SECURED PROMISSORY NOTE
$1,000,000 Date: October 1, 1996
---------
FOR VALUE RECEIVED, Source Scientific, Inc. (the "Borrower") hereby absolutely
and unconditionally promises to pay to Concord Growth Corporation (the
"Lender"), or order, on demand but in no event later than the date specified in
the Loan Agreement (as defined below) as the date on which all amounts owing by
the Borrower to the Lender are due and payable, in immediately available funds,
the principal amount of One Million Dollars ($1,000,000) (the Maximum Credit)
or, if less, the aggregate principal amount of this Note outstanding on such
date, and to pay interest and fees on the unpaid principal amount hereof, in
immediately available funds, monthly in arrears on the first day of each
calendar month for the immediately preceding month in the amounts specified in
the Loan Agreement (as defined below). This note evidences loans and other
credit accommodations made or to be made by the Lender to the Borrower pursuant
to the Security Agreement dated October 1, 1996 and the Loan Agreement dated
October 1, 1996, by and between Xxxxxx and Xxxxxxxx (as amended and in effect
from time to time, the "Loan Agreement"). Capitalized terms defined in the Loan
Agreement, whether directly or indirectly by reference, shall have the
respective meanings herein assigned to such terms in the Loan Agreement.
The principal amount of this Note is subject to prepayment in whole or in part
in the manner and to the extent specified in the Loan Agreement. Upon the
occurrence of any Event of Default, the entire unpaid principal balance of this
Note, all of the unpaid interest and fees accrued thereon or with respect
thereto and all other amounts payable by Borrower to Lender under the Loan
Agreement or hereunder may automatically become immediately due and payable,
without demand, in the manner and with the effect provided in the Loan
Agreement.
This Note is secured by the security interests in, liens on and rights of setoff
against, the assets of the Borrower granted as collateral security pursuant to
the Loan Agreement and any other documents, instruments and agreements executed
and delivered from time to time in connections therewith.
No delay or omission on the part of the Lender or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or any
other right of the Lender or of such holder, nor shall any delay, omission or
waiver of any one occasion be deemed a bar to or waiver of the same or any other
right or any other occasion. The Borrower and every endorser and guarantor of
this Note regardless of the time, order or place of signing hereby waives
presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person or entity primarily or secondarily liable.
All expenses of enforcement of the Lender's rights hereunder and other costs and
expenses in respect hereof (including reasonable court costs and legal and other
professional fees) shall be for the account of the Borrower.
Borrower acknowledges that Lender may assign and sell participations in its
rights and obligations under this Note, the Loan Agreement and any other
agreements. Lender may include its repayment rights under the Loan Agreement,
this Note and the other agreements in a pool of loan receivables in which Lender
sells undivided interests as part of a securitization program. Xxxxxxxx
understands that Lender may from time to time transfer and assign its rights
under the Loan Agreement and this Note to one or more assignees. Borrower hereby
consents to these transfers and assignments by Xxxxxx to one or more assignees.
Xxxxxxxx hereby agrees that any such assignee may exercise the rights of Xxxxxx
xxxxxxxxx. Borrower hereby consents and acknowledges that any and all defenses,
claims or counterclaims that it may have against Lender shall be limited to, and
may only be brought against, Lender and shall not extend to any assignee.
Borrower and Lender intend that any and all direct or indirect assignees of the
Lender of the type set forth above shall be third party beneficiaries of this
Note.
This Note shall be binding upon the Borrower's successors and assigns, and shall
inure to the benefit of the Lender's successors and assigns.
THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO CONFLICTS OF
LAW).
XXXXXXXX, LENDER AND, BY ITS ACCEPTANCE HEREOF, EACH HOLDER, EACH WAIVE ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF
THEM AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THE LOAN
AGREEMENT, THIS NOTE, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTUOUS
CONTACT BY BORROWER OR LENDER, OR WHICH IN ANY WAY, DIRECTLY OR INDIRECTLY,
ARISES FROM OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO
EVENT WILL LENDER OR ANY HOLDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly
authorized officer to take effect as of the date first hereinabove written.
BORROWER:
SOURCE SCIENTIFIC, INC.
By:
ACCOMMODATION NOTE
$250,000 Date: October 1, 1996
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FOR VALUE RECEIVED, the undersigned (hereinafter "Borrower"), hereby promises to
pay to the order of CONCORD GROWTH CORPORATION, a California corporation
(hereinafter "Lender"), or its assigns, at 0000 Xxxx Xxxxxx Xxxxx, Xxxx Xxxx, XX
00000, or at such other place as the holder of this Accommodation Note (the
"Note") may designate from time to time in writing, in such coin or currency of
the United States which shall be legal tender in payment of all the debts and
dues, public and private, at the time of payment, the principal sum of Two
Hundred Fifty Thousand DOLLARS ($250,000), or such lesser principal amount as
may be from time to time outstanding pursuant to the terms of this Note,
together with interest from and after the date hereof on the unpaid principal
balance outstanding at the rate and payable in the manner set forth below.
All capitalized terms used in this Note, unless otherwise specifically defined
in this Note, shall have the meanings ascribed to them in that certain Loan
Agreement between Borrower and Lender dated as of October 1, 1996, as amended,
supplemented, extended or restated from time to time (the "Loan Agreement").
Lender may make advances from time to time, in its sole discretion, under this
Note in increments of not less than $25,000 (each an "Accommodation") up to a
maximum aggregate amount not to exceed the lesser of: (a) Two Hundred Fifty
Thousand Dollars ($250,000) or (b) the amount by which the Maximum Credit
exceeds the sum of all outstanding Advances and Accommodations.
In the event the aggregate outstanding Accommodations shall at any time exceed
the limitations provided in this Note, Borrower shall immediately repay the
Accommodations in the amount of such excess.
Each payment shall be first applied to interest and other charges due
hereunder, with remaining amounts being applied to principal.
This Note is an "Accommodation Note" referred to in, and is issued pursuant to,
that certain Loan Agreement, evidences one or more "Accommodations" referred to
in the Loan Agreement, and is entitled to all of the benefits and security of
the Loan Agreement, the Security Agreement and the other Loan Documents. All of
the terms, covenants, and conditions of the Loan Agreement, Security Agreement
and the other Loan Documents are hereby made a part of this Note and are deemed
incorporated herein in full. In the event there exists any actual conflict
between the terms of this Note and the terms of the Loan Documents, the
provisions of this Note shall control.
Accommodation Fee. Borrower shall pay Lender on the date hereof a facility fee
(the "Accommodation Fee") in the amount of NA percent (NA%) of the Principal Sum
of this Note, which fee is fully earned and non-refundable as of the date such
payment is due.
Interest. Interest shall accrue on the principal balance outstanding under this
Note at a floating rate per annum equal to the Prime Rate (as defined below)
plus two and three quarters percent (Prime + 2.75%) (the "Accommodation Interest
Rate"), which interest shall be payable and calculated as hereinafter set forth.
Borrower shall pay such interest to Lender on the first day of each month in an
amount equal to (a) the quotient obtained by dividing the sum of the daily
unpaid principal balance outstanding on each day during the immediately
preceding month by the actual number of days in such month (the "Average
Accommodation Daily Balance"), multiplied by (b) the quotient obtained by
dividing the Accommodation Interest Rate by 360, multiplied by (c) the actual
number of days in the immediately preceding month. The Accommodation Interest
Rate shall increase or decrease monthly, on the first day of each month, by the
amount of any increase or decrease in the Prime Rate. For purposes of this
Agreement, the "Prime Rate" is the prime rate of interest publicly listed by the
Western Edition of the Wall Street Journal on the first day of each month or, if
the first day of such month is not a business day, on the last business day of
the immediately preceding month. In the event the prime commercial interest rate
listed by the Wall Street Journal is a range, the highest rate in the range
shall be the "Prime Rate".
Administrative Fee. Borrower shall pay Lender on the first day of each month an
administrative fee (the "Accommodation Administrative Fee") in an amount equal
to (a) the Average Accommodation Daily Balance for the immediately preceding
month, multiplied by (b) one quarter of one percent ( .25%).
All obligations under this Note, including all Accommodations, and all accrued
and unpaid interest and Accommodation Administrative Fees and Accommodation
Fees, constitute Obligations secured by the Collateral, and shall be due and
payable in full on the date the Loan Agreement is terminated if it is terminated
prior to expiration of the Term (the "Maturity Date"). Each individual
Accommodation shall be paid in full, no later than sixty (60) days after such
Accommodation has been made to Borrower. All obligations and payments due herein
under this Note, may be applied to the revolving loans contemplated in the Loan
Agreement.
