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[COMERICA LOGO]
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
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OBLIGOR # NOTE # AGREEMENT DATE
DECEMBER 18, 1997
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CREDIT LIMIT INTEREST RATE B+2.00% OFFICER NO./INITIALS
$5,000,000.00 10.50% 48154 XXXXX XXXX
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THIS AGREEMENT is entered into on DECEMBER 18, 1997, between COMERICA
BANK-CALIFORNIA ("Bank") as secured party, whose Headquarter Office is 000 XXXX
XXXXX XXXXX XXXXXX, XXX XXXX, XX and GENERAL AUTOMATION INC. ("Borrower"), a
DELAWARE CORPORATION whose sole place of business (if it has only one), chief
executive office (if it has more than one place of business) or residence (if an
individual) is located at 00000 XXXXXXXX XXXXX, XXXXXX, XX. The parties agree as
follows:
1. DEFINITIONS
1.1 "Agreement" as used in this Agreement means and includes this Loan
& Security Agreement (Accounts and Inventory), any concurrent or subsequent
rider to this Loan & Security Agreement (Accounts and Inventory) and to any
such rider.
1.2 "Bank Expenses" as used in this Agreement means and includes: all
costs or expenses required to be paid by Borrower under this Agreement
which are paid or advanced by Bank; taxes and insurance premiums of every
nature and kind of Borrower paid by Bank; filing, recording, publication
and search fees, appraiser fees, and/or fees and costs, and title insurance
premiums paid or incurred by Bank in connection with Bank's transactions
with Borrower; costs and expenses incurred by Bank in collecting the
Receivables (with or without suit) to correct any default or enforce any
provision of this Agreement, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, disposing of, preparing
for sale and/or advertising to sell the Collateral, whether or not a sale
is consummated; costs and expenses of suit incurred by Bank in enforcing or
defending this Agreement or any portion hereof, including, but not limited
to, expenses incurred by Bank in attempting to obtain relief from any stay,
restraining order, injunction or similar process which prohibits Bank from
exercising any of its rights or remedies; and attorneys' fees and expenses
incurred by Bank in advising, structuring, drafting, reviewing, amending,
terminating, enforcing, defending or concerning this Agreement, or any
portion hereof or any agreement related hereto, whether or not suit is
brought. Bank Expenses shall include Bank's in-house legal charges at
reasonable rates.
1.3 "Base Rate" as used in this Agreement means that variable rate of
interest so announced by Bank at its headquarters office in San Jose,
California as its "Base Rate" from time to time and which serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto.
1.4 "Borrower's Books" as used in this Agreement means and includes
all of the Borrower's books and records including but not limited to:
minute books; ledgers; records indicating, summarizing or evidencing
Borrower's assets, liabilities, Receivables, business operations or
financial condition, and all information relating thereto, computer
programs; computer disk or tape files; computer printouts; computer runs;
and other computer prepared information and equipment of any kind.
1.5 "Borrowing Base" as used in this Agreement means the sum of: (1)
EIGHTY percent ( 00.00%) of the net amount of Eligible Accounts after
deducting therefrom all payments, adjustments and credits applicable
thereto ("Accounts Receivable Borrowing Base"); and (2) the amount, if any,
of the advances against Inventory agreed to be made pursuant to any
Inventory Rider ("Inventory Borrowing Base"), or other rider, amendment or
modification to this Agreement, that may now or hereafter be entered into
by Bank and Borrower.
* 60% OF ELIGIBLE SERVICE RELATED ACCOUNTS RECEIVABLE LESS THAN 60 DAYS
PAST DUE, NOT TO EXCEED $2,000,000.00.
1.6 "Cash Flow" as used in this Agreement means for any applicable
period of determination, the Net Income (after deduction for income taxes
and other taxes of such person determined by reference to income or profits
of such person) for such period, plus, to the extent deducted in
computation of such Net Income, the amount of depreciation and amortization
expense and the amount of deferred tax liability during such period, all
as determined in accordance with GAAP. The applicable period of
determination will be N/A, beginning with the period from _________________
to ___________________.
1.7 "Collateral" as used in this Agreement means and includes each and
all of the following: the Receivables; the Intangibles; the negotiable
collateral, the Inventory; all money, deposit accounts and all other assets
of Borrower in which Bank receives a security interest or which hereafter
come into the possession, custody or control of Bank; and the proceeds of
any of the foregoing, including, but not limited to, proceeds of insurance
covering the collateral and any and all Receivables, Intangibles,
negotiable collateral, Inventory, equipment, money, deposit accounts or
other tangible and intangible property of borrower resulting from the sale
or other disposition of the collateral, and the proceeds thereof.
Notwithstanding anything to the contrary contained herein, collateral shall
not include any waste or other materials which have been or may be
designated as toxic or hazardous by Bank.
1.
2
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
1.8 "Credit" as used in this Agreement means all Obligations, except
those obligations arising pursuant to any other separate contract, instrument,
note, or other separate agreement which, by its terms, provides for a specified
interest rate and term.
1.9 "Current Assets" as used in this Agreement means, as of any
applicable date of determination, all cash, non-affiliated customer
receivables, United States government securities, claims against the United
States government, and inventories.
1.10 "Current Liabilities" as used in this Agreement means, as of any
applicable date of determination, (i) all liabilities of a person that should
be classified as current in accordance with GAAP, including without limitation
any portion of the principal of the indebtedness classified as current, plus
(ii) to the extent not otherwise included, all liabilities of the Borrower to
any of its affiliates whether or not classified as current in accordance with
GAAP.
1.11 "Daily Balance" as used in this Agreement means the amount determined
by taking the amount of the Credit owned at the beginning of a given day,
adding any new Credit advanced or incurred on such date, and subtracting any
payments or collections which are deemed to be paid and are applied by Bank in
reduction of the Credit on that date under the provisions of this Agreement.
1.12 "Eligible Accounts" as used in this Agreement means and includes
those accounts of Borrower which are due and payable within thirty (30) days,
or less, from the date of Invoice, have been validly assigned to Bank and
strictly comply with all of Borrower's warranties and representations to Bank;
but Eligible Accounts shall not include the following; (a) accounts with
respect to which the account debtor is an officer, employee, partner, joint
venturer or agent of Borrower; (b) accounts with respect to which goods are
placed on consignment, guaranteed sale or other terms by reason of which the
payment by the account debtor may be conditional; (c) accounts with respect to
which the account debtor is not a resident of the United States; (d) accounts
with respect to which the account debtor is the United States or any
department, agency or instrumentality of the United States; (e) accounts with
respect to which the account debtor is any State of the United States or any
city, county, town, municipality or division thereof; (f) accounts with respect
to which the account debtor is a subsidiary of, related to, affiliated or has
common shareholders, officers or directors with Borrower; (g) accounts with
respect to which Borrower is or may become liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower; (h) accounts
not paid by an account debtor within ninety (90) days from the date of the
Invoice; (i) accounts with respect to which account debtors dispute liability
or make any claim, or have any defense, crossclaim, counterclaim, or offset;
(j) accounts with respect to which any Insolvency Proceedings is filed by or
against the account debtor, or if an account debtor becomes insolvent, fails or
goes out of business; and (k) accounts owed by any single account debtor which
exceed twenty percent (20%) of all of the Eligible Accounts; and (l) accounts
with a particular account debtor on which over twenty-five percent (25%) of the
aggregate amount owing is greater than ninety (90) days from the date of the
invoice.
1.13 "Event of Default" as used in this Agreement means those events
described in Section 7 contained herein below.
