[LOGO OMITTED] COMERICA
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
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OBLIGOR # NOTE # AGREEMENT DATE
8718029017 January 29, 2007
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CREDIT LIMIT INTEREST RATE OFFICER NO./INITIALS
$2,000,000.00 Base Rate Plus 0.500%% 48828, Xxxx Xxxxxxxxxx
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THIS AGREEMENT is entered into on January 29, 2007, between Comerica
("Bank") as secured party, whose Western Divison headquarters office is 000 Xxxx
Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, XX and the undersigned ("Borrower"), whose sole
place of business (if it has only one), chief executive office (If it has more
than one place of business) or residence (if an individual) is located at the
address set forth below its name on the signature page to this Agreement. The
parties agree as follows:
1. DEFINITIONS.
1.1 "Accounts" shall mean and includes all presently existing and
hereafter arising accounts, including without limitation all accounts
receivable, contract rights and other forms of right to payment for
monetary obligations or receivables for property sold or to be sold,
leased, licensed, assigned or otherwise disposed of, or for services
rendered or to be rendered (including without limitation all
health-care-insurance receivables) owing to Borrower, and any supporting
obligations, credit insurance, guaranties or security therefor,
irrespective of whether earned by performance.
1.2 "Agreement" shall mean and includes this Loan and Security
Agreement (Accounts and Inventory), any concurrent or subsequent rider to
this Loan and Security Agreement (Accounts and Inventory) and any
extensions, supplements, amendments or modifications to this Loan and
Security Agreement (Accounts and Inventory) and/or to any such rider.
1.3 "Bank Expenses" shall mean and includes: all costs or expenses
required to be paid by Borrower under this Agreement which are paid or
advanced by Bank; taxes and insurance premiums of every nature and kind of
Borrower paid by Bank; filing, recording, publication and search fees,
appraiser fees, auditor fees and costs, and title insurance premiums paid
or incurred by Bank in connection with Bank's transactions with Borrower;
costs and expenses incurred by Bank in collecting the Accounts (with or
without suit) to correct any default or enforce any provision of this
Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, disposing of, preparing for sale and/or
advertising to sell the Collateral, whether or not a sale is consummated;
costs and expenses of suit incurred by Bank in enforcing or defending this
Agreement or any portion hereof, including, but not limited to, expenses
incurred by Bank in attempting to obtain relief from any stay, restraining
order, injunction or similar process which prohibits Bank from exercising
any of its rights or remedies; and reasonable attorneys' fees and expenses
incurred by Bank in advising, structuring, drafting, reviewing, amending,
terminating, enforcing, defending or concerning this Agreement, or any
portion hereof or any agreement related hereto, whether or not suit is
brought. Bank Expenses shall include Bank's in-house legal charges at
reasonable rates.
1.4 "Base Rate" shall mean that variable rate of Interest so
announced by Bank at its headquarters office in San Jose, California as
its "Base Rate" from time to time and which serves as the basis upon which
effective rates of Interest are calculated for those loans making
reference thereto.
1.5 "Borrower's Books" shall mean and includes all of Borrower's
books and records including but not limited to minute books; ledgers;
records indicating, summarizing or evidencing Borrower's assets,
(including, without limitation, the Accounts) liabilities, business
operations or financial condition, and all information relating thereto,
computer programs; computer disk or tape files; computer printouts;
computer runs; and other computer prepared information and equipment of
any kind.
1.6 "Borrowing Base" shall mean the sum of: (1) eighty percent
(80%) of the net amount of Eligible Accounts after deducting therefrom all
payments, adjustments and credits applicable thereto; and (2) the amount,
if any, of the advances against Inventory agreed to be made pursuant to
any Inventory Rider, or other rider, amendment or modification to this
Agreement, that may now or hereafter be entered into by Bank and Borrower.
Anything contained in the foregoing to the contrary notwithstanding, Bank
may adjust the Borrowing Base percentage(s) and the definition of Eligible
Accounts and Eligible Inventory, in each case as provided for under
subsection 6.7 hereof.
1.7 "Cash Flow" shall mean, for any applicable period of
determination, the Net Income (after deduction for income taxes and either
taxes of such Person, or its subsidiaries, determined by reference to
income or profits of such Person, or its subsidiaries) for such period,
plus, to the extent deducted in computation of such Net Income, the amount
of depreciation and amortization expense and the increase (or decrease) in
the deferred tax liability during such period, all as determined in
accordance with GAAP.
1.8 "Cash Flow Coverage Ratio" shall mean, as of any applicable
period of determination, the ratio of (a) the sum of (i) Cash Flow plus
(ii) any and all interest paid or payable with respect to Long Term
Indebtedness and Subordinated Debt, determined on the basis of the four
fiscal quarters immediately preceding the date of determination to (b) the
sum of (i) Current Maturities of Long Term Indebtedness plus (ii) any and
all Interest paid or payable with respect to Long Term Indebtedness and
Subordinated Debt determined on the basis of the four fiscal quarters
immediately preceding the date of determination.
1.9 "Collateral" shall mean and includes all personal property of
Borrower, including without limitation each and all of the following: the
Accounts; the Inventory, the General Intangibles; the Negotiable
Collateral; Borrower's Books; all Borrower's deposit accounts; all
Borrower's Investment property (including without limitation securities
and securities entitlements); all goods, instruments, documents, policies
and certificates of insurance, deposits, money or other personal property
of Borrower in which Bank receives a security interest and which now or
later come into the possession, custody or control of Bank; all Borrower's
equipment and fixtures; all additions, accessions, attachments, parts,
replacements, substitutions, renewals, interest, dividends, distributions
or rights of any kind for or with respect to any of the foregoing
(including without limitation any stock splits, stock rights, voting
rights and preferential rights); any supporting obligations for any of the
foregoing; and the products and proceeds of any of the foregoing,
including, but not limited to, proceeds of insurance covering the
Collateral, and any and all Accounts, General Intangibles, Negotiable
Collateral, Inventory, equipment, money, deposit accounts, investment
property, equipment, fixtures or other tangible and intangible property of
Borrower resulting from the sale or other disposition of the Collateral
and the proceeds thereof and any supporting obligations or security
therefor and any right to payment thereunder, and including, without
limitation, cash or other property which were proceeds and are recovered
by a bankruptcy trustee or otherwise as a preferential transfer by
Borrower. Notwithstanding anything to the contrary contained herein,
Collateral shall not include any waste or other materials which have been
or may be designated as toxic or hazardous by Bank.
1.10 "Credit" shall mean all Indebtedness, except that Indebtedness
arising pursuant to any other separate contract, instrument, note or other
separate agreement which, by its terms, provides for a specified interest
rate and term.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.11 "Credit Limit" shall mean Two Million and no/100 Dollars
Dollars ($2,000,000.00).
1.12 "Current Assets" shall mean, in respect of a Person and as of
any applicable date of determination, all current assets of such Person
determined in accordance with GAAP.
1.13 "Current Liabilities" shall mean, in respect of a Person and
as of any applicable date of determination, all liabilities of such Person
that should be classified as current in accordance with GAAP.
1.14 "Current Maturities of Long Term Indebtedness" shall mean, in
respect of a Person and as of any applicable date of determination
thereof, that portion of Long Term Indebtedness that should be classified
as current in accordance with GAAP.
1.15 "Current Ratio" shall mean, in respect of a Person and as of
any applicable date of determination, Current Assets divided by Current
Liabilities.
1.16 "Daily Balance" shall mean the amount determined by taking the
amount of the Credit owed at the beginning of a given day, adding any new
Credit advanced or incurred on such date, and subtracting any payments or
collections which are deemed to be paid and are applied by Bank in
reduction of the Credit on that date under the provisions of this
Agreement.
1.17 "Debt" shall mean, as of any applicable date of determination,
all items of indebtedness, obligation or liability of a Person, whether
matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP. In the case of Borrower, the term
"Debt" shall include, without limitation, the Indebtedness.
1.18 "Eligible Accounts" shall mean and includes those Accounts of
Borrower which are due and payable within thirty (30) days, or less, from
the date of Invoice, have been validly assigned to Bank and strictly
comply with all of Borrower's warranties and representations to Bank; but
Eligible Accounts shall not include the following: (a) Accounts with
respect to which the account debtor is an officer, employee, partner,
joint venturer or agent of Borrower; (b) Accounts with respect to which
goods are placed on consignment, guaranteed sale or other terms by reason
of which the payment by the account debtor may be conditional; (c)
Accounts with respect to which the account debtor is not a resident of the
United States; (d) Accounts with respect to which the account debtor is
the United States or any department, agency or instrumentality of the
United States; (e) Accounts with respect to which the account debtor is
any State of the United States or any city, county, town, municipality or
division thereof; (f) Accounts with respect to which the account debtor is
a subsidiary of, related to, affiliated or has common shareholders,
officers or directors with Borrower; (g) Accounts with respect to which
Borrower is or may become liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower; (h) Accounts not paid
by an account debtor within ninety one (91) days from the date of the
invoice; (I) Accounts with respect to which account debtors dispute
liability or make any claim, or have any defense, crossclaim,
counterclaim, or offset; (j) Accounts with respect to which any Insolvency
Proceeding is filed by or against the account debtor, or if an account
debtor becomes insolvent, fails or goes out of business; (k) Accounts owed
by any single account debtor which exceed twenty percent (20%) of all of
the Eligible Accounts; and (I) Accounts with a particular account debtor
on which over twenty-five percent (25%) of the aggregate amount owing is
greater than ninety (90) days from the data of the invoice.
1.19 "Event of Default" shall mean one or more of those events
described in Section 7 contained herein below.
1.20 "GAAP" shall mean, as of any applicable period, generally
accepted accounting principles in effect during such period.
1.21 "General Intangibles" shall mean and includes all of
Borrower's present and future general intangibles and other personal
property (including without limitation all payment intangibles, electronic
chattel paper, contract rights, rights arising under common law, statutes,
or regulations choses or things in action, goodwill, patents, trade names,
trademarks servicemarks, copyrights, blueprints, drawings, plans,
diagrams, schematics, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment (including
without limitation, rights to payment evidenced by chattel paper,
documents or instruments) and other rights under any royalty or licensing
agreements, infringement claims, software (including without limitation
any computer program that is embedded in goods that consist solely of the
medium in which the program is embedded), information contained on
computer disks or tapes, literature, reports, catalogs, insurance premium
rebates, tax refunds, and tax refund claims), other than goods. Accounts,
Inventory, Negotiable Collateral, and Borrowers Books.
1.22 "Indebtedness" shall mean and includes any and all loans,
advances, Letter of Credit Obligations, overdrafts, debts, liabilities
(including, without limitation, any and all amounts charged to Borrower's
loan account pursuant to any agreement authorizing Bank to charge
Borrower's loan account), obligations, lease payments, guaranties,
covenants and duties owing by Borrower to Bank of any kind and description
whether advanced pursuant to or evidenced by this Agreement; by any note
or other Instrument; or by any other agreement between Bank and Borrower
and whether or not for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due now existing or hereafter
arising, including, without limitation, any interest, fees, expenses,
costs and other amounts owed to Bank that but for the provisions of the
United States Bankruptcy Code would have accrued after the commencement of
any Insolvency Proceeding, and including, without limitation, any debt,
liability, or obligations owing from Borrower to others which Bank may
have obtained by assignment, participation, purchase or otherwise, and
further including, without limitation, all interest not paid when due and
all Bank Expenses which Borrower is required to pay or reimburse by this
Agreement, by law, or otherwise.
1.23 "Insolvency Proceeding" shall mean and includes any proceeding
or case commenced by or against Borrower, or any guarantor of Borrower's
Indebtedness, or any of Borrower's account debtors, under any provisions
of the United States Bankruptcy Code, as amended, or any other bankruptcy
or insolvency law, including, but not limited to assignments for the
benefit of creditors, formal or informal moratoriums, composition or
extensions with some or all creditors, any proceeding seeking a
reorganization, arrangement or any other relief under the United States
Bankruptcy Code, as amended, or any other bankruptcy or insolvency law.