In no event shall charges constituting interest under this Note exceed the
highest rate permitted under applicable law. In the event that a court of
competent jurisdiction makes a final determination that Xxxxxx has received
interest under this Note in excess of the maximum lawful rate, then such excess
shall be deemed a payment of principal and applied against the principal under
this Note, and the interest payable under this Note shall be deemed amended to
the amount payable under the maximum lawful rate. It is the intent hereof that
Borrower not pay or contract to pay, and that Lender not receive or contract to
receive, directly or indirectly in any manner whatsoever, interest in excess of
that which may be paid by Borrower under applicable law.
Upon the occurrence of an Event of Default, this Note may, and without demand,
notice or legal process of any kind, be declared, and upon such declaration
immediately shall become, or upon certain circumstances set forth in the Loan
Agreement may become without declaration, due and payable. Without limiting the
terms of the Loan Agreement, Security Agreement and the other Loan Documents, if
Lender takes any action to collect this Note, then Borrower shall be obligated
to pay any reasonable fees and expenses in connection with such action, which
fees and expenses constitute Obligations secured by the Collateral.
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
Wherever possible each provision of this Note shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby, or
any other property or indebtedness due or to become due to Borrower. Xxxxxxxx
agrees that, without releasing or impairing Xxxxxxxx's liability hereunder,
Xxxxxx may at any time release, surrender, substitute or exchange any collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
This Note shall be governed by, and construed and enforced in accordance with,
the laws of the State of California. Sections of the Loan Agreement relating to
waiver of jury trial, consent to jurisdiction, no implied waiver, and release
apply to this Note, and are hereby incorporated into this Note by reference.
IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be duly executed and
delivered on the date first above written.
"Borrower":
SOURCE SCIENTIFIC, INC.
By:
Name:
Title:
"Lender":
CONCORD GROWTH CORPORATION
By:
Name:
Title:
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is entered into as of October 1, 1996,
between Source Scientific, Inc., ("Borrower") and Concord Growth Corporation
("Lender"), in connection with various loans and other credit accommodations by
Lender to Borrower pursuant to the Loan Agreement dated October 1, 1996
[concurrently herewith] between Borrower and Lender, as the same may be amended,
restated, supplemented, extended, or replaced from time to time (collectively,
the "Loan Agreement").
Capitalized terms used in this Agreement shall have either (a) the meanings
assigned to them in Section 6.6 of this Agreement, or (b) if such terms are not
otherwise defined in this Agreement, the respective meanings assigned to them in
the Loan Agreement.
1. GRANT OF SECURITY INTEREST
1.1 Grant of Security Interest. To secure the payment and performance
in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of
setoff against, and Borrower hereby assigns and pledges to Lender
for security purposes, all of Borrower's right, title and interest
in and to the following property, whether now owned or existing or
hereafter acquired or arising, wherever located, (collectively,
the "Collateral"), including any Collateral not deemed eligible
for lending purposes: (a) All accounts; (b) All chattel paper; (c)
All general intangibles, including, without limitation, all rights
to payment, causes of action,
rights to receive tax refunds, contract rights, customer
lists, guaranties, deposit accounts, cash, rights in and
claims under insurance policies (including rights to
unearned premiums), copyrights, patents, trademarks,
tradenames, rights under license agreements and rights
thereunder, all other intellectual property, and goodwill
(including the goodwill associated with trademarks and
trademark licenses);
(d) All investment property (as defined in the Uniform Commercial
Code); (e) All inventory; (f) All equipment and fixtures; (g) All
documents, instruments, letters of credit and bankers'
acceptances; (h) All consumer goods, farm products, crops, timber,
minerals or the like (including oil and gas); (i) All books and
records relating to any of the above, including, without
limitation, all computer
programs, printed output and computer readable data in the
possession or control of the Borrower, any computer service
bureau or other third party; and
(j) All accessions, substitutions for and all replacements,
products, and cash and non-cash proceeds of the foregoing,
in whatever form, including all insurance proceeds and all
claims against third parties for loss or destruction of or
damage to any of the foregoing.
2. APPOINTMENT AS ATTORNEY-IN-FACT; PRESERVATION OF COLLATERAL
2.1. Attorney-in-Fact. Borrower hereby appoints Xxxxxx and any designee
of Lender as Xxxxxxxx's attorney-in-fact and authorizes Lender or
such designee, at Borrower's sole expense, to exercise at any
times in Xxxxxx's or such designee's discretion all or any of the
following powers, which powers, being coupled with an interest,
shall be irrevocable until all Obligations have been paid and sat-
isfied in full:
(a) receive, endorse, assign, deliver, and deposit, in the name
of Lender or Borrower, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and docu-
ments relating to the Collateral or the proceeds thereof;
(b) notify account debtors, other obligors or any bailees of the
interest of Lender in the Collateral or request from account
debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender,
information concerning the Collateral and any amounts owing
with respect thereto;
(c) notify account debtors or other obligors to make payment
directly to Lender, or notify bailees as to the disposition
of Collateral;
(d) execute in the name of Borrower and file against Borrower in
favor of Lender financing statements, deeds of trust,
mortgages, or other assignment documents, as well as any
amendments with respect to any portion of the Collateral;
(e) obtain insurance at Borrower's expense and, after an Event
of Default, to adjust or settle any claim or other matter
arising pursuant to Borrower's insurance or to amend or
cancel such insurance;
(f) after an Event of Default, take or bring, in the name of
Lender or Borrower, all steps, actions, suits or proceedings
deemed by Lender necessary or desirable to direct collection
of or other realization upon the accounts and other
Collateral;
(g) after an Event of Default, change the address for delivery
of mail to Borrower and to receive and open mail addressed
to Borrower; and
(h) after an Event of Default, extend the time of payment of,
compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all
accounts or other Collateral which includes a monetary
obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations.
2.2. Limitations Upon Written Notice or After Event of Default.
Borrower shall not, without the prior written consent of Lender,
(1) absent an Event of Default, after receiving written notice
from Lender, or (2) after an Event of Default:
(a) grant any extension of time of payment of any of the
accounts or any of the other Collateral that includes a
monetary obligation;
(b) compromise or settle any of the accounts or any such other
Collateral for less than the full amount thereof;
(c) release in whole or in part any account debtor or other
person liable for the payment of any of the accounts or any
such other Collateral; or
(d) grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any of the
accounts or any such other Collateral.
2.3. Xxxxxx's Right to Cure. Lender may, at its option, cure any
default by Borrower under any agreement with a third party or pay
or bond on appeal any judgment entered against Borrower, discharge
taxes, liens, security interest or other encumbrances t any time
levied on or existing with respect to the Collateral and pay any
amount or perform any act which, in Lender's sole judgment, is
necessary or appropriate to preserve, protect, insure, or realize
upon the Collateral. Xxxxxx may charge Xxxxxxxx's loan account for
any amounts so expended, such amounts to be repayable by Borrower
on demand. Lender shall be under no obligation to effect such
cure, payment, bonding or discharge, and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower.
2.4. Inspection; Access to Collateral. Lender or its designee shall
have access at any time to all of the premises where Collateral
is located for the purposes of inspecting the Collateral and
making copies of Borrower's books and records. Lender may use such
of Borrower's personnel, equipment, including computer equipment,
programs, printed output and computer readable media, supplies and
premises for the collection of accounts and realization on other
Collateral as Lender deems appropriate. Borrower hereby irrevo-
cably authorizes all accountants and third parties to disclose
and deliver to Lender all financial and other information in their
possession regarding Borrower. All such inspection, copying,
use of personnel, equipment and premises, and disclosure of infor-
mation, shall be at Borrower's sole expense.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which,
shall be continuing conditions of the making of loans or other credit
accommodations by Lender to Borrower under the Loan Agreement:
3.1. Trade Names. Borrower may from time to time render invoices to
account debtors under its trade names set forth in Schedule A
hereto; provided, that (a) each such trade name does not refer to
another corporation or other legal entity, and (b) all accounts
and proceeds thereof (including any returned merchandise) invoiced
under any such trade names are owned exclusively by Borrower and
are subject to the security interest of Lender.
3.2. Locations of Collateral. Xxxxxxxx's books and records concerning
accounts and its chief executive office are and shall be
maintained only at the address set forth below Xxxxxxxx's
signature. Borrower's only other places of business and the only
other locations of Collateral, if any, are and shall be the
addresses set forth in Schedule A, except Borrower may change such
locations or open a new place of business after thirty (30) days
prior written notice to Lender. Prior to any change in location or
opening of any new place of business, Borrower shall execute and
deliver or cause to be executed and delivered to Lender such
financing statements and other agreements as Lender may require.
