Loan, Security and Bulk Purchase Agreement
XXXXX
FARGO CENTURY, INC.
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Client:
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INFOSONICS
CORPORATION,
a
Maryland corporation
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Address:
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0000
Xxxxxxxxx Xxxxx #000
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Xxx
Xxxxx, XX 00000
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Date:
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April
30, 2008
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This
Loan, Security and Bulk Purchase Agreement is entered into on the above date
between XXXXX
FARGO CENTURY, INC.
(“Xxxxx
Fargo Century”), whose address is 000 X. Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
XX 00000 and the client named above (“Client”), whose chief executive office is
located at the above address (“Client’s Address”). The Schedule to this
Agreement (the “Schedule”) being signed concurrently is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth
in
Section 8 below.)
1. BULK
PURCHASE.
1.1 Bulk
Purchase. Xxxxx
Fargo Century
will act as the sole bulk purchaser to the Client on the terms and conditions
set forth in this Agreement. Xxxxx Fargo Century hereby purchases from Client,
and Client hereby sells and assigns to Xxxxx Fargo Century, all of Client’s
Receivables, which shall include all foreign Receivables due and payable to
any
subsidiary of Client that have been legally, absolutely and irrevocably assigned
to Client by a written agreement in form and substance acceptable to Xxxxx
Fargo
Century, free and clear of all voluntary liens. The purchase price for the
Receivables shall be an amount equal to the net amount thereof, after all
discounts available or taken, as herein defined, less the amount of Xxxxx Fargo
Century’s A/R Management Fee on the purchase of such Receivables as provided in
the Schedule hereof. Such purchase price, less any reserves which Xxxxx Fargo
Century may have established as herein provided and less any sums advanced,
remitted or otherwise paid to Client or for Client’s account or debited to
Client’s account hereunder shall be payable by Xxxxx Fargo Century to Client the
next business day after collection of the Receivables purchased. Xxxxx Fargo
Century is not assuming the credit risk or any other risk with respect to the
Receivables. Without limiting the generality of the foregoing, Xxxxx Fargo
Century is not assuming the risk of non-payment for any reason of any
Receivable, Xxxxx Fargo Century shall have no obligation to pay the purchase
price for any Receivable except to the extent the same is finally collected
in
immediately available funds, and Xxxxx Fargo Century is not assuming any duty
or
responsibility to expend any collection effort with respect to any Receivable.
Client shall not be entitled to pledge Xxxxx Fargo Century’s credit for any
purpose whatsoever.
1.2 Advances.
Xxxxx
Fargo Century shall, at Client’s request but in Xxxxx Fargo Century’s sole and
absolute discretion, make advance payments to Client on the purchase price
of
Receivables prior to the aforesaid time or times of Xxxxx Fargo Century’s
obligation to make payment thereof, and advances with respect to Client’s
Eligible Inventory, in an amount up to the Advance Limit set forth on the
Schedule. (All of the foregoing are referred to in this Agreement as
“Advances”.) Nothing herein shall limit or restrict Xxxxx Fargo Century’s right
to adjust advance formulas upward or downward based upon Xxxxx Fargo Century’s
lending criteria which is established in Xxxxx Fargo Century’s sole and absolute
discretion and on Xxxxx Fargo Century’s own collateral evaluations. All Advances
shall be debited by Xxxxx Fargo Century to Client’s account with Xxxxx Fargo
Century, and all Advances and all other monetary Obligations shall bear
Interest
at the
Contract
Rate
set
forth in the Schedule from the date of advance to the date repaid. For purposes
of calculating interest all payments received on the collection of Receivables
shall be credited to Client’s account on the
Business Days
of
actual collection of the Receivable in immediately available funds. Xxxxx Fargo
Century may reserve out of the purchase price of all Receivables sold and
assigned to Xxxxx Fargo Century and any Advances that may otherwise be available
to Client an amount which, in Xxxxx Fargo Century’s judgment, is sufficient to
protect Xxxxx Fargo Century against possible returns, claims, allowances,
expenses and recourse to Client on Receivables sold and assigned to Xxxxx Fargo
Century and against other contingencies for which Client may be chargeable
hereunder. As used herein, the term “net amount” of Receivables shall mean the
gross amount of Receivables less returns, allowances and discounts to customers
upon shortest or longest selling terms, as Xxxxx Fargo Century may elect. If
at
any time or for any reason the total of all outstanding Advances and all other
Obligations exceeds the Advance Limit, Client shall immediately pay the amount
of the excess to Xxxxx Fargo Century, without notice or demand.
1.3 A/R
Management Fee.
For
Xxxxx Fargo Century’s services hereunder, Xxxxx Fargo Century shall receive an
A/R Management Fee equal to the percentage shown on the Schedule multiplied
by
the gross amount of each Receivable of Client, which A/R Management Fee shall
be
due and payable by Client as of the date a Receivable arises, and shall then
be
chargeable to Client’s account with Xxxxx Fargo Century. The maximum aggregate
A/R Management Fees payable under this Agreement for each Contract Year hereof
shall be the amount shown in the Schedule.
2. SECURITY
INTEREST.
2.1 Security
Interest. To
secure
the payment and performance of all of the Obligations when due, Client hereby
grants to Xxxxx Fargo Century a security interest in all of the following
(collectively, the “Collateral”): all right, title and interest of Client in and
to the following, whether now owned or hereafter arising or acquired and
wherever located:
All
Receivables;
All
Inventory;
All
Equipment;
All
General Intangibles (including without limitation all Intellectual Property
and
Deposit Accounts);
All
Investment Property;
All
Other
Property; and
Any
and
all claims, rights and interests in any of the above, and all guaranties and
security for any of the above, and all substitutions and replacements for,
additions, accessions, attachments, accessories, and improvements to, and
proceeds (including proceeds of any insurance policies, proceeds of proceeds
and
claims against third parties) of, all of the above, and all Client’s books
relating to any of the above.
2
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XXXXX
FARGO CENTURY, INC.
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3. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE CLIENT.
In
order
to induce Xxxxx Fargo Century to enter into this Agreement and to make Advances,
Client represents and warrants to Xxxxx Fargo Century as follows, and Client
covenants that the following representations will continue to be true, and
that
Client will at all times comply with all of the following
covenants:
3.1 Corporate
Existence and Authority.
Client
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Client is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so would have a
material adverse effect on Client. The execution, delivery and performance
by
Client of this Agreement, and all other documents contemplated hereby
(i) have been duly and validly authorized, (ii) are enforceable
against Client in accordance with their terms, (iii) do not violate
Client’s articles or certificate of incorporation, or Client’s by-laws, or any
law or any material agreement or instrument which is binding upon Client or
its
property, and (iv) do not constitute grounds for acceleration of any
material indebtedness or obligation under any material agreement or instrument
which is binding upon Client or its property.
3.2 Name;
Trade Names and Styles.
The name
of Client set forth in the heading to this Agreement is its correct name. Listed
on the Schedule are all prior names of Client and all of Client’s present and
prior trade names. Client shall give Xxxxx Fargo Century 30 days’ prior written
notice before changing its name or doing business under any other name. Client
has complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
3.3 Place
of Business; Location of Collateral. The
address set forth in the heading to this Agreement is Client’s chief executive
office. In addition, Client has places of business and Collateral is located
only at the locations set forth on the Schedule. Client will give Xxxxx Fargo
Century at least 30 days prior written notice before opening any additional
place of business, changing its chief executive office, or moving any of the
Collateral to a location other than Client’s Address or one of the locations set
forth on the Schedule.
3.4 Title
to Collateral.
Client
is now, and will at all times in the future be, the sole owner of all the
Collateral, except for specific items of Equipment which are leased by Client.
The Collateral now is and will remain free and clear of any and all liens,
charges, security interests, encumbrances and adverse claims, except for the
security interest in favor of Xxxxx Fargo Century and purchase money security
interests in specific items of equipment. Xxxxx Fargo Century now has, and
will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral (except for purchase money security interests in
specific items of equipment), and Client will at all times defend Xxxxx Fargo
Century and the Collateral against all claims of others. None of the Collateral
now is or will be affixed to any real property in such a manner, or with such
intent, as to become a fixture. Client will keep in full force and effect,
and
will comply with all the terms of, any lease of real property where any of
the
Collateral now or in the future may be located.
3.5 Maintenance
of Collateral. Client
will maintain the Collateral in good working condition, ordinary wear and tear
excepted, and Client will not use the Collateral for any unlawful purpose.
