Exhibit 99.14
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XXXXX.XXX, INC.
LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY AGREEMENT is entered into as of February __, 2005,
by and between COMERICA BANK ("Bank") and XXXXX.XXX, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, payment intangibles, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing.
"ACH Line" means a line of credit for Automated Clearing House
transactions not to exceed $500,000.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Line.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses, whether generated in-house or by
outside counsel) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; reasonable Collateral
audit fees; and Bank's reasonable attorneys' fees and expenses (whether
generated in-house or by outside counsel) incurred in amending, enforcing or
defending the Loan Documents (including fees and expenses of appeal), incurred
before, during and after an Insolvency Proceeding, whether or not suit is
brought.
"Borrower State" means Washington, the state under whose laws
Borrower is organized.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Cash" means unrestricted cash and cash equivalents.
"Change in Control" shall mean a transaction in which any
"person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner"
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(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of a sufficient number of shares of all classes of stock then
outstanding of Borrower ordinarily entitled to vote in the election of
directors, empowering such "person" or "group" to elect a majority of the Board
of Directors of Borrower, who did not have such power before such transaction.
"Chief Executive Office State" means Washington, where Borrower's
chief executive office is located.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code, as amended
or supplemented from time to time.
"Collateral" means the property described on Exhibit A attached
hereto and all Negotiable Collateral and Intellectual Property Collateral to the
extent not described on Exhibit A, except to the extent any such property (i) is
nonassignable by its terms without the consent of the licensor thereof or
another party (but only to the extent such prohibition on transfer is
enforceable under applicable law, including, without limitation, Sections 9406
and 9408 of the Code), or (ii) the granting of a security interest therein is
contrary to applicable law, provided that upon the cessation of any such
restriction or prohibition, such property shall automatically become part of the
Collateral; provided that in no case shall the definition of "Collateral"
exclude any Accounts, proceeds of the disposition of any property, or general
intangibles consisting of rights to payment.
"Collateral State" means the state or states where the Collateral
is located, which is Washington.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, or merchant services issued for the
account of that Person; and (iii) all obligations arising under any interest
rate, currency or commodity swap agreement, interest rate cap agreement,
interest rate collar agreement, or other agreement or arrangement designated to
protect a Person against fluctuation in interest rates, currency exchange rates
or commodity prices; provided, however, that the term "Contingent Obligation"
shall not include endorsements for collection or deposit in the ordinary course
of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance or any other extension of
credit by Bank to or for the benefit of Borrower hereunder.
"Environmental Laws" means all laws, rules, regulations, orders
and the like issued by any federal state, local foreign or other governmental or
quasi-governmental authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect from time to time.
"Guarantor" means Xxxx Xxxx, an individual.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations, (d) all Contingent
Obligations, and (e) all obligations arising under the ACH Line.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means all of Borrower's right,
title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest.
"Investment" means any beneficial ownership of (including stock,
partnership or limited liability company interest other securities) any Person,
or any loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
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"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other document, instrument or agreement
entered into in connection with this Agreement, all as amended or extended from
time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries taken as a whole, (ii) the ability of Borrower to
repay the Obligations or otherwise perform its obligations under the Loan
Documents, (iii) Borrower's interest in, or the value, perfection or priority of
Bank's security interest in the Collateral.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, drafts, instruments
(including promissory notes), securities, documents of title, and chattel paper,
and Borrower's Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness not to exceed One Hundred Thousand Dollars
($100,000) in the aggregate in any fiscal year of Borrower secured by a lien
described in clause (c) of the defined term "Permitted Liens;" provided such
Indebtedness does not exceed the lesser of the cost or fair market value of the
equipment financed with such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(f) Extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased or
the terms modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) Marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Moody's Investors
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Service, (iii) Bank's certificates of deposit maturing no more than one year
from the date of investment therein, and (iv) Bank's money market accounts;
(c) Repurchases of stock from former employees or directors of
Borrower under the terms of applicable repurchase agreements (i) in an aggregate
amount not to exceed One Hundred Thousand Dollars ($100,000) in any fiscal year,
provided that no Event of Default has occurred, is continuing or would exist
after giving effect to the repurchases, or (ii) in any amount where the
consideration for the repurchase is the cancellation of indebtedness owed by
such former employees to Borrower regardless of whether an Event of Default
exists;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries not to exceed One Hundred
Thousand Dollars ($100,000) in the aggregate in any fiscal year;
(f) Investments not to exceed One Hundred Thousand Dollars
($100,000) in the aggregate in any fiscal year consisting of (i) travel advances
and employee relocation loans and other employee loans and advances in the
ordinary course of business, and (ii) loans to employees, officers or directors
relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plan agreements approved by Borrower's Board
of Directors;
(g) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of Borrower's business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business, provided that this subparagraph
(h) shall not apply to Investments of Borrower in any Subsidiary; and
(i) Joint ventures or strategic alliances in the ordinary course
of Borrower's business consisting of the non-exclusive licensing of technology,
the development of technology or the providing of technical support, provided
that any cash Investments by Borrower do not exceed One Hundred Thousand Dollars
($100,000) in the aggregate in any fiscal year.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule (excluding Liens to be satisfied with the proceeds of the Advances) or
arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which Borrower maintains adequate reserves,
provided the same have no priority over any of Bank's security interests;
(c) Liens not to exceed One Hundred Thousand Dollars ($100,000)
in the aggregate (i) upon or in any Equipment (other than Equipment financed by
an Equipment Advance) acquired or held by Borrower or any of its Subsidiaries to
secure the purchase price of such Equipment or indebtedness incurred solely for
the purpose of financing the acquisition or lease of such Equipment, or (ii)
existing on such Equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such Equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase; and
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(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Sections 8.5 or 8.9;
"Permitted Transfer" means the conveyance, sale, lease, transfer
or disposition by Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business;
(c) worn-out or obsolete Equipment not financed with the proceeds
of Equipment Advances; or
(d) other assets of Borrower or its Subsidiaries that do not in
the aggregate exceed One Hundred Thousand Dollars ($100,000) during any fiscal
year.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Line" means a Credit Extension of up to One Million
Dollars ($1,000,000).
"Revolving Maturity Date" means the date Three Hundred Sixty Four
(364) days after the Closing Date.
"Schedule" means the schedule of exceptions attached hereto and
approved by Bank, if any.
"SOS Reports" means the official reports from the Secretaries of
State of each Collateral State, Chief Executive Office State and the Borrower
State and other applicable federal, state or local government offices
identifying all current security interests filed in the Collateral and Liens of
record as of the date of such report.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated in writing to the debt owing by Borrower to Bank on terms
reasonably acceptable to Bank (and identified as being such by Borrower and
Bank).
