EXHIBIT 10.4
EQUIPMENT LOAN AND SECURITY AGREEMENT
Borrower: DICON FIBEROPTICS, INC Lender: FIRST BANK & TRUST
0000 Xxxxx Xxxxxx 000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
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THIS EQUIPMENT LOAN AND SECURITY AGREEMENT ("Agreement") made effective
April 25, 2001 by and between DICON FIBEROPTICS, INC., a California corporation
("BORROWER") and FIRST BANK & TRUST, a California corporation with a State
banking license ("LENDER").
RECITALS
A. Borrower has applied to Lender for a loan (the "Equipment Loan") in
the maximum sum of EIGHT MILLION EIGHT HUNDRED THIRTY-TWO THOUSAND THREE HUNDRED
SIXTEEN AND NO/100 Dollars ($8,832,316.00) to be used to finance of the
acquisition of the Equipment set forth in EXHIBIT B attached hereto and
incorporated herein.
B. Subject to the terms and conditions of this Agreement, Borrower has
agreed to borrow, and Lender agreed to lend to Borrower, the Equipment Loan.
C. Pursuant to the terms of this Agreement, Borrower's obligations under
the Equipment Loan are to be secured by a security interest in the Collateral
(as defined herein).
AGREEMENT
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Borrower and Lender hereby agree as follows:
1. DEFINITIONS. Unless defined herein, capitalized terms as used herein shall
have the meaning defined in EXHIBIT A attached hereto and incorporated herein by
this reference. Terms not otherwise defined in this Agreement and the Loan
Documents shall have the meanings attributed to such terns in the Uniform
Commercial Code. All references to dollar amounts shall mean amounts in lawful
money of the United States of America.
2. EQUIPMENT LOAN. Subject to the terms and conditions contained herein, Lender
agrees to lend to Borrower, and Borrower agrees to borrow from Lender, the
Equipment Loan, under the following terms and conditions:
2.1. EQUIPMENT NOTE. The Equipment Loan shall be evidenced by the
Equipment Note and the Loan Documents.
2.2. PURPOSE. Advances under the Equipment Note shall be used to finance
the purchase of the Equipment.
2.3. ADVANCES. Advances shall be made up to sixty-five percent (65.00%)
of the invoiced purchase price of each item of Equipment, provided that the
aggregate amount of Advances made shall not exceed the Equipment Note Amount.
Advances shall be made as to each item of Equipment upon presentation to Lender
of the Equipment Purchase Documentation. If necessary to perfect a security
interest in the Equipment, Lender, at Lender's option, may make disbursements of
any Advances payable to the Equipment vendor.
2.4. ADVANCE PERIOD. Advances shall be made during the Advance Period.
No advances shall be made under the Equipment Loan after April 30, 2001.
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2.5. NON-REVOLVING COMMITMENT. The Equipment Loan represents a
non-revolving commitment in that advances made under the Equipment Note may not
be re-borrowed once repaid.
2.6. AUTHORIZATION FOR ADVANCES. Until Lender receives notice from
Borrower of revocation of their authority, the following persons are authorized
to request Advances under the Equipment Loan:
Ho-Xxxxx Xxx, President & CEO
Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower's accounts with Lender.
2.7. INTEREST. Interest under the Equipment Note shall be payable
monthly beginning May 31 2001, and on the last day of each month thereafter,
and, subject to the Fixed Rate Option and the Deposit Incentive Rate set forth
herein below, shall accrue on the principal balance outstanding under the
Equipment Note at a variable rate of one-half of one percentage point (00.50%)
per annum in excess of the Index as it may change from time to time. Interest
shall be computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Should interest not be timely paid, it shall become a part of
the principal and thereafter bear interest as provided herein.
2.8. PRINCIPAL. Principal shall be payable in sixty (60) monthly
installments commencing on May 31, 2001, and on the last day of each month
thereafter. The monthly principal installments shall be established at the
amount necessary to fully amortize the Advances in sixty (60) equal monthly
installments.
2.9. MATURITY DATE. The entire amount of unpaid principal and accrued
but unpaid interest will be immediately due and payable in full on the Maturity
Date.
2.10. LOAN FEE. As consideration for extension of the Equipment Loan,
and as a condition precedent to any obligation of Lender to make any Advances
under the Equipment Loan, Borrower shall pay Lender the Loan Fee.
2.11. FEES AND COSTS. Borrower agrees to pay all fees and costs,
including, but not limited to recording fees, filing fees, and other fees and
costs incurred in connection with the documentation and funding of the Equipment
Loan. Borrower agrees to reimburse Lender upon demand for all such fees and
costs incurred by Lender in connection with the Equipment Loan, and for one-half
of all attorneys' fees and related costs incurred by Lender in connection with
the negotiation and documentation of the Equipment Loan, including the
preparation and negotiation of the Loan Documents.
2.12. COLLATERAL. The Equipment Loan shall be secured by a security
interest in the Collateral.
2.13. INITIAL LOAN DOCUMENTS. To evidence and effect the Equipment Loan,
Borrower shall execute and deliver to Lender, each of the following documents
(the "INITIAL LOAN DOCUMENTS"):
2.13.1 This Agreement, in form satisfactory to Lender;
2.13.2 The Equipment Note, in form satisfactory to Lender;
2.13.3 A Financing Statement, in form satisfactory to Lender;
2.13.4 A Certificate of Secretary- Articles and By-Laws, in
form satisfactory to lender;
2.13.5 A Certificate of Secretary (Corporate Resolution to
Borrow), in form satisfactory to Lender; and
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2.13.6 A Certificate of Secretary (Incumbency Certificate), in
form satisfactory to Lender.
2.14. OTHER TERMS AND CONDITIONS. The Equipment Loan shall be subject to
all other terms and conditions contained in the Loan Documents, each of which is
incorporated herein by this reference.
