LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement"), dated as of
January 15, 1998, is entered into by and between First Pacific Networks, Inc., a
Delaware corporation ("FPN" or the "Debtor"), and Asset Recovery Group, LLC, a
Colorado limited liability company ("Asset"), with reference to the following
facts:
R E C I T A L S
A. WHEREAS, FPN filed a voluntary petition under Chapter 11 of Title 11
United States Codes (the "Bankruptcy Code") on February 10, 1997, commencing
that certain bankruptcy case styled IN RE FIRST PACIFIC NETWORKS, INC.,
Bankruptcy Case No. 97-51077ASW (the "Bankruptcy Case"), which case remains
pending in the United States Bankruptcy Court for the Northern District of
California, San Xxxx Division; and
B. WHEREAS, FPN is operating its Bankruptcy Case as the "Debtor-in-
Possession" within the meaning of sections 1101, 1106 and 1107 of the Bankruptcy
Code, and with all of the rights and powers pertaining thereto, no trustee
having been appointed; and
C. WHEREAS, FPN's business consists of the development and manufacture of
cable data modem, cable telephone and cable energy management devices for which
FPN requires financing for working capital and other related purposes, in order
to continue its operations pending confirmation of a plan of reorganization in
the Bankruptcy Case; and
D. WHEREAS, FPN recognizes that there appears to be no reasonable
prospect that FPN, without such financing, will be able to reorganize its
current business operations; and
E. WHEREAS, FPN believes that liquidation would not be in the best
interest of its creditors; and
F. WHEREAS, FPN has attempted to obtain the required funds in the form of
an unsecured or secured credit, or equity financing, but was unable to do so;
and
G. WHEREAS, FPN has investigated alternative opportunities to obtain
financing on a secured basis, and has determined, after review and analysis by
the Debtor's management, that the transaction described herein is in the best
interests of the Debtor's estate and its creditors; and
H. WHEREAS, Asset is only willing to lend funds upon the terms and
conditions set forth in this Loan and Security Agreement and the Secured
Promissory Note (the "Secured Note") of even date herewith (collectively, the
"Loan Documents"); and
I. WHEREAS, the Debtor will set a continued hearing (the "Initial
Hearing"), on notice to creditors, for the initial approval of the Loan
Documents, pursuant to section 364 of the United
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States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code")
and Rule 4001(c) of the Federal Rules of Bankruptcy Procedure ("Fed.R.B.P."),
including approval of the "Initial Financing" as defined herein, pursuant to
which the Debtor will seek authority to borrow the sum of up to Six Hundred
Thousand Dollars ($600,000) (the "Initial Financing") from Asset, which will
be funded incrementally, on a senior secured and super-priority basis, as
further described herein; and
J. WHEREAS, if the Bankruptcy Court issues its Order approving the
Initial Financing at the Initial Hearing (the "Interim Order"), FPN will
subsequently set additional hearing date(s) for the final approval of certain
additional loan and security documents contemplating an aggregate borrowing of
up to $6 million from Asset and/or its nominee (the "Full Financing")
constituting funding that FPN anticipates will be sufficient to sustain
operations until a Plan of Reorganization, jointly developed with such lender,
can be developed and confirmed.
NOW, THEREFORE, the parties hereto agree as follows:
1. INDEBTEDNESS. Subject to all of the terms hereof, and the
Secured Note of even date herewith, Asset agrees to lend to FPN the sum of up to
$600,000. FPN shall use the Initial Financing to pay when due expenses of the
type and for the purposes and in the amount described, and without material
variance from, the items included in the budget attached as Exhibit A to this
Agreement, or other expenses as may be approved by in advance and in writing, by
Asset.
2. CONDITIONS TO INITIAL FINANCING. Without otherwise limiting the
provisions of paragraph 1, Asset shall not be obligated to advance the funds
until such time as each of the following conditions shall have been satisfied:
a. the following documents (collectively referred to as the
"Post-petition Documentation") have been executed and delivered to Asset, in
written form acceptable to Asset:
(1) This Loan and Security Agreement, including additional
original execution copies hereof for filing in the Office of Patents and
Trademarks, Patent division and Trademark division, United States Department of
Commerce; and
(2) The Secured Note; and
(3) Financing Statement to be executed by FPN as Debtor in
favor of Asset to be filed in the Office of the California Secretary of State;
b. The Court shall have entered the Interim Order approving the
Initial Financing in a form acceptable to Asset.