"Subsidiary" means any corporation, partnership or limited
liability company or joint venture in which (i) any general partnership interest
or (ii) more than fifty percent (50%) of the stock, limited liability company
interest or joint venture of which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through an Affiliate.
"Tax Lien" means that certain Federal Tax Lien filed against
Borrower by the Internal Revenue Service on October 5, 2004, in the amount of
$137,798.71.
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"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 Accounting Terms. Any accounting term not specifically defined
herein shall be construed in accordance with GAAP and all calculations shall be
made in accordance with GAAP. The term "financial statements" shall include the
accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
(a) Promise to Pay. Borrower promises to pay to Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Credit Extensions made by Bank to Borrower, together with interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.
(b) Advances Under Revolving Line.
(i) Amount. Subject to and upon the terms and conditions of
this Agreement Borrower may request Advances in an aggregate outstanding amount
not to exceed Five Hundred Thousand Dollars ($500,000) minus the aggregate
outstanding amount of the Tax Lien. Notwithstanding the foregoing, upon receipt
by Bank of Guarantor's brokerage statements demonstrating that Guarantor has at
least One Million Five Hundred Thousand Dollars ($1,500,000) in cash, publically
traded stocks and bonds, Borrower may thereafter request Advances in an
aggregate outstanding amount not to exceed the Revolving Line minus the
aggregate outstanding amount of the Tax Lien. Amounts borrowed pursuant to this
Section 2.1(b) may be repaid and reborrowed at any time prior to the Revolving
Maturity Date, at which time all Advances under this Section 2.1(b) shall be
immediately due and payable. Borrower may prepay any Advances without penalty or
premium.
(ii) Form of Request. Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time (1:00 p.m. Pacific time for wire transfers), on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1(b) to Borrower's deposit account.
(c) ACH Line. Subject to the terms and conditions of this
Agreement, Borrower may request ACH origination services by delivering to Bank a
duly executed ACH application on Bank's standard form; provided, however, that
the total amount of the ACH processing reserves shall not exceed the ACH Line.
In addition, Bank may, in its sole discretion, charge as Advances any amounts
that become due or owing to Bank in connection with the ACH services. If
Borrower has not secured to Bank's satisfaction its obligations with respect to
any ACH origination services by the Revolving Maturity Date, then, effective as
of such date, the balance in any deposit accounts held by Bank and the
certificates of deposit issued by Bank in Borrower's name (and any interest paid
thereon or proceeds thereof, including any amounts payable upon the maturity or
liquidation of such certificates), shall automatically secure such obligations
to the extent of the then outstanding ACH origination services. Borrower
authorizes Bank to hold such balances in pledge and to decline to honor any
drafts thereon or any requests by Borrower or any other Person to pay or
otherwise transfer any part of such balances for so long as the ACH origination
services continue.
2.2 Intentionally Omitted..
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2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates. Except as set forth in Section 2.3(b), the
Advances shall bear interest, on the outstanding daily balance thereof, at a
variable rate equal to the Prime Rate.
(b) Late Fee; Default Rate. If any payment is not made within ten
(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
first calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies, except that
to the extent Borrower uses the Advances to purchase Collateral, Borrower's
repayment of the Advances shall apply on a "first-in-first-out" basis so that
the portion of the Advances used to purchase a particular item of Collateral
shall be paid in the chronological order the Borrower purchased the Collateral.
After the occurrence of an Event of Default, Bank shall have the right, in its
sole discretion, to immediately apply any wire transfer of funds, check, or
other item of payment Bank may receive to conditionally reduce Obligations, but
such applications of funds shall not be considered a payment on account unless
such payment is of immediately available federal funds or unless and until such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Bank after 12:00 noon Pacific time shall be deemed to have
been received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Documentation Fee. On the Closing Date, a documentation fee
equal to $1,000, which shall be nonrefundable; and
(b) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, and, after the Closing Date, all Bank
Expenses as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 13.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.
3. CONDITIONS OF LOANS.
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3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) an officer's certificate of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) UCC National Form Financing Statement;
(d) an intellectual property security agreement;
(e) current SOS Reports indicating that except for Permitted
Liens, there are no other security interests or Liens of record in the
Collateral;
(f) a Lessor's Acknowledgment and Subordination;
(g) agreement to provide insurance;
(h) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(i) current financial statements, including unaudited statements
for Borrower's most recently ended fiscal year, company prepared consolidated
and consolidating balance sheets and income statements for the most recently
ended month in accordance with Section 6.2, and such other updated financial
information as Bank may reasonably request;
(j) current Compliance Certificate in accordance with Section
6.2; and
(k) such other documents or certificates, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in the Collateral to secure prompt repayment of any
and all Obligations and to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in later-acquired Collateral. Notwithstanding
any termination, Bank's Lien on the Collateral shall remain in effect for so
long as any Obligations are outstanding.
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4.2 Perfection of Security Interest. Borrower authorizes Bank to file
at any time financing statements, continuation statements, and amendments
thereto that (i) either specifically describe the Collateral or describe the
Collateral as all assets of Borrower of the kind pledged hereunder, and (ii)
contain any other information required by the Code for the sufficiency of filing
office acceptance of any financing statement, continuation statement, or
amendment, including whether Borrower is an organization, the type of
organization and any organizational identification number issued to Borrower, if
applicable. Any such financing statements may be signed by Bank on behalf of
Borrower, as provided in the Code, and may be filed at any time in any
jurisdiction whether or not Revised Article 9 of the Code is then in effect in
that jurisdiction. Borrower shall from time to time endorse and deliver to Bank,
at the request of Bank, all Negotiable Collateral and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
Borrower shall have possession of the Collateral, except where expressly
otherwise provided in this Agreement or where Bank chooses to perfect its
security interest by possession in addition to the filing of a financing
statement. Where Collateral is in possession of a third party bailee, Borrower
shall take such steps as Bank reasonably requests for Bank to (i) obtain an
acknowledgment, in form and substance satisfactory to Bank, of the bailee that
the bailee holds such Collateral for the benefit of Bank, (ii) obtain "control"
of any Collateral consisting of investment property, deposit accounts,
letter-of-credit rights or electronic chattel paper (as such items and the term
"control" are defined in Revised Article 9 of the Code) by causing the
securities intermediary or depositary institution or issuing bank to execute a
control agreement in form and substance satisfactory to Bank. Borrower will not
create any chattel paper without placing a legend on the chattel paper
acceptable to Bank indicating that Bank has a security interest in the chattel
paper. Borrower from time to time may deposit with Bank specific cash collateral
to secure specific Obligations; Borrower authorizes Bank to hold such specific
balances in pledge and to decline to honor any drafts thereon or any request by
Borrower or any other Person to pay or otherwise transfer any part of such
balances for so long as the specific Obligations are outstanding.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is duly existing under the laws of the state in which it is organized and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement by which it is
bound, except to the extent such default could not reasonably be expected to
cause a Material Adverse Effect.
