EXHIBIT 10.3
Bank of America
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Business Loan Agreement
This Agreement dated as of 4/21 , 2000 , is between Bank of America, N.A.
(the "Bank") and Sunrise Telecom, Inc. (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1. Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Commitment") is Nine Million and 00/100 Dollars ($9,000,000.00). In the
event that the Borrower's initial public offering ("IPO") is not completed
by August 1, 2000, the amount of the Commitment from such date until the
Expiration Date (as defined below) will be Six Million and 00/100 Dollars
($6,000,000.00).
(b) This is a revolving line of credit providing for cash advances and letters
of credit. During the availability period, the Borrower may repay principal
amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
advances under the line of credit plus the outstanding amounts of any
letters of credit, including amounts drawn on letters of credit and not yet
reimbursed, to exceed the Commitment.
1.2. Availability Period. The line of credit is available between the date of
this Agreement and May 1, 2001, or such earlier date as the availability
may terminate as provided in this Agreement (the "Expiration Date").
1.3. Interest Rate.
(a) Unless the Borrower elects an optional interest rate as described below,
the interest rate is the Bank's Prime Rate minus 0.25 percentage point.
(b) The Prime Rate is the rate of interest publicly announced from time to time
by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on
various factors, including the Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at, above,
or below the Prime Rate. Any change in the Prime Rate shall take effect at
the opening of business on the day specified in the public announcement of
a change in the Bank's Prime Rate.
1.4. Repayment Terms.
(a) The Borrower will pay interest on May 1, 2000, and then monthly thereafter
until payment in full of any principal outstanding under this line of
credit.
(b) The Borrower will repay in full all principal and any unpaid interest or
other charges outstanding under this line of credit no later than the
Expiration Date. Any amount bearing interest at an optional interest rate
(as described below) may be repaid at the end of the applicable interest
period, which shall be no later than ninety (90) days after the Expiration
Date.
1.5. Optional Interest Rates. Instead of the interest rate based on the Bank's
Prime Rate, the Borrower may elect the optional interest rates listed below
during interest periods agreed to by the Bank and the Borrower. The
optional interest rates shall be subject to the terms and conditions
described later in this Agreement. Any principal amount bearing interest at
an optional rate under this Agreement is referred to as a "Portion." The
following optional interest rates are available:
(a) Short Term Fixed Rates.
(b) the IBOR Rate plus 1.75 percentage points.
(c) the LIBOR Rate plus 1.75 percentage points.
1.6. Letters of Credit.
(a) This line of credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 180 days but
not to extend more than 180 days beyond the Expiration Date. Each
commercial letter of credit will require drafts payable at sight.
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(ii) standby letters of credit with a maximum maturity of 365 days but not
to extend more than 365 days beyond the Expiration Date.
(iii) The amount of letters of credit outstanding at any one time
(including amounts drawn on letters of credit and not yet reimbursed)
may not exceed Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00).
(b) The Borrower agrees:
(i) any sum drawn under a letter of credit may, at the option of the Bank,
be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this
Agreement.
(ii) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding letters of credit.
(iii) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form
and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
(iv) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of
Credit.
(v) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
1.7. Foreign Exchange Facility.
(a) During the availability period, the Bank at its discretion may enter into
spot and forward foreign exchange contracts with the Borrower. The foreign
exchange contract limit will be Two Million Five Hundred Thousand and
00/100 U.S. Dollars (U.S. $2,500,000.00), and the settlement limit will be
One Million and 00/100 U.S. Dollars (U.S. $1,000,000.00). The "foreign
exchange contract limit" is the maximum limit on the net difference between
the total foreign exchange contracts outstanding less the total foreign
exchange contracts for which the Borrower has already compensated the Bank.
The "settlement limit" is the maximum limit on the gross total amount of
all sale and purchase contracts on which delivery is to be effected and
settlement allowed on any one banking day.
(b) The Bank shall not be obligated to permit the Borrower to enter into any
foreign exchange contracts which would exceed the settlement limit.
However, if the Bank decides, in its discretion, to waive the settlement
limit for foreign exchange contracts which will settle on any particular
banking day, the Bank shall not be required to make any U.S. Dollar or
foreign currency settlement payment to the Borrower until the Bank receives
evidence satisfactory to it that the Borrower has paid the Bank all of the
Borrowers U.S. Dollar and foreign currency settlement payments. The Bank
shall not be liable for interest or other damages caused by any such
failure to pay or deliver or any such delay in payment or delivery.
(c) The Borrower will pay the Bank on demand the Bank's then standard foreign
exchange contract fees for each contract.
(d) Foreign exchange contracts will be in form and substance satisfactory to
the Bank.
(e) No foreign exchange contracts will mature later than one hundred eighty
(180) days after the Expiration Date, and in addition no foreign exchange
contract shall have a tenor longer than 180 days.
(f) The Borrower understands the risks of, and is financially able to bear any
losses resulting from, entering into foreign exchange contracts. The Bank
shall not be liable for any loss suffered by the Borrower as a result of
the Borrowers foreign exchange trading. The Borrower will enter into each
foreign exchange contract in reliance only upon the Borrower's own
judgment. The Borrower acknowledges that in entering into foreign exchange
contracts with the Borrower, the Bank is not acting as a fiduciary. The
Borrower understands that neither the Bank nor the Borrower has any
obligation to enter into any particular foreign exchange contract with the
other.
(g) On the date of this Agreement and at the time of each request by the
Borrower for a foreign exchange contract, the Borrower represents and
warrants that the Borrower has, and shall maintain, a net worth of at least
One Million Dollars ($1,000,000). The Borrower represents and warrants
that it will enter into foreign exchange contracts only in connection with
the conduct of its business or to manage the risk of an asset or liability
owned or incurred in the conduct of its business, and not for speculative
purposes.
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(h) The Borrower hereby requests the Bank to rely upon and execute the
Borrower's telephonic instructions regarding foreign exchange contracts,
and the Borrower agrees that the Bank shall incur no liability for its acts
or omissions which result from interruption of communications,
misunderstood communications or instructions from unauthorized persons,
unless caused by the willful misconduct of the Bank or its officers or
employees. The Borrower agrees to protect the Bank and hold it harmless
from any and all loss, damage, claim, expense (including the reasonable
fees of outside counsel and the allocated costs of staff counsel) or
inconvenience, however arising, which the Bank suffers or incurs or might
suffer or incur, based on or arising out of said acts or omissions.
(i) The Borrower agrees to promptly review all confirmations sent to the
Borrower by the Bank. The Borrower understands that these confirmations
are not legal contracts but only evidence of the valid and binding oral
contract which the Borrower has already entered into with the Bank. The
Borrower agrees to promptly execute and return to the Bank confirmations
which accurately reflect the terms of a foreign exchange contract, and
immediately contact the Bank if the Borrower believes a confirmation is not
accurate. In the event of a conflict, inconsistency or ambiguity between
the provisions of this Agreement and the provisions of a confirmation, the
provisions of this Agreement will prevail.
(j) The Borrower agrees that the Bank may electronically record all telephonic
conversations with the Borrower relating to foreign exchange contracts and
that such tape recordings may be submitted in evidence to any court or in
any other proceedings relating to such contracts. The Borrower agrees that
in the event of a conflict, inconsistency or ambiguity between the terms of
a foreign exchange contract as reflected in a tape recording and the terms
stated on a confirmation, the terms reflected in the tape recording shall
control.
(k) Any sum owed to the Bank under a foreign exchange contract may, at the
option of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere
in this Agreement. The Borrower hereby authorizes the Bank to debit the
Borrower's account with the Bank for payments due from the Borrower to the
Bank with respect to any foreign exchange contract. The Borrower
acknowledges that any collateral pledged to secure the Borrowers
performance of its obligations under this Agreement secures its obligations
under foreign exchange contracts with the Bank.