3. SECURITY INTEREST. As security for the prompt payment and
performance in full of all obligations, duties and liabilities, including the
Initial Financing (collectively, the
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"Secured Obligations") at any time owing by FPN and arising under this
Agreement, the Secured Note, and other documents issued to create or perfect
the security interest granted herein, (collectively, the "Loan Documents"),
FPN hereby grants to Asset a continuing security interest (the "Security
Interest") senior in priority and payment rights to the claim or lien of any
other creditor, in and to all of FPN's right, title, claim, estate and
interest in and to the following types and items of property, whether now
owned and existing or hereafter acquired or arising, and wherever located
(collectively, the "Collateral"):
a. All accounts, whether now existing or hereafter acquired;
b. All inventory, whether now existing or hereafter acquired;
c. All of Debtor's right, title, estate and interest in and to
real property owned or leased from time to time and in and to any fixtures
(including, without limitation, the fee and leasehold interests in real
property, and all buildings, improvements and fixtures now or hereafter attached
or appurtenant thereto or forming a part thereof), whether now existing or
hereafter acquired;
d. All of Debtor's right, title, estate and interest, whether
now existing or hereafter acquired, in and to all corporate and other business
records in any form, including in form for use by computers or data processing
machines; royalties, inventions, copyrights, copyright applications, rights and
interests in copyrights and works protectable by copyright, (collectively the
"Copyrights"), trade secrets and other confidential information relating to the
business of Debtor, including, by way of illustration and not limitation, each
and every kind of know-how practiced by Debtor; licenses, customer lists,
advertising, service marks, service xxxx applications, designs, logos, slogans,
indicia, corporate names, company names, business names, fictitious business
names, trade names, trade styles and registrations issued with respect to any of
the foregoing used in Debtor's business or in which Debtor otherwise has an
interest; and all other information of any kind or character, whether or not
reduced in writing, with respect to the conduct by Debtor of its business not
generally known by the public; and the goodwill associated with the foregoing;
e. All of Debtor's right, title, estate and interest, whether
now existing or hereafter acquired, in and to all foreign and domestic patent
rights, inventions for which patent applications have not been filed, patent
applications, patents, follow-on applications, patents issuing from
continuations, extensions or divisional applications, improvements on existing
inventions and future inventions, (collectively the "Patents"):
f. All products and proceeds of the foregoing, including,
without limitation, all license royalties and any claim by FPN against third
parties for past, present or future infringement of any patent, including,
without limitation, any patent referred to in subsection "e" of this paragraph;
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g. All of the Debtor's right, title, estate and interest,
whether now existing or hereafter acquired, in and to all trademarks, trademark
applications, goodwill associated with the trademarks, (collectively, the
"Trademarks"):
h. All products and proceeds of the foregoing, including,
without limitation, any claim by FPN against third parties for past, present or
future (a) infringement or dilution of any trademark or trademark registration
including, without limitation, the trademarks and trademark registrations
referred to in subsection "i." of this paragraph, or (b) injury to the goodwill
associated with any trademark or trademark registration; and
i. All of Debtor's right, title, estate and interest, whether
now existing or hereafter acquired, in and to all contracts, contract rights,
undertakings, or other agreements, whether written or oral (other than rights
evidenced by chattel paper, documents or instruments) in or under which Debtor
may now or hereafter have any right, title or interest, including, without
limitation, with respect to an account, any agreement relating to the terms of
payment or the terms of performance thereof;
j. All chattel paper, instruments, securities, bills of
lading, warehouse receipts and other documents of title and documents of any
kind now existing or hereafter acquired or arising, whether arising from or
related to the disposition of inventory, equipment, or otherwise, and all rights
now or hereafter existing in and to all security agreements, leases, securities,
letters of credit and other contracts, documents and instruments securing or
otherwise relating to any such accounts, rights or instruments;
k. All other personal property of the Debtor, including
general intangibles, including without limitation, all other rights to payment
not specified above, and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Debtor and wherever located;
l. All proceeds and products of the foregoing (including,
without limitation, cash proceeds and noncash proceeds resulting from the sale
or other voluntary or involuntary dispositions thereof or any other realization
in respect thereof (the "Sale Proceeds") and including, but not limited to, all
property of any type that is acquired with any cash proceeds), all guarantees,
insurance and rights against sureties Debtor may have in connection therewith
and all proceeds and products relating thereto or therefrom, and all Debtor's
right, title and interest in and to additions, accessions, replacements and
substitutions to and for the foregoing, and all documents, ledger sheets and
files (including in form for use or processing by computers or other electronic
machines) of Debtor relating thereto. The term "proceeds" as used herein shall
include, without limitation, all accounts, chattel paper, deposit accounts,
instruments, equipment, inventory, documents, farm products, general intangibles
and other proceeds (all of the foregoing shall have the meaning given them in
the Code) which arise from the sale, lease, transfer or other use or disposition
of any kind of any collateral or proceeds and all proceeds of any type described
above acquired with cash proceeds.