Client will immediately advise Xxxxx Fargo Century in writing of any material
loss or damage to the Collateral.
3.6 Books
and Records.
Client
has maintained and will maintain at Client’s Address complete and accurate books
and records, comprising an accounting system in accordance with generally
accepted accounting principles.
3.7 Financial
Condition, Statements and Reports.
All
financial statements now or in the future delivered to Xxxxx Fargo Century
have
been, and will be, prepared in conformity with generally accepted accounting
principles and now and in the future will completely and fairly reflect the
financial condition of Client, at the times and for the periods therein stated.
Between the last date covered by any such statement provided to Xxxxx Fargo
Century and the date hereof, there has been no material adverse change in the
financial condition or business of Client. Client is now and will continue
to be
solvent at all times.
3.8 Tax
Returns and Payments; Pension Contributions.
Client
has timely filed (after any legal extension obtained), and will timely file
(after any legal extension obtained), all tax returns and reports required
by
applicable law, and Client has timely paid, and will timely pay, all applicable
taxes, assessments, deposits and contributions now or in the future owed by
Client.
3.9 Compliance
with Law.
Client
has complied, and will comply, in all material respects, with all provisions
of
all applicable laws and regulations, including, but not limited to, those
relating to Client’s ownership of real or personal property, the conduct and
licensing of Client’s business, and all environmental matters. All proceeds of
all Advances shall be used solely for lawful business purposes.
3.10 Litigation.
Except
as disclosed in the Schedule, there is no claim, suit, litigation, proceeding
or
investigation pending or threatened against or affecting Client involving more
than $500,000. Client will promptly inform Xxxxx Fargo Century in writing of
any
claim, proceeding, litigation or investigation in the future threatened or
instituted by or against Client involving any claim of $500,000 or
more.
4. RECEIVABLES.
4.1 Representations
Relating to Receivables. Client
represents and warrants to Xxxxx Fargo Century as follows: Each Receivable
with
respect to which Advances are requested by Client shall, on the date each
Advance is requested and made, represent an undisputed, bona fide, existing,
unconditional obligation of the Account Debtor created by the sale, delivery,
and acceptance of goods or the rendition of services, in the ordinary course
of
Client’s business.
4.2 Representations
Relating to Documents and Legal Compliance. Client
represents and warrants to Xxxxx Fargo Century as follows: All statements made
and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Receivables are and shall be true and correct and
all
such invoices, instruments and other documents and all of Client’s books and
records are and shall be genuine and all signatories and endorsers have the
capacity to contract. All sales and other transactions underlying or giving
rise
to each Receivable shall comply with all applicable laws and governmental rules
and regulations. All signatures and endorsements on all documents, instruments,
and agreements relating to all Receivables are and shall be genuine, and all
such documents, instruments and agreements are and shall be legally enforceable
in accordance with their terms.
4.3 Schedules
and Documents relating to Receivables. Client
shall deliver to Xxxxx Fargo Century transaction reports and loan requests,
schedules and assignments of all Receivables and the invoices relating thereto,
and schedules of collections, all on Xxxxx Fargo Century’s standard forms, on a
weekly basis or as otherwise requested by Xxxxx Fargo Century; but Client’s
failure to execute and deliver the same shall not affect or limit Xxxxx Fargo
Century’s security interest and other rights in all of Client’s Receivables, nor
shall Xxxxx Fargo Century’s failure to advance or lend against a specific
Receivable affect or limit Xxxxx Fargo Century’s security interest and other
rights therein. Together with each such schedule and assignment, or later if
requested by Xxxxx Fargo Century, Client shall furnish Xxxxx Fargo Century
with
copies (or, after the occurrence and during the continuation of an Event of
Default, at Xxxxx Fargo Century’s request, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and Client
warrants the genuineness of all of the foregoing. Client shall also furnish
to
Xxxxx Fargo Century an aged accounts receivable trial balance in such form
and
at such intervals as Xxxxx Fargo Century shall request. In addition, Client
shall deliver to Xxxxx Fargo Century the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and
in
the same form as received, with all necessary endorsements.
4.4 Collection
of Receivables. Before
any Advances are made hereunder, Client, Xxxxx Fargo Century and a bank
acceptable to Xxxxx Fargo Century shall enter into a restricted account
agreement, in form acceptable to Xxxxx Fargo Century in its sole discretion,
and
said agreement shall continue in full force and effect throughout the term
of
this Agreement and so long as any Obligations remain unpaid. Client shall direct
all Account Debtors to make all payments on all Receivables to the account
that
is the subject of said restricted account agreement (the “Restricted Account”),
and all invoices issued by Client shall state that payment thereon is to be
made
to the Restricted Account. Said restricted account agreement shall provide
that
all collections received shall be remitted, on a daily basis, to Xxxxx Fargo
Century, to be applied to the Obligations in such order as Xxxxx Fargo Century
shall determine in its sole discretion. If, for any reason, Client shall receive
payment of any Receivables or any proceeds of any other Collateral, Client
shall
hold all of the same in trust for Xxxxx Fargo Century, and Client shall
immediately deposit all such payments in the Restricted Account, within one
business day after receipt of the same, in their original form, duly
endorsed.
4.5 Disputes.
Client
shall notify Xxxxx Fargo Century promptly of all disputes or claims relating
to
Receivables on the regular reports to Xxxxx Fargo Century. Client shall not
forgive, or settle any Receivable for less than 90% of the original amount
of
such Receivable, or agree to do any of the foregoing, without Xxxxx Fargo
Century’s prior written consent.
4.6 Returns.
Provided
no Event of Default has occurred and is continuing, if any Account Debtor
returns any Inventory to Client in the ordinary course of its business, Client
shall promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount (sending a copy
to
Xxxxx Fargo Century). In the event any attempted return occurs after the
occurrence of any Event of Default, Client shall (i) not accept any return
without Xxxxx Fargo Century’s prior written consent, (ii) hold the returned
Inventory in trust for Xxxxx Fargo Century, (iii) segregate all returned
Inventory from all of Client’s other property, (iv) conspicuously label the
returned Inventory as Xxxxx Fargo Century’s property, and (v) immediately
notify Xxxxx Fargo Century of the return of any Inventory, specifying the reason
for such return, the location and condition of the returned Inventory, and
on
Xxxxx Fargo Century’s request deliver such returned Inventory to Xxxxx Fargo
Century.
4.7 Verification.
Client
has informed Xxxxx Fargo Century that the certified public accounting firm
engaged by Client contacts Account Debtors from time to time to verify the
validity, amounts and other matters relating to Receivables. Client hereby
authorizes Xxxxx Fargo Century to obtain all of such information from Client’s
certified public accountants from time to time and will instruct them to provide
all such information to Xxxxx Fargo Century at its request. If at any time
such
certified public accounting firm informs Xxxxx Fargo Century that such certified
public accounting firm no longer contacts Account Debtors for such verification,
Client authorizes Xxxxx Fargo Century to thereafter do so on an anonymous basis.
Xxxxx Fargo Century or its designee may, at any time upon the occurrence and
during the continuation of any Event of Default, notify Account Debtors that
the
Receivables have been assigned and transferred to Xxxxx Fargo
Century.
4.8 No
Liability. Xxxxx
Fargo Century shall not under any circumstances be responsible or liable for
any
shortage or discrepancy in, damage to, or loss or destruction of, any goods,
the
sale or other disposition of which gives rise to a Receivable, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Receivable, or for settling any
Receivable in good faith for less than the full amount thereof, nor shall Xxxxx
Fargo Century be deemed to be responsible for any of Client’s obligations under
any contract or agreement giving rise to a Receivable, except in the case of
Xxxxx Fargo Century’s gross negligence or willful misconduct.
5. ADDITIONAL
DUTIES OF THE CLIENT.
5.1 Insurance.
Client
shall, at all times, insure all of the Collateral and carry such other business
insurance, with insurers reasonably acceptable to Xxxxx Fargo Century, in such
form and amounts as Xxxxx Fargo Century may reasonably require, and Client
shall
provide evidence of such insurance to Xxxxx Fargo Century, so that Xxxxx Fargo
Century is satisfied that such insurance is, at all times, in full force and
effect. All such insurance policies shall name Xxxxx Fargo Century as the
exclusive additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Xxxxx Fargo Century. Upon receipt
of the proceeds of any such insurance, Xxxxx Fargo Century shall apply such
proceeds in reduction of the Obligations in such order as Xxxxx Fargo Century
shall determine in its sole discretion. If Client fails to provide or pay for
any insurance, Xxxxx Fargo Century may, but is not obligated to, obtain the
same
at Client’s expense. Client shall promptly deliver to Xxxxx Fargo Century copies
of all reports made to insurance companies.