3.3. Encumbrances Against Collateral. Borrower has and at all times
will continue to have good and marketable title to all of the
Collateral, free and clear of all liens, security interests,
claims or encumbrances of any kind except, if any, those set forth
on Schedule A hereto. The liens and security interests granted by
Borrower to Lender in the Collateral are first priority liens and
security interests, subject only to those liens and security
interests set forth on Schedule A, unless the holder of any such
liens and security interests subordinates to Lender.
3.4. Insurance. Borrower shall at all times maintain, with financially
sound and reputable insurers, casualty insurance with respect to
the Collateral and other assets. Borrower shall at the request
of Xxxxxx, name Lender as loss payee of such insurance. All
such insurance policies shall be in such form, substance,
amounts and coverage as may be satisfactory to Lender and shall
provide for thirty (30) days' prior written notice to Lender of
cancellation or reduction of coverage. Borrower shall deliver to
Lender, in kind, all payments or instruments representing proceeds
of insurance received by Borrower. Insurance proceeds received
by Xxxxxx, at any time, may be applied, at Xxxxxx's option, to
repay any of the Obligations, whether or not due (and in any order
determined by Lender), or held as security therefor, or employed
to replace or repair any portion of the Collateral.
3.5. Supplemental Documentation. Upon Xxxxxx's request, at any time,
Borrower shall execute and deliver such agreements, documents and
instruments, and do such further acts as Lender in its discretion,
deems necessary or appropriate to create, preserve, perfect or
evidence any security interest of Lender, or the priority thereof,
in the Collateral.
3.6. Other Fees and Expenses. Borrower shall pay to Lender immediately
upon Xxxxxx's demand, all fees and expenses, including reasonable
fees and expenses of attorneys and other professionals, incurred
by Lender in connection with any and all of the following:
(a) preparing, amending, supplementing, restating, negotiating
or enforcing the Loan Agreement, any of the other Loan Documents
or any waivers or consents in connection with the foregoing, (b)
perfecting, protecting or enforcing Xxxxxx's interest in the Coll-
ateral, (c) collecting the Obligations, or (d) defending or in
any way addressing any claims made or litigation initiated by or
against Lender as a result of Xxxxxx's relationship with Borrower
or any guarantor. All such fees and expenses shall be payable to
Lender whether incurred before, during or after any bankruptcy
case or insolvency proceeding involving Borrower, any guarantor
or any account debtor. Borrower shall be exempt from payment of
such fees and expenses in the event of willful misconduct and
gross negligence on the part of the Lender.
3.7. Copyrights, Patents and Trademarks. Borrower owns or possesses
all of the copyrights, patents, trademarks and licenses necessary
to conduct its business. All such copyrights, patents, trademarks
and licenses are listed on Schedule A hereto.
4. EVENTS OF DEFAULT AND REMEDIES
4.1. Events of Default. The occurrence of an "Event of Default" under
the Loan Agreement constitutes an Event of Default under this
Agreement.
4.2. Remedies. Upon the occurrence of an Event of Default and at any
time thereafter, Xxxxxx shall have all rights and remedies prov-
ided in this Agreement, the Loan Agreement, any other Loan
Documents, he Uniform Commercial Code as in effect in California
or other applicable law, all of which rights and remedies may be
exercised without notice to Borrower, all such notices being
hereby waived, except such notice as is expressly provided for
hereunder or is not waivable under applicable law. All rights and
remedies of Lender are cumulative and not exclusive and are
enforceable, in Xxxxxx's discretion, alternatively, successively,
or concurrently on any one or more occasions and in any order
Lender any determine. Without limiting the foregoing, Lender may:
(a) terminate the facility under the Loan Agreement with respect
to further Advances and other loans and Accommodations,
whereupon no further Advances, loans or other Accommod-
ations will be made thereunder or pursuant to any Inventory
Rider;
(b) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender whereupon all
Obligations shall become immediately due and payable without
demand, presentation, protest, or further notice of any
kind;
(c) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral;
(d) require Borrower, at Borrower's expense, to assemble and
make available to Lender all or any portion of the
Collateral at any place and time designated by Lender;
(e) collect, foreclose, receive, appropriate, setoff and realize
upon, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all
accounts or other Collateral which includes a monetary
obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations;
(f) sell, lease, transfer, assign, deliver or otherwise dispose
of any and all Collateral, at such prices or terms as Lender
may deem reasonable, for cash, upon credit or for future
delivery, with Lender having the right to purchase the whole
or any part of the Collateral at any public sale and, to the
extent authorized by applicable law, at any private sale.
If any of the Collateral is sold or leased by Lender upon
credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment therefor is
finally collected by Xxxxxx. If notice of disposition of
Collateral is required by law, seven (7) days prior notice
by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or
other intended disposition of Collateral is to be made,
shall be deemed to be reasonable notice thereof and Borrower
waives any other notice. If Lender institutes any action
to recover any Collateral or seeks recovery of any Colla-
teral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
4.3. Application of Collateral Proceeds. Lender may apply the cash
proceeds of Collateral actually received by Lender from any sale,
lease, foreclosure or other disposition of the Collateral to
payment of any of the Obligations, in whole or in part (including
reasonable attorneys' fees and legal expenses incurred by Lender
with respect thereto or otherwise chargeable to Borrower) and in
such order as Lender may elect, whether or not then due. Borrower
shall remain liable to Lender for the payment of any deficiency,
together with interest at the rate provided in the Loan Agreement
plus the Default Rate as defined in the Loan Agreement, and all
costs and expenses of collection or enforcement, including
reasonable attorneys' fees and expenses.
4.4. Grant of License to Use Patents and Trademarks. To enable Lender
to exercise rights and remedies under Section 4.2 hereof Borrower
hereby grants to Lender an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to
Borrower) to use, license or sublicense any patent, trademark,
trade secret, or copyright now owned or hereafter acquired by
Borrower, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored
and to all computer and automatic machinery software and programs
used for the compilation or printout thereof.
5. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; AND RELEASE
5.1. Governing Law. This Agreement, the Loan Agreement and the other
Loan Documents shall be governed by, and construed in accordance
with, the laws of the State of California (without giving effect
to principles of conflicts of laws).
5.2. WAIVER OF JURY TRIAL. BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY OF ANY ACTION OR PROCEEDING ASSERTING ANY CAUSE
OF ACTION, CLAIM, THIRD PARTY CLAIM OR COUNTERCLAIM (COLLECTIVELY,
"CLAIMS") ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN
AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE COLLATERAL. THIS WAIVER
EXTENDS TO ALL SUCH CLAIMS, INCLUDING, WITHOUT LIMITATION, CLAIMS
WHICH INVOLVE PERSONS OR ENTITIES OTHER THAN LENDER, CLAIMS WHICH
ARISE OUT OF OR ARE IN ANY WAY CONNECTED TO THE RELATIONSHIP
BETWEEN LENDER AND BORROWER, AND ANY CLAIMS FOR DAMAGES, BREACH OF
CONTRACT, SPECIFIC PERFORMANCE, TORT OR ANY EQUITABLE OR LEGAL
RELIEF OF ANY KIND.
5.3. Jurisdiction. Borrower hereby irrevocably submits to the juris-
diction of any California State or Federal court sitting in San
Francisco County in any action or proceeding arising out of or
relating to this Agreement, the Loan Agreement or any of the Loan
Documents, and Borrower hereby irrevocably agrees that all claims
with respect to such action or proceeding may be heard and deter-
mined in such California State court or, to the extent permitted
by law, in such Federal court. Borrower hereby irrevocably
waives, to the fullest extent Borrower may effectively do so,
the defense of inconvenient forum to the maintenance of such
action or proceeding. Borrower irrevocably consents to the
service of any and all process in any such action or proceeding
by the mailing of copies of such process to Borrower's address
specified in the Loan Agreement. Xxxxxxxx agrees that a final
judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment
or in any other matter provided by law. Nothing in this Section
5.3 shall affect Xxxxxx's right to serve legal process in any
other manner permitted by law or affect Xxxxxx's right to bring an
action or proceeding against Borrower or Xxxxxxxx's property in
the courts of other jurisdictions.
5.4. No Implied Waiver. Lender shall not, by any act, delay, omission
or otherwise be deemed to have expressly or impliedly waived any
of its rights or remedies unless such waiver shall be in writing
and signed by an authorized officer of Lender. A waiver by Lender
of any right or remedy on any one occasion shall not be construed
as a bar to or waiver of any such right or remedy which Lender
would otherwise have on any future occasion, whether similar in
kind or otherwise.