2.15. ANNUAL FIXED RATE OPTION. Provided that no Event of Default exists
and has not been cured, and subject to the provisions of Section 2.17 herein
below, effective April 30, 2001, and annually on April 30 of each year
thereafter, Borrower may, at Borrower's option, elect to fix the interest rate
on the Equipment Loan for a twelve month period at a rate of one-half of one
percentage point (00.50%) per annum in excess of the Index at that date (the
"FIXED RATE OPTION"). Notice of Borrower's election of the Fixed Rate Option
must be given to Lender on or before April 25 of each year in order to elect the
Fixed Rate Option for the next twelve month period. Unless Borrower elects the
Fixed Rate Option, effective April 30 of each year, the interest will accrue for
the succeeding twelve months at the variable interest rate as provided in
Section 2.7 herein above.
2.16. DEPOSIT INCENTIVE RATE. Provided that Borrower has not elected the
Fixed Rate Option, and subject to the provisions of Section 2.17 herein below,
commencing May 31, 2001, and on the last day of each month thereafter, and
provided that no Event of Default exists and remains uncured, Lender will reduce
the interest rate to be otherwise charged under the Equipment Loan for the next
month as follows:
2.16.1 By one-quarter of one percent (00.25%) per annum, when
the daily collected balances in Borrower's demand
deposit accounts with Lender have averaged over the
preceding ninety (90) days in excess of $1,000,000.
2.16.2 By one half of one percent (00.50%) per annum, when the
daily collected balances in Borrower's demand deposit
accounts with Lender have averaged over the preceding
ninety (90) days in excess of $2,000,000.
2.17. INTEREST AFTER DEFAULT. Notwithstanding the Fixed Rate Option or
the Deposit Incentive Rate, if any Event of Default occurs and remains uncured
beyond any period allowed to cure such Event of Default pursuant to Section 14.8
of this Agreement, Lender, at Lender's option, may increase the interest rate
under the Note to four percentage points (4.000%) over the interest rate to be
otherwise charged under the Note (the "DEFAULT RATE").
3. CONDITIONS PRECEDENT TO INITIAL ADVANCE. Lender's obligation to make the
Initial Advance and each Subsequent Advance under this Agreement shall be
subject to the Borrower's fulfillment to Lender's satisfaction of all of the
conditions set forth in this Agreement and in the Initial Loan Documents,
including but not limited to the following:
3.1. INITIAL LOAN DOCUMENTS. The execution and delivery by Borrower of
each of the Initial Loan Documents specified in Section 2.13 of this Agreement,
in form satisfactory to Lender.
3.2. EQUIPMENT PURCHASE DOCUMENTATION. Borrower shall have delivered to
Lender such Equipment Purchase Documentation as Lender may reasonably require to
specifically identify the Equipment to be financed by the Initial Advance.
3.3. PAYMENT OF FEES AND COSTS. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as specified in
this Agreement or any of the other Loan Documents.
3.4. REPRESENTATIONS AND WARRANTIES. The representations and warranties
set forth in this Agreement and the other Initial Loan Documents are true and
correct in all material respects.
3.5. NO EVENT OF DEFAULT. There shall not exist at the time of any
Advance a condition which would constitute an Event of Default under this
Agreement or under any of the Initial Loan Documents.
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3.6. COMPLIANCE CERTIFICATE. Borrower shall have delivered to Lender a
certificate, dated as of the date of the Initial Advance, in form satisfactory
to Lender, executed by Borrower's Director of Finance, or other officer or
person acceptable to Lender, certifying that the representations and warranties
set forth in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
3.7. INSURANCE. Borrower shall have delivered to Lender a certificate of
insurance evidencing coverage as required under the Equipment Loan Agreement.
3.8. FIXTURES. In addition to the Initial Loan Documents, if Lender
reasonably determines that any of the Equipment to be financed by the Initial
Advance is or will become a Fixture, Lender may, in Lender's sole discretion
require Borrower to execute and deliver, or cause to be executed and delivered
to Lender by Borrower and/or Landlord, each of the following documents:
3.8.1 A Fixture Filing, in form satisfactory to Lender;
3.8.2 A Landlord Consent, in form satisfactory to Lender, from
each Landlord of any Premises on which a Fixture is
located.
4. CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCE. Lender's obligation to make any
Subsequent Advance under this Agreement shall be subject to the Borrower's
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement, including but not limited to the following:
4.1. FINANCING STATEMENT AMENDMENT. The execution and delivery by
Borrower of a Financing Statement Amendment in form satisfactory to Lender,
amending the Financing Statement to specifically identify the Equipment financed
by the Subsequent Advance.
4.2. VALIDITY OF LOAN DOCUMENTS. Each of the Loan Documents shall
constitute, legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
4.3. EQUIPMENT PURCHASE DOCUMENTATION. Borrower shall have delivered to
Lender such Equipment Purchase Documentation as Lender may reasonably require to
specifically identify the Equipment to be financed by the Subsequent Advance.
4.4. PAYMENT OF FEES AND COSTS. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as specified in
this Agreement or any of the other Loan Documents.
4.5. REPRESENTATIONS AND WARRANTIES. The representations and warranties
set forth in this Agreement and the other Loan Documents are true and correct in
all material respects.
4.6. NO EVENT OF DEFAULT. There shall not exist at the time of any
Advance a condition which would constitute an Event of Default under this
Agreement or under any of the Loan Documents.
4.7. COMPLIANCE CERTIFICATE. Borrower shall have delivered to Lender a
certificate, dated as of the date of the Subsequent Advance, in form
satisfactory to Lender, executed by Borrower's Director of Finance, or other
officer or person acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as of the date of
the certificate and further certifying that, as of the date of the certificate,
no Event of Default exists under this Agreement.
4.8. FIXTURES. If Lender reasonably determines that any of the Equipment
to be financed by any Subsequent Advance is or will become a Fixture, Lender
may, in Lender's sole discretion require Borrower to execute and deliver, or
cause to be executed and delivered to Lender by Borrower and/or Landlord, each
of the following documents:
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4.8.1 A Fixture Filing and/or a Fixture Filing Amendment, in
form satisfactory to Lender;
4.8.2 A Landlord Consent, in form satisfactory to Lender,
from each Landlord of any Premises on which a Fixture
is located.
5. GRANT OF SECURITY INTEREST. For valuable consideration, Borrower hereby
grants to Lender a security interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.