5.2 Reports.
Client,
at its expense, shall provide Xxxxx Fargo Century with the written reports
set
forth in the Schedule, and such other written reports with respect to Client,
as
Xxxxx Fargo Century shall from time to time reasonably specify, including
without limitation accounts payable agings, aged by invoice date, and
outstanding or held check registers, and inventory reports, all in such form
and
with such detail as Xxxxx Fargo Century shall reasonably specify. Client shall
also cause all individual Guarantors, if any, to furnish to Xxxxx Fargo Century
his/her personal financial statement in form and substance acceptable to Xxxxx
Fargo Century (but no more frequently than once in any twelve-month
period).
5.3 Access
to Collateral, Books and Records.
At
reasonable times, and on two Business Days’ notice, Xxxxx Fargo Century, or its
agents, shall have the right to inspect the Collateral, and the right to audit
and copy Client’s books and records; provided,
that
after the occurrence and during the continuation of an Event of Default, no
notice shall be required. The foregoing inspections and audits shall be at
Client’s expense and the charge therefor shall be $750 per person per day for
the time of Xxxxx Fargo Century’s personnel, or such other amount as shall
represent Xxxxx Fargo Century’s then standard charge for the same, plus all
out-of-pocket expenses incurred by Xxxxx Fargo Century in connection therewith;
provided,
that
audit expenses during any Contract Year shall not exceed $10,000 and Client
shall only be obligated to pay for 1 full appraisal and two desktop appraisals
during any Contract Year, except that from and after the occurrence and during
the continuation of an Event of Default all fees and costs incurred by Xxxxx
Fargo Century with respect to all audits and appraisals shall be at Client’s
expense.
5.4 Remittance
of Proceeds. Except
for sums to be deposited in the Restricted Account as provided in Section 4.4
above, all proceeds arising from the sale or other disposition of any Collateral
shall be delivered, in kind, by Client to Xxxxx Fargo Century in the original
form in which received by Client not later than the following business day
after
receipt by Client, to be applied to the Obligations in such order as Xxxxx
Fargo
Century shall determine. Client shall not commingle proceeds of Collateral
with
any of Client’s other funds or property, and shall hold such proceeds separate
and apart from such other funds and property and in an express trust for Xxxxx
Fargo Century. Nothing in this Section limits the restrictions on disposition
of
Collateral set forth elsewhere in this Agreement.
5.5 Negative
Covenants.
Client
shall not, without Xxxxx Fargo Century’s prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity;
(ii) acquire any assets, except in the ordinary course of business;
(iii) enter into any other transaction outside the ordinary course of
business; (iv) sell or transfer any Collateral, except that, provided no
Default or Event of Default has occurred and is continuing, Client may sell
finished Inventory in the ordinary course of Client’s business and Client may
trade-in or dispose of obsolete or unneeded Equipment in good faith arm’s length
transactions, in the ordinary course of business; (v) store any Inventory
or other Collateral with any warehouseman or other third party, except for
storage of Inventory with a public warehouse in the ordinary course of business
where there is in place an agreement between Xxxxx Fargo Century and such
warehouseman in form and substance satisfactory to Xxxxx Fargo Century in its
discretion; (vi) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis; (vii) make any loans of any money
or other assets, or purchase the stock or other securities of, or make any
other
investment in, any other Person; (viii) incur any debts, outside the
ordinary course of business; (ix) guarantee or otherwise become liable with
respect to the obligations of another party or entity; (x) pay or declare
any dividends on Client’s stock (except for dividends payable solely in stock of
Client); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Client’s stock; (xii) make any change in Client’s
capital structure which would have a material adverse effect on Client or on
the
prospect of repayment of the Obligations; or (xiii) dissolve or elect to
dissolve; or (xiv) make any Capital Expenditure in excess of $1,000,000 in
any fiscal year; (xv) amend, modify or waive any term or provision of its
Certificate of Incorporation or By-Laws unless required by law; or
(xvi) agree to do any of the foregoing.
5.6 Litigation
Cooperation.
Should
any third-party suit or proceeding be instituted by or against Xxxxx Fargo
Century with respect to any Collateral or in any manner relating to Client,
Client shall, without expense to Xxxxx Fargo Century, make available Client
and
its officers, employees and agents, and Client’s books and records, without
charge, to the extent that Xxxxx Fargo Century may deem them reasonably
necessary in order to prosecute or defend any such suit or
proceeding.
5.7 Notification
of Changes. Client
will promptly notify Xxxxx Fargo Century in writing of any change in its
officers or directors, the opening of any new bank account or other Deposit
Account, and any material adverse change in the business or financial affairs
of
Client.
5.8 Further
Assurances.
Client
agrees, at its expense, on request by Xxxxx Fargo Century, to execute all
documents and take all actions, as Xxxxx Fargo Century may deem reasonably
necessary or useful in order to perfect and maintain Xxxxx Fargo Century’s
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
5.9 Indemnity.
Client
hereby agrees to indemnify the following persons (collectively, the
“Indemnitees”): Xxxxx Fargo Century and its affiliates, subsidiaries, parent,
directors, officers, employees, agents, and attorneys, and to hold them harmless
from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including attorneys’
fees), of every nature, character and description, which any Indemnitee may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Client or its employees, any relationship or agreement between Xxxxx Fargo
Century and Client, any actual or alleged failure of Xxxxx Fargo Century to
comply with any writ of attachment or other legal process relating to Client
or
any of its property, or any other matter, cause or thing whatsoever occurred,
done, omitted or suffered to be done by any Indemnitee relating to Client or
the
Obligations. Notwithstanding any provision in this Agreement to the contrary,
the indemnity agreement set forth in this Section shall survive any termination
of this Agreement and shall for all purposes continue in full force and
effect.
6. TERM.
6.1 Maturity
Date.
Subject
to early termination as provided in Section 6.2, this Agreement shall continue
in effect until the maturity date set forth on the Schedule (the “Maturity
Date”); provided
that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless Client gives written notice to Xxxxx Fargo Century, not less
than sixty days prior to the next Maturity Date, that Client elects to terminate
this Agreement effective on the next Maturity Date .
6.2 Early
Termination.
This
Agreement may be terminated (i) by Xxxxx Fargo Century or Client prior to the
Maturity Date at any time (whether or not an Event of Default has occurred)
effective 60 days after written notice of termination is given by Xxxxx Fargo
Century to Client or by Client to Xxxxx Fargo Century, as the case may be;
or
(ii) by Xxxxx Fargo Century at any time after the occurrence of an Event of
Default, without notice, effective immediately; provided
that an
early termination by Client in the first and second Contract Years shall not
be
effective until and unless the Early Termination Fee set forth in the Schedule
is paid by Client to Xxxxx Fargo Century on or prior to such termination date,
which Early Termination Fee Client hereby agrees to pay on or prior to such
termination date; provided,
further,
that if
such early termination is due to a refinancing through Xxxxx Fargo Bank, N.A.
or
any of its affiliates, then no Early Termination Fee shall be due and
payable.
6.3 Payment
of Obligations.
On the
Maturity Date or on any earlier effective date of termination, Client shall
pay
and perform in full all Obligations, whether evidenced by installment notes
or
otherwise, and whether or not all or any part of such Obligations are otherwise
then due and payable. Notwithstanding any termination of this Agreement, all
of
Xxxxx Fargo Century’s security interests in all of the Collateral and all of the
terms and provisions of this Agreement shall continue in full force and effect
until all Obligations have been paid and performed in full; provided that,
without limiting the fact that Advances are subject to the discretion of Xxxxx
Fargo Century, Xxxxx Fargo Century may, in its sole discretion, refuse to make
any further Advances after termination. No termination shall in any way affect
or impair any right or remedy of Xxxxx Fargo Century, nor shall any such
termination relieve Client of any Obligation to Xxxxx Fargo Century, until
all
of the Obligations have been paid and performed in full.
7. EVENTS
OF DEFAULT AND REMEDIES.
7.1 Events
of Default.