5.3 Collateral. Borrower has rights in or the power to transfer the
Collateral, and its title to the Collateral is free and clear of Liens, adverse
claims, and restrictions on transfer or pledge except for Permitted Liens. All
Collateral is located solely in the Collateral States. All Inventory is in all
material respects of good and merchantable quality, free from all material
defects, except for Inventory for which adequate reserves have been made. Except
as set forth in the Schedule, none of the Collateral is maintained or invested
with a Person other than Bank or Bank's Affiliates.
5.4 Intellectual Property Collateral. Borrower is the sole owner of
the Intellectual Property Collateral, except for licenses granted by Borrower to
its customers in the ordinary course of business. To the best
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of Borrower's knowledge, each of the Copyrights, Trademarks and Patents is valid
and enforceable, and no part of the Intellectual Property Collateral has been
judged invalid or unenforceable, in whole or in part, and no claim has been made
to Borrower that any part of the Intellectual Property Collateral violates the
rights of any third party except to the extent such claim could not reasonably
be expected to cause a Material Adverse Effect. Except as set forth in the
Schedule, Borrower's rights as a licensee of intellectual property do not give
rise to more than five percent (5%) of its gross revenue in any given month,
including without limitation revenue derived from the sale, licensing, rendering
or disposition of any product or service.
5.5 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.
5.6 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which a likely adverse decision could
reasonably be expected to have a Material Adverse Effect.
5.7 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that are delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated and consolidating financial condition as of the
date thereof and Borrower's consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts
(including trade debts) as they mature; the fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; and Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement.
5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary
have met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied in all material respects with all the
provisions of the Federal Fair Labor Standards Act. Borrower is in compliance
with all environmental laws, regulations and ordinances except where the failure
to comply is not reasonably likely to have a Material Adverse Effect. Borrower
has not violated any statutes, laws, ordinances or rules applicable to it, the
violation of which could reasonably be expected to have a Material Adverse
Effect. Borrower and each Subsidiary have filed or caused to be filed all tax
returns required to be filed, and have paid, or have made adequate provision for
the payment of, all taxes reflected therein except those being contested in good
faith with adequate reserves under GAAP or where the failure to file such
returns or pay such taxes could not reasonably be expected to have a Material
Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.11 Government Consents. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Effect.
5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower
is not a party to, nor is bound by, any license or other agreement that
prohibits or otherwise restricts Borrower from granting a security interest in
Borrower's interest in such license or agreement or any other property.
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5.13 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading, it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing and Government Compliance. Borrower shall maintain
its and each of its Subsidiaries' corporate existence and good standing in the
Borrower State, shall maintain qualification and good standing in each other
jurisdiction in which the failure to so qualify could have a Material Adverse
Effect, and shall furnish to Bank the organizational identification number
issued to Borrower by the authorities of the state in which Borrower is
organized, if applicable. Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply in all material respects
with all applicable Environmental Laws, and maintain all material permits,
licenses and approvals required thereunder where the failure to do so could have
a Material Adverse Effect. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, and shall maintain, and shall cause each
of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which or failure to comply with which could reasonably
be expected to have a Material Adverse Effect.
6.2 Financial Statements, Reports, Certificates. Borrower shall
deliver the following to Bank (i) as soon as available, but in any event within
thirty (30) days after the end of each calendar month, a company prepared
consolidated and consolidating balance sheet and income statement covering
Borrower's operations during such period, in a form reasonably acceptable to
Bank and certified by a Responsible Officer; (ii) as soon as available, but in
any event within one hundred twenty (120) days after the end of Borrower's
fiscal year, audited consolidated and consolidating financial statements of
Borrower prepared in accordance with GAAP, consistently applied, together with
an opinion which is unqualified or otherwise consented to in writing by Bank on
such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (iii) as soon as available, but in any event
within thirty (30) days after the end of each calendar month, copies of
Guarantor's personal brokerage statements of all brokerage accounts held in the
name of Guarantor; (iv) if applicable, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed
with the Securities and Exchange Commission; (v) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000) or more; (vi) promptly
upon receipt, each management letter prepared by Borrower's independent
certified public accounting firm regarding Borrower's management control
systems; (vii) such budgets, sales projections, operating plans or other
financial information generally prepared by Borrower in the ordinary course of
business as Bank may reasonably request from time to time; and (viii) within
thirty (30) days of the last day of each fiscal quarter, a report signed by
Borrower, in form reasonably acceptable to Bank, listing any applications or
registrations that Borrower has made or filed in respect of any Patents,
Copyrights or Trademarks and the status of any outstanding applications or
registrations, as well as any material change in Borrower's Intellectual
Property Collateral, including but not limited to any subsequent ownership right
of Borrower in or to any Trademark, Patent or Copyright not specified in
Exhibits A, B, and C of any Intellectual Property Security Agreement delivered
to Bank by Borrower in connection with this Agreement/
(a) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate certified as of the last day of the applicable month and
signed by a Responsible Officer in substantially the form of Exhibit C together
with aged listings by invoice date of accounts receivable and accounts payable.
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(b) As soon as possible and in any event within three (3)
calendar days after becoming aware of the occurrence or existence of an Event of
Default hereunder, a written statement of a Responsible Officer setting forth
details of the Event of Default, and the action which Borrower has taken or
proposes to take with respect thereto.
(c) Bank shall have a right from time to time hereafter to audit
Borrower's Accounts and appraise Collateral at Borrower's expense, provided that
such audits will be conducted no more often than every six (6) months unless an
Event of Default has occurred and is continuing.
Borrower may deliver to Bank on an electronic basis any certificates,
reports or information required pursuant to this Section 6.2, and Bank shall be
entitled to rely on the information contained in the electronic files, provided
that Bank in good faith believes that the files were delivered by a Responsible
Officer. If Borrower delivers this information electronically, it shall also
deliver to Bank by U.S. Mail, reputable overnight courier service, hand
delivery, facsimile or .pdf file within five (5) Business Days of submission of
the unsigned electronic copy the certification of monthly financial statements,
the intellectual property report, the Borrowing Base Certificate and the
Compliance Certificate, each bearing the physical signature of the Responsible
Officer.
6.3 Inventory; Returns. Borrower shall keep all Inventory in good and
merchantable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist on the
Closing Date. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims involving more than One Hundred Thousand Dollars
($100,000).
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, including, but not limited
to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability,
and will execute and deliver to Bank, on demand, proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits and
any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.5 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain liability
and other insurance in amounts and of a type that are customary to businesses
similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and all liability insurance policies shall show Bank as an additional
insured and specify that the insurer must give at least 20 days notice to Bank
before canceling its policy for any reason. Upon Bank's request, Borrower shall
deliver to Bank certified copies of the policies of insurance and evidence of
all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, all proceeds payable under any such policy shall, at Bank's
option, be payable to Bank to be applied on account of the Obligations.
