Exhibit 10.6
[COMERICA LOGO] REVOLVING CREDIT LOAN & SECURITY
AGREEMENT
(ACCOUNTS AND INVENTORY)
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OBLIGOR # NOTE # AGREEMENT DATE
MAY 23, 1995
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CREDIT LIMIT INTEREST RATE B+0.50% OFFICER NO./INITIALS
$4,000,000.00 9.50% 48703 XXXX XXXX XXXX
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THIS AGREEMENT is entered into on MAY 23, 1995, between COMERICA BANK-
CALIFORNIA ("Bank") as secured party, whose Headquarter Office is 000 XXXX XXXXX
XXXXX XX., XXX XXXX, XX and SBE, INC. ("Borrower"), a CALIFORNIA CORPORATION
whose sole place of business (if it has only one), chief executive office (if it
has more than one place of business) or residence (if an individual) is located
at 0000 XXXXXX XXXXXX XXXX, XXX XXXXX, XX. The parties agree as follows:
1. DEFINITIONS
1.1 "Agreement" as used in this Agreement means and includes this
Revolving Credit Loan & Security Agreement (Accounts and Inventory), any
concurrent or subsequent rider to this Revolving Credit Loan & Security
Agreement (Accounts and Inventory) and any extensions, supplements,
amendments or modifications to this Revolving Credit Loan & Security
Agreement (Accounts and Inventory) and to any such rider.
1.2 "Bank Expenses" as used in this Agreement means and includes: all
costs or expenses required to be paid by Borrower under this Agreement which
are paid or advanced by Bank; taxes and insurance premiums of every nature
and kind of Borrower paid by Bank; filing, recording, publication and search
fees, appraiser fees, auditor fees and costs, and title insurance premiums
paid or incurred by Bank in connection with Bank's transactions with
Borrower; costs and expenses incurred by Bank in collecting the Receivables
(with or without suit) to correct any default or enforce any provision of
this Agreement, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, disposing of, preparing for sale
and/or advertising to sell the Collateral, whether or not a sale is
consummated; costs and expenses of suit incurred by Bank in enforcing or
defending this Agreement or any portion hereof, including, but not limited
to, expenses incurred by Bank in attempting to obtain relief from any stay,
restraining order, injunction or similar process which prohibits Bank from
exercising any of its rights or remedies; and attorneys' fees and expenses
incurred by Bank in advising, structuring, drafting, reviewing, amending,
terminating, enforcing, defending or concerning this Agreement, or any
portion hereof or any agreement related hereto, whether or not suit is
brought. Bank Expenses shall include Bank's in-house legal charges at
reasonable rates.
1.3 "Base Rate" as used in this Agreement means that variable rate of
interest so announced by Bank at its headquarters office in San Jose,
California as its "Base Rate" from time to time and which serves as the basis
upon which effective rates of interest are calculated for those loans making
reference thereto.
1.4 "Borrower's Books" as used in this Agreement means and includes all
of the Borrower's books and records including but not limited to: minute
books; ledgers; records indicating, summarizing or evidencing Borrower's
assets, liabilities, Receivables, business operations or financial condition,
and all information relating thereto, computer programs; computer disk or
tape files; computer printouts; computer runs; and other computer prepared
information and equipment of any kind.
1.5 "Borrowing Base" as used in this Agreement means the sum of: (1)
SEVENTY-FIVE percent (75.00%) of the net amount of Eligible Accounts after
deducting therefrom all payments, adjustments and credits applicable thereto
("Accounts Receivable Borrowing Base"); and (2) the amount, if any, of the
advances against Inventory agreed to be made pursuant to any Inventory Rider
("Inventory Borrowing Base"), or other rider, amendment or modification to
this Agreement, that may now or hereafter be entered into by Bank and
Borrower.
1.6 "Cash Flow" as used in this Agreement means, for any applicable
period of determination, the Net Income (after deduction for income taxes and
other taxes of such person determined by reference to income or profits of
such person) for such period, plus, to the extent deducted in computation of
such Net Income, the amount of depreciation and amortization expense and the
amount of deferred tax liability during such period, all as determined in
accordance with GAAP. The applicable period of determination will be N/A,
beginning with the period from _______________ to _______________.
1.7 "Collateral" as used in this Agreement means and includes each and
all of the following: the Receivables; the Intangibles; the negotiable
collateral, the Inventory; all money, deposit accounts and all other assets
of Borrower in which Bank receives a security interest or which hereafter
come into the possession, custody or control of Bank; and the proceeds of any
of the foregoing, including, but not limited to, proceeds of insurance
covering the collateral and any and all Receivables, Intangibles, negotiable
collateral, Inventory, equipment, money, deposit accounts or other tangible
and intangible property of borrower resulting from the sale or other
disposition of the collateral, and the proceeds thereof. Notwithstanding
anything to the contrary contained herein, collateral shall not include any
waste or other materials which have been or may be designated as toxic or
hazardous by Bank.
1.8 "Credit" as used in this Agreement means all Obligations, except
those obligations arising pursuant to any other separate contract,
instrument, note, or other separate agreement which, by its terms, provides
for a specified interest rate and term.
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1.9 "Current Assets" as used in this Agreement means, as of any
applicable date of determination, all cash, non-affiliated customer
receivables, United States government securities, claims against the United
States government, and inventories.
1.10 "Current Liabilities" as used in this Agreement means, as of any
applicable date of determination, (i) all liabilities of a person that should
be classified as current in accordance with GAAP, including without
limitation any portion of the principal of the indebtedness classified as
current, plus (ii) to the extent not otherwise included, all liabilities of
the Borrower to any of its affiliates whether or not classified as current in
accordance with GAAP.
1.11 "Daily Balance" as used in this Agreement means the amount
determined by taking the amount of the Credit owed at the beginning of a
given day, adding any new Credit advanced or incurred on such date, and
subtracting any payments or collections which are deemed to be paid and are
applied by Bank in reduction of the Credit on that date under the provisions
of this Agreement.
1.12 "Eligible Accounts" as used in this Agreement means and includes
those accounts of Borrower which are due and payable within THIRTY (30) days,
or less, from the date of invoice, have been validly assigned to Bank and
strictly comply with all of Borrower's warranties and representations to
Bank; but Eligible Accounts shall not include the following: (a) accounts
with respect to which the account debtor is an officer, employee, partner,
joint venturer or agent of Borrower; (b) accounts with respect to which goods
are placed on consignment, guaranteed sale or other terms by reason of which
the payment by the account debtor may be conditional; (c) accounts with
respect to which the account debtor is not a resident of the United States;
(d) accounts with respect to which the account debtor is the United States or
any department, agency or instrumentality of the United States; (e) accounts
with respect to which the account debtor is any State of the United States or
any city, county, town, municipality or division thereof; (f) accounts with
respect to which the account debtor is a subsidiary of, related to,
affiliated or has common shareholders, officers or directors with Borrower,
(g) 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; (h) accounts not paid by an account debtor within ninety (90) days
from the date of the invoice; (l) accounts with respect to which account
debtors dispute liability or make any claim, or have any defense, crossclaim,
counterclaim, or offset; (j) accounts with respect to which any Insolvency
Proceeding is filed by or against the account debtor, of if an account debtor
becomes insolvent, fails or goes out of business; and (k) accounts owed by
any single account debtor which exceed twenty percent (20%) of all of the
Eligible Accounts; and (l) accounts with a particular account debtor on which
over twenty-five percent (25%) of the aggregate amount owing is greater than
ninety (90) days from the date of the invoice. CONCENTRATION ALLOWANCE OF
30% FOR SIEMENS, AOL, AND TANDEM COMPUTERS. ALLOW FOREIGN RECEIVABLES OF NTT
(JAPAN) AND SIEMENS (GERMANY) UP TO $1,000,000.00, WITH A $500,000.00 LIMIT
FOR EACH FOREIGN DEBTOR. CONCENTRATION LIMIT OF 25% FOR ALL ACCOUNTS.