1.24 "Inventory" shall mean and includes all present and future
inventory in which Borrower has any interest, including, but not limited
to, goods held by Borrower for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw
materials, work in process, finished goods (including without limitation
any computer program embedded in any of the foregoing goods and any
supporting information provided in connection therewith that (i) is
associated with the goods in such a manner that the program customarily is
considered part of the goods or that (ii) by becoming the owner of the
goods, a person acquires a right to use the program in connection with the
goods), together with any advertising materials and packing and shipping
materials, wherever located and any documents of title representing any of
the above, and any equipment, fixtures or other property used in the
storing, moving, preserving, identifying, accounting for and shipping or
preparing for the shipping of inventory, and any and all other items
hereafter acquired by Borrower by way of substitution, replacement,
return, repossession or otherwise, and all additions and accessions
thereto, and the resulting product or mass, and any documents of title
respecting any of the above.
2.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
1.25 "Letter of Credit Obligations" shall mean, as of any
applicable date of determination, the sum of the undrawn amount of any
letter(s) of credit issued by Bank upon the application of and/or for the
account of Borrower, plus any unpaid reimbursement obligations owing by
Borrower to Bank in respect of any such letter(s) of credit.
1.26 "Long Term Indebtedness" shall mean, in respect of a Person
and as of any applicable date of determination thereof, all Debt which
should be classified as "funded indebtedness" or "long term indebtedness"
on a balance sheet of such Person as of such date in accordance with GAAP.
1.27 "Net Income" shall mean the net income (or loss) of a person
for any period of determination, determined in accordance with GAAP but
excluding in any event:
a. any gains or losses on the sale or other disposition,
not in the ordinary course of business, of investments or fixed or
capital assets, and any taxes on the excluded gains and any tax
deductions or credits on account on any excluded losses; and
b. in the case of Borrower, net earnings of any Person in
which Borrower has an ownership interest, unless such net earnings
shall have actually been received by Borrower in the form of cash
distributions.
1.28 "Negotiable Collateral" shall mean and include all of
Borrower's present and future letters of credit, advises of credit,
letter-of-credit rights, certificates of deposit, notes, drafts, money,
documents (including without limitation all negotiable documents),
instruments (including without limitation all promissory notes), tangible
chattel paper or any other similar property.
1.29 "Judicial Officer or Assignee" shall mean and includes any
trustee, receiver, controller, custodian, assignee for the benefit of
creditors or any other person or entity having powers or duties like or
similar to the powers and duties of trustee, receiver, controller,
custodian or assignee for the benefit of creditors.
1.30 "Person" or "person" shall mean and includes any individual,
corporation, partnership, Joint venture, firm, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.
1.31 "Quick Assets" shall mean, as of any applicable date of
determination, unrestricted cash, certificates of deposit or marketable
securities and net accounts receivable arising from the sale of goods and
services, and United States government securities and/or claims against
the United States government of Borrower and its subsidiaries.
1.32 "Quick Ratio" shall mean, as of an applicable date of
determination, Quick Assets divided by Current Liabilities, excluding
Subordinated Debt.
1.33 "Subordinated Debt" shall mean indebtedness of the Borrower to
any Person which has been subordinated to the Indebtedness pursuant to a
Subordination Agreement in form and content satisfactory to Bank.
1.34 "Subordination Agreement" shall mean any subordination
agreement, which is in form and substance satisfactory to Bank, and which
makes any or all present and future Indebtedness of Borrower to any Person
subordinate to the Indebtedness.
1.35 "Tangible Effective Net Worth" shall mean, with respect to any
Person and as of any applicable date of determination, Tangible Net Worth
plus Subordinated Debt.
1.36 "Tangible Net Worth" shall mean, with respect to any Person
and as of any applicable date of determination, the excess of:
a. the net book value of all assets of such Person
(excluding affiliate receivables, patents, patent rights,
trademarks, trade names, franchises, copyrights, licenses, goodwill,
and all other intangible assets of such Person) after all
appropriate deductions in accordance with GAAP (including, without
limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization), less
b. all Debt of such Person at such time.
1.37 "Working Capital" shall mean, as of any applicable date of
determination, Current Assets less Current Liabilities.
Any and all terms used in the foregoing definitions and elsewhere in this
Agreement shall be construed and defined in accordance with the meaning and
definition of such terms under and pursuant to the California Uniform Commercial
Code (hereinafter referred to as the "Uniform Commercial Code") as amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the Uniform
Commercial Code have, at all times, the broadest and most inclusive meanings
possible. Accordingly, if the Uniform Commercial Code shall in the future be
amended or held by a court to define any term used herein more broadly or
inclusively than the Uniform Commercial Code in effect on the date of this
Agreement, then such term, as used herein, shall be given such broadened
meaning. If the Uniform Commercial Code shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the Uniform Commercial Code in effect on the date of this Agreement, such
amendment or holding shall be disregarded in defining terms used in this
Agreement.
2. LOAN AND TERMS OF PAYMENT.
For value received, Borrower promises to pay to the order of Bank such
amount, as provided for below, together with interest, as provided for
below.
2.1 Upon the request of Borrower, made at any time and from time
to time during the term hereof, and so long as no Event of Default has
occurred, Bank shall lend to Borrower an amount equal to the Borrowing
Base; provided, however, that the Daily Balance shall not exceed the
lesser of either the Credit Limit or the Borrowing Base, minus all Letter
of Credit Obligations. If at any time for any reason, the amount of
Indebtedness owed by Borrower to Bank pursuant to this Section 2.1 and
Section 2.3 of this Agreement is greater than the aggregate amount
available to be drawn under this Section 2.1, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.
2.2 Except as hereinbelow provided, the Credit shall bear
interest, on the Daily Balance owing, at a fluctuating rate of interest
equal to the Base Rate plus one half percent (0.500%) percentage points
per annum.
All Interest chargeable under this Agreement that is based upon a per
annum calculation shall be computed on the basis of a three hundred sixty
(360) day year for actual days elapsed. The Base Rate as of the date of
this Agreement is eight and one quarter percent (8.250%) per annum. In the
event that the Base Rate announced is, from time to time hereafter,
changed, adjustment in the Base Rate shall be made and based on the Base
Rate in effect on the date of such change. The Base Rate, as adjusted,
shall apply to the Credit until the Bass Rate is adjusted again.
3.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
All interest payable by Borrower under the Credit shall be due and payable
on the first day of each calendar month during the term of this Agreement.
A late payment charge equal to five percent (5%) of each late payment may
be charged on any payment not received by Bank within ten (10) calendar
days after the payment due date, but acceptance of payment of this charge
shall not waive any Event of Default under this Agreement. Upon the
occurrence of an Event of Default hereunder, and without constituting a
waiver of any such Event of Default, then during the continuation thereof,
at Bank's option, the Credit shall bear interest, on the Daily Balance
owing, at a rate equal to three percent (3%) per year in excess of the
rate applicable immediately prior to the occurrence of the Event of
Default, and such rate of interest shall fluctuate thereafter from time to
time at the same time and in the same amount as any fluctuation in the
date of interest applicable immediately prior to any such occurrence.
2.3 Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued letters of credit for the account of
Borrower during the term of this Agreement in the aggregate outstanding
face amount not to exceed (i) the lesser of the Credit Limit or the
Borrowing Base, minus (ii) the then outstanding Daily Balance, provided
that the Letter of Credit Obligations shall not in any case exceed Two
Hundred Fifty Thousand and no/100 Dollars $250,000.00). All letters of
credit shall be, in form and substance, acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank's form
of standard Letter of Credit Application and Agreement.
The obligation of Borrower to immediately reimburse Bank for drawings made
under letters of credit shall be absolute, unconditional and irrevocable
in accordance with the terms of this Agreement and the Letter of Credit
Application and Agreement with respect to each such letter of credit.
Borrower shall indemnify, defend, protect and hold Bank harmless from any
loss, cost, expense, or liability, including, without limitation,
reasonable attorney's fees incurred by Bank, whether in-house or outside
counsel is used, arising out of or in connection with any letters of
credit.
3. TERM.
3.1 This Agreement shall remain in full force and effect until:
[ ] Terminated by notice, by either party. Notice of such termination
shall be effectuated by mailing of a registered or certified letter not
less than thirty (30) days prior to the effective date of such
termination, addressed to the other party at the address set forth herein
and the termination shall be effective as of the date so fixed in such
notice.
[x] January 1, 2008. unless earlier terminated by notice by Borrower.
Notice of such termination by Borrower shall be effectuated by mailing of
a registered or certified letter not less than thirty (30) days prior to
the effective date of such termination, addressed to Bank at the address
set forth herein and the termination shall be effective as of the date so
fixed in such notice.
Notwithstanding the foregoing, should Borrower be in default of one or
more of the provisions of this Agreement, Bank may terminate this
Agreement at any time without notice. Notwithstanding the foregoing,
should either Bank or Borrower become insolvent or unable to meet its
debts as they mature, or fail, suspend, or go out of business, the other
party shall have the right to terminate this Agreement at any time without
notice. On the date of termination all Indebtedness shall become
immediately due and payable without notice or demand; no notice of
termination by Borrower shall be effective until Borrower shall have paid
all Indebtedness to Bank in full. Notwithstanding termination, until all
Indebtedness has been fully satisfied, Bank shall retain its security
interest in all existing Collateral and Collateral arising thereafter, and
Borrower shall continue to perform all of its obligations.
3.2 After termination and when Bank has received payment in full
of Borrower's Indebtedness to Bank, Bank shall reassign to Borrower all
Collateral held by Bank, and shall execute a termination of all security
agreements and security interests given by Borrower to Bank.
4. CREATION OF SECURITY INTEREST.
4.1 Borrower hereby grants to Bank a continuing security Interest
in all presently existing and hereafter arising Collateral in order to
secure prompt repayment of any and all Indebtedness owed by Borrower to
Bank and in order to secure prompt performance by Borrower of each and all
of its covenants and obligations under this Agreement and otherwise
created. Bank's security interest in the Collateral shall attach to all
Collateral without further act on the part of Bank or Borrower. In the
event that any Collateral, including proceeds, is evidenced by or consists
of Negotiable Collateral, Borrower, immediately upon the request of Bank,
shall (a) endorse or assign such Negotiable Collateral to Bank, (b)
deliver actual physical possession of such Negotiable Collateral to Bank,
and (c) xxxx conspicuously all of its records pertaining to such
Negotiable Collateral with a legend, in form and substance satisfactory to
Bank (and in the case of Negotiable Collateral consisting of tangible
chattel paper, immediately xxxx all such tangible chattel paper with a
conspicuous legend in form and substance satisfactory to Bank), indicating
that the Negotiable Collateral is subject to the security interest granted
to Bank hereunder.
4.2 Bank's security Interest in the Accounts shall attach to all
Accounts without further act on the part of Bank or Borrower. Upon request
from Bank, Borrower shall provide Bank with schedules describing all
Accounts created or acquired by Borrower (including without limitation
agings listing the names and addresses of, and amounts owing by date by
account debtors), and shall execute and deliver written assignments of all
Accounts to Bank all in a form acceptable to Bank; provided, however.
Borrower's failure to execute and deliver such schedules and/or
assignments shall not affect or limit Bank's security interest and other
rights in and to the Accounts. Together with each schedule, Borrower shall
furnish Bank with copies of Borrower's customers' invoices or the
equivalent, and original shipping or delivery receipts for all merchandise
sold, and Borrower warrants the genuineness thereof. Upon the occurrence
of an Event of Default, Bank or Bank's designee may notify customers or
account debtors of Bank's security interest in the Collateral and direct
such customers or account debtors to make payments directly to Bank, but
unless and until Bank does so or gives Borrower other written
instructions, Borrower shall collect all Accounts for Bank, receive in
trust all payments thereon as Bank's trustee, and, if so requested to do
so from Bank, Borrower shall immediately deliver said payments to Bank in
their original form as received from the account debtor and all letters of
credit, advices of credit, instruments, documents, chattel paper or any
similar property evidencing or constituting Collateral. Notwithstanding
anything to the contrary contained herein, if sales of inventory are made
for cash, Borrower shall immediately deliver to Bank, in identical form,
all such cash, checks, or other forms of payment which Borrower receives.