6.6 Accounts. Borrower shall maintain all its depository and operating
accounts with Bank, and its primary investment accounts with Bank or Bank's
Affiliates.
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6.7 Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as the case
may be, those registrable intellectual property rights now owned or hereafter
developed or acquired by Borrower, to the extent that Borrower, in its
reasonable business judgment, deems it appropriate to so protect such
intellectual property rights.
(b) Borrower shall promptly give Bank written notice of any
applications or registrations of intellectual property rights filed with the
United States Patent and Trademark Office, including the date of such filing and
the registration or application numbers, if any.
(c) Borrower shall (i) give Bank not less than thirty (30) days
prior written notice of the filing of any applications or registrations with the
United States Copyright Office, including the title of such intellectual
property rights to be registered, as such title will appear on such applications
or registrations, and the date such applications or registrations will be filed;
(ii) prior to the filing of any such applications or registrations, execute such
documents as Bank may reasonably request for Bank to maintain its perfection in
such intellectual property rights to be registered by Borrower; (iii) upon the
request of Bank, either deliver to Bank or file such documents simultaneously
with the filing of any such applications or registrations; (iv) upon filing any
such applications or registrations, promptly provide Bank with a copy of such
applications or registrations together with any exhibits, evidence of the filing
of any documents requested by Bank to be filed for Bank to maintain the
perfection and priority of its security interest in such intellectual property
rights, and the date of such filing.
(d) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect and maintain the perfection and priority of Bank's security interest in
the Intellectual Property Collateral.
(e) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the trade secrets, Trademarks, Patents and Copyrights,
(ii) use commercially reasonable efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any material Trademarks,
Patents or Copyrights to be abandoned, forfeited or dedicated to the public
without the written consent of Bank, which shall not be unreasonably withheld.
(f) Bank may audit Borrower's Intellectual Property Collateral to
confirm compliance with this Section, provided such audit may not occur more
often than twice per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section.
6.8 Consent of Inbound Licensors. Prior to entering into or becoming
bound by any license or agreement, Borrower shall: (i) provide written notice to
Bank of the material terms of such license or agreement with a description of
its likely impact on Borrower's business or financial condition; and (ii) in
good faith use commercially reasonable efforts to obtain the consent of, or
waiver by, any person whose consent or waiver is necessary for Borrower's
interest in such licenses or contract rights to be deemed Collateral and for
Bank to have a security interest in it that might otherwise be restricted by the
terms of the applicable license or agreement, whether now existing or entered
into in the future, provided, however, that the failure to obtain any such
consent or waiver shall not constitute a default under this Agreement.
6.9 Creation/Acquisition of Subsidiaries. In the event Borrower or any
Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Bank of the creation or acquisition of such new Subsidiary
and take all such action as may be reasonably required by Bank to cause such
Subsidiary to guarantee the Obligations of Borrower under the Loan Documents and
grant a continuing pledge and security interest in and to the collateral of such
Subsidiary (substantially as described on Exhibit A hereto), and Borrower shall
grant and pledge to Bank a perfected security interest in the stock, units or
other evidence of ownership of such Subsidiary.
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6.10 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the outstanding Obligations are paid in full or for
so long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following without Bank's prior written consent, which
shall not be unreasonably withheld:
7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise
dispose of (collectively, to "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, or move cash balances on
deposit with Bank to accounts opened at another financial institution, other
than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in Control. Change
its name or the Borrower State or relocate its chief executive office without
thirty (30) days prior written notification to Bank; replace its chief executive
officer or chief financial officer without thirty (30) days prior written
notification to Bank; engage in any business, or permit any of its Subsidiaries
to engage in any business, other than or reasonably related or incidental to the
businesses currently engaged in by Borrower; change its fiscal year end; suffer
or permit a Change in Control.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) such transactions do not in the aggregate exceed One
Hundred Fifty Thousand Dollars ($150,000) during any fiscal year, (ii) no Event
of Default has occurred, is continuing or would exist after giving effect to
such transactions, (iii) such transactions do not result in a Change in Control,
and (iv) Borrower is the surviving entity.
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with respect
to any of its property, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries so
to do, except for Permitted Liens, or covenant to any other Person that Borrower
in the future will refrain from creating, incurring, assuming or allowing any
Lien with respect to any of Borrower's property.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may (i) repurchase the stock of former employees
pursuant to stock repurchase agreements as long as an Event of Default does not
exist prior to such repurchase or would not exist after giving effect to such
repurchase, and (ii) repurchase the stock of former employees pursuant to stock
repurchase agreements by the cancellation of indebtedness owed by such former
employees to Borrower regardless of whether an Event of Default exists.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments, or maintain or invest any of its property with
a Person other than Bank or Bank's Affiliates or permit any Subsidiary to do so
unless such Person has entered into a control agreement with Bank, in form and
substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.
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7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
affecting Bank's rights contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment
with a bailee, warehouseman, or similar third party unless the third party has
been notified of Bank's security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank's benefit or (b) is in possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment.
Except for Inventory sold in the ordinary course of business and except for such
other locations as Bank may approve in writing, Borrower shall keep the
Inventory and Equipment only at the location set forth in Section 10 and such
other locations of which Borrower gives Bank prior written notice and as to
which Bank files a financing statement, or takes other action, where needed to
perfect its security interest.
7.11 No Investment Company; Margin Regulation. Become or be controlled
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.