1.14 "Fixed Charges" as used in this Agreement means and includes for any
applicable period of determination, the sum, without duplication, or (a) all
interest paid or payable during such period by a person on debt of such person,
plus (b) all payments of principal or other sums paid or payable during such
period by such person with respect to debt of such person having a final
maturity more than one year from the date of creation of such debt, plus (c)
all debt discount and expenses amortized or required to be amortized during
such person, plus (d) the maximum amount of all rents and other payments paid
or required to be paid by such person during such period under any lease or
other contract or arrangement providing for use of real or personal property in
respect of which such person is obligated as a lessee, use or obligor, plus (e)
all dividends and other distributions paid or payable by such person or
otherwise accumulated during such period on any capital stock of such person,
plus (f) all loans or other advances made by such person during such period to
any Affiliate of such person. The applicable period of determination will be
N/A, beginning with the period from ____________ to ____________.
1.15 "GAAP" as used in this Agreement means as of any applicable period,
generally accepted accounting principles in effect during such period.
1.16 "Insolvency Proceeding" as used in this Agreement means and includes
any proceeding or case commenced by or against the Borrower, or any guarantor
of Borrower's Obligations, or any of Borrower's account debtors, under any
provisions of the Bankruptcy Code, as amended, or any other bankruptcy or
insolvency law, including but not limited to assignments for the benefit of
creditors, formal or informal moratoriums, composition or extensions with some
or all creditors, any proceeding seeking a reorganization, arrangement or any
other relief under the Bankruptcy code, as amended, or any other bankruptcy or
insolvency law.
1.17 "Intangibles" as used in this Agreement means an includes all of
Borrower's present and future general intangibles and other personal property
(including, without limitation, any and all rights in any legal proceedings,
goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings,
purchase orders, computer programs, computer disks, computer tapes, literature,
reports, catalogs and deposit accounts) other than goods and Receivables, as
well as Borrower's Books relating to any of the foregoing.
CA L&S (12-84)
2.
3
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
1.18 "Inventory" as used in this Agreement means and includes all
present and future inventory in which Borrower has any interest, including, but
not limited to, goods held by Borrower for sale or lease or to be furnished
under a contract of service and all of Borrower's present and future raw
materials, work in process, finished goods, advertising materials, and packing
and shipping materials, wherever located and any documents of title representing
any of the above, and any equipment, fixtures or other property used in the
storing, moving, preserving, identifying, accounting for and shipping or
preparing for the shipping of inventory, and any and all other items hereafter
acquired by Borrower by way of substitution, replacement, return, repossession
or otherwise, and all additions and accessions thereto, and the resulting
product or mass, and any documents of title respecting any of the above.
1.19 "Net Income" as used in this agreement means the net income (or
loss) of a person for any period determined in accordance with GAAP but
excluding in any event:
(a) any gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments or fixed or
capital assets, and any taxes on the excluded gains and any tax
deductions or credits on account on any excluded losses; and
(b) in the case of the Borrower, net earnings of any Person in
which Borrower has an ownership interest, unless such net earnings
shall have actually been received by Borrower in the form of cash
distributions.
1.20 "Judicial Officer or Assignee" as used in this Agreement means and
includes any trustee, receiver, controller, custodian, assignee for the benefit
of creditors or any other person or entity having powers or duties like or
similar to the powers and duties of trustee, receiver, controller, custodian or
assignee for the benefit of creditors.
1.21 "Obligations" as used in this Agreement means and includes any and
all loans, advances, overdrafts, debts, liabilities (including, without
limitation, and all amounts charged to Borrower's account pursuant to any
agreement authorizing Bank to charge Borrower's account), obligations, lease
payments, guaranties, covenants and duties owing by Borrower to Bank of any kind
and description whether advanced pursuant to or evidenced by this Agreement; by
any note or other instrument; or by any other agreement between Bank and
Borrower and whether or not for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which Bank may have obtained by
assignment, participation, purchase or otherwise, and further including, without
limitation, all interest not paid when due and all Bank Expenses which Borrower
is required to pay or reimburse by this Agreement, by law, or otherwise.
1.22 "Person" or "person" as used in this Agreement means and includes
any individual, corporation, partnership, joint venture, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.
1.23 "Receivables" as used in this Agreement means and includes all
presently existing and hereafter arising accounts, instruments, documents,
chattel paper, general intangibles, all other forms of obligations owing to
Borrower, all of Borrower's rights in, to and under all purchase orders
heretofore or hereafter received, all moneys due to Borrower under all contracts
or agreements (whether or not yet earned or due), all merchandise returned to or
reclaimed by Borrower and the Borrower's books (except minute books) relating to
any of the foregoing.
1.24 "Subordinated Debt" as used in this Agreement means indebtedness
of the Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content satisfactory to the
Bank.
1.25 "Subordination Agreement" as used in this Agreement a
subordination agreement in form satisfactory to Bank making all present and
future indebtedness of the Borrower to TEXAS MICRO INC. subordinate to the
Obligations.
1.26 "Tangible Effective Net Worth" as used in this Agreement means net
worth as determined in accordance with GAAP consistently applied, increased by
Subordinated Debt if any, and decreased by the following: patents, licenses,
goodwill, subscription lists, organization expenses, trade receivables converted
to notes, and money due from affiliates (including officers, directors,
subsidiaries and commonly held companies.
1.27 "Tangible Net Worth" as used in this Agreement means, as of any
applicable date of determination, the excess of:
a. the net book value of all assets of a person (other than
patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, and similar intangible assets)
after all appropriate deductions in accordance with GAAP
(including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over
b. all total liabilities of such person.
1.28 "Total Liabilities" as used in this Agreement means the total of
all items of indebtedness, obligation or liability which, in accordance with
GAAP consistently applied, would be included in determining the total
liabilities of the Borrower as of the date Total Liabilities is to be
determined, including without limitation (a) all obligations secured by any
mortgage, pledge, security interest or other lien on property owned or acquired,
whether or not the obligations secured thereby shall have been assumed; (b) all
obligations which are capitalized lease obligations; and (c) all guaranties,
endorsements or other contingent or surety obligations with respect to the
indebtedness of others, whether
CA L&S (12-84)
3.
4
LOAN SECURITY AGREEMENT
(Accounts & Inventory)
or not reflected on the balance sheets of the Borrower, including any
obligation to furnish funds, directly or indirectly through the purchase
of goods, supplies, services, or by way of stock purchase, capital
contribution, advance or loan or any obligation to enter into a contract
for any of the foregoing.
1.29 "Working Capital" as used in this Agreement means, as of
any applicable date of determination, Current Assets less Current
Liabilities.
1.30 Any and all terms used in this Agreement shall be
construed and defined in accordance with the meaning and definition of
such terms under and pursuant to the California Uniform Commercial Code
(hereinafter referred to as the "Code") as amended.
2. LOAN AND TERMS OF PAYMENT
For value received, Borrower promises to pay to the order of Bank such
amount, as provided for below, together with interest, as provided for
below,
2.1 Upon the request of Borrower, made at any time and from
time to time during the term hereof, and so long as no Event of Default
has occurred, Bank shall lend to Borrower an amount equal to the
Borrowing Base; provided, however, that in no event shall Bank be
obligated to make advances to Borrower under this Section 2.1 whenever
the Daily Balance exceeds, at any time, either the Borrowing Base or
the sum of FIVE MILLION AND NO/100 ($5,000,000.00), such amount being
referred to herein as "Overadvance".
2.2 Except as hereinbelow provided, the Credit shall bear
interest, on the Daily Balance owing, at a rate of TWO AND NO/1000
(2.000%) percentage points per annum above the Base Rate (the "Rate").
The Credit shall bear interest, from and after the occurrence of an
Event of Default and without constituting a waiver of any such Event of
Default, on the Daily Balance owing, at a rate three (3) percentage
points per annum above the Rate. All interest chargeable under this
Agreement that is based upon a per annum calculation shall be computed
on the basis of a three hundred sixty (360) day year for actual days
elapsed.
