EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of March 19, 2003 by
and between The 3DO Company, a California corporation ("Borrower"), and IIG
Capital LLC, as agent for the IIG Trade Opportunities Fund, N.V. ("Lender").
RECITALS
A. Borrower has requested that Lender provide financial accommodations to
Borrower as more fully set forth herein and in the Loan Documents.
B. This Agreement is entered into and will be performed in the Chosen
State.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Parties hereby agree as follows:
AGREEMENT
1 Certain Definitions and Index to Definitions.
1.1 Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP consistently applied.
1.2 Definitions. All other terms contained in this Agreement which are
not specifically defined herein shall have the meanings provided in the UCC to
the extent the same are used herein. All references herein to the singular or
plural shall also mean the plural or the singular, respectively. As used herein,
the following terms shall have the following meanings:
1.2.1 "Account Management Fee" - $1,500.00 per month.
1.2.2 "Advances" - see Section 2.1.1 hereof.
1.2.3 "Agreement" - this Loan and Security Agreement, together
with all exhibits and schedules hereto, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated, or replaced.
1.2.4 "Allowable Amount" - the lesser of (i) the Borrowing Base
less Availability Reserves, if any and (ii) the Maximum Amount.
1.2.5 "Anniversary Date" - each date which is an anniversary of
the date of this Agreement.
1.2.6 "Audit Fee" - $15,000.00 per year or portion thereof.
Page 1 of 31
1.2.7 "Avoidance Claim" - any claim that any payment received by
Lender from or for the account of an Account Debtor is avoidable under the
Bankruptcy Code or any other debtor relief statute.
1.2.8 "Availability Reserves" - as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Advances which would otherwise be available to Borrower
hereunder:
1.2.8.1 To reflect events, conditions, contingencies or
risks which, as determined by Lender in good faith, do or may
reasonably be expected to affect either (i) the Collateral or any
other property which is security for the Obligations or its
value, (ii) the assets, business or prospects of Borrower or any
Obligor, or (iii) the security interest and other rights of
Lender in the Collateral (including the enforceability,
perfection and priority thereof);
1.2.8.2 To reflect Lender's good faith belief that any
financial information furnished by or on behalf of Borrower or
any Obligor to Lender is or may have been incomplete, inaccurate
or misleading in any material respect; or
1.2.8.3 In respect of any state of facts that Lender
determined in good faith constitutes an Event of Default or may
reasonably be expected to, with notice or passage of time or
both, constitute an Event of Default.
1.2.9 "Average Unused Portion of Maximum Amount" - the Maximum
Amount less the average Obligations that were outstanding during the immediately
preceding month.
1.2.10 "Balance Subject to Interest" - The sum of the unpaid
balances of:
1.2.10.1 Advances;
1.2.10.2 Other payments made by Lender arising hereunder for
which Borrower is liable to Lender.
1.2.11 "Borrower" - see Preamble hereof.
1.2.12 "Borrowing Base" - the sum of:
1.2.12.1 60% of the Net Face Amount of Borrower's Eligible
Accounts, plus
1.2.12.2 the lesser of (i) $2,000,000.00 or (ii) 25% of the
value (determined at the lower of cost or market) of Borrower's
Eligible Inventory.
Page 2 of 31
1.2.13 "Borrowing Base Certificate" - a request for an Advance,
in a form acceptable to Lender.
1.2.14 "Business Day" - any day which is not a Saturday, Sunday,
or other day on which national banks are authorized or required to be closed.
1.2.15 "Chosen State" - New York.
1.2.16 "Claim" - a claim by an Account Debtor, of any defense,
dispute, offset, counterclaim, or rights of return or cancellation with respect
to any Account.
1.2.17 "Clearance Days" - 3 banking days.
1.2.18 "Collateral" - All Borrower's present and future Accounts,
Chattel Paper, Goods (including Inventory and Equipment), Instruments,
Investment Property, Documents, and General Intangibles, and the proceeds
thereof.
1.2.19 "Collateral Management Fee" - 0.4% per month of the
average monthly balance of the gross face amount of the outstanding Accounts.
1.2.20 "Contractual Termination Date" - The end of a Term.
1.2.21 "Credit Accommodation" - any advance or other extension of
credit by Lender to or on behalf of Borrower hereunder.
1.2.22 "Default Rate" - 8% per annum in excess of the Interest
Rate.
1.2.23 "Default Waiver Fee" - $2,500.00.
1.2.24 "Delinquent Account" - see Section 1.2.26.1.
1.2.25 "Early Termination Fee" - the greater of (x) total
interest for the immediately preceding three months, or (y) $300,000.00.
1.2.26 "Eligible Account" - an Account, excluding the following:
1.2.26.1 Any Account which remain uncollected for more than
90 days from invoice date (each a "Delinquent Account");
1.2.26.2 Any Account due from an Account Debtor that is
insolvent;
1.2.26.3 Any Account due from an Account Debtor affiliated
with Borrower in any manner;
1.2.26.4 Any Account which is not unconditionally due and
owing;
Page 3 of 31
1.2.26.5 Any Account with respect to which the Account
Debtor is not a resident or citizen of, located in, or subject to
service of process in, the United States, and which are not
either (i) covered by credit insurance in form and amount, and by
an insurer, satisfactory to Lender, or (ii) supported by one or
more letters of credit issued by a financial institution,
acceptable to Lender;
1.2.26.6 Any Account due from an Account Debtor who is any
national, federal state or municipal government, including,
without limitation, any instrumentality, division, agency, body
or department thereof, except where the Account Debtor is bound
to make payment directly to Lender;
1.2.26.7 That portion of Accounts due from an Account Debtor
which is in excess of 25% percent of Borrower's aggregate dollar
amount of all outstanding Accounts Receivable;
1.2.26.8 Accounts which are not free of all liens,
encumbrances, charges, rights and interest of any kind, except
liens in favor of Lender, subordinate liens existing as of the
date of this Agreement, and subordinate liens hereafter acquired
with Lender's consent, which consent shall not be unreasonably
withheld;
1.2.26.9 Accounts which are supported or represented by a
promissory note, post-dated check or letter of credit unless
Lender holds a first perfected security interest therein;
1.2.26.10 Accounts that represent progress payments or other
advance xxxxxxxx that are due prior to the completion of
performance by Borrower of the subject contract for goods or
services;
1.2.26.11 Accounts for which Borrower is or may become
indebted to the Account Debtor, except Accounts owing from an
Account Debtor which has signed an estoppel letter acceptable to
Lender whereby it agrees not to assert its claims against
Borrower as a defense to payment of Accounts; and
1.2.26.12 Accounts which are unsuitable as collateral, as
determined by Lender in the exercise of its commercially
reasonable discretion.