5.5. Release. Borrower hereby releases and exculpates Lender, its
officers, employees and designees, from any liability arising from
any acts under this Agreement, the Loan Agreement or any other
Loan Documents, or in furtherance thereof, whether as
attorney-in-fact or otherwise, whether of omission or commission,
and whether based upon any error of judgment or mistake of law or
fact, except for willful misconduct or gross negligence. In no
event will Lender have any liability to Borrower for lost profits
or other special, consequential, exemplary, or punitive damages.
6. TERM OF AGREEMENT: MISCELLANEOUS
6.1. Term. This Agreement shall remain in effect unless and until
Lender receives full, final and indefeasible payment of all
Obligations, the Loan Agreement shall be terminated and of no
further force and effect, and Xxxxxx notifies Borrower in writing
that the foregoing have occurred.
6.2. Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be made in the manner and shall have the
effect provided in the Loan Agreement.
6.3. Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect the
Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be
invalid or unenforceable.
6.4. Headings. All title and section headings used in this Agreement
are for convenience only and shall not be used in interpreting
this Agreement.
6.5. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be an original but all
of which shall constitute one and the same agreement.
6.6. Definitions. All terms used herein which are defined in the
Uniform Commercial Code as in effect in California shall have the
meanings given therein unless otherwise defined in this Agreement.
All references to the singular or plural herein shall include the
singular and plural, unless the context otherwise requires. The
term "including" is not limiting or exclusive. Capitalized terms
used in this Agreement shall have the following respective
meanings when used herein:
"Collateral" shall have the meaning set forth in Section 1.1.
"Event of Default" shall have the meaning se forth in Section 4.1.
"Loan Agreement" shall have the meaning set forth in the
introductory paragraph of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date stated above.
"Borrower"
Source Scientific, Inc.
By:
Title:
Address of Xxxxxxxx's Chief Executive Office and Principal Place of Business:
0000 Xxxxxxx Xxx
Xxxxxx Xxxxx, XX 00000
Telephone: 000 000-0000
Facsimile: 000 000-0000
"Lender"
CONCORD GROWTH CORPORATION
By:
Title:
Address:
0000 Xxxx Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
SCHEDULE A
TO
SECURITY AGREEMENT
1. Trade Names (Section 3.1)
Xxxxx Instruments
Source Scientific Systems, Inc.
2. Locations of Collateral (Section 3.2)
0000 Xxxxxxx Xxx, Xxxxxx Xxxxx, XX 00000
3. Intentionally omitted.
4. Encumbrances Against Collateral (Section 3.3)
See Exhibit B
EXHIBIT B
TO
SECURITY AGREEMENT
FILING FILING SECURED DESCRIPTION OF
NUMBER DATE JURISDICTION PARTY COLLATERAL
94-095748 05.13.94 CA Xxxxx Financial Corp Equipment
94-144647 07.15.94 CA AT&T Capital Equipment
Services
94-156287 08.01.94 CA Xxxxx Financial Corp Equipment
LOAN AGREEMENT
This Loan Agreement (the "Agreement") is entered into as of October 1, 1996,
between Source Scientific, Inc., a Corporation ("Borrower"), with its chief
executive office and principal place of business located at the address set
forth below Borrower's signature line, and Concord Growth Corporation
("Lender"), concerning loans and other credit accommodations to be made by
Lender to Borrower.
Capitalized terms used in this Agreement shall have the meanings assigned to
them in Section 8.11, Definitions, or in such other Section of this Agreement as
is identified in Section 8.11.
1. LOANS AND OTHER CREDIT ACCOMMODATIONS
1.1. Loans. Subject to the terms and conditions in this Agreement,
Lender shall make revolving loans to Borrower from time to time
against Eligible Accounts (each, an "Advance") up to a maximum
aggregate amount outstanding at any time not to exceed the lesser
of (a) eighty percent (80%) (the "Advance Rate") of the aggregate
amount of all Eligible Accounts, or (b) one million Dollars
($1,000,000) (the "Maximum Credit"). Except as otherwise provided
in this Agreement, Advances may be borrowed, repaid and
reborrowed.
In the event the aggregate outstanding Advances shall at any time
exceed the foregoing limitation, Borrower shall immediately repay
the Advances in the amount of such excess.
1.2. Eligible Accounts. "Eligible Accounts" are accounts which are and
remain acceptable to Lender as Collateral for lending purposes.
General criteria for Eligible Accounts are set forth below but
may be revised from time to time by Xxxxxx, in its sole judgment,
upon notice to Borrower; provided, that Lender may, in its sole
sole discretion, make exceptions to any of the general criteria
described below on a case by case basis without implying changes
to such criteria:
(a) such account was created in the ordinary course of
Borrower's business;
(b) such account is represented by an invoice in form acceptable
to Lender;
(c) the invoice that is delivered by Borrower to the account
debtor with respect to such account instructs
the account debtor to make payment directly to the Lockbox;
(d) Borrower has delivered to Lender such original documents as
Lender may have requested pursuant to Section 3.2 in
connection with such account and, if requested by Xxxxxx,
Lender shall have received from the account debtor a
verification of such account, satisfactory to Lender;
(e) the amount of such account represented by the invoice is
absolutely owing to Borrower [except for any discounts for
prompt payment provided by Borrower to account debtors in
the normal course of Borrower's business which are approved
in advance by Lender];
(f) the goods giving rise to such account were not at the time
of the sale subject to any liens except those permitted in
the Security Agreement;
(g) such account is not evidenced by chattel paper or an
instrument of any kind; (h) such account is due not more
than thirty (30) days from the date of the invoice; i) such
account arises from a bona fide completed sale of goods or
performance of services, which goods and services have been
delivered to, or performed for, and in either case accepted
by, the account debtor;
(j) such account does not arise from the delivery of any tool-
ings, samples, trial merchandise, promotional or demonstra-
tion material;
(k) such account does not arise from a sale to an individual
acting with respect to his or her own personal, family or
household consumption;
(l) such account does not arise from progress xxxxxxxx (i.e.,
xxxxxxxx representing a percentage of the amount due upon
completion or achievement of a contractual milestone but
where failure to complete or deliver the remaining work or
goods may constitute an offset, defense or counterclaim to
payment);
(m) such account does not arise from a retention (i.e., a
percentage of the amount payable to Borrower pursuant to the
contract which is withheld by the account debtor until a
time after completion) nor is such account subject to
holdbacks for retention;
(n) such account does not arise from a bill and hold sale (i.e.,
a sale in which the account debtor has been invoiced without
either delivery or acceptance of the goods or services or
transfer of title of the goods, even when the goods are held
and the invoices are issued at the account debtor's
request);
(o) such account does not arise from a sale on consignment,
"sale or return" or "sale on approval" (i.e., sales in which
title purports not to pass or has not passed to the account
debtor until payment, resale, acceptance or otherwise);
(p) such account does not arise from a guaranteed sale (i.e., a
sale in which the account debtor reserves the right to
return any unsold goods even if title purports to pass to
the account debtor);
(q) such account does not arise on terms under which payment
may be conditional or contingent in any way; (r) there are
no contra relationships (i.e., a situation in which the
Borrower owes the account debtor money), setoffs, de-
ductions, allowances, counterclaims or disputes existing
with respect to such account and there are no other facts
existing or threatened which would impair or delay the coll-
ectibility of all or any portion thereof;
(s) neither the account debtor nor any officer or employee of
the account debtor is an officer, employee or agent of or is
affiliated with Borrower, directly or indirectly;
(t) the account debtor is neither the United States nor any
State, subdivision, municipality, department or agency of
the United States, unless there has been compliance with the
Federal Assignment of Claims Act or any similar State or
local law, if applicable;
(u) the account debtor's chief executive office and principal
place of business are located in the United States;
(v) the account debtor is not the subject of any bankruptcy
or insolvency proceeding of any kind; (w) such account is
owed by an account debtor deemed creditworthy at all times
by Lender;
(x) there are no facts existing or threatened which might result
in any adverse change in the account debtor's financial con-
dition;
(y) such account has not remained unpaid for more than ninety (90)
days after the original invoice date; (z) such account is not owed
by an account debtor who is or whose affiliates are past due upon
other
accounts owed to Borrower comprising more than twenty-five
percent (25%) of the accounts of such account debtor or its
affiliates owed to Borrower;
(aa) such account is owed by an account debtor whose total
indebtedness to Borrower does not exceed the amount of any
customer credit limit as established, and changed, from time
to time by Lender on notice to Borrower (accounts excluded
from Eligible Accounts solely by reason of this subsection
(aa) shall nevertheless be considered Eligible Accounts in
an amount not to exceed the customer credit limits);
(bb) the aggregate amount of all accounts owed by the account
debtor and/or such account debtor's affiliates does not
exceed twenty percent (20%) of the aggregate amount of all
otherwise Eligible Accounts (accounts excluded from Eligible
Accounts solely by reason of this subsection (bb) shall
nevertheless be considered Eligible Accounts in an amount
not to exceed twenty percent (20%) of the aggregate face
amount of all otherwise Eligible Accounts).