The Base Rate as of the date of this Agreement is EIGHT AND
500/1000 (8.500%) per annum. In the event that the Base Rate announced
is, from time to time hereafter, changed, adjustment in the Rate shall
be made and based on the Base Rate in effect on the date of such change.
The Rate, as adjusted, shall apply to the Credit until the Base Rate is
adjusted again. The minimum interest payable by the Borrower under this
Agreement shall in no event be less than _____ N/A____ per month. All
interest payable by Borrower under the Credit shall be due and payable
on the first day of each calendar month during the term of this
Agreement and Bank may, at its option, elect to treat such interest and
any and all Bank Expenses as advances under the Credit, which amounts
shall thereupon constitute Obligations and shall thereafter accrue
interest at the rate applicable to the Credit under the terms of the
Agreement.
2.3 Without affecting Borrower's obligation to repay
immediately any Overadvances in accordance with Section 2.1 hereof, all
Overadvances shall bear additional interest on the amount thereof at a
rate equal to ___N/A____ (N/A %) percentage points per month in excess
of the interest rate set forth in Section 2.2, from the date incurred
and for each month thereafter, until repaid in full.
3. TERM
3.1 This Agreement shall remain in full force and effect until
terminated by notice, by either party. Notice of such termination
shall be effectuated by mailing of a registered or certified letter not
less than thirty (30) days prior to the effective date of such
termination, addressed to the other party at the address set forth
herein and the termination shall be effective as of the date so fixed in
such notice. Notwithstanding the foregoing, should Borrower be in
default of one or more of the provisions of this Agreement, Bank may
terminate this Agreement at any time without notice. Notwithstanding
the foregoing, should either Bank or Borrower become insolvent or
unable to meet its debts as they mature, or fall, suspend, or go out of
business, the other party shall have the right to terminate this
Agreement at any time without notice. On the date of termination all
Obligations shall become immediately due and payable without notice or
demand; no notice of termination by Borrower shall be effective until
Borrower shall have paid all Obligations to Bank in full.
Notwithstanding termination, until all Obligations have been fully
satisfied, Bank shall retain its security interest in all existing
Collateral and Collateral arising thereafter, and Borrower shall
continue to perform all of its Obligations.
3.2 After termination and when Bank has received payment in
full of Borrower's Obligations to Bank, Bank shall reassign to Borrower
all Collateral held by Bank, and shall execute a termination of all
security agreements and security interests given by Borrower to Bank,
upon the execution and delivery of mutual general releases.
4. CREATION OF SECURITY INTEREST
4.1 Borrower hereby grants to Bank a continuing security
interest in all presently existing and hereafter arising Collateral in
order to secure prompt repayment of any and all Obligations owed by
Borrower to Bank and in order to secure prompt performance by Borrower
of each and all of its covenants and Obligations under this Agreement
and otherwise created. Bank's security interest in the Collateral shall
attach to all Collateral without further act on the part of Bank or
Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of a letter of credit,
CA L&S (1-94)
4.
5
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
advice of credit, instrument, money, negotiable documents, chattel paper or
similar property (collectively, "Negotiable Collateral"), Borrower shall,
immediately upon receipt thereof, endorse and assign such Negotiable Collateral
over to Bank and deliver actual physical possession of the Negotiable
Collateral to Bank.
4.2 Bank's security interest in Receivables shall attach to all
Receivables without further act on the part of Bank or Borrower. Upon request
from Bank, Borrower shall provide Bank with schedules describing all
Receivables created or acquired by Borrower (including without limitation
agings listing the names and addresses of, and amounts owing by date by account
debtors), and shall execute and deliver written assignments of all Receivables
to Bank all in a form acceptable to Bank, provided, however, Borrower's failure
to execute and deliver such schedules and/or assignments shall not affect or
limit Bank's security interest and other rights in and to the Receivables.
Together with each schedule, Borrower shall furnish Bank with copies of
Borrower's customers' invoices or the equivalent, and original shipping or
delivery receipts for all merchandise sold, and Borrower warrants the
genuineness thereof. Bank or Bank's designee may notify customers or account
debtors of collection costs and expenses to Borrower's account but, unless and
until Bank does so or gives Borrower other written instructions, Borrower shall
collect all Receivables for Bank, receive in trust all payments thereon as
Bank's trustee, and, if so requested to do so from Bank, Borrower shall
immediately deliver said payments to Bank in their original form as received
from the account debtor and all letters of credit, advices of credit,
instruments, documents, chattel paper or any similar property evidencing or
constituting Collateral. Notwithstanding anything to the contrary contained
herein, if sales of inventory are made for cash, Borrower shall immediately
deliver to Bank, in identical form, all such cash, checks, or other forms of
payment which Borrower receives. The receipt of any check or other item of
payment by Bank shall not be considered a payment on account until such check
or other item of payment is honored when presented for payment, in which event,
said check or other item of payment shall be deemed to have been paid to Bank
TWO ( 2 )calendar days after the date Bank actually
receives, such check or other item of payment.
4.3 Bank's security interest in inventory shall attach to all inventory
without further act on the part of Bank or Borrower. Upon Bank's request
Borrower will from time to time at Borrower's expense pledge, assemble and
deliver such inventory to Bank or to a third party as Bank's bailee; or hold
the same in trust for Bank's account or store the same in a warehouse in Bank's
name; or deliver to Bank documents of title representing said inventory; or
evidence of Bank's security interest in some other manner acceptable to Bank.
Until a default by Borrower under this Agreement or any other Agreement between
Borrower and Bank, Borrower may, subject to the provisions hereof and consistent
herewith, sell the inventory, but only in the ordinary course of Borrower's
business. A sale of inventory in Borrower's ordinary course of business does
not include an exchange or a transfer in partial or total satisfaction of a
debt owing by Borrower.
4.4 Borrower shall execute and deliver to Bank concurrently with
Borrower's execution of this Agreement, and at any time or times hereafter at
the request of Bank, all financing statements, continuation financing
statements, security agreements, mortgages, assignments, certificates of title,
affidavits, reports, notices, schedules of accounts, letters of authority and
all other documents that Bank may request, in form satisfactory to Bank, to
perfect and maintain perfected Bank's security interest in the Collateral and
in order to fully consummate all of the transactions contemplated under this
Agreement. Borrower hereby irrevocably makes, constitutes and appoints Bank
(and any of Bank's officers, employees or agents designated by Bank) as
Borrower's true and lawful attorney-in-fact with power to sign the name of
Borrower on any financing statements, continuation financing statements,
security agreement, mortgage, assignment, certificate of title, affidavit,
letter of authority, notice of other similar documents which must be executed
and/or filed in order to perfect or continue perfected Bank's security interest
in the Collateral.
Borrower shall make appropriate entries in Borrower's Books disclosing
Bank's security interest in the Receivables, Bank (through any of its officers,
employees or agents) shall have the right at any time or times hereafter during
Borrower's usual business hours, or during the usual business hours of any
third party having control over the records of Borrower, to inspect and verify
Borrower's Books in order to verify the amount or condition of, or any other
matter, relating to, said Collateral and Borrower's financial condition.
4.5 Borrower appoints Bank or any other person whom Bank may designate as
Borrower's attorney-in-fact, with power: to endorse Borrower's name on any
checks, notes, acceptances, money order, drafts or other forms of payment or
security that may come into Bank's possession; to sign Borrower's name on any
invoice or xxxx of lading relating to any Receivables, on drafts against
account debtors, on schedules and assignments of Receivables, on verifications
of Receivables and on notices to account debtors; to establish a lock box
arrangement and/or to notify the post office authorities to change the address
for delivery of Borrower's mail addressed to Borrower to an address designated
by Bank, to receive and open all mail addressed to Borrower, and to retain all
mail relating to the Collateral and forward all other mail to Borrower; to
send, whether in writing or by telephone, requests for verification of
Receivables; and to do all things necessary to carry out this Agreement.