1.2.27 "Eligible Inventory" - Inventory of Borrower which is:
1.2.27.1 Subject to Lender's first, perfected security
interest;
1.2.27.2 Not owned by Borrower for more than 60 days; and
Page 4 of 31
1.2.27.3 Otherwise acceptable to Lender in its reasonable
sole discretion.
1.2.28 "Event of Default" - see Section 12 hereof.
1.2.29 "Exposed Payments" - Payments received by Lender from an
Account Debtor which has become subject to a bankruptcy proceeding, to the
extent such payments cleared said Account Debtor's deposit account within ninety
days of the commencement of said bankruptcy case.
1.2.30 "GAAP" - means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and pronouncements of
the Financial Accounting Standards Board (or any successor authority) that are
applicable as of the date of determination.
1.2.31 "Guarantors" - all individuals and entities now or
hereafter guaranteeing the Obligations.
1.2.32 "Interest Rate" - The greater of (i) 5% percent per annum
in excess of the Prime Rate or (ii) 9.5% per annum. Any change in the Interest
Rate shall be effective as of the date of any change in the Prime Rate.
1.2.33 "Key Employees" - Xxxxxxx X. Xxxxxxx III.
1.2.34 "Lender" - See Preamble.
1.2.35 "Loan Documents" - this Agreement, together with any
documents, instruments and agreements, executed and/or delivered in connection
herewith, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.2.36 "Loan Fee" - 1.5% of the Maximum Amount.
1.2.37 "Maximum Amount" - $10,000,000.
1.2.38 "Minimum Quarterly Income" - $300,000.
1.2.39 "Misdirected Payment Fee" - the greater of (i) $2,000 or
(ii) 3% of any payment described in Section 3.2.2.7 hereof.
1.2.40 "Missed Payoff Fee" - (a) 2% of the unpaid balance of the
Obligations of Borrower on the Termination Date, if Borrower pays Lender the
unpaid balance of the Obligations in full between one and five Business Days
after the Termination Date, (b) 3% of the unpaid balance of the Obligations of
Borrower on the Termination Date, if Borrower pays Lender the unpaid balance of
the Obligations in full between six and ten Business Days after the Termination
Date; and (c) 5% of the unpaid balance of the Obligations of Borrower on the
Page 5 of 31
Termination Date, if Borrower pays Lender the unpaid balance of the Obligations
in full more than 10 Business Days after the Termination Date.
1.2.41 "Missing Notation Fee" - the greater of (i) $2,000 or (ii)
3% of the Net Face Amount.
1.2.42 "Monetary Collateral" - cash, checks or other proceeds of
Collateral in tangible form.
1.2.43 "Net Face Amount" - with respect to an Account, the gross
face amount of such Account less all trade discounts or other deductions and
claims to which the Account Debtor is contractually entitled.
1.2.44 "Obligated Party" - any entity obligated with respect to
any Collateral.
1.2.45 "Obligations" - all present and future obligations owing
by Borrower to Lender whether or not for the payment of money, whether direct or
indirect, absolute or contingent, joint or several, whether arising before,
during or after the commencement of any Bankruptcy Case in which Borrower is a
debtor.
1.2.46 "Obligors" - Borrower and all Guarantors.
1.2.47 "Prime Rate" - The prime rate as reflected in the Wall
Street Journal from time to time. If the prime rate is reflected as a range,
than the Prime Rate as used herein shall be the highest amount in said range.
1.2.48 "Subordinating Creditor" - any creditor of the Borrower
which has executed a Subordination Agreement.
1.2.49 "Subordination Agreement" - a subordination agreement in
form and substance acceptable to Lender whereby Subordinating Creditor
subordinates in favor of Lender obligations owed to it by Borrower.
1.2.50 "Term" - one year from the date hereof, or if this
Agreement is extended pursuant to Section 17.2 hereof, one year from the date of
such extension.
1.2.51 "Termination Date" - the earlier of (i) the Contractual
Termination Date or (ii) the date on which Lender elects to terminate this
Agreement pursuant to the terms herein.
1.2.52 "UCC" - The Uniform Commercial Code in effect in the
Chosen State at the date on which a determination thereunder is to be made.
1.2.53 "Unused Line Fee" - 0.5% percent per annum of the Average
Unused Portion of the Maximum Amount.
page 6 of 31
1.2.54 "Value of Eligible Inventory" - As determined by Lender in
good faith, the lower of (a) cost, computed on a first-in-first-out basis in
accordance with GAAP, or (b) market value.
2 Credit Facilities.
2.1 Advances. Subject to the terms and conditions of this Agreement,
from the date on which this Agreement becomes effective until the Termination
Date:
2.1.1 Lender, shall, from time to time, at the request of
Borrower, make advances ("Advances") to Borrower, less any Availability
Reserves, so long as, before and after such Advance, the Obligations do not
exceed the Allowable Amount.
2.1.2 Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, reduce the Borrowing Base to
the extent that Lender determines in good faith that:
2.1.2.1 The dilution with respect to the Accounts for any
period (based on the ratio of (a) the aggregate amount of
reductions in Accounts other than as a result of payments in cash
to (b) the aggregate amount of total sales) has increased in any
material respect or may be reasonably anticipated to increase in
any material respect above historical levels;
2.1.2.2 The general creditworthiness of Account Debtors has
declined, or
2.1.2.3 The number of days of the turnover of the Inventory
for any period has changed in any material respect, or (a) the
liquidation value of the Eligible Inventory, or any category
thereof, has decreased, or (b) the nature and quality of the
Inventory has deteriorated.
2.2 General Provisions.
2.2.1 Borrowing Base Certificate. Each request from Borrower for
a Credit Accommodation shall be accompanied by a Borrowing Base Certificate in
the form attached hereto as Exhibit A, completed and signed by Borrower.
2.2.2 Crediting Borrower's Account. All Credit Accommodations by
Lender may be made by deposits or transfers to any demand deposit account of
Borrower.
2.2.3 Authorization for Credit Accommodations. Subject to the
terms and conditions of this Agreement, Lender is authorized to make Credit
Accommodations:
2.2.3.1 Upon telephonic, facsimile or other instructions
received from any of Borrower's representatives listed on Exhibit
B hereto, as such schedule may be amended from time to time upon
five (5) days notice to Lender; or
Page 7 of 31
2.2.3.2 At the sole discretion of Lender, and
notwithstanding any other provision in this Agreement, if
necessary to meet any Obligations, including but not limited to
any interest not paid when due.