1.3. Accommodations. Lender may, in its sole discretion, provide
additional loans or financial accommodations (the
"Accommodations") to Borrower. Such Accommodations, if made, shall
be evidenced by, and repayable in accordance with, one or more
secured promissory notes in form and substance acceptable to
Lender (each, an "Accommodation Note"), and shall constitute
Obligations under this Agreement.
1.4. Inventory Loans. In the event Lender has agreed or hereafter
agrees to provide loans to Borrower against any inventory of
Borrower, such loans shall be upon the terms and conditions set
forth in an Inventory Rider signed by Borrower and Lender (the
"Inventory Rider") and shall constitute Obligations under this
Agreement. Any such inventory loans shall not, when added to the
outstanding Advances exceed the Maximum Credit.
1.5. Reserves. Lender shall have the right to establish reserves
against the amount of the Advances available under Section 1.1 to
the extent necessary, in Xxxxxx's credit judgment, to ensure
payment of the Obligations (the "Reserves"). Lender may, at its
option, implement Reserves by either (i) designating as ineligible
a sufficient amount of accounts that would otherwise be Eligible
Accounts so as to reduce Borrower's availability by the amount of
the intended Reserve, (ii) changing the Advance Rate set forth in
Section 1.1, [or (iii) establishing a cash collateral account in
Lender's name to hold collections as Xxxxxx's cash collateral].
2. INTEREST AND FEES
2.1. Facility Fee. Borrower shall pay Lender on the date hereof, and on
each anniversary of the date of this agreement, a facility fee
(the "Facility Fee") in the amount of one percent (1%) of the
Maximum Credit, which fee is fully earned and non-refundable as of
the date each such payment is due.
2.2. Interest. Borrower shall pay interest to Xxxxxx on the outstand-
ing Advances under this Agreement at floating rate per annum
equal to the Prime Rate plus two and three quarters percent (Prime
+ 2.75%) (the "Interest Rate"), which interest shall be payable
and calculated as hereinafter set forth. Borrower shall pay such
interest to Lender on the first day of each month in an amount
equal to (a) the quotient obtained by dividing the sum of the
daily unpaid Advances outstanding on each day during the immed-
iately preceding month by the actual number of days in such month
(the "Average Daily Balance"), multiplied by (b) the quotient
obtained by dividing the Interest Rate by 360, multiplied by (c)
the actual number of days in the immediately preceding month. The
Interest Rate shall increase or decrease monthly, on the first day
of each month, by the amount of any increase or decrease in the
Prime Rate. For purposes of this Agreement, the "Prime Rate" is
the prime rate of interest publicly listed by the Western Edition
of the Wall Street Journal on the first day of each month or, if
the first day of such month is not a business day, on the last
business day of the immediately preceding month. In the event the
prime commercial interest rate listed by the Wall Street Journal
is a range, the highest rate in the range shall be the "Prime
Rate".
2.3. Default Rate. Upon and after either (a) notification to Borrower
of the occurrence of an Event of Default, or (b) termination of
this Agreement, until the date that all Obligations are
indefeasibly paid and satisfied in full, interest shall accrue on
all Obligations at a rate equal to the sum of the Interest Rate
otherwise payable to Lender plus __twelve percent (_12%).
2.4. Administrative Fee. Borrower shall pay Lender on the first day
of each month an administrative fee (the "Administrative Fee")
in an amount equal to (a) the Average Daily Balance for the immed-
iately preceding month, multiplied by (b) one quarter of one per-
cent (_0.25%).
2.5. Monthly Minimum Fee. Lender would not have entered into this
Agreement and agreed to provide Borrower with the financing here-
under unless Borrower guaranteed Lender that the sum of the
interest as set forth in Section 2.2, in any Inventory Rider and
in any Accommodation Note, and the administrative fees set forth
in Section 2.4, in any Inventory Rider and in any Accommodation
Note, paid to Lender in each month would be at least four thousand
Dollars ($4,000) (the "Monthly Minimum Fee"). In the event the
aggregate amount of such interest and administrative fees payable
on the first day of any month is less than the Monthly Minimum Fee
then Borrower shall pay to Lender on the first day of such month
the Monthly Minimum Fee in satisfaction of the interest and ad-
ministrative fees payable during such month.
2.6. Early Termination Fee. In the event either (a) Borrower xxxxxx-
xxxx this Agreement prior to the end of any Term, (b) Lender ter-
minates this Agreement with respect to further Advances, inven-
tory loans and other Accommodations upon and after the occurrence
of any Event of Default, or (c) this Agreement automatically
terminates upon the occurrence of an Event of Default under
Sections 6.1(i) or (j) as set forth in Section 6.2, in view of
the impracticality and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable
calculation of Xxxxxx's lost profits, in addition to all other Ob-
ligations, Borrower shall pay to Lender, upon the effective date
of any such termination, an early termination fee equal to the
Minimum Monthly Fee multiplied by the number of months remain-
ing in the then-current Term (the "Early Termination Fee"). Any
partial month remaining in such Term shall constitute a full month
for the purpose of calculating the Early Termination Fee.
2.7. Audit Fees. Lender or its designee may conduct Quarterly
examinations of the Collateral and Xxxxxxxx's operations, unless
an Event of Default has occurred and is continuing, in which event
the number of audits conducted will be in Lender's reasonable
discretion. Borrower shall pay Lender audit fees not to exceed
__five hundred ninety five Dollars ($595__) per person per day
plus expenses per audit but no more than $1,500 per audit. Audit
fees shall be payable upon demand by Xxxxxx.
2.8. Maximum Lawful Rate. In no event shall charges constituting
interest under this Agreement exceed the highest rate permitted
under applicable law. In the event that a court of competent
jurisdiction makes a final determination that Xxxxxx has received
interest under this Agreement in excess of the maximum lawful
rate, then such excess shall be deemed a payment of principal and
applied against the principal under this Agreement, and the
interest payable under this Agreement shall be deemed amended to
the amount payable under the maximum lawful rate.
2.9. Calculations Based on 360 Day Year. Interest and any other amounts
payable by Borrower to Lender based on a per annum rate shall be
calculated on the basis of actual number of days elapsed over a
360-day year.
2.10. Charges to Loan Account. At Lender's option, all principal,
interest, fees, costs, expenses and other charges provided for in
this Agreement, or in any other Loan Documents may be charged to
any loan account of Borrower maintained by Lender either by (a)
deducting such amounts from any Advance requested by Borrower and
made by Lender, or (b) treating such amounts as additional
Advances.
3. ADMINISTRATION AND COLLECTION
3.1. Delivery of Invoices. Borrower shall deliver a copy of each
invoice to Lender as such invoice is generated and delivered to an
account debtor or at least once per week in a batch. Xxxxxxxx's
granting of credits, discounts, allowances, deductions, return
authorizations or the like with respect to any account will be
promptly reported to Lender in writing.
3.2. Delivery of Evidence of Shipment and Other Account Information.
Borrower shall deliver to Lender proof of rendition of services,
shipment, and delivery of goods at the same time Borrower delivers
the invoices to Lender with respect to such services or goods
pursuant to Section 3.1. Borrower shall deliver to Lender such
other agreements and documents relating to the accounts or other
Collateral, including assignments to Lender, at such times as
Lender may request and in the manner specified by Lender.
3.3. Lockbox; Collection of Collateral. Borrower shall instruct each
account debtor to make all payments owed to Borrower in Xxxx-
xxxx'x name or properly registered trade name as set forth in the
Security Agreement directly to a lockbox acceptable to Lender (the
"Lockbox"). Borrower shall include on each invoice delivered to
an account debtor a notice of assignment to Lender to make all
payments directly to the Lockbox. Such instructions shall not be
changed without Xxxxxx's prior written consent. Payments on
all Borrower's accounts and all other proceeds of Collateral shall
be made directly to the Lockbox, whether or not Lender is provid-
ing financing for such account. All payments received in the
Lockbox by 10:00 a.m. on any business day shall be deposited in
an account designated by and acceptable to Lender on the same day
and credited to Xxxxxxxx's loan account as set forth in Section
3.5. At Lender's request, all invoices and statements sent to
any account debtor, other obligor or bailee, shall state that the
accounts and such other Collateral have been assigned to Lender
and are payable directly and only to Lender. Upon demand by
Xxxxxx, Xxxxxxxx shall reimburse Lender for the costs incurred by
Xxxxxx in establishing and maintaining the Lockbox.