Borrower ratifies and approves all acts of the attorney-in-fact. Neither Bank
nor its attorney-in-fact will be liable for any acts or omissions or for any
error of judgement or mistake of fact or law. This power being coupled with an
interest, is irrevocable so long as any Receivables in which Bank has a
security interest remain unpaid and until the Obligations have been fully
satisfied.
4.6 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, warehousemen,
or any personnel to protect the Collateral, pay any service bureau, or, obtain
any records, and all costs for the same shall be added to the Obligations and
shall be payable on demand.
4.7 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries
and service providers.
CA L&S (1-94)
5.
6
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
5. CONDITIONS PRECEDENT
5.1 Conditions precedent to the making of the loans and the extension
of the financial accommodations hereunder, Borrower shall execute, or cause
to be executed, and deliver to Bank, in form and substance satisfactory to
Bank and its counsel, the following:
a. This Agreement and other documents required by Bank;
b. Financing statements (Form UCC-1) in form satisfactory to Bank
for filing and recording with the appropriate governmental
authorities;
c. If Borrower is a corporation, then certified extracts from the
minutes of the meeting of its board of directors, authorizing the
borrowings and the grantings of the security interest provided
for herein and authorizing specific officers to execute and
deliver the agreements provided for herein;
d. If Borrower is a corporation, then a certificate of good
standing showing that Borrower is in good standing under the laws
of the state of its incorporation and certificates indicating
that Borrower is qualified to transact business and is in good
standing in any other state in which it conducts business;
e. If Borrower is a partnership, then a copy of Borrower's
partnership agreement certified by each general partner of
Borrower;
f. UCC searches, tax lien and litigation searches, fictitious
business statement filings, insurance certificates, notices or
other similar documents which Bank may require and in such form
as Bank may require, in order to reflect, perfect or protect
Bank's first priority security interest in the Collateral and in
order to fully consummate all of the transactions contemplated
under this Agreement;
g. Evidence that Borrower has obtained insurance and acceptable
endorsements;
h. Waivers executed by landlords and mortgagees of any real
property on which any Collateral is located; and
i. Warranties and representations of others.
6. WARRANTIES, REPRESENTATIONS AND COVENANTS.
6.1 If so requested by Bank, Borrower shall, at such intervals
designated by Bank, during the term hereof execute and deliver a Report of
Accounts Receivable or similar report, in form customarily used by Bank.
Borrower's Borrowing Base at all times pertinent hereto shall not be less
than the advances made hereunder. Bank shall have the right to recompute
Borrower's Borrowing Base in conformity with this Agreement.
6.2 If any warranty is breached as to any account, or any account is
not paid in full by an account debtor within NINETY (90) days from the date
of invoice, or an account debtor disputes liability or makes any claim with
respect thereto, or a petition in bankruptcy or other application for
relief under the Bankruptcy Code or any other insolvency law is filed by or
against an account debtor, or an account debtor makes an assignment for the
benefit of creditors, becomes insolvent, fails or goes out of business,
then Bank may deem ineligible any and all accounts owing by that account
debtor, and reduce Borrower's Borrowing Base by the amount thereof. Bank
shall retain its security interest in all Receivables and accounts, whether
eligible or ineligible, until all Obligations have been fully paid and
satisfied. Returns and allowances, if any, as between Borrower and its
customers, will be on the same basis and in accordance with the usual
customary practices of the Borrower, as they exist at this time. Any
merchandise which is returned by an account debtor or otherwise recovered
shall be set aside, marked with Bank's name, and Bank shall retain a
security interest therein. Borrower shall promptly notify Bank of all
disputes and claims and settle or adjust them on terms approved by Bank.
After default by Borrower hereunder, no discount, credit or allowance shall
be granted to any account debtor by Borrower and no return of merchandise
shall be accepted by Borrower without Bank's consent. Bank may, after
default by Borrower, settle or adjust disputes and claims directly with
account debtors for amounts and upon terms which Bank considers advisable,
and in such cases Bank will credit Borrower's account with only the net
amounts received by Bank in payment of the accounts, after deducting all
Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
a. Borrower has good and marketable title to the Collateral. Bank
has and shall continue to have a first priority perfected
security interest in and to the Collateral. The Collateral shall
at all times remain free and clear of all liens, encumbrances and
security interests (except those in favor of Bank).
b. All accounts are and will, at all times pertinent hereto, be
bona fide existing Obligations created by the sale and delivery
of merchandise or the rendition of services to account debtors in
the ordinary course of business, free of liens, claims,
encumbrances and security interests (except as held by bank and
except as may be consented to, in writing, by Bank) and are
unconditionally owed to Borrower without defenses, disputes,
offsets, counterclaims, rights of return or cancellation, and
Borrower shall have received no notice of actual or imminent
bankruptcy or insolvency of any account debtor at the time an
account due from such account debtor is assigned to Bank.
6.
CA L&S (1-94)
7
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
c. At the time each account is assigned to Bank, all property giving rise
to such account shall have been delivered to the account debtor or to the
agent for the account debtor for immediate shipment to, and unconditional
acceptance by, the account debtor. Borrower shall deliver to Bank, as Bank
may from time to time require, delivery receipts, customer's purchase
orders, shipping instructions, bills of lading and any other evidence of
shipping arrangements. Absent such a request by Bank, copies of all such
documentation shall be held by Borrower as custodian for Bank.
6.4 At the time each eligible account is assigned to Bank, all such
eligible accounts will be due and payable on terms set forth in Section 1.7, or
on such other terms approved in writing by Bank in advance of the creation of
such accounts and which are expressly set forth on the face of all invoices,
copies of which shall be held by Borrower as custodian for Bank, and no such
eligible account will then be past due.
6.5 Borrower shall keep the Inventory only at the following locations:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF and the owner or
mortgagees of the respective locations are: ________________________________
____________________________________________________________________________.
a. Borrower, immediately upon demand by Bank therefor, shall now and from
time to time hereafter, at such intervals as are requested by Bank,
deliver to Bank, designations of inventory specifying Borrower's cost of
inventory, the wholesale market value thereof and such other matters and
information relating to the inventory as Bank may request;
b. Borrower Inventory, valued at the lower of Borrower's cost or the
wholesale market value thereof, at all times pertinent hereto shall not be
less than N/A Dollars ($ N/A) which no less than N/A Dollars ($ N/A) shall
be in raw materials and finished goods;
c. All of the Inventory is and shall remain free from all purchase money
or other security interests, liens or encumbrances, except as held by Bank;
d. Borrower does not keep and hereafter at all times shall keep correct
and accurate records itemizing and describing the kind, type, quality and
quantity of the inventory, its cost therefor and selling price thereof,
and the daily withdrawals therefrom and additions thereto, all of which
records shall be available upon demand to any of Bank's offices, agents
and employees for inspection and copying;
e. All Inventory, now and hereafter at all times, shall be new inventory
of good and merchantable quality free from defects;
f. Inventory if not now and shall not at any time or times hereafter be
located or stored with a bailee, warehouseman or other third party without
Bank's prior written consent, and, in such event, Borrower will
concurrently therewith cause any such bailee, warehouseman or other third
party to issue and deliver to Bank, in a form acceptable to Bank, warehouse
receipts in Bank's name evidencing the storage of Inventory or other
evidence of Bank's prior rights in the Inventory. In any event, Borrower
shall instruct any third party to hold all such Inventory for Bank's
account subject to Bank's security interests and its instructions; and
g. Bank shall have the right upon demand now and/or at all times
hereafter, during Borrower's usual business hours, to inspect and examine
the Inventory and to check and test the same as to quality, quantity,
value and condition and Borrower agrees to reimburse Bank for Bank's
reasonable costs and expenses in so doing.