2.3 Limitations on Credit Accommodations. Notwithstanding anything to
the contrary contained herein, Lender shall not be obligated to make a Credit
Accommodation if, before or as a result thereof, the Obligations shall exceed
the Allowable Amount.
3 Payments by Borrower.
3.1 In General.
3.1.1 Place of Payments. All payments hereunder shall be made by
Borrower to Lender at Lender's address set forth herein or at such other place
as Lender may designate in writing.
3.1.2 ACH Debits. In order to satisfy any of the Obligations,
Lender is hereby authorized by Borrower to initiate electronic debit entries
through the ACH or other electronic payment system to any account maintained by
Borrower. At the Lender's request, Borrower shall execute and deliver to Lender
an authorization agreement for ACH debits.
3.2 Interest and Fees.
3.2.1 Interest.
3.2.1.1 Basic Interest. Subject to Section 3.2.1.3 hereof,
interest on the Balance Subject to Interest shall be payable
monthly, in arrears, shall be computed at the Interest Rate, and
shall be due on the first (1st) day of each month following the
accrual thereof. Lender is authorized to debit Borrower's loan
account on the first business day of each month for interest
accrued hereunder during the preceding month.
3.2.1.2 Minimum Quarterly Income. Any amount by which the
interest and fees (other than Loan Fees) earned in any quarter
(prorated for partial periods) is less than the Minimum Quarterly
Income, to be paid on the first day of the following quarter.
3.2.1.3 Default Interest. Immediately upon the occurrence of
an Event of Default, interest shall be charged on the Balance
Subject to Interest computed at the Default Rate. Lender's
failure to assess interest at the Default Rate as provided
hereunder shall not be deemed a waiver by Lender to charge such
Default Rate.
3.2.1.4 Calculation of Interest. All interest charged
hereunder shall be computed on the basis of a three hundred sixty
(360) day year for the actual number of days elapsed.
Page 8 of 31
3.2.1.5 Application of Collections. Lender shall, for the
purpose of the computation of interest due hereunder, add the
Clearance Days to any payments, which is acknowledged by the
parties to constitute an integral aspect of the pricing of
Lender's facility to Borrower, and shall apply irrespective of
the characterization of whether receipts are owned by Borrower or
Lender. Should any check or item of payment not be honored when
presented for payment, then Borrower shall be deemed not to have
made such payment, and interest shall be recalculated
accordingly.
3.2.2 Fees.
3.2.2.1 Audit Fee. Borrower shall immediately pay to Lender
an Audit Fee, in addition to Lender's related out-of-pocket
expenses, in connection with each audit Lender performs or causes
to be performed hereunder.
3.2.2.2 Collateral Management Fee. Borrower shall pay the
Collateral Management Fee to Lender monthly, in arrears, on the
first (1st) day of each month following the accrual thereof.
3.2.2.3 Loan Fee. Borrower shall pay the Loan Fee to Lender
on the date hereof, and on each Anniversary Date on which (a) any
portion of the Obligation is outstanding and (b) this Agreement
has not been terminated, which amounts shall be debited to
Borrower's loan account. Any portion not paid when due shall
accrue interest at the applicable interest rate set forth herein.
3.2.2.4 Default Waiver Fee. Borrower shall pay the Default
Waiver Fee to Lender, immediately upon the waiver by Lender of
any Event of Default hereunder, so long as the waiver was done at
the Borrower's request.
3.2.2.5 Early Termination Fee. Borrower shall promptly pay
to Lender the Early Termination Fee if Borrower terminates this
Agreement, becomes subject to a Bankruptcy proceeding, or repays
the Obligations (whether by acceleration or otherwise) prior to
the next Contractual Termination Date.
3.2.2.6 Account Management Fee. The Account Management Fee,
on the first day of each month until the last to occur of (i)
payment in full of all Obligations, and (ii) termination of this
Agreement.
3.2.2.7 Misdirected Payment Fee. Borrower shall pay the
Misdirected Payment Fee to Lender, promptly on its accrual, on
the amount of any payment on an Account, which has been received
by Borrower and not delivered in kind by Borrower to Lender
within three (3) Business Days of receipt thereof.
Page 9 of 31
3.2.2.8 Missed Payoff Fee. Borrower shall pay the Missed
Payoff Fee to Lender promptly upon its accrual.
3.2.2.9 Missing Notation Fee. Borrower shall promptly pay to
Lender the Missing Notation Fee on any invoice that is sent by
Borrower to an Account Debtor that does not contain the notice as
required by Section 6.1 hereof.
3.2.2.10 Unused Line Fee. Borrower shall pay the Unused Line
Fee to Lender on the first (1st) day of each month during the
term of this Agreement.
4 Grant of Security Interest.
4.1 To secure the performance of the Obligations, Borrower grants to
the Lender a security interest in the Collateral, and all proceeds and products
thereof.
4.2 Notwithstanding anything to the contrary herein, upon Borrower's
request and so long as Borrower is not in default under this Agreement at the
time of such request, Lender agrees to subordinate its security interest in any
trademarks, patents, copyrights, trade secrets and other intellectual property
to the security interest granted by Borrower to any other secured party;
provided, that such other party executes an intercreditor agreement with Lender
in the form attached hereto as Exhibit C or such other form as shall be
reasonably agreed upon between Lender and such other secured party.
5 Authorization to File Financing Statements.
5.1 The Borrower irrevocably authorizes the Lender to file in any
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that:
5.1.1 Indicate the Collateral as all assets of the Borrower or
words of similar effect, regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the UCC, or as being of an
equal or lesser scope or with greater detail;
5.1.2 Contain any other information required by part 5 of Article
9 of the UCC for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether the Borrower is an organization,
the type of organization, and any organization identification number issued to
the Borrower and, (ii) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or timber to be cut,
a sufficient description of real property to which the Collateral relates; and
5.1.3 Contain a notification that the Borrower has granted a
negative pledge to the Lender, and that any subsequent lienor may be tortuously
interfering with Lender's rights;
5.1.4 Advises third parties that any notification of Borrower's
Account Debtors will interfere with Lender's collection rights.
Page 10 of 31
5.2 The Borrower agrees to furnish any of the foregoing
information to the Lender promptly upon request.
5.3 The Borrower ratifies its authorization for the Lender to
have filed any like initial financing statements or amendments thereto if filed
prior to the date hereof.
5.4 The Lender may add any supplemental language to any such
financing statement as Lender may determine to be necessary or helpful in
acquiring or preserving rights against third parties.