3.4. Payment in Kind; Delivery to Lender. Notwithstanding Borrower's
instructions to account debtors and other persons, in the event
Borrower receives any payments on accounts or other proceeds of
Collateral, Borrower will hold such payments in trust and
safekeeping for Lender and immediately turn over to Lender the
identical check or other form of payment received by Borrower with
any necessary endorsement or assignment.
3.5. Crediting of Payments. All Obligations shall be payable at
Xxxxxx's office set forth below, at Xxxxxx's bank as identified
to Borrower, or at such other place as Lender may expressly desig-
nate from time to time. For purposes of determining availa-
bility under this Agreement, payments on financed accounts and
other payments with respect to the Collateral and Obligations
will be credited to the loan account of Borrower upon the date of
Xxxxxx's receipt of advice from Xxxxxx's bank that such payments
have been credited to Xxxxxx's account or in the case of payments
received directly in kind by Xxxxxx, upon the date of Xxxxxx's
deposit thereof at Lender's bank, subject in either case to final
payment and collection. Solely for the purpose of calculating
interest and fees under this Agreement, including interest
and fees under any Inventory Rider and any Accommodation Note,
payments on financed accounts and other payments with respect to
Collateral and Obligations shall be deemed received by Lender
three (3) business days after the date of Xxxxxx's receipt of
advice from Xxxxxx's bank that such payments have been credited
to Xxxxxx's account or in the case of payments received directly
in kind by Lender, three (3) business days after the date of Len-
der's deposit thereof at Xxxxxx's bank, subject in either case to
final payment and collection.
3.6. Intentionally omitted.
3.7. Account Verification. Lender may at any time, but without any
duty to do so, whether or not an Event of Default has occurred,
and without notice to or assent of Borrower, in Xxxxxx's own name,
pseudonymously, or by its designee: (a) request any account
debtor, other obligor or bailee by telephone or in writing for
verification of accounts and other Collateral; (b) notify any
account debtor that the accounts and other Collateral that
includes a monetary obligation have been assigned to Lender by
Borrower and that payment thereof is to be made directly to Len-
der; and (c) demand, collect or enforce payment of any accounts
or such other Collateral. Upon Xxxxxx's request, Xxxxxxxx shall
assist Lender in connection with any request, notification or
demand hereunder.
3.8. Loan Account. Lender shall render to Borrower monthly a loan
account statement. Each statement shall be considered correct and
binding upon Borrower as an account stated, except to the extent
that Xxxxxx receives, within thirty (30) days after the mailing of
such statement, written notice from Borrower of any specific
exceptions by Xxxxxxxx to that statement.
4. INTENTIONALLY OMITTED.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which,
shall be continuing conditions to making any Advances, inventory and
other loans and Accommodations by Lender to Borrower:
5.1. Account Representations and Warranties. Each account submitted
to Xxxxxx meets each of the eligibility requirements in Section
1.2, except as either (a) disclosed in writing to Lender at the
time Borrower submits such account to Lender, or (b) is evident
on the invoice representing such account. Each account, inclu-
ding Eligible and non-Eligible Accounts, (i) is a bona fide
account, (ii) represents indebtedness owed to Borrower, and
(iii) is in all respects what it purports to be. All state-
ments made and all unpaid balances and other information appear-
ing in the invoices, agreements, proofs of rendition of services
and delivery of goods and other documentation relating to the
accounts, and all confirmatory assignments, schedules, state-
ments of account and books and records with respect thereto, are
true and correct and in all respects what they purport to be.
5.2. Use of Proceeds; Single Loan. Borrower shall use the proceeds of
Advances and other loans or Accommodations made by Lender to
Borrower for legal and proper business purposes, and not for any
personal, family, or household purposes. All Advances and other
loans and Accommodations shall constitute one general Obligation
and shall be secured by Xxxxxx's security interest in all of the
Collateral.
5.3. Compliance with Laws; Payment of Taxes. Borrower is and at all
times will continue to be in compliance with the requirements of
all material laws, rules, regulations and orders of any governmen-
tal authority relating to its business, including those relat-
ing to taxes (including payment and withholding of payroll taxes,
employer and employee contributions and similar items), sec-
urities, employee retirement and welfare benefits, employee
health and safety, labor and environmental matters, and all mater-
ial agreements or other instruments binding on Borrower or its
property. Borrower shall pay all taxes, assessments and govern-
mental charges against Borrower or any Collateral prior to the
date on which penalties are imposed or liens attach with respect
thereto, unless the same are being contested in good faith and,
at Xxxxxx's option, Reserves are established for the amount
contested and penalties which may accrue thereon.
5.4. Delivery of Agings and Financial Information. Borrower shall
keep and maintain its books and records in accordance with gener-
ally accepted accounting principles, consistently applied. Xxxx-
xxxx shall, at its sole expense, deliver to Lender (a) on or
before the thirtieth (30th ) day of each month, true and com-
plete monthly agings of its accounts receivable and accounts and
notes payable, and monthly inventory reports and bank statements
for the prior month-end, and (b) on or before the thirtieth (30th)
day of each month, true and correct monthly internally prepared
interim financial statements for the prior month-end. Annually,
Borrower shall, at its sole expense, deliver to Lender true and
correct (a) financial statements of Xxxxxxxx prepared according to
generally accepted accounting principles, as soon as available,
but in no event later than ninety (90) days after the end of Xxxx-
xxxx'x fiscal year, and (b) tax returns within ten (10) days
after such tax returns are filed with the appropriate taxing au-
thorities. Lender may require that annual financial statements
be prepared and certified by an independent certified public acc-
ountant acceptable to Lender. Borrower shall also cause each
person or entity that is or becomes a guarantor to deliver to Len-
der year end financial statements of such guarantor within thir-
ty (30) days after the end of each such period.
All of the information required above shall be in such form, and
together with such other information with respect to the business
of Borrower or any guarantor, as Lender may request.
5.5. No Sale of Collateral, Merger or Acquisition of Interest. Borrower
shall not, directly or indirectly, without the prior written
consent of Lender: (a) sell, lease, transfer, assign, or otherwise
dispose of any part of the Collateral or any material portion of
its other assets other than sales of inventory to buyers in the
ordinary course of business; (b) consolidate with or merge with or
into any other entity; or (c) form or acquire any interest in any
corporation or other entity.
5.6. No Loans, Dividends, Transactions With Affiliates. Borrower shall
not, directly or indirectly, without the prior written consent of
Lender: (a) lend money or property to, guarantee, pay or assume
indebtedness of, or invest in (by capital contribution or other-
wise), any person, corporation or other entity (including any
officer, director, employee, shareholder or affiliate of Xxxx-
xxxx); (b) declare or pay any dividends on, redeem, or otherwise
make any distributions on account of, any shares of any class of
stock or other equity interest of Borrower now or hereafter out-
standing; or (c) enter into any sale, lease or other transaction
with any officer, director, employee, shareholder or affiliate of
Borrower on terms that are less favorable to Borrower than those
which might be obtained at the time from persons who are not an
officer, director, employee, shareholder or affiliate of Borrower.
5.7. Replacement of Officers and General Partners. If Xxxxxxxx
is a corporation and the chief executive officer, chief oper-
ating officer or chief financial officer existing on the date
of this Agreement shall resign or otherwise cease to be actively
employed by Xxxxxxxx in such capacity, Borrower shall appoint a
replacement or substitution reasonably satisfactory to Lender
within fifteen (15) days after the effective date of such resign-
ation or the date such person ceases to be actively employed by
Xxxxxxxx. If Borrower is a partnership and any general partner
withdraws or ceases to perform its duties in such capacity, such
general partner shall be replaced with a new general partner
reasonably satisfactory to lender within fifteen (15) days after
the effective date of such withdrawal or the date such general
partner ceases to perform its duties.
5.8. Financial Covenants. Borrower shall:
(a) at all times maintain working capital of not less than NA
Dollars ($NA), as determined in accordance with generally
accepted accounting principles in effect on the date hereof,
consistently applied;
(b) at all times maintain net worth of not less than NA Dollars
($NA), as determined in accordance with generally accepted
accounting principles in effect on the date hereof,
consistently applied; and
(c) not, directly or indirectly, expend or commit to expend, for
fixed or capital assets (including capital lease
obligations) an amount in excess of NA Dollars ($NA) in any
fiscal year of Borrower.
(d) maintain positive cash flow (defined as Earnings Before
Interest, Taxes, Depreciation, Amortization) on a quarterly
basis, as determined in accordance with generally accepted
accounting principles in effect on the date hereof,
consistently applied.