6.6 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:
x. Xxxxx a security interest in or permit a lien, claim or encumbrance
upon any of the Collateral to any person, association, firm, corporation,
entity or governmental agency or instrumentality;
b. Permit any levy, attachment or restraint to be made affecting any of
Borrower's assets;
c. Permit any judicial officer or assignee to be appointed or to take
possession of any or all of Borrower's assets;
d. Other than sales of inventory in the ordinary course of Borrower's
business, to sell, lease, or otherwise dispose of, move, or transfer,
whether by sale or otherwise, any of Borrower's assets;
e. Change in name, business structure, corporate identity or structure;
add any new fictitious names, liquidate, merger or consolidate with or
into any other business organization;
f. Move or relocate any Collateral;
g. Acquire any other business organization;
CA L&S (1-94) 7.
8
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
h. Enter into any transaction not in the usual course of Borrower's
business:
i. Make any Investment in securities of any person, association,
firm, entity, or corporation other than the securities of the United
States of America;
j. Make any change in Borrower's financial structure or in any of
its business objectives, purposes or operations which would adversely
affect the ability of Borrower to repay Borrower's Obligations;
k. Incur any debts outside the ordinary course of Borrower's
business except renewals or extensions of existing debts and interest
thereon;
l. Make any advance or loan except in the ordinary course of
Borrower's business as currently conducted;
m. Make loans, advances or extensions of credit to any Person,
except for sales on open account and otherwise in the ordinary
course of business;
n. Guarantee or otherwise, directly or indirectly, in any way be or
become responsible for obligations of any other person, whether by
agreement to purchase the indebtedness of any other Person, agreement
for the furnishing of funds to any other Person through the
furnishing of goods, supplies or services, by way of stock purchase,
capital contribution, advance or loan, for the purpose of paying or
discharging (or causing the payment or discharge of) the indebtedness
of any other person, or otherwise, except for the endorsement of
negotiable instruments by the Borrower in the ordinary course of
business for deposit or collection;
o. (a) Sell, lease, transfer or otherwise dispose of properties and
assets having and aggregate book value of more than N/A Dollars
($ N/A) (whether in one transaction or in a series of transactions)
except as to the sale of inventory in the ordinary course of
business; (b) change its name, consolidate with or merge into any
other corporation, permit another corporation to merge into it,
acquire all or substantially all the properties or assets of any
other Person, enter into any reorganization or recapitalization or
reclassify its capital stock, or (c) enter into any sale-leaseback
transaction;
p. Purchase or hold beneficially any stock or other securities of,
or make any investment or acquire any interest whatsoever in, any
other Person, except for the common stock of the Subsidiaries owned
by the Borrower on the date of this Agreement and except for
certificates of deposit with maturities of one year or less of United
States commercial banks with capital, surplus and undivided profits
in excess of One Hundred Million Dollars ($100,000,000) and direct
obligations of the United States Government maturing within one year
from the date of acquisition thereof;
q. Allow any fact, condition or event to occur or exist with respect
to any employee pension or profit sharing plans established or
maintained by it which might constitute grounds for termination of any
such plan or for the court appointment of a trustee to administer any
such plan.
6.7 Borrower is not a merchant whose sales for resale of goods for
personal, family or household purposes exceeded seventy-five percent (75%) in
dollar volume of its total sales of all goods during the twelve (12) months
preceding the filing by Bank of a financing statement describing the
Collateral. At no time hereafter shall Borrower's sales for resale goods for
personal, family or household purposes exceed seventy-five percent (75%) in
dollar volume of its total sales.
6.8 Borrower's sole place of business or chief executive office or
residence is located at the address indicated above and Borrower covenants and
agrees that it will not, during the term of this Agreement, without prior
written notification to Bank, relocate said sole place of business or chief
executive office or residence.
6.9 If Borrower is a corporation, Borrower represents, warrants and
covenants as follows:
a. Borrower will not make any distribution or declare or pay any
dividend (in stock or in cash) to any shareholder or on any of its
capital stock, of any class, whether now or hereafter outstanding, or
purchase, acquire, repurchase, or redeem or retire any such capital
stock;
b. Borrower is and shall at all times hereafter be a corporation
duly organized and existing in good standing under the laws of the
state of its incorporation and qualified and licensed to do business
in California or any other state in which it conducts its business;
CA L&S (1-94)
8.
9
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
c. Borrower has the right and power and is duly authorized to
enter into this Agreement; and
d. The execution by Borrower of this Agreement shall not
constitute a breach of any provision contained in Borrower's
articles of incorporation or by-laws.
6.10 The execution of and performance by Borrower of all of the terms
and provisions contained in this Agreement shall not result in a breach of
or constitute an event of default under any Agreement to which Borrower is
not or hereafter becomes a party.
6.11 Borrower shall promptly notify Bank in writing of its acquisition
by purchase, lease or otherwise of any after acquired property of the type
included in the Collateral, with the exception of purchases of inventory in
the ordinary course of business.
6.12 All assessments and taxes, whether real, personal or otherwise,
due or payable by, or imposed, levied or assessed against, Borrower or any
of its property have been paid, and shall hereafter be paid in full, before
delinquency. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it
by law, and will execute and deliver to Bank, on demand, appropriate
certificates attesting to the payment or deposit thereof. Borrower will
make timely payment or deposit of all F.I.C.A. payments and withholding
taxes required of it by applicable laws, and will upon request furnish Bank
with proof satisfactory to it that Borrower has made such payments or
deposit. If Borrower fails to pay any such assessment, tax, contribution,
or make such deposit, or furnish the required proof, Bank may, in its sole
and absolute discretion and without notice to borrower, (i) make payment of
the same or any part thereof, or (ii) set up such reserves in Borrower's
account as Bank deems necessary to satisfy the liability therefor, or
both. Bank may conclusively rely on the usual statements of the amount
owing or other official statements issued by the appropriate governmental
agency. Each amount so paid or deposited by Bank shall constitute a Bank
Expense and an additional advance to Borrower.
6.13 There are no actions or proceedings pending by or against
Borrower or any guarantor of Borrower before any court or administrative
agency and Borrower has no knowledge of any pending, threatened or imminent
litigation, governmental investigations or claims, complaints, actions or
prosecutions involving Borrower or any guarantor of Borrower, except as
heretofore specifically disclosed in writing to Bank. If any of the
foregoing arise during the term of the Agreement, borrower shall
immediately notify Bank in writing.
6.14 a. Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers
and all other hazards and risks ordinarily insured against by other
owners who use such properties in similar businesses for the full
insurable value thereof. Borrower shall also keep and maintain
business interruption insurance and public liability and property
damage insurance relating to Borrower's ownership and use of the
Collateral and its other assets. All such policies of insurance shall
be in such form, with such companies, and in such amounts as may be
satisfactory to Bank. Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all
premiums therefor. All such policies of insurance (except those of
public liability and property damage) shall contain an endorsement in
form satisfactory to Bank showing Bank as a loss payee thereof, with a
waiver of warranties (Form 438-BFU), and all proceeds payable
thereunder shall be payable to Bank and, upon receipt by Bank, shall
be applied on account of the Obligations owing to Bank. To secure the
payment of the Obligations, Borrower grants Bank a security interest
in and to all such policies of insurance (except those of public
liability and property damage) and the proceeds thereof, and Borrower
shall direct all insurers under such policies of insurance to pay all
proceeds thereof directly to Bank.
b. Borrower hereby irrevocably appoints Bank (and any of Bank's
officers, employees or agents designated by Bank) as Borrower's
attorney for the purpose of making, selling and adjusting claims under
such policies of insurance, endorsing the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of
such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. Borrower will
not cancel any of such policies without Bank's prior written consent.