7.12 Negative Pledge Agreements. Permit the inclusion in any contract
to which it or a Subsidiary becomes a party of any provisions that could
restrict or invalidate the creation of a security interest in any of Borrower's
or such Subsidiary's property.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay any of the Obligations
when due;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Article 6
or violates any of the covenants contained in Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform or observe any other
material term, provision, condition, covenant contained in this Agreement, in
any of the Loan Documents, or in any other present or future agreement between
Borrower and Bank and as to any default under such other term, provision,
condition or covenant that can be cured, has failed to cure such default within
ten (10) days after Borrower receives notice thereof or any officer of Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the ten (10) day period or cannot after diligent attempts
by Borrower be cured within such ten (10) day period, and such default is likely
to be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default but no Credit
Extensions will be made;
8.3 Defective Perfection. If Bank shall receive at any time following
the Closing Date an SOS Report indicating that except for Permitted Liens,
Bank's security interest in the Collateral is not prior to all other security
interests or Liens of record reflected in such SOS Report;
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8.4 Material Adverse Effect. If there occurs any circumstance or
circumstances that could have a Material Adverse Effect;
8.5 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or 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, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be made during such cure period);
8.6 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.7 Other Agreements. If there is a default or other failure to
perform in any agreement to which Borrower is a party with a third party or
parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess
of One Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
8.8 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.9 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.10 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
8.11 Guaranty. If any guaranty of all or a portion of the Obligations
(a "Guaranty") ceases for any reason to be in full force and effect, or any
guarantor fails to perform any obligation under any Guaranty or a security
agreement securing any Guaranty (collectively, the "Guaranty Documents"), or any
event of default occurs under any Guaranty Document or any guarantor revokes or
purports to revoke a Guaranty, or any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
in any Guaranty Document or in any certificate delivered to Bank in connection
with any Guaranty Document, or if any of the circumstances described in Sections
8.3 through 8.9 occur with respect to any guarantor.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, 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 all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event
-17-
of Default described in Section 8.6, all Obligations shall become immediately
due and payable without any action by Bank);
(b) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and (ii) pay in advance all Letter of Credit fees scheduled to be paid or
payable over the remaining term of the Letters of Credit, and Borrower shall
promptly deposit and pay such amounts;
(c) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) 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, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing
to or for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, 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, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell 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 Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate. Bank may sell the Collateral
without giving any warranties as to the Collateral. Bank may specifically
disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral. If Bank sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Bank,
and applied to the indebtedness of the purchaser. If the purchaser fails to pay
for the Collateral, Bank may resell the Collateral and Borrower shall be
credited with the proceeds of the sale;
(i) Bank may credit bid and purchase at any public sale;
(j) Apply for the appointment of a receiver, trustee, liquidator
or conservator of the Collateral, without notice and without regard to the
adequacy of the security for the Obligations and without regard to the solvency
of Borrower, any guarantor or any other Person liable for any of the
Obligations; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
-18-
Bank may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (g)
to modify, in its sole discretion, any intellectual property security agreement
entered into between Borrower and Bank without first obtaining Borrower's
approval of or signature to such modification by amending Exhibits A, B, and C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims to
have any right, title or interest; and (h) to file, in its sole discretion, one
or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Borrower where permitted by law;
provided Bank may exercise such power of attorney to sign the name of Borrower
on any of the documents described in clauses (g) and (h) above, regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide Credit Extensions
hereunder is terminated.
9.3 Accounts Collection. At any time after the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank's trustee, and immediately deliver such
payments to Bank in their original form as received from the account debtor,
with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under the Revolving Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.5 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. Bank has no obligation to clean
up or otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.
9.6 No Obligation to Pursue Others. Bank has no obligation to attempt
to satisfy the Obligations by collecting them from any other Person liable for
them and Bank may release, modify or waive any collateral provided by any other
Person to secure any of the Obligations, all without affecting Bank's rights
against Borrower. Borrower waives any right it may have to require Bank to
pursue any other Person for any of the Obligations.
9.7 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, 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 Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
-19-
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given. Borrower expressly agrees that this Section may
not be waived or modified by Bank by course of performance, conduct, estoppel or
otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the
Obligations.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: XXXXX.XXX, INC.
0000 000xx Xxx., XX
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
FAX: (___) ___________
If to Bank: Comerica Bank
0000 Xxxxxxxxx Xxx., Xxxxx 0000
Xx Xxxxxxx, XX 00000
Attn: Manager
FAX: (000) 000-0000
with a copy to: Comerica Bank
00000 XX 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx - Vice President
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR
BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
-20-
12. REFERENCE PROVISION.
The parties prefer that any dispute between them be resolved in
litigation subject to a Jury Trial Waiver as set forth in Section 11 of this
Agreement, but the availability of that process is in doubt because of the
opinion of the California Court of Appeal in Grafton Partners LP v. Superior
Court, 9 Cal.Rptr.3d 511. This Reference Provision will be applicable until the
California Supreme Court completes its review of that case, and will continue to
be applicable if either that court or a California Court of Appeal publishes a
decision holding that a pre-dispute Jury Trial Waiver provision similar to that
contained in the Loan Documents is invalid or unenforceable. Delay in requesting
appointment of a referee pending review of any such decision, or participation
in litigation pending review, will not be deemed a waiver of this Reference
Provision.
12.1 Mechanics.
(a) Other than (i) nonjudicial foreclosure of security interests
in real or personal property, (ii) the appointment of a receiver or (iii) the
exercise of other provisional remedies (any of which may be initiated pursuant
to applicable law), any controversy, dispute or claim (each, a "Claim") between
the parties arising out of or relating to this Agreement or any other document,
instrument or agreement between the Bank and the undersigned (collectively in
this Section, the "Loan Documents"), will be resolved by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure ("CCP"), or their successor sections, which
shall constitute the exclusive remedy for the resolution of any Claim, including
whether the Claim is subject to the reference proceeding. Except as otherwise
provided in the Loan Documents, venue for the reference proceeding will be in
the Superior Court or Federal District Court in the County or District where
venue is otherwise appropriate under applicable law (the "Court").
(b) The referee shall be a retired Judge or Justice selected by
mutual written agreement of the parties. If the parties do not agree, the
referee shall be selected by the Presiding Judge of the Court (or his or her
representative). A request for appointment of a referee may be heard on an ex
parte or expedited basis, and the parties agree that irreparable harm would
result if ex parte relief is not granted. The referee shall be appointed to sit
with all the powers provided by law. Each party shall have one peremptory
challenge pursuant to CCP Section 170.6. Pending appointment of the referee, the
Court has power to issue temporary or provisional remedies.
(c) The parties agree that time is of the essence in conducting
the reference proceedings. Accordingly, the referee shall be requested to (a)
set the matter for a status and trial-setting conference within fifteen (15)
days after the date of selection of the referee, (b) if practicable, try all
issues of law or fact within ninety (90) days after the date of the conference
and (c) report a statement of decision within twenty (20) days after the matter
has been submitted for decision. Any decision rendered by the referee will be
final, binding and conclusive, and judgment shall be entered pursuant to CCP
Section 644.
(d) The referee will have power to expand or limit the amount and
duration of discovery. The referee may set or extend discovery deadlines or
cutoffs for good cause, including a party's failure to provide requested
discovery for any reason whatsoever. Unless otherwise ordered, no party shall be
entitled to "priority" in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery shall
be responded to within fifteen (15) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.
12.2 Procedures. Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter, except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee, and the referee will be provided a courtesy copy of the
transcript. The party making such a request shall have the obligation to arrange
for and pay the court reporter. Subject to the referee's power to award costs to
the prevailing party, the parties will equally share the cost of the referee and
the court reporter at trial.