6. DEPOSIT ACCOUNTS. Borrower hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Borrower's right, title and interest in and to any funds
deposited with Lender, including but not limited to any Loan Proceeds. Borrower
shall have the unfettered right at any time and from time to withdraw from
Lender any and all funds deposited with Lender, except during such period or
periods of time that Lender shall have the right to exercise remedies under
Section 15 of this Agreement.
7. OBLIGATIONS OF BORROWER WITH RESPECT TO THE COLLATERAL. Borrower warrants and
covenants to Lender as follows:
7.1 PERFECTION OF SECURITY INTEREST. Borrower agrees to execute such
Financing Statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Borrower will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Borrower will note Lender's
interest upon any and all chattel paper if not delivered to Lender for
possession by Lender. Borrower hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing, upon failure of Borrower to do so
after written request by Lender, any Financing Statement or Financing Statement
Amendment on behalf of Borrower, or file a carbon, photographic or other
reproduction of any Financing Statement or of this Agreement for use as a
Financing Statement, as necessary to perfect or to continue the security
interest granted in this Agreement. Borrower will reimburse Lender for all
expenses for the perfection and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify Lender of any
change in Borrower's name including any change to the assumed business names of
Borrower.
7.2 LOCATION OF THE COLLATERAL. Borrower will deliver to Lender in form
satisfactory to Lender a schedule of Collateral Locations.
7.3 REMOVAL OF COLLATERAL. Borrower shall keep the Collateral at the
Collateral Locations, or to the extent the Collateral consists of intangible
property such as accounts, and the records concerning the Collateral, at
Borrower's address shown above. Borrower shall not remove the Collateral from
the Collateral Locations without the prior written consent of Lender.
7.4 TRANSACTIONS INVOLVING COLLATERAL. Borrower shall not sell, offer to
sell, or otherwise transfer or dispose of the Collateral. A sale in the ordinary
course of Borrower's business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Borrower shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be subject to any lien, security
interest, encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests granted
under this Agreement. Unless waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for Lender and
shall not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Borrower shall immediately deliver any such proceeds to Lender for
application to payment of the Indebtedness.
7.5 TITLE. Borrower represents and warrants to Lender that it holds good
and marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which Lender
has specifically consented. Borrower shall defend Lender's rights in the
Collateral against the claims and demands of all other persons.
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7.6 MAINTENANCE AND INSPECTION OF COLLATERAL. Borrower shall maintain
all tangible Collateral in good condition and repair. Borrower will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have the
right at all reasonable times and on reasonable notice to examine, inspect, and
audit the Collateral wherever located. Borrower shall immediately notify Lender
of all cases involving the return, rejection, repossession, loss or damage of or
to any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all happenings
and events affecting the Collateral or the value or the amount of the
Collateral.
7.7 TAXES, ASSESSMENTS AND LIENS. Borrower will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Loan Documents. Borrower may withhold any such payment or
may elect to contest any lien if Borrower is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender's
interest in the Collateral is not jeopardized in Lender's sole opinion. If the
Collateral is subjected to a lien which is not discharged within fifteen (15)
days, Borrower shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to provide
for the discharge of the lien plus any interest, costs, attorneys' fees or other
charges that could accrue as a result of foreclosure or sale of the Collateral.
In any such contest Borrower shall defend itself and Lender and shall satisfy
any final adverse judgment before enforcement against the Collateral. Borrower
shall name Lender as an additional obligee under any surely bond furnished in
the contest proceedings.
7.8 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Borrower shall comply
promptly with all laws, ordinances and regulations of all governmental
authorities applicable to the disposition or use of the Collateral. Borrower may
contest in good faith any such law, ordinance or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Lender's interest in the Collateral, in Lender's opinion, is not jeopardized.
7.9 INSURANCE.
7.9.1 Borrower, at its sole cost and expense, will keep the
Collateral insured for the mutual benefit of Borrower
and Lender against loss or damage by fire, and against
loss or damage by other risks embraced by coverage of
the type now known as the broad form of extended
coverage, including, but not limited to, riot and civil
commotion, vandalism, malicious mischief, burglary,
theft, and mysterious disappearance, and against any
other risks or hazards that Lender may from time to time
reasonably designate, in an amount not less than one
hundred percent (100%) of the then full replacement cost
of the Collateral, without deduction for physical
depreciation. The policies of insurance carried in
accordance with this Section will contain the
Replacement Cost Endorsement.
7.9.2 Borrower, at its sole cost and expense, but for the
mutual benefit of Borrower and Lender, will maintain,
for so long as any Indebtedness is owing under the
Equipment Note, in any amounts, as may from time to time
be reasonably required by Lender business interruption
insurance.
7.9.3 Borrower, at its sole cost and expense, will obtain and
maintain public liability insurance covering the
Collateral and the ownership, use, occupancy, and
maintenance of the Collateral.
7.9.4 All policies of insurance required pursuant to this
Agreement will be issued in an amount and by a company
reasonably acceptable to Lender, in form and substance
satisfactory to Lender and will be approved by Lender as
to amounts, form, risk coverage, and deductibles as
approved by Lender, and shall contain a loss payable or
other endorsement satisfactory to Lender insuring Lender
as mortgagee, together with such other
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endorsements as may be required by Lender, including
stipulations that coverages will not be cancelled or
diminished without at least thirty (30) days' prior
written notice to Lender.
7.10 APPLICATION OF INSURANCE PROCEEDS. Borrower shall promptly notify
Lender of any loss of damage to the Collateral. Lender may make proof of loss if
Borrower fails to do so within thirty (30) days of the casualty. All proceeds of
any insurance on the Collateral, including accrued interest thereon, shall be
held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Borrower from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent to
repair or replacement of the Collateral, Lender shall retain a sufficient amount
of the proceeds to pay all of the Indebtedness, and shall pay the balance to
Borrower. Any proceeds which have not been disbursed within six (6) months after
their receipt and which Borrower has not committed to the repair or restoration
of the Collateral, may, at Lender's option, be used to prepay the Indebtedness.