Each such Insurer shall agree by endorsement upon the policy or
policies of insurance issued by it to Borrower as required above, or
by independent instruments furnished to Bank, that it will give Bank
at least ten (10) days written notice before any such policy or
policies of insurance shall be altered or cancelled, and that no act
or default of Borrower, or any other person, shall affect the right of
Bank to recover under such policy or policies of insurance required
above or to pay any premium in whole or in part relating thereto.
Bank, without waiving or releasing any Obligations or any Event of
Default, may, but shall have no obligation to do so, obtain and
maintain such policies of insurance and pay such premiums and take any
other action with respect to such policies which Bank deems advisable.
All sums so disbursed by Bank, as well as reasonably attorneys' fees,
court costs, expenses and other charges relating thereto, shall
constitute Bank Expenses and are payable on demand.
CA L&S (1-94)
9.
10
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
6.15 All financial statements and information relating to Borrower
which have been or may hereafter be delivered by Borrower to Bank are true and
correct and have been prepared in accordance with GAAP consistently applied and
there has been no material adverse change in the financial condition of Borrower
since the submission of such financial information to Bank.
6.16 a. Borrower at all times hereafter shall maintain a standard and
modern system of accounting in accordance with GAAP consistently
applied with ledger and account cards and/or computer tapes and
computer disks, computer printouts and computer records pertaining
to the Collateral which contain information as may from time to
time be requested by Bank, not modify or change its method of
accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any
third party accounting firm and/or service bureau for the
preparation and/or storage of Borrower's accounting records
without the written consent of Bank first obtained and without
said accounting firm and/or service bureau agreeing to provide
information regarding the Receivables and Inventory and Borrower's
financial condition to Bank; permit Bank and any of its employees,
officers or agents, upon demand, during Borrower's usual business
hours, or the usual business hour of third persons having control
thereof, to have access to and examine all of the Borrower's Books
relating to the Collateral, Borrower's Obligations to Bank,
Borrower's financial condition and the results of Borrower's
operations and in connection therewith, permit Bank or any of its
agents, employees or officers to copy and make extracts therefrom.
b. Borrower shall deliver to Bank within FORTY-FIVE (45) days
after the end of each QUARTER, a COMPANY PREPARED balance sheet
and profit and loss statement covering Borrower's operations and
deliver to Bank within ninety (90) days after the end of each of
Borrower's fiscal years a(n) CPA UNQUALIFIED AUDITED statement of
the financial condition of the Borrower for each such fiscal year,
including but not limited to, a balance sheet and profit and loss
statement and any other report requested by Bank relating to the
Collateral and the financial condition of Borrower, and a
certificate signed by an authorized employee of Borrower to the
effect that all reports, statements, computer disk or tape files,
computer printouts, computer runs, or other computer prepared
information of any kind or nature relating to the foregoing or
documents delivered or caused to be delivered to Bank under this
subparagraph are complete, correct and thoroughly present the
financial condition of Borrower and that there exists on the date
of delivery to Bank no condition or event which constitutes a
breach or Event of Default under this Agreement.
c. In addition to the financial statements requested above, the
Borrower agrees to provide Bank with the following schedules:
X Accounts Receivable Agings on a MONTHLY basis
-----
X Accounts Payable Agings on a MONTHLY basis
-----
Job Progress Reports on a basis; and
----- -------
SEQUOIA SERVICE CONTRACTS on a QUARTERLY basis
BORROWING BASE CERTIFICATES on a MONTHLY BASIS FOR BOTH
PRODUCTS SALES AND SERVICE CONTRACTS.
6.17 Borrower shall maintain the following financial ratios and
covenants on a consolidated and non-consolidated basis:
a. Working Capital in an amount not less than n/a
b. Tangible Effective Net Worth in an amount not less than
$3,700,000.00 on 12/31/97; STEPPING UP TO $4,000,000.00 ON
3/31/98, TO $4,300,000.00 ON 6/30/98 AND TO $4,600,000.00 ON
9/30/98.
c. a ratio of Current Assets to Current Liabilities of not less
than N/A
d. a quick ratio of cash plus securities plus Receivables to
Current Liabilities of not less than N/A
e. a ratio of Total Liabilities (less debt subordinated to Bank)
to Tangible Effective Net Worth of less than 3.00:1.00
f. a ratio of Cash Flow to Fixed Charges of not less than N/A
g. Net income after taxes of N/A
h. Borrower shall not without Bank's prior written consent acquire
or expend for or commit itself to acquire or expend for fixed
assets by lease, purchase or otherwise in an aggregate amount
that exceeds ONE HUNDRED FIFTY THOUSAND AND NO/100 Dollars
($150,000.00) in any fiscal year; and
i. DOWN STREAMING OF FUNDS TO SUBSIDIARIES TO BE LIMITED TO
---------------------------------------------------------------
$100,000.00 ANNUALLY.
---------------------------------------------------------------
j. TWO ACCOUNTS RECEIVABLE AUDITS PER YEAR PLUS NEXT AUDIT TO
---------------------------------------------------------------
INCLUDE INVENTORY CED AUDIT.
---------------------------------------------------------------
k. BORROWER WILL BE CHARGED $5,000.00 FOR EACH COVENANT
VIOLATION
---------------------------------------------------------------
AND $500.00 FOR LATE STATEMENTS.
---------------------------------------------------------------
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.
CA L&S (1-94)
10.
11
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
6.18 Borrower shall promptly supply Bank (and cause any guarantor to supply
Bank) with such other information (including tax returns) concerning its affair
(or that of any guarantor) as Bank may request from time to time hereafter, and
shall promptly notify Bank of any material adverse change in Borrower's
financial condition and of any condition or event which constitutes a breach of
or an event which constitutes an Event of Default under this Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent and able
to pay its debts (including trade debts) as they mature.
6.20 Borrower shall immediately and without demand reimburse Bank for all
sums expended by Bank in connection with any action brought by Bank to correct
any default or enforce any provision of this Agreement, including all Bank
Expenses; Borrower authorizes and approves all advances and payments by Bank for
items described in this Agreement as Bank Expenses.
6.21 Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank, either now or hereafter.
6.22 Borrower shall keep all of its principal bank accounts with Bank and
shall notify the Bank immediately in writing of the existence of any other bank
account, deposit account, or any other account into which money can be
deposited.
6.23 Borrower shall furnish to the Bank: (a) as soon as possible, but in
not event later than thirty (30) days after Borrower knows or has reason to
know that any reportable event with respect to any deferred compensation plan
has occurred, a statement of the chief financial officer of Borrower setting
forth the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower; (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each
deferred compensation plan; (c) promptly after receipt thereof, a copy of any
notice Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information from time
to time disseminated to the participants by the administrator of the deferred
compensation plan.
6.24 Borrower is now and shall at all times hereafter remain in compliance
with all federal, state and municipal laws, regulations and ordinances relating
to the handling, treatment and disposal of toxic substances, wastes and
hazardous material and shall maintain all necessary authorizations and permits.
6.25 Borrower shall maintain insurance on the life of N/A in an amount not
to be less than NO/100 Dollars ($ N/A) under one or more policies issued by
insurance companies satisfactory to Bank, which policies shall be assigned to
Bank as security for the indebtedness and on which Bank shall be named as sole
beneficiary.
