
Default; (iii) except as provided by law, without court order or prior demand,
enter upon the premises where the Collateral is located and taken immediate
possession of and remove it without liability of lender to Borrower or any other
person or entity; (iv) terminate this Security Agreement and sell the Collateral
at public or private sale, or otherwise dispose of, hold, use or lease any or
all of the Collateral in a commercially reasonable manner; or (v) exercise any
other right or remedy available to it under applicable law. If Lender has
declared due any or all of the Remaining Payments, Borrower will pay immediately
to Lender, without duplication, (A) the Remaining Payment, (B) all amounts which
may be then due or accrued, and (C) all other amounts due under this Security
Agreement and under the Notes (Lender's Return, as referred to below, means the
amounts described in clauses (A), (B) and (C) above). The net proceeds of any
sale or lease of such Collateral will be credited against Lender's Return. The
net proceeds of a sale of the collateral pursuant to this Section 16(b) is
defined as the sales price of the Collateral less selling expenses, including,
without limitation, costs of remarketing the Collateral and all refurbishing
costs and commissions paid with respect to such remarketing. The net proceeds of
a lease of the Collateral pursuant to this Section 16(b) is defined as the
amount equal to the monthly payments due under such lease (discounted at 6% per
annum compounded monthly on the basis of a 360 day year (the "Discount Rate")
plus the residual value of the Collateral at the end of the basis term of such
lease, as reasonably determined by Lender, and discounted at the Discount Rate.
Borrower agrees to pay all reasonable out-of-pocket costs of Lender incurred in
enforcement of this Security Agreement, the Notes or any instrument or agreement
required under this Security Agreement,
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including, but not limited to reasonable attorneys' fees and litigation expenses
and fees of collection agencies ("Remedy Expenses"). At Lender's request,
Borrower shall assemble the collateral and make it available to Lender at such
time and location as Lender may reasonably designate. Borrower waives any right
it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
In addition to the foregoing remedies, if an Event of Default hereunder shall
have occurred and be continuing, Lender shall have the right to cause its
representative or representatives to attend any meeting of Borrower's Board of
Directors or any committee thereof. In such case, Borrower shall provide Lender
with the same notice of any such Board or committee meeting that is given to the
members of Borrower's Board or committee thereof.
(c) APPLICATION OF PROCEEDS. The proceeds of any sale of all or any part of
the Collateral and the proceeds of any remedy afforded to lender by this
Security Agreement shall be paid to and applied as follows:
FIRST, to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
SECOND, to the payment of all other amounts not described in item THIRD
below due under this Security Agreement and all Notes;
THIRD, to pay Lender an amount equal to lender's Return, to the extend
not previously paid by Borrower; and
FOURTH, to the payment of any surplus to Borrower or to whomever may
lawfully be entitled to receive it.
(d) EFFECT OF DELAY; WAIVER, FORECLOSURE ON COLLATERAL. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
agreement or any rights, powers or remedies exercised hereunder or thereunder.
Lender shall not be required first to foreclose on the Collateral prior to
bringing an action against Borrower for sums owed to Lender under this Security
Agreement or under any Note.
SECTION 17. LATE PAYMENT. Borrower shall pay Lender a late charge of 10% of any
payment owed Lender by borrower which is not paid when due (taking into account
applicable grace periods), for
8
every month such payment is not paid when due, but in no event any amount
greater than the highest rate permitted by applicable law. If such amounts have
not been received by Lender at Lender's place of business or by lender's
designated agent by the date such amounts are due under this Security Agreement
or the Notes, Lender shall xxxx Borrower for such charges. Borrower acknowledges
that invoices for amounts due hereunder or under the Notes are sent by Lender
for borrower's convenience only. Borrower's non-receipt of an invoice will not
relieve Borrower of its obligation to make payments hereunder or under the
Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENT. Borrower hereby appoints Lender (and each of
Lender's officers, employees or agents designated by Lender) with full power of
substitution by Lender, as Borrower's attorney, with power to execute and
deliver on Borrower's behalf, financing statements necessary to perfect and/or
give notice of Lender's security interest in any of the collateral.