The receipt of any check or other item of payment by Bank shall not be
considered a payment on account until such check or other item of payment
is honored when presented for payment, in which event, said check or other
item of payment shall be deemed to have been paid to Bank two (2) calendar
days after the date Bank actually receives such check or other item of
payment.
4.3 Bank's security interest in Inventor/ shall attach to all
Inventory without further act on the part of Bank or Borrower. Borrower
will at Borrower's expense pledge, assemble and deliver such inventory to
Bank or to a third party as Bank's bailee; or hold the same in trust for
Bank's account or store the same in a warehouse in Bank's name: or deliver
to Bank documents of title representing said Inventory; or evidence of
Bank's security interest in some other manner acceptable to Bank. Until a
default by Borrower under this Agreement or any other Agreement between
Borrower and Bank, Borrower may, subject to the provisions hereof and
consistent herewith, sell the Inventory, but only in the ordinary course
of Borrower's business. A sale of Inventory in Borrower's ordinary course
of business does not include an exchange or a transfer in partial or total
satisfaction of a debt owing by Borrower.
4.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
4.4 Concurrently with Borrower's execution of this Agreement, and
at any time or times hereafter at the request of Bank, Borrower shall (a)
execute and deliver to Bank security agreements, mortgages, assignments,
certificates of title, affidavits, reports, notices, schedules of
accounts, letters of authority and all other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and maintain
perfected Bank's security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under this Agreement, (b)
cooperate with Bank in obtaining a control agreement in form and substance
satisfactory to Bank with respect to all deposit accounts, electronic
chattel paper, investment property, and letter-of-credit rights, and (c)
in the event that any Collateral is in the possession of a third party,
Borrower shall join with Bank in notifying such third party of Bank's
security interest and obtaining an acknowledgment from such third party
that it is holding such Collateral for the benefit of Bank. By
authenticating or becoming bound by this Agreement, Borrower authorizes
the filing of initial financing statement(s), and any amendment(s)
covering the Collateral to perfect and maintain perfected Bank's security
interest in the Collateral. Upon the occurrence of an Event of Default,
Borrower hereby irrevocably makes, constitutes and appoints Bank (and any
of Bank's officers, employees or agents designated by Bank) as Borrower's
true and lawful attorney-in-fact with power to sign the name of Borrower
on any security agreement, mortgage, assignment, certificate of title,
affidavit, letter of authority, notice of other similar documents which
must be executed and/or filed in order to perfect or continue perfected
Bank's security interest in the Collateral, and to take such actions in
its own name or in Borrower's name as Bank, in its sole discretion, deems
necessary or appropriate to establish exclusive possession or control (as
defined in the Uniform Commercial Code) over any Collateral of such nature
that perfection of Bank's security Interest may be accomplished by
possession or control.
4.5 Borrower shall make appropriate entries in Borrower's Books
disclosing Bank's security interest in the Accounts. Bank (through any of
its officers, employees or agents) shall have the right at any time or
times hereafter, provided that reasonable notice is provided, during
Borrower's usual business hours, or during the usual business hours of any
third party having control over the records of Borrower, to inspect and
verify Borrower's Books in order to verify the amount or condition of, or
any other matter, relating to, said Collateral and Borrower's financial
condition.
4.6 Effective only upon the occurrence of an Event of Default,
Borrower appoints Bank or any other person whom Bank may designate as
Borrower's attorney-in-fact, with power: to endorse Borrower's name on any
checks, notes, acceptances, money order, drafts or other forms of payment
or security that may come into Bank's possession; to sign Borrower's name
on any invoice or xxxx of lading relating to any Accounts, on drafts
against account debtors, on schedules and assignments of Accounts, on
verifications of Accounts and on notices to account debtors; to establish
a lock box arrangement and/or to notify the post office authorities to
change the address for delivery of Borrower's mail addressed to Borrower
to an address designated by Bank, to receive and open all mail addressed
to Borrower and to retain all mail relating to the Collateral and forward
all other mail to Borrower; to send, whether in writing or by telephone,
requests for verification of Accounts; and to do all things necessary to
carry out this Agreement. Borrower ratifies and approves all acts of the
attorney-in-fact. Neither Bank nor its attorney-in-fact will be liable for
any acts or omissions or for any error of judgement or mistake of fact or
law. This power being coupled with an interest, is irrevocable so long as
any Accounts in which Bank has a security interest remain unpaid and until
the Indebtedness has been fully satisfied.
4.7 In order to protect or perfect any security interest which
Bank is granted hereunder. Bank may, in its sole discretion, discharge any
lien or encumbrance or bond the same, pay any insurance, maintain guards,
warehousemen, or any personnel to protect the Collateral, pay any service
bureau, or, obtain any records, and all costs for the same shall be added
to the Indebtedness and shall be payable on demand.
4.8 Borrower agrees that Bank may provide information relating to
this Agreement or relating to Borrower to Bank's parent, affiliates,
subsidiaries and service providers.
5. CONDITIONS PRECEDENT.
5.1 As conditions precedent to the making of the loans and the
extension of the financial accommodations hereunder, Borrower shall
execute, or cause to be executed, and deliver to Bank, in form and
substance satisfactory to Bank and its counsel, the following:
a. This Agreement and other documents, instruments and
agreements required by Bank;
b. If Borrower is a corporation, limited liability company,
limited partnership or other such entity, certified copies of all
actions taken by Borrower, any grantor of a security Interest to
Bank to secure the Indebtedness, and any guarantor of the
Indebtedness, authorizing the execution, delivery and performance of
this Agreement and any other documents, instruments or agreements
entered into in connection herewith, and authorizing specific
officers to execute and deliver any such documents, instruments and
agreements;
c. If Borrower is a corporation, limited liability company,
limited partnership or other such entity, then a certificate of good
standing showing that Borrower is in good standing under the laws of
the state of its Incorporation or formation and certificates
indicating that Borrower is qualified to transact business and is in
good standing in any other state in which it conducts business;
d. If Borrower is a partnership, then a copy of Borrower's
partnership agreement certified by each general partner of Borrower;
e. UCC searches and financing statements, tax lien and
litigation searches, fictitious business statement filings,
insurance certificates, notices or other similar documents which
Bank may require and in such form as Bank may require, in order to
reflect, perfect or protect Bank's first priority security interest
in the Collateral and in order to fully consummate all of the
transactions contemplated under this Agreement;
f. Evidence that Borrower has obtained Insurance and
acceptable endorsements;
g. Such control agreements from each Person as Bank may
require;
h. Duly executed certificates of title with respect to that
portion of the Collateral that is subject to certificates of title;
i. Such collateral access agreements from each lessor,
warehouseman, bailee, and other Person as Bank may require, duly
executed by each such Person; and
j. Warranties and representations of officers.
6. WARRANTIES. REPRESENTATIONS AND COVENANTS.
5.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
6.1 If so requested by Bank, Borrower shall, at such intervals
designated by Bank, during the term hereof execute and deliver a Report of
Accounts Receivable or similar report, in form customarily used by Bank.
The aggregate amount of the Borrowing Base at all times during the
effectiveness of this Agreement shall not be less than the advances made
hereunder. Bank shall have the right to recompute the Borrowing Base in
conformity with this Agreement.
6.2 If any warranty is breached as to any Account, or any Account
is not paid in full by an account debtor within ninety (90) days from the
date of invoice, or an account debtor disputes liability or makes any
claim with respect thereto, or a petition in bankruptcy or other
application for relief under the Bankruptcy Code or any other insolvency
law is filed by or against an account debtor, or an account debtor makes
an assignment for the benefit of creditors, becomes insolvent, fails or
goes out of business, then Bank may deem ineligible any and all Accounts
owing by that account debtor, and reduce the Borrowing Base by the amount
thereof. Bank shall retain its security interest in all Accounts, whether
eligible or ineligible, until all Indebtedness has been fully paid and
satisfied. Returns and allowances, if any, as between Borrower and its
customers, will be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at this time. Any
merchandise which is returned by an account debtor or otherwise recovered
shall be set aside, marked with Bank's name, and Bank shall retain a
security interest therein. Borrower shall promptly notify Bank of all
disputes and claims and settle or adjust them on terms approved by Bank.
After default by Borrower hereunder, no discount, credit or allowance
shall be granted to any account debtor by Borrower and no return of
merchandise shall be accepted by Borrower without Bank's consent. Bank
may, after default by Borrower, settle or adjust disputes and claims
directly with account debtors for amounts and upon terms which Bank
considers advisable, and in such cases Bank will credit Borrower's loan
account with only the net amounts received by Bank in payment of the
Accounts, after deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
a. Borrower has good and marketable title to the
Collateral. Bank has and shall continue to have a first priority
perfected security interest in and to the Collateral. The Collateral
shall at all times remain free and clear of all liens, encumbrances
and security interests (except those in favor of Bank);
b. All Accounts are and will, at all times pertinent
hereto, be bona fide existing obligations created by the sale and
delivery of merchandise or the rendition of services to account
debtors in the ordinary course of business, free of liens, claims,
encumbrances and security interests (except as held by Bank and
except as may be consented to, in writing, by Bank) and are
unconditionally owed to Borrower without defenses, disputes, offsets
counterclaims, rights of return or cancellation, and Borrower shall
have received no notice of actual or imminent bankruptcy or
insolvency of any account debtor at the time an Account due from
such account debtor is assigned to Bank; and
c. At the time each Account is assigned to Bank, all
property giving rise to such Account shall have been delivered to
the account debtor or to the agent for the account debtor for
immediate shipment to, and unconditional acceptance by, the account
debtor. Borrower shall deliver to Bank, as Bank may from time to
time require, delivery receipts, customer's purchase orders,
shipping instructions, bills of lading and any other evidence of
shipping arrangements. Absent such a request by Bank, copies of all
such documentation shall be held by Borrower as custodian for Bank.
6.4 At the time each eligible Account is assigned to Bank, all
such Eligible Accounts will be due and payable on terms set forth in
Section 1.18, or on such other terms approved in writing by Bank in
advance of the creation of such Accounts and which are expressly set forth
on the face of all invoices, copies of which shall be held by Borrower as
custodian for Bank, and no such Eligible Account will then be past due.
6.5 Borrower shall keep the Inventory only at the following
locations: n/a and the owner or mortgagees of the respective locations
are: n/a.
a. Borrower, immediately upon demand by Bank therefor,
shall now and from time to time hereafter, at such intervals as are
reasonably requested by Bank, deliver to Bank, designations of
Inventory specifying Borrower's cost of Inventory, the wholesale
market value thereof and such other matters and information relating
to the Inventory as Bank may request;
b. Borrower's Inventory, valued at the lower of Borrower's
cost or the wholesale market value thereof, at all times pertinent
hereto shall not be less than n/a Dollars ($ n/a ) of which no less
than n/a Dollars ($ n/a ) shall be in raw materials and finished
goods;
c. All of the Inventory is and shall remain free from all
purchase money or other security interests, liens or encumbrances,
except as held by Bank;
d. Borrower does now keep and hereafter at all times shall
keep correct and accurate records itemizing and describing the kind,
type, quality and quantity of the Inventory, its cost therefor and
selling price thereof, and the daily withdrawals therefrom and
additions thereto, all of which records shall be available upon
demand to any of Bank's officers, agents and employees for
inspection and copying;
e. All Inventory, now and hereafter at all times, shall be
new Inventory of good and merchantable quality free from material
defects;
f. Inventory is not now and shall not at any time or times
hereafter be located or stored with a bailee, warehouseman or other
third party without Bank's prior written consent, and, in such
event, Borrower will concurrently therewith cause any such bailee,
warehouseman or other third party to issue and deliver to Bank,
warehouse receipts in Bank's name evidencing the storage of
Inventory and/or an acknowledgment by such bailee of Bank's prior
rights in the Inventory, in each case in form and substance
acceptable to Bank. In any event, Borrower shall instruct any third
party to hold all such Inventory for Bank's account subject to
Bank's security interests and its instructions; and
g. Bank shall have the right upon demand now and/or at all
times hereafter, during Borrower's usual business hours, after
reasonable notice, to inspect and examine the Inventory and to check
and test the same as to quality, quantity, value and condition and
Borrower agrees to reimburse Bank for Bank's reasonable costs and
expenses in so doing.