7.11 INSURANCE REPORTS. Borrower, upon request of Lender, shall furnish
to Lender reports on each existing policy of insurance required under this
Agreement, showing such information as Lender may reasonably request including
the following: (a) the name of the insurer; (b) the risks insured; (c) the
amount of the policy; (d) the property insured; (e) the then current value on
the basis of which insurance has been obtained and the manner of determining
that value; and (f) the expiration date of the policy. In addition, if Lender
reasonably believes the Collateral is underinsured, Lender shall notify
Borrower. If Borrower fails to demonstrate to Lender's reasonable satisfaction
that the Collateral is adequately insured, Borrower shall upon request by Lender
(however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or replacement
cost of the Collateral.
8. TERM. This Agreement shall be effective on the Effective Date and shall
continue in full force and effect until such time as the Equipment Loan has been
paid in full, in principal, interest, costs, expenses, attorneys' fees, and
other fees and charges, or until such time as the parties may agree in writing
to terminate this Agreement.
9. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender,
as of the Effective Date, and as of the date of each Advance:
9.1. ASSUMED BUSINESS NAMES. Borrower has filed or recorded all
documents or filings required by law relating to all assumed business names used
by Borrower. Excluding the name of Borrower, the following is a complete list of
all assumed business names under which Borrower does business: NONE.
9.2. AUTHORIZATION. Borrower's execution, delivery, and performance of
this Agreement and all the other Loan Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a violation of,
or constitute a default under (1) any provision of any agreement or other
instrument binding upon Borrower or (2) any law, governmental regulation, court
decree, or order applicable to Borrower or to Borrower's properties.
9.3. FINANCIAL INFORMATION. Each of Borrower's financial statements
supplied to Lender truly and completely disclosed Borrower's financial condition
as of the date of the statement, and there has been no material adverse change
in Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender that will more likely than not result in
Borrower not being able to repay the Loan in accordance with its amortization
schedule. Borrower has no material contingent obligations as of the date of a
financial statement except as disclosed in such financial statements.
9.4. LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement Borrower is required to give under this Agreement when delivered will
constitute, legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
9.5. LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has
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occurred, which will more likely than not result in Borrower not being able to
repay the Loan in accordance with its amortization schedule, other than
litigation, claims, or other events, if any, that have been disclosed to Lender
in writing.
9.6. TAXES. To the best of Borrower's knowledge, all of Borrower's tax
returns and reports that are or were required to be filed, have been filed, or
such filing has been extended, and all taxes, assessments and other governmental
charges have been paid in full, except those presently being or to be contested
by Borrower in good faith in the ordinary course of business and for which
adequate reserves have been provided.
9.7. INFORMATION. All information heretofore or contemporaneously
herewith furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will be,
true and accurate in every material respect on the date as of which such
information is dated or certified; and none of such information is or will be
incomplete by omitting to state any material fact necessary to make such
information not misleading on the date as of which such information is dated or
certified.
9.8. LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any security agreements, or
permitted the filing or attachment of any security interests on or affecting any
of the Collateral that would be prior or that may in any way be superior to
Lender's security interests and rights in and to such Collateral.
9.9. TITLE TEA ASSETS. Borrower has good title to Borrower's assets, the
same are not subject to any liens or encumbrances other than those disclosed to
Lender prior to the Effective Date, or as to each Advance, prior to such
Advance.
9.10. FIXTURES. None of the Equipment is or will become a Fixture.
9.11. TRADEMARKS, PATENTS. Borrower, as of the date of this Agreement,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights, and licenses to conduct Borrower's business as now operated, without any
known conflict with the valid trademarks, trade names, copyrights, patents, and
license rights of others.
9.12. REGULATION U. The proceeds of the Equipment Loan shall not be used
to purchase or carry margin stock (as defined within Regulation U of the Board
of Governors of the Federal Reserve system).
9.13. BUSINESS PURPOSE. The primary purpose of this loan is for business
purposes, and not for personal, family or household purposes or personal
investment.
9.14. BINDING EFFECT. This Agreement, and all of the other Loan
Documents are binding upon the signers thereof, as well as upon their
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
10. ENVIRONMENTAL PROVISIONS.
10.1. HAZARDOUS SUBSTANCES. Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that: (1) Except in the
ordinary course of business, and in strict compliance with all Environmental
Laws, during the period of Borrower's occupancy of the Premises, there has been
no use, generation, manufacture, storage, treatment, or disposal, of any
Hazardous Substance by any person on, under, about or from any of the Premises;
and (2) Borrower has no knowledge of, or reason to believe that there has been
any actual or threatened litigation or claims of any kind by any person relating
to such matters. The representations and warranties contained herein are based
on Borrower's reasonable due diligence in investigating the Collateral for
hazardous waste and hazardous substances.
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10.2. USE OF HAZARDOUS SUBSTANCES. Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the Premises shall use,
generate, manufacture, store, treat, dispose of or release any Hazardous
Substance on, under, about or from any of the Premises except in compliance with
all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation all Environmental Laws.
10.3. ENVIRONMENTAL INSPECTIONS. Borrower authorizes Lender and its
agents, at any reasonable time and upon reasonable notice, to enter upon the
Premises to make such inspections and tests as may be reasonably appropriate to
determine compliance of the Premises with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any responsibility
or liability on the part of Lender to Borrower or to any other person.
10.4. RELEASE AND INDEMNITY. Borrower hereby (1) releases and waives any
future claims against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release of a hazardous waste or substance on the
properties.
10.5. SURVIVAL. The provisions of this section of the Agreement,
including the obligation to indemnify, shall survive the payment of the
indebtedness and the termination, expiration or satisfaction of this Agreement
and shall not be affected by Lender's acquisition of any interest in any of the
Collateral, whether by foreclosure or otherwise.
11. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so
long as this Agreement remains in effect, Borrower will:
11.1. NOTICES OF CLAIMS AND LITIGATION. Promptly inform Lender in
writing of (1) all material adverse changes in Borrower's financial condition
which will more likely than not result in Borrower not being able to repay the
Loan in accordance with its amortization schedule, and (2) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower which will more likely than not result in
Borrower not being able to repay the Loan ire accordance with its amortization
schedule, and (3) any Event of Default.