1.13 "Event of Default" as used in this Agreement means those events
described in Section 7 contained herein below.
1.14 "Fixed Charges" as used in this Agreement means and includes, for
any applicable period of determination, the sum, without duplication, of (a)
all interest paid or payable during such period by a person on debt of such
person, plus (b) all payments of principal or other sums paid or payable
during such period by such person with respect to debt of such person having
a final maturity more than one year from the date of creation of such debt,
plus (c) all debt discount and expense amortized or required to be amortized
during such period by such person, plus (d) the maximum amount of all rents
and other payments paid or required to be paid by such person during such
period under any lease or other contract or arrangement providing for use of
real or personal property in respect of which such person is obligated as a
lessee, use or obligor, plus (e) all dividends and other distributions paid
or payable by such person or otherwise accumulating during such period on any
capital stock of such person, plus (f) all loans or other advances made by
such person during such person to any Affiliate of such person. The
applicable period of determination will be N/A, beginning with the period
from _______________ to _______________.
1.15 "GAAP" as used in this Agreement means as of any applicable period,
generally accepted accounting principles in effect during such period.
1.16 "Insolvency Proceeding" as used in this Agreement means and includes
any proceeding or case commenced by or against the Borrower, or any guarantor
of Borrower's Obligations, or any of borrower's account debtors, under any
provisions of the Bankruptcy Code, as amended, or any other bankruptcy or
insolvency law, including but not limited to assignments for the benefit of
creditors, formal or informal moratoriums, composition of extensions with
some or all creditors, any proceeding seeking a reorganization, arrangement
or any other relief under the Bankruptcy code, as amended, or any other
bankruptcy or insolvency law.
1.17 "Intangibles" as used in this Agreement means and includes all of
Borrower's present and future general intangibles and other personal property
(including, without limitation, any and all rights in any legal proceedings,
goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings,
purchase orders, computer programs, computer disks, computer tapes,
literature, reports, catalogs and deposit accounts) other than goods and
Receivables, as well as Borrower's Books relating to any of the foregoing.
1.18 "Inventory" as used in this Agreement means and includes all present
and future inventory in which Borrower has any interest, including, but not
limited to, goods held by Borrower for sale or lease or to be furnished under
a contract of service and all of Borrower's present and future raw materials,
work in process, finished goods, advertising materials, and packing and
shipping materials, wherever located and any documents of title representing
any of the above, and any equipment, fixtures or other property used in the
storing, moving, preserving, identifying, accounting for and shipping or
preparing for the shipping of inventory, and any and all other items
hereafter acquired by Borrower by way of substitution,
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replacement, return, repossession or otherwise, and all additions and
accessions thereto, and the resulting product or mass, and any documents of
title respecting any of the above.
1.19 "Net Income" as used in this Agreement means the net income (or
loss) of a person for any period determined in accordance with GAAP but
excluding in any event:
(a) any gains or losses on the sale or other disposition, not in the
ordinary course of business, of investments or fixed or capital assets,
and any taxes on the excluded gains and any tax deductions or credits
on account on any excluded losses; and
(b) in the case of the Borrower, net earnings of any Person in which
Borrower has an ownership interest, unless such net earnings shall have
actually been received by Borrower in the form of cash distributions.
1.20 "Judicial Officer or Assignee" as used in this Agreement means and
includes any trustee, receiver, controller, custodian, assignee for the
benefit of creditors or any other person or entity having powers or duties
like or similar to the powers and duties of trustee, receiver, controller,
custodian or assignee for the benefit of creditors.
1.21 "Obligations" as used in this Agreement means and includes any and
all loans, advances, overdrafts, debts, liabilities (including, without
limitation, any and all amounts charged to Borrower's account pursuant to any
agreement authorizing Bank to charge Borrower's account), obligations, lease
payments, guaranties, covenants and duties owing by Borrower to Bank of any
kind and description whether advanced pursuant to or evidenced by this
Agreement; by any note or other instrument; or by any other agreement between
Bank and Borrower and whether or not for the payment of money, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which Bank may have obtained by
assignment, participation, purchase or otherwise, and further including,
without limitation, all interest not paid when due and all Bank Expenses
which Borrower is required to pay or reimburse by this Agreement, by law, or
otherwise.
1.22 "Person" or "person" as used in this Agreement means and includes
any individual, corporation, partnership, joint venture, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
1.23 "Receivables" as used in this Agreement means and includes all
presently existing and hereafter arising accounts, instruments, documents,
chattel paper, general intangibles, all other forms of obligations owing to
Borrower, all of Borrower's rights in, to and under all purchase orders
heretofore or hereafter received, all moneys due to Borrower under all
contracts or agreements (whether or not yet earned or due), all merchandise
returned to or reclaimed by Borrower and the Borrower's books (except minute
books) relating to any of the foregoing.
1.24 "Subordinated Debt" as used in this Agreement means indebtedness of
the Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content satisfactory to the
Bank.
1.25 "Subordination Agreement" as used in this Agreement means a
subordination agreement in form satisfactory to Bank making all present and
future indebtedness of the Borrower to N/A subordinate to the Obligations.
1.26 "Tangible Effective Net Worth" as used in this Agreement means net
worth as determined in accordance with GAAP consistently applied, increased
by Subordinated Debt, if any, and decreased by the following: patents,
licenses, goodwill, subscription lists, organization expenses, trade
receivables converted to notes, money due from affiliates (including
officers, directors, subsidiaries and commonly held companies).
1.27 "Tangible Net Worth" as used in this Agreement means, as of any
applicable date of determination, the excess of
a. the net book value of all assets of a person (other than patents,
patent rights, trademarks, trade names, franchises, copyrights,
licenses, goodwill, and similar intangible assets) after all
appropriate deductions in accordance with GAAP (including, without
limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization), over
b. all Debt of such person.
1.28 "Total Liabilities" as used in this Agreement means the total of all
items of indebtedness, obligation or liability which, in accordance with GAAP
consistently applied, would be included in determining the total liabilities
of the Borrower as of the date Total Liabilities is to be determined,
including without limitation (a) all obligations secured by any mortgage,
pledge, security interest or other lien on property owned or acquired,
whether or not the obligations secured thereby shall have been assumed; (b)
all obligations which are capitalized lease obligations; and (c) all
guaranties, endorsements or other contingent or surety obligations with
respect to the indebtedness of others, whether or not reflected on the
balance sheets of the Borrower, including any obligation to furnish funds,
directly or indirectly through the purchase of goods, supplies, services, or
by way of stock purchase, capital contribution, advance or loan or any
obligation to enter into a contract for any of the foregoing.
1.29 "Working Capital" as used in this Agreement means, as of any
applicable date of determination, Current Assets less Current Liabilities.
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1.30 Any and all terms used in this Agreement shall be construed and
defined in accordance with the meaning and definition of such terms under and
pursuant to the California Uniform Commercial Code (hereinafter referred to
as the "Code") as amended.
2. LOAN AND TERMS OF PAYMENT
For value received, Borrower promises to pay to the order of Bank such
amount, as provided for below, together with interest, as provided for
below.