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In addition to the foregoing, FPN hereby also grants to Asset a
security interest in all equipment, whether now existing or hereafter acquired,
owned by Debtor and used by Debtor at any location.
4. PRIORITY OF LOAN IN FPN BANKRUPTCY CASE. The Interim Financing
shall have priority in FPN's Bankruptcy Case in accordance with the provisions
of Section 364(c) of the Bankruptcy Code over all administrative expenses of the
kind specified in Sections 503(b) or 507(b) of the Code, subject only to (i) the
reasonable fees and expenses of a trustee and his professionals, and (ii)
reasonable fees and expenses of the Debtor's professionals, as approved by the
Bankruptcy Court on application on notice to creditors. No other costs or
administrative expenses which have been or may be incurred in FPN's Bankruptcy
Case and no priority claims are or will be prior to or on a parity with the
claims of Asset against FPN arising out of the Post-petition Financing or with
the security interests and liens of Asset in and to the Collateral. Neither FPN
nor any trustee shall be entitled to assert a claim under Section 506(c) of the
Bankruptcy Code for costs and expenses incurred in connection with the
preservation, protection, enhancement, or realization of the Collateral.
5. PROHIBITION AGAINST LIENS. If at any time during FPN's
Bankruptcy Case, security interests or liens in the Collateral or any portion
thereof are granted to other parties pursuant to Section 364(d) of the
Bankruptcy Code, which security interests or liens are senior to or on a parity
with the security interests or liens of Asset hereunder, such grant shall be
deemed an Event of Default under paragraph 15 hereof. The proceeds of any
loans, advances, or other indebtedness secured by such senior or parity security
interests or liens shall be applied to satisfy FPN's indebtedness hereunder. In
the event that FPN makes any additional borrowings, whether secured or
unsecured, after the date of this Agreement, all proceeds of such borrowings
shall be used to repay the Post-petition Financing.
6. REPRESENTATIONS AND WARRANTIES. FPN hereby represents and
warrants as follows:
a. STATUS. FPN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
b. AUTHORITY. FPN has the power and authority to consummate
the transactions contemplated in the Loan Documents, and the Loan Documents have
been duly authorized, by FPN and when executed and delivered shall constitute
the legal, valid and binding obligation of FPN, enforceable against FPN in
accordance with their terms. Subject to approval of the Loan Documents by the
Bankruptcy Court, all consents of any person or entity and all governmental
authorizations and actions of any kind necessary to authorize the security
interest granted herein or required for the validity or enforceability against
FPN of the Motion and the Loan Documents or the perfection of the security
interest granted in this Agreement have been obtained or performed and are valid
and subsisting in full force and effect.
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c. NAMES; BUSINESS LOCATIONS. FPN's principal place of
business and chief executive office and the location of its principal records
concerning the Collateral are all as set forth in paragraph 18.e(1) hereof.
d. COLLATERAL. Without otherwise affecting the senior priority
of the security interests granted pursuant to this Agreement, except for sales
of Collateral in the ordinary course of FPN's operations, FPN is and will
continue to be the owner of the Collateral free and clear of all claims, liens,
security interests, pledges and other encumbrances, except for the security
interest created by this Agreement. This Agreement creates a valid security
interest in the Collateral securing the payment and performance of all of the
obligations of the Post-petition Financing, and all filings and other actions
necessary to perfect or protect such security interest have been taken,
including, without limitation, the filing of financing statements or similar
documents in all applicable jurisdictions.
e. PATENTS, COPYRIGHTS AND TRADEMARKS. As to the Patents,
Copyrights and Trademarks:
(1) the Patents Copyrights and Trademarks are subsisting
and have not been adjudged invalid or unenforceable, in whole or in part;
(2) no written claim (and, to the best of FPN's knowledge,
no oral claim) has been made that the use of any of the Patents, Copyrights or
Trademarks does or may violate the rights of any third person;
(3) FPN is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the Patents, each of
the Copyrights and each of the Trademarks, free and clear of any pledges,
assignments, licenses, registered user agreements and covenants by assignor not
to xxx third persons except those license rights granted to Entergy Enterprises
Inc. for PowerView-Registered Trademark-;
(4) Except as noted in paragraph 6b, FPN has the
unqualified right to enter into this Agreement and perform its terms.
7. COVENANTS. FPN hereby covenants and agrees as follows:
a. SALE, ASSIGNMENT OR TRANSFER OF COLLATERAL. Except for
sales in the ordinary course of business, FPN will not sell or assign or
otherwise transfer the Collateral, either in whole or in part, or any interest
therein, nor will FPN remove or permit removal of any of the Collateral from its
current location(s), without the prior written consent of Asset. FPN shall at
all reasonable times give Asset, and its agents and representatives, full access
to the Collateral and shall provide Asset with such information with respect to
the Collateral as it may reasonably request.