6.26 Borrower shall limit direct and indirect compensation paid to the
following employees: N/A to an aggregate of N/A Dollars ($ N/A) per N/A.
7. EVENTS OF DEFAULT Any one or more of the following events shall
constitute a default by Borrower under this Agreement:
a. If Borrower fails or neglects to perform, keep or observe any term,
provision, condition, covenant, agreement, warranty or representation
contained in this Agreement, or any other present or future agreement
between Borrower and Bank;
b. If any representation, statement, report or certificate made or
delivered by Borrower, or any of the officers, employees or agents to Bank
is not true and correct;
c. If Borrower fails to pay when due and payable or declared due and
payable, all or any portion of the Borrower's Obligations (whether of
principal, interest, taxes, reimbursement of Bank Expenses, or otherwise);
d. If there is a material impairment of the prospect of repayment of all
or any portion of Borrower's Obligations or a material impairment of the
value or priority of Bank's security interest in the Collateral;
e. If all or any of Borrower's assets are attached, seized, subject to a
writ or distress warrant, or are levied upon, or come into the possession
of any Judicial Officer or Assignee and the same are not released,
discharged or bonded against within (10) days thereafter;
f. If any insolvency Proceeding is filed or commenced by or against
Borrower without being dismissed within ten (10) days thereafter;
CA L&S (1-94) 11.
12
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
g. If any proceeding is filed or commenced by or against Borrower for
its dissolution or liquidation;
h. If Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its
business affairs;
i. If a notice of lien, levy or assessment is filed of record with
respect to any or all of Borrower's assets by the United States
Government, or any department, agency or instrumentality thereof, or
by any state, county, municipal or other government agency, or if any
taxes or debts owing at any time hereafter to any one or more of such
entities becomes a lien, whether xxxxxx or otherwise, upon any or all
of the Borrower's assets and the same is not paid on the payment date
thereof;
j. If a judgment or other claim becomes a lien or encumbrance upon any
or all of Borrower's assets and the same is not satisfied, dismissed
or bonded against within ten (10) days thereafter;
k. If Borrower's records are prepared and kept by an outside computer
service bureau at the time this Agreement is entered into or during
the term of this Agreement such an agreement with an outside service
bureau is entered into, and at any time thereafter, without first
obtaining the written consent of Bank, Borrower terminates, modifies,
amends or changes its contractual relationship with said computer
service bureau or said computer service bureau fails to provide Bank
with any requested information or financial data pertaining to Bank's
Collateral, Borrower's financial condition or the results of
Borrower's operations;
l. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result in an
acceleration of the maturity of Borrower's indebtedness to others,
whether under any indenture, agreement or otherwise;
m. If Borrower makes any payment on account of indebtedness which has
been subordinated to Borrower's Obligations to Bank;
n. If any misrepresentation exists now or thereafter in any warranty
or representation made to Bank by any officer or director of Borrower,
or if any such warranty or representation is withdrawn by any officer
or director;
o. If any party subordinating its claims to that of Bank's or any
guarantor of Borrower's Obligations dies or terminates its
subordination or guaranty, becomes insolvent or an Insolvency
Proceeding is commenced by or against any such subordinating party or
guarantor;
p. If Borrower is an individual and Borrower dies;
q. If there is a change of ownership or control of N/A percent (___%)
or more of the issued and outstanding stock of Borrower; or
r. If any reportable event, which the Bank determines constitutes
grounds for the termination of any deferred compensation plan by the
Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer
any such plan, shall have occurred and be continuing thirty (30) days
after written notice of such determination shall have been given to
Borrower by Bank, or any such Plan shall be terminated within the
meaning of Title IV of the Employment Retirement Income Security Act
("ERISA"), or a trustee shall be appointed by the appropriate United
States District Court to administer any such plan, or the Pension
Benefit Guaranty Corporation shall institute proceedings to terminate
any plan and in case of any event described in this Section 7.0, the
aggregate amount of the Borrower's liability to the Pension Benefit
Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA shall
exceed five percent (5%) of borrower's Tangible Effective Net Worth.
Notwithstanding anything contained in Section 7 to the contrary,
Bank shall refrain from exercising its rights and remedies and Event
of Default shall thereafter not be deemed to have occurred by reason
of the occurrence of any of the events set forth in Sections 7.a, 7.f
or 7.j of this Agreement if, within ten (10) days from the date
thereof, the same is released, discharged, dismissed, bonded against
or satisfied; provided, however, if the event is the institution of
Insolvency Proceedings against Borrower, Bank shall not be obligated
to make advances to Borrower during such cure period.
8. BANK'S RIGHTS AND REMEDIES
8.1 Upon the occurrence of an Event of Default by Borrower under
this Agreement, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all
of which are authorized by Borrower:
a. Declare Borrower's Obligations, whether evidenced by this
Agreement, installment notes, demand notes or otherwise, immediately
due and payable to the Bank;
b. Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, or any other agreement between Borrower
and Bank;
c. Terminate this Agreement as to any future liability or obligation
of Bank, but without affecting Bank's rights and security interests in
the Collateral, and the Obligations of Borrower to Bank;
CA L&S (1-94) 12.
13
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
d. Without notice to or demand upon Borrower or any guarantor, make
such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires and to
make the Collateral available to Bank as Bank may designate. Borrower
authorizes Bank to enter the premises where the Collateral is located,
take and maintain possession of the Collateral and the premises (at no
charge to Bank), or any part thereof, and to pay, purchase, contest or
compromise any encumbrance, charge or lien which in the opinion of
Bank appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith;
e. Without limiting Bank's rights under any security interest, Bank
is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature as it pertains to the Collateral, in
completing production of, advertising for sale and selling any
Collateral and Borrower's rights under all licenses and all franchise
agreement shall inure to Bank's benefit, and Bank shall have the right
and power to enter into sublicense agreements with respect to all such
rights with third parties on terms acceptable to Bank;
f. Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sales and sell (in the manner provided for
herein) the Inventory;
g. Sell or dispose the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including
Borrower's premises) as is commercially reasonable in the opinion of
Bank. It is not necessary that the Collateral be present at any such
sale;
h. Bank shall give notice of the disposition of the Collateral as
follows:
(1) Bank shall give the Borrower and each holder of a security
interest in the Collateral who has filed with Bank a written
request for notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some
disposition other than a public sale is to be made of the
Collateral, the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower's address appearing in this Agreement, at
least five (5) calendar days before the date fixed for the sale,
or at least five (5) calendar days before the date on or after
which the private sale or other disposition is to be made, unless
the Collateral is perishable or threatens to decline speedily in
value. Notice to persons other than Borrower claiming an interest
in the Collateral shall be sent to such addresses as have been
furnished to Bank;
(3) If the sale is to be a public sale, Bank shall also give
notice of the time and place by publishing a notice one time at
least five (5) calendar days before the date of the sale in a
newspaper of general circulation in the county in which the sale
is to be held; and
(4) Bank may credit bid and purchase at any public sale.
i. Borrower shall pay all Bank Expenses incurred in connection with
Bank's enforcement and exercise of any of its rights and remedies as
herein provided, whether or not suit is commenced by Bank;
j. Any deficiency which exists after disposition of the Collateral
as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third
parties, to Borrower by Bank, or, in Bank's discretion, to any party
who Bank believes, in good faith, is entitled to the excess; and
k. Without constituting a retention of Collateral in satisfaction of
an obligation within the meaning of 9505 of the Uniform Commercial
Code or an action under California Code of Civil Procedure 726, apply
any and all amounts maintained by Borrower as deposit accounts (as
that term is defined under 9105 of the Uniform Commercial Code) or
other accounts that Borrower maintains with Bank against the
Obligations.