(e) maintain profitability on a quarterly basis, as determined
in accordance with generally accepted accounting principles
in effect on the date hereof, consistently applied.
5.9. Litigation. There are no actions, suits, proceedings,
investigations or claims pending, or to the knowledge of Xxxxxxxx
threatened, against Borrower or any of Borrower's assets, except
as disclosed to Lender in writing before the date of this
Agreement. Borrower shall promptly notify Lender in writing of any
loss, damage, suit, proceeding, investigation, or claim relating
to a material portion of the Collateral or that may result in a
material adverse change in Borrower's business, assets,
liabilities or condition.
5.10. No Payments to Subordinated Creditors. Borrower shall not make any
payments to any of the Subordinated Creditors on account of
principal, interest or any other indebtedness, other than
permitted payments as consented to by Xxxxxx in writing, unless
and until all of the Obligations are indefeasibly paid and
satisfied in full. Borrower may make payments to Subordinated
Creditors unless and until an Event of Default occurs.
5.11. Survival and Continuation of Representations. Each representation
and warranty contained in this Agreement and the other Loan
Documents shall be continuous and shall remain accurate, complete
and not misleading during the Term of this Agreement, and all such
representations and warranties shall survive the execution and
delivery by Borrower and Lender of this Agreement and the other
Loan Documents.
5.12. Organization and Qualification. Borrower is, and shall continue to
be, a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
Borrower is qualified and authorized to do business and is, and
shall continue to be, in good standing as a foreign corporation in
each State where is conducts business and in which the failure to
so qualify would have a material adverse effect on the financial
condition, business or properties of Borrower.
5.13. Corporate Power and Authority. Borrower is duly authorized and
empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement
and each of the other Loan Documents have been duly authorized by
all necessary corporate action and do not and will not contravene
Borrower's charter, articles or certificate of incorporation or
by-laws or result in a breach of or constitute a default under any
indenture, loan agreement or any other agreement, lease or
instrument to which Borrower is a party or by which it or its
properties may be bound.
5.14. Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will
be, a legal, valid and binding obligation of Borrower enforce-
able against it in accordance with its terms.
6. EVENTS OF DEFAULT AND REMEDIES
6.1. Events of Default. The occurrence of any one or more of the
following shall constitute an "Event of Default" under this Agree-
ment:
(a) Borrower fails to pay as and when due any of the Obligations
(b) Borrower fails to perform or breaches any of the material
covenants or terms of this Agreement, the Security Agreement
or any other Loan Document (other than a covenant or term
which is dealt with specifically elsewhere in this Section
6.1);
(c) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the Security Agreement
or any other Loan Document or otherwise, or to any affiliate
of Lender, shall be inaccurate or misleading in any material
respect;
(d) Any guarantor revokes, terminates or fails to perform any of
the terms of any guaranty, endorsement or other agreement of
such party in favor of Lender or any affiliate of Lender;
(e) Notice of a federal tax lien is filed against Borrower or
Borrower fails to pay any payroll or withholding taxes;
(f) Any judgment, writ of attachment or similar process
involving an amount in excess of ten thousand Dollars
($10,000__) is obtained against Borrower or any guarantor,
or any of their representative assets, and remains
undischarged for thirty (30) days after it is obtained;
(g) Borrower or any guarantor (if Borrower or guarantor is a
partnership or corporation) or any general partner of
Borrower or any guarantor (if such general partner is a
corporation), is dissolved, or Borrower or any guarantor (if
Borrower or guarantor is a corporation) fails to maintain
its corporate existence in good standing, or the usual
business of Borrower or any guarantor ceases or is
suspended;
(h) Borrower (if Borrower is a natural person), any guarantor
(if such guarantor is a natural person) or any general
partner of Borrower or any guarantor (if Borrower or such
guarantor is a partnership and the general partner is a
natural person), dies and, with respect to the death of a
guarantor or a general partner such guarantor or general
partner has not been replaced within ten (10) days of the
death of such guarantor or general partner by another person
as creditworthy in Xxxxxx's reasonable judgment as the
original guarantor or general partner;
(i) Borrower or any guarantor becomes insolvent, makes an
assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a general meeting of its
creditors or principal creditors;
(j) Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in
effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or
hereafter in effect (whether at law or in equity) is filed
by or against Borrower or any guarantor;
(k) The indictment of Borrower or any guarantor under any
criminal statute, or commencement of criminal or civil
proceedings against Borrower or any guarantor, pursuant to
which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the
property of Borrower or such guarantor;
(l) Any default or event of default exists under any agreement,
document or instrument at any time executed and/or delivered
to Lender or any of its affiliates, by an affiliate of
Borrower;
(m) If Borrower is a corporation, any change in the controlling
ownership of Borrower occurs; (n) Borrower makes any payment to a
Subordinated Creditor in violation of the terms of any agreement
entered into between such Subordinated Creditor and Lender,
a copy of which has been delivered to Borrower.
6.2. Remedies. Upon the occurrence of an Event of Default and at
any time thereafter, Lender may, without notice, exercise
any or all of the rights and remedies provided in the Security
Agreement, the other Loan Documents or under applicable law,
including the immediate termination of any further Advances, in-
ventory and other loans and Accommodations, the declaration of
all Obligations to be immediately due and payable, and the enfor-
cement of Xxxxxx's security interest in all or any portion of the
Collateral; provided, that immediately upon the occurrence of
an Event of Default of a type described in Section 6.1(i) or (j),
this Agreement shall automatically terminate without notice or
demand of any kind and the Obligations shall be immediately due
and payable.
7. GOVERNING LAW; WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION;
OTHER WAIVERS.
7.1. Incorporation of Security Agreement Provisions Relating to
Governing Law, Waiver of Jury Trial, Consent to Jurisdiction No
Implied Waiver and Release. Sections 5.1, 5.2, 5.3, 5.4 and 5.5 of
the Security Agreement relating to governing law, waiver of jury
trial, consent to jurisdiction, no implied waiver and release
apply to this Agreement and to the Security Agreement and other
Loan Documents, and are hereby incorporated into this Agreement by
reference.
7.2. Waiver of Setoff. Borrower hereby irrevocably waives any right
to offset against amounts owed by Borrowerto Lender under the Loan
Documents any claims or counterclaims that may be asserted by
Borrower.
8. OTHER FEES AND EXPENSES; TERM OF AGREEMENT; MISCELLANEOUS
8.1. Other Fees and Expenses. Borrower shall pay Lender immediately
upon demand, those fees and expenses described in Section 3.6
of the Security Agreement.
8.2. Effectiveness; Term. This Agreement shall only become effective
upon execution and delivery by Xxxxxxxx and Lender and, unless
earlier terminated as provided in this Agreement, shall continue
in full force and effect for an initial term of twelve (12) months
from the date of this Agreement as set forth in the introductory
paragraph hereof and shall be deemed automatically renewed for
successive twelve-(12) month periods.
Unless earlier terminated as provided in this Agreement, all Obli-
gations shall be due and payable in full at the expiration of the
last renewal Term. This Agreement may be terminated prior to
the end of the initial or any renewal term (each, a "Term") as
follows:
(a) Borrower or Lender may terminate this Agreement as of the
end of any Term by either party giving the other written
notice at least thirty (30) days prior to the end of such
Term. If either Borrower or Lender so notifies the other,
all Obligations shall be due and payable in full
at the end of such Term;
(b) In addition to being able to terminate this Agreement at the
end of each Term, Borrower may terminate this Agreement at
any other time after giving Lender at least thirty (30) days
prior written notice and paying Lender an Early Termination
Fee as set forth in Section 2.6. Any such termination shall
be effective upon payment to Lender in full of all
Obligations, including the Early Termination Fee; and
(c) Lender shall also have the right to terminate this Agreement
as set forth in Section 6.2 upon and after the occurrence of
an Event of Default or, as set forth in Section 6.2, this
Agreement shall automatically terminate following the
occurrence of an Event of Default under Section 6.1(i) or
(j). Upon any such termination following an Event of
Default, all Obligations, including the Early Termination
Fee, shall be due and payable in full.
8.3. Deposit to Allow for Open Accommodations and Remittance Items.
Upon termination of this Agreement by Xxxxxxxx, as permitted
herein, in addition to payment of all Obligations, Borrower shall
deposit such amount of cash collateral as Lender determines is
necessary to secure Lender from loss or expense, including
reasonable attorneys' fees, in connection with any open
Accommodations or remittance items or other payments provisionally
credited to the Obligations and/or to which Lender has not yet
received final and indefeasible payment.