The
occurrence of any of the following events shall constitute an “Event of Default”
under this Agreement, and Client shall give Xxxxx Fargo Century immediate
written notice thereof: (a) Any warranty, representation, statement, report
or certificate made or delivered to Xxxxx Fargo Century by Client or any of
Client’s officers, employees or agents, now or in the future, shall be untrue or
misleading in a material respect; or (b) Client shall fail to pay when due
any Advance or any interest thereon or any other monetary Obligation; or
(c) the total Advances and other Obligations outstanding at any time shall
exceed the Advance Limit (except pursuant to a written agreement between Xxxxx
Fargo Century and Client) for two (2) business days following notice from Xxxxx
Fargo Century; or (d) Client shall fail to perform any material
non-monetary Obligation and such failure shall continue for ten (10) days;
or
(e) any levy, assessment, attachment, seizure, lien or encumbrance is made
on all or any part of the Collateral which is not cured within 10 days after
the
occurrence of the same; or (f) Client breaches any material contract or
obligation, which has or may reasonably be expected to have a material adverse
effect on Client’s business or financial condition and such failure shall
continue for ten (10) days; or (g) dissolution, termination of existence,
insolvency, business failure or temporary or permanent suspension of business
of
Client or any Guarantor; or appointment of a receiver, trustee or custodian,
for
all or any part of the property of, assignment for the benefit of creditors
by,
or the commencement of any proceeding by or against Client or any Guarantor
under any reorganization, bankruptcy, insolvency, arrangement, readjustment
of
debt, dissolution or liquidation law or statute of any jurisdiction, now or
in
the future in effect; or (h) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to
do
any of the foregoing or death of any Guarantor; or (i) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset pledged by any
third party to secure any or all of the Obligations, or any attempt to do any
of
the foregoing, or commencement of proceedings by or against any such third
party
under any bankruptcy or insolvency law; or (j) any person acquires
beneficial ownership, directly or indirectly, of more than 50% of the voting
stock of Client [,other
than Xxxxxx Ram, CEO],
without
the prior written consent of Xxxxx Fargo Century; or (k) Client shall
generally not pay its debts as they become due, or Client shall conceal, remove
or transfer any part of its property, with intent to hinder, delay or defraud
its creditors, or make or suffer any transfer of any of its property which
may
be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or
(l) there shall be a material adverse change in Client’s business or
financial condition.
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7.2 Remedies.
Upon the
occurrence and during the continuance of any Event of Default, and at any time
thereafter, Xxxxx Fargo Century, at its option, and without notice or demand
of
any kind (all of which are hereby expressly waived by Client), may do any one
or
more of the following: (a) Cease making Advances or otherwise extending
credit to Client under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it
may be found, and for that purpose Client hereby authorizes Xxxxx Fargo Century
without judicial process to enter onto any of Client’s premises without
interference to search for, take possession of, keep, store, or remove any
of
the Collateral, and remain on the premises or cause a custodian to remain on
the
premises in exclusive control thereof, without charge for so long as Xxxxx
Fargo
Century deems it reasonably necessary in order to complete the enforcement
of
its rights under this Agreement or any other agreement; provided, however,
that
should Xxxxx Fargo Century seek to take possession of any of the Collateral
by
Court process, Client hereby irrevocably waives: (i) any bond and any
surety or security relating thereto required by any statute, court rule or
otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that Xxxxx Fargo Century retain possession of,
and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Client to assemble any or all of the Collateral and make it
available to Xxxxx Fargo Century at places designated by Xxxxx Fargo Century
which are reasonably convenient to Xxxxx Fargo Century and Client, and to remove
the Collateral to such locations as Xxxxx Fargo Century may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral
prior to a disposition thereof and, for such purpose and for the purpose of
removal, Xxxxx Fargo Century shall have the right to use Client’s premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in
its condition at the time Xxxxx Fargo Century obtains possession of it or after
further manufacturing, processing or repair, at one or more public and/or
private sales, in lots or in bulk, for cash, exchange or other property, or
on
credit, and to adjourn any such sale from time to time without notice other
than
oral announcement at the time scheduled for sale. Xxxxx Fargo Century shall
have
the right to conduct such disposition on Client’s premises without charge, for
such time or times as Xxxxx Fargo Century deems reasonable, or on Xxxxx Fargo
Century’s premises, or elsewhere and the Collateral need not be located at the
place of disposition. Xxxxx Fargo Century may directly or through any affiliated
company purchase or lease any Collateral at any such public disposition, and
if
permissible under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Client of any liability Client
may
have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale; (g) Demand and receive possession of any of
Client’s federal and state income tax returns and the books and records utilized
in the preparation thereof or referring thereto. All reasonable attorneys’ fees,
expenses, costs, liabilities and obligations incurred by Xxxxx Fargo Century
with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal
to
the highest Contract Rate applicable to any of the Obligations. Without limiting
any of Xxxxx Fargo Century’s rights and remedies, from and after the occurrence
of any Event of Default, the Contract Rate applicable to the Obligations shall
be increased by an additional three percent per annum.
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7.3 Standards
for Determining Commercial Reasonableness.
Client
and Xxxxx Fargo Century agree that a sale or other disposition (collectively,
“sale”) of any Collateral which complies with the following standards will
conclusively be deemed to be commercially reasonable: (i) Notice of the
sale is given to Client at least seven days prior to the sale, and, in the
case
of a public sale, notice of the sale is published at least seven days before
the
sale in a newspaper of general circulation in the county where the sale is
to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Xxxxx Fargo Century, with or without the Collateral being present; (iv) The
sale commences at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of
the purchase price in cash or by cashier’s check or wire transfer is required;
(vi) With respect to any sale of any of the Collateral, Xxxxx Fargo Century
may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Client any and all information concerning the same. Xxxxx Fargo
Century shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
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7.4 Power
of Attorney.
Client
grants to Xxxxx Fargo Century an irrevocable power of attorney coupled with
an
interest, authorizing and permitting Xxxxx Fargo Century (acting through any
of
its employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Client, and at Client’s expense, to do any
or all of the following, in Client’s name or otherwise, but Xxxxx Fargo Century
agrees to exercise the following powers in a commercially reasonable manner:
(a) Execute on behalf of Client any documents that Xxxxx Fargo Century may,
in its sole discretion, deem advisable in order to perfect and maintain Xxxxx
Fargo Century’s security interest in the Collateral, or in order to exercise a
right of Client or Xxxxx Fargo Century, or in order to fully consummate all
the
transactions contemplated under this Agreement, or under any and all other
present and future agreements; (b) Take control in any manner of any cash
or non-cash items of payment or proceeds of Collateral; endorse the name of
Client upon any instruments, or documents, evidence of payment or Collateral
that may come into Xxxxx Fargo Century’s possession; (c) After the
occurrence and during the continuance of any Event of Default, without limiting
Xxxxx Fargo Century’s other rights and remedies, do any of the following:
(i) Grant extensions of time to pay, compromise claims and settle
Receivables and Other Property for less than face value and execute all releases
and other documents in connection therewith; (ii) Pay any sums required on
account of Client’s taxes or to secure the release of any liens therefor;
(iii) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (iv) instruct
the post office authorities to direct the Client’s mail to Xxxxx Fargo
Century.
7.5 Application
of Proceeds.
All
proceeds realized as the result of any sale or other disposition of the
Collateral shall be applied by Xxxxx Fargo Century first to the reasonable
costs, expenses, liabilities, obligations and attorneys’ fees incurred by Xxxxx
Fargo Century in the exercise of its rights under this Agreement, second to
the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Xxxxx Fargo Century shall determine in its sole
discretion. Any surplus shall be paid to Client or other persons legally
entitled thereto; Client shall remain liable to Xxxxx Fargo Century for any
deficiency. If Xxxxx Fargo Century, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with
any
purchaser at any sale of Collateral, Xxxxx Fargo Century shall have the option,
exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of purchase price or deferring the reduction
of the Obligations until the actual receipt by Xxxxx Fargo Century of the cash
therefor.
7.6 Remedies
Cumulative.
In
addition to the rights and remedies set forth in this Agreement, Xxxxx Fargo
Century shall have all the other rights and remedies accorded a secured party
under the Code and under all other applicable laws, and under any other
instrument or agreement now or in the future entered into between Xxxxx Fargo
Century and Client, and all of such rights and remedies are cumulative and
none
is exclusive. Exercise or partial exercise by Xxxxx Fargo Century of one or
more
of its rights or remedies shall not be deemed an election, nor bar Wells Fargo
Century from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of Xxxxx Fargo Century to exercise any rights
or
remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
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8. DEFINITIONS.