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b. LIENS. Except in connection with product sales made in the
ordinary course of its business, FPN will not directly or indirectly create,
assume or permit to exist any Lien on or with respect to the Collateral (other
than the security interest granted herein). As used herein, "Lien" means any
mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, encumbrance, lien (statutory or other), preference, priority
or other security agreement of any kind or nature whatsoever.
c. INSURANCE. FPN will, at its own expense, maintain insurance
policies with respect to the Collateral in such amounts, against such risks, in
such form and with such insurers as are satisfactory to Asset.
d. MAINTENANCE OF COLLATERAL. FPN, at its expense, shall cause
the Collateral to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted. In the case of any
loss or damage to any of the Collateral, FPN shall, as promptly as practicable
after the occurrence thereof, make or cause to be made all repairs, replacements
and other improvements in connection therewith as are necessary or desirable.
e. CHANGES IN NAME AND LOCATION OF COLLATERAL AND BUSINESS.
FPN shall not (i) utilize any trade name; (ii) change its name; (iii) acquire
any business; (iv) change the location of its principal place of business or
chief executive office; or (v) change the place where said records or their
duplicates are kept or acquire any additional offices; in each case without
giving at least thirty (30) days' prior written notice thereof.
f. FURTHER ASSURANCES. FPN covenants that FPN shall from time
to time make, execute, acknowledge and deliver all such further documents,
instruments and assurances as may be required by Asset to perfect, protect
and/or preserve the security interest created by, and to carry out the intent
of, this Agreement, and hereby authorizes Asset or its agents to file financing
statements and amendments thereto relating to all or any of the Collateral where
desirable in Asset's judgment to perfect the security interest granted herein
without the signature of FPN where permitted by law. Without limiting the
foregoing, FPN will deliver to Asset any promissory note or other instrument or
chattel paper constituting Collateral, duly endorsed or accompanied by duly
executed instruments of transfer or assignment in form and substance
satisfactory to Asset.
g. AGREEMENT TO DEFEND COLLATERAL. FPN will defend the
Collateral against all claims and demands of all persons at any time asserting
the same, or any interest therein, and will take all steps necessary to
preserve, protect and maintain the security interest of Asset in the Collateral
as a fully perfected first lien.
h. FUTURE RIGHTS. If, before the Secured Obligations shall
have been satisfied in full, FPN shall (i) obtain rights to any new patentable
inventions, trademarks, trademark registrations or applications, or (ii) become
entitled to the benefit of any patent or trademark application, trademark,
trademark registration, or patent for any reissue, division, continuation,
renewal, extension, or continuation-in-part of any patent or any improvement on
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any patent, the provisions of this Agreement shall automatically apply thereto
and FPN shall give to Asset prompt written notice thereof. FPN agrees to
include any future patents, patent applications, trademarks, trademark
applications, or trademark registrations which constitute Collateral under this
Agreement.
i. NO INCONSISTENT AGREEMENT. So long as any of the Secured
Obligations remains outstanding, FPN shall not enter into any agreement (for
example, a license agreement) that is inconsistent with FPN's obligations under
this Agreement; PROVIDED, HOWEVER, that FPN may grant licenses of the Patents
and Trademarks and of any future Collateral of such type for limited purposes in
the course of FPN's normal business activities which do not, taken together with
the value of the consideration received therefor, materially impair the value of
such Collateral.
j. RIGHT TO XXX. Unless and until an Event of Default shall
have occurred and be continuing, FPN shall have the right to bring any
opposition proceedings, cancellation proceedings or lawsuit in its own name to
enforce or protect any Patents, Copyrights or Trademarks.
k. TAXES. FPN shall pay when due all taxes, assessments or
charges upon the Collateral, or for its use or operation, or upon the proceeds
thereof, or upon this Agreement or any other Loan Document.
8. APPOINTMENT OF ASSET AS FPN'S LAWFUL ATTORNEY-IN-FACT. FPN
hereby irrevocably appoints Asset as FPN's true and lawful attorney-in-fact,
with full power of substitution, to do all acts and things which Asset may deem
necessary or advisable to perfect and continue perfected the Security Interest
or to maintain its priority.
9. FPN COOPERATION. FPN shall cooperate with Asset in filing
financing statements, mortgages, security agreements, or other instruments and
taking any other action in order to validate and perfect the security interests,
liens, or mortgages in the Collateral granted to Asset hereunder. FPN shall, at
its own expense, execute and deliver to Asset, for recording with appropriate
governmental authorities, all agreements, financing statements, instruments, and
other documents as Asset may request to evidence, confirm, validate, or perfect
the Interim Financing and the security interests and liens in the Collateral.