8.4. Continuing Obligations Upon Termination. No termination of this
Agreement, including any termination set forth in Section 8.2 or
6.2, shall relieve or discharge Borrower of its obligations,
duties and covenants hereunder until such time as all Obligations
to Lender have been indefeasibly paid and satisfied in full.
Without limiting the generality of the foregoing, all security
interests and liens of Lender in and upon all then-existing and
thereafter-arising or acquired Collateral, and all warranties,
representations, covenants, agreements and waivers of Borrower,
shall continue in full force and effect until released and
terminated by Xxxxxx in writing after full and final payment of
all Obligations.
8.5. Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be (a) made to Lender at its address set
forth below its signature line and to Borrower at its chief
executive office set forth below its signature line, or to such
other address as either party may designate by written notice to
the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if
by telex, telegram or telecopy, immediately upon receipt; if by
overnight delivery service, one business day after dispatch; and
if by first class or certified mail, three (3) calendar days after
mailing.
8.6. Participations; securitization. Lender may assign and sell par-
ticipations in its rights and obligations under this agreement
and the other loan documents. Lender may include the loans made
pursuant to this agreement and the other loan documents in a pool
of loans in which lender sells undivided interests as part of a
securitization program.
(a) Assignment of Loans. Borrower understands that Lender
may from time to time transfer and assign Loans and its
rights under this Agreement to one or more
assignees. Borrower hereby consents to these transfers and
assignments by Xxxxxx to one or more assignees. Borrower
hereby consents that any such assignee may exercise the
rights of Lender hereunder. Borrower further hereby consents
and acknowledges that any and all defenses, claims or
counterclaims that it may have against Lender shall be
limited to, and may only be brought against, Lender and
shall not extend to any assignee, including but not limited
to funding obligations.
(b) Borrower and Lender intend that any and all direct or
indirect assignees of the Lender of the type set forth above
shall be third party beneficiaries of this Agreement.
8.7. Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect
the Agreement as a whole, but this Agreement shall be
construed as though it did not contain the particular provision
held to be invalid or unenforceable.
8.8. Integration. This Agreement, the Security Agreement and the
other Loan Documents contain the entire agreement of the par-
ties as to the subject matter hereof. All prior commitments, pro-
posals and negotiations concerning the subject matter hereof are
merged herein. Neither this Agreement, the Security Agreement
nor any of the other Loan Documents shall be amended, modified
or discharged orally or by course of conduct,but only by a written
agreement signed by an authorized officer of Lender and Xxxxxxxx.
This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors
and assigns, except that Borrower shall not assign this Agree-
ment or any of its rights hereunder without the prior written
consent of Xxxxxx.
8.9. Headings. All title and section headings used in this Agreement
are for convenience only and shall not be used in interpreting
this Agreement.
8.10. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be an original but all
of which shall constitute one and the same agreement.
8.11. Definitions. All terms used herein which are defined in the
Uniform Commercial Code as in effect in California shall have the
meanings given therein unless otherwise defined in this Agreement.
All references to the singular or plural herein shall include the
singular and plural, unless the context otherwise requires. Unless
otherwise specified any reference to a "Section" shall refer to
the relevant Section of this Agreement. The term "including" is
not limiting or exclusive. Capitalized terms used in this
Agreement shall have the following respective meanings when used
herein:
"Accommodations" shall have the meaning set forth in Section 1.3.
"Accommodation Note" shall have the meaning set forth in Section
1.3.
"Administrative Fee" shall have the meaning set forth in Section
2.4.
"Advance" shall have the meaning set forth in Section 1.1.
"Advance Rate" shall have the meaning set forth in Section 1.1.
"Agreement" shall mean this Loan Agreement, as the same may be
amended, supplemented, extended or restated from time to time.
"Average Daily Balance" shall have the meaning set forth in
Section 2.2.
"Borrower" shall mean the Borrower as identified in the
introductory paragraph of this Agreement, and its successors and
assigns.
"Collateral" shall have the meaning set forth in the Security
Agreement.
"Early Termination Fee" shall have the meaning set forth in Sec-
tion 2.6.
"Eligible Accounts" shall have the meaning set forth in Section
1.2.
"Event of Default" shall have the meaning set forth in Section
6.1.
"Facility Fee" shall have the meaning set forth in Section 2.1.
"Interest Rate" shall have the meaning set forth in Section 2.2.
"Inventory Rider" shall have the meaning set forth in Section 1.4.
"Lender" shall mean the Lender as identified in the introductory
paragraph of this Agreement, and its successors and assigns. "Loan
Documents" shall mean this Agreement, any Inventory Rider, any
Accommodation Notes, the Security Agreement, and all instruments,
documents, agreements and other writings signed by Borrower or any
Guarantor and delivered to Lender in connection with this
Agreement or otherwise, whether now existing or hereafter arising,
as the same may be amended, supplemented, extended or restated
from time to time.
"Lockbox" shall have the meaning set forth in Section 3.3.
"Maximum Credit" shall have the meaning set forth in Section 1.1.
"Monthly Minimum Fee" shall have the meaning set forth in Section
2.5.
"Obligations" shall mean any and all loans, advances, fees,
charges, indebtedness and obligations of every kind owing by
Borrower to Lender, and/or Lender's affiliates, or incurred by
Xxxxxx on behalf of Borrower, however evidenced, whether arising
under this Agreement, the Security Agreement, any other Loan
Documents or otherwise, and whether now existing or hereafter
arising, including all Advances, inventory loans, Accommodations,
Finance Fees, interest, Administrative Fees, Early Termination
Fees, Facility Fees, attorneys' fees and expenses.
"Reserves" shall have the meaning set forth in Section 1.5.
"Security Agreement" shall mean the Security Agreement executed by
Xxxxxxxx and Xxxxxx dated October 1, 1996 , pursuant to which
Borrower grants to Lender a security interest in and lien upon its
personal property, as the same may be amended, supplemented,
extended or restated from time to time.
"Subordinated Creditors" shall mean NA.
"Term" shall have the meaning set forth in Section 8.2.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first stated above.
"Borrower"
Source Scientific, Inc.
By:
Title:
Address of Xxxxxxxx's Chief Executive Office and Principal Place of Business
0000 Xxxxxxx Xxx
Xxxxxx Xxxxx,XX 00000
Telephone:000 000-0000
Facsimile:000 000-0000
"Lender"
CONCORD GROWTH CORPORATION
By:
Title:
Address:
0000 Xxxx Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
CERTIFIED COPY OF RESOLUTIONS
RESOLVED, that the Concord Growth Corporation Loan Agreement of the date
specified below between this company and Concord Growth Corporation (herein
"Lender") and all other agreements and documents connected therewith be, and the
same hereby are, approved on the terms and conditions as set forth therein;
RESOLVED, that any officer of this company is authorized and directed to
enter into said agreement and all other agreements and documents connected
therewith and to execute the same for and on behalf of this company on the terms
and conditions set forth therein;
RESOLVED, that any officer of this company is authorized and directed to
negotiate, agree upon, execute and deliver, from time to time, in the name of,
and on behalf of, this company, such agreements, amendments and supplements to
said agreement or any other agreement or document connected therewith,
documents, instruments, certificates, notices, and further assurances, and to
perform any and all such acts and things as may be required by Xxxxxx in
connection with said agreement or any other agreement or document connected
therewith, or may to him seem necessary or proper to implement and effect
complete consummation of said agreement or any other agreement or document
connected therewith in all respects and the purposes set forth in these
resolutions;
RESOLVED, that a schedule of account submitted and signed by any employee
of the company will authorize the sale, transfer or assignment of, for full face
value or at a discount therefrom, accounts, notes, trade acceptances, drafts,
contracts, leases or other instruments owned or held by the company and
guarantee payment thereof on the company's behalf.
RESOLVED, that these resolutions shall remain in full force and effect
until written notice of their amendment or repeal shall be received by Xxxxxx
and until all indebtedness and obligations arising out of said agreement and all
other agreements and documents connected therewith shall have been paid and
satisfied in full.
The undersigned, as the duly constituted Secretary of this company does hereby
certify that the foregoing is a true and correct copy of the resolutions duly
adopted at a meeting of the Board of Directors of this company, duly called,
noticed and held on the date specified below, at which meeting there was at all
times present and acting a quorum of the members of said Board; that said
resolutions are in full force and effect; and that the following is a true and
correct list of the present officers of this company:
Date of Loan Agreement: October 1, 1996
President's Name: Xxxxxxx Xxxxxxxx
Vice-President's Name: ______________________________
Corp. Secretary's Name: ______________________________
CFO/Treasurer's Name: M. A. Shawky
Corporate Secretary's Signature:
Name of Company: Source Scientific, Inc.
(seal)
Date company's Board of Directors adopted above resolutions:
