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EXHIBIT 10.27
SENIOR LOAN AND SECURITY AGREEMENT NO. L6244
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. L6244 (this "Security Agreement") is
dated as of May 28, 1999 between ACCELERATED NETWORKS, INC., a California
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings the
Commitment amount as defined in Section 3(a)(ii) below, and Lender desires to
loan, subject to the terms and conditions herein set forth, such amount to
Borrower (each, a "Loan" and collectively, the "Loans"). Such borrowings shall
be evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles, in
each case, to the extent funded hereunder, including but not limited to lab and
text equipment high end computers, peripherals, workstations, servers, routers,
hubs, RAID's, office and phone equipment, and furniture, (and also certain
custom use equipment, installation and delivery costs, purchase tax, toolings,
software, tenant improvements and other items generally considered fungible or
expendable ("Soft Costs")) whether now owned by Borrower or hereafter acquired,
and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
which is described on the Note attached hereto or any subsequently-executed Note
entered into by Lender and Borrower and which incorporates this Security
Agreement by reference (collectively, the "Collateral").
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Term and monthly payment amount payable with respect to each item of
Collateral shall be as set forth in and as stated in the respective Note(s). The
terms of each Note hereto are subject to all conditions and provisions of this
Security Agreement as it may at any time be amended. Each Note shall constitute
a separate and independent Loan and contractual obligation of Borrower and shall
incorporate the terms and conditions of this Security Agreement and any
additional provisions contained in such Note. In the event of a conflict between
the terms and conditions of this Security Agreement and any provisions of such
Note, the provisions of such Note shall prevail with respect to such Note only.
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SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees that
its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such monthly payment amounts and other sums, are absolute and unconditional
and are not subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment due or alleged to be due to, or by reason of, any past, present or
future claims which Borrower may have against Lender, any assignee, the
manufacturer or seller of the Collateral, or against any person for any reason
whatsoever.
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
conditions of this Security Agreement Lender hereby agrees to make senior
secured Loans to Borrower, subject to the following conditions: (i) each Loan
shall be evidenced by a Note; (ii) the total principal amount of the Loans shall
not exceed $1,500,000 in the aggregate (the "Commitment") provided that no more
than 30% of the amount of the utilized Commitment may be used to finance Soft
Costs; (iii) the amount of each Loan shall be at least $25,000 except for a
final Loan which may be less than $25,000; (iv) Lender shall not be obligated to
make any Loan after June 30, 2000; (v) at the time of each Loan, no Event of
Default or event which with the giving of notice or passage of time, or both,
could become an Event of Default shall have occurred, as reasonably determined
by Lender, and certified by Borrower; (vi) at the time of each Loan, Borrower
has reimbursed Lender for all UCC filing and search costs, inspection and
labeling costs, and appraisal fees, if any, not covered by the Fee; (vii) for
each Loan, Borrower shall present to Lender a list of proposed Collateral for
approval by Lender in its sole discretion; (viii) for each Loan, Borrower shall
have provided Lender with each of the closing documents described in Exhibit A
hereto (which documents shall be in form and substance reasonably acceptable to
Lender); (ix) any failure of Borrower to perform in accordance with its business
plan referred to as "Accelerated Networks, Inc. 1999 AOP, 2000 and 2001
Forecast-Balance Sheet Statement of Operations and Statement of Cash Flow" dated
February 16, 1999 (the "Business Plan") (all quarterly figures will be prorated
to monthly), as may be amended from time to time in form and substance
acceptable to Lender is not a material adverse change as reasonably, determined
by Lender; (x) there shall be no material adverse change in Borrower's
condition, financial or otherwise, that would materially impair the ability of
Borrower to meet its payment and other obligations under this Loan (a "Material
Adverse Effect') as reasonably determined by Lender, and Borrower so certifies,
from (yy) the date of the most recent financial statements delivered prior to
such time by Borrower to Lender to (zz) the date of the proposed Loan; (xi)
Borrower shall use the proceeds of all Loans hereunder to purchase or reimburse
the purchase of Collateral; (xii) all Collateral has been marked and labeled by
Lender or Lender's agent; and (xiii) Lender has received in form and substance
acceptable to Lender: (a) unless previously delivered, Borrower's interim
financial statements signed by a financial officer of Borrower, (b) prior to the
first funding, Lender has confirmed Borrower's financial condition with evidence
satisfactory to Lender; and (c) unless previously delivered, complete copies of
the Borrower's audit reports for its most recent fiscal year, which shall
include at least Borrower's balance sheet as of the close of such year, and
Borrower's statement of income and retained earnings and of changes in financial
position for such year, prepared on a consolidated basis and certified by
independent public accountants. Such certificate shall not be qualified or
limited because of restricted or limited examination by such accountant of any
material portion of the
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company's records. Such reports shall be prepared in accordance with generally
accepted accounting principles and practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
bear interest and be payable at the times and in the manner provided therein.
Following payment of the Indebtedness related to each Note, Lender shall return
such Note, marked "cancelled," to Borrower. Borrower has the ability to prepay
any and all outstanding Notes in whole but not in part after twelve (12) months
from the date of such Note under this Security Agreement. The prepayment amount
shall be the sum of (i) and (ii) below, discounting the amounts in (ii) at a
rate of 6% per annum compounded monthly on the basis of a 360 day year: (i) all
amounts which may be then due or accrued to the payment date for all outstanding
Notes; (ii) as of such payment date, an amount equal to: (A) all remaining
monthly payments due under all outstanding Notes, and (B) 15% of the original
principal amount of any such outstanding Note calculated in accordance with
Election No. 1 in Section 29. The prepayment conditions are as follows: (a)
Borrower must provide Lender with at least five (5) days' advance written notice
of its intention to prepay; and (b) the prepayment date must fall on a regular
monthly payment date.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i) the
payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender in connection with the transactions contemplated hereby (the
"Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it has fall
authority to execute and deliver this Security Agreement and the Notes and
perform the terms hereof and thereof, and this Security Agreement and the Notes
have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) there is
no action or proceeding pending or threatened against Borrower before any court
or administrative agency which might have a Material Adverse Effect on the
business, financial condition or operations of Borrower; (f) at the time any
Loan is made hereunder, Borrower owns and will keep all of the Collateral free
and clear of all liens, claims and encumbrances, and, except for this Security
Agreement, there is no deed of trust, mortgage, security agreement or other
third party interest against any of the Collateral other than Permitted Liens
(as defined below); (g) at the time any Loan is made hereunder, Borrower has
good and marketable title to the Collateral; (h)
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at the time any Loan is made hereunder, all Collateral that is the subject of
that Loan has been received, installed and is ready for use and is satisfactory
in all respects for the purposes of this Security Agreement; (i) the Collateral
that is the subject of that Loan is, and will remain at all times under
applicable law, removable personal property, which is free and clear of any lien
or encumbrance except in favor of Lender other than Permitted Liens (as defined
below), notwithstanding the manner in which the Collateral may be attached to
any real property; 0) all credit and financial information submitted to Lender
herewith or at any other time is and will at the time given be true and correct
in all material respects; and (k) the security interest granted to Lender
hereunder is a first priority security interest subject to Permitted Liens, and
(1) on or before January 1, 2000, computer systems that are material to
Borrower's business or operations shall be Year 2000 performance compliant and
will thus be able to accurately process date data from, into and between the
twentieth and twenty-first centuries including leap year calculations.
"Permitted Liens" shall mean and include: (i) liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith; and (ii) liens of carriers,
warehousemen, mechanics, materialmen, vendors, landlords and other liens arising
by operation of law incurred in the ordinary course of business.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral funded by such
Note shall be located at the address (the "Collateral Location") shown on
Exhibit A to each Note and shall not be moved without Lender's prior written
consent which location shall in all events be within the United States. All of
the records regarding the Collateral shall be located at 000 Xxxxxxx Xxxxx,
Xxxxxxxx, XX 00000, and/or such other location of which Borrower has given
notice to Lender in accordance with this Security Agreement. Lender shall have
the right to inspect Collateral, including records relating thereto, and
Borrower's books and records at any time (upon reasonable notification) during
regular business hours, such books and records t6 be maintained in accordance
with prudent industry practice. Borrower shall be responsible for all labor,
material and freight charges incurred in connection with any removal or
relocation of Collateral which-is requested by Borrower and consented to by
Lender, as well as for any charges due to the installation or moving of the
Collateral. Payments under the Notes and under this Security Agreement shall
continue during any period in which the Collateral is in transit during a
relocation. During Borrower's regular business hours and upon at least two days'
notice to Borrower, Lender or its agent shall xxxx and label Collateral, which
labels (to be provided by Lender) shall state that such Collateral is subject to
a security interest of Lender, and Borrower shall keep such labels on the
Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Upon reasonable notice, Borrower
will permit Lender to inspect each item of Collateral and its maintenance
records during Borrower's regular business hours. Borrower will at its sole
expense comply with all applicable laws, rules, regulations, requirements and
orders with respect to the use, maintenance, repair, condition, storage and
operation of each item of Collateral. Any addition or improvement that is so
required or cannot be so removed will immediately become Collateral of Lender.
(b) Service and Repair. With respect to computer equipment, other than personal
computers,
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Borrower has entered into, and will maintain in effect, vendor's standard
maintenance contract or another contract satisfactory to Lender for a period
equal to the term of each Loan and extensions thereto which provides for the
maintenance of the Collateral in good condition and working order and repairs
and replacement of parts thereof, all in accordance with the terms of such
maintenance contract. Borrower shall have that Collateral certified for the
vendor's standard maintenance agreement before Lender acquires any interest in
the Collateral as provided in this Security Agreement. With respect to any other
Collateral, Borrower will at its sole expense maintain and service and repair
any damage to each item of Collateral in a manner consistent with prudent
industry practice and Borrower's own practice so that such item of Collateral is
at all times (i) in the same condition as when delivered to Borrower, except for
ordinary wear and tear, and (ii) in good operating order for the function
intended by its manufacturer's warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." Notwithstanding any Casualty Occurrence, the Loan to
which such casualtied item of Collateral is subject shall continue in full force
and effect without any abatement in the monthly payment due. Borrower shall, at
its election, (a) no later than thirty (30) days after such Casualty Occurrence
repair the Collateral returning it to good operating condition, (b) no later
than thirty (30) days after such Casualty Occurrence replace the Collateral with
Collateral acceptable to Lender in its reasonable discretion, in good condition
and repair taking all steps required by Lender to perfect Lender's first
priority security interest therein, which replacement Collateral shall be
subject to the terms of this Security Agreement, or (c) on the next regular
monthly payment date which falls after such thirty (30) days, or if there is no
such payment date, thirty (30) days after such Casualty Occurrence pay to Lender
an amount equal to the Balance Due (as defined below) for each lost or damaged
item of Collateral. The Balance Due for each such item is the sum of: (i) all
amounts for each item which may be then due or accrued to the payment date, plus
(ii) as of such payment date, an amount equal to the product of the fraction
specified below times the sum of all remaining payments under the respective
Note, including the amount of any mandatory or optional payment required or
permitted to be paid by Borrower to Lender at the maturity of the Note
discounting to present value the amounts in (ii) at a rate of 6% per annum
compounded monthly on the basis of a 360 day year ("Discount Rate"). The
numerator of the fraction shall be the collateral value (as set forth on the
applicable Note) of the item and the denominator shall be the aggregate
collateral value of all items under the Note. Upon the making of such payments,
Lender shall release such item of Collateral from its lien hereunder.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured
against all risks of physical loss for at least the replacement value of the
Collateral and in no event for less than the amount payable following a Casualty
Occurrence (as provided in Section 9). Such insurance shall provide for a loss
payable endorsement to Lender and/or any assignee of Lender. Borrower shall
maintain commercial general liability insurance, including products liability
and completed -operations coverage, with respect to loss or damage for personal
injury, death or property damage in an amount not less than $2,000,000 in the
aggregate, naming Lender and/or
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Lender's assignee as additional insured. Such insurance shall contain insurer's
agreement to give thirty (30) days' advance written notice to Lender before
cancellation or material change of any policy of insurance. Borrower will
provide Lender and any assignee of Lender with a certificate of insurance from
the insurer evidencing Lender's or such assignee's interest in the policy of
insurance. Such insurance shall cover any Casualty Occurrence to any unit of
Collateral. Notwithstanding anything in Section 9 or this Section 10 to the
contrary, this Security Agreement and Borrower's obligations hereunder shall
remain in full force and effect with respect to any unit of Collateral which is
not subject to a Casualty Occurrence. If Borrower fails to provide or maintain
insurance as required herein, Lender shall have the right but shall not be
obligated, to obtain such insurance. In that event Borrower shall pay to Lender
the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first and prior
perfected security interest (d) furnish Lender with its annual audited financial
statements within one hundred twenty (120) days following the end of Borrower's
fiscal year, unaudited quarterly financial statements within sixty (60) days
after the end of each fiscal quarter, and including an income statement and
balance sheet all of which shall be certified by an officer of Borrower as true
and correct and shall be prepared in accordance with generally accepted
accounting principles consistently applied, and such other information as Lender
may reasonably request; and (e) promptly (but in no event more than five (5)
days after the occurrence of such event) notify Lender of any change in
Borrower's condition during the commitment period which constitutes a Material
Adverse Effect, and of the occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon Lender's
request, will, at Borrower's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
and approved by Lender. Borrower's obligations under this Section 12 shall
survive the payment in full of all the
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Indebtedness and the performance of all Obligations with respect to acts or
events occurring or alleged to have occurred prior to the payment in full of all
the Indebtedness and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to Lender's income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY EXCEPT
TO A SUCCESSOR IN INTEREST TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS OF
BORROWER; PROVIDED, HOWEVER, THAT, THE FINANCIAL CONDITION OF SUCH SUCCESSOR IS
GREATER THAN OR EQUAL TO BORROWER AS DETERMINED IN GOOD FAITH BY LENDER AND THE
SUCCESSOR'S BUSINESS AND ITS MAJOR INVESTORS ARE REASONABLY ACCEPTABLE TO
LENDER, OR SUCH ENTITY HAS OUTSTANDING RATED INVESTMENT GRADE PUBLIC DEBT.
LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY
INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN
PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If
Borrower is given notice of such assignment it agrees to acknowledge receipt
thereof in writing
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and Borrower shall execute such additional documentation as Lender's assignee
and/or secured party shall reasonably require at Lender's expense. Each such
assignee and/or secured party shall have all of the rights, but (except as
provided in this Section 15) none of the obligations, of Lender under this
Security Agreement, unless such assignee or secured party expressly agrees to
assume such obligations in writing. Borrower shall not assert against any
assignee and/or secured party any defense, counterclaim or offset that Borrower
may have against Lender. Notwithstanding any such assignment, and providing no
Event of Default has occurred and is continuing, Lender, or its assignees,
secured par-ties, or their agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the terms and
conditions of this Security Agreement. Subject to the foregoing, the Notes and
this Security Agreement shall inure to the benefit of, and are binding upon, the
successors and assignees of the parties hereto. Borrower acknowledges that any
such assignment by Lender will not change Borrower's duties or obligations under
this Security Agreement and the Notes or increase any burden or risk on
Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes shall prove to have been incorrect in any
material respect when made or given; (iv) Borrower's failure to comply with or
perform any material term, covenant or condition of this Security Agreement or
any Note or under any other agreement between Borrower and Lender or under any
lease or mortgage of real property covering the location of the Collateral if
such failure to comply or perform is not cured by Borrower within thirty (30)
days after Borrower knows of the noncompliance or nonperformance or notice from
Lender or such longer period that Borrower is diligently attempting to effect
such cure; (v) seizure of any of the Collateral under legal process; (vi) the
filing by or against Borrower or any guarantor under any guaranty executed in
connection with this Security Agreement ("Guarantor") of a petition for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors; (vii) the
voluntary or involuntary making of an assignment of a substantial portion of its
assets by Borrower or by any Guarantor for the benefit of its creditors, the
appointment of a receiver or trustee for Borrower or any Guarantor or for any of
Borrowers or Guarantor's assets, the institution by or against Borrower or any
Guarantor of any formal or informal proceeding for dissolution, liquidation,
settlement of claims against or winding up of the affairs of Borrower or any
Guarantor provided that in the case of all such involuntary proceedings, same
are not dismissed within sixty (60) days after commencement; (viii) the making
by Borrower or by any Guarantor of a transfer of all or a material portion of
Borrower's or Guarantor's assets or inventory not in the ordinary course of
business; or (ix) any default or breach by any Guarantor of any of the terms of
its guaranty to Lender in connection with this Security Agreement.
(b) Remedies. If any Event of Default has occurred, Lender may in its
sole discretion exercise one or more of the following remedies with respect to
any or all of the Collateral: (i) declare due any or all of the aggregate sum of
all remaining payments under the Notes, including
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the amount of any mandatory or optional payment required or permitted to be paid
by Borrower to Lender at the maturity of the Notes ("Remaining Payments"); (ii)
proceed by appropriate court action or actions either at law or in equity to
enforce Borrower's performance of the applicable covenants of the Notes and this
Security Agreement or to recover all damages and expenses incurred by Lender by
reason of an Event of Default; (iii) except as provided by law, without court
order or prior demand, enter upon the premises where the Collateral is located
and take immediate possession of and remove it without liability of Lender to
Borrower or any other person or entity; (iv) terminate this Security Agreement
and sell the Collateral at public or private sale, or otherwise dispose of,
hold, use or lease any or all of the Collateral in a commercially reasonable
manner; or (v) exercise any other right or remedy available to it under
applicable law. If Lender has declared due any or all of the Remaining Payments,
Borrower will pay immediately to Lender, without duplication, (A) the Remaining
Payments discounted to present value at the Discount Rate, (B) all amounts which
may be then due or accrued, and (C) all other amounts due under this Security
Agreement and under the Notes (Lender's Return, as referred to below, means the
amounts described in clauses (A), (B) and (C) above). The net proceeds of any
sale or lease of such Collateral will be credited against Lender's Return. The
net proceeds of a sale of the Collateral pursuant to this Section 16(b) is
defined as the sales price of the Collateral less selling expenses, including,
without limitation, costs of remarketing the Collateral and all refurbishing
costs and commissions paid with respect to such remarketing. The net proceeds of
a lease of the Collateral pursuant to this Section 16(b) is defined as the
amount equal to the monthly payments due under such lease (discounted to present
value at the Discount Rate) plus the residual value of the Collateral at the end
of the basic term of such lease, as reasonably determined by Lender, and
discounted at the Discount Rate.
At Lender's request, Borrower shall assemble the Collateral and make it
available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part
of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First, to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to,
remarketing, all Remedy Expenses, all expenses, liabilities and advances
incurred or made pursuant to this Security Agreement or any Note by Lender in
connection with foreclosure, suit, sale or enforcement of this Security
Agreement or the Notes, and taxes, assessments or liens superior to Lender's
security interest granted by this Security Agreement;
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Second, to the payment of all other amounts not described in item
Third below due under this Security Agreement and all Notes;
Third, to pay Lender an amount equal to Lender's Return, to the
extent not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever may
lawfully be entitled to receive it.
(d) Effect of Delay, Waiver; Foreclosure on Collateral. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies exercised hereunder or thereunder.
Lender shall not be required first to foreclose on the Collateral prior to
bringing an action against Borrower for sums owed to Lender under this Security
Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 8% of any
payment in the ordinary course owed Lender by Borrower which is not paid when
due (taking into account applicable grace periods), for every month such payment
is not paid when due, but in no event an amount greater than the highest rate
permitted by applicable law. If such amounts have not been received by Lender at
Lender's place of business or by Lender's designated agent by the date such
amounts are due under this Security Agreement or the Note;, Lender shall xxxx
Borrower for such charges. Borrower acknowledges that invoices for amounts due
hereunder or under the Notes are sent by Lender for Borrower's convenience only.
Borrower's non-receipt of an invoice will not relieve Borrower of its obligation
to make payments hereunder or under the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each of
Lender's officers, employees or agents designated by Lender) with full power of
substitution by Lender, as Borrower's attorney, with power to execute and
deliver on Borrower's behalf, financing statements and other documents necessary
to perfect and/or give notice of Lender's security interest in any of the
Collateral. Notwithstanding the above, Borrower will, upon
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Lender's request, execute all financing statements pursuant to the Uniform
Commercial Code and all such other documents reasonably requested by Lender to
perfect Lender's security interests hereunder. Borrower authorizes Lender to
file financing statements signed only by Lender (where such authorization is
permitted by law) at all places where Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs and
expenses including reasonable attorney's fees, litigation expenses and the fees
of collection agencies, incurred by Lender (a) in enforcing any of the terms,
conditions or provisions hereof and related to the exercise of its remedies
("Remedy Expenses"), and (b) in connection with any bankruptcy or post-judgment
proceeding, whether or not suit is filed and, in each and every action, suit or
proceeding, including any and all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral that would materially impair the value or function
thereof without Lender's prior written consent, which shall not be given for
changes that will adversely affect the reliability and utility of the Collateral
or which cannot be removed without damage to the Collateral, or which in any way
decrease the value of the Collateral for purposes of resale or lease. All
attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lender.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any, applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
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SECTION 25. COMMITMENT FEE. Borrower has paid to Lender a commitment fee ("Fee")
of $15,000. The Fee shall be applied by Lender first to reimburse Lender for all
out-of-pocket UCC and other search costs, inspections and labeling costs and
appraisal fees, if any, incurred by Lender, and then proportionally to the first
monthly payment for each Note hereunder in the proportion that the Collateral
value for such Note bears to Lender's entire commitment. However, the portion of
the Fee which is not applied to such monthly payments shall be non-refundable
except if Lender defaults in its obligation to fund Loans pursuant to Section 3.