11.2. FINANCIAL RECORDS. Maintain its books and records in accordance
with GAAP, applied on a consistent basis, and permit Lender to examine and audit
Borrower's books and records at all reasonable times and upon reasonable notice.
11.3. FINANCIAL STATEMENTS. Furnish Lender with the following:
11.3.1 INTERIM STATEMENTS. As soon as available, but in no
event later than forty-five (45) days after the end of
each fiscal quarter, Borrower's unaudited balance sheet
and profit and loss statement for the period ended,
prepared by Borrower substantially in accordance with
GAAP.
11.3.2 ANNUAL STATEMENTS. As soon as available, but in no event
later than one-hundred twenty (120) days after the end
of each fiscal year, audited year-end financial
statements of Borrower, prepared by a certified public
accountant selected by Borrower and satisfactory to
Lender, issued with an unqualified opinion, prepared in
accordance with GAAP.
11.3.3 TAX RETURNS. As soon as available, but in no event later
than thirty (30) days after the applicable filing date,
as may be extended, for the tax reporting period ended,
Federal and all State income tax returns.
9
11.3.4 ACCOUNTS RECEIVABLE AGINGS. As soon as available, but in
no event later than forty-five (45) days after the end
of each fiscal quarter, an accounts receivable aging
summary, as of the quarter-end.
11.3.5 ACCOUNTS PAYABLE AGINGS. As soon as available, but in no
event later than forty-five (45) days after the end of
each fiscal quarter, an accounts payable aging summary,
as of the quarter-end.
11.3.6 LOAN COMPLIANCE CERTIFICATE. As soon as available, but
in no event later than forty-five (45) days after the
end of each fiscal quarter, a certificate, in form
satisfactory to Lender, signed by the Director of
Finance of Borrower:
11.3.6.1 showing for each of the Financial Covenants and
Ratios to be met by Borrower under Section 11.5
below, such Financial Covenant and/or Ratio of
Borrower as of that quarter-end, and certifying
Borrower's compliance, or non-compliance, as
the case may be, with the same; and
11.3.6.2 certifying Borrower's compliance, in all
material respects, if true, with all other
terms and conditions of this Agreement, and to
the extent Borrower is in material violation or
in material non-compliance with any of the
terms and conditions of this Agreement, stating
such provisions and the nature and extent of
such violation or non-compliance.
All financial reports required to be provided under this Agreement shall
be certified by Borrower as being true and correct in all material
respects.
11.4. ADDITIONAL INFORMATION. Furnish such additional information and
statements, as Lender may reasonably request from time to time.
11.5. FINANCIAL COVENANTS AND RATIOS. Comply with the following
covenants and ratios:
11.5.1 MINIMUM PROFITABILITY. Borrower shall show a positive
Net Income calculated on a quarterly and annual basis,
based on quarterly unaudited and annual audited
financial statements, respectively.
11.5.2 MINIMUM DEBT SERVICE COVERAGE RATIO. Borrower shall
show a minimum Debt Service Coverage Ratio of 1.5 to 1,
calculated on an annual basis, based on annual audited
financial statements.
11.5.3 MINIMUM QUICK RATIO REQUIREMENTS. Borrower shall have a
minimum Quick Ratio of .85 to 1, calculated on a
quarterly basis based on the quarterly unaudited
statements and at year-end based on the annual audited
financial statements.
11.5.4 MINIMUM TANGIBLE NET WORTH. Borrower shall have a
minimum Tangible Net Worth of $40,000,000, calculated on
a quarterly basis based on the quarterly unaudited
statements and at year-end based on the annual audited
financial statements.
11.5.5 MAXIMUM DEBT TO TANGIBLE NET WORTH RATIO. Borrower shall
have a Debt to Tangible Net Worth ratio of not more than
2.00 to 1, measured annually as of the fiscal year-end
based on the annual audited financial statements.
Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph
shall be certified by Borrower as being true and correct.
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11.6. OTHER AGREEMENT. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party, except such as may be contested in good faith or as to which a bona fide
dispute may exist, and notify Lender immediately in writing of any default in
connection with any other such agreements which will more likely than not result
in Borrower not being able to repay the Loan in accordance with its amortization
schedule.
11.7. TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrower's properties, income, or profits, except as
may be contested in good faith or as to which a bona fide dispute may exist.
11.8. PERFORMANCE. Perform and comply, in a timely manner, with all
terms, conditions, and provisions set forth in this Agreement, in the Loan
Documents, and in all other instruments and agreements between Borrower and
Lender.
11.9. OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present executive
and management personnel; provide notice to Lender of any change in executive
and management personnel; conduct its business affairs in a reasonable and
prudent manner.
11.10. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrower's properties, businesses and
operations, and to the use of the Collateral or occupancy of the Premises,
including without limitation, the Americans With Disabilities Act. Borrower may
contest in good faith any such law, ordinance, or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Borrower has notified Lender in writing prior to doing so and so long as, in
Lender's sole opinion, Lender's interests in the Collateral are not jeopardized;
provided, however, Lender may require Borrower to post adequate security or a
surety bond, reasonably satisfactory to Lender, to protect Lender's interest in
the Collateral.
11.11. INSPECTION. Permit employees or agents of Lender at any
reasonable time, on reasonable notice and in such a manner that will protect
Borrower's trade secrets and intellectual property, to inspect any and all
Collateral and the Premises and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer software
programs for the generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit Lender free
access to such records at all reasonable times and on reasonable notice, and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
11.12. ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence the Equipment Loan and to perfect or maintain
perfection of Lender's security interest in the Collateral.
11.13. FIXTURES. If Lender at any time reasonably determines that any of
the Equipment is or will become a Fixture, Lender may, in Lender's sole
discretion require Borrower to execute and deliver, or cause to be executed and
delivered to Lender, each of the following documents:
11.13.1 A Fixture Filing and/or Fixture Filing Amendment, in
form satisfactory to Lender, covering any such
Fixtures; and
11.13.2 A Landlord Consent, in form satisfactory to Lender, from
each Landlord of any Premises on which a Fixture is
located.