8.2 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative, Bank shall have all other rights and
remedies not inconsistent herewith as provided by law or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election or
acquiescence by Bank.
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY
If Borrower fails to pay promptly when due to another person or entity, monies
which Borrower is required to pay by reason of any provision in this Agreement,
Bank may, but need not, pay the same and charge Borrower's account therefor, and
Borrower shall promptly reimburse Bank. All such sums shall become additional
indebtedness owing to Bank, shall bear interest at the rate hereinabove
provided, and shall be secured by all Collateral. Any payments made by Bank
shall not constitute (i) an agreement by it to make similar payments in the
future, or (ii) a waiver by Bank of any default under this Agreement, Bank need
not inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance or lien and the receipt of the usual official notice of
the payment thereof shall be conclusive evidence that the same was validly due
and owing. Such payments shall constitute Bank Expenses and additional advances
to Borrower.
CA L&S (1-94) 13.
14
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
10. WAIVERS
10.1 Borrower agrees that checks and other instruments received by
Bank in payment or on account of Borrower's Obligations constitute only
conditional payment until such items are actually paid to Bank and Borrower
waives the right to direct the application of any and all payments at any
time or times hereafter received by Bank on account of Borrower's
Obligations and Borrower agrees that Bank shall have the continuing
exclusive right to apply and reapply such payments in any manner as Bank
may deem advisable, notwithstanding any entry by Bank upon its books.
10.2 Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension
or renewal of any or all commercial paper, accounts, documents,
instruments chattel paper, and guarantees at any time held by Bank on
which Borrower may in any way be liable.
10.3 Bank shall not in any way or manner be liable or responsible
for (a) the safekeeping of the Inventory; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehousemen, bailee, forwarding agency or other person whomsoever. All
risk of loss, damage or destruction of inventory shall be borne by
Borrower.
10.4 Borrower waives the right and the right to assert a
confidential relationship, if any, it may have with any accountant,
accounting firm and/or service bureau or consultant in connection with any
information requested by Bank pursuant to or in accordance with this
Agreement, and agrees that a Bank may contact directly any such
accountants, accounting firm and/or service bureau or consultant in order
to obtain such information.
10.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION
HEREUNDER, OR CONTEMPLATED HEREUNDER, OR ANY OTHER CLAIM (INCLUDING TORT
OR BREACH OF DUTY CLAIMS) OR DISPUTE HOWSOEVER ARISING BETWEEN BANK AND
BORROWER.
10.6 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails
to pursue or enforce any term, such waiver, delay or failure to pursue or
enforce shall only be effective with respect to that single act and shall
not be construed to affect any subsequent transactions or Bank's right to
later pursue such rights and remedies.
11. ONE CONTINUING LOAN TRANSACTION All loans and advances heretofore, now or
at any time or times hereafter made by Bank to Borrower under this Agreement or
any other agreement between Bank and Borrower, shall constitute one loan secured
by Bank's security interests in the Collateral and by all other security
interests, liens, encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Bank.
Notwithstanding the above, (i) to the extent that any portion of the Obligations
are consumer loan, that portion shall not be secured by any deed of trust or
mortgage on or other security interest in the Borrower's principal dwelling
which is not a purchase money security interest as to that portion, unless
expressly provided to the contrary in another place, or (ii) if the Borrower (or
any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure the loan
and any other Obligation of the Borrower (or any of them), unless expressly
provided to the contrary in another place.
12. NOTICES Unless otherwise provided in this Agreement, all notices or
demands by either party on the other relating to this Agreement shall be in
writing and sent by regular United States mail, postage prepaid, properly
addressed to Borrower or to Bank at the addresses stated in this Agreement, or
to such other addresses as Borrower or Bank may from time to time specify to the
other in writing. Requests to Borrower by Bank hereunder may be made orally.
13. AUTHORIZATION TO DISBURSE Bank is hereby authorized to make loans and
advances hereunder upon telephonic or other instructions received from anyone
purporting to be an officer, employee, or representative of Borrower, or at the
discretion of Bank if said loans and advances are necessary to meet any
Obligations of Borrower to Bank. Bank shall have no duty to make inquiry or
verify the authority of any such party, and Borrower shall hold Bank harmless
from any damage, claims or liability by reason of Bank's honor of, or failure to
honor, any such instructions.
14. DESTRUCTION OF BORROWER'S DOCUMENTS Any documents, schedules, invoices or
other papers delivered to Bank, may be destroyed or otherwise disposed of by
Bank six (6) months after they are delivered to or received by Bank, unless
Borrower requests, in writing, the return of the said documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.
15. CHOICE OF LAW The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined according to the laws of the
State of California. The parties agree that all actions or proceedings arising
in connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or the County of Santa
Xxxxx.
16. GENERAL PROVISIONS
16.1 This Agreement shall be binding and deemed effective when executed
by the Borrower and accepted and executed by Bank at its headquarter
office.
14.
15
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
16.2 This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties, provided,
however, that Borrower may not assign this Agreement or any rights
hereunder without Bank's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Bank
shall release Borrower or any guarantor from their Obligations to Bank.
Bank may assign this Agreement and its rights and duties hereunder. Bank
reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in Bank's rights and
benefits hereunder. In connection therewith, Bank may disclose all
documents and information which Bank now or hereafter may have relating to
Borrower or Borrower's business.
16.3 Paragraph headings and paragraph numbers have been set forth
herein for convenience only; unless the contrary is compelled by the
context, everything contained in each paragraph applies equally to this
entire Agreement.
16.4 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Bank or Borrower, whether under any
rule of construction or otherwise; on the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according
to the ordinary meaning of the words used so as to fairly accomplish the
purposes and intentions of all parties hereto. When permitted by the
context, the singular includes the plural and vice versa.
16.5 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
16.6 This Agreement cannot be changed or terminated orally. Except as
to currently existing Obligations owing by Borrower to Bank, all prior
agreements, understandings, representations, warranties, and negotiations,
if any, with respect to the subject matter hereof, are merged into this
Agreement.
16.7 The parties intend and agree that their respective rights,
duties, powers, liabilities, obligations and discretions shall be
performed, carried out, discharged and exercised reasonably and in good
faith.
16.8 In addition, if this Agreement is secured by a deed of trust or
mortgage covering real property, then the trustor or mortgagor shall not
mortgage or pledge the mortgaged premises as security for any other
indebtedness or obligations. This Agreement, together with all other
indebtedness secured by said deed of trust or mortgage, shall become due
and payable immediately, without notice, at the option of Bank, (a) if said
trustor or mortgagor shall mortgage or pledge the mortgaged premises for
any other indebtedness or obligations or shall convey, assign or transfer
the mortgaged premises by deed, installment sale contract or other
instrument; (b) if the title to the mortgaged premises shall become vested
in any other person or party in any manner whatsoever, or (c) if there is
any disposition (through one or more transactions) of legal or beneficial
title to a controlling interest of said trustor or mortgagor.
IN WITNESS WHEREOF, the parties hereto have caused this Loan & Security
Agreement (Accounts and Inventory) to be executed as of the date first
hereinabove written.
ATTEST:
----------------------------------
Title:
BORROWER: GENERAL AUTOMATION, INC.
Accepted and effective as of By: [SIG]
DECEMBER 16, 1997 at Bank's ------------------------------
Headquarter Office Signature of
Title: VP Finance
---------------------------
By:
---------------------------------- ------------------------------
Signature of
By: /s/ XXXXX XXXX Title:
------------------------------ ---------------------------
Signature of XXXXX XXXX
Title: Vice President By:
--------------------------- ------------------------------
Signature of
Title:
---------------------------
By:
------------------------------
Signature of
Title:
---------------------------
15.
CA L&S (1-94)