2.1 Upon the request of Borrower, made at any time and from time to time
during the term hereof, and so long as no Event of Default has occurred, Bank
shall lend to Borrower an amount equal to the Borrowing Base; provided,
however, that in no event shall Bank be obligated to make advances to
Borrower under this Section 2.1 whenever the Daily Balance exceeds, at any
time, either the Borrowing Base or the sum of FOUR MILLION AND NO/100
($4,000,000.00), such amount being referred to herein as an "Overadvance".
Borrower shall be allowed to advance up to $2,000,000.00 in excess of the
eligible borrowing base, provided that such amounts over formula are cash
secured and are within the commitment amount.
2.2 Except as hereinbelow provided, the Credit shall bear interest, on
the Daily Balance owing, at a rate of 500/1000 (0.500) percentage points per
annum above the Base Rate (the "Rate"). The Credit shall bear interest, from
and after the occurrence of an Event of Default and without constituting a
waiver of any such Event of Default, on the Daily Balance owing, at a rate
three (3) percentage points per annum above the Rate. All interest
chargeable under this Agreement that is based upon a per annum calculation
shall be computed on the basis of a three hundred sixty (360) day year for
actual days elapsed.
The Base Rate as of the date of this Agreement is NINE AND NO/1000
(9.000%) per annum. In the event that the Base Rate announced is, from time
to time hereafter changed, adjustment in the Rate shall be made and based on
the Base Rate in effect on the date of such change. The Rate, as adjusted,
shall apply to the Credit until the Base Rate is adjusted again. The minimum
interest payable by the Borrower under this Agreement shall in no event be
less than N/A per month. All interest payable by Borrower under the Credit
shall be due and payable on the first day of each calendar month during the
term of this Agreement and Bank may, at its option, elect to treat such
interest and any and all Bank Expenses as advances under the Credit, which
amounts shall thereupon constitute Obligations and shall thereafter accrue
interest at the rate applicable to the Credit under the terms of the
Agreement.
2.3 Without affecting Borrower's obligation to repay immediately any
Overadvance in accordance with Section 2.1 hereof, all Overadvances shall
bear additional interest on the amount thereof at a rate equal to N/A (N/A%)
percentage points per month in excess of the interest rate set forth in
Section 2.2, from the date incurred and for each month thereafter, until
repaid in full.
3. TERM
3.1 This Agreement shall remain in full force and effect until APRIL 30,
1996, or until terminated by notice by Borrower. Notice of such termination
by Borrower shall be effectuated by mailing of a registered or certified
letter not less than thirty (30) days prior to the effective date of such
termination, addressed to the Bank at the address set forth herein and the
termination shall be effective as of the date so fixed in such notice.
Notwithstanding the foregoing, should Borrower be in default of one or more
of the provisions of this Agreement, Bank may terminate this Agreement at any
time without notice. Notwithstanding the foregoing, should either Bank or
Borrower become insolvent or unable to meet its debts as they mature, or
fail, suspend, or go out of business, the other party shall have the right to
terminate this Agreement at any time without notice. On the date of
termination all Obligations shall become immediately due and payable without
notice or demand; no notice of termination by Borrower shall be effective
until Borrower shall have paid all Obligations to Bank in full.
Notwithstanding termination, until all Obligations have been fully satisfied,
Bank shall retain its security interest in all existing Collateral and
Collateral arising thereafter, and Borrower shall continue to perform all of
its Obligations.
3.2 After termination and when Bank has received payment in full of
Borrower's Obligations to Bank, Bank shall reassign to Borrower all
Collateral held by Bank, and shall execute a termination of all security
agreements and security interests given by Borrower to Bank, upon the
execution and delivery of mutual general releases.
4. CREATION OF SECURITY INTEREST
4.1 Borrower hereby grants to Bank a continuing security interest in all
presently existing and hereafter arising Collateral in order to secure prompt
repayment of any and all Obligations owed by Borrower to Bank and in order to
secure prompt performance by Borrower of each and all of its covenants and
Obligations under this Agreement and otherwise created. Bank's security
interest in the Collateral shall attach to all Collateral without further act
on the part of Bank or Borrower. In the event that any Collateral,
including proceeds, is evidenced by or consists of a letter of credit,
advice of credit, instrument, money, negotiable documents, chattel paper or
similar property (collectively, "Negotiable Collateral"), Borrower shall,
immediately upon receipt thereof, endorse and assign such Negotiable
Collateral over to Bank and deliver actual physical possession of the
Negotiable Collateral to Bank.
4.2 Bank's security interest in Receivables shall attach to all
Receivables without further act on the part of Bank or Borrower. Upon
request from Bank, Borrower shall provide Bank with schedules describing all
Receivables created or acquired by Borrower (including without limitation
agings listing the names and addresses of, and amounts owing by date by
account debtors), and shall execute and deliver written assignments of all
Receivables to Bank all in a form acceptable to Bank, provided, however,
Borrower's failure to execute and deliver such schedules and/or assignments
shall not affect or limit Bank's security interest and other rights in and to
the Receivables. Together with each schedule,
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Borrower shall furnish Bank with copies of Borrower's customers' invoices or
the equivalent, and original shipping or delivery receipts for all
merchandise sold, and Borrower warrants the genuineness thereof. Bank or
Bank's designee may notify customers or account debtors of collection costs
and expenses to Borrower's account but, unless and until Bank does so or
gives Borrower other written instructions, Borrower shall collect all
Receivables for Bank, receive in trust all payments thereon as Bank's
trustee, and, if so requested to do so from Bank, Borrower shall immediately
deliver said payments to Bank in their original form as received from the
account debtor and all letters of credit, advices of credit, instruments,
documents, chattel paper or any similar property evidencing or constituting
Collateral. Notwithstanding anything to the contrary contained herein, if
sales of inventory are made for cash, Borrower shall immediately deliver to
Bank, in identical form, all such cash, checks, or other forms of payment
which Borrower receives. The receipt of any check or other item of payment
by Bank shall not be considered a payment on account until such check or
other item of payment is honored when presented for payment, in which event,
said check or other item of payment shall be deemed to have been paid to Bank
TWO (2) calendar days after the date Bank actually receives such check or
other item of payment.
4.3 Bank's security interest in inventory shall attach to all inventory
without further act on the part of Bank or Borrower. Upon Bank's request
Borrower will from time to time at Borrower's expense pledge, assemble and
deliver such inventory to Bank or to a third party as Bank's bailee; or hold
the same in trust for Bank's account or store the same in a warehouse in
Bank's name; or deliver to Bank documents of title representing said
inventory; or evidence of Bank's security interest in some other manner
acceptable to Bank. Until a default by Borrower under this Agreement or any
other Agreement between Borrower and Bank, Borrower may, subject to the
provisions hereof and consistent herewith, sell the inventory, but only in
the ordinary course of Borrower's business. A sale of inventory in
Borrower's ordinary course of business does not include an exchange or a
transfer in partial or total satisfaction of a debt owing by Borrower.
4.4 Borrower shall execute and deliver to Bank concurrently with
Borrower's execution of this Agreement, and at any time or times hereafter at
the request of Bank, all financing statements, continuation financing
statements, security agreements, mortgages, assignments, certificates of
title, affidavits, reports, notices, schedules of accounts, letters of
authority and all other documents that Bank may request, in form satisfactory
to Bank, to perfect and maintain perfected Bank's security interest in the
Collateral and in order to fully consummate all of the transactions
contemplated under this Agreement. Borrower hereby irrevocably makes,
constitutes and appoints Bank (and any of Bank's officers, employees or
agents designated by Bank) as Borrower's true and lawful attorney-in-fact
with power to sign the name of Borrower on any financing statements,
continuation financing statements, security agreement, mortgage, assignment,
certificate of title, affidavit, letter of authority, notice of other similar
documents which must be executed and/or filed in order to perfect or continue
perfected Bank's security interest in the Collateral.