10. EVENTS OF DEFAULT. Upon the occurrence of any one or more of the
following Events of Default, and following the dispatch of written notice to FPN
from Asset, all advances hereunder shall be immediately due and payable, and the
date on which such notice is given shall constitute the Termination Date:
a. The appointment of a Chapter 7 trustee in FPN's Bankruptcy
Case;
b. The dismissal of FPN's Bankruptcy Case;
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c. FPN's failure to comply with any material provision of the
Interim Order or this Agreement, or any related security agreement or mortgages,
the utilization of the proceeds of any advance under the Post-petition Financing
for purposes other than as permitted herein;
d. The granting of a security interest in or lien against the
Collateral or any portion thereof to other parties, which security interest or
lien is senior to or on a parity with the security interests or liens of Asset
hereunder, or the transfer of an interest in the Collateral or any portion
thereof outside of FPN's estate, except as permitted herein.
FPN shall give Asset prompt written notice of the occurrence of
an Event of Default or the occurrence of any event which, through the passage of
time, would constitute an event of default. FPN may terminate the financing
arrangement provided hereunder upon one business day's notice to Asset, and all
principal of, interest accrued on, and allowed fees, costs and expenses of Asset
related to, the Interim Financing shall be payable within forty-five (45) days
of such Termination Date. Unless FPN terminates such financing arrangement
prior to the Termination Date, or Asset converts the Interim Financing to equity
in the Reorganized Debtor, the principal of, accrued interest on, and allowed
fees, costs and expenses of Asset related to the Interim Financing as provided
for herein shall be paid in full by FPN on the Termination Date.
11. RIGHTS AND REMEDIES UPON DEFAULT.
Upon the occurrence of any Event of Default as defined herein, Asset
may at its option do any one or more of the following:
(1) by written notice to FPN, declare all of the Secured
Obligations forthwith due and payable, whereupon the same shall become due and
payable, without further notice of any kind;
(2) on or after April 1, 1998, exercise with regard to the
Interim Financing and the Collateral, all rights and remedies afforded by the
Uniform Commercial Code and other applicable law with respect to the
indebtedness thereunder and the collateral security therefore. Without limiting
the foregoing, Asset shall then have the right to collect and take immediate
possession and control of all or any part of the Collateral and the proceeds
thereof, the power to sell all or any portion of the Collateral at public or
private sale at such place and time and on such terms as Asset shall see fit as
permitted by applicable laws, the right of setoff, and the right to endorse in
the name of FPN any instrument representing the Collateral. At any such sale or
other disposition of the Collateral, Asset may, to the extent permissible under
applicable law, purchase the whole or any part of the Collateral, free from any
right of redemption on the part of FPN, which right is hereby waived and
released.
If it shall be necessary for Asset, at any time, to exercise such
rights and remedies in order to effect repayment of the Interim Financing, Asset
shall have the right to exercise such rights and remedies as to all or such part
of the Collateral as Asset shall, in its sole discretion, elect.
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In addition to all rights and remedies available to Asset hereunder,
under the Secured Note and under applicable law, Asset as Secured Party shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code in any jurisdiction as to any Collateral therein located (whether or not
the Uniform Commercial Code applies to the affected Collateral). The rights and
remedies provided for under this Agreement are cumulative and are not exclusive
of any rights and remedies that may be available to Asset under applicable law
or otherwise.
12. RELIEF FROM STAY IN FPN CASE. Reference is made to the Order,
entry of which shall be deemed a modification or termination of the automatic
stay under Section 362 of the Bankruptcy Code to permit Asset to exercise,
subject to the limitations set forth in the remainder of this paragraph, all its
rights and remedies provided for hereinabove. If any default or event of
default occurs hereunder or under any of the Loan Documentation, and is not
cured within five business days after the date written notice of default or
event of default is given by Asset to Debtor's counsel, then Asset may, upon
five (5) days notice to counsel for Debtor (which notice may be via facsimile),
apply to the Court for relief from stay to exercise any and all of the rights
and remedies provided herein, in the Post-Petition Documentation, the Pre-
Petition Documentation or which it otherwise has by agreement, at law or in
equity, provided that if a default or event of default has occurred and is
continuing, Asset shall not provide financing to Debtor during such four
business day period or thereafter, and Debtor's authorization to use the Pre-
Petition Collateral and the Post-Petition Collateral shall be deemed terminated
without further action by Asset, or further Order of the Court. Nothing hereby
shall restrict Asset from seeking or obtaining appropriate relief from the Court
before or after expiration of said five business day period.