6.6 Borrower represents, warrants and covenants with Bank that
Borrower will not, without Bank's prior written consent:
x. Xxxxx a security interest in or permit a lien, claim or
encumbrance upon any of the Collateral to any person, association,
firm, corporation, entity or governmental agency or instrumentality;
b. Permit any levy, attachment or restraint to be made
affecting any of Borrower's assets;
c. Permit any Judicial Officer or Assignee to be appointed
or to take possession of any or all of Borrower's assets;
6.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
d. Sell, lease, or otherwise dispose of, move, or transfer,
whether by sale or otherwise, any of Borrower's properties or
assets, other than sales of Inventory in the ordinary course of
Borrower's business;
e. Change its name, the location of its sole place of
business, chief executive office or residence, business structure,
corporate identity or structure, form of organization or the state
in which it has been formed or organized; add any new fictitious
names, dissolve, liquidate, merge or consolidate with or into any
other corporation, entity, or other business organization, or permit
another corporation, entity or other business organization to merge
into it;
f. Move or relocate any Collateral;
g. Acquire any other business organization;
h. Enter into any transaction not in the usual course of
Borrower's business;
i. Make any change in Borrower's financial structure or in
any of its business objectives, purposes or operations which would
materially adversely affect the ability of Borrower to repay
Borrower's Indebtedness;
j. Incur any debts outside the ordinary course of
Borrower's business except renewals or extensions of existing debts
and interest thereon;
k. Make loans, advances or extensions of credit to any
Person, except in the ordinary course of business;
l. Guarantee or otherwise, directly or indirectly, in any
way be or become responsible for obligations of any other Person,
whether by agreement to purchase the indebtedness of any other
Person, agreement for the furnishing of funds to any other Person
through the furnishing of goods, supplies or services, by way of
stock purchase, capital contribution, advance or loan, for the
purpose of paying or discharging (or causing the payment or
discharge of) the indebtedness of any other Person, or otherwise,
except for the endorsement of negotiable instruments by Borrower in
the ordinary course of business for deposit or collection;
m. Make any payment on account of any Subordinated Debt
except for regularly scheduled payments of interest and principal in
accordance with the provisions of any Subordination Agreement
executed by Bank and the subordinated debt holder, or amend any
provision contained in any documentation relating to any such
Subordinated Debt without Bank's prior written consent;
n. (i) Acquire all or substantially all the properties or
assets of any other Person, enter into any reorganization or
recapitalization or reclassify its capital stock, or (ii) enter into
any sale-leaseback transaction;
o. Purchase or hold beneficially any stock or other
securities of, or make any investment or acquire any securities or
other interest whatsoever in, any other Person, except for the
common stock of the Subsidiaries owned by Borrower on the date of
this Agreement and except for certificates of deposit with
maturities of one year or less of United States commercial banks
with capital, surplus and undivided profits in excess of One Hundred
Million Dollars ($100,000,000.00) and the securities or other direct
obligations of the United States Government maturing within one year
from the date of acquisition thereof;
p. Allow any fact, condition or event to occur or exist
with respect to any employee pension or profit sharing plans
established or maintained by it which might constitute grounds for
termination of any such plan or for the court appointment of a
trustee to administer any such plan; and
q. Borrower shall not, without Bank's prior written
consent, acquire or expend for, or commit itself to acquire or
expend for, fixed assets by lease, purchase or otherwise, except in
the ordinary course of Borrower's business.
6.7 Borrower shall permit representatives of Bank to conduct
audits of Borrower's Books relating to the Accounts and other Collateral
and make extracts therefrom, with results satisfactory to Bank, provided
that Bank shall use its best efforts to not interfere with the conduct of
Borrower's business, and to the extent possible to arrange for
verification of the Accounts directly with the account debtors obligated
thereon or otherwise, all under reasonable procedures acceptable to Bank
and at Borrower's sole expense; provided, however, that, prior to an Event
of Default, Borrower shall not be responsible for more than one (1) such
audit in each calendar year. Notwithstanding any of the provisions
contained in Section 2.1 of this Agreement or otherwise, Borrower hereby
acknowledges and agrees that upon completion of any such audit Bank shall
have the right to adjust the Borrowing Base percentage or the definition
of Eligible Accounts and Eligible Inventory, in its sole and reasonable
discretion, based on its review of the results of such audit.
6.8 Borrower represents, warrants, covenants and agrees that:
a. Borrower's true and correct legal name is that set forth
on the signature page to this Agreement Except as disclosed in
writing to Bank on or before the date of this Agreement, Borrower
has not done business under any name other than that set forth on
the signature page to this Agreement;
b. If Borrower is an individual, the location (as
determined pursuant to the Uniform Commercial Code) of Borrower's
principal residence is that set forth following Borrower's name on
the signature page to this Agreement;
c. If Borrower is a registered organization that is
organized under the laws of any one of the states comprising the
United States (e.g. corporation, limited partnership, registered
limited liability partnership or limited liability company), and is
located (as determined pursuant to the Uniform Commercial Code) in
the state under the laws of which it was organized, Borrower's form
of organization and the state in which It has been organized are
those set forth immediately following Borrower's name on the
signature page to this Agreement;
d. If Borrower is a registered organization organized under
the laws of the United States, and Borrower is located in the state
that United States law designates as its location or, if United
States law authorizes Borrower to designate the state for its
location, the state designated by Borrower, or if neither of the
foregoing are applicable, at the District of Columbia (in each case
as determined in accordance with the Uniform Commercial Code),
Borrower's form of organization and the state or district in which
it is located are those set forth immediately following Borrower's
name on the signature page to this Agreement;
e. If Borrower is a domestic organization that is not a
registered organization under the laws of the United States or any
state thereof (e.g. general partnership, joint venture, trust,
estate or association), and Borrower is located (as determined
pursuant to the Uniform Commercial Code) at its sole place of
business or, if it has more than one place of
7.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
business, at its chief executive office, Borrower's form of
organization and the address of that location are those set forth on
the signature page to this Agreement; and
f. If Borrower is a foreign individual or foreign
organization or a branch or agency of a bank that is not organized
under the laws of the United States or a state thereof, Borrower is
located (as determined pursuant to the Uniform Commercial Code) at
the address set forth following Borrower's name on the signature
page to this Agreement.
6.9 If Borrower is a corporation, Borrower represents, warrants
and covenants as follows:
a. Borrower will not make any distribution or declare or
pay any dividend (in stock or in cash) to any shareholder or on any
of its capital stock, of any class, whether now or hereafter
outstanding, or purchase, acquire, repurchase, or redeem or retire
any such capital stock; provided, however, so long as no Event of
Default has or is continuing hereunder, to the extent that and so
long as Borrower is an entity that is not directly subject to
Federal income taxation and with respect to which any earnings are
attributable ratably to each Person with an ownership Interest in
Borrower, Borrower may make distributions to each such Person in an
amount necessary to pay each such Person's income tax resulting from
such ownership Interest in Borrower, provided, further, that,
promptly upon request of Bank, Borrower shall cause each such Person
to provide Bank with copies of its tax return to substantiate any
such distribution;
b. Borrower is and shall at all times hereafter be a
corporation duly organized and existing in good standing under the
laws of the state of its incorporation and qualified and licensed to
do business in California or any other state in which it conducts
its business;
c. Borrower has the right and power and is duly authorized
to enter into this Agreement; and
d. The execution by Borrower of this Agreement shall not
constitute a breach of any provision contained in Borrower's
articles of incorporation or by-laws.
6.10 The execution of and performance by Borrower of all of the
terms and provisions contained in this Agreement shall not result in a
breach of or constitute an event of default under any agreement to which
Borrower is now or hereafter becomes a party.
6.11 Borrower shall promptly notify Bank in writing of its
acquisition by purchase, lease or otherwise of any after acquired property
of the type included in the Collateral, with the exception of purchases of
Inventory in the ordinary course of business.
6.12 All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against,
Borrower or any of its property have been paid, and shall hereafter be
paid in full, before delinquency. Borrower shall make due and timely
payment or deposit of all federal, state and local taxes, assessments or
contributions required of it by law, and will execute and deliver to Bank,
on demand, appropriate certificates attesting to the payment or deposit
thereof. Borrower will make timely payment or deposit of all F.I.C.A.
payments and withholding taxes required of it by applicable laws, and will
upon request furnish Bank with proof satisfactory to it that Borrower has
made such payments or deposit. If Borrower fails to pay any such
assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in its sole and absolute discretion and without
notice to Borrower, (i) make payment of the same or any part thereof, or
(ii) set up such reserves in Borrower's loan account as Bank deems
necessary to satisfy the liability therefor, or both. Bank may
conclusively rely on the usual statements of the amount owing or other
official statements issued by the appropriate governmental agency. Each
amount so paid or deposited by Bank shall constitute a Bank Expanse and an
additional advance to Borrower.
6.13 There are no actions or proceedings pending by or against
Borrower or any guarantor of Borrower before any court or administrative
agency and Borrower has no knowledge of any pending, threatened or
imminent litigation, governmental investigations or claims, complaints,
actions or prosecutions involving Borrower or any guarantor of Borrower,
except as heretofore specifically disclosed in writing to Bank. If any of
the foregoing arise during the term of the Agreement, Borrower shall
immediately notify Bank in writing.
6.14 Insurance.
a. Borrower, at its expense, shall keep and maintain its
assets insured against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks ordinarily insured
against by other owners who use such properties in similar
businesses for the full insurable value thereof. Borrower shall also
keep and maintain business interruption insurance and public
liability and property damage insurance relating to Borrower's
ownership and use of the Collateral and its other assets. All such
policies of insurance shall be in such form, with such companies,
and in such amounts as may be satisfactory to Bank. Borrower shall
deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All such policies
of insurance (except those of public liability and property damage)
shall contain an endorsement in a form satisfactory to Bank showing
Bank as a loss payee thereof, with a waiver of warranties
satisfactory to BANK, and all proceeds payable thereunder shall be
payable to Bank and, upon receipt by Bank, shall be applied on
account of the Indebtedness owing to Bank. To secure the payment of
the Indebtedness, Borrower grants Bank a security interest in and to
all such policies of insurance (except those of public liability and
property damage) and the proceeds thereof, and Borrower shall direct
all Insurers under such policies of insurance to pay all proceeds
thereof directly to Bank.
b. Borrower hereby Irrevocably appoints Bank (and any of
Bank's officers, employees or agents designated by Bank) as
Borrower's attorney for the purpose of making, selling and adjusting
claims under such policies of insurance, endorsing the name of
Borrower on any check, draft, instrument or other item of payment
for the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of
insurance. Borrower will not cancel any of such policies without
Bank's prior written consent, Each such insurer shall agree by
endorsement upon the policy or policies of insurance issued by it to
Borrower as required above, or by independent instruments furnished
to Bank, that it will give Bank at least ten (10) days written
notice before any such policy or policies of insurance shall be
altered or canceled, and that no act or default of Borrower, or any
other person, shall affect the right of Bank to recover under such
policy or policies of Insurance required above or to pay any premium
in whole or in part relating thereto. Bank, without waiving or
releasing any Indebtedness or any Event of Default, may, but shall
have no obligation to do so, obtain and maintain such policies of
insurance and pay such premiums and take any other action with
respect to such policies which Bank deems advisable. All sums so
disbursed by Bank, as well as reasonable attorneys' fees incurred by
Bank, whether in- house or outside counsel is used, court costs,
expenses and other charges relating thereto, shall constitute Bank
Expenses and are payable on demand.
6.15 All financial statements and information relating to Borrower
which have been or may hereafter be delivered by Borrower to Bank are true
and correct and have been prepared in accordance with GAAP consistently
applied and there has been no material adverse change in the financial
condition of Borrower since the submission of such financial information
to Bank.