12.3 Application of Law. The referee shall be required to determine
all issues in accordance with existing case law and the statutory laws of the
State of California. The rules of evidence applicable to
-21-
proceedings at law in the State of California will be applicable to the
reference proceeding. The referee shall be empowered to enter equitable as well
as legal relief, provide all temporary or provisional remedies, enter equitable
orders that will be binding on the parties and rule on any motion which would be
authorized in a trial, including without limitation motions for summary judgment
or summary adjudication. The referee shall issue a decision at the close of the
reference proceeding which disposes of all claims of the parties that are the
subject of the reference. The referee's decision shall be entered by the Court
as a judgment or an order in the same manner as if the action had been tried by
the Court. The parties reserve the right to appeal from the final judgment or
order or from any appealable decision or order entered by the referee. The
parties reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
12.4 Repeal. If the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by reference
procedure will be resolved and determined by arbitration. The arbitration will
be conducted by a retired judge or Justice, in accordance with the California
Arbitration Act Section 1280 through Section 1294.2 of the CCP as amended from
time to time. The limitations with respect to discovery set forth above shall
apply to any such arbitration proceeding.
12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER
THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY, AND
THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO THIS
REFERENCE PROVISION. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR
THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY
DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE
LOAN DOCUMENTS.
13. GENERAL PROVISIONS.
13.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties and shall bind all Persons who become bound as a debtor to this
Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
13.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank,
its officers, employees and agents as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
13.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
13.4 Severability of Provisions. 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.
13.5 Amendments in Writing, Integration. All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.
-22-
13.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
13.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make any Credit
Extension to Borrower. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 13.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
XXXXX.XXX, INC.
By:
------------------------------------
Title:
---------------------------------
COMERICA BANK
By:
------------------------------------
Title:
---------------------------------
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
DEBTOR XXXXX.XXX, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to xxx in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and
the goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the obligation)
of Secured Party to xxx in its own name and/or in the name of the Debtor for
past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United States
Patent and Trademark Office or any similar office of any foreign jurisdiction,
and interests under patent license agreements, including, without limitation,
the inventions and improvements described and claimed therein, (ii) licenses
pertaining to any patent whether Debtor is licensor or licensee, (iii) income,
royalties, damages, payments, accounts and accounts receivable now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to xxx in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
EXHIBIT B
TECHNOLOGY & LIFE SCIENCES DIVISION
LOAN ANALYSIS
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS
[3:00* P.M., Pacific Time/ 3:30 P.M. Eastern Time]
DEADLINE FOR WIRE TRANSFERS IS
[1:30 P.M., Pacific Time/ 3:30 P.M. Eastern Time]
[*At month end and the day before a holiday,
the cut off time is 1:30 P.M., Pacific Time]
To: Loan Analysis DATE: _______________ TIME: _____________
FAX #: (000) 000-0000
FROM: XXXXX.XXX, INC. TELEPHONE REQUEST (For Bank Use Only):
Borrower's Name
FROM: ___________________________ The following person is authorized to request the loan
Authorized Signer's Name payment transfer/loan advance on the designated
account and is known to me.
FROM: ___________________________ ______________________________________________________
Authorized Signer's Name Authorized Request & Phone #
PHONE #: ___________________________ ______________________________________________________
Received by (Bank) & Phone #
FROM ACCOUNT#: __________________________
(please include Note number, if applicable)
---------------------------------------------------
TO ACCOUNT #: ___________________________ Authorized Signature (Bank)
(please include Note number, if applicable)
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT For Bank Use Only
PRINCIPAL INCREASE* (ADVANCE) $______________________ Date Rec'd: _________________________
PRINCIPAL PAYMENT (ONLY) $______________________ Time: _______________________________
Comp. Status: YES NO
OTHER INSTRUCTIONS: Status Date: ________________________
_______________________________________________________ Time: _______________________________
_______________________________________________________ Approval: ___________________________
All representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Borrowing Certificate,
including without limitation the representation that Borrower has paid for and
owns the equipment financed by the Bank; provided, however, that those
representations and warranties the date expressly referring to another date
shall be true, correct and complete in all material respects as of such date.
* IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE YES NO
If YES, the Outgoing Wire Transfer Instructions must be completed below.
OUTGOING WIRE TRANSFER INSTRUCTIONS Fed Reference Number Bank Transfer Number
THE ITEMS MARKED WITH AN ASTERISK (*) ARE REQUIRED TO BE COMPLETED.
*Beneficiary Name ______________________________________________________________
*Beneficiary Account Number ____________________________________________________
*Beneficiary Address ___________________________________________________________
Currency Type __________________ US DOLLARS ONLY
*ABA Routing Number (9 Digits) _________________________________________________
*Receiving Institution Name ____________________________________________________
*Receiving Institution Address _________________________________________________
*Wire Account $__________
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: COMERICA BANK
FROM: XXXXX.XXX, INC.
The undersigned authorized officer of XXXXX.XXX, INC. hereby certifies that
in accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct as of the date hereof. Attached
herewith are the required documents supporting the above certification. The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
Guarantor's brokerage statements Monthly within 30 days
10K and 10Q (as applicable) Yes No
Compliance Cert., A/R & A/P Agings Monthly within 30 days Yes No
A/R AUDIT INITIAL AND SEMI-ANNUAL YES NO
IP Report Quarterly within 30 days Yes No
Total amount of Borrower's cash and investments Amount: $________ Yes No
Total amount of Borrower's cash and investments
maintained with Bank Amount: $________ Yes No
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See Attached.
Received by:
---------------------------
Sincerely, AUTHORIZED SIGNER
Date:
----------------------------------
------------------------------------- Verified:
SIGNATURE ------------------------------
AUTHORIZED SIGNER
-------------------------------------
TITLE Date:
----------------------------------
-------------------------------------
DATE Compliance Status Yes No
SCHEDULE OF EXCEPTIONS
Permitted Indebtedness (Section 1.1)
1) MGN Opportunity LLC
Note Date: 2/14/2002 & 7/1/2002
Type: Demand Note
Note Principal: $155,000 & $45,000
Interest Rate: 8%
Accrued Interest as of 12/31/04: $44,718
Total Outstanding Principal + Interest: $244,718
Status: Convert or payoff on next round of financing.
2) XML Fund Investors I LLC
Type: Convertible Note
Interest Rate: 8%
Note Principal: $100,000
Maturity Date: 12/14/01
Accrued Interest as of 12/31/04: $32,311
Total Outstanding Principal + Interest: $132,311
Status: Convert or payoff on next round of financing.
3) Federal Government tax penalties - $137,798.71
Permitted Investments (Section 1.1)
None.
Permitted Liens (Section 1.1)
Federal Tax Lien filed against Borrower by the Internal Revenue Service on
October 5, 2004, in the amount of $137,798.71.
Prior Names (Section 5.5)
XxxxxxxxxXX.xxx, Inc.
JRWW, Inc.
Merchant Xxxxxxxx.xxx LLC
Litigation (Section 5.6)
Xxxxx Xxxxxxxx (cross -complainant) v. Xxxxx.xxx
Issue: Fraud, Conspiracy to Defraud, and Indemnity and Contribution
Current Status: Set for trial 3/7/05
Amount: unknown but less than $100,000
Note: Any settlement payments will be adjusted out from future royalty payments
to previous owners of Merchant Partners LLC.