As used
in this Agreement, the following terms have the following meanings:
“Account
Debtor”
means
the obligor on a Receivable.
“Advances”
has
the
meaning set forth in Section 1.2 above.
“Agreement”
and
“this
Agreement”
means
this Loan, Security and Bulk Purchase Agreement and all modifications and
amendments thereto, extensions thereof, and replacements therefor.
“Capital
Expenditures”
means
all expenditures made and liabilities incurred for the acquisition of any fixed
asset or improvement, replacement, substitution or addition thereto which has
a
useful life of more than one year and including, without limitation, those
arising in connection with Capital Leases.
“Capital
Lease”
means
any lease of property by Client that, in accordance with generally accepted
accounting principles, should be capitalized for financial reporting purposes
and reflected as a liability on the balance sheet of Client.
“Code”
means
the Uniform Commercial Code as adopted and in effect in the State of California
on the date hereof.
“Collateral”
has
the
meaning set forth in Section 2.1 above.
“Contract
Year”
means
the twelve-month period commencing on the date hereof and each subsequent
twelve-month period.
“Default”
means
any event which with notice or passage of time or both, would constitute an
Event of Default.
“Deposit
Account”
means
all of the following, now owned and hereafter acquired by Client: all “deposit
accounts” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all general and special bank accounts, demand accounts, checking accounts,
savings accounts and certificates of deposit.
“Eligible
Inventory”
means
Inventory which Xxxxx Fargo Century, in its sole and absolute discretion,
determines (i) consists of finished goods, in good, new and salable
condition which are not obsolete or unmerchantable, and are not comprised of
work in process, packaging materials, accessories or supplies; (ii) meets
all standards imposed by any governmental agency or authority;
(iii) conforms in all respects to the warranties and representations set
forth herein; (iv) is at all times subject to Xxxxx Fargo Century’s duly
perfected, first priority security interest; and (v) is situated at the
location shown in the Schedule.
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“Eligible
Receivables”
means
Receivables which meet the following minimum requirements and criteria:
(a) shipment of the merchandise or the rendition of services has been
completed; (b) no return, rejection or repossession of the merchandise has
occurred; (c) the merchandise or services has not been rejected or disputed
by the customer and there shall not have been asserted any offset, defense
or
counterclaim; (d) the Receivable continues to be in full conformity with
the representations and warranties made by Client to Xxxxx Fargo Century with
respect thereto; (e) Xxxxx Fargo Century is, and continues to be, satisfied
with the credit standing of the Account Debtor in relation to the amount of
credit extended; (f) the Receivable is documented by an invoice in a form
approved by Xxxxx Fargo Century and is not to be unpaid more than 90
days
from invoice date; (g) less than 20%
of the
unpaid amount of invoices due from such Account Debtor remain unpaid more than
90
days
from invoice date (cross ageing); (h) the Receivable is not evidenced by
chattel paper or an instrument of any kind with respect to or in payment of
the
Receivable unless such instrument is duly endorsed to Xxxxx Fargo Century and
in
Xxxxx Fargo Century’s possession or represents a check in payment of a
Receivable; (i) if the customer is located outside of the United States,
the goods which gave rise to such Receivable were shipped after receipt by
Xxxxx
Fargo Century from or on behalf of the customer of either (1) an
irrevocable letter of credit, assigned and delivered to Xxxxx Fargo Century
and
confirmed by a financial institution acceptable to Xxxxx Fargo Century and
is in
form and substance acceptable to Xxxxx Fargo Century, payable in the full amount
of the Receivable in United States dollars at a place of payment located within
the United States, or (2) credit insurance from an insurance company
acceptable to Xxxxx Fargo Century insuring such Receivable, which credit
insurance names Xxxxx Fargo Century as loss payee or beneficiary; (j) the
Receivable is not subject to any lien; (k) the Receivable does not arise
out of transactions with any of Client’s employees, officers, agents, directors,
stockholders or affiliates; (l) the Receivable is payable to Client;
(m) the Receivable does not arise out of a xxxx and hold sale prior to
shipment, and if the Receivable arises out of a sale to any customer to whom
Client is indebted, the amount of such indebtedness, and any anticipated
indebtedness, is deducted in determining the face amount of such Receivable;
(n) the Receivable is net of any returns, discounts, claims, credits and
allowances; (o) if the Receivable arises out of contracts between Client
and the United States, any state, or any department, agency or instrumentality
of any of them, Client has so notified Xxxxx Fargo Century, in writing, prior
to
the creation of such Receivable, and, if Xxxxx Fargo Century so requests, there
has been compliance with any governmental notice or approval requirements,
including without limitation, compliance with the Federal Assignment of Claims
Act; (p) the Receivable is a good and valid account representing an
undisputed bona fide indebtedness incurred by the Account Debtor therein named,
for a fixed sum as set forth in the invoice relating thereto with respect to
an
unconditional sale and delivery upon the stated terms of goods sold by Client,
or work, labor and/or services rendered by Client; (q) the Receivable does
not arise out of progress xxxxxxxx prior to completion of the order; and
(r) the Receivable is otherwise satisfactory to Xxxxx Fargo Century as
determined in good faith in the reasonable exercise of Xxxxx Fargo Century’s
discretion.
“Equipment”
means
all of the following, now owned and hereafter acquired by Client: all
“equipment” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.
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“Event
of Default”
means
any of the events set forth in Section 7.1 of this Agreement.
“General
Intangibles”
means
all of the following, now owned and hereafter acquired by Client: all “general
intangibles” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all Intellectual Property, Deposit Accounts, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists,
telephone numbers, domain names, claims, income tax refunds, security and other
deposits, options to purchase or sell real or personal property, rights in
all
litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.
“Guarantor”
means
any Person who has guaranteed any of the Obligations.
“Intellectual
Property”
means
all of the following, now owned and hereafter acquired by Client: all
(a) copyrights, copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, (b) trade secret rights,
including all rights to unpatented inventions and know-how, and confidential
information; (c) mask work or similar rights available for the protection
of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same;
(e) trademarks, servicemarks, trade styles, and trade names, whether or not
any of the foregoing are registered, and all applications to register and
registrations of the same and like protections, and the entire goodwill of
the
business of Client connected with and symbolized by any such trademarks;
(f) computer software and computer software products; (g) designs and
design rights; (h) technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above;
and
(j) all licenses or other rights to use any property or rights of a type
described above.
“Inventory”
means
all of the following, now owned and hereafter acquired by Client: all
“inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Client’s custody or possession or in transit
and including any returned goods and any documents of title representing any
of
the above.
“Investment
Property”
means
all of the following, now owned and hereafter acquired by Client: all investment
property, securities, stocks, bonds, debentures, debt securities, partnership
interests, limited liability company interests, options, security entitlements,
securities accounts, commodity contracts, commodity accounts, and all financial
assets held in any securities account or otherwise, wherever located, and all
other securities of every kind, whether certificated or
uncertificated,
“Obligations”
means
all present and future Advances, advances, debts, liabilities, obligations,
guaranties, covenants, duties and indebtedness at any time owing by Client
or
any of its subsidiaries or affiliates to Xxxxx Fargo Century or its parent
or
any of its subsidiaries or affiliates, whether evidenced by this Agreement
or
any note or other instrument or document, whether arising from an extension
of
credit, loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment or as a result
of
the bulk purchasing by Xxxxx Fargo Century, or by Xxxxx Fargo Century’s parent,
subsidiary or affiliates, of the accounts owing from Client to others, or as
a
result of any participation by Xxxxx Fargo Century in Client’s debts owing to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney’s fees, expert
witness fees, audit fees, loan fees, termination fees, minimum interest charges
and any other sums chargeable to Client under this Agreement or under any other
present or future instrument or agreement between Client and Xxxxx Fargo
Century.
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“Other
Property”
means
all of the following, now owned and hereafter acquired by Client: all of the
following as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and all rights relating
thereto: “documents”, “instruments”, “chattel paper”, “letters of credit”,
“fixtures”, and “money”, and all other tangible and intangible personal property
and rights of any other kind which are not included in the other items of
Collateral, whether or not covered by the Code.
“Person”
means
any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any agency
or political division thereof, or any other entity.
“Receivables”
means
all of the following, now owned and hereafter acquired by Client: all “accounts”
as defined in the Code in effect on the date hereof with such additions to
such
term as may hereafter be made (whether or not earned by performance), and all
guaranties and other security therefor, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured
party.
Other
Terms.