6.16 Financial Reporting.
8.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
a. Borrower at all times hereafter shall maintain a
standard and modern system of accounting in accordance with GAAP
consistently applied with ledger and account cards and/or computer
tapes and computer disks, computer printouts and computer records
pertaining to the Collateral which contain Information as may from
time to time be requested by Bank, not modify or change its method
of accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any
third party accounting firm and/or service bureau for the
preparation and/or storage of Borrower's accounting records without
the written consent of Bank first obtained and without said
accounting firm and/or service bureau agreeing to provide
information regarding the Accounts and Inventory and Borrower's
financial condition to Bank; permit Bank and any of its employees,
officers or agents, upon demand, during Borrower's usual business
hours, or the usual business hours of third persons having control
thereof, to have access to and examine all of Borrower's Books
relating to the Collateral, Borrower's Indebtedness to Bank,
Borrower's financial condition and the results of Borrower's
operations and in connection therewith, permit Bank or any of its
agents, employees or officers to copy and make extracts therefrom.
b. Borrower shall deliver to Bank within forty five (45)
days after the end of each quarter, a company prepared balance sheet
and profit and loss statement covering Borrower's operations and
deliver to Bank within one hundred twenty (120) days after the end
of each of Borrower's fiscal years a(n) CPA audited statement of the
financial condition of Borrower for each such fiscal year, including
but not limited to, a balance sheet and profit and loss statement
and any other report requested by Bank relating to the Collateral
and the financial condition of Borrower, and a certificate signed by
an authorized employee of Borrower to the effect that all reports,
statements, computer disk or tape files, computer printouts,
computer runs, or other computer prepared information of any kind or
nature relating to the foregoing or documents delivered or caused to
be delivered to Bank under this subparagraph are complete, correct
and thoroughly present the financial condition of Borrower and that
there exists on the date of delivery to Bank no condition or event
which constitutes a breach or Event of Default under this Agreement.
c. In addition to the financial statements requested above,
within fifteen (15) days of the end of each month set forth in this
clause (c) (other than with respect to those items which provide
that they are due on a daily basis, which such items shall be due on
a daily basis), Borrower agrees to provide Bank with the following
schedules:
[GRAPHIC OMITTED]
x Accounts Receivable Agings on a monthly basis;
x Accounts Payable Agings on a monthly basis;
n/a Job Progress Reports on a n/a basis;
x Borrowing Base Certificate on a monthly basis;
n/a Compliance Certification on a n/a basis; and
_______________________________________ on a _________________ basis.
6.17 Borrower shall maintain the following financial ratios and
covenants on a consolidated and non-consolidated basis, which shall be
monitored on a quarterly basis, except as noted below:
a. Working Capital in an amount not less than n/a
____________________________________________________________________
b. Tangible Effective Net Worth in an amount not less than
n/a
____________________________________________________________________
c. a Current Ratio of not less than n/a
____________________________________________________________________
d. a Quick Ratio of not less than n/a
____________________________________________________________________
e. a Debt-to-Tangible Effective Net Worth of not more than
4.00:1.00
____________________________________________________________________
f. Cash Flow Coverage Ratio of not less than n/a
____________________________________________________________________
g. Minimum Net Income of at least n/a
____________________________________________________________________
h. Maximum loss Quarter 1, 2007 of ($250,000)
Maximum loss Quarter 2, 2007 of ($250,000)
Minimum profit Quarter 3, 2007 of $250,000
Minimum profit Quarter 4, 2007 of $250,000.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors
and shareholders) shall be excluded from Borrower's assets for all
purposes hereunder.
6.18 Borrower shall promptly supply Bank (and cause any guarantor
to supply Bank) with such other information (lncluding tax returns)
concerning its financial affairs (or that of any guarantor) as Bank may
request from time to time hereafter, and shall promptly notify Bank of any
material adverse change in Borrower's financial condition and of any
condition or event which constitutes a breach of or an event which
constitutes an Event of Default under this Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent
and able to pay its debts (including trade debts) as they mature.
6.20 Borrower shall immediately and without demand reimburse Bank
for all sums expended by Bank in connection with any action brought by
Bank to correct any default or enforce any provision of this Agreement,
including all Bank Expenses; Borrower authorizes and approves all advances
and payments by Bank for items described in this Agreement as Bank
Expenses.
9.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
6.21 Each warranty, representation and agreement contained in this
Agreement shall automatically be deemed repeated with each advance and
shall conclusively be presumed to have been relied on by Bank regardless
of any investigation made or information possessed by Bank. The
warranties, representations and agreements set forth herein shall be
cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall give, or cause to be
given, to Bank, either now or hereafter.
6.22 Borrower shall keep all of its principal bank accounts with
Bank and shall notify Bank immediately in writing of the existence of any
other bank account, deposit account, or any other account into which money
can be deposited.
6.23 Borrower shall furnish to Bank: (a) as soon as possible, but
in no event later than thirty (30) days after Borrower knows or has reason
to know that any reportable event with respect to any deferred
compensation plan has occurred, a statement of the chief financial officer
of Borrower setting forth the details concerning such reportable event and
the action which Borrower proposes to take with respect thereto, together
with a copy of the notice of such reportable event given to the Pension
Benefit Guaranty Corporation, if a copy of such notice is available to
Borrower; (b) promptly after the filing thereof with the United States
Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of
each annual report with respect to each deferred compensation plan; (c)
promptly after receipt thereof, a copy of any notice Borrower may receive
from the Pension Benefit Guaranty Corporation or the Internal Revenue
Service with respect to any deferred compensation plan; provided, however,
this subparagraph shall not apply to notice of general application issued
by the Pension Benefit Guaranty Corporation or the Internal Revenue
Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information
from time to time disseminated to the participants by the administrator of
the deferred compensation plan.
6.24 Borrower is now and shall at all times hereafter remain in
compliance with all federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic
substances, wastes and hazardous material and shall maintain all necessary
authorizations and permits.
6.25 Borrower shall maintain insurance on the life of n/a in an
amount not to be less than n/a Dollars ($____) under one or more policies
issued by insurance companies satisfactory to Bank, which policies shall
be assigned to Bank as security for the Indebtedness and on which Bank
shall be named as sole beneficiary.
6.26 Borrower shall limit direct and Indirect compensation paid to
the following employees: n/a, _____________, _____________ to an aggregate
of n/a Dollars ($ n/a ) per n/a.
7. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
a. If Borrower fails or neglects to perform, keep or
observe any term, provision, condition, covenant, agreement,
warranty or representation contained in this Agreement, or any other
presentor future document, instrument or agreement between Borrower
and Bank:
b. If any representation, statement, report or certificate
made or delivered by Borrower, or any of its officers, employees or
agents to Bank is not true and correct;
c. If Borrower fails to pay when due and payable or
declared due and payable, all or any portion of Borrower's
Indebtedness (whether of principal, interest, taxes, reimbursement
of Bank Expenses, or otherwise);
d. If there is a material impairment of the prospect of
repayment of all or any portion of Borrower's Indebtedness or a
material impairment of the value or priority of Bank's security
interest in the Collateral;
e. If all or any of Borrower's assets are attached, seized,
subject to a writ or distress warrant, or are levied upon, or come
into the possession of any Judicial Officer or Assignee and the same
are not released, discharged or bonded against within ten (10) days
thereafter;
f. If any Insolvency Proceeding is filed or commenced by or
against Borrower, without being dismissed within ten (10) days
thereafter;
g. If any proceeding is filed or commenced by or against
Borrower for its dissolution or liquidation;
h. If Borrower is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any
material part of its business affairs;
i. If a notice of lien, levy or assessment is filed of
record with respect to any or all of Borrower's assets by the United
States Government, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other government
agency, or if any taxes or debts owing at any time hereafter to any
one or more of such entities becomes a lien, whether inchoate or
otherwise, upon any or all of Borrower's assets and the same is not
paid on the payment date thereof;
j. If a judgment or other claim becomes a lien or
encumbrance upon any or all of Borrower's assets and the same is not
satisfied, dismissed or bonded against within ten (10) days
thereafter;
k. If Borrower's records are prepared and kept by an
outside computer service bureau at the time this Agreement is
entered into or during the term of this Agreement such an agreement
with an outside service bureau is entered into, and at any time
thereafter, without first obtaining the written consent of Bank,
Borrower terminates, modifies, amends or changes its contractual
relationship with said computer service bureau or said computer
service bureau fails to provide Bank with any requested information
or financial data pertaining to Bank's Collateral, Borrower's
financial condition or the results of Borrower's operations;
l. If Borrower permits a default in any material agreement
to which Borrower is a party with third parties so as to result in
an acceleration of the maturity of Borrower's indebtedness to
others, whether under any indenture, agreement or otherwise;
m. If Borrower makes any payment on account of indebtedness
which has been subordinated to Borrower's Indebtedness to Bank
except as otherwise permitted under the terms of this Agreement;
n. If any misrepresentation exists now or thereafter in any
warranty or representation made to Bank by any officer or director
of Borrower, or if any such warranty or representation is withdrawn
by any officer or director;
10.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
o. If any party subordinating its claims to that of Bank's
or any guarantor of Borrower's Indebtedness dies, terminates its
subordination or guaranty, violates the terms of the subordination
or guaranty, becomes insolvent, or an Insolvency Proceeding is
commenced by or against any such subordinating party or guarantor;
p. If Borrower is an individual and Borrower dies;
q. If Borrower is a corporation, trust, limited or general
partnership or joint venture, or limited liability company, should
there occur (i) a sale, conveyance, transfer, disposition or
encumbrance, either voluntary or involuntary, or should an agreement
be entered into to accomplish any thereof, with respect to (A) more
than ten percent (10%) of the issued and outstanding capital stock
of Borrower if a corporation or (B) the beneficial interest of
Borrower if a trust or (C) any general partnership or joint venture
interest if Borrower is a limited or general partnership or a joint
venture or (D) any membership interest if Borrower is a limited
liability company, or (ii) a change in any general partner or Joint
venturer if Borrower is a limited or general partnership or a joint
venture; or
r. If any reportable event, which Bank determines
constitutes grounds for the termination of any deferred compensation
plan by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a
trustee to administer any such plan, shall have occurred and be
continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Bank, or any such
Plan shall be terminated within the meaning of Title IV of the
Employment Retirement Income Security Act ("ERISA"), or a trustee
shall be appointed by the appropriate United States District Court
to administer any such plan, or the Pension Benefit Guaranty
Corporation shall Institute proceedings to terminate any plan and in
case of any event described in this Section 7, the aggregate amount
of Borrower's liability to the Pension Benefit Guaranty Corporation
under Sections 4062, 4063 or 4064 of ERISA shall exceed five percent
(5%) of Borrower's Tangible Effective Net Worth.
Notwithstanding anything contained in Section 7 to the contrary,
Bank shall refrain from exercising its rights and remedies and Event
of Default shall thereafter not be deemed to have occurred by reason
of the occurrence of any of the events set forth in Sections 7.e,
7.f or 7.j of this Agreement if, within ten (10) days from the date
thereof, the same is released, discharged, dismissed, bonded against
or satisfied; provided, however, if the event is the institution of
Insolvency Proceedings against Borrower, Bank shall not be obligated
to make advances to Borrower during such cure period.
8. BANK'S RIGHTS AND REMEDIES.
8.1 Upon the occurrence of an Event of Default by Borrower under
this Agreement, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
a. Declare Borrower's Indebtedness, whether evidenced by
this Agreement, installment notes, demand notes or otherwise,
immediately due and payable to Bank;
b. Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, or any other agreement
between Borrower and Bank;
c. Terminate this Agreement as to any future liability or
obligation of Bank, but without affecting Bank's rights and security
interests in the Collateral, and the Indebtedness of Borrower to
Bank;
d. Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Bank considers
necessary or reasonable to protect Its security interest in the
Collateral. Borrower agrees to assemble the Collateral if Bank so
requires and to make the Collateral available to Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, take and maintain possession of the
Collateral and the premises (at no charge to Bank), or any part
thereof, and to pay, purchase, contest or compromise any
encumbrance, charge or lien which in the opinion of Bank appears to
be prior or superior to its security interest and to pay all
expenses incurred in connection therewith;
e. Without limiting Bank's rights under any security
Interest, Bank is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks and
advertising matter, or any property or a similar nature as it
pertains to the Collateral, in completing production of, advertising
for sale and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall Inure to Bank's benefit
and Bank shall have the right and power to enter into sublicense
agreements with respect to all such rights with third parties on
terms acceptable to Bank;
f. Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sales and sell (in the manner
provided for herein) the inventory;
g. Sell or dispose the Collateral at either a public or
private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as is commercially reasonable
in the opinion of Bank. It is not necessary that the Collateral be
present at any such sale. At any sale or other disposition of the
Collateral pursuant to this Section, Bank disclaims all warranties
which would otherwise be given under the Uniform Commercial Code,
including without limitation a disclaimer of any warranty relating
to title, possession, quiet enjoyment or the like, and Bank may
communicate these disclaimers to a purchaser at such disposition.