Delivery of such Fixture Filing and/or Fixture Filing Amendment and Landlord
Consent, shall be effective to cure any Event of Default that arises from such
Equipment becoming a Fixture.
11
12. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any of the other Loan Documents,
including but not limited to Borrower's failure to discharge or pay when due any
amounts Borrower is required to discharge or pay under this Agreement or any of
the other Loan Documents, Lender on Borrower's behalf may (but shall not be
obligated to) take any action reasonably appropriate to maintain and preserve
the Collateral, including but not limited to discharging or paying all taxes,
liens, security Interests, encumbrances and other claims, at any time levied or
placed on any Collateral and paying all costs for insuring, maintaining and
preserving any Collateral; provided. however, that, except in exercise of its
rights and remedies under Section 15 of this Agreement, Lender shall not remove
the Collateral from the Premises and shall not take custody or control of the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the Default Rate from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. Any Collateral also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.
13. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while
this Agreement is in effect, without the prior written consent of Lender:
13.1. ADDITIONAL LOANS AND INVESTMENTS. Borrower shall not make any
investment in or loan to, or purchase or acquire any interest in, any entity or
venture; provided, however, that this Section 13.1 shall not be deemed to
prohibit investments or loans or purchases or acquisition which are permitted be
any one of the following subsections:
13.1.1 Borrower may make investments, loans, purchases and
acquisitions in the ordinary course of its business;
13.1.2 Borrower may make short term investments in and
purchases of liquid marketable securities and
obligations;
13.1.3 Borrower may make investments in and loans to or
purchase or acquire any interest in any majority owned
entity or venture;
13.1.4 Borrower may make investments, or purchase or acquire
any interest in any entity or venture if the entity or
venture will become with such investment, purchase or
acquisition, a majority owned entity or venture;
13.1.5 Borrower may make investments in and loans to or
purchase or acquire any interest in any customer of or
supplier to Borrower;
13.1.6 Borrower may make investments in or loans to, or
purchase or acquire any interest in, any entity or
venture if the activities of the entity or venture are
related to the manufacturing, sales or research and
development activities of Borrower;
13.1.7 Borrower may make investments in or loans to, or
purchase or acquire any interest in, any entity or
venture if the activities of the entity or venture are
unrelated to the manufacturing, sales, or research and
development activities of Borrower, provided the amount
of such investment, loan, purchase or acquisition does
not exceed the greater of (i) $1,000,000, or (ii) two
percent (2.00%) of Tangible Net Worth (determined at the
time of the investment, loan, purchase or acquisition).
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13.2. SURETY OR GUARANTOR OBLIGATIONS. Borrower shall not incur any
obligations as surety or guarantor; provided, however, that this Section 13.2
shall not be deemed to prohibit incurring obligations as surety or guarantor
which are permitted by any one of the following subsections:
13.2.1 Borrower may incur obligations as surety or guarantor in
the ordinary course of its business.
13.2.2 Borrower may incur obligations as surety or guarantor of
the obligations of any majority owned entity or venture;
13.2.3 Borrower may incur obligations as surety or guarantor
which do not exceed the greater of (i) $1,000,000, or
(ii) two percent (2.00%) of Tangible Net Worth
in the aggregate amount outstanding at any time.
13.3. TRANSFER OR DISPOSITION OF ASSETS. Borrower shall not sell, lease,
exchange, transfer or otherwise dispose of any of its assets, provided, however,
that this Section 13.3 shall not be deemed to prohibit sales, leases, exchanges,
transfers or disposition of assets which are permitted by any one of the
following subsections:
13.3.1 Borrower may sell, lease, exchange, transfer, or
otherwise dispose of assets in the ordinary course of
its business, for fair and reasonable consideration;
13.3.2 Borrower may sell, lease, exchange, transfer, or
otherwise dispose of assets to any majority owned entity
or venture, for fair and reasonable consideration;
13.3.3 Borrower may sell, lease, exchange, transfer or
otherwise dispose of assets, for fair and reasonable
consideration, as a means of accomplishing a merger or
consolidation permitted by subsections 13.4.1 and 134.2;
13.3.4 Borrower may sell, lease, exchange, transfer or
otherwise dispose of fixed or capital assets with a
book value not exceeding in the aggregate annually the
greater of (i) $1,000,000, or (ii) two percent (2.00%)
of Tangible Net Worth as of the prior fiscal year end.
13.3.5 Borrower may enter sale and leaseback agreements for
fixed and capital assets.
Notwithstanding any provision of this Section 13.3, Borrower shall not sell,
lease, exchange, transfer or otherwise dispose of any of the Collateral without
the express written consent of Lender.
13.4. CONTINUITY OF OPERATIONS. Borrower shall not engage in any
business activities substantially different from the business activities in
which Borrower is presently engaged, and Borrower shall not cease operations,
liquidate, or dissolve or enter into any merger or consolidation; provided,
however, that this Section 13.4 shall not be deemed to prohibit Borrower from
entering into any merger or consolidation which is permitted by any one of the
following subsections:
13.4.1 Borrower may merge or consolidate with any majority
owned entity or venture;
13.4.2 Borrower may merge or consolidate with any entity or
venture if Borrower is the surviving entity.
13.5. FIXTURES. Cause or allow any of the Equipment to become a Fixture.
14. DEFAULT. Each of the following shall constitute an event of default ("EVENT
OF DEFAULT") under this Agreement:
14.1. PAYMENT DEFAULT. Borrower fails to make any payment when due under
the Loan.
13
14.2. OTHER DEFAULTS. Borrower fails to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement or in
any of the other Loan Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
14.3. WARRANTIES AND REPRESENTATIONS. Any warranty, representation or
statement made or furnished to Lender by Borrower or on Borrower's behalf under
this Agreement, the Note, or the other Loan Documents is false or misleading in
any material respect, at the time made or furnished, or any warranty or
representation made in Section 9 of this Agreement becomes false or misleading
at any time after the Effective Date, or any warranty or representation made in
Section 9 of this Agreement at the time of any Advance becomes false or
misleading at any time thereafter. If the representation set forth in Section
9.1 becomes false or misleading as a result of Borrower doing business under a
new assumed name, Borrower may correct the representation in Section 9.1, and no
Event of Default shall have occurred, by notifying Lender of the new assumed
business name.