5.5 At Borrower's request, Lender will provide Borrower with
copies of the financing statements filed by Lender against Borrower.
6 Collection and Administration of Accounts.
6.1 Collection. Lender may notify Borrower's customers that that
the underlying Account has been assigned to Lender and that payment thereof is
to be made to the order of Lender and sent directly to Lender.
6.2 Lender's Powers. Borrower hereby authorizes Lender, at
Borrower's sole expense, to exercise at any time in Lender's discretion all or
any of the following powers, which powers are irrevocable until all of the
Obligations have been paid in full:
6.2.1 Receive, take, endorse, assign, deliver, accept and
deposit, in the name of Lender or Borrower, any and all cash,
checks, commercial paper, drafts, remittances and other
instruments and documents relating to the Collateral or the
proceeds thereof;
6.2.2 Pay any sums necessary to discharge any lien or
encumbrance that is senior to Lender's security interest in the
Collateral, which sums shall be included as Obligations
hereunder.
6.3 Release. Borrower hereby releases and exculpates Lender, its
officers, employees, agents, designees, attorneys, and accountants from any
liability arising from any acts under this Agreement or in furtherance thereof,
whether of omission or commission, and whether based upon any error of judgment
or mistake of law or fact, except for gross negligence or willful misconduct. In
no event shall Lender have any liability to Borrower for lost profits or other
special or consequential damages.
7 Representations and Warranties by Borrower. All Accounts listed on any
report provided by Borrower to Lender will be:
7.1 Bona fide existing obligations created by the sale and delivery of
goods or the rendition of services in the ordinary course of Borrower's
business;
7.2 To Borrower's knowledge, unconditionally owed and will be paid to
Lender without defenses, disputes, offsets, counterclaims, or rights of return
or cancellation;
Page 11 of 31
7.3 Not sales to any entity that is affiliated with Seller or in
any way not an "arms length" transaction.
8 Conditions Precedent to All Advances. Subject to the other terms and
conditions contained herein, Lender's obligation to make any Credit
Accommodation available to Borrower is subject to the satisfaction of, or waiver
of, immediately prior to or concurrently with the making of such Credit
Accommodation, the following conditions precedent:
8.1 Representations and Warranties. The representations and warranties
contained in the Loan Documents shall be true and correct in all respects on and
as of the date of such Credit Accommodation.
8.2 No Event of Default. No Event of Default or event that with the
giving of notice or passage of time would constitute an Event of Default shall
have occurred and be continuing on the date of such Credit Accommodation.
8.3 Payment of All Fees. Borrower shall have paid to Lender all accrued
and unpaid fees and other amounts due and payable hereunder and pursuant to the
terms hereof.
8.4 Lender's Priority Interest. Lender shall have a first priority
security interest in the Collateral.
9 Authorization to Lender. The Borrower irrevocably authorizes Lender to
take any and all appropriate action and to execute any and all documents and
instruments, in the name of Borrower, that may be necessary or desirable to
accomplish the purposes of this Agreement including the filing on behalf of
Borrower with such governmental authorities as are appropriate such documents
(including, without limitation, applications, certificates, and tax returns) as
may be required for purposes of having Borrower qualified to transact business
in a particular state or geographic location.
10 Affirmative Covenants. Until full payment of the Obligations and
termination of this Agreement, Borrower shall:
10.1 Promptly advise Lender, in writing, of the assertion of any Claim
by an Account Debtor.
10.2 Financial Statements, Reports and Certifications. Furnish to
Lender, in form and substance satisfactory to Lender:
10.2.1 Annual Financial Statements. As soon as possible after the
end of each fiscal year of Borrower, and in any event within 90 days thereafter:
10.2.1.1 A complete copy of Borrower's financial statements,
including but not limited to (a) the management letter, if any,
(b) the balance sheet as of the close of the fiscal year, and (c)
the income statement for such year, together with a statement of
cash flows, audited
Page 12 of 31
by a firm of independent certified public accountants of
recognized standing and acceptable to Lender, and
10.2.1.2 A statement certified by the chief financial
officer of Borrower that Borrower is in compliance with all the
terms, conditions, covenants and warranties of this Agreement.
10.2.2 Other Financial Statements. No later than 20 days after
the close of each month (an "Accounting Period"):
10.2.2.1 Borrower's balance sheet as of the close of such
Accounting Period and its income statement for that portion of
the then current fiscal year through the end of such Accounting
Period certified by Borrower's chief financial officer as being
complete, correct, and fairly representing its financial
condition and results of operations;
10.2.2.2 Borrower's accounts receivable and accounts payable
agings as of the end of such Accounting Period, as well as its
month end inventory report, and an accounts receivable collection
report in a form satisfactory to Lender, certified by Borrower's
chief financial officer as being complete, correct; and
10.2.2.3 Borrower's weekly sell-through report.
10.2.3 Tax Returns. Copies of each of Borrower's:
10.2.3.1 Federal income tax returns, and any amendments
thereto, within 10 days of the filing thereof with the Internal
Revenue Service; and
10.2.3.2 Federal payroll tax returns within ten (10) days of
filing, together with proof, satisfactory to Lender, which all
taxes have been paid.
10.2.4 Inventory Reports. A listing of all Borrower's Inventory,
based upon a physical count taken by Borrower every 3 months and whenever
requested by Lender.
10.3 Inspections.
10.3.1 During usual business hours, permit Lender, without notice
to Borrower, to periodically:
10.3.1.1 have access to all premises where Collateral is
located for the purposes of inspecting (and removing, if after
the occurrence of an Event of Default) any of the Collateral; and
10.3.1.2 to inspect, audit, make copies of, and make
extracts from Borrower's records as Lender may reasonably
request.
Page 13 of 31
10.3.2 Without expense to Lender, Lender may use any of
Borrower's personnel, equipment, including computer equipment, programs, printed
output and computer readable media, supplies and premises as are reasonably
necessary for the collection of accounts and realization on other Collateral.
10.4 Indemnification. Indemnify and hold Lender harmless from any and
all liability with respect to any stamp or other taxes (other than transfer or
income taxes) which may be determined to be payable in connection with the
execution of the Loan Documents or any action of Lender with respect to the
Collateral, including, without limitation, the transfer of the Collateral to
Lender's name or that of Lender's nominee or any purchaser at a foreclosure
sale.
10.5 Enforcement of Judgments. Reimburse Lender for all costs and
expenses, including reasonable attorneys' fees, which Lender incurs in enforcing
any judgment rendered in connection with this Agreement. This provision is
severable from all other provisions hereof and shall survive, and not be deemed
merged into, such judgment.