Notwithstanding the above, borrower will, upon Lender's request, execute all
financing statements pursuant to the Uniform Commercial Code and all such other
documents reasonably requested by Lender to perfect Lender's security interests
hereunder. Borrower authorizes Lender to file financing statements signed only
by Lender (where such authorization is permitted by law) at all places where
Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs and
expenses including reasonable attorney" fees and the fees of collection
agencies, incurred by Lender (a) in enforcing any of the terms, conditions, or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
is filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachment shall be made
to the Collateral without Lender's prior written consent, which shall not be
given for changes that will affect the reliability and utility of the Collateral
or which cannot be removed without damage to the Collateral, or which in any way
affect the value of the collateral for purposes of resale or lease. All
attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lessor.
9
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
SECTION 25. STOCK WARRANT. Borrower agrees that it will issue to Lender upon
execution of this Security Agreement a Warrant in the form of the Warrant
Agreement attached hereto as Exhibit B. Borrower and Lender agree that the value
of the Warrant hereunder is ten dollars ($10.00).
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee ("Fee")
of $10,000. Up to $1,000 of the Fee shall be applied by Lender first to
reimburse Lender for all out-of-pocket UCC and other search costs, inspections
and labeling costs and appraisal fees, incurred by Lender, and the balance then
applied proportionally tot he first monthly payment for each Note hereunder in
the proportion that the Collateral value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such monthly
payments shall be non-refundable except if Lender defaults in its obligation to
fund Loans pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at 0000 Xxxxxx Xxxxxxxxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000, Attention: Asset Management and to Borrower at 000
Xxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000, Attention: Xxxx Xxxx, V.P.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) Borrower represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with respect to
this Security Agreement. (d) Borrower acknowledges that borrower has read this
Security Agreement and the Notes, understands them and agrees to be bound by
their terms and further agrees that this Security Agreement and the Notes
constitute the entire agreement between Lender and Borrower with respect to the
subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement and the Notes may not be changed,
altered or modified except by an instrument signed by an officer or authorized
representative of Lender and Borrower. (f) Any failure of Lender to require
strict performance by Borrower or any waiver by Lender of any provision herein
or in a Note shall not be construed as a consent or waiver of any other breach
of the same or any other provision. (g) If any provision of this Security
Agreement or any Note is held invalid, such invalidity shall not affect any
other provisions hereof or thereof. (h) The obligations of Borrower to pay the
Indebtedness and perform the Obligations shall survive the expiration or earlier
termination of this Security Agreement and each Note until all Obligations of
Borrower to Lender have been met and all liabilities of Borrower to Lender and
any assignee have been paid in full. (i) Borrower will notify Lender at least 30
days before changing its name, principal place of business or chief executive
officer. (j) Borrower will, at its expense, promptly execute and deliver to
Lender such documents and assurance (including financing statements) and take
such further action as Lender may reasonably request in order to carry out the
intent of this Security Agreement and Lender's rights and remedies.
10
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed in
the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights duties of Lender and Borrower, shall
be construed pursuant to and in accordance with the laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement and each Note shall be in
the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco. BORROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 30. ADDITIONAL INTEREST COMPENSATION. (a) GENERAL. Borrower shall be
required to choose a final payment or Note extension election ("Additional
Interest Compensation") at the expiration of the first Note's term. Borrower
shall provide written notice of its election to Lender at least 90 days prior to
the end of the term of the first Note. That choice shall be an election of
Borrower's additional interest compensation election for all, but not less than
all, of the Collateral under all Notes under the Security Agreement.
In the event Borrower does not provide 90 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 2.
(b) END OF LOAN POSITION ELECTIONS. As Additional Interest Compensation,
borrower shall be required to:
ELECTION NO. 1: Make a final payment equal to 15% of the Note's original
principal amount.