All
accounting terms used in this Agreement, unless otherwise indicated, shall
have
the meanings given to such terms in accordance with generally accepted
accounting principles, consistently applied. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meanings provided by
the
Code, to the extent such terms are defined therein.
9. GENERAL
PROVISIONS.
9.1 Computations.
In
computing interest on the Obligations, all checks, wire transfers and other
items of payment received by Xxxxx Fargo Century (including proceeds of
Receivables and payment of the Obligations in full) shall be deemed applied
by
Xxxxx Fargo Century on account of the Obligations on the Business Day of receipt
by Xxxxx Fargo Century of immediately available funds. Xxxxx Fargo Century
shall
not, however, be required to credit Client’s account for the amount of any item
of payment which is unsatisfactory to Xxxxx Fargo Century in its discretion,
and
Xxxxx Fargo Century may charge Client’s account for the amount of any item of
payment which is returned to Xxxxx Fargo Century unpaid.
9.2 Application
of Payments; Accountings. All
payments with respect to the Obligations may be applied, and in Xxxxx Fargo
Century’s sole discretion reversed and re-applied, to the Obligations, in such
order and manner as Xxxxx Fargo Century shall determine in its sole discretion.
Xxxxx Fargo Century may, in its discretion, require that Client pay monetary
Obligations in cash to Xxxxx Fargo Century, or charge them to Client’s account,
in which event they will bear interest at the same rate applicable to the
Advances. Xxxxx Fargo Century shall provide Client monthly with an account
of
advances, charges, expenses and payments made pursuant to this Agreement. Such
account shall be deemed correct, accurate and binding on Client and an account
stated (except for reverses and reapplications of payments made and corrections
of errors discovered by Xxxxx Fargo Century), unless Client notifies Xxxxx
Fargo
Century in writing to the contrary within sixty days after each account is
rendered, describing the nature of any alleged errors or
admissions.
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9.3 Notices.
All
notices to be given under this Agreement shall be in writing and shall be given
either personally, by reputable private delivery service, by regular first-class
mail or certified mail return receipt requested, addressed to Xxxxx Fargo
Century or Client at the addresses shown in the heading to this Agreement,
or at
any other address designated in writing by one party to the other party or
by
electronic mail (at such email addresses as Xxxxx Fargo Century or Client,
as
applicable, may designate to each other in accordance herewith). All notices
shall be deemed to have been given upon actual receipt in the case of notices
personally delivered, upon the receipt of confirmation of receipt in the case
of
notices delivered by electronic mail, or at the expiration of one business
day
following delivery to the private delivery service, or two business days
following the deposit thereof in the United States mail, with postage
prepaid.
9.4 Attorneys
Fees and Costs.
Client
shall reimburse Xxxxx Fargo Century for all reasonable attorneys’ fees and all
filing, recording, search, title insurance, appraisal, audit, and other
reasonable costs incurred by Xxxxx Fargo Century, pursuant to, or in connection
with, or relating to this Agreement (whether or not a lawsuit is filed),
including, but not limited to, all reasonable attorneys’ fees and costs Xxxxx
Fargo Century incurs in order to do the following: prepare and negotiate this
Agreement and any present or future documents relating to this Agreement and
any
waiver, amendment, supplement, consent or modification hereof or thereof; obtain
legal advice in connection with this Agreement or Client; enforce, or seek
to
enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; obtaining or enforcing payment of any Obligation, commence,
intervene in, or defend any action or proceeding; initiate any complaint to
be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; protect, obtain
possession of, lease, dispose of, or otherwise enforce Xxxxx Fargo Century’s
security interest in, the Collateral; and otherwise represent Xxxxx Fargo
Century in any litigation relating to Client. If either Xxxxx Fargo Century
or
Client files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover
its
reasonable costs and attorneys’ fees, including (but not limited to) reasonable
attorneys’ fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment.
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9.5 Waivers.
The
failure of Xxxxx Fargo Century at any time or times to require Client to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Client and Xxxxx Fargo Century shall not
waive or diminish any right of Xxxxx Fargo Century later to demand and receive
strict compliance therewith. Any waiver of any default shall not waive or affect
any other default, whether prior or subsequent, and whether or not similar.
None
of the provisions of this Agreement or any other agreement now or in the future
executed by Client and delivered to Xxxxx Fargo Century shall be deemed to
have
been waived by any act or knowledge of Xxxxx Fargo Century or its agents or
employees, but only by a specific written waiver signed by an authorized officer
of Xxxxx Fargo Century and delivered to Client. Client waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, Receivable, General Intangible, document
or guaranty at any time held by Xxxxx Fargo Century on which Client is or may
in
any way be liable, and notice of any action taken by Xxxxx Fargo Century, unless
expressly required by this Agreement. NEITHER XXXXX FARGO CENTURY NOR ITS
PARENT, NOR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR ATTORNEYS SHALL BE RESPONSIBLE OR LIABLE TO CLIENT OR TO ANY OTHER
PARTY FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY
BE
ALLEGED AS A RESULT OF ANY FINANCIAL ACCOMMODATION HAVING BEEN EXTENDED,
SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER OR AS A RESULT OF
ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
9.6 General.
The
provisions of this Agreement shall be binding upon and inure to the benefit
of
the respective successors, assigns, heirs, beneficiaries and representatives
of
Client and Xxxxx Fargo Century; provided, however, that Client may not assign
or
transfer any of its rights under this Agreement without the prior written
consent of Xxxxx Fargo Century, and any prohibited assignment shall be void.
No
consent by Xxxxx Fargo Century to any assignment shall release Client from
its
liability for the Obligations. If Client consists of more than one Person,
their
liability shall be joint and several, and the compromise of any claim with,
or
the release of, any Client shall not constitute a compromise with, or a release
of, any other Client. This Agreement and all acts and transactions hereunder
and
all rights and obligations of Xxxxx Fargo Century and Client shall be governed
by the laws of the State of California. Client (i) agrees that all actions
and proceedings relating directly or indirectly to this Agreement shall, at
Xxxxx Fargo Century’s option, be litigated in courts located within, and that
the exclusive venue therefor shall be the State of California;
(ii) consents to the jurisdiction and venue of any such court and consents
to service of process in any such action or proceeding by personal delivery
or
any other method permitted by law; and (iii) waives any and all rights
Client may have to object to the jurisdiction of any such court, or to transfer
or change the venue of any such action or proceeding. Paragraph headings are
only used in this Agreement for convenience, and shall not be used in any manner
to construe, limit, define or interpret any term or provision of this Agreement.
The term “including”, whenever used in this Agreement, shall mean “including
(but not limited to)”. This Agreement has been fully reviewed and negotiated
between the parties and no uncertainty or ambiguity in any term or provision
of
this Agreement shall be construed strictly against Xxxxx Fargo Century or Client
under any rule of construction or otherwise. Should any provision of this
Agreement be held by any court of competent jurisdiction to be void or
unenforceable, such defect shall not affect the remainder of this Agreement,
which shall continue in full force and effect. This Agreement and such other
written agreements, documents and instruments as may be executed in connection
herewith are the final, entire and complete agreement between Client and Xxxxx
Fargo Century and supersede all prior and contemporaneous negotiations and
oral
representations and agreements, all of which are merged and integrated in this
Agreement. There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.
The
terms and provisions of this Agreement may not be waived or amended, except
in a
writing executed by Client and a duly authorized officer of Xxxxx Fargo Century.
Time is of the essence in the performance by Client of each and every obligation
under this Agreement.
18
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XXXXX
FARGO CENTURY, INC.
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Loan,
Security and Bulk Purchase
Agreement
|
9.7 Mutual
Waiver of Jury Trial. CLIENT
AND XXXXX FARGO CENTURY EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO,
THIS
AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN XXXXX
FARGO CENTURY AND CLIENT, OR ANY CONDUCT, ACTS OR OMISSIONS OF XXXXX FARGO
CENTURY OR CLIENT OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH XXXXX FARGO CENTURY OR CLIENT,
IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
9.8 Reference
Provision.
(a) The
parties prefer that any dispute between them be resolved in litigation subject
to a Jury Trial Waiver as set forth in the Loan Documents (defined below),
but
the California Supreme Court has held that pre-dispute Jury Trial Waivers not
authorized by statute are unenforceable. This Reference Provision will be
applicable until: (i) the California Supreme Court holds that a pre-dispute
Jury Trial Waiver provision similar to that contained in the Loan Documents
is
valid or enforceable; or (ii) the California Legislature enacts a statute
which becomes law, authorizing pre-dispute Jury Trial Waivers of the type in
the
Loan Documents and, as a result, such waivers become enforceable.