(l) In addition to any other rights or remedies which the Bank may have under
this Agreement or otherwise, upon the occurrence of an event of default
under this Agreement, or if the Borrower's aggregate realized or unrealized
xxxx-to-market losses on foreign exchange contracts exceed $500,000.00 (the
"Revaluation Limit"), the Bank may:
(i) Suspend performance of its obligations to the Borrower under any
foreign exchange contract;
(ii) Declare all foreign exchange contracts, interest and any other
amounts which are payable by the Borrower to the Bank immediately
due and payable; and
(iii) Without notice to the Borrower, close out any or all foreign
exchange contracts or positions of the Borrower with the Bank.
The Bank shall not be under any obligation to exercise any such rights or
remedies or to exercise them at a time or in a manner beneficial to the
Borrower. The Borrower shall be liable for any amounts owing to the Bank
after exercise of any such rights and remedies.
2. OPTIONAL INTEREST RATES
2.1. Optional Rates. Each optional interest rate is a rate per year. Interest
will be paid on the last day of each interest period, and on the first day of
each month during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Prime Rate, unless the
Borrower has designated another optional interest rate for the Portion. No
Portion will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest rates
for interest periods commencing after the default occurs.
2.2. Short Term Fixed Rate. The election of Short Term Fixed Rates shall be
subject to the following terms and requirements:
(a) The "Short Term Fixed Rate" means the fixed interest rate the Bank and the
Borrower agree will apply during the applicable interest period.
(b) The interest period during which the Short Term Fixed Rate will be in
effect will be no shorter than 30 days and no longer than one year.
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(c) Each Short Term Fixed Rate Portion will be for an amount not less than the
following:
(i) for interest periods of 91 days or longer, Five Hundred Thousand
Dollars ($500,000).
(ii) for interest periods of between 30 days and 90 days, One Million
Dollars ($1,000,000).
(d) Each prepayment of a Short Term Fixed Rate Portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee as described
below. A "prepayment" is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this Agreement.
(e) The prepayment fee shall be in an amount sufficient to compensate the Bank
for any loss, cost or expense incurred by it as a result of the prepayment,
including any loss of anticipated profits and any loss or expense arising
from the liquidation or reemployment of funds obtained by it to maintain
such Portion or from fees payable to terminate the deposits from which such
funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing.
For purposes of this paragraph, the Bank shall be deemed to have funded
each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so funded.
2.3. IBOR Rate. The election of IBOR Rates shall be subject to the following
terms and requirements:
(a) The interest period during which the IBOR Rate will be in effect will be no
shorter than 30 days and no longer than one year. The last day of the
interest period will be determined by the Bank using the practices of the
offshore dollar inter-bank market.
(b) Each IBOR Rate Portion will be for an amount not less than the following:
(i) for interest periods of 91 days or longer, Five Hundred Thousand
Dollars ($500,000).
(ii) for interest periods of between 30 days and 90 days, One Million
Dollars ($1,000,000).
(c) The Borrower may not elect an IBOR Rate with respect to any principal
amount which is scheduled to be repaid before the last day of the
applicable interest period.
(d) The "IBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts
in the calculation will be determined by the Bank as of the first day of
the interest period.)
IBOR Rate = IBOR Base Rate
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(1.00 - Reserve Percentage)
Where,
(i) "IBOR Base Rate" means the interest rate at which the Bank's Grand
Cayman Branch, Grand Cayman, British West Indies, would offer U.S.
dollar deposits for the applicable interest period to other major
banks in the offshore dollar inter-bank market.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal,
emergency, supplemental, special, and other reserve percentages.
(e) Each prepayment of an IBOR Rate Portion, whether voluntary, by reason of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid, and a prepayment fee as described below. A
"prepayment" is a payment of an amount on a date earlier than the scheduled
payment date for such amount as required by this Agreement.
(f) The prepayment fee shall be in an amount sufficient to compensate the Bank
for any loss, cost or expense incurred by it as a result of the prepayment,
including any loss of anticipated profits and any loss or expense arising
from the liquidation or reemployment of funds obtained by it to maintain
such Portion or from fees payable to terminate the deposits from which such
funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing.
For purposes of this paragraph, the Bank shall be deemed to have funded
each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so funded.
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(g) The Bank will have no obligation to accept an election for an IBOR Rate
Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods equal to the
interest period, of an IBOR Rate Portion are not available in the
offshore dollar inter-bank market; or
(ii) the IBOR Rate does not accurately reflect the cost of an IBOR Rate
Portion.
2.4. LIBOR Rate. The election of LIBOR Rates shall be subject to the following
terms and requirements:
(a) The interest period during which the LIBOR Rate will be in effect will be
one, two, three, four, five, six, seven, eight, nine, ten, eleven, or
twelve months. The first day of the interest period must be a day other
than a Saturday or a Sunday on which the Bank is open for business in New
York and London and dealing in offshore dollars (a "LIBOR Banking Day").
The last day of the interest period and the actual number of days during
the interest period will be determined by the Bank using the practices of
the London inter-bank market.
(b) Each LIBOR Rate Portion will be for an amount not less than the following:
(i) for interest periods of four months or longer, Five Hundred Thousand
Dollars ($500,000).
(ii) for interest periods of one, two or three months, One Million Dollars
($1,000,000).
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All amounts
in the calculation will be determined by the Bank as of the first day of
the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
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(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the average per annum interest
rate at which U.S. dollar deposits would be offered for the applicable
interest period by major banks in the London inter-bank market, as
shown on the Telerate Page 3750 (or such other page as may replace it)
at approximately 11:00 a.m. London time two (2) London Banking Days
before the commencement of the interest period. If such rate does not
appear on the Telerate Page 3750 (or such other page that may replace
it), the rate for that interest period will be determined by such
alternate method as reasonably selected by Bank. A "London Banking
Day" is a day on which the Bank's London Branch is open for business
and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR Rate Portion no later than
12:00 noon time on the LIBOR Banking Day preceding the day on which the
London Inter-Bank Offered Rate will be set, as specified above. For
example, if there are no intervening holidays or weekend days in any of the
relevant locations, the request must be made at least three days before the
LIBOR Rate takes effect.
(e) The Borrower may not elect a LIBOR Rate with respect to any principal
amount which is scheduled to be repaid before the last day of the
applicable interest period.
(f) Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid and a prepayment fee as described below. A
"prepayment" is a payment of an amount on a date earlier than the scheduled
payment date for such amount as required by this Agreement.
(g) The prepayment fee shall be in an amount sufficient to compensate the Bank
for any loss, cost or expense incurred by it as a result of the prepayment,
including any loss of anticipated profits and any loss or expense arising
from the liquidation or reemployment of funds obtained by it to maintain
such Portion or from fees payable to terminate the deposits from which such
funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing.
For purposes of this paragraph, the Bank shall be deemed to have funded
each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so funded.
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(h) The Bank will have no obligation to accept an election for a LIBOR Rate
Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods equal to the
interest period, of a LIBOR Rate Portion are not available in the
London inter-bank market; or
(ii) the LIBOR Rate does not accurately reflect the cost of a LIBOR Rate
Portion.
3. FEES AND EXPENSES
3.1. Fees.
(a) Loan fee. The Borrower agrees to pay a loan fee in the amount of Eleven
Thousand Five Hundred Fifty and 00/100 Dollars ($11,550.00). This fee is
due on or before the date of this Agreement.