10.6 Taxes and Expenses Regarding Borrower's Assets.
10.6.1 Make timely payment or deposit of all taxes, assessments
or contributions required of Borrower. If Borrower fails to make any such
payment or deposit or furnish proof of such payment immediately upon Lender's
request, Lender may, in its sole discretion and without notice to Borrower:
10.6.1.1 make payment of the same or any part thereof; or
10.6.1.2 Set up such reserves against the Obligations as
Lender deems necessary to satisfy the liability therefore, or
both.
10.6.2 Lender may conclusively rely on statements of the amount
owing or other official statements issued by the appropriate governmental
agency. Any payment made by Lender shall constitute neither:
10.6.2.1 an agreement by Lender to make similar payments in
the future; nor
10.6.2.2 A waiver by Lender of any default under the Loan
Documents. Lender need not inquire into, nor contest the validity
of, any expense, tax, security interest, encumbrance or lien, and
the receipt of the usual official notice requiring the payment
thereof shall be conclusive evidence that the same was validly
due and owing.
10.7 Change in Name. Give Lender written notice immediately upon
forming an intention to change its name, state of organization or form of
business organization.
10.8 Maintenance of Insurance. The Borrower will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with general practices of businesses
Page 14 of 31
engaged in similar activities in similar geographic areas. Such insurance shall
be in such minimum amounts that the Borrower will not be deemed a co-insurer
under applicable insurance laws, regulations, and policies and otherwise shall
be in such amounts, contain such terms, be in such forms and be for such periods
as may be reasonably satisfactory to the Lender. In addition, all such insurance
shall be payable to the Lender under a Lender Loss Payable Endorsement. Without
limiting the foregoing, the Borrower will:
10.8.1 Keep all of its physical property insured with casualty or
physical hazard insurance on an "all risks" basis, with broad form flood and
earthquake coverage and electronic data processing coverage, with a full
replacement cost endorsement and an "agreed amount" clause in an amount equal to
100% of the full replacement cost of such property;
10.8.2 Maintain all such workers' compensation or similar
insurance as may be required by law;
10.8.3 Maintain, in amounts and with deductibles equal to those
generally maintained by businesses engaged in similar activities in similar
geographic areas, general public liability insurance against claims of bodily
injury, death, or property damage occurring, on, in or about the properties of
the Borrower; business interruption insurance; and product liability insurance.
10.9 Before sending any invoice to an Account Debtor, Borrower shall
xxxx same with a notice of assignment as may be required by Lender.
10.10 Notwithstanding that Borrower has agreed to pay the Misdirected
Payment Fee, Borrower shall pay to Lender on the next banking day following the
date of receipt by Borrower the amount of any proceeds of Accounts received by
Borrower.
11 Negative Covenants. Borrower will not:
11.1 Modify Account Obligations. After an Event of Default, (i) grant
any extension of time for payment of any Accounts, (ii) compromise or settle any
Accounts for less than the full amount thereof, (iii) release in whole or in
part any Account Debtor; or (iv) grant any credits, discounts, allowances,
deductions, return authorizations, or the like with respect to any Accounts.
11.2 Negative Pledge. Hereafter grant any lien upon the Collateral
except in favor of Lender.
12 Events of Default. Each of the following events or conditions shall
constitute an "Event of Default":
12.1 Borrower fails to pay any of the Obligations when they become due,
whether at maturity, upon acceleration, or otherwise;
12.2 Borrower fails to cure the breach of any Obligation other than a
payment obligation within five Business Days after notice thereof is sent by
Lender to Borrower;
Page 15 of 31
12.3 Borrower is in default with respect to any present or future
agreement with Lender;
12.4 The Obligations at any time exceed the Allowable Amount;
12.5 An order for relief is entered against any Obligor by any United
States Bankruptcy Court; or any Obligor does not generally pay its debts as they
become due (within the meaning of 11 U.S.C. 303(h) as at any time amended, or
any successor statute thereto); or any Obligor makes an assignment for the
benefit of creditors; or any Obligor applies for or consents to the appointment
of a custodian, receiver, trustee, or similar officer for it or for all or any
substantial part of its assets, or such custodian, receiver, trustee, or similar
officer is appointed without the application or consent of any Obligor; or any
Obligor institutes (by petition, application, answer, consent, or otherwise) any
bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application, or otherwise) against any Obligor; or any judgment, writ,
warrant of attachment, execution, or similar process shall be issued or levied
against a substantial portion of the property of any Obligor;
12.6 An adverse change occurs with respect to the financial condition
or operations of Borrower which results in a material impairment of the prospect
of repayment of the Obligations;
12.7 A sale, hypothecation or other disposition is made of fifty
percent (50%) or more of the beneficial interest in any class of voting stock of
Borrower;
12.8 Any Guarantor defaults in the performance of its obligations to
Lender or shall notify Lender of its intention to rescind, modify, terminate or
revoke its guaranty or it shall cease to be in full force and effect for any
reason whatever;
12.9 Any Subordinating Creditor fails to perform or observe any of such
Subordinating Creditor's obligations under any Subordination Agreement, or
notifies Lender of the Subordinating Creditor's intention to rescind, modify,
terminate or revoke the Subordination Agreement with respect to future
transactions, or the Subordination Agreement ceases to be in full force and
effect for nay reason whatsoever;
12.10 Any of the Key Employees fails to devote one hundred (100%)
percent of their efforts in furtherance of the business affairs of Borrower for
any one month, or ceases to be employed by Borrower in the capacity that such
employee held as of the date of this Agreement;
12.11 Any provision of this Agreement or any of the Loan Documents
ceases, for any reason, to be valid and binding on Borrower.
13 Remedies.
13.1 Upon the occurrence of any Event of Default, and until such time
as all Obligations are repaid, all Obligations shall accrue interest at the
Default Rate and Lender may:
page 16 of 31
13.1.1 Declare this Agreement and all of Lender's obligations
hereunder terminated;
13.1.2 Declare all Obligations to be immediately due and payable,
without presentment, demand, protest, or notice of any kind, all of which are
hereby expressly waived by Lender.
13.1.3 Take or bring, in the name of Lender or Borrower, all
steps, actions, suits or proceedings deemed by Lender necessary or desirable to
effect collection of or other realization upon any Collateral;
13.1.4 Change the address for delivery of Borrower's mail to
Lender and to receive and open mail addressed to Borrower; 13.1.5 Extend the
time of payment of, compromise, or settle for cash, credit, return of
merchandise, any and all Monetary Collateral and discharge or release any
Obligated Party without affecting any of the Obligations;
13.1.6 Execute, file and serve, in its own name or in the name of
Borrower, mechanics lien or similar notices, or claims under any payment or
performance bond for the benefit of Borrower.