(b) Other
than (i) nonjudicial foreclosure of security interests in real or personal
property, (ii) the appointment of a receiver or (iii) the exercise of
other provisional remedies (any of which may be initiated pursuant to applicable
law), any controversy, dispute or claim (each, a “Claim”) between the parties
arising out of or relating to this Agreement or any other document, instrument
or agreement between Xxxxx Fargo Century and the Client (collectively in this
Section, the “Loan Documents”), will be resolved by a reference proceeding in
California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure (“CCP”), or their successor sections, which
shall constitute the exclusive remedy for the resolution of any Claim, including
whether the Claim is subject to the reference proceeding. Except as otherwise
provided in the Loan Documents, venue for the reference proceeding will be
in
the Superior Court or Federal District Court in the County or District where
the
real property, if any, is located or in a County or District where venue is
otherwise appropriate under applicable law (the “Court”).
19
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XXXXX
FARGO CENTURY, INC.
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Loan,
Security and Bulk Purchase
Agreement
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(c) The
referee shall be a retired Judge or Justice selected by mutual written agreement
of the parties. If the parties do not agree, the referee shall be selected
by
the Presiding Judge of the Court (or his or her representative). A request
for
appointment of a referee may be heard on an ex parte or expedited basis, and
the
parties agree that irreparable harm would result if ex parte relief is not
granted. The referee shall be appointed to sit with all the powers provided
by
law. Pending appointment of the referee, the Court has power to issue temporary
or provisional remedies.
(d) The
parties agree that time is of the essence in conducting the reference
proceedings. Accordingly, the referee shall be requested, subject to change
in
the time periods specified herein for good cause shown, to (a) set the
matter for a status and trial-setting conference within fifteen (15) days after
the date of selection of the referee, (b) if practicable, try all issues of
law or fact within ninety (90) days after the date of the conference and
(c) report a statement of decision within twenty (20) days after the matter
has been submitted for decision.
(e) The
referee will have power to expand or limit the amount and duration of discovery.
The referee may set or extend discovery deadlines or cutoffs for good cause,
including a party’s failure to provide requested discovery for any reason
whatsoever. Unless otherwise ordered based upon good cause shown, no party
shall
be entitled to “priority” in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery shall
be responded to within fifteen (15) days after service. All disputes relating
to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.
(f) Except
as
expressly set forth in this Agreement, the referee shall determine the manner
in
which the reference proceeding is conducted including the time and place of
hearings, the order of presentation of evidence, and all other questions that
arise with respect to the course of the reference proceeding. All proceedings
and hearings conducted before the referee, except for trial, shall be conducted
without a court reporter, except that when any party so requests, a court
reporter will be used at any hearing conducted before the referee, and the
referee will be provided a courtesy copy of the transcript. The party making
such a request shall have the obligation to arrange for and pay the court
reporter. Subject to the referee’s power to award costs to the prevailing party,
the parties will equally share the cost of the referee and the court reporter
at
trial.
(g) The
referee shall be required to determine all issues in accordance with existing
case law and the statutory laws of the State of California. The rules of
evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, provide all temporary or provisional
remedies, enter equitable orders that will be binding on the parties and rule
on
any motion which would be authorized in a trial, including without limitation
motions for summary judgment or summary adjudication. The referee shall issue
a
decision and pursuant to CCP §644 the referee’s decision shall be entered by the
Court as a judgment or an order in the same manner as if the action had been
tried by the Court. The final judgment or order or from any appealable decision
or order entered by the referee shall be fully appealable as provided by law.
The parties reserve the right to findings of fact, conclusions of laws, a
written statement of decision, and the right to move for a new trial or a
different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
20
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FARGO CENTURY, INC.
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Loan,
Security and Bulk Purchase
Agreement
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(h) If
the
enabling legislation which provides for appointment of a referee is repealed
(and no successor statute is enacted), any dispute between the parties that
would otherwise be determined by reference procedure will be resolved and
determined by arbitration. The arbitration will be conducted by a retired judge
or Justice, in accordance with the California Arbitration Act §1280 through
§1294.2 of the CCP as amended from time to time. The limitations with respect
to
discovery set forth above shall apply to any such arbitration proceeding.
(i) THE
PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS REFERENCE
PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY. AFTER CONSULTING
(OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH
PARTY KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS
REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT
OF
OR IS RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.
10. USA
PATRIOT ACT.
Xxxxx
Fargo Century shall have received, sufficiently in advance of the closing date,
all documentation and other information required by bank regulatory authorities
under applicable “know your customer” and anti-money laundering rules and
regulations, including without limitation the United States PATRIOT Act (Title
III of Pub L. 107-56) (the “Act”). Xxxxx Fargo Century hereby notifies the
Client that pursuant to the requirements of the Act, its is required to obtain,
verify and record information that identifies the Client, which information
includes the name and addresses of the Client, and other information that will
allow Xxxxx Fargo Century to identify the Client in accordance with the Act.
The
Client shall and shall cause its subsidiaries, to provide such information
and
take such actions as requested by Xxxxx Fargo Century in order to assist Xxxxx
Fargo Century in maintaining compliance with the Act.
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FARGO CENTURY, INC.
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Loan,
Security and Bulk Purchase
Agreement
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|
CLIENT
|
XXXXX
FARGO CENTURY
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|||
|
INFOSONICS
CORPORATION, INC.
|
XXXXX
FARGO CENTURY, INC.
|
|||
|
By
|
/s/
Xxxxxx Ram
|
By
|
/s/
Xxxxx Xxxxxxxx
|
|
|
Name
|
Xxxxxx
Ram
|
Name
|
Xxxxx Xxxxxxxx | |
|
Title
|
CEO
|
Title:
|
Executive Vice President, Western Regional Manager | |
S-1
Loan,
Security and Bulk Purchase Agreement
|
XXXXX
FARGO CENTURY, INC.
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Loan,
Security and Bulk Purchase
Agreement
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SCHEDULE
TO
LOAN,
SECURITY AND BULK PURCHASE Agreement
|
Client:
|
INFOSONICS
CORPORATION
|
|
Address:
|
0000
Xxxxxxxxx Xxxxx, #000
|
|
Xxx
Xxxxx, XX 00000
|
|
|
Date:
|
April
30, 2008
|
This
Schedule is an integral part of the Loan, Security and Bulk Purchase Agreement
between Xxxxx
Fargo Century, Inc.
(“Xxxxx
Fargo Century”) and the above client (“Client”) of even date.
|
1.
|
ADVANCE
LIMIT
|
|
(Section
1.1):
|
An
amount not to exceed the lesser of $45,000,000
(“Maximum Discretionary Line Amount”)
or
the sum of (a) and (b) below:
|
|
(a) 85%
of
the net amount of Client’s Eligible Receivables (as defined in Section 8
above); plus
|
|
|
(b) the
lesser of (i) 50%
of
the value of Client’s Eligible Inventory (as defined in Section 8 above)
and (ii) 85%
of
the net orderly liquidation value (as determined by an independent
third-party inventory appraisal acceptable to Xxxxx Fargo Century),
which
is located at Client’s Address, 0000 X.X. 00xx Xxxxxx, Xxxxx [Dorel],
Florida and at any other location where Xxxxx Fargo Century has received
a
signed collateral access agreement in form and substance acceptable
to it;
provided
that the amount under this subsection 1(b) shall not exceed the lesser
of
(i) 30%
of
total Advances outstanding at any given time, and (ii) $8,000,000.
“Value” of Client’s Eligible Inventory shall mean the lower of cost or
wholesale market value thereof, as determined by Xxxxx Fargo Century
in
its sole discretion.
|
|
|
(c) based
on the formula set forth in (b) above, the initial advance rates
against Inventory by product type as of the date hereof
are:
|
|
Product
|
Initial
Advance Rate
|
|
|
Very
Kool
|
20.0%
|
|
|
LG
|
50.0%
|
|
|
Samsung
|
50.0%
|
|
|
Other
Brands
|
30.00%
|
|
XXXXX
FARGO CENTURY, INC.
|
Loan,
Security and Bulk Purchase
Agreement
|
|
2.
|
INTEREST.
|
Contract
Rate (Section
1.2):
A
rate
equal to, at Client’s option, (i) the “Prime Rate” (as defined below), in effect
from time to time, minus 0.50%
per
annum, or (ii) the “LIBOR Rate” (as defined below), in effect from time to time,
plus 2.0%
per
annum
(the sum of the LIBOR Rate and such margin is herein referred to as the
“Adjusted LIBOR Rate"), which margin shall be reduced to 1.75% if the Client
achieves net operating profit for its fiscal year 2008.