Inbound Licenses (Section 5.12)
None.
CORPORATION RESOLUTIONS AND INCUMBENCY CERTIFICATION
AUTHORITY TO PROCURE LOANS
I certify that I am the duly elected and qualified Secretary of XXXXX.XXX, INC.;
that the following is a true and correct copy of resolutions duly adopted by the
Board of Directors of the Corporation in accordance with its bylaws and
applicable statutes.
COPY OF RESOLUTIONS:
Be it Resolved, That:
1. Any one (1) of the following __________________________ (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the
name of the Corporation to:
(a) Negotiate and procure loans, letters of credit and other credit or
financial accommodations from Comerica Bank ("Bank"), a Michigan
banking corporation, including, without limitation, that certain Loan
and Security Agreement dated as of February __, 2005, as may
subsequently be amended from time to time.
(b) Discount with the Bank, commercial or other business paper belonging
to the Corporation made or drawn by or upon third parties, without
limit as to amount;
(c) Purchase, sell, exchange, assign, endorse for transfer and/or deliver
certificates and/or instruments representing stocks, bonds, evidences
of Indebtedness or other securities owned by the Corporation, whether
or not registered in the name of the Corporation;
(d) Give security for any liabilities of the Corporation to the Bank by
grant, security interest, assignment, lien, deed of trust or mortgage
upon any real or personal property, tangible or intangible of the
Corporation;
(e) Issue a warrant or warrants to purchase the Corporation's capital
stock; and
(f) Execute and deliver in form and content as may be required by the Bank
any and all notes, evidences of Indebtedness, applications for letters
of credit, guaranties, subordination agreements, loan and security
agreements, financing statements, assignments, liens, deeds of trust,
mortgages, trust receipts and other agreements, instruments or
documents to carry out the purposes of these Resolutions, any or all
of which may relate to all or to substantially all of the
Corporation's property and assets.
2. Said Bank be and it is authorized and directed to pay the proceeds of any
such loans or discounts as directed by the persons so authorized to sign,
whether so payable to the order of any of said persons in their individual
capacities or not, and whether such proceeds are deposited to the
individual credit of any of said persons or not;
3. Any and all agreements, instruments and documents previously executed and
acts and things previously done to carry out the purposes of these
Resolutions are ratified, confirmed and approved as the act or acts of the
Corporation.
4. These Resolutions shall continue in force, and the Bank may consider the
holders of said offices and their signatures to be and continue to be as
set forth in a certified copy of these Resolutions delivered to the Bank,
until notice to the contrary in writing is duly served on the Bank (such
notice to have no effect on any action previously taken by the Bank in
reliance on these Resolutions).
-1-
5. Any person, corporation or other legal entity dealing with the Bank may
rely upon a certificate signed by an officer of the Bank to effect that
these Resolutions and any agreement, instrument or document executed
pursuant to them are still in full force and effect and binding upon the
Corporation.
6. The Bank may consider the holders of the offices of the Corporation and
their signatures, respectively, to be and continue to be as set forth in
the Certificate of the Secretary of the Corporation until notice to the
contrary in writing is duly served on the Bank.
I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.
I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:
(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)
NAME (TYPE OR PRINT) TITLE SIGNATURE
-------------------- ----- ---------
In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on February
___, 2005.
----------------------------------------
Secretary
The Above Statements are Correct.
----------------------------------------
SIGNATURE OF OFFICER OR DIRECTOR OR, IF
NONE. A SHAREHOLDER OTHER THAN SECRETARY
WHEN SECRETARY IS AUTHORIZED TO SIGN
ALONE.
FAILURE TO COMPLETE THE ABOVE WHEN THE SECRETARY IS AUTHORIZED TO SIGN ALONE
SHALL CONSTITUTE A CERTIFICATION BY THE SECRETARY THAT THE SECRETARY IS THE SOLE
SHAREHOLDER, DIRECTOR AND OFFICER OF THE CORPORATION.
-2-
ATTN: XXXXX.XXX, INC.
USA PATRIOT ACT
NOTICE
OF
CUSTOMER IDENTIFICATION
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify,
and record information that identifies each person who opens an account.
WHAT THIS MEANS FOR YOU: when you open an account, we will ask your name,
address, date of birth, and other information that will allow us to identify
you. We may also ask to see your driver's license or other identifying
documents.
COMERICA BANK
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(REVOLVER)
Name(s): XXXXX.XXX, INC. Date: February __, 2005
$_________ credited to deposit account No. ___________ when Advances are
requested or disbursed to Borrower by cashiers check or by wire
transfer
Amounts paid to others on your behalf:
$_________ to Comerica Bank for Loan Fee
$_________ to Comerica Bank for Document Fee
$_________ to Comerica Bank for accounts receivable audit (estimate)
$_________ to Bank counsel fees and expenses
$_________ to _______________
$_________ to _______________
$_________ TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Comerica Bank to disburse the loan proceeds as stated above.
------------------------------------- ----------------------------------------
Signature Signature
AGREEMENT TO PROVIDE INSURANCE
TO: COMERICA BANK Date: February __, 2005
Attn: Xxxx X. Xxxxxx, MC 4770
00 X. Xxxxxxx Xxxx
Xxx Xxxx, XX 00000 Borrower: XXXXX.XXX, INC.
In consideration of a loan in the amount of $1,500,000, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force during
the term of the loan.
I/We also agree to advise the below named agent to add Comerica Bank as
lender's loss payable on the new or existing insurance policy, and to furnish
Bank at above address with a copy of said policy/endorsements and any subsequent
renewal policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the real
property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Comerica
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent Telephone No.: __________
Agent's Address: _______________________________________________________________
________________________________________________________________________________
Signature of Obligor:
----------------------------
Signature of Obligor:
----------------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date: _____________________
Person Spoken to: __________________________________
Policy Number: _____________________________________
Effective From: ______________ To: _________________
Verified by: _________________________________________________________________
COMERICA BANK
MEMBER FDIC AUTOMATIC DEBIT AUTHORIZATION
To: COMERICA BANK
Re: LOAN # ___________________________________
You are hereby authorized and instructed to charge account No. ____________ in
the name of XXXXX.XXX, INC. for principal, interest and other payments due on
above referenced loan as set forth below and credit the loan referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each principal payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each payment for Bank Expenses as it becomes due according to
the terms of the Loan and Security Agreement and any renewals or
amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
------------------------------------- February __, 2005
------------------------------------- February __, 2005
COMERICA BANK
MEMBER FDIC AUTOMATIC DEBIT AUTHORIZATION
To: COMERICA BANK
Re: LOAN # ___________________________________
You are hereby authorized and instructed to charge account No. _____________ in
the name of XXXXX.XXX, INC. for principal, interest and other payments due on
above referenced loan as set forth below and credit the loan referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each principal payment as it becomes due according to the terms
of the Loan and Security Agreement and any renewals or amendments
thereof.