13. PAYMENTS SET ASIDE. To the extent that FPN makes a payment to
Asset, or Asset enforces or otherwise exercises any of its rights and remedies
hereunder or under applicable law, and such payment or payments or the proceeds
of such enforcement or exercise are subsequently invalidated or required to be
repaid to FPN or paid to a trustee, receiver or any other person or entity under
applicable law, then to the extent of such invalidation, repayment or payment,
the obligation or part thereof originally intended to be satisfied, and all
security interests, liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or exercise had not occurred.
14. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement shall
create a continuing security interest in the Collateral and shall remain in full
force and effect until indefeasible payment and performance in full of all of
the Secured Obligations.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of FPN contained in this Agreement shall survive the execution,
delivery and performance of this Agreement until the termination of this
Agreement.
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16. STAY OR MODIFICATION OF ORDER TO THIS AGREEMENT. If any or all
of the provisions of the Interim Order, this Agreement, or any related security
agreements or mortgages executed pursuant to, and consistent with, the Interim
Order are hereafter modified, vacated, or stayed by subsequent order of the
Bankruptcy Court or any other court, such stay, modification, or violation shall
not affect the validity of any debt to Asset incurred pursuant to the Interim
Order and this Agreement prior to the effective date of such stay, modification,
or vacation, or the validity and enforceability of any lien, security interest,
priority or other right authorized hereby with respect to any such debt to
Asset, and notwithstanding such stay, modification, or vacation, any of FPN's
obligations to Asset pursuant to the Interim Order and this Agreement arising
prior to the effective date of such stay, modification or vacation shall be
governed in all respects by the original provisions of the Interim Order and
this Agreement and Asset shall be entitled to all of its respective rights,
privileges, and benefits including, without limitation, the liens, security
interest, priorities and rights of purchase granted herein to or for the benefit
of Asset, with respect to all such debt.
17. SURVIVAL OF PROVISIONS. The provisions of this Agreement and any
actions taken pursuant hereto shall survive entry of any order which may be
entered confirming any plan of reorganization or which may be entered
converting the FPN case from Chapter 11 to Chapter 7 or dismissing those or any
subsequent proceedings, and the terms and provisions of the Interim Order, this
Agreement and the liens and security interests granted hereunder shall continue
in that or any superseding case under the Code, and such liens and security
interests shall maintain their priority as provided by the Interim Order and
this Agreement until satisfied and discharged, notwithstanding any dismissal of
FPN's current bankruptcy case or any subsequent cases or proceedings.
18. MISCELLANEOUS.
a. BINDING EFFECT. This Agreement shall be binding upon FPN,
its successors and permitted assigns, including any trustee appointed in FPN's
Chapter 11 or Chapter 7 Bankruptcy Case, and shall inure to the benefit of Asset
and its successors and assigns. FPN shall not assign this Agreement except with
the express written consent of Asset.
b. WAIVERS. No failure or delay on the part of Asset in
exercising any right, power or privilege hereunder, under the Secured Note or
any other agreement or instrument in connection herewith or therewith shall
operate as a waiver thereof or preclude any other or further exercise thereof or
of any other right, power or privilege.
c. AMENDMENTS. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by FPN herefrom, shall in any event be
effective unless the same shall be in writing and signed by the parties hereto,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
d. DEFINITIONS. Unless otherwise provided herein or unless the
context clearly requires a different meaning, all terms used herein and defined
in the Uniform California Commercial Code shall have the meanings ascribed to
such terms therein.
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e. NOTICES. Any notice or other communication required or
desired to be served, given or delivered hereunder shall be in writing and shall
be personally delivered or sent by prepaid courier, by overnight, registered or
certified mail (postage prepaid), or by prepaid telex, telecopy or telegram
(with messenger delivery specified) and shall be deemed given on the day that
such writing is received by the intended recipient thereof. All such notices
and other communications shall be addressed to the parties to be notified as
follows:
(1) In the case of FPN:
First Pacific Networks, Inc.
000 Xxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, President & CEO
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx, Esq.
Xxxxxxx & Xxxxx, LLP
000 Xxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(2) In the case of Asset:
Asset Recovery Group, LLC
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx X. Chi
Facsimile:_____________________
with a copy to:
_______________________________
_______________________________
_______________________________
Attention:_____________________
Facsimile:_____________________
or to such other address as any parties may hereafter designate for itself by
written notice to the other parties in the manner herein prescribed.