(b) Waiver fee. If the Bank, at its discretion, agrees to waive or amend any
terms of this Agreement, the Borrower will, at the Bank's option, pay the
Bank a fee for each waiver or amendment in an amount advised by the Bank at
the time the Borrower requests the waiver or amendment. Nothing in this
paragraph shall imply that the Bank is obligated to agree to any waiver or
amendment requested by the Borrower. The Bank may impose additional
requirements as a condition to any waiver or amendment.
(c) Late Fee. To the extent permitted by law, the Borrower agrees to pay a
late fee in an amount not to exceed two percent (2%) of any installment
that is more than fifteen (15) days late. The imposition and payment of a
late fee shall not constitute a waiver of the Bank's rights with respect to
the default.
3.2. Expenses. The Borrower agrees to immediately repay the Bank for expenses
that include, but are not limited to, filing, recording and search fees,
appraisal fees, title report fees and documentation fees.
3.3. Reimbursement Costs.
(a) The Borrower agrees to reimburse the Bank for any expenses it incurs in the
preparation of this Agreement and any agreement or instrument required by
this Agreement. Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of the Bank's in-house
counsel.
4. COLLATERAL
4.1. Personal Property. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower. In addition, all personal property
collateral securing this Agreement shall also secure all other present and
future obligations of the Borrower to the Bank (excluding any consumer credit
covered by the federal Truth in Lending law, unless the Borrower has otherwise
agreed in writing). All personal property collateral securing any other present
or future obligations of the Borrower to the Bank shall also secure this
Agreement.
(a) Inventory.
(b) Receivables.
4.2. Personal Property Supporting Guaranty. The obligations of the guarantor,
Hukk Engineering, Inc. ("Hukk"), to the Bank will be secured by personal
property Hukk now owns or will own in the future as listed below. The collateral
is further defined in security agreement(s) executed by Hukk.
(a) Inventory.
(b) Receivables.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1. Requests for Credit. Each request for an extension of credit will be made
in writing in a manner acceptable to the Bank, or by another means acceptable to
the Bank.
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5.2. Disbursements and Payments. Each disbursement by the Bank and each payment
by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made for the account of the Bank's branch selected by the Bank from time to
time;
(c) made in immediately available funds, or such other type of funds selected
by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
5.3. Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates and telefax
requests for the issuance of letters of credit given, or purported to be
given, by any one of the individuals authorized to sign loan agreements on
behalf of the Borrower, or any other individual designated by any one of
such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 14871-03852, or such other of the Borrowers
accounts with the Bank as designated in writing by the Borrower.
(c) The Borrower will indemnify and hold the Bank harmless from all liability,
loss, and costs in connection with any act resulting from telephone or
telefax instructions the Bank reasonably believes are made by any
individual authorized by the Borrower to give such instructions. This
paragraph will survive this Agreement's termination, and will benefit the
Bank and its officers, employees, and agents.
5.4. Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit the Borrower's deposit account
number 14871-03852, or such other of the Borrower's accounts with the Bank
as designated in writing by the Borrower (the "Designated Account") on the
date each payment of principal and interest and any fees from the Borrower
becomes due (the "Due Date"). If the Due Date is not a banking day, the
Designated Account will be debited on the next banking day.
(b) Approximately 10 days prior to each Due Date, the Bank will mail to the
Borrower a statement of the amounts that will be due on that Due Date (the
"Billed Amount"). The calculation will be made on the assumption that no
new extensions of credit or payments will be made between the date of the
billing statement and the Due Date, and that there will be no changes in
the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued Amount").
If the Billed Amount debited to the Designated Account differs from the
Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the Billed
Amount for the following Due Date will be increased by the amount of
the discrepancy. The Borrower will not be in default by reason of
any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the Billed
Amount for the following Due Date will be decreased by the amount of
the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrower interest on any
overpayment.
(d) The Borrower will maintain sufficient funds in the Designated Account to
cover each debit. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this Agreement,
the debit will be reversed.
5.5. Banking Days. Unless otherwise provided in this Agreement, a banking day
is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. For amounts bearing interest at an offshore rate (if
any), a banking day is a day other than a Saturday or a Sunday on which the Bank
is open for business in California and dealing in offshore dollars. All
payments and disbursements which would be due on a day which is not a banking
day will be due on the next banking day. All payments received on a day which
is not a banking day will be applied to the credit on the next banking day.
5.6. Additional Costs. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class
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of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
5.7. Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.
5.8. Default Rate. Upon the occurrence of any default under this Agreement,
principal amounts outstanding under this Agreement will at the option of the
Bank bear interest at the Bank's Prime Rate plus 2 percentage points. This will
not constitute a waiver of any default.
6. CONDITIONS
The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:
6.1. Authorizations. Evidence that the execution, delivery and performance by
the Borrower and each guarantor of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
6.2. Governing Documents. A copy of the Borrower's articles of incorporation.
6.3. Security Agreements. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
6.4. Evidence of Priority. Evidence that security interests and liens in favor
of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
6.5. Insurance. Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.
6.6. Guaranty. A guaranty signed by Hukk in the amount of Nine Million Dollars
($9,000,000).
6.7. Other Items. Any other items that the Bank reasonably requires.
7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation:
7.1. Organization of Borrower. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
7.2. Authorization. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.
7.3. Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.
7.4. Good Standing. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
7.5. No Conflicts. This Agreement does not conflict with any law, agreement, or
obligation by which the Borrower is bound.
-8-
7.6. Financial Information. All financial and other information that has been
or will be supplied to the Bank is:
(a) sufficiently complete to give the Bank accurate knowledge of the Borrowers
(and any guarantor's) financial condition, including all material
contingent liabilities.
(b) in compliance with all government regulations that apply.
7.7. Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
7.8. Collateral. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others, except those which have been approved by the Bank in
writing.
7.9. Permits, Franchises. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
7.10. Other Obligations. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
7.11. Income Tax Matters. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
7.12. No Event of Default. There is no event which is, or with notice or lapse
of time or both would be, a default under this Agreement.
7.13. Insurance. The Borrower has obtained, and maintained in effect, the
insurance coverage required in the "Covenants" section of this Agreement.
7.14. Location of Borrower. The Borrowers place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
8. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1. Use of Proceeds. To use the proceeds of the credit only for working
capital, and at the option of the Bank, to finance any draft under any letters
of credit issued hereunder.
8.2. Financial Information. To provide the following financial information and
statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time:
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited (with an
unqualified opinion) by a certified public accountant acceptable to the
Bank. The statements shall be prepared on a consolidated basis.
(b) Within 45 days of the period's end, the Borrower's quarterly financial
statements. These financial statements may be Borrower prepared. The
statements shall be prepared on a consolidated and consolidating basis.
(c) Within 90 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements may be Borrower prepared.
The statements shall be prepared on a consolidating basis.
(d) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
consolidated budget for its then current fiscal year, including balance
sheet, income statement, and cash flow, all projected on a quarterly
basis.
(e) Within the period(s) provided in (a) and (b) above, a compliance
certificate of the Borrower signed by an authorized financial officer of
the Borrower setting forth (i) the information and computations (in
sufficient detail) to establish that the Borrower is in compliance with
all financial covenants at the end of the period covered by the financial
statements then being furnished and (ii) whether there existed as of the
date of such financial statements and whether there exists as of the date
of the certificate, any default under this Agreement and, if any such
default exists, specifying the nature thereof and the action the Borrower
is taking and proposes to take with respect thereto.
-9-
8.3. Quick Ratio. To maintain on a consolidated basis a ratio of quick assets
to current liabilities ("Quick Ratio") of at least 1.5:1.0. In the event that
the net cash proceeds received by the Borrower on the closing date of its IPO
(the "IPO Proceeds") equal or exceed Forty-Five Million Dollars ($45,000,000),
the Borrower will maintain a Quick Ratio of at least 2.25:1.0 as of the IPO
closing date and thereafter.