Borrower shall make appropriate entries in Borrower's Books disclosing
Bank's security interest in the Receivables. Bank (through any of its
officers, employees or agents) shall have the right at any time or times
hereafter during Borrower's usual business hours, or during the usual
business hours of any third party having control over the records of
Borrower, to inspect and verify Borrower's Books in order to verify the
amount or condition of, or any other matter, relating to, said Collateral and
Borrower's financial condition.
4.5 Borrower appoints Bank or any other person whom Bank may designate
as Borrower's attorney-in-fact, with power to endorse Borrower's name on any
checks, notes, acceptances, money order, drafts or other forms of payment or
security that may come into Bank's possession; to sign Borrower's name on any
invoice or xxxx of lading relating to any Receivables, on drafts against
account debtors, on schedules and assignments of Receivables, on
verifications of Receivables and on notices to account debtors; to establish
a lock box arrangement and/or to notify the post office authorities to change
the address for delivery of Borrower's mail addressed to Borrower to an
address designated by Bank, 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; to send, whether in writing or by telephone, requests
for verification of Receivables; and to do all things necessary to carry out
this Agreement. Borrower ratifies and approves all acts of the attorney-in-
fact. Neither Bank nor its attorney-in-fact will be liable for any acts or
omissions or for any error of judgement or mistake of fact or law. This
power being coupled with an interest, is irrevocable so long as any
Receivables in which Bank has a security interest remain unpaid and until the
Obligations have been fully satisfied.
4.6 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards,
warehousemen, or any personnel to protect the Collateral, pay any service
bureau, or, obtain any records, and all costs for the same shall be added to
the Obligations and shall be payable on demand.
4.7 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries
and service providers.
5. CONDITIONS PRECEDENT
5.1 Conditions precedent to the making of the loans and the extension of
the financial accommodations hereunder, Borrower shall execute, or cause to
be executed, and deliver to Bank, in form and substance satisfactory to Bank
and its counsel, the following:
a. This Agreement and other documents required by Bank;
b. Financing statements (Form UCC-1) in form satisfactory to Bank for
filing and recording with the appropriate governmental authorities;
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c. If Borrower is a corporation, then certified extracts from the
minutes of the meeting of its board of directors, authorizing the
borrowings and the granting of the security interest provided for
herein and authorizing specific officers to execute and deliver the
agreements provided for herein;
d. If Borrower is a corporation, then a certificate of good standing
showing that Borrower is in good standing under the laws of the state
of its incorporation and certificates indicating that Borrower is
qualified to transact business and is in good standing in any other
state in which it conducts business;
e. If Borrower is a partnership, then a copy of Borrower's partnership
agreement certified by each general partner of Borrower;
f. UCC searches, tax lien and litigation searches, fictitious business
statement filings, insurance certificates, notices or other similar
documents which Bank may require and in such form as Bank may require,
in order to reflect, perfect or protect Bank's first priority security
interest in the Collateral and in order to fully consummate all of the
transactions contemplated under this Agreement;
g. Evidence that Borrower has obtained insurance and acceptable
endorsements;
h. Waivers executed by landlords and mortgagees of any real property on
which any Collateral is located; and
i. Warranties and representations of officers.
6. WARRANTIES REPRESENTATIONS AND COVENANTS.
6.1 If so requested by Bank, Borrower shall, at such intervals
designated by Bank, during the term hereof execute and deliver a Report of
Accounts Receivable or similar report, in form customarily used by Bank.
Borrower's Borrowing Base at all times pertinent hereto shall not be less
than the advances made hereunder. Bank shall have the right to recompute
Borrower's Borrowing Base in conformity with this Agreement.
6.2 If any warranty is breached as to any account, or any account is not
paid in full by an account debtor within NINETY (90) days from the date of
invoice, or an account debtor disputes liability or makes any claim with
respect thereto, or a petition in bankruptcy or other application for relief
under the Bankruptcy Code or any other insolvency law is filed by or against
an account debtor, or an account debtor makes an assignment for the benefit
of creditors, becomes insolvent, fails or goes out of business, then Bank may
deem ineligible any and all accounts owing by that account debtor, and reduce
Borrower's Borrowing Base by the amount thereof. Bank shall retain its
security interest in all Receivables and accounts, whether eligible or
ineligible, until all Obligations have been fully paid and satisfied.
Returns and allowances, if any, as between Borrower and its customers, will
be on the same basis and in accordance with the usual customary practices of
the Borrower, as they exist at this time. Any merchandise which is returned
by an account debtor or otherwise recovered shall be set aside, marked with
Bank's name, and Bank shall retain a security interest therein. Borrower
shall promptly notify Bank of all disputes and claims and settle or adjust
them on terms approved by Bank. After default by Borrower hereunder, no
discount, credit or allowance shall be granted to any account debtor by
Borrower and no return of merchandise shall be accepted by Borrower without
Bank's consent. Bank may, after default by Borrower, settle or adjust
disputes and claims directly with account debtors for amounts and upon terms
which Bank considers advisable, and in such cases Bank will credit Borrower's
account with only the net amounts received by Bank in payment of the
accounts, after deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
a. Borrower has good and marketable title to the Collateral. Bank has
and shall continue to have a first priority perfected security interest
in and to the Collateral. The Collateral shall at all times remain
free and clear of all liens, encumbrances and security interests
(except those in favor of Bank).
b. All accounts are and will, at all times pertinent hereto, be bona
fide existing obligations created by the sale and delivery of
merchandise or the rendition of services to account debtors in the
ordinary course of business, free of liens, claims, encumbrances and
security interests (except as held by Bank and except as may be
consented to, in writing, by Bank) and are unconditionally owed to
Borrower without defenses, disputes, offsets, counterclaims, rights of
return or cancellation, and Borrower shall have received no notice of
actual or imminent bankruptcy or insolvency of any account debtor at
the time an account due from such account debtor is assigned to Bank.
c. At the time each account is assigned to Bank, all property giving
rise to such account shall have been delivered to the account debtor or
to the agent for the account debtor for immediate shipment to, and
unconditional acceptance by, the account debtor. Borrower shall
deliver to Bank, as Bank may from time to time require, delivery
receipts, customer's purchase orders, shipping instruction, bills of
lading and any other evidence of shipping arrangements. Absent such a
request by Bank, copies of all such documentation shall be held by
Borrower as custodian for Bank.
6.4 At the time each eligible account is assigned to Bank, all such
eligible accounts will be due and payable on terms set forth in Section 1.12,
or on such other terms approved in writing by Bank in advance of the creation
of such accounts and which are expressly set forth on the face of all
invoices, copies of which shall be held by Borrower as custodian for Bank,
and no such eligible account will then be past due.