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f. SEVERABILITY. The unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provision
or provisions herein contained unenforceable or invalid.
g. GOVERNING LAW. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of California applicable to contracts made and to be performed entirely
within the State of California.
h. LIMITATION OF LIABILITY. No claim shall be made by either
party against the other party or its members, its directors, officers, employees
or agents for any special, indirect, consequential or punitive damages in
respect of any claim for breach of contract or under any other theory of
liability arising out of or related to the transactions contemplated by this
Loan and Security Agreement and the Secured Promissory Note, or any act,
omission or event occurring in connection therewith, except for (1) an
injunction and/or damages related to the use of any FPN property except as
permitted by this Agreement; and (2) damages related to Asset's wrongful refusal
to lend funds hereunder, and provided that in any such action the damages shall
be limited to that portion of the Interim Financing which Asset wrongfully
refused to advance to FPN.
i. COMPLETE AGREEMENT. This Agreement and the documents
executed in connection herewith are intended by the parties as the final
expression of their agreement regarding the subject matter hereof and as a
complete and exclusive statement of the terms and conditions of such agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agrement as
of the date first above written.
Asset Recovery Group, LLC, First Pacific Networks, Inc.,
a Colorado limited liability company a Delaware corporation
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxx X. Xxxxxxx
-------------------------------- --------------------------------
Xxxxx X. Xxxxxxx
President & CEO
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AMENDMENT TO LOAN AND SECURITY AGREEMENT
DATED JANUARY 15, 1998
BETWEEN FIRST PACIFIC NETWORKS, INC. (FPN) AND
ASSET RECOVERY GROUP, LLC, (ASSET)
This Amendment to Loan and Security Agreement dated January 15, 1998
(Agreement) is to be considered part of the "Loan Documents" as defined in
recital H of the Agreement.
The amendments are as follows:
Paragraph 1. shall now read:
1. INDEBTEDNESS. Subject to all of the terms hereof, and the
Secured Note(s), Asset agrees to lend to FPN the sum of $600,000, to be funded
incrementally. FPN shall draw down on $158,000 of Initial Financing and shall
draw down on the balance of $442,000 when it becomes available and has been
approved by the Bankruptcy Court. FPN shall use the Initial Financing to pay
when due expenses of the type and for the purposes and in the amount described,
and without material variance from, the items included in the budget attached as
Exhibit A to this Agreement, or other expenses as may be approved by in advance
and in writing, by Asset.
Paragraph 8. shall now read:
8. APPOINTMENT OF ASSET AS FPN'S LAWFUL ATTORNEY-IN-FACT. FPN
hereby irrevocably appoints Asset as FPN's true and lawful attorney-in-fact,
with full power of substitution, to do all acts and things which Asset may deem
necessary or advisable to perfect and continue perfected the Security Interest
or to maintain its priority provided Asset does not exercise any of its rights
under paragraph 11.(2) unless Asset shall have loaned FPN $600,000 pursuant to
this Agreement .
Paragraph 11.(2) shall now read:
11. RIGHTS AND REMEDIES UPON DEFAULT.
Upon the occurrence of any Event of Default as defined herein, Asset
may at its option do any one or more of the following:
(2) on or after August 1, 1998, provided Asset shall have
loaned FPN $600,000 pursuant to this Agreement, and further provided that FPN
has not requested an extension of this date which extension shall not be
unreasonably withheld by Asset, exercise with regard to the Interim Financing
and the Collateral, all rights and remedies afforded by the Uniform Commercial
Code and other applicable law with respect to the indebtedness thereunder and
the collateral security therefore. Without
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limiting the foregoing, Asset shall then have the right to collect and take
immediate possession and control of all or any part of the Collateral and the
proceeds thereof, the power to sell all or any portion of the Collateral at
public or private sale at such place and time and on such terms as Asset shall
see fit as permitted by applicable laws, the right of setoff, and the right to
endorse in the name of FPN any instrument representing the Collateral. At any
such sale or other disposition of the Collateral, Asset may, to the extent
permissible under applicable law, purchase the whole or any part of the
Collateral, free from any right of redemption on the part of FPN, which right is
hereby waived and released.
Paragraph 12. shall now read:
12. RELIEF FROM STAY IN FPN CASE. Reference is made to the Order,
entry of which shall be deemed a modification or termination of the automatic
stay under Section 362 of the Bankruptcy Code to permit Asset to exercise,
subject to the limitations set forth in the remainder of this paragraph, all its
rights and remedies provided for hereinabove. If any default or event of
default occurs hereunder or under any of the Loan Documentation, and is not
cured within five business days after the date written notice of default or
event of default is given by Asset to Debtor's counsel, then Asset may,
provided Asset shall have loaned FPN $600,000 pursuant to this Agreement, upon
five (5) days notice to counsel for Debtor (which notice may be via facsimile),
apply to the Court for relief from stay to exercise any and all of the rights
and remedies provided herein, in the Post-Petition Documentation, the Pre-
Petition Documentation or which it otherwise has by agreement, at law or in
equity, and Debtor's authorization to use the Pre-Petition Collateral and the
Post-Petition Collateral shall be deemed terminated without further action by
Asset, or further Order of the Court. Nothing hereby shall restrict Asset from
seeking or obtaining appropriate relief from the Court before or after
expiration of said five business day period.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of January 15, 1998.