"Quick assets" means cash, short-term cash investments in non-affiliated
entities, net trade receivables (including foreign receivables) and marketable
securities not classified as long-term investments. "Current liabilities" shall
include (a) all obligations classified as current liabilities under generally
accepted accounting principles, plus (b) all principal amounts outstanding under
revolving lines of credit, whether classified as current or long-term, which are
not already included under (a) above.
8.4. Total Liabilities to Tangible Net Worth. To maintain on a consolidated
basis a ratio of total liabilities to tangible net worth ("Debt/TNW Ratio") not
exceeding 0.75:1.0. In the event that the IPO Proceeds equal or exceed Forty-
Five Million Dollars ($45,000,000), the Borrower will maintain a Debt/TNW Ratio
not exceeding 0.50:1.0 as of the IPO closing date and thereafter.
"Total liabilities" means the sum of current liabilities plus long term
liabilities.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, deferred receivables, and other
like intangibles, and monies due from affiliates, officers, directors, employees
or shareholders of the Borrower) less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against assets.
8.5. Profitability. To maintain on a consolidated basis a positive net income
after taxes and extraordinary items for each quarterly accounting period and at
fiscal year end.
8.6. Other Debts. Not to have outstanding or incur any direct or contingent
liabilities (other than those to the Bank), or become liable for the liabilities
of others, without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Liabilities and lines of credit in existence on the date of this Agreement
disclosed in writing to the Bank.
(e) Additional debts for the acquisition of fixed assets, to the extent
permitted elsewhere in this Agreement.
(f) Additional debts for business purposes, which do not exceed a total
principal amount of One Million Dollars ($1,000,000). In the event that
the IPO Proceeds equal or exceed Forty-Five Million Dollars ($45,000,000),
the Borrower may incur additional debts for business purposes which do not
exceed a total principal amount of Two Million Dollars ($2,000,000) instead
of One Million Dollars ($1,000,000). For purposes of this subparagraph,
"debts for business purposes" only includes debts incurred under promissory
notes signed by the Borrower in favor of sellers in connection with
acquisitions and purchases permitted under Paragraph 8.22(g) below and
monetary obligations incurred by the Borrower under non-competition
agreements entered into by the Borrower in connection with such
acquisitions and purchases.
8.7. Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to the
Bank.
(d) Additional liens against the property of the Borrower which secure
indebtedness permitted by the preceding paragraph.
8.8. Capital Expenditures. Not to spend or incur obligations (including the
total amount of any capital leases) for more than Three Million Dollars
($3,000,000) in any single fiscal year to acquire fixed assets. In the event
that the IPO Proceeds equal or exceed Forty-Five Million Dollars ($45,000,000),
the Borrower may spend or incur obligations (including the total amount of any
capital leases) for not more than (i) Five Million Dollars ($5,000,000) during
fiscal year 2000 to acquire fixed
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assets (other than those described in clause (ii) of this paragraph), and (ii)
Twenty Million Dollars ($20,000,000) to acquire the Borrower's new headquarters
facility, and furniture, office equipment and fixtures for such facility.
8.9. Dividends. Not to declare or pay any dividends on any of its shares, and
not to purchase, redeem or otherwise acquire for value any of its shares, or
create any sinking fund in relation thereto, except:
(a) dividends payable in its capital stock;
(b) from earnings available for dividends and earned during the immediately
preceding fiscal year, and in any event, not in excess of Seven Hundred
Fifty Thousand Dollars ($750,000) in any one fiscal year. In the event
that the IPO Proceeds equal or exceed Forty-Five Million Dollars
($45,000,000), such maximum amount shall be increased to One Million
Dollars ($1,000,000) in any one fiscal year as of the fiscal year in
which the IPO closing date occurs and thereafter;
(c) purchases, redemptions, or other acquisitions for value of any of its
shares, or the creation of any sinking fund in relation thereto, in an
amount in any fiscal year not to exceed 20% of the Borrower's net income
for the immediately preceding fiscal year.
8.10. IPO Proceeds. To first apply the IPO Proceeds to repay in full all
principal and any unpaid interest or other charges under this line of
credit that are outstanding as of the IPO closing date.
8.11. Paydown Period. To reduce the amount of advances outstanding under this
Agreement to zero for a period of at least 30 consecutive days in each line-
year. "Line-year" means the period between the date of this Agreement and May 1,
2001, and each subsequent one-year period (if any). For the purposes of this
paragraph, "advances" does not include undrawn amounts of outstanding letters of
credit.
8.12. Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over Two Hundred Fifty Thousand Dollars ($250,000) against
the Borrower (or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor) and any
government authority.
(c) any event of default under this Agreement, or any event which, with
notice or lapse of time or both, would constitute an event of default.
(d) any material adverse change in the Borrower's (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
(e) any change in the Borrower's name, legal structure, place of business, or
chief executive office if the Borrower has more than one place of
business.
(f) any actual contingent liabilities of the Borrower (or any guarantor), and
any such contingent liabilities which are reasonably foreseeable, where
such liabilities are in excess of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000) in the aggregate.
8.13. Books and Records. To maintain adequate books and records.
8.14. Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit, and make copies of books and records at
any reasonable time. If any of the Borrower's properties, books or
records are in the possession of a third party, the Borrower authorizes
that third party to permit the Bank or its agents to have access to
perform inspections or audits and to respond to the Bank's requests for
information concerning such properties, books and records.
The Bank has no duty to inspect the Borrowers properties or to examine, audit,
or copy books and records and the Bank shall not incur any obligation or
liability by reason of not making any such inspection or inquiry. In the event
that the Bank inspects the Borrower's properties or examines, audits, or copies
books and records, the Bank will be acting solely for the purposes of protecting
the Bank's security and preserving the Bank's rights under this Agreement.
Neither the Borrower nor any other party is entitled to rely on any inspection
or other inquiry by the Bank. The Bank owes no duty of care to protect the
Borrower or any other party against, or to inform the Borrower or any other
party of, any adverse condition that may be observed as affecting the Borrower's
properties or premises, or the Borrower's business. In the event that the Bank
has a duty or obligation under applicable laws, regulations or legal
requirements to disclose any report or findings made as a result of, or in
connection with, any site visit, observation or testing by the Bank, the Bank
may make such a disclosure to the Borrower or any other party.
-11-
8.15. Compliance with Laws. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.
8.16. Preservation of Rights. To maintain and preserve all rights, privileges,
and franchises the Borrower now has.
8.17. Maintenance of Properties. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
8.18. Perfection of Liens. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
8.19. Cooperation. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
8.20. Insurance.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to
the Bank and must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance satisfactory to the
Bank as to amount, nature and carrier covering property damage (including
loss of use and occupancy) to any of the Borrower's properties, public
liability insurance including coverage for contractual liability, product
liability and workers' compensation, and any other insurance which is
usual for the Borrower's business.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
8.21. Additional Negative Covenants. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a
limited liability company.
(d) sell, assign, lease, transfer or otherwise dispose of any assets for less
than fair market value, or enter into any agreement to do so.
(e) sell, assign, lease, transfer or otherwise dispose of all or a
substantial part of the Borrower's business or the Borrower's assets
except in the ordinary course of the Borrower's business.
(f) enter into any sale and leaseback agreement covering any of its fixed
assets.