13.2 BORROWER WAIVES ANY REQUIREMENT THAT LENDER INFORM BORROWER BY
AFFIRMATIVE ACT OR OTHERWISE OF ANY ACCELERATION OF BORROWER'S OBLIGATIONS
HEREUNDER. FURTHER, LENDER'S FAILURE TO CHARGE OR ACCRUE INTEREST OR FEES AT ANY
"DEFAULT" OR "PAST DUE" RATE SHALL NOT BE DEEMED A WAIVER BY LENDER OF ITS CLAIM
THERETO.
14 Standards for Exercising Remedies.
14.1 To the extent that applicable law imposes duties on the Lender to
exercise remedies in a commercially reasonable manner, the Borrower acknowledges
and agrees that it is not commercially unreasonable for the Lender:
14.2 to not incur expenses to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition;
14.3 to fail to obtain third party consents for access to Collateral to
be disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of;
14.4 to fail to exercise collection remedies against Account Debtors or
other persons obligated on Collateral or to remove liens or encumbrances on or
any adverse claims against Collateral;
Page 17 of 31
14.5 to exercise collection remedies against Account Debtors and other
persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists;
14.6 to advertise dispositions of Collateral through publications or
media of general circulation, whether or not the Collateral is of a specialized
nature;
14.7 to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature;
14.8 to dispose of Collateral by using Internet sites that provide for
the auction of assets of the types included in the Collateral or that have the
reasonable capability of doing so, or that match buyers and sellers of assets;
14.9 to dispose of assets in wholesale rather than retail markets;
14.10 to disclaim all disposition warranties; or
14.11 to purchase insurance or credit enhancements to insure the Lender
against risks of loss, collection or disposition of Collateral or to provide to
the Lender a guaranteed return from the collection or disposition of Collateral.
14.12 Borrower acknowledges that the purpose of this Section 14 is to
provide non-exhaustive indications of what actions or omissions by the Lender
would not be commercially unreasonable in the Lender's exercise of remedies
against the Collateral and that other actions or omissions by the Lender shall
not be deemed commercially unreasonable solely on account of not being indicated
in this Section. Without limitation upon the foregoing, nothing contained herein
shall be construed to grant any rights to the Borrower or to impose any duties
on the Lender that would not have been granted or imposed by this Agreement or
by applicable law in the absence of this Section 14.
15 Proceeds and Expenses of Dispositions. Borrower shall pay to the Lender
on demand any and all expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in protecting, preserving, or
enforcing the Lender's rights under or in respect of any of the Obligations or
any of the Collateral. After deducting all of said expenses, the residue of any
proceeds of collection or sale of the Obligations or Collateral shall, to the
extent actually received in cash, be applied to the payment of the Obligations
in such order or preference as the Lender may determine, notwithstanding
contrary instructions received by Lender from the Borrower or any other third
party.
16 Attorneys Fees and Expenses. Borrower agrees to reimburse Lender on
demand for:
16.1 The actual amount of all costs and expenses, including attorneys'
fees, which Lender has incurred or may incur in:
Page 18 of 31
16.1.1 Negotiating, preparing, or administering this Agreement
and any documents prepared in connection herewith;
16.1.2 Any way arising out of this Agreement;
16.1.3 Protecting, preserving or enforcing any lien, security
interest or other right granted by Borrower to Lender or arising under
applicable law, whether or not suit is brought, including but not limited to the
defense of any Avoidance Claims;
16.2 The actual costs, including photocopying (which, if performed by
Lender's employees, shall be at the rate of $.10/page), travel, and attorneys'
fees and expenses incurred in complying with any subpoena or other legal process
attendant to any litigation in which Borrower is a party;
16.3 The actual amount of all costs and expenses, including attorneys'
fees, which Lender may incur in enforcing this Agreement and any documents
prepared in connection herewith, or in connection with any federal or state
insolvency proceeding commenced by or against Borrower, including those (i)
arising out the automatic stay, (ii) seeking dismissal or conversion of the
bankruptcy proceeding or (ii) opposing confirmation of Borrower's plan
thereunder.
17 Termination.
17.1 This Agreement shall become effective upon the execution and
delivery hereof by Borrower and Lender and shall continue in full force and
effect for the Term.
17.2 This Agreement shall be automatically extended for successive
Terms unless either party has advised the other of their intention to have this
Agreement terminate on the next Contractual Termination Date, so long as such
notice is in writing and is received at least sixty days prior to such date.
17.3 Upon the Termination Date, the unpaid balance of the Obligations
shall be due and payable without demand or notice.
17.4 Exposed Payments.
17.4.1 Upon termination of this Agreement, Borrower shall pay to
Lender (or Lender may retain), to hold in a non-segregated non-interest bearing
account the amount of all Exposed Payments (the "Preference Reserve").
17.4.2 Lender may charge the Preference Reserve with the amount
of any Exposed Payments which Lender pays to the bankruptcy estate of the
Account Debtor which made the Exposed Payment, on account of a claim asserted
under Section 547 of the Bankruptcy Code.
17.4.3 Lender shall refund to Borrower from time to time that
balance of the Preference Reserve for which a claim under Section 547 of the
Bankruptcy Code can no
Page 19 of 31
longer be asserted due to the passage of the statute of limitations, settlement
with the bankruptcy estate of the Account Debtor or otherwise.
18 Revocation of Borrower's Right to Sell Inventory Free and Clear of
Lender's Security Interest. Lender may, upon the occurrence of an Event of
Default, revoke Borrower's right to sell Inventory free and clear of Lender's
security interest therein.
19 No Lien Termination without Release. In recognition of the Lender's
right to have its attorneys' fees and other expenses incurred in connection with
this Agreement secured by the Collateral, notwithstanding payment in full of all
Obligations by Borrower, Lender shall not be required to record any terminations
or satisfactions of any of Lender's liens on the Collateral unless and until
Borrower and all Guarantors has executed and delivered to Lender a general
release in the form of Exhibit D hereto. Borrower understands that this
provision constitutes a waiver of its rights under ss.9-513 of the UCC.
20 Account Stated. Lender shall render to Borrower a statement setting
forth the transactions arising hereunder. Each statement shall be considered
correct and binding upon Borrower, absent manifest error, as an account stated,
except to the extent that Lender receives, within thirty (30) days after the
mailing of such statement, written notice from Borrower of any specific
exceptions by Borrower to that statement.