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6.5 Borrower shall keep the inventory only at the following locations:
0000 Xxxxxx Xxxxxx Xxxx, Xxx Xxxxx, XX 00000 and the owner or mortgagees of
the respective locations are: None.
a. Borrower, immediately upon demand by Bank therefor, shall now and from
time to time hereafter, at such intervals as are requested by Bank,
deliver to Bank, designations of inventory specifying Borrower's cost of
inventory, the wholesale market value thereof and such other matters and
information relating to the inventory as Bank may request;
b. Borrower's inventory, valued at the lower of Borrower's cost or the
wholesale market value thereof, at all times pertinent hereto shall not be
less than N/A Dollars ($ N/A) of which no less than N/A Dollars ($ N/A)
shall be in raw materials and finished goods;
c. All of the inventory is and shall remain free from all purchase money
or other security interests, liens or encumbrances, except as held by
Bank;
d. Borrower does now keep and hereafter at all times shall keep correct
and accurate records itemizing and describing the kind, type, quality and
quantity of the inventory, its cost therefor and selling price thereof,
and the daily withdrawals therefrom and additions thereto, all of which
records shall be available upon demand to any of Bank's officers, agents
and employees for inspection and copying;
e. All inventory, now and hereafter at all times, shall be new inventory
of good and merchantable quality free from defects;
f. Inventory is not now and shall not at any time or times hereafter be
located or stored with a bailee, warehouseman or other third party without
Bank's prior written consent, and, in such event, Borrower will
concurrently therewith cause any such bailee, warehouseman or other third
party to issue and deliver to Bank, in a form acceptable to Bank,
warehouse receipts in Bank's name evidencing the storage of inventory or
other evidence of Bank's prior rights in the inventory. In any event,
Borrower shall instruct any third party to hold all such inventory for
Bank's account subject to Bank's security interests and its instructions;
and
g. Bank shall have the right upon demand now and/or at all times
hereafter, during Borrower's usual business hours, to inspect and examine
the inventory and to check and test the same as to quality, quantity,
value and condition and Borrower agrees to reimburse Bank for Bank's
reasonable costs and expenses in so doing.
6.6 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:
x. Xxxxx a security interest in or permit a lien, claim or encumbrance
upon any of the Collateral to any person, association, firm, corporation,
entity or governmental agency or instrumentality;
b. Permit any levy, attachment or restraint to be made affecting any of
Borrower's assets;
c. Permit any Judicial Officer or Assignee to be appointed or to take
possession of any or all of Borrower's assets;
d. Other than sales of inventory in the ordinary course of Borrower's
business, to sell, lease, or otherwise dispose of, move, or transfer,
whether by sale or otherwise, any of Borrower's assets;
e. Change its name, business structure, corporate identity or structure;
add any new fictitious names, liquidate, merge or consolidate with or into
any other business organization;
f. Move or relocate any Collateral;
g. Acquire any other business organization;
h. Enter into any transaction not in the usual course of Borrower's
business;
i. Make any investment in securities of any person, association, firm,
entity, or corporation other than the securities of the United States of
America;
j. Make any change in Borrower's financial structure or in any of its
business objectives, purposes or operations which would adversely effect
the ability of Borrower to repay Borrower's Obligations;
k. Incur any debts outside the ordinary course of Borrower's business
except renewals or extensions of existing debts and interest thereon;
l. Make any advance or loan except in the ordinary course of Borrower's
business as currently conducted;
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m. Make loans, advances or extensions of credit to any Person, except for
sales on open account and otherwise in the ordinary course of business;
n. Guarantee or otherwise, directly or indirectly, in any way be or become
responsible for obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person, agreement for the
furnishing of funds to any other Person through the furnishing of goods,
supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person, or
otherwise, except for the endorsement of negotiable instruments by the
Borrower in the ordinary course of business for deposit or collection.
o. (a) Sell, lease, transfer or otherwise dispose of properties and assets
having an aggregate book value of more than N/A Dollars ($ N/A) (whether
in one transaction or in a series of transactions) except as to the sale
of inventory in the ordinary course of business; (b) change its name,
consolidate with or merge into any other corporation, permit another
corporation to merge into it, acquire all or substantially all the
properties or assets of any other Person, enter into any reorganization or
recapitalization or reclassify its capital stock, or (c) enter into any
sale-leaseback transaction;
p. Subordinate any indebtedness due to it from a person to indebtedness of
other creditors of such person;
q. Purchase or hold beneficially any stock or other securities of, or make
any investment or acquire any interest whatsoever in, any other Person,
except for the common stock of the Subsidiaries owned by the Borrower on
the date of this Agreement and except for certificates of deposit with
maturities of one year or less of United States commercial banks with
capital, surplus and undivided profits in excess of $100,000,000 and
direct obligations of the United States Government maturing within one
year from the date of acquisition thereof; or
r. Allow any fact, condition or event to occur or exist with respect to
any employee pension or profit sharing plans established or maintained by
it which might constitute grounds for termination of any such plan or for
the court appointment of a trustee to administer any such plan.
6.7 Borrower is not a merchant whose sales for resale of goods for
personal, family or household purposes exceeded seventy-five percent (75%) in
dollar volume of its total sales of all goods during the 12 months preceding
the filing by Bank of a financing statement describing the Collateral. At no
time hereafter shall Borrower's sales for resale of goods for personal,
family or household purposes exceed seventy-five percent (75%) in dollar
volume of its total sales.
6.8 Borrower's sole place of business or chief executive office or
residence is located at the address indicated above and Borrower covenants
and agrees that it will not, during the term of this Agreement, without prior
written notification to Bank, relocate said sole place of business or chief
executive office or residence.
6.9 If Borrower is a corporation, Borrower represents, warrants and
covenants as follows:
a. Borrower will not make any distribution or declare or pay any dividend
(in stock or in cash) to any shareholder or on any of its capital stock,
of any class, whether now or hereafter outstanding, or purchase, acquire,
repurchase, redeem or retire any such capital stock;
b. Borrower is and shall at all times hereafter be a corporation duly
organized and existing in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in California or
any other state in which it conducts its business;
c. Borrower has the right and power and is duly authorized to enter into
this Agreement; and
d. The execution by Borrower of this Agreement shall not constitute a
breach of any provision contained in Borrower's articles of incorporation
or by-laws.
6.10 The execution of and performance by Borrower of all of the terms and
provisions contained in this Agreement shall not result in a breach of or
constitute an event of default under any agreement to which Borrower is now
or hereafter becomes a party.
6.11 Borrower shall promptly notify Bank in writing of its acquisition by
purchase, lease or otherwise of any after acquired property of the type
included in the Collateral, with the exception of purchases of inventory in
the ordinary course of business.
6.12 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 have been paid, and shall hereafter be paid in full, before
delinquency. 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 Bank, on demand, appropriate
certificates attesting to the payment or deposit thereof. Borrower will make
timely payment or deposit of all F.I.C.A. payments and withholding taxes
required of it by applicable laws, and will upon request furnish Bank with
proof satisfactory to it that Borrower has made such payments or deposit. If
Borrower fails to pay any such assessment, tax, contribution, or make such
deposit, or furnish the required proof, Bank may, in its sole and absolute
discretion and without notice to Borrower,
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(i) make payment of the same or any part thereof; or (ii) set up such
reserves in Borrower's account as Bank deems necessary to satisfy the
liability therefor, or both. Bank may conclusively rely on the usual
statements of the amount owing or other official statements issued by the
appropriate governmental agency. Each amount so paid or deposited by Bank
shall constitute a Bank Expense and an additional advance to Borrower.
6.13 There are no actions or proceedings pending by or against Borrower
or any guarantor of Borrower before any court or administrative agency and
Borrower has no knowledge of any pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except as heretofore
specifically disclosed in writing to Bank. If any of the foregoing arise
during the term of the Agreement, Borrower shall immediately notify Bank in
writing.
6.14 a. Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use
such properties in similar businesses for the full insurable value thereof.