Asset Recovery Group, LLC, First Pacific Networks, Inc.,
a Colorado limited liability company a Delaware corporation
By /s/ Xxxxxx X.Xxxxxxxx By /s/Xxxxx X. Xxxxxxx
-------------------------- ------------------------
Xxxxxx Xxxxxxxx Xxxxx X. Xxxxxxx
Co-Manager President & CEO
15
SECURED PROMISSORY NOTE NO. 1
FOR VALUE RECEIVED, First Pacific Networks, Inc., a Delaware
corporation ("FPN"), promises to pay to Asset Recovery Group, LLC ("Payee"), or
order, the principal sum of One Hundred Fifty-Eight Thousand Dollars ($158,000),
with interest from the date of FPN's receipt of such funds at the rate of ten
percent (10%) simple interest per annum. Principal and accrued interest shall
be payable upon FPN's exit from Chapter 11 or June 30, 1998, whichever is first.
Interest not paid when due shall thereafter bear like interest as the
principal, but such unpaid interest so compounded shall not exceed an amount
equal to simple interest on the unpaid principal at the maximum rate permitted
by law. Principal and interest are payable in lawful money of the United
States.
This note is secured by the pledge of collateral set forth in the Loan
and Security Agreement, as amended, between FPN and Payee dated January 15, 1998
(the "Security Agreement"). In the event that FPN shall have defaulted in the
payment of any principal or interest on this Secured Promissory Note as and when
it shall have become due and payable in accordance with the terms hereof, Payee
shall have, and may exercise, all of the rights, powers and remedies available
to it, to the extent permitted by applicable law. Notwithstanding the
foregoing, Payee agrees not to foreclose on the Collateral, as defined in the
Security Agreement, until the first to occur of August 1, 1998, or the dismissal
of the FPN Chapter 11 Bankruptcy Case. Payee shall not be entitled to foreclose
on the intellectual property components of the Collateral (defined as
Copyrights, Patents and Trademarks) of FPN unless and until FPN has received and
accepted Six Hundred Thousand Dollars ($600,000) from Payee.
If collection action needs be instituted on this note, FPN promises to
pay all costs of collection, including reasonable attorneys' fees.
First Pacific Networks, Inc.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Xxxxx X. Xxxxxxx, President & CEO
Date: January 15, 1998
-------------------------------
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SECURED PROMISSORY NOTE NO. 2
FOR VALUE RECEIVED, First Pacific Networks, Inc., a Delaware corporation
("FPN"), promises to pay to Asset Recovery Group, LLC ("Payee"), or order, the
principal sum of Four Hundred Forty-Two Thousand Dollars ($442,000), with
interest from the date of FPN's receipt of such funds at the rate of ten percent
(10%) simple interest per annum. Principal and accrued interest shall be
payable upon FPN's exit from Chapter 11 or June 30, 1998, whichever is first.
Interest not paid when due shall thereafter bear like interest as the
principal, but such unpaid interest so compounded shall not exceed an amount
equal to simple interest on the unpaid principal at the maximum rate permitted
by law. Principal and interest are payable in lawful money of the United
States.
This note is secured by the pledge of collateral set forth in the Loan and
Security Agreement, as amended, between FPN and Payee dated January 15, 1998
(the "Security Agreement"). In the event that FPN shall have defaulted in the
payment of any principal or interest on this Secured Promissory Note as and when
it shall have become due and payable in accordance with the terms hereof, Payee
shall have, and may exercise, all of the rights, powers and remedies available
to it, to the extent permitted by applicable law. Notwithstanding the
foregoing, Payee agrees not to foreclose on the Collateral, as defined in the
Security Agreement, until the first to occur of August 1, 1998, or the dismissal
of the FPN Chapter 11 Bankruptcy Case. Payee shall not be entitled to foreclose
on the intellectual property components of the Collateral (defined as
Copyrights, Patents and Trademarks) of FPN unless and until FPN has received and
accepted Six Hundred Thousand Dollars ($600,000) from Payee.
If collection action needs be instituted on this note, FPN promises to pay
all costs of collection, including reasonable attorneys' fees.
First Pacific Networks, Inc.
By:
---------------------------------
Xxxxx X. Xxxxxxx, President & CEO
Date:
-------------------------------
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