This disclaimer of warranties will not render the sale commercially
unreasonable:
h. Bank shall give notice of the disposition of the
Collateral as follows:
(1) Bank shall give Borrower and each holder of
a security interest in the Collateral who has filed with
Bank a written request for notice, a notice in writing
of the time and place of public sale, or, If the sale is
a private sale or some disposition other than a public
sale is to be made of the Collateral, the time on or
after which the private sale or other disposition is to
be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower's address appearing
in this Agreement, at least ten (10) calendar days
before the date fixed for the sale, or at least ten (10)
calendar days before the date on or after which the
private sale or other disposition is to be made, unless
the Collateral is perishable or threatens to decline
speedily in value. Notice to persons other than Borrower
claiming an interest in the Collateral shall be sent to
such addresses as have been furnished to Bank or as
otherwise determined in accordance with Section 9611 of
the Uniform Commercial Code; and
(3) If the sale is to be a public sale, Bank
shall also give notice of the time and place by
publishing a notice one time at least ten (10) calendar
days before the date of the sale in a newspaper of
general circulation in the county in which the sale is
to be held; and
11.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
(4) Bank may credit bid and purchase at any
public sale.
i. Borrower shall pay all Bank Expenses incurred in
connection with Bank's enforcement and exercise of any of its rights
and remedies as herein provided, whether or not suit is commenced by
Bank;
j. Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
Any excess will be returned, without interest and subject to the
rights of third parties, to Borrower by Bank, or, in Bank's
discretion, to any party who Bank believes, in good faith, is
entitled to the excess;
k. Without constituting a retention of Collateral in
satisfaction of an obligation within the meaning of 9620 of the
Uniform Commercial Code or an action under California Code of Civil
Procedure 726, apply any and all amounts maintained by Borrower as
deposit accounts (as that term is defined under 9102 of the Uniform
Commercial Code) or other accounts that Borrower maintains with Bank
against the Indebtedness;
l. The proceeds of any sale or other disposition of
Collateral authorized by this Agreement shall be applied by Bank
first upon all expenses authorized by the Uniform Commercial Code
and all reasonable attorney fees and legal expenses incurred by
Bank, whether in-house or outside counsel is used, the balance of
the proceeds of the sale or other disposition shall be applied in
the payment of the Indebtedness, first to interest, then to
principal, then to remaining Indebtedness and the surplus, if any,
shall be paid over to Borrower or to such other person(s) as may be
entitled to it under applicable law. Borrower shall remain liable
for any deficiency, which it shall pay to Bank immediately upon
demand. Borrower agrees that Bank shall be under no obligation to
accept any noncash proceeds in connection with any sale or
disposition of Collateral unless failure to do so would be
commercially unreasonable. If Bank agrees in its sole discretion to
accept noncash proceeds (unless the failure to do so would be
commercially unreasonable), Bank may ascribe any commercially
reasonable value to such proceeds. Without limiting the foregoing,
Bank may apply any discount factor in, determining the present
value of proceeds to be received in the future or may elect to apply
proceeds to be received in the future only as and when such proceeds
are actually received in cash by Bank; and
m. The following shall be the basis for any finder of
fact's determination of the value of any Collateral which is the
subject matter of a disposition giving rise to a calculation of any
surplus or deficiency under Section 9615(f) of the Uniform
Commercial Code: (i) The Collateral which is the subject matter of
the disposition shall be valued in an "as is" condition as of the
date of the disposition, without any assumption or expectation that
such Collateral will be repaired or improved in any manner; (ii) the
valuation shall be based upon an assumption that the transferee of
such Collateral desires a resale of the Collateral for cash promptly
(but no later than 30 days) following the disposition; (iii) all
reasonable closing costs customarily borne by the seller in
commercial sales transactions relating to property similar to such
Collateral shall be deducted including, without limitation,
brokerage commissions, tax prorations, attorney's fees, whether
in-house or outside counsel is used, and marketing costs; (iv) the
value of the Collateral which is the subject matter of the
disposition shall be further discounted to account for any estimated
holding costs associated with maintaining such Collateral pending
sale (to the extent not accounted for in (iii) above), and other
maintenance, operational and ownership expenses; and (v) any expert
opinion testimony given or considered in connection with a
determination of the value of such Collateral must be given by
persons having at least 5 years experience in appraising property
similar to the Collateral and who have conducted and prepared a
complete written appraisal of such Collateral taking into
consideration the factors set forth above. The "value" of any such
Collateral shall be a factor in determining the amount of proceeds
which would have been realized in a disposition to a transferee
other than a secured party, a person related to a secured party or a
secondary obligor under Section 9615(f) of the Uniform Commercial
Code.
8.2 In addition to any and all other rights and remedies available
to Bank under or pursuant to this Agreement or any other documents,
Instrument or agreement contemplated hereby, Borrower acknowledges and
agrees that (i) at any time following the occurrence and during the
continuance of any Event of Default, and/or (ii) termination of Bank's
commitment or obligation to make loans or advances or otherwise extent
credit to or in favor of Borrower hereunder, in the event that and to the
extent that there are any Letter of Credit Obligations outstanding at such
time, upon demand of Bank, Borrower shall deliver to Bank, or cause to be
delivered to Bank, cash collateral in an amount not less than such Letter
of Credit Obligations, which cash collateral shall be held and retained by
Bank as cash collateral for the repayment of such Letter of Credit
Obligations, together with any and all other Indebtedness of Borrower to
Bank remaining unpaid, and Borrower pledges to Bank and grants to Bank a
continuing first priority security interest in such cash collateral so
delivered to Bank. Alternatively, Borrower shall cause to be delivered to
Bank an irrevocable standby letter of credit issued in favor of Bank by a
bank acceptable to Bank, in its sole discretion, in an amount not less
than such Letter of Credit Obligations, and upon terms acceptable to Bank,
in its sole discretion.
8.3 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and
remedies not inconsistent herewith as provided by law or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and
no waiver by Bank of any default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election or
acquiescence by Bank.
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY. If Borrower fails to pay
promptly when due to another person or entity, monies which Borrower is required
to pay by reason of any provision in this Agreement, Bank may, but need not, pay
the same and charge Borrower's loan account therefor, and Borrower shall
promptly reimburse Bank. All such sums shall become additional Indebtedness
owing to Bank, shall bear interest at the rate hereinabove provided, and shall
be secured by all Collateral. Any payments made by Bank shall not constitute (i)
an agreement by it to make similar payments in the future, or (ii) a waiver by
Bank of any default under this Agreement. Bank need not inquire as to, or
contest the validity of, any such expense, tax, security interest, encumbrance
or lien and the receipt of the usual official notice of the payment thereof
shall be conclusive evidence that the same was validly due and owing. Such
payments shall constitute Bank Expenses and additional advances to Borrower.
10. WAIVERS.
10.1 Borrower agrees that checks and other instruments received by
Bank in payment or on account of Borrower's Indebtedness constitute only
conditional payment until such items are actually paid to Bank and
Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Indebtedness and Borrower agrees that Bank shall have the
continuing exclusive right to apply and reapply such payments in any
manner as Bank may deem advisable, notwithstanding any entry by Bank upon
its books.
10.2 Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement extension
or renewal of any or all commercial paper, accounts, documents,
instruments, chattel paper, and guarantees at any time held by Bank on
which Borrower may in any way be liable.
10.3 Bank shall not in any way or manner be liable or responsible
for (a) the safekeeping of the Inventory; (b) any xxxx or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act
12.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
or default of any carrier, warehouseman, ballee, forwarding agency or
other person whomsoever. All risk of loss, damage or destruction of
Inventory shall be borne by Borrower.
10.4 Borrower waives the right and the right to assert a
confidential relationship, if any, it may have with any accountant,
accounting firm and/or service bureau or consultant in connection with any
information requested by Bank pursuant to or in accordance with this
Agreement, and agrees that a Bank may contact directly any such
accountants, accounting firm and/or service bureau or consultant in order
to obtain such Information.
10.5 Co-Borrowers. Each Borrower agrees as follows:
a. Each Borrower agrees that it is jointly and severally,
directly, and primarily liable to Bank for payment in full of the
Indebtedness and that such liability is independent of the duties,
obligations and liabilities of the other Borrower. The Agreement and
each other document, instrument and agreement entered into by any
one or more of the Borrowers in connection therewith (collectively,
hereinafter, the "Loan Documents") are a primary and original
obligation of each Borrower, are not the creation of a surety
relationship, and are an absolute, unconditional, and continuing
promise of payment and performance which shall remain in full force
and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with
respect to the Loan Documents. Each Borrower acknowledges that the
obligations of such Borrower undertaken herein might be construed to
consist, at least in part, of the guaranty of obligations of persons
or entities other than such Borrower (Including any other Borrower
party hereto) and, in full recognition of that fact, each Borrower
consents and agrees that Bank may, at any time and from time to
time, without notice or demand, whether before or after any actual
or purported termination, repudiation, or revocation of the
Agreement and the other Loan Documents by any one or more Borrowers,
and without affecting the enforceability or continuing effectiveness
hereof as to each Borrower: (a) supplement, restate, modify, amend,
increase, decrease, extend, renew, accelerate, or otherwise change
the time for payment or the terms of the Indebtedness or any part
thereof, including any increase or decrease of the rate(s) of
interest thereon; (b) supplement, restate, modify, amend, increase,
decrease or waive, or enter into or give any agreement, approval, or
consent with respect to, the Indebtedness or any part thereof, or
any of the Loan Documents or any additional security or guaranties,
or any condition, covenant, default, remedy, right, representation
or term thereof or thereunder; (c) accept new or additional
instruments, documents or agreements in exchange for or relative to
any of the Loan Documents or the Indebtedness or any part thereof;
(d) accept partial payments on the Indebtedness; (e) receive and
hold additional security or guaranties for the Indebtedness or any
part thereof; (f) release, reconvey, terminate, waive, abandon, fail
to perfect, subordinate, exchange, substitute, transfer, or enforce
any security or guaranties, and apply any security and direct the
order or manner of sale thereof as Bank in its sole and absolute
discretion may determine; (g) release any Person from any personal
liability with respect to the Indebtedness or any part thereof; (h)
settle, release on terms satisfactory to Bank or by operation of
applicable laws, or otherwise liquidate or enforce any Indebtedness
and any security therefor or guaranty thereof in any manner, consent
to the transfer of any security and bid and purchase at any sale; or
(i) consent to the merger, change, or any other restructuring or
termination of the corporate or partnership existence of any
Borrower or any other Person, and correspondingly restructure the
Indebtedness, and any such merger, change, restructuring, or
termination shall not affect the liability of any Borrower or the
continuing effectiveness hereof, or the enforceability hereof with
respect to all or any part of the Indebtedness.
b. Upon the occurrence and during the continuance of any Event of
Default, Bank may enforce the Agreement and the other Loan Documents
independently as to each Borrower and Independently of any other
remedy or security Bank at any time may have or hold in connection
with the indebtedness, and it shall not be necessary for Bank to
marshal assets in favor of any Borrower or any other Person or to
proceed upon or against or exhaust any security or remedy before
proceeding to enforce the Agreement and the other Loan Documents.