14.4. DISSOLUTION OR INSOLVENCY. The dissolution or termination of
Borrower's existence as a going business, the insolvency of Borrower, the
appointment of a receiver for any part of Borrower's property, any assignment
for the benefit of creditors, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
14.5. DEFECTIVE COLLATERALIZATION. This Agreement or any of the other
Loan Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien)
at any time and for any reason.
14.6. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower or by any governmental agency
against any of the Collateral. This includes a garnishment of any of Borrower's
accounts, including deposit accounts, with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower as to the
validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety
bond for the creditor or forfeiture proceeding, in an amount reasonably
determined by Lender as being an adequate reserve or bond for the dispute.
14.7. ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition that will more likely than not result in Borrower not being
able to repay the Loan in accordance with its amortization schedule.
14.8. RIGHT TO CURE. Lender shall notify Borrower in writing of any
Event of Default. Any Event of Default may be cured (and no Event of Default
will have occurred) if, after receiving written notice from Lender of such Event
of Default: (1) Borrower cures the default within fifteen (15) days (or within 5
days in the case of an Event of Default under Section 14.1) from receipt of such
notice; or (2) if the Event of Default is not an Event of Default under Section
14.1, and the cure requires more than fifteen (15) days, Borrower immediately
initiates steps which Lender reasonably believes to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
14.9. MANDATORY PREPAYMENT. Notwithstanding the provisions of Section
14.8, if Lender has given Borrower three (3) written notices under Section 14.8
of the same violation of this Agreement constituting an Event of Default within
the preceding twelve (12) month period, Lender may by written notice to Borrower
require Borrower to prepay the Loan in full on the date falling ninety (90) days
after Borrower's receipt of such notice requiring prepayment of the Loan.
15. RIGHTS AND REMEDIES ON DEFAULT. If Lender has notified Borrower of an Event
of Default under Section 14.8, and if the Event of Default has not been cured
within the time required under Section 14.8, or if Lender has notified Borrower
that it is requiring prepayment of the Loan under Section 14.9 and if Borrower
has not prepaid the Loan in full as required under Section 14.9, Lender shall
have all the rights of a secured party under the Uniform Commercial Code and
Lender may exercise any one or more of the following rights and remedies:
14
15.1 ACCELERATE INDEBTEDNESS. Lender may declare the entire
Indebtedness, including any prepayment penalty which Borrower would be required
to pay, immediately due and payable, without prior notice.
15.2 TERMINATION OF ADVANCES. Lender, without prior notice to Borrower,
may terminate any obligation under this Agreement to make any further Advances
under the Loan.
15.3 ASSEMBLE COLLATERAL. Lender may require Borrower to deliver to
Lender all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by Lender. Lender also shall have full power to enter upon the
property of Borrower to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement that may not be
reasonably removed at the time of repossession, Borrower agrees Lender may take
such other goods, provided that Lender makes reasonable efforts to return them
to Borrower after repossession.
15.4 SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its own
name or that of Borrower. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Lender will give Borrower
reasonable notice of the time after which any private sale of any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice is given at least ten (10) days, or such
lesser time as required under the Uniform Commercial Code, before the time of
the sale or disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall become a part of
the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Default Rate from date of expenditure until repaid.
15.5 APPOINT RECEIVER. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment of a
receiver; (a) Lender may have a receiver appointed as a matter of right, (b) the
receiver may be an employee of Lender and may serve without bond, and (c) ail
fees of the receiver and his or her attorney shall become part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Default Rate from date of expenditure until repaid.
15.6 COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through
a receiver, may collect the payments, rents, income, and revenues from the
proceeds of the Collateral. Lender may at any time in its discretion transfer
any chattel paper, instruments or other proceeds from the sale of the Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the proceeds of the Collateral
consists of accounts, general intangibles, insurance policies, instruments,
chattel paper, choses in action, or similar property, Lender may demand,
collect, receipt for, settle, compromise, adjust, xxx for, foreclose, or realize
on such proceeds as Lender may determine, whether or not Indebtedness is then
due. For these purposes, Lender may, on behalf of and in the name of Borrower,
receive, open and dispose of mail addressed to Borrower; change any address to
which mail and payments of such proceeds are to be sent; and endorse notes,
checks, drafts, money orders, documents of title, instruments and items
pertaining to payment of the proceeds of any of the Collateral. To facilitate
collection, Lender may notify account debtors and obligors on any proceeds of
the Collateral to make payments directly to Lender.
15.7 OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Borrower for any deficiency
remaining on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement. Borrower
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper representing proceeds of the
Collateral.
15.8 OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform Commercial
Code, as may be amended from time to time. In addition, Lender
15
shall have and may exercise any or all other rights and remedies it may have
available at law, in equity, or otherwise.
15.9 CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Loan Documents or by any other writing, shall
be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or to take action to perform an obligation of
Borrower under this Agreement, after Borrower's failure to perform, shall not
affect Lender's rights under this Agreement.
16. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
16.1 AMENDMENTS. This Agreement, together with any of the Loan
Documents, constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or amendment.
16.2 APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit, Borrower
and Lender agree to submit to the jurisdiction of the courts of Contra Costa
County, State of California. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
16.3 ATTORNEYS FEES; EXPENSES. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, including expert witness and consultant fees and related expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement, and Borrower shall pay the costs
and expenses of such enforcement. Costs and expenses include Lender's attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also shall pay all court costs and
such additional fees as may be directed by the court. In any legal action or
proceeding brought by either party to enforce or interpret this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
costs.
16.4 JURY TRIAL WAIVER. Borrower and Lender waive any right to trial by
jury with respect to any action or proceeding (a) brought by Borrower, or
Lender, relating to (i) the Loan or any understandings or prior dealings between
the parties or (ii) the Loan Documents, or (b) to which Lender is a party.