Borrower shall also keep and maintain business interruption insurance and
public liability and property damage insurance relating to Borrower's
ownership and use of the Collateral and its other assets. All such policies
of insurance shall be in such form, with such companies, and in such amounts
as may be satisfactory to Bank. Borrower shall deliver to Bank 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 an endorsement in a form
satisfactory to Bank showing Bank as a loss payee thereof, with a waiver of
warranties (Form 438-BFU), and all proceeds payable thereunder shall be
payable to Bank and, upon receipt by Bank, shall be applied on account of the
Obligations owing to Bank. To secure the payment of the Obligations,
Borrower grants Bank a security interest in and to all such policies of
insurance (except those of public liability and property damage) and the
proceeds thereof, and Borrower shall direct all insurers under such policies
of insurance to pay all proceeds thereof directly to Bank.
b. Borrower hereby irrevocable appoints Bank (and any of Bank's officers,
employees or agents designated by Bank) as Borrower's attorney for the
purpose of making, selling and adjusting claims under such policies of
insurance, endorsing the name of Borrower on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. Borrower will not cancel any of such policies without Bank's
prior written consent. Each such insurer shall agree by endorsement upon the
policy or policies of insurance issued by it to Borrower as required above,
or by independent instruments furnished to Bank, that it will give Bank at
least ten (10) days written notice before any such policy or policies of
insurance shall be altered or cancelled, and that no act or default of
Borrower, or any other person, shall affect the right of Bank to recover
under such policy or policies of insurance required above or to pay any
premium in whole or in part relating thereto. Bank, without waiving or
releasing any Obligations or any Event of Default, may, but shall have no
obligation to do so, obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect to such policies which
Bank deems advisable. All sums so disbursed by Bank, as well as reasonable
attorneys' fees, court costs, expenses and other charges relating thereto,
shall constitute Bank Expenses and are payable on demand.
6.15 All financial statements and information relating to Borrower which
have been or may hereafter be delivered by Borrower to Bank are true and
correct and have been prepared in accordance with GAAP consistently applied
and there has been no material adverse change in the financial condition of
Borrower since the submission of such financial information to Bank.
6.16 a. Borrower at all times hereafter shall maintain a standard and
modern system of accounting in accordance with GAAP consistently applied with
ledger and account cards and/or computer tapes and computer disks, computer
printouts and computer records pertaining to the Collateral which contain
information as may from time to time be requested by Bank, not modify or
change its method of accounting or enter into, modify or terminate any
agreement presently existing, or at any time hereafter entered into with any
third party accounting firm and/or service bureau for the preparation and/or
storage of Borrower's accounting records without the written consent of Bank
first obtained and without said accounting firm and/or service bureau
agreeing to provide information regarding the Receivables and inventory and
Borrower's financial condition to Bank; permit Bank and any of its employees,
officers or agents, upon demand, during Borrower's usual business hours, or
the usual business hour of third persons having control thereof, to have
access to and examine all of the Borrower's Books relating to the Collateral,
Borrower's Obligations to Bank, Borrower's financial condition and the
results of Borrower's operations and in connection therewith, permit Bank or
any of its agents, employees or officers to copy and make extracts therefrom.
b. Borrower shall deliver to Bank within thirty (30) days after the end of
each MONTH, a COMPANY PREPARED balance sheet and profit and loss statement
covering Borrower's operations and deliver to Bank within ninety (90) days
after the end of each of Borrower's fiscal years a(n) AUDITED statement of
the financial condition of the Borrower for each such fiscal year, including
but not limited to, a balance sheet and profit and loss statement and any
other report requested by Bank relating to the Collateral and the financial
condition of Borrower, and a certificate signed by an authorized employee of
Borrower to the effect that all reports, statements, computer disk or tape
files, computer printouts, computer runs, or other computer prepared
information of any kind or nature relating to the foregoing or documents
delivered or caused to be delivered to Bank under this subparagraph are
complete, correct and thoroughly present the financial condition of borrower
and that there exists on the date of delivery to Bank no condition or event
which constitutes a breach or Event of Default under this Agreement.
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c. In addition to the financial statements requested above, the Borrower
agrees to provide Bank with the following schedules:
X Accounts Receivable Agings on a MONTHLY basis:
----------- -----------------
X Accounts Payable Agings on a MONTHLY basis;
----------- -----------------
X Summary Distributor Sell- on a MONTHLY basis; and
----------- Through Report -----------------
X BORROWING BASE CERTIFICATE on a MONTHLY basis
----------- -----------------
6.17 Borrower shall maintain the following financial ratios and covenants
on a consolidated and non-consolidated basis:
a. Working Capital in an amount not less than n/a
b. Tangible Effective Net Worth in an amount not less than $10,800,000.00
DEFINED AS MINIMUM TANGIBLE NET WORTH LESS INTANGIBLE ASSETS (eg.
CAPITALIZED SOFTWARE COSTS AND SOFTWARE) PLUS 100% OF ANY NEW EQUITY
RAISED AND 75% OF NET QUARTERLY PROFITS.
c. a ratio of Current Assets to Current Liabilities of not less than N/A
d. a quick ratio of cash plus securities plus Receivables to Current
Liabilities of not less than 1.25:1.00
e. a ratio of Total Liabilities (less debt subordinated to Bank) to
Tangible Effective Net Worth of less than 0.60:1.00
f. a ratio of Cash Flow to Fixed Charges of not less than N/A
g. Net income after taxes of QUARTERLY BASIS. BORROWER IS NOT TO HAVE
OPERATING AND AFTER TAX LOSSES GREATER THAN $1,450,000.00 IN THE QUARTER
ENDING 7-31-95, AND THE MAXIMUM NET LOSS ALLOWED FOR THE FOURTH QUARTER
ENDING 10-31-95 IS $750,000.00. BORROWER IS TO BE PROFITABLE QUARTERLY ON
AN OPERATING AND AFTER TAX BASIS THEREAFTER WITH ONE LOSS QUARTER ALLOWED
PER YEAR NOT TO EXCEED $250,000.00
h. Borrower shall not without Bank's prior written consent acquire or
expend for or commit itself to acquire or expend for fixed assets by
lease, purchase or otherwise in an aggregate amount that exceeds n/a
Dollars ($ n/a) in any fiscal year; and
ADDITIONAL PROVISION:
i. BORROWER SHALL REGISTER ALL ESSENTIAL COPYRIGHTABLE MATERIAL WITHIN 90
DAYS OF THE DATE OF THIS AGREEMENT AND SHALL FURTHER ALLOW BANK TO PERFECT
THE SECURITY INTEREST ON SUCH COPYRIGHT. FAILURE TO COMPLY WITH THIS
PROVISION SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER THE TERMS SETFORTH
HEREIN.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.
6.18 Borrower shall promptly supply Bank (and cause any guarantor to
supply Bank) with such other information (including tax returns) concerning
its financial affairs (or that of any guarantor) as Bank may request from
time to time hereafter, and shall promptly notify Bank of any material
adverse change in Borrower's financial condition and of any condition or
event which constitutes a breach of or an event which constitutes an Event of
Default under this Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent and able
to pay its debts (including trade debts) as they mature.
6.20 Borrower shall immediately and without demand reimburse Bank for all
sums expended by Bank in connection with any action brought by Bank to
correct any default or enforce any provision of this Agreement, including all
Bank Expenses; Borrower authorizes and approves all advances and payments by
Bank for items described in this Agreement as Bank Expenses.
6.21 Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall
be conclusively presumed to have been rolled on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements
which Borrower shall give, or cause to be given, to Bank, either now or
hereafter.
6.22 Borrower shall keep all of its principal bank accounts with Bank and
shall notify the Bank immediately in writing of the existence of any other
bank account, deposit account, or any other account into which money can be
deposited.