ELECTION NO. 2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly rate of 1.5% of the Note's original principal amount.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED SNAP TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxx By: /s/ Young X. Xxxx
------------------------- --------------------------
Name: Xxxxxxx X. Xxxx Name (Print): Young X. Xxxx
----------------------- ----------------
Title: Vice President Title: President
--------------------- -----------------------
HEADQUARTERS LOCATIONS:
000 Xxxxxxxx Xxxxxx,
Xxx Xxxxxxxxx, XX 00000
County of San Francisco
EXHIBITS AND SCHEDULES:
Exhibit A - Closing Memorandum
Exhibit B - Stock Warrant
11
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT
NO. 6182
DATED October 1, 1998
CLOSING MEMORANDUM
1* Duly executed Senior Loan and Security Agreement.
2. Duly executed Senior Security Promissory Note with Exhibit A Collateral
description attached.
3. Insurance certificates reflecting coverage required under Section 10 of the
Senior Loan and Security Agreement.
4.* Resolutions of Borrower's board of directors.
5. Real property Waiver.**
6. UCC-1 Financing Statements with respect to the Collateral.
7.* Stock warrant.
8. UCC search (Lender will obtain).
9.* Payment of Commitment Fee.
10. Certificate of Chief Financial Officer stating that (i) there are no liens,
charges, security interests or other encumbrances that may affect Lender's
right, title and interest in the Collateral and there are no UCC-1
financing statements filed or in the process of being filed against any of
the Collateral, (ii) Borrower is performing according to Borrower's
business plan, (iii) no change which is a Material Adverse Effect has
occurred in the financial condition of Borrower, (iv) no default has
occurred, and (v) the representations and warranties in Section 5 of the
Senior Loan and Security Agreement are true and correct as if made on the
date of the Loan.
11.* Certificate from the Security of State of Borrower's state of
incorporation, and form the state in which Borrower's chief executive
officer is located, if different, stating the borrower is in good standing
or is authorized to transact business, as the case may be, dated not more
than thirty days prior to the first Loan (Lender will obtain).
12.* Borrower's Business Plan.
13. Borrower's most recent financial statements.
14. List of proposed Collateral.
15. Purchase documentation verifying Borrower's ownership of equipment.
16. See Section 3 of the Senior Loan and Security Agreement for additional
conditions to closing.
17. Intercreditor Agreement, if applicable.
* First Loan only.
** Required if any Equipment is a fixture, i.e., attached to real property, or
located in certain states.
12
NOTE NO. 01
TO SENIOR LOAN AND SECURITY AGREEMENT
NO. 6182
DATED AS OF OCTOBER 1, 1998
BETWEEN SNAP TECHNOLOGIES, INC.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER
SENIOR SECURED PROMISSORY NOTE
$261,125.14 January 1, 1999
FOR VALUE RECEIVED, the undersigned, SNAP TECHNOLOGIES, INC., a California
corporation ("Borrower"), hereby promises to pay to the order of PHOENIX LEASING
INCORPORATED, or its assigns (the "Lender") the principal sum of Two Hundred
Sixty-One Thousand One Hundred Twenty-Five and 14/100 Dollars ($261,125.14),
together with interest thereon until the principal is fully repaid. Principal
and interest shall be payable in consecutive monthly installments, each of which
shall be equal to the percentage specified below of the principal sum and in the
amounts each month specified below.
Month Payment Amount Percentage
----- -------------- ----------
1-12 $5,744.75 2.20%
13-42 $7,703.19 2.95%
The first and last payments shall be due on the first day of the month
immediately following the date of this Note (unless the date of this Note is the
first day of the month in which case such payments are due on that day), and
each succeeding payment shall be made on the first day of each succeeding month.
An interim payment will be due on the same date as the first payment for the
period from the date Lender funds the principal amount of this Note until the
first day of the following month and shall be equal to 1/30 of the monthly loan
payment multiplied by the number of days, if any, between (and including) the
funding date and the first day of the following month.