(g) acquire or purchase a business or its assets for a consideration,
including assumption of direct or contingent debt, in excess of One
Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate. In
the event that the IPO Proceeds equal or exceed Forty-Five Million
Dollars ($45,000,000), the maximum consideration shall be increased to
Fifteen Million Dollars ($15,000,000) in the aggregate as of the IPO
closing date. It is provided, however, that the Borrower may not acquire
or purchase a business or its assets after the IPO closing date unless
(i) the target business is engaged in business activities substantially
similar to the Borrower's present business, (ii) such acquisition or
purchase is not hostile, (iii) the Borrower submits to the Bank a pro-
forma balance sheet and income statement prior to the close of such
acquisition or purchase, which balance sheet and income statement shall
give effect to such acquisition or purchase, (iv) the Borrower submits to
the Bank a compliance certificate prior to the close of such acquisition
or purchase, which compliance certificate shall show that after giving
effect to such acquisition or purchase, the Borrower shall be in
compliance with the financial covenants and other terms and conditions of
this Agreement, and (v) the aggregate amount of direct and contingent
debt assumed by the Borrower in connection with all such acquisitions or
purchases does not exceed Two Million Dollars ($2,000,000).
8.22. Guaranties from Subsidiaries. Within 30 days after the Borrower's
acquisition of any new domestic subsidiary, to deliver to the Bank a guaranty
signed by the subsidiary together with a security agreement and any other
documents signed by the subsidiary, that are necessary to grant to the Bank an
enforceable first priority security interest in the subsidiary's personal
property. All such documents must be in form and content acceptable to the Bank.
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9. DEFAULT
If any of the following events occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
9.1. Failure to Pay. The Borrower fails to make a payment under this
Agreement when due.
9.2. Lien Priority. The Bank fails to have an enforceable first lien (except
for any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for this Agreement (or any guaranty).
9.3. False Information. The Borrower (or any guarantor) has given the Bank
false or misleading information or representations.
9.4. Bankruptcy. The Borrower (or any guarantor) files a bankruptcy petition,
a bankruptcy petition is filed against the Borrower (or any guarantor) or the
Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.
9.5. Receivers. A receiver or similar official is appointed for the
Borrower's (or any guarantor's) business, or the business is terminated, or any
guarantor is liquidated or dissolved.
9.6. Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower (or any guarantor) in an aggregate amount
of Two Hundred Fifty Thousand Dollars ($250,000) or more in excess of any
insurance coverage.
9.7. Judgments. Any judgments or arbitration awards are entered against the
Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) or more in
excess of any insurance coverage.
9.8. Government Action. Any government authority takes action that the Bank
believes materially adversely affects the Borrowers (or any guarantor's)
financial condition or ability to repay.
9.9. Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in the Borrower's (or any guarantor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.
9.10. Cross-default. Any default occurs under any agreement in connection with
any credit the Borrower (or any guarantor) or any of the Borrower's related
entities or affiliates has obtained from anyone else or which the Borrower (or
any guarantor) or any of the Borrower's related entities or affiliates has
guaranteed.
9.11. Default under Related Documents. Any guaranty, subordination agreement,
security agreement, deed of trust, or other document required by this Agreement
is violated or no longer in effect.
9.12. Other Bank Agreements. The Borrower (or any guarantor) or any of the
Borrower's related entities or affiliates fails to meet the conditions of, or
fails to perform any obligation under any other agreement the Borrower (or any
guarantor) or any of the Borrower's related entities or affiliates has with the
Bank or any affiliate of the Bank.
9.13. Other Breach Under Agreement. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article. This includes any failure or
anticipated failure by the Borrower to comply with any financial covenants set
forth in this Agreement, whether such failure is evidenced by financial
statements delivered to the Bank or is otherwise known to the Borrower or the
Bank.
10. ENFORCING THIS AGREEMENT; MISCELLANEOUS
10.1. GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
10.2. California Law. This Agreement is governed by California law.
10.3. Successors and Assigns. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees; provided
that such actual or potential participants or assignees shall agree to treat all
financial information exchanged as confidential. If a participation is sold or
the loan is assigned, the purchaser will have the right of set-off against the
Borrower.
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10.4. Arbitration.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, whether arising in contract, tort or
by statute, including but not limited to controversies or claims that
arise out of or relate to: (i) this Agreement (including any renewals,
extensions or modifications); or (ii) any document related to this
Agreement (collectively a "Claim").
(b) At the request of the Borrower or the Bank, any Claim shall be resolved
by arbitration in accordance with the Federal Arbitration Act (Title 9,
U. S. Code) (the "Act"). The Act will apply even though this Agreement
provides that it is governed by the law of a specified state.
(c) Arbitration proceedings will be determined in accordance with the Act,
the rules and procedures for the arbitration of financial services
disputes of J.A.M.S./Endispute or any successor thereof ("J.A.M.S."), and
the terms of this paragraph. In the event of any inconsistency, the terms
of this paragraph shall control.
(d) The arbitration shall be administered by J.A.M.S. and conducted in any
U.S. state where real or tangible personal property collateral for this
credit is located or if there is no such collateral, in California. All
Claims shall be determined by one arbitrator; however, if Claims exceed
Five Million Dollars ($5,000,000), upon the request of any party, the
Claims shall be decided by three arbitrators. All arbitration hearings
shall commence within ninety (90) days of the demand for arbitration and
close within ninety (90) days of commencement and the award of the
arbitrator(s) shall be issued within thirty (30) days of the close of the
hearing. However, the arbitrator(s), upon a showing of good cause, may
extend the commencement of the hearing for up to an additional sixty (60)
days. The arbitrator(s) shall provide a concise written statement of
reasons for the award. The arbitration award may be submitted to any
court having jurisdiction to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to decide whether any Claim is
barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. For purposes of the application of the statute
of limitations, the service on J.A.M.S. under applicable J.A.M.S. rules
of a notice of Claim is the equivalent of the filing of a lawsuit. Any
dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s)
shall have the power to award legal fees pursuant to the terms of this
Agreement.
(f) This paragraph does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies, such as but not limited to, setoff; (ii)
initiate judicial or nonjudicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale rights,
or (iv) act in a court of law to obtain an interim remedy, such as but
not limited to, injunctive relief, writ of possession or appointment of a
receiver, or additional or supplementary remedies.
(g) The filing of a court action is not intended to constitute a waiver of
the right of the Borrower or the Bank, including the suing party,
thereafter to require submittal of the Claim to arbitration.
10.5. Severability; Waivers. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
10.6. Administration Costs. The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.
10.7. Attorneys' Fees. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any case is commenced by or against the
Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar
or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house counsel.
10.8. One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit;
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(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
10.9. Indemnification. The Borrower will indemnify and hold the Bank harmless
from any loss, liability, damages, judgments, and costs of any kind relating to
or arising directly or indirectly out of (a) this Agreement or any document
required hereunder, (b) any credit extended or committed by the Bank to the
Borrower hereunder, and (c) any litigation or proceeding related to or arising
out of this Agreement, any such document, or any such credit. This indemnity
includes but is not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries
and all of their directors, officers, employees, agents, successors, attorneys,
and assigns. This indemnity will survive repayment of the Borrowers obligations
to the Bank. All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.
10.10. Notices. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, or by overnight courier,
to the addresses on the signature page of this Agreement, or sent by facsimile
to the fax numbers listed on the signature page, or to such other addresses as
the Bank and the Borrower may specify from time to time in writing. Notices
sent by first class mail shall be deemed delivered on the earlier of actual
receipt or on the fourth business day after deposit in the U.S. mail.
10.11. Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
10.12. Prior Agreement Superseded. This Agreement supersedes the Business Loan
Agreement entered into as of November 9, 1999 between the Bank and the Borrower,
and any credit outstanding thereunder shall be deemed to be outstanding under
this Agreement.
This Agreement is executed as of the date stated at the top of the first page.
Bank Of America, N.A. Sunrise Telecom, Inc.