6.23 Borrower shall furnish to the Bank: (a) as soon as possible, but in
no event later than thirty (30) days after Borrower knows or has reason to
know that any reportable event with respect to any deferred compensation plan
has occurred, a statement of the chief financial officer of Borrower setting
forth the details concerning such reportable
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event and the action which Borrower proposes to take with respect thereto,
together with a copy of the notice of such reportable event given to the
Pension Benefit Guaranty Corporation, if a copy of such notice is available
to Borrower; (b) promptly after the filing thereof with the United States
Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of
each annual report with respect to each deferred compensation plan; (c)
promptly after receipt thereof, a copy of any notice Borrower may receive
from the Pension Benefit Guaranty Corporation or the Internal Revenue Service
with respect to any deferred compensation plan; provided, however, this
subparagraph shall not apply to notice of general application issued by the
Pension Benefit Guaranty Corporation or the Internal Revenue Service; and (d)
when the same is made available to participants in the deferred compensation
plan, all notices and other forms of information from time to time
disseminated to the participants by the administrator of the deferred
compensation plan.
6.24 Borrower is now and shall at all times hereafter remain in
compliance with all federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic
substances, wastes and hazardous material and shall maintain all necessary
authorizations and permits.
6.25 Borrower shall maintain insurance on the life of N/A in an amount
not to be less than NO/100 Dollars ($ n/a) under one or more policies issued
by insurance companies satisfactory to Bank, which policies shall be assigned
to Bank as security for the Obligations and on which Bank shall be named as
sole beneficiary.
6.26 Borrower shall limit direct and indirect compensation paid to the
following employees: N/A, to an aggregate of N/A Dollars ($ N/A) per
__________________.
7. EVENTS OF DEFAULT
Any one or more of the following events shall constitute a default by
Borrower under this Agreement:
a. If Borrower fails or neglects to perform, keep or observe any term,
provision, condition, covenant, agreement, warranty or representation
contained in this Agreement, or any other present or future agreement between
Borrower and Bank;
b. If any representation, statement, report or certificate made or delivered
by Borrower, or any of its officers, employees or agents to Bank is not true
and correct;
c. If Borrower fails to pay when due and payable or declared due and payable,
all or any portion of the Borrower's Obligations (whether of principal,
interest, taxes, reimbursement of Bank Expenses, or otherwise);
d. If there is a material impairment of the prospect of repayment of all or
any portion of Borrower's Obligations or a material impairment of the value
or priority of Bank's security interest in the Collateral;
e. If all or any of Borrower's assets are attached, seized, subject to a writ
or distress warrant, or are levied upon, or come into the possession of any
Judicial Officer or Assignee and the same are not released, discharged or
bonded against within ten (10) days thereafter;
f. If any insolvency Proceeding is filed or commenced by or against Borrower
without being dismissed within ten (10) days thereafter;
g. If any proceeding is filed or commenced by or against Borrower for its
dissolution or liquidation;
h. If 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;
i. If a notice of lien, levy or assessment is filed of record with respect to
any or all of Borrower's assets by the United States Government, or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any
time hereafter to any one or more of such entities becomes a lien, whether
xxxxxx or otherwise, upon any or all of the Borrower's assets and the same is
not paid on the payment date thereof;
j. If a judgment or other claim becomes a lien or encumbrance upon any or all
of Borrower's assets and the same is not satisfied, dismissed or bonded
against within ten (10) days thereafter;
k. If Borrower's records are prepared and kept by an outside computer service
bureau at the time this Agreement is entered into or during the term of this
Agreement such an agreement with an outside service bureau is entered into,
and at any time thereafter, without first obtaining the written consent of
Bank, Borrower terminates, modifies, amends or changes its contractual
relationship with said computer service bureau or said computer service
bureau fails to provide Bank with any requested information or financial data
pertaining to Bank's Collateral, Borrower's financial condition or the
results of Borrower's operations;
l. If Borrower permits a default in any material agreement to which Borrower
is a party with third parties so as to result in an acceleration of the
maturity of Borrower's indebtedness to others, whether under any indenture,
agreement or otherwise;
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m. If Borrower makes any payment on account of indebtedness which has been
subordinated to Borrower's Obligations to Bank;
n. If any misrepresentation exists now or thereafter in any warranty or
representation made to Bank by any officer or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director;
o. If any party subordinating its claims to that of Bank's or any guarantor
of Borrower's Obligations dies or terminates its subordination or guaranty,
becomes insolvent or an insolvency Proceeding is commenced by or against any
such subordinating party or guarantor;
p. If Borrower is an individual and Borrower dies;
q. If there is a change of ownership or control of N/A percent ( %) or more
of the issued and outstanding stock of Borrower;
r. If any reportable event, which the Bank determines constitutes grounds for
the termination of any deferred compensation plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any such plan, shall have occurred
and be continuing thirty (30) days after written notice of such determination
shall have been given to Borrower by Bank, or any such Plan shall be
terminated within the meaning of Title IV of the Employment Retirement Income
Security Act ("ERISA"), or a trustee shall be appointed by the appropriate
United States District Court to administer any such plan, or the Pension
Benefit Guaranty Corporation shall institute proceedings to terminate any
plan and in case of any event described in this Section 7.0, the aggregate
amount of the Borrower's liability to the Pension Benefit Guaranty
Corporation under Sections 4062, 4063 or 4064 of ERISA shall exceed five
percent (5%) of Borrower's Tangible Effective Net Worth.
Notwithstanding anything contained in Section 7 to the contrary, Bank
shall refrain from exercising its rights and remedies and Event of Default
shall thereafter not be deemed to have occurred by reason of the occurrence
of any of the events set forth in Sections 7.e, 7.f or 7.j of this Agreement
if, within ten (10) days from the date thereof, the same is released,
discharged, dismissed, bonded against or satisfied; provided, however, if the
event is the institution of insolvency Proceedings against Borrower, Bank
shall not be obligated to make advances to Borrower during such cure period.
8. BANK'S RIGHTS AND REMEDIES
8.1 Upon the occurrence of an Event of Default by Borrower under this
Agreement, Bank 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 Borrower's Obligations, whether evidenced by this Agreement,
installment notes, demand notes or otherwise, immediately due and payable
to the Bank;
b. Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, or any other agreement between Borrower and
Bank;
c. Terminate this Agreement as to any future liability or obligation of
Bank, but without affecting Bank's rights and security interests in the
Collateral, and the Obligations of Borrower to Bank;
d. Without notice to or demand upon Borrower or any guarantor, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, take and maintain
possession of the Collateral and the premises (at no charge to Bank), or
any part thereof, and to pay, purchase, contest or compromise any
encumbrance, charge or lien which in the opinion of Bank appears to be
prior or superior to its security interest and to pay all expenses
incurred in connection therewith;
e. Without limiting Bank's rights under any security interest, Bank 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 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 and Borrower's rights
under all licenses and all franchise agreement shall inure to Bank's
benefit, and Bank shall have the right and power to enter into sublicense
agreements with respect to all such rights with third parties on terms
acceptable to Bank;
f. Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sales and sell (in the manner provided for herein) the
inventory;
g. Sell or dispose 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 is commercially reasonable in the opinion of Bank. It is not necessary
that the Collateral be present at any such sale;
h. Bank shall give notice of the disposition of the Collateral as follows:
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REVOLVING
LOAN & SECURITY AGREEMENT
(ACCOUNTS & INVENTORY)
(1) Bank shall give the Borrower and each holder of a security
interest in the Collateral who has filed with Bank 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 disposition
other than a public sale is to be made of the Collateral, 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's address appearing in this Agreement, 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 Bank;
(3) If the sale is to be a public sale, Bank 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 country in which the sale is to be held;
and
(4) Bank may credit bid and purchase at any public sale.