Each Borrower expressly waives any right to require Bank to marshal
assets in favor of any Borrower or any other Person or to proceed
against any other Borrower or any Collateral provided by any Person,
and agrees that Bank may proceed against Borrowers or any Collateral
in such order as it shall determine in its sole and absolute
discretion.
c. Bank may file a separate action or actions against any
Borrower, whether action is brought or prosecuted with respect to
any security or against any other person, or whether any other
person is joined in any such action or actions. Each Borrower agrees
that Bank and any Borrower and any affiliate of any Borrower may
deal with each other in connection with the Indebtedness or
otherwise, or alter any contracts or agreements now or hereafter
existing between any of them, in any manner whatsoever, all without
in any way altering or affecting the continuing efficacy of the
Agreement or the other Loan Documents.
d. Bank's rights under the Loan Documents shall be reinstated and
revived, and the enforceability of the Agreement and the other Loan
Documents shall continue, with respect to any amount at any time
paid on account of the Indebtedness which thereafter shall be
required to be restored or returned by Bank, all as though such
amount had not been paid. The rights of Bank created or granted
herein and the enforceability of the Agreement and the other Loan
Documents at all times shall remain effective to cover the full
amount of all the Indebtedness even though the Indebtedness,
including any part thereof or any other security or guaranty
therefor, may be or hereafter may become invalid or otherwise
unenforceable as against any Borrower and whether or not any other
Borrower shall have any personal liability with respect thereto.
e. To the maximum extent permitted by applicable law and to the
extent that a Borrower is deemed a guarantor, each Borrower
expressly waives any and all defenses now or hereafter arising or
asserted by reason of (a) any disability or other defense of any
other Borrower with respect to the Indebtedness, (b) the
unenforceability or invalidity of any security or guaranty for the
Indebtedness or lack of perfection or continuing perfection or
failure of priority of any security for the Indebtedness, (c) the
cessation for any cause whatsoever of the liability of any other
Borrower (other than by reason of the full payment and performance
of all Indebtedness), (d) any failure of the Bank to marshal assets
in favor of Bank or any Borrower or any other person, (e) any
failure of Bank to give notice of sale or other disposition of
collateral to any Borrower or any other Person or any defect in any
notice that may be given in connection with any sale or disposition
of collateral, (f) any failure of Bank to comply with applicable law
in connection with the sale or other disposition of any collateral
or other security for any Obligation, Including any failure of Bank
to conduct a commercially reasonable sale or other disposition of
any collateral or other security for any Obligation, (g) any act or
omission of Bank or others that directly or indirectly results in or
aids the discharge or release of any Borrower or the Indebtedness or
any security or guaranty therefor by operation of law or otherwise,
(h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal
obligation, (i) any failure of Bank to file or enforce a claim in
any bankruptcy or other proceeding with respect to any Person, (j)
the election by Bank of the application or non-application of
Section 1111 (b)(2) of the United States Bankruptcy Code, (k) any
extension of credit or the grant of any lien under Xxxxxxx 000 xx
xxx Xxxxxx Xxxxxx Bankruptcy Code, (1) any use of cash collateral
under Section 383 of the United States Bankruptcy Code, (m) any
agreement or stipulation with respect to the provision of adequate
protection in any bankruptcy proceeding of any Person, (n) the
avoidance of any lien in favor of Bank for any reason, or (o) any
action taken by Bank that is authorized by the Agreement or any
other provision of any Loan Document Until such time as all of the
Indebtedness have been fully, finally, and indefeasibly paid in full
in cash: (i) each Borrower hereby waives and postpones any right of
subrogation it has or may have as against any other Borrower respect
to the Indebtedness; and (ii) in addition, each Borrower also hereby
waives and
13.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
postpones any right to proceed or to seek recourse against or with
respect to any property or asset of any other Borrower. Each
Borrower expressly waives all setoffs and counterclaims and all
presentments, demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices
of dishonor and all other notices or demands of any kind or nature
whatsoever with respect to the Indebtedness, and all notices of
acceptance of the Agreement or the other Loan Documents or of the
existence, creation or incurring of new or additional Indebtedness.
f. In the event that all or any part of the Indebtedness at any
time are secured by any one or more deeds of trust or mortgages or
other instruments creating or granting liens on any interests in
real property, each Borrower authorizes Bank, upon the occurrence of
and during the continuance of any Event of Default, at its sole
option, without notice or demand and without affecting the
obligations of any Borrower, the enforceability of the Agreement and
the other Loan Documents, or the validity or enforceability of any
liens of Bank, to foreclose any or all of such deeds of trust or
mortgages or other instruments by judicial or nonjudicial sale.
g. Without limiting the generality of any other waiver or other
provision set forth in this Agreement, each Borrower waives all
rights and defenses that such Borrower may have because the
Indebtedness is secured by real property. This means, among other
things:
(1) Bank may collect from any Borrower without first
foreclosing on any real or personal property pledged as
Collateral by any other Borrower to secure the Indebtedness.
(2) If Bank forecloses on any real property pledged as
Collateral by any Borrower:
(a) the amount of the debt may be reduced only by the
price for which that Collateral is sold at the
foreclosure sale, even if the collateral is worth more
than the sale price.
(b) Bank may collect from any Borrower even if Bank,
by foreclosing on the real property pledged as
Collateral, has destroyed any right that Borrower may
have to collect from any other Borrower.
This is an unconditional and irrevocable waiver of any rights
and defenses each Borrower may have because the Indebtedness
is secured by Real Property. These rights and defenses
include, but are not limited to, any rights or defenses based
upon Section 580a, 580b, 580d, or 726 of the California Code
of Civil Procedure.
h. To the fullest extent permitted by applicable law, to the
extent that a Borrower is deemed a guarantor, each Borrower
expressly waives any defenses to the enforcement of the Agreement
and the other Loan Documents or any rights of Bank created or
granted hereby or to the recovery by Bank against any Borrower or
any other Person liable therefor of any deficiency after a judicial
or nonjudicial foreclosure or sale, even though such a foreclosure
or sale may impair the subrogation rights of Borrowers and may
preclude Borrowers from obtaining reimbursement or contribution from
other Borrowers. To the fullest extent permitted by applicable law,
each Borrower expressly waives any suretyship defenses or benefits
that it otherwise might or would have under applicable law. WITHOUT
LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET
FORTH IN THIS AGREEMENT, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS AND DEFENSES ARISING
OUT OF AN ELECTION OF REMEDIES BY BANK, EVEN THOUGH THAT ELECTION OF
REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR THE INDEBTEDNESS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE OTHER BORROWERS BY
OPERATION OF LAW, INCLUDING BUT NOT LIMITED TO SECTION 580d OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE.
10.6 THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER
CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT,
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR
THE INDEBTEDNESS.
10.7 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails
to pursue or enforce any term, such waiver, delay or failure to pursue or
enforce shall only be effective with respect to that single act and shall
not be construed to affect any subsequent transactions or Bank's right to
later pursue such rights and remedies.
11. ONE CONTINUING LOAN TRANSACTION. All loans and advances heretofore, now or
at any time or times hereafter made by Bank to Borrower under this Agreement or
any other agreement between Bank and Borrower, shall constitute one loan secured
by Bank's security interests in the Collateral and by all other security
interests, liens, encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Bank.
Notwithstanding the above, (I) to the extent that any portion of the
Indebtedness is a consumer loan, that portion shall not be secured by any deed
of trust or mortgage on or other security interest in Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if Borrower
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure the loan
and any other Indebtedness of Borrower (or any of them), unless expressly
provided to the contrary in another place.
12. NOTICES. Unless otherwise provided in this Agreement, all notices or
demands by either party on the other relating to this Agreement shall be in
writing and sent by regular United States mail, postage prepaid, properly
addressed to Borrower or to Bank at the addresses stated in this Agreement, or
to such other addresses as Borrower or Bank may from time to time specify to the
other in writing. Requests for information made to Borrower by Bank from time to
time hereunder may be made orally or in writing, at Bank's discretion.
13. AUTHORIZATION TO DISBURSE. Bank is hereby authorized to make loans and
advances hereunder upon telephonic or other instructions received from anyone
purporting to be an officer, employee, or representative of Borrower, or at the
discretion of Bank if said loans and advances are necessary to meet any
Indebtedness of Borrower to Bank. Bank shall have no duty to make inquiry or
verify the authority of any such party, and Borrower shall hold Bank harmless
from any damage, claims or liability by reason of Bank's honor of, or failure to
honor, any such instructions.
14. PAYMENTS. Borrower hereby authorizes Bank to deduct the full amount of any
interest, fees, costs, or Bank Expenses due under this Agreement and not paid or
collected when due in accordance with the terms and conditions hereof from any
account maintained by Borrower with Bank. Should there be insufficient funds in
any such account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower; provided, however,
that Bank shall not be obligated to advance funds to cover any such payment.
14.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
15. DESTRUCTION OF BORROWER'S DOCUMENTS. Any documents, schedules, invoices or
other papers delivered to Bank, may be destroyed or otherwise disposed of by
Bank six (6) months after they are delivered to or received by Bank, unless
Borrower requests, in writing, the return of the said documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.
16. CHOICE OF LAW. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined according to the laws of the
State of California. The parties agree that all actions or proceedings arising
in connection with this Agreement shall be tried and litigated only in the state
and federal courts in California.
17. GENERAL PROVISIONS.
17.1 This Agreement shall be binding and deemed effective when
executed by Borrower and accepted and executed by Bank at its headquarters
office.
17.2 This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided,
however, that Borrower may not assign this Agreement or any rights
hereunder without Bank's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Bank
shall release Borrower or any guarantor from their obligations to Bank.
Bank may assign this Agreement and its rights and duties hereunder. Bank
reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in Bank's rights and
benefits hereunder. In connection therewith, Bank may disclose all
documents and information which Bank now or hereafter may have relating to
Borrower or Borrower's business.
17.3 Paragraph headings and paragraph numbers have been set forth
herein for convenience only; unless the contrary is compelled by the
context, everything contained in each paragraph applies equally to this
entire Agreement. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting.
The words "hereof", "herein", "hereby", "hereunder", and similar terms in
this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement.
17.4 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Bank or Borrower, whether under any
rule of construction or otherwise; on the contrary, this Agreement has
been reviewed by all parties and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
17.5 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
17.6 This Agreement cannot be changed or terminated orally. This
Agreement contains the entire agreement of the parties hereto and
supersedes all prior agreements, understandings, representations,
warranties and negotiations, if any, related to the subject matter hereof,
and none of the parties shall be bound by anything not expressed in
writing.
17.7 The parties intend and agree that their respective rights,
duties, powers, liabilities, obligations and discretions shall be
performed, carried out, discharged and exercised reasonably and in good
faith.
17.8 In addition, if this Agreement is secured by a deed of trust
or mortgage covering real property, then the trustor or mortgagor shall
not mortgage or pledge the mortgaged premises as security for any other
indebtedness or obligations. This Agreement, together with all other
indebtedness secured by said deed of trust or mortgage, shall become due
and payable immediately, without notice, at the option of Bank, (a) if
said trustor or mortgagor shall mortgage or pledge the mortgaged premises
for any other indebtedness or obligations or shall convey, assign or
transfer the mortgaged premises by deed, installment sale contract or
other instrument; (b) if the title to the mortgaged premises shall become
vested in any other person or party in any manner whatsoever, or (c) if
there is any disposition (through one or more transactions) of legal or
beneficial title to a controlling interest of said trustor or mortgagor.
17.9 Each undersigned Borrower hereby agrees that it is jointly and
severally, directly, and primarily liable to Bank for payment and
performance in full of all duties, obligations and liabilities under this
Agreement and each other document, instrument and agreement entered into
by Borrower with or in favor of Bank in connection herewith, and that such
liability is independent of the duties, obligations and liabilities of any
other Borrower or any other guarantor of the Indebtedness, as applicable.
Each reference herein to Borrower shall mean each and every Borrower party
hereto, individually and collectively, jointly and severally.
15.
LOAN AND SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security
Agreement (Accounts and Inventory) to be executed as of the date first
hereinabove written.
BORROWER: Akeena Solar, Inc.
a Delaware Corporation
---------------------------
Accepted and effective as of January 29, 2007 By: /s/ Xxxxx "Lad" Xxxxxxx
-------------------- --------------------------
At Bank's Western Division Headquarters Office Signature of
Title: CFO
Comerica Bank -----------------------
------------------------------------------------
By:
By: /s/ Xxxx Xxxxxxxxxx --------------------------
--------------------------------------------- Signature of
Signature of Xxxx Xxxxxxxxxx Title:
-----------------------
Title: First Vice President - Western Market
------------------------------------------ By:
--------------------------
Signature of
Address for Notices Title:
------------------- -----------------------
000 Xxxxxxxxxx Xxxxxx By:
Xxx Xxxxx, XX 00000 --------------------------
Signature of
Title:
-----------------------
16.