X /s/ Xxxxxxx Xxxxxxxxxx X /s/ Xxxx Xxxxx
---------------------------------- ---------------------------------
By: Xxxxxxx Xxxxxxxxxx, By: Xxxx Xxxxx, President/
Vice President Chief Executive Officer
Address where notices to the Bank are to be sent:
South Bay Commercial Banking Office #01487 X /s/ Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxx ---------------------------------
Xxx Xxxx, XX 00000 By: Xxxxx Xxxxxxxx, Treasurer
Address for Notices:
00 Xxxxx Xxxx Xxxxxxxxx
Xxx Xxxx, XX 00000
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Bank of America
================================================================================
Security Agreement (Receivables and Inventory)
1. THE SECURITY.
The undersigned Sunrise Telecom, Inc. ("Borrower") hereby assigns and grants to
Bank of America, N.A. ("Bank") a security interest in the following described
property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Borrower: accounts, contract rights, chattel paper, instruments,
deposit accounts, and general intangibles.
B. All inventory now owned or hereafter acquired by Borrower.
C. All negotiable and nonnegotiable documents of title now owned or
hereafter acquired by Borrower.
D. All rights under contracts of insurance now owned or hereafter
acquired by Borrower covering any of the above-described property.
E. All proceeds, product, rents and profits now owned or hereafter
acquired by Borrower of any of the above-described property.
F. All books and records now owned or hereafter acquired by Borrower
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS.
The collateral secures and will secure all Indebtedness of Borrower to Bank. For
the purposes of this Agreement, "Indebtedness" means all loans and advances made
by Bank to Borrower and all other obligations and liabilities of Borrower to
Bank, whether now existing or hereafter incurred or created, whether voluntary
or involuntary, whether due or not due, whether absolute or contingent, or
whether incurred directly or acquired by Bank by assignment or otherwise. Unless
Borrower shall have otherwise agreed in writing, Indebtedness, for the purposes
of this Agreement, shall not include "consumer credit" subject to the disclosure
requirements of the Federal Truth in Lending Act or any regulations promulgated
thereunder.
3. BORROWER'S COVENANTS.
Borrower covenants and warrants that unless compliance is waived by Bank in
writing:
A. Borrower will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
B. Borrower has notified Bank in writing of, and will notify Bank in
writing prior to any change in the locations of (i) Borrower's place
of business or Borrower's chief executive office if Borrower has more
than one place of business and (ii) any Collateral, including the
Books and Records.
C. Borrower will notify Bank in writing prior to any change in Borrower's
name, identity or business structure.
D. Borrower will maintain and keep in force insurance covering Collateral
designated by Bank against fire and extended coverages. Such insurance
shall require losses to be paid on a replacement cost basis, be issued
by insurance companies acceptable to Bank and include a loss payable
endorsement in favor of Bank in a form acceptable to Bank.
E. Borrower has not granted and will not grant any security interest in
any of the Collateral except to Bank, and will keep the Collateral
free of all liens, claims, security interests and encumbrances of any
kind or nature, except the security interest of Bank.
F. Borrower will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Borrower's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Borrower, or (ii) any other Collateral except with the
prior written consent of Bank.
G. Borrower will promptly notify Bank in writing of any event which
affects the value of any Collateral, the ability of Borrower or Bank
to dispose of any Collateral, or the rights and remedies of Bank in
relation thereto, including but not limited to, the levy of any legal
process against any Collateral and the adoption of any marketing
order, arrangement or procedure affecting the Collateral, whether
governmental or otherwise.
H. If any Collateral is or becomes the subject of any negotiable document
of title including any warehouse receipt or xxxx of lading, Borrower
shall immediately deliver such document to Bank.
I. Until Bank exercises its rights to make collection, Borrower will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS.
Borrower agrees that Bank may at its option at any time, whether or not Borrower
is in default:
A. Require Borrower to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver
daily such collections and proceeds to Bank in kind.
B. Require Borrower to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
C. Examine the Collateral, including the Books and Records, and make
copies of or extracts from the Books and Records, and for such
purposes enter at any reasonable time upon the property where any
Collateral or any Books and Records are located.
D. Require Borrower to deliver to Bank any instruments or chattel paper.
E. Require Borrower to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory.
F. Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
G. Require Borrower to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
H. Demand and collect any payments and proceeds of the Collateral. In
connection therewith Borrower irrevocably authorizes Bank to endorse
or sign Borrower's name on all checks, drafts, collections, receipts
and other documents, and to take possession of and open the mail
addressed to Borrower and remove therefrom any payments and proceeds
of the Collateral.
5. DEFAULTS.
Any one or more of the following shall be a default hereunder:
A. Borrower fails to pay any indebtedness when due.
B. Borrower breaches any term, provision, warranty or representation
under this Agreement or under any other obligation of Borrower to
Bank.
C. Any custodian, receiver or trustee is appointed to take possession,
custody or control of all or a substantial portion of the property of
Borrower or of any guarantor of any indebtedness.
D. Borrower or any guarantor of any indebtedness becomes insolvent, or is
generally not paying or admits in writing its inability to pay its
debts as they become due, fails in business, makes a general
assignment for the benefit of creditors, dies or commences any case,
proceeding or other action under any bankruptcy or other law for the
relief of, or relating to, debtors.
E. Any case, proceeding or other action is commenced against Borrower or
any guarantor of any indebtedness under any bankruptcy or other law
for the relief of, or relating to, debtors.
F. Any involuntary lien of any kind or character attaches to any
Collateral.
G. Any financial statements, certificates, schedules or other information
now or hereafter furnished by Borrower to Bank proves false or
incorrect in any material respect.
6. BANK'S REMEDIES AFTER DEFAULT.
In the event of any default Bank may do any one or more of the following:
A. Declare any indebtedness immediately due and payable, without notice
or demand.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
C. Enforce the security interest of Bank in any deposit account of
Borrower maintained with Bank by applying such account to the
Indebtedness.
D. Require Borrower to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by
Bank.
E. Enter upon the property where any Collateral, including any Books and
Records are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Borrower's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or
lease, sell or lease, or otherwise dispose of, any Collateral.
X. Xxxxx extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Borrower.
G. Use or transfer any of Borrower's rights and interest in any
Intellectual Property now owned or hereafter acquired by Borrower, if
Bank deems such use or transfer necessary or advisable in order to
take possession of, hold, preserve, process, assemble, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral. Borrower agrees that any such use or
transfer shall be without any additional consideration to Borrower. As
used in this paragraph, "Intellectual Property" includes, but is not
limited to, all trade secrets, computer software, service marks,
trademarks, trade names, trade styles, copyrights, patents,
applications for any of the foregoing, customer lists, working
drawings, instructional manuals, and rights in processes for technical
manufacturing, packaging and labelling in which Borrower has any right
or interest, whether by ownership, license, contract or otherwise.
H. Have a receiver appointed by any court of competent jurisdiction to
take possession of the Collateral.
I. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Borrower hereby irrevocably
constitutes and appoints Bank as Borrower's attorney-in-fact to
perform all acts and execute all documents in connection therewith.
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7. MISCELLANEOUS.
A. Any waiver, expressed or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter.
B. Borrower shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with
this Agreement as Bank may reasonably deem necessary.
C. All notes, security agreements, subordination agreements and other
documents executed by Borrower or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. This Agreement shall be governed by and construed according to the
laws of the State of California, to the jurisdiction of which the
parties hereto submit.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Borrower agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services.
H. Any Borrower who is married agrees that such Borrower's separate
property shall be liable for payment of the Indebtedness if such
Borrower is personally liable for the Indebtedness.