Interest
shall be calculated on the basis of a 360-day year for the actual number of
days
elapsed. The Contract Rate in each month shall be based on the Prime Rate on
the
last Business Day of the preceding month. “Prime Rate” means the “prime rate”
announced from time to time by Xxxxx Fargo Bank N.A. (or such other bank as
Xxxxx Fargo Century shall select in its discretion) as its “prime” or base rate
for commercial loans, whether or not that rate is the lowest interest rate
charged by said bank. “LIBOR Rate” means the one (1) month average of rates
which are listed as the Three (3) Month “London Interbank Offered Rate (Libor)”
(for Dollars), as published in the Money Rates section of the Wall Street
Journal on each Business Day of such calendar month. “Business Day” means any
day other than a Saturday, Sunday or other day on which commercial banks in
London and/or Los Angeles are authorized or required by law to
close.
Notwithstanding
the foregoing, the Client agrees that Xxxxx Fargo Century may from time to
time
review the Adjusted LIBOR Rate formula set forth above, based on its own cost
of
funds, and if it determines in its reasonable discretion that offering the
foregoing Adjusted LIBOR Rate is not economically feasible to it, and if the
parties are then unable to agree on a revised formula for the Adjusted LIBOR
Rate, then the effective rate shall be the Prime Rate, and the LIBOR Rate shall
no longer be available hereunder.
At
any
time from and after the occurrence and during the continuation of an Event
of
Default, Xxxxx Fargo Century may in its discretion increase the Contract Rate
by
up to 3.0% per annum.
|
3.
|
A/R
MANAGEMENT FEE (SECTION
1.3):
|
|
A/R
Management Fee:
|
0.10%
of
the gross invoice amount of each Receivable, computed as provided
in, and
subject to the provisions of, Section 1.3 and the other provisions
of this
Loan, Security and Bulk Purchase Agreement.
|
|
Maximum
Annual
A/R
Management Fee:
|
$100,000
per Contract Year.
|
|
XXXXX
FARGO CENTURY, INC.
|
Loan,
Security and Bulk Purchase
Agreement
|
|
4.
|
LITIGATION
(Section 3.10)
|
Securities
Class Actions
In
the
securities class action, captioned In Re: InfoSonics Corporation Securities
Litigation, Lead Case No. 06 CV 1231, now pending before Judge Xxxxxxxxxx in
the
United States District Court for the Southern District of California, Plaintiffs
filed a second amended consolidated complaint on September 10, 2007 against
the
Company and certain of its officers and directors. The second amended
consolidated complaint alleges violations of Section 10(b) of the Exchange
Act
and associated Rule 10b-5, Section 20(a) and Section 20A in connection with
the
announcement of the Company’s restatement of first quarter 2006 earnings and in
connection with allegedly false and/or misleading statements related to the
Company’s distribution of the VK Mobile phone. Plaintiffs seek a declaration
that their action is a proper class action pursuant to Rule 23(a) and (b)(3),
unspecified damages, prejudgment and post-judgment interest, attorneys’ fees,
expert witness fees, other costs, and other unspecified relief. The plaintiffs
purport to represent a class of purchasers of the Company’s stock during the
period February 6, 2006 to August 9, 2006.
On
October 1, 2007, the defendants filed a motion to dismiss the second amended
consolidated complaint on the grounds, among others, that the plaintiffs had
failed to adequately plead violations of the securities laws. On February 15,
2008, the Court held a hearing on the motion to dismiss and thereafter took
the
matter under submission. At this time, discovery has not begun and no trial
date
has been set by the Court.
Derivative
Action
In
the
derivative action, captioned In Re InfoSonics Corporation Derivative Litigation,
Lead Case No. 06 CV 1336, now pending before Judge Xxxxxxxxxx in the United
States District Court for the Southern District of California, plaintiffs filed
a consolidated complaint on November 6, 2006 purportedly on behalf of the
Company against certain of its officers and directors, and the Company as a
nominal defendant. The consolidated complaint alleges claims for violations
of
Section 14(a) of the Exchange Act, Sections 25402 and 25403 of the California
Corporations Code, disgorgement under the Xxxxxxxx-Xxxxx Act of 2002, breach
of
fiduciary duty, abuse of control, gross mismanagement, waste of corporate
assets, unjust enrichment, rescission, a constructive trust, and an accounting,
in connection with the Company’s restatement of first quarter 2006 earnings and
in connection with allegations of wrongdoing with respect to granting,
exercising, accounting and reporting of the stock options that the Company
granted in December 2005. Plaintiffs seek unspecified damages, declaratory
relief regarding the Xxxxxxxx-Xxxxx Act of 2002, Section 14(a) of the Exchange
Act, and the legality of stock options, a constructive trust, restitution,
disgorgement, modification of certain corporate governance and internal
procedures, extraordinary equitable and/or injunctive relief, costs, and such
other relief as is just and proper.
|
XXXXX
FARGO CENTURY, INC.
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Loan,
Security and Bulk Purchase
Agreement
|
Defendants
filed a motion to dismiss the consolidated complaint on the grounds, among
others, that the plaintiffs had failed to make a demand on the Company’s board
of directors and to adequately allege their other purported claims. On September
4, 2007, the Court granted defendants’ motion to dismiss for failure to make a
demand on the board, and also granted with prejudice the motion to dismiss
the
Xxxxxxxx-Xxxxx claim. The Court denied the other grounds for dismissal. On
March
4, 2008, the Court entered an order continuing the deadline for plaintiffs
to
file an amended complaint to June 3, 2008. At this time, discovery on the merits
has not begun and no trial date has been set by the Court.
|
5.
|
MATURITY
DATE
|
|
(Section
6.1):
|
April
30, 2010,
subject to automatic renewal as provided in Section 6.1 above, and
early
termination as provided in Section 6.2 above.
|
|
6.
|
EARLY
TERMINATION FEE.
|
(Section
6.2):
First
Contract Year: 1.0% of the Maximum Discretionary Line Amount.
Second
Contract Year: 0.5% of the Maximum Discretionary Line Amount.
|
7.
|
REPORTING.
|
(Section
5.3):
Client
shall provide Xxxxx Fargo Century with the following:
|
1.
|
Weekly
inventory designations and perpetual inventory reports, by Wednesday
of
the following week.
|
|
2.
|
Monthly
unaudited financial statements, on a consolidated basis with its
subsidiaries, as soon as available, and in any event within 30 days
after
the end of each month, in form and substance acceptable to Xxxxx
Fargo
Century.
|
|
3.
|
Monthly
Receivable agings, aged by invoice date, accounts payable aging report,
by
vendor, and borrowing base certificate, all within 10 days after
the end
of each month.
|
|
XXXXX
FARGO CENTURY, INC.
|
Loan,
Security and Bulk Purchase
Agreement
|
|
4.
|
10-Q
quarterly reports and 10-K annual reports as soon as
available.
|
|
5.
|
Annual
consolidated business plan and projections, prepared on a monthly
basis,
within 60 days prior to each fiscal year
end.
|
|
6.
|
Annual
financial statements within 90 days after the end of each fiscal
year of
Client, on a consolidated basis with its subsidiaries, in form and
substance acceptable to Xxxxx Fargo Century and audited by an independent
certified public accountant acceptable to Xxxxx Fargo
Century.
|
|
7.
|
Promptly
upon actual knowledge, information regarding any changes to the overall
or
per customer insured amounts or limits under any credit insurance
policy.
|
|
8.
|
Such
other information as Xxxxx Fargo Century may reasonably request from
time
to time.
|
|
8.
|
ADDITIONAL
PROVISIONS.
|
If
any,
and as needed.
|
Client:
|
Xxxxx
Fargo Century:
|
|||
|
InfoSonics
Corporation, Inc.
|
Xxxxx
Fargo Century, Inc.
|
|||
|
By
|
/s/
Xxxxxx Ram
|
|||
|
Name
|
Xxxxxx
Ram
|
By
|
/s/ Xxxxx Xxxxxxxx | |
|
Title
|
CEO
|
Title:
|
Executive Vice President, Western Regional Manager | |