21 Retention of Records. Lender shall retain any documents, schedules,
invoices or other papers delivered by Borrower only for such period as Lender,
at its sole discretion, may determine necessary, after which time Lender may
destroy such records without notice to or consent from Borrower.
22 Notices to Third Parties. Lender shall have the right at any time to
give any Guarantor or Subordinating Creditor notice of any fact or event
relating to this Agreement, as Lender may deem necessary or desirable in
Lender's sole discretion, including, without limitation, Borrower's financial
condition. Borrower shall provide to each Guarantor and Subordinating Creditor a
copy of each notice, statement or report required to be given to Lender
hereunder.
23 Information to Participants. Lender may furnish any financial or other
information concerning Borrower, or any of its subsidiaries, heretofore or
hereafter provided by Borrower to Lender, pursuant to this Agreement or
otherwise, to any prospective or actual purchaser of any participation or other
interest in any loans made by Lender to Borrower (whether under this Agreement
or otherwise), or to any prospective purchaser of any securities issued or to be
issued by Lender.
24 Entire Agreement. No promises of any kind have been made by Lender or
any third party to induce Borrower to execute this Agreement. No course of
dealing, course of performance or trade usage, and no parole evidence of any
nature, shall be used to supplement or modify any terms of this Agreement.
Page 20 of 31
25 Notice.
25.1 All notices required to be given to any party shall be deemed
given upon the first to occur of (i) transmittal by electronic means to a
receiver under the control of such party; or (ii) actual receipt by such party
or an employee or agent of such party.
25.2 The addresses of the parties are as set forth below or as may
otherwise be specified from time to time in a writing sent by one party to the
other in accordance with the provisions hereof:
BORROWER
Address: 000 Xxxxxxxx Xxx
Xxxxxxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx, III
Fax Number: 000-000-0000
LENDER
Address: 0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxx Silver
Fax Number: 000-000-0000
25.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of whom shall be an original, with the same effect as if all
signatures were upon the same instrument. Delivery of an executed counterpart of
the signature page to this Agreement by facsimile shall be effective as delivery
of a manually executed counterpart of this Agreement, and any party delivering
such an executed counterpart of the signature page to this Agreement by
facsimile to any other party shall thereafter also promptly deliver a manually
executed counterpart of this Agreement to such other party, provided that the
failure to deliver such manually executed counterpart shall not affect the
validity, enforceability, or binding effect of this Agreement.
26 Amendment and Waiver. Only a writing signed by all parties hereto may
amend this Agreement. No failure or delay in exercising any right hereunder
shall impair any such right that Lender may have, nor shall any waiver by Lender
hereunder be deemed a waiver of any default or breach subsequently occurring.
Lender's rights and remedies herein are cumulative and not exclusive of each
other or of any rights or remedies that Lender would otherwise have.
27 Governing Law. This Agreement and all transactions contemplated
hereunder and/or evidenced hereby shall be governed by, construed under, and
enforced in accordance with the internal laws of the Chosen State.
28 Venue. Any suit, action or proceeding arising hereunder, or the
interpretation, performance or breach hereof, shall, if Lender so elects, be
instituted in any court sitting in the
Page 21 of 31
Chosen State, in the city in which Lender's chief executive office is located,
or if none, any court sitting in the Chosen State (the "Acceptable Forums").
Borrower agrees that the Acceptable Forums are convenient to it, and submits to
the jurisdiction of the Acceptable Forums and waives any and all objections to
jurisdiction or venue. Should such proceeding be initiated in any other forum,
Borrower waives any right to oppose any motion or application made by Lender to
transfer such proceeding to an Acceptable Forum.
29 Jury Trial Waiver. IN RECOGNITION OF THE HIGHER COSTS AND DELAY WHICH
MAY RESULT FROM A JURY TRIAL, THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING HEREUNDER, OR
(B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT HERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY SUCH
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
30 Service Of Process. Borrower agrees that Lender may effect service of
process upon Borrower by regular mail at the address set forth in this
Agreement, or at the option of Lender if Borrower is a Registered Organization,
by service upon Borrower's agent for the service of process.
31 Assignment. Lender may assign its rights and delegate its duties
hereunder to any affiliate of Lender. Upon such assignment, Borrower shall be
deemed to have attorned to such assignee and shall owe the same obligations to
such assignee and shall accept performance hereunder by such assignee as if such
assignee were Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
BORROWER: The 3DO Company, a California corporation
By: /s/ Xxxxxxx X. Xxxxxxx, III
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx, III
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
Page 22 of 31
LENDER: IIG Capital LLC, as agent for the IIG Trade
Opportunities Fund, N.V.
By: /s/ Xxxxxx Silver
----------------------------------------
Name: Xxxxxx Silver
--------------------------------------
Title: Managing Partner
-------------------------------------
Page 23 of 31
EXHIBIT A
BORROWING BASE CERTIFICATE
Page 24 of 31
EXHIBIT B
LIST OF BORROWER'S REPRESENTATIVES
Xxxxx Xxxxxxxxxx
Xxxx Xxxxxxxx
Xxxxx Xxxx
Xxxxxxx X. Xxxxxxx
Page 25 of 31
EXHIBIT C
COLLATERAL SHARING AGREEMENT
This AGREEMENT, dated as of _________________ between _, (the "Earlier
Creditor"), and _ (the "Later Creditor").
RECITALS
A. The Debtor is indebted to the Earlier Creditor and shall incur new
obligations to the Earlier Creditor, direct and indirect, absolute and
contingent (the "Earlier Creditor Obligations"), secured by present and future
assets of the Debtor (the "Collateral").
B. The Later Creditor has agreed to extend financial accommodations to the
Debtor secured by the Later Creditor Collateral on the condition that its
security interest therein is senior to that of the Earlier Creditor.
C. The Creditors are executing this Agreement to adjust their lien
priorities with respect to the Later Creditor Collateral.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Creditors hereby agree as follows:
AGREEMENT
1. Definitions and Index to Definitions.
1.1. The following terms shall the meanings set forth below:
1.1.1. "Chosen State" - _
1.1.2. "Collateral" - see Recital A.
1.1.3. "Creditors" - the Earlier Creditor and the Later Creditor.
1.1.4. "Debtor" - _.
1.1.5. "Earlier Creditor" - see Preamble.
1.1.6. "Earlier Creditor Obligations" - see Recital A.
1.1.7. "Later Creditor" - see Preamble.
1.1.8. "Later Creditor Collateral" - the Debtor's present and future
patents, copyrights and trademarks.