Date: 4/21 , 2000
-------------------
BANK OF AMERICA, N.A. Borrower:
Sunrise Telecom, Inc.
X /s/ Xxxxxxx Xxxxxxxxxx
----------------------------------- X /s/ Xxxx Xxxxx
By: Xxxxxxx Xxxxxxxxxx, ----------------------------------
Vice President By: Xxxx Xxxxx, President/
Chief Executive Officer
X /s/ Xxxxx Xxxxxxxx
----------------------------------
By: Xxxxx Xxxxxxxx, Treasurer/
Chief Financial Officer
Bank of America
================================================================================
To: Continuing Guaranty
Bank of America, N.A. Borrowers: Sunrise Telecom, Inc.
Guarantors: Hukk Engineering, Inc.
(1) For valuable consideration, the undersigned ("Guarantors") jointly and
severally unconditionally guarantee and promise to pay to Bank of America, N.A.
("Bank"), or order, on demand, in lawful money of the United States, any and all
indebtedness of Sunrise Telecom, Inc. ("Borrowers") to Bank. The word
"indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations, and liabilities of Borrowers or any one or
more of them to Bank, heretofore, now, or hereafter made, incurred or created,
whether voluntary or involuntary and however arising, whether direct or acquired
by Bank by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrowers may be liable individually or jointly with others, or whether recovery
upon such indebtedness may be or hereafter become barred by any statute of
limitations, or whether such indebtedness may be or hereafter become otherwise
unenforceable.
(2) The liability of Guarantors under this Guaranty (exclusive of
liability under any other guaranties executed by Guarantors) shall not exceed at
any one time the total of (a) Nine Million and 00/100 Dollars ($9,000,000.00),
for the principal amount of the indebtedness and (b) all interest, fees, and
other costs and expenses relating to or arising out of the indebtedness or such
part of the indebtedness as shall not exceed the foregoing limitation. It is
provided, however, that the amount guaranteed under this Guaranty shall not
exceed the Maximum Guaranteed Amount. "Maximum Guaranteed Amount" means the
greater of: (x) the "reasonably equivalent value" received by Guarantors in
exchange for or in connection with Guarantors' execution of this Guaranty; or
(y) ninety percent (90%) of the excess of (i) a "fair valuation" of the amount
of the assets of Guarantors as of the applicable date of determination of the
incurrence of Guarantors' obligations under this Guaranty over (ii) a "fair
valuation" of Guarantors' debts as of such date. For purposes of the definition
of "Maximum Guaranteed Amount", "reasonably equivalent value", "fair valuation"
and the calculation of assets and other property and debts shall be determined
in accordance with applicable federal and California state laws governing the
determination of the insolvency of a debtor and to further the intent of the
parties not to render Guarantors insolvent or to leave Guarantors with an
unreasonably small amount of capital in relation to their business, in all cases
at the applicable date for determination of the incurrence of Guarantors'
obligations under this Guaranty. Bank may permit the indebtedness to exceed
Guarantors' liability, and may apply any amounts received from any source, other
than from Guarantors, to the unguaranteed portion of the indebtedness. This is a
continuing guaranty relating to any indebtedness, including that arising under
successive transactions which shall either continue the indebtedness or from
time to time renew it after it has been satisfied. Any payment by Guarantors
shall not reduce their maximum obligation hereunder, unless written notice to
that effect be actually received by Bank at or prior to the time of such
payment.
(3) If any Borrower is a partnership and any Guarantor is a general
partner of that partnership, then such Guarantor shall not be liable under this
Guaranty for any indebtedness of such Borrower which is secured by real
property; provided, however, that such Guarantor shall remain liable under
partnership law for all the indebtedness of such Borrower.
(4) The obligations hereunder are joint and several, and independent of
the obligations of Borrowers, and a separate action or actions may be brought
and prosecuted against Guarantors whether action is brought against Borrowers or
whether Borrowers be joined in any such action or actions; and Guarantors waive
the benefit of any statute of limitations affecting their liability hereunder.
(5) Guarantors authorize Bank, without notice or demand and without
affecting their liability hereunder, from time to time, either before or after
revocation hereof, to (a) renew, compromise, extend, accelerate, or otherwise
change the time for payment of, or otherwise change the terms of the
indebtedness or any part thereof, including increase or decrease of the rate of
interest thereon; (b) receive and hold security for the payment of this Guaranty
or any of the indebtedness, and exchange, enforce, waive, release, fail to
perfect, sell, or otherwise dispose of any such security; (c) apply such
security and direct the order or manner of sale thereof as Bank in its
discretion may determine; and (d) release or substitute any one or more of the
endorsers or guarantors.
(6) Guarantors waive any right to require Bank to (a) proceed against
Borrowers; (b) proceed against or exhaust any security held from Borrowers; or
(c) pursue any other remedy in Bank's power whatsoever. Guarantors waive any
defense arising by reason of any disability or other defense of Borrowers, or
the cessation from any cause whatsoever of the liability of Borrowers, or any
claim that Guarantors' obligations exceed or are more burdensome than those of
Borrowers. Until the indebtedness shall have been paid in full, even though the
indebtedness is in excess of Guarantors' liability hereunder, Guarantors waive
any right of subrogation, reimbursement, indemnification, and contribution
(contractual, statutory, or otherwise) including, without limitation, any claim
or right of subrogation under the Bankruptcy Code (Title 11, United States Code)
or any successor statute, arising from the existence or performance of this
Guaranty and Guarantors waive any right to enforce any remedy which Bank now has
or may hereafter have against Borrowers and waive any benefit of, and any right
to participate in, any security now or hereafter held by Bank. Guarantors waive
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
indebtedness.
-1-
(7) (a) Guarantors understand and acknowledge that if Bank forecloses,
either by judicial foreclosure or by exercise of power of sale, any deed of
trust securing the indebtedness, that foreclosure could impair or destroy any
ability that Guarantors may have to seek reimbursement, contribution, or
indemnification from Borrowers or others based on any right Guarantors may have
of subrogation, reimbursement, contribution, or indemnification for any amounts
paid by Guarantors under this Guaranty. Guarantors further understand and
acknowledge that in the absence of this paragraph, such potential impairment or
destruction of Guarantors' rights, if any, may entitle Guarantors to assert a
defense to this Guaranty based on Section 580d of the California Code of Civil
Procedure as interpreted in Union Bank x. Xxxxxxx, 265 Cal. App. 2d. 40 (1968).
By executing this Guaranty, Guarantors freely, irrevocably, and unconditionally:
(i) waive and relinquish that defense and agree that Guarantors will be fully
liable under this Guaranty even though Bank may foreclose, either by judicial
foreclosure or by exercise of power of sale, any deed of trust securing the
indebtedness; (ii) agree that Guarantors will not assert that defense in any
action or proceeding which Bank may commence to enforce this Guaranty; (iii)
acknowledge and agree that the rights and defenses waived by Guarantors in this
Guaranty include any right or defense that Guarantors may have or be entitled to
assert based upon or arising out of any one or more of Sections 580a, 580b,
580d, or 726 of the California Code of Civil Procedure or Section 2848 of the
California Civil Code; and (iv) acknowledge and agree that Bank is relying on
this waiver in creating the indebtedness, and that this waiver is a material
part of the consideration which Bank is receiving for creating the indebtedness.
(b) Guarantors waive any rights and defenses that are or may become
available to Guarantors by reason of Sections 2787 to 2855, inclusive, of the
California Civil Code.