I. Borrower shall pay all Bank Expenses incurred in connection with Bank's
enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Bank;
J. Any deficiency which exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of third parties, to
Borrower by Bank, or, in Bank's discretion, to any party who Bank
believes, in good faith, is entitled to the excess; and
K. Without constituting a retention of Collateral in satisfaction of an
obligation within the meaning of 9505 of the Uniform Commercial Code or an
action under California Code of Civil Procedure 726, apply any and all
amounts maintained by Borrower as deposit accounts (as that term is defined
under 9105 of the Uniform Commercial Code) or other accounts that Borrower
maintains with Bank against the Obligations.
8.2 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and
remedies not inconsistent herewith as provided by law or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and
no waiver by Bank of any default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election or
acquiescence by Bank.
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY.
------------------------------------------------
If Borrower fails to pay promptly when due to another person or entity,
monies which Borrower is required to pay by reason of any provision in
this Agreement, Bank may, but need not, pay the same and charge Borrower's
account therefor, and Borrower shall promptly reimburse Bank. All such sums
shall become additional indebtedness owing to Bank, shall bear interest at the
rate hereinabove provided, and shall be secured by all Collateral. Any
payments made by Bank shall not constitute (i) an agreement by it to make
similar payments in the future; or (ii) a waiver by Bank of any default under
this Agreement. Bank need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance or lien and the receipt of
the usual official notice of the payment thereof shall be conclusive evidence
that the same was validly due and owing. Such payments shall constitute Bank
Expenses and additional advances to Borrower.
10. WAIVERS
-------
10.1 Borrower agrees that checks and other instruments received by
Bank in payment or on account of Borrower's Obligations constitute
only conditional payment until such items are actually paid to Bank
and Borrower waives the right to direct the application of any and
all payments at any time or times hereafter received by Bank on
account of Borrower's Obligations and Borrower agrees that Bank
shall have the continuing exclusive right to apply and reapply
such payments in any manner as Bank may deem advisable,
notwithstanding any entry by Bank upon its books.
10.2 Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, documents,
instruments chattel paper, and guarantees at any time held by Bank on which
Borrower may in any way be liable.
10.3 Bank shall not in any way or manner be liable or
responsible for (a) the safekeeping of the inventory; (b) any loss
or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency
or other person whomsoever. All risk of loss, damage or destruction
of inventory shall be borne by Borrower.
10.4 Borrower waives the right and the right to assert a
confidential relationship, if any, it may have with any accountant,
accounting firm and/or service bureau or consultant in connection
with any information requested by Bank pursuant to or in accordance
with this Agreement, and agrees that a Bank may contact directly
any such accountants, accounting firm and/or service bureau or
consultant in order to obtain such information.
10.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
TRANSACTION HEREUNDER, OR CONTEMPLATED HEREUNDER, OR ANY OTHER
CLAIM (INCLUDING TORT OR BREACH OF DUTY CLAIMS) OR DISPUTE
HOWSOEVER ARISING BETWEEN BANK AND BORROWER.
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REVOLVING
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
10.6 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails
to pursue or enforce any terms, such waiver, delay or failure to pursue
or enforce shall only be effective with respect to that single act and
shall not be construed to affect any subsequent transactions or Bank's
right to later pursue such rights and remedies.
11. ONE CONTINUING LOAN TRANSACTION.
All loans and advances heretofore, new or at any time or times hereafter made by
Bank to Borrower under this Agreement or any other agreement between Bank and
Borrower, shall constitute one loan secured by Bank's security interests in the
Collateral and by all other security interests, liens, encumbrances heretofore,
now or from time to time hereafter granted by Borrower to Bank.
Notwithstanding the above, (i) to the extent that any portion of the Obligations
are a consumer loan, that portion shall not be secured by any deed of trust or
mortgage on or other security interest in the Borrower's principal dwelling
which is not a purchase money security interest as to that portion, unless
expressly provided to the contrary in another place, or (ii) if the Borrower (or
any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure the loan
and any other Obligation or the Borrower (or any of them), unless expressly
provided to the contrary in another place.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by either
party on the other relating to this Agreement shall be in writing and sent by
regular United States mail, postage prepaid, properly addressed to Borrower or
to Bank at the addresses stated in this Agreement, or to such other addresses as
Borrower or Bank may from time to time specify to the other in writing.
Requests to Borrower by Bank hereunder may be made orally.
13. AUTHORIZATION TO DISBURSE.
Bank is hereby authorized to make loans and advances hereunder upon telephonic
or other instructions received from anyone purporting to be an officer,
employer, or representative of Borrower, or at the discretion of Bank if said
loans and advances are necessary to meet any Obligations of Borrower to Bank.
Bank shall have no duty to make inquiry or verify the authority of any such
party, and Borrower shall hold Bank harmless from any damage, claims or
liability by reason of Bank's honor of, or failure to honor, any such
instructions.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
Any documents, schedules, invoices or other papers delivered to Bank, may be
destroyed or otherwise disposed of by Bank six (6) months after they are
delivered to or received by Bank, unless Borrower requests, in writing, the
return of the said documents, schedules, invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
15. CHOICE OF LAW.
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder and concerning the
Collateral, shall be determined according to the laws of the State of
California. The parties agree that all actions of proceedings arising in
connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or County of Santa
Xxxxx.
16. GENERAL PROVISIONS.
16.1 This Agreement shall be binding and deemed effective when executed
by the Borrower and accepted and executed by Bank at its Headquarter Office.
16.2 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 hereunder without Bank's
prior written consent and any prohibited assignment shall be absolutely void.
No consent to an assignment by Bank shall release Borrower or any guarantor
from their Obligations to Bank. Bank may assign this Agreement and its
rights and duties hereunder. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in Bank's rights and benefits hereunder. In connection therewith,
Bank may disclose all documents and information which Bank now or hereafter
may have relating to Borrower or Borrower's business.
16.3 Paragraph headings and paragraph 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.
16.4 Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against Bank or Borrower, whether under any rule of
construction or otherwise; on the contrary, this Agreement has been reviewed
by all parties 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. When permitted by the context, the
singular includes the plural and vice versa.
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REVOLVING
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
16.5 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 provisions.
16.6 This Agreement cannot be changed or terminated orally. Except as to
currently existing Obligations owing by Borrower to Bank, all prior
agreements, understandings, representations, warranties, and negotiations, if
any, with respect to the subject matter hereof, are merged into this
Agreement.
16.7 The parties intend and agree that their respective rights, duties,
powers liabilities, obligations and discretions shall be performed, carried
out, discharged and exercised reasonably and in good faith.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Loan
& Security Agreement (Accounts and Inventory) to be executed as of the date
first hereinabove written.
ATTEST: BORROWER: SBE, INC.
By: /s/ Xxxxxxx X. Xxxx
----------------------------------- -------------------------------------
Title: Signature of Xxxxxxx X. Xxxx
Accepted and effective as of May 23, Title: Chief Financial Officer
1995 at Bank's Headquarter Office ----------------------------------
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Signature of Xxxxxxx Xxxxxxx
(Bank) COMERICA BANK-CALIFORNIA Title: Controller
----------------------------------
By: /s/ Xxxx Xxxx Xxxx By: /s/ Xxxxxxx X. Xxxx
--------------------------------- -------------------------------------
Signature of XXXX XXXX XXXX Signature of Xxxxxxx X. Xxxx
Title: VICE PRESIDENT Title: President
------------------------------ ----------------------------------
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Signature of Xxxxxxx X. Xxxx
Title: Chairman
----------------------------------
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