Borrower's Additional Interest Compensation shall be due on the first day of the
forty-third (43rd) month as provided below: (a) GENERAL. Borrower shall be
required to choose a final payment or Note extension election ("Additional
Interest Compensation") at the expiration of the first Note's term. Borrower
shall provide written notice of its election to Lender at least 90 days prior to
the end of the term of the first Note. That choice shall be an election of
Borrower's additional interest compensation election for all, but not less than
all, of the Collateral under all Notes under the Security Agreement.
In the event Borrower does not provide 90 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 2.
(b) END OF LOAN POSITION ELECTIONS. As Additional Interest Compensation,
Borrower shall be required to:
ELECTION NO. 1: Make a final payment equal to 15% of the Note's original
principal amount.
ELECTION NO. 2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly rate of 1.5% of the Note's original principal amount.
NOTE NO. 01
TO SENIOR LOAN AND SECURITY AGREEMENT
NO. 6182
DATED AS OF OCTOBER 1, 1998
BETWEEN SNAP TECHNOLOGIES, INC.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER
Borrower has the ability to prepay all, but not fewer than all, outstanding
Notes in whole but not in part upon at least five (5) days prior written
notice to Lender of Borrower's intention to merge into, consolidate with or
convey or transfer its properties substantially as an entirety to any other
person or entity, or if Borrower seeks Lender's consent as required under
Section 15, and Lender declines to consent to such merger, consolidation,
conveyance or transfer. The prepayment amount shall be the sum of (i) and
(ii) below, discounting the amounts in (ii) at a rate of 6% per annum
compounded monthly on the basis of a 360 day year: (i) all amounts which may
be then due or accrued to the payment date for all outstanding Notes; (ii) as
of such payment date, an amount equal to: (A) all remaining monthly payments
due under all outstanding Notes, and (B) 12 additional monthly payments for
all outstanding Notes, the amounts of which will be calculated in accordance
with Election No. 2 in Section 30. The prepayment conditions are as follows:
(a) Borrower must provide Lender with at least five (5) days' advance written
notice of its intention to prepay; and (b) the prepayment date must fall on a
regular monthly payment date.
Borrower shall pay Lender a late charge of 10% of any payment owed Lender by
Borrower which is not paid when due (taking into account applicable grace
periods), for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law.
Payments of principal and interest hereunder shall be made in lawful money of
the United States of America at the offices of Lender at 0000 Xxxxxx Xxxxxxxxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000, or such other place as the Lender shall designate
to the Borrower in writing.
This Note is secured by a Senior Loan and Security Agreement, dated as of
October 1, 1998 between Borrower and Lender (the "Security Agreement") and is
entitled to the benefits of the Security Agreement which contains, among other
things, provisions for (i) events of default and the Lender's rights and
remedies following an event of default (which include, but are not limited to,
acceleration of this Note), (ii) Collateral which secures the repayment of this
Note and is more particularly described on Exhibit A, and (iii) other rights and
remedies of Lender.
This Note may be declared due prior to its expressed maturity date only in the
events, on the terms and in the manner provided in the Security Agreement.
This Note shall be construed and enforced in accordance with the laws of the
State of California, excluding principles of conflicts of laws. Borrower agrees
that any action or proceeding arising out of or relating to this Note shall be
in the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco.
NOTE NO. 01
TO SENIOR LOAN AND SECURITY AGREEMENT
NO. 6182
DATED AS OF OCTOBER 1, 1998
BETWEEN SNAP TECHNOLOGIES, INC.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER
The Borrower hereby expressly waives presentment for payment, demand for
payment, notice of dishonor, protest, notice of protest, notice of nonpayment,
and all lack of diligence or delays in collection or enforcement of this Note.
BORROWER:
SNAP TECHNOLOGIES, INC.
By: /s/ YOUNG SHIN
------------------
Name (Print): YOUNG SHIN
--------------
Title: CEO/PRESIDENT
-----------------