(c) Guarantors waive all rights and defenses that Guarantors may have
because any of the indebtedness is secured by real property. This means, among
other things: (I) Bank may collect from Guarantors without first foreclosing on
any real or personal property collateral pledged by Borrowers; and (ii) if Bank
forecloses on any real property collateral pledged by Borrowers: (1) the amount
of the indebtedness may be reduced only by the price for which that collateral
is sold at the foreclosure sale, even if the collateral is worth more than the
sale price, and (2) Bank may collect from Guarantors even if Bank, by
foreclosing on the real property collateral, has destroyed any right Guarantors
may have to collect from Borrowers. This is an unconditional and irrevocable
waiver of any rights and defenses Guarantors may have because any of the
indebtedness is secured by real property. These rights and defenses include, but
are not limited to, any rights or defenses based upon Section 580a, 580b, 580d,
or 726 of the California Code of Civil Procedure.
(d) Guarantors waive any right or defense they may have at law or
equity, including California Code of Civil Procedure Section 580a, to a fair
market value hearing or action to determine a deficiency judgment after a
foreclosure.
(e) No provision or waiver in this Guaranty shall be construed as
limiting the generality of any other waiver contained in this Guaranty.
(8) Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Borrowers such information concerning
Borrowers' financial conditions or business operations as Guarantors may
require, and that Bank has no duty at any time to disclose to Guarantors any
information relating to the business operations or financial conditions of
Borrowers.
(9) To secure all of Guarantors' obligations hereunder, Guarantors assign
and grant to Bank a security interest in all moneys, securities, and other
property of Guarantors now or hereafter in the possession of Bank, all deposit
accounts of Guarantors maintained with Bank, and all proceeds thereof. Upon
default or breach of any of Guarantors' obligations to Bank, Bank may apply any
deposit account to reduce the indebtedness and may foreclose any collateral as
provided in the Uniform Commercial Code and in any security agreements between
Bank and Guarantors.
(10) Any obligations of Borrowers to Guarantors, now or hereafter existing,
including but not limited to any obligations to Guarantors as subrogees of Bank
or resulting from Guarantors' performance under this Guaranty, are hereby
subordinated to the indebtedness. Such obligations of Borrowers to Guarantors if
Bank so requests shall be enforced and performance received by Guarantors as
trustees for Bank, and the proceeds thereof shall be paid over to Bank on
account of the indebtedness, but without reducing or affecting in any manner the
liability of Guarantors under the provisions of this Guaranty.
(11) This Guaranty may be revoked at any time by Guarantors in respect to
future transactions, unless there is a continuing consideration as to such
transactions which Guarantors do not renounce. Such revocation shall be
effective upon actual receipt by Bank, at the address shown below or at such
other address as may have been provided to Guarantors by Bank, of written notice
of revocation. Revocation shall not affect any of Guarantors' obligations or
Bank's rights with respect to transactions which precede Bank's receipt of such
notice, regardless of whether or not the indebtedness related to such
transactions, before or after revocation, has been renewed, compromised,
extended, accelerated, or otherwise changed as to any of its terms, including
time for payment or increase or decrease of the rate of interest thereon, and
regardless of any other act or omission of Bank authorized hereunder. Revocation
by any one or more of Guarantors shall not affect any obligations of any
nonrevoking Guarantors. If this Guaranty is revoked, returned, or canceled, and
subsequently any payment or transfer of any interest in property by Borrowers to
Bank is rescinded or
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must be returned by Bank to Borrowers, this Guaranty shall be reinstated with
respect to any such payment or transfer, regardless of any such prior
revocation, return, or cancellation.
(12) Where any one or more of Borrowers are corporations, partnerships, or
limited liability companies, it is not necessary for Bank to inquire into the
powers of Borrowers or of the officers, directors, partners, members, managers,
or agents acting or purporting to act on their behalf, and any indebtedness made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
(13) (a) Guarantors authorize Bank to verify or check any information
given by Guarantors to Bank, check Guarantors' credit references, verify
employment, and obtain credit reports.
(b) Guarantors authorize Bank to disclose to any of Bank's affiliates
any information given by Guarantors to Bank in connection with Bank's extension
of credit to Borrowers provided that (i) such information will be used by such
affiliate only in connection with evaluating Borrowers' request or application
for a product or service offered by such affiliate and (ii) Guarantors may at
any time revoke this authorization. Such revocation shall be effective upon
actual receipt by Bank, at the address shown below or at such other address as
may have been provided to Guarantors by Bank, of written notice of such
revocation.
(c) Guarantors acknowledge and agree that the authorizations provided
in subparagraphs (a) and (b) of this paragraph apply to any individual general
partners of any Guarantor and to any Guarantor's spouse and any such general
partner's spouse if such Guarantor or such general partner is married and lives
in a community property state.
(14) Bank may, without notice to Guarantors and without affecting
Guarantors' obligations hereunder, assign the indebtedness and this Guaranty, in
whole or in part. Guarantors agree that Bank may disclose to any assignee or
purchaser, or any prospective assignee or purchaser, of all or part of the
indebtedness any and all information in Bank's possession concerning Guarantors,
this Guaranty, and any security for this Guaranty.
(15) Guarantors agree to pay all reasonable attorneys' fees, including
allocated costs of Bank's in-house counsel, and all other costs and expenses
which may be incurred by Bank (a) in the enforcement of this Guaranty or (b) in
the preservation; protection, or enforcement of any rights of Bank in any case
commenced by or against Guarantors under the Bankruptcy Code (Title 11, United
States Code) or any similar or successor statute.
(16) Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall be deemed
to have been used in the singular where the context and construction so require;
and when there is more than one Borrower named herein, or when this Guaranty is
executed by more than one Guarantor, the words "Borrowers" and "Guarantors"
respectively shall mean all and any one or more of them.
(17) This Guaranty shall be governed by and construed according to the laws
of the State of California, to the jurisdiction of which the parties hereto
submit.
(18) (a) Any controversy or claim between or among the parties, including
but not limited to those arising out of or relating to this Guaranty or any
agreements or instruments relating hereto or delivered in connection herewith
and any claim based on or arising from an alleged tort, shall at the request of
any party be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Guaranty, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrators shall give effect to statutes of limitation in determining any
claim, except as expressly waived hereunder by Guarantors. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrators. Judgment upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.
(b) Notwithstanding the provisions of subparagraph (a), no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation to Bank which is secured by real
property collateral located in California. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim shall be determined as provided in subparagraph (c).
(c) A controversy or claim which is not submitted to arbitration as
provided and limited in subparagraphs (a) and (b) shall, at the request of any
party, be determined by a reference in accordance with California Code of Civil
Procedure Section 638 et seq. If such an election is made, the parties shall
designate to the court a referee or referees selected under the auspices of the
AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings.
The presiding referee of the panel, or the referee if there is a single referee,
shall be an active attorney or retired judge. Judgment upon the award rendered
by such referee or referees shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure
Sections 644 and 645.
-3-
(d) No provision of this paragraph shall limit the right of any party
to this Guaranty to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or to
obtain provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other proceeding.
The exercise of a remedy does not waive the right of either party to resort to
arbitration or reference. At Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under the deed
of trust or mortgage or by judicial foreclosure.
Date: 4/21 , 2000
----------------------
Witnessed: Hukk Engineering, Inc.
X /s/ Xxxxxxx Xxxxxxxxxx X /s/ Xxxxx Xxxxxxxx
----------------------------------- -----------------------------------
Witness By: Xxxxx Xxxxxxxx, Secretary/Treasurer
-----------------------------------
Address
X /s/ Xxxx Xxxxx
-----------------------------------
By: Xxxx Xxxxx, CEO
X__________________________________
Witness 0000-X Xxxxxxxxx
Xxxxxxx Xxxxxx
----------------------------------- Xxxxxxxx, XX 00000
Address
Address for Notices:
Bank of America, N.A.
South Bay Commercial Banking Xxxxxx #00000
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
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