BORROWER AND LENDER AGREE THAT THIS AGREEMENT CONSTITUTES A WRITTEN CONSENT TO
WAIVER OF TRIAL BY JURY PURSUANT TO THE PROVISIONS OF CODE OF CIVIL PROCEDURE
SECTION 631 AND BORROWER AND LENDER EACH CONSTITUTE AND APPOINT THE OTHER PARTY
ITS TRUE AND LAWFUL ATTORNEY-IN-FACT (THE APPOINTMENT BEING COUPLED WITH AN
INTEREST) AND BORROWER AND LENDER EACH AUTHORIZE AND EMPOWER THE OTHER PARTY, IN
THE NAME, PLACE, AND STEAD OF THE OTHER PARTY, TO FILE THIS AGREEMENT WITH THE
CLERK OR JUDGE OF ANY COURT OF COMPETENT JURISDICTION AS A STATUTORY WRITTEN
CONSENT TO WAIVER OF TRIAL BY JURY.
Initials:__[insert initials of parties] Initials:__[Insert initials of parties]
16.5 CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.
16.6 CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or unrelated to
Lender. Lender may provide, without any limitation whatsoever, to any one or
more purchasers, or potential purchasers, any information or knowledge Lender
may have about Borrower or about any other matters relating to the Loan,
provided that any such purchaser or potential purchaser agrees to keep such
information
16
private and confidential. Borrower hereby waives any rights to privacy Borrower
may have with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loan and will have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests, but no greater rights than Lender has under this
Agreement. Borrower further agrees that either Lender or such purchaser may
enforce Borrower's obligation under the Loan irrespective of the failure or
insolvency of any holder of any interest in the Loan. Borrower further agrees
that the purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.
16.7 NOTICES. Any notice required to be given under this Agreement shall
be given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law), when
deposited with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of this
Agreement. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. For notice purposes, Borrower
agrees to keep Lender informed at all times of Borrower's current address.
16.8 PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the Indebtedness
and, at Lender's option, shall be payable by Borrower as provided in Section 12
above.
16.9 SEVERABILITY. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid of unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
16.10 SUCCESSORS AND ASSIGNS. The Loan Documents shall bind and inure to
the benefit of the parties hereto and their successors and assigns. Borrower
shall not, however, have the right to assign Borrower's rights under this
Agreement or any interest therein, without the prior written consent of Lender.
16.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands
and agrees that in extending Loan Advances, Lender Is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or
in any certificate or other instrument delivered by Borrower to Lender under
this Agreement or the other Loan Documents. Borrower further agrees that
regardless of any investigation made by Lender, all such representations,
warranties and covenants will survive the extension of Loan Advances and
delivery to Lender of the Loan Documents, shall be continuing in nature, shall
be deemed made and redated by Borrower at the time each Loan Advance is made,
and shall remain in full force and effect until such time as Borrower's
indebtedness shall be paid in full, or until this Agreement shall be terminated
in the manner provided above, whichever is the last to occur.
16.12 TIME IS OF THE ESSENCE. Time is of the essence in the performance
of this Agreement.
16.13 WAIVER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, shall constitute a waiver of any of Lender's rights or of
any of Borrower's obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such consent
by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required.
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THIS EQUIPMENT LOAN AND SECURITY AGREEMENT IS DATED AS OF THE DATE FIRST SET
FORTH ABOVE.
BORROWER: DICON FIBEROPTICS, INC., a California corporation
By: /s/ HO-XXXXX XXX
-------------------------------------------
Ho-Xxxxx Xxx, Ph.D., President & CEO
LENDER: FIRST BANK & TRUST, a California corporation
with a State banking license
By: /s/ XXX X. XXXXXXX
-------------------------------------------
Xxx X. Xxxxxxx, Vice President
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EXHIBIT A
[DEFINITIONS]
The following words shall have the following meanings when used in this
Agreement.
ADVANCE. The word "Advance" means a disbursement of Loan funds made, or to be
made, to Borrower or on Borrower's behalf on a line of credit or multiple
advance basis under the terms and conditions of this Agreement.
ADVANCE PERIOD. The term "Advance Period" shall mean that period from the
Effective Date to and including April 30, 2001.
AGREEMENT. The word "Agreement" means the Equipment Loan and Security Agreement,
as this Equipment Loan and Security Agreement may be amended or modified from
time to time, together with all exhibits and schedules attached to the Equipment
Loan and Security Agreement from time to time.
BORROWER. The word "Borrower" means DiCon Fiberoptics, Inc., a California
corporation.
CERTIFICATE OF SECRETARY - ARTICLES AND BY-LAWS. The term "Certificate of
Secretary - Articles and Bylaws" shall mean a certificate, executed and
delivered by the Corporate Secretary of Borrower, in form satisfactory to
Lender, attaching the Articles of Incorporation and Bylaws of Borrower, and
certifying that the Articles of Incorporation and Bylaws attached thereto have
not been rescinded or amended and remain in effect on the date of said
certificate.
CERTIFICATE OF SECRETARY (CORPORATE RESOLUTION TO BORROW). The term "Certificate
of Secretary (Corporate Resolution to Borrow)" shall mean a certificate,
executed and delivered by the Corporate Secretary of Borrower, in form
satisfactory to Lender, attaching resolutions of the Board of Directors of
Borrower, authorizing the Equipment Loan and the execution and delivery of the
Loan Agreement, Promissory Note and Financing Statements, and certifying that
the resolutions attached thereto have not been rescinded or amended and remain
in effect on the date of said certificate.
CERTIFICATE OF SECRETARY (INCUMBENCY CERTIFICATE). The term "Certificate of
Secretary (Incumbency Certificate)" shall mean a certificate, executed and
delivered by the Corporate Secretary of Borrower, in form satisfactory to
Lender, certifying that Ho-Xxxxx Xxx is the President and Chief Executive
Officer of Borrower.
COLLATERAL. The word "Collateral" means the following described property of
Borrower, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
The Equipment, together with all Related Software.
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All replacements of and substitutions for any property described
above.
(b) All accounts, contract rights, general intangibles, instruments,
rents, monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in this
Collateral section.
(c) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section.
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(d) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Borrower's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
COLLATERAL LOCATIONS. The term "Collateral Locations" means any building or
other place where the Equipment and any other Collateral may be located.
CURRENT ASSETS. The term "