[LOGO OMITTED] COMERICA ENVIRONMENTAL RIDER
Comerica Bank
----------------------------------------
NAME OF XXXXXX
000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
-------------------------------------------------
ADDRESS
This ENVIRONMENTAL RIDER (this "Rider") dated this 29th day of January
2007, is hereby made a part of and incorporated into that certain Loan and
Security Agreement (the "Agreement") dated January 29, 2007 between Comerica
Bank ("Bank") and Akeena Solar, Inc. ("Debtor").
1. Debtor hereby represents, warrants and covenants that none of the
collateral or real property occupied and/or owned by Debtor has ever been used
by Debtor or any other previous owner and/or operator in connection with the
disposal of or to refine, generate, manufacture, produce, store, handle, treat,
transfer, release, process or transport any hazardous substance, as defined in
42 U.S.C. 9601 (14) ("Hazardous Substance"), and Debtor will not at any time use
the collateral or such real property for the disposal of, refining of,
generating, manufacturing, producing, storing, handling, treating, transferring,
releasing, processing, or transporting any such Hazardous Substances and/or any
other hazardous waste.
2. None of the collateral or real property used and/or occupied by
Debtor has been designated, listed or identified in any manner by the United
States Environmental Protection Agency (the "EPA") or under and pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, set forth at 42 U.S.C. 9601 et seq. ("CERCLA") or the Resource
Conservation and Recovery Act of 1986, as amended, set forth at 42 U.S.C. 9601
et seq. ("RCRA") or any other environmental protection statute as a Hazardous
Substance, or any other hazardous waste, disposal or removal site, superfund or
cleanup site or candidate for removal of closure pursuant to RCRA, CERCLA or any
other environmental protection statute.
3. Debtor has not received a summons, citation, notice, directive,
letter or other communication, written or oral, from the EPA or any other
federal or state governmental agency or instrumentality, authorized pursuant to
an environmental protection statute, concerning any intentional or unintentional
action or omission by Debtor resulting in the releasing, spilling, leaking,
pumping, pouring, emitting, emptying, dumping or otherwise disposing of a
Hazardous Substance or any other hazardous waste into the environment resulting
in damage thereto or to the fish, shellfish, wildlife, biota or other natural
resources.
4. Debtor shall not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part, or on the part of
any third party, on property owned and/or occupied by Debtor, any disposal,
releasing, spilling, leaking, pumping, omitting, pouring, emptying or dumping of
a Hazardous Substance or any other hazardous waste into the environment where
damage may result to the environment, fish, shellfish, wildlife, biota or other
natural resources unless such disposal, release, spill, leak, pumping, emission,
pouring, emptying or dumping is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal or state governmental
authority.
5. Debtor shall furnish to Bank:
(a) Promptly and in any event within thirty (30) days after
receipt thereof, a copy of any notice, summons, citation, directive, letter or
other communications from the EPA or any other governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Debtor's part in connection with the handling, transporting, transferring,
disposal or in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying or dumping of a Hazardous Substance or any other hazardous waste into
the environment resulting in damage to the environment, fish, shellfish,
wildlife, biota and any other natural resource;
(b) Promptly and in any event within thirty (30) days after the
receipt thereof, a copy of any notice of or other communication concerning the
filing of a lien upon, against or in connection with Debtor, the collateral or
Debtor's real property by the EPA or any other governmental agency or
instrumentality authorized to file such a lien pursuant to an environmental
protection statute in connection with a fund to pay for damages and/or cleanup
and/or removal costs arising from the intentional or unintentional action or
omission of Debtor resulting from the disposal or in the releasing, spilling,
leaking, pumping, pouring, emitting, emptying or dumping of a Hazardous
Substance or any other hazardous waste into the environment;
(c) Promptly and in any event within thirty (30) days after the
receipt thereof, a copy of any notice, directive, letter or other communication
from the EPA or any other governmental agency or instrumentality acting under
the authority of an environmental protection statute indicating that all or any
portion of the Debtor's property or assets have been listed and/or Debtors
deemed by such agency to be the owner and operator of the facility that has
failed to furnish to the EPA or other authorized governmental agency or
instrumentality, all the information required by the RCRA, CERCLA or other
applicable environmental protection statutes;
(d) Promptly and in no event more than thirty (30) days after the
filing thereof with the EPA or other governmental agency or instrumentality
authorized as such pursuant to an environmental protection statute, copies of
any and all information reports filed with such agency or instrumentality in
connection with Debtor's compliance with RCRA, CERCLA or other applicable
environmental protection statutes.
6. Any one or more of the following events which occur with respect to
Debtor shall constitute an event of default:
(a) The breach by Debtor of any covenant or condition,
representation or warranty contained in this Rider;
(b) The failure by Debtor to comply with each, every and all of
the requirements of RCRA, CERCLA or any other environmental protection statute
applicable to the collateral or the real property occupied and/or owned by
Debtor;
(c) The receipt by Debtor of a notice from the EPA or any other
governmental agency or instrumentality acting under the authority of any
environmental protection statute, indicating that a lien has been filed against
any of the collateral, or any of Debtor's other property by the EPA or any other
governmental agency or instrumentality in connection with a fund as a result of
damage arising from an intentional or unintentional action or omission by Debtor
resulting from the disposal, releasing, spilling, leaking, pumping, pouring,
emitting, emptying or dumping of a Hazardous Substance or any other hazardous
waste into the environment; and
(d) Any other event or condition exists which might in the
opinion of Bank, under applicable environmental protection statutes, have a
material adverse effect on the financial or operational condition of Debtor or
the value of all or any material part of the collateral or other property of
Debtor.
In witness whereof, the Debtor has agreed as of the date first set forth
above.
Akeena Solar, Inc.
------------------------------------------
By: /s/ Xxxxx "Lad" Xxxxxxx By:
------------------------------------ ------------------------------------
Its: CFO Its:
----------------------------------- -----------------------------------
By: By:
------------------------------------ ------------------------------------
Its: Its:
----------------------------------- -----------------------------------
[LOGO OMITTED] COMERICA EQUIPMENT RIDER
Borrower(s): Akeena Solar, Inc.
Borrower has entered into a certain Loan and Security Agreement (Accounts
and Inventory) (hereinafter referred to as "Agreement"), dated January 29, 2007
with Bank (Secured Party). This EQUIPMENT RIDER (hereinafter referred to as this
"Rider") dated January 29, 2007 is hereby made a part of and incorporated into
that Agreement.
1. Borrower grants to Bank a security interest in the following wherever
located (hereinafter referred to as "Equipment"):
(a) all of Borrower's present machinery, equipment, fixtures, vehicles,
office equipment, furniture, furnishings, tools, dies, jigs and
attachments, wherever located, (including but not limited to, the
items listed and described on the Schedule of Equipment attached
hereto and marked Exhibit "A" and by this reference made a part
hereof as though fully set forth herein);
(b) all of Borrower's additional equipment, wherever located, of like or
unlike nature, to be acquired hereafter, and all replacements,
substitutes, accessions, additions and improvements to any of the
foregoing; and
(c) all of Borrower's general intangibles, including without limitation,
computer programs, computer disks, computer tapes, literature,
reports, catalogs, drawings, blueprints and other proprietary items.
2. Bank's security interest in the Equipment as set forth above shall secure
each, any and all of Borrower's Indebtedness to Bank, as the term "Indebtedness"
is defined in the Agreement.
3. Bank may, in its sole discretion, from time to time hereafter, make loans
to Borrower. Loans made by Bank to Borrower pursuant to this Rider shall be
included as part of the Indebtedness of Borrower to Bank and at Bank's option,
may be evidenced by promissory note(s), in form satisfactory to Bank. Such loans
shall bear interest at the rate and be payable in the manner specified in said
promissory note(s) in the event Bank exercises the aforementioned option, and in
the event Bank does not, such loans shall bear interest at the rate and be
payable in the manner specified in the Agreement.
4. Borrower represents and warrants to Bank that:
(a) it has good and indefeasible title to the Equipment;
(b) The Equipment is and will be free and clear of all liens, security
interests, encumbrances and claims, except as held by Bank,
(c) the Equipment shall be kept only at the following locations: 000
XXXXXXXXXX XXX, XXX XXXXX, XX 00000
(d) the owners or mortgagees of the respective locations are: XXXXXXXXXX
INTERNATIONAL
(e) Bank shall have the right upon demand now and/or at all times
hereafter, during Borrower's usual business hours to inspect and
examine the Equipment and Borrower agrees to reimburse Bank for its
reasonable costs and expenses in so doing.
5. Borrower shall keep and maintain the Equipment in good operating condition
and repair, make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Borrower shall not permit any items of Equipment to become a fixture to real
estate or accession to other property, and the Equipment is now and shall at all
times remain and be personal property.
6. Borrower, at its expense, shall keep and maintain: the Equipment insured
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners who use such
properties and interest in properties in similar businesses for the full
insurable value thereof; and business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of its assets. All such policies of insurance shall be in such form, with such
companies and in such amounts as may be satisfactory to Bank. Borrower shall
deliver to Bank certified copies of such policies of insurance and evidence of
the payment of all premiums thereof. All such policies of insurance (except
those of public liability and property damage) shall contain an endorsement in a
form satisfactory to Bank showing loss payable to Bank and all proceeds payable
thereunder shall be payable to Bank and upon receipt by Bank shall be applied on
the account of Borrower's Indebtedness. To secure the payment of Borrower's
indebtedness, Borrower grants Bank a security interest in and to all such
policies of insurance (except those of public liability and property damage) and
the proceeds thereof and directs all insurers under such policies of insurance
to pay all proceeds thereof directly to Bank. Borrower hereby irrevocably
appoints Bank (and any of Bank's officers, employees or agents designated by
Bank) as Borrower's attorney-in-fact for the purpose of making, settling and
adjusting claims under such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance. Each
such insurer shall agree by endorsement upon the policy or policies of insurance
issued by it to Borrower as required above, or by independent instruments
furnished to Bank that it will give Bank at least ten (10) days written notice
before any such policy or policies of insurance shall be altered or canceled,
and that no act or default of Borrower, or any other person, shall affect the
right of Bank to recover under such policy or policies of insurance required
above or to pay any premium in whole or in part relating thereto. Bank, without
waiving or releasing any obligations or defaults by Borrower hereunder, may at
any time or times hereafter, but shall have no obligation to do so, obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect to such policies which Bank deems advisable. All sums so
disbursed by Bank, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be a part of Borrower's indebtedness
and payable on demand.
7. Until default by Borrower under the Agreement or this Rider. Borrower may,
subject to the provisions of the Agreement and this Rider and consistent
therewith, remain in possession thereof and use the Equipment referred to herein
in the ordinary course of business at the location or locations hereinabove
designated.
8. All of the terms, conditions, warranties, covenants, agreements and
representations of the Agreement are incorporated herein and reaffirmed.
9. Upon a default by Borrower under the Agreement or this Rider, Borrower
upon request of Bank to do so, agrees to assemble and make the Equipment or any
part thereof available to Bank at a place designated by Bank.
10. Borrower shall upon demand by Bank immediately deliver to Bank and
properly endorse, any and all evidences of ownership, certificates of title or
applications for title to any of the aforesaid items of Equipment.
11. Bank shall not in any way or manner be liable or responsible for (a) the
safekeeping of the Equipment; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof or (d) any act or default by any person whomsoever. All risk of loss,
damage or destruction of the Equipment shall be borne by Borrower.
Borrower(s): Akeena Solar, Inc.
/s/ Xxxxx "Lad" Xxxxxxx
------------------------------------- ----------------------------------------
By: By:
------------------------------------- ----------------------------------------
By: By:
------------------------------------- ----------------------------------------
By: By:
Accepted this 29th day of January, 2007 at Bank's place of business in 000 Xxxx
Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, XX
/s/ Xxxx Xxxxxxxxxx
---------------------------------------
By: Xxxx Xxxxxxxxxx
First Vice President - Western Marke