1.1.9. "Later Creditor Obligations" - obligations of the Debtor to the
Later Creditor secured directly or indirectly by the Later Creditor Collateral.
Page 26 of 31
1.1.10. "Later Creditor Security Interest" - any security interest of
Later Creditor in the Later Creditor Collateral.
1.1.11. "Obligations Limit" - $_.
1.1.12. "Retained Collateral" - The Collateral other than the Later
Creditor Collateral.
1.1.13. "Termination Event" - either:
1.1.13.1. The Later Creditor Security Interest becomes
unperfected;
1.1.13.2. Default by Later Creditor under any agreement between
Later Creditor and Earlier Creditor, whether or not waived by Earlier Creditor
or cured by Later Creditor; or
1.1.13.3. The Later Creditor Obligations exceeds the Obligations
Limit.
1.2. All capitalized terms used but not defined herein shall have the
meaning as set forth in the Uniform Commercial Code then in effect.
2. Priority.
So long as no Termination Event has occurred, and notwithstanding the terms
or provisions of any agreement or arrangement which either Creditor may now or
hereafter have with the Debtor or any rule of law and irrespective of the time,
order or method or attachment or perfection of any security interest or the
recordation or other filing in any public record of any financing statement, any
perfected Later Creditor Security Interest shall be senior to the security
interest of the Earlier Creditor in the Later Creditor Collateral.
3. Enforcement of Security Interest.
3.1. The Later Creditor shall have no right to take any action with respect
to any of the Retained Collateral, whether by judicial or non-judicial
foreclosure, notification to the Debtor's account debtors, or otherwise, unless
and until all Earlier Creditor Obligations have been fully and indefensibly
paid, and the Earlier Creditor has terminated the perfection of its security
interests therein.
3.2. Any proceeds of the Retained Collateral, or proceeds thereof (whether
or not identifiable), received by the Later Creditor shall be paid to the
Earlier Creditor, for the account of the Debtor, on demand.
3.3. The Earlier Creditor shall have no right to take any action with
respect to the Later Creditor Collateral whether by judicial or non-judicial
foreclosure, notification to the Debtor's account debtors, or otherwise, unless
and until all Later Creditor Obligations have been
Page 27 of 31
fully and indefeasibly paid, and the Later Creditor has terminated the
perfection of its security interests therein.
3.4. Any proceeds of the Later Creditor Collateral, or proceeds thereof
(whether or not identifiable), received by the Earlier Creditor shall be paid to
the Later Creditor, for the account of the Debtor, on demand.
4. Inducement.
This Agreement is entered into as a specific inducement to the Later
Creditor to provide credit accommodations to the Debtor.
5. Waiver of Marshaling.
The Later Creditor irrevocably waives any right to compel the Earlier
Creditor to marshal assets of the Debtor, whether such rights arise under
California Civil Code xx.xx. 2899 and 3433 or otherwise.
6. Applicable Law.
This Agreement shall be governed by the law of the Chosen State.
7. Benefits Of This Agreement.
This Agreement is solely for the benefit of and shall bind the Creditors
and their respective successors and assigns and no other entity shall have any
right, benefit, priority, or interest hereunder.
8. Modification.
This Agreement shall be subject to modification only in writing, signed by
the Creditors.
9. Term.
This Agreement shall continue so long as both Creditors have a perfected
security interest in the Collateral.
10. Enforcement.
In the event that either party finds it necessary to retain counsel in
connection with the interpretation, defense, or enforcement of this agreement,
the prevailing party shall recover its reasonable attorney's fees and expenses
from the unsuccessful party. It shall be presumed (subject to rebuttal only by
the introduction of competent evidence to the contrary) that the amount
recoverable is the amount billed to the prevailing party by its counsel and that
such amount will be reasonable if based on the billing rates charged to the
prevailing party by its counsel in similar matters.
Page 28 of 31
11. Notice.
11.1. All notices shall be deemed given upon the first to occur of (i)
deposit thereof in a receptacle under the control of the United States Postal
Service, (ii) transmittal by electronic means to a receiver under the control of
such party with electronic acknowledgement that such transmission was received;
or (iii) delivery to a nationally recognized overnight delivery service,
properly addressed and prepaid.
11.2. For the purposes hereof, notices hereunder shall be sent to the
following addresses, or to such other address as may have been advised by the
recipient to the sender.
EARLIER CREDITOR
Address:
-----------------------------------------------------
Officer:
-----------------------------------------------------
Fax Number:
--------------------------------------------------
LATER CREDITOR
Address:
-----------------------------------------------------
Officer:
-----------------------------------------------------
Fax Number:
--------------------------------------------------
12. Waiver.
Later Creditor waives any rights it may have to claim that the
enforceability of this agreement may be affected by any subsequent modification,
release, extension, or other change, material or otherwise, in the Earlier
Creditor Obligations or the Collateral.
13. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
EARLIER CREDITOR:
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
--------------------------------------------
LATER CREDITOR:
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
--------------------------------------------
Page 29 of 31
Later Creditor:
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
--------------------------------------------
Page 30 of 31
EXHIBIT D
GENERAL RELEASE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are
hereby acknowledged, the undersigned and each of them (collectively "Releasor")
hereby forever releases, discharges and acquits IIG Capital LLC, as agent for
the IIG Trade Opportunities Fund, N.V. ("Releasee"), its parent, directors,
shareholders, agents and employees, of and from any and all claims of every
type, kind, nature, description or character, and irrespective of how, why, or
by reason of what facts, whether heretofore existing, now existing or hereafter
arising, or which could, might, or may be claimed to exist, of whatever kind or
name, whether known or unknown, suspected or unsuspected, liquidated or
unliquidated, each as though fully set forth herein at length, to the extent
that they arise out of or are in way connected to or are related to that certain
Loan and Security Agreement dated March 19, 2003.
Releasor agrees that the matters released herein are not limited to matters
which are known or disclosed.
Releasor acknowledges that factual matters now unknown to it may have given
or may hereafter give rise to Claims which are presently unknown, unanticipated
and unsuspected, and it acknowledges that this Release has been negotiated and
agreed upon in light of that realization and that it nevertheless hereby intends
to release, discharge and acquit the Releasee from any such unknown Claims.
Acceptance of this Release shall not be deemed or construed as an admission
of liability by any party released.
Releasor acknowledges that either (a) it has had advice of counsel of its
own choosing in negotiations for and the preparation of this release, or (b) it
has knowingly determined that such advise is not needed.
DATED:
-------
Individual Releasor:
---------------------------------------------
[Name of individual], individually
Entity Releasor:
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Page 31 of 31