SECTION 26. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at 0000 Xxxxxx Xxxxxxxxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000, Attention: Asset Management and to Borrower at 000
Xxxxxxx Xxxxx, Xxxxxxxx, XX 00000, Attention: Xxxxxxxx X. Xxxxx, or at such
other address as the parties may notify one another of in writing from time to
time.
SECTION 27. MISCELLANEOUS. (a) Borrower -shall provide Lender with such
corporate resolutions, financial statements and other documents as Lender shall
reasonably request from time to time. (b) Borrower represents that the
Collateral hereunder is used solely for business purposes. (c) Time is of the
essence with respect to this Security Agreement. (d) Borrower acknowledges that
Borrower has read this Security Agreement and the Notes, understands them and
agrees to be bound by their terms and further agrees that this Security
Agreement and the Notes constitute the entire agreement between Lender and
Borrower with respect to the subject matter hereof and supersede all previous
agreements, promises, or representations. (e) This Security Agreement and the
Notes may not be changed, altered or modified except by an instrument signed by
an officer or authorized representative of Lender and Borrower. (f) Any failure
of Lender to require strict performance by Borrower or any waiver by Lender of
any provision herein or in a Note shall not be construed as a consent or waiver
of any other breach of the same or any other provision. (g) If any provision of
this Security Agreement or any Note is held invalid, such invalidity shall not
affect any other provisions hereof or thereof. (h) The obligations of Borrower
to pay the Indebtedness and perform the Obligations shall survive the expiration
or earlier termination of this Security Agreement and each Note until all
Obligations of Borrower to Lender have been met and all liabilities of Borrower
to Lender and any assignee have been paid in full. (i) Borrower will notify
Lender at least 30 days before changing its name, principal place of business or
chief executive office. (j) Borrower will, at its expense, promptly execute and
deliver to Lender such documents and assurances (including financing statements)
and take such further action as Lender may reasonably request in order to carry
out the intent of this Security Agreement and Lender's rights and remedies.
SECTION 28. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
each Note shall be deemed to have been made under and shall be governed by the
laws of the State of California in all respects, including matters of
construction, validity and performance. At Lender's sole discretion, option and
election, jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement or any Note shall be in
the Superior Court of Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California
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located in San Francisco, California. BORROWER, TO THE EXTENT IT MAY LAWFULLY DO
SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY SECURITY DOCUMENTS, OR ANY
OTHER AGREEMENTS EXECUTED 1N CONNECTION HEREWITH.
SECTION 29. END OF LOAN POSITION. (a) General, Borrower shall be required to
choose a final payment or Note extension election ("End of Loan Position") at
the expiration of each Note's term. Borrower shall provide written notice of its
election to Lender at least 90 days prior to the end of the term of such Note.
That choice shall be an election of Borrower's End of Loan Position election for
all, but not less than all, of the Collateral under such Note under the
Security, Agreement.
In the event Borrower does not provide 90 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 1.
(b) End of Loan Position Elections. As its End of Loan Position, Borrower shall
be required to;
Election No. 1: Make a final payment equal to 15% of the Note's original
principal amount.
Election No. 2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly rate of 1,65% of the Note's original principal amount,
(c) Release. Upon payment of all amounts due under either Election I or 2,
Lender shall, upon request by Borrower, promptly release all liens and security
interests it has in the applicable Collateral.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED ACCELERATED NETWORKS, INC.
By: /s/ Xxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxxx
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Name: Xxx Xxxxxx Name: Xxxxxxxx X. Xxxxx
-------------------------------- --------------------------------
Title: AVP Title: Chief Financial Officer
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HEADQUARTERS LOCATION:
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
County of Ventura
EXHIBITS AND SCHEDULES:
Exhibit A -- Closing Memorandum
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