[X] Debit each payment for Bank Expenses as it becomes due according to
the terms of the Loan and Security Agreement and any renewals or
amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
------------------------------------- February __, 2005
------------------------------------- February __, 2005
COMERICA BANK
COMERICA BANK
CLIENT AUTHORIZATION
Fax (000) 000-0000
GENERAL AUTHORIZATION
I hereby authorize Comerica Bank to use my company name, logo, and information
relating to our banking relationship in its marketing and advertising campaigns
which is intended for Comerica Bank's customers, prospects and shareholders.
Comerica Bank will forward any advertising or article including client for prior
review and approval.
-------------------------------------
Signature
-------------------------------------
Printed Name Title
-------------------------------------
Company
-------------------------------------
Mailing Address
-------------------------------------
City, State, Zip Code
-------------------------------------
Phone Number
-------------------------------------
Fax Number
-------------------------------------
E-Mail
February ___, 2005
DEBTOR XXXXX.XXX, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO UCC NATIONAL FORM FINANCING STATEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to xxx in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and
the goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the obligation)
of Secured Party to xxx in its own name and/or in the name of the Debtor for
past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United States
Patent and Trademark Office or any similar office of any foreign jurisdiction,
and interests under patent license agreements, including, without limitation,
the inventions and improvements described and claimed therein, (ii) licenses
pertaining to any patent whether Debtor is licensor or licensee, (iii) income,
royalties, damages, payments, accounts and accounts receivable now or hereafter
due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to xxx in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement (this "Amendment") is
entered into as of June 16, 2005, by and between COMERICA BANK ("Bank") and
XXXXX.XXX, INC. ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of February 18, 2005, as amended from time to time (the "Agreement").
The parties desire to amend the Agreement in accordance with the terms of this
Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The following defined terms in Section 1.1 of the Agreement hereby are
amended or restated as follows:
"ACH Line" means a line of credit for Automated Clearing House
transactions not to exceed Seven Hundred Fifty Thousand Dollars ($750,000).
"Credit Card Services Line" means a credit facility for corporate
credit cards not to exceed Twenty Thousand Dollars ($20,000.00).
"Credit Extension" means each Advance, use of Credit Card Services or
any other extension of credit by Bank to or for the benefit of Borrower
hereunder.
2. The first sentence of Section 2.1(b)(i) of the Agreement is hereby
amended and restated in its entirety to read as follows:
"Subject to and upon the terms and conditions of this Agreement
Borrower may request Advances in an aggregate outstanding amount not to exceed
Six Hundred Thousand Dollars ($600,000) minus the aggregate outstanding amount
of the Tax Lien."
3. A new Section 2.1(d) is hereby added to the Agreement as follows:
"(d) Credit Card Services. Subject to the terms and conditions of this
Agreement, Borrower may request corporate credit cards services from Bank (the
"Credit Card Services"). The aggregate limit of the corporate credit cards shall
not exceed the Credit Card Services Line. Bank may, in its sole discretion,
charge as Advances any amounts that become due or owing to Bank in connection
with the Credit Card Services. The terms and condition (including repayment and
fees) of such Credit Card Services shall be subject to the terms and conditions
of the Bank's standard forms of application and agreement for the Credit Card
Services, which Borrower hereby agrees to execute.
4. A new Section 2.1(e) is hereby added to the Agreement as follows:
"(e) Collateralization of Obligations Extending Beyond Maturity. If
Borrower has not secured to Bank's satisfaction its obligations with respect to
any Credit Card Services by the Revolving Maturity Date, then, effective as of
such date, the balance in any deposit accounts held by Bank and the certificates
of deposit or time deposit accounts issued by Bank in Borrower's name (and any
interest paid thereon or proceeds thereof, including any amounts payable upon
the maturity or liquidation of such certificates or accounts), shall
automatically secure such obligations to the extent of the then continuing or
outstanding Credit Card Services. Borrower authorizes Bank to hold such balances
in pledge and to decline to honor any drafts thereon or any requests by Borrower
or any other Person to pay or otherwise transfer any part of such balances for
so long as the Credit Card Services are outstanding or continue.
5. Section 6.2(ii) is hereby amended and restated in its entirety to read
as follows:
-1-
"(ii) as soon as available, but in any event within one hundred fifty
(150) days after the end of Borrower's fiscal year, audited consolidated and
consolidating financial statements of Borrower prepared in accordance with
GAAP, consistently applied, together with an opinion which is unqualified or
otherwise consented to in writing by Bank on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank"
6. Exhibit C to the Agreement is hereby replaced with Exhibit C attached
hereto.
7. No course of dealing on the part of Bank or its officers, nor any
failure or delay in the exercise of any right by Bank, shall operate as a waiver
thereof, and any single or partial exercise of any such right shall not preclude
any later exercise of any such right. Bank's failure at any time to require
strict performance by a Borrower of any provision shall not affect any right of
Bank thereafter to demand strict compliance and performance. Any suspension or
waiver of a right must be in writing signed by an officer of Bank.
8. Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof.
9. Borrower represents and warranties that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
10. As a condition to the effectiveness of this Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Amendment, duly executed by Borrower,
(b) a Certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Amendment;
(c) an Agreement to Provide Insurance;
(d) all reasonable Bank Expenses incurred through the date of
this Amendment, which may be debited from any of Borrower's accounts; and
(e) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
11. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all the which together shall constitute
one instrument.
-2-
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
XXXXX.XXX, INC.
By: /s/ Illegible
------------------------------------
Title: Illegible
COMERICA BANK
By: /s/ Illegible
------------------------------------
Title: Illegibile
[SIGNATUREE PAGE TO AMENDMENT TO LOAN & SECURITY AGREEMENT]
AGREEMENT TO PROVIDE INSURANCE
TO: COMERICA BANK Date: June 16, 2005
attn: Xxxx X. Xxxxxx, MC 4770
00 X. Xxxxxxx Xxxx
Xxx Xxxx, XX 00000 Borrower: XXXXX.XXX, INC.
In consideration of a loan in the amount of $1,770,000, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force during
the term of the loan.
I/We also agree to advise the below named agent to add Comerica Bank as
lender's loss payable on the new or existing insurance policy, and to furnish
Bank at above address with a copy of said policy/endorsements and any subsequent
renewal policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
The amount of the loan, OR
All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the real
property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Comerica
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent Telephone No.:
Agent's Address:
Signature of Obligor: /s/ Illegible
-----------------------------
Signature of Obligor:
-----------------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date: __________________
Person Spoken to: ______________________________
Policy Number: _________________________________
Effective From: __________ To: _________________
Verified by: ___________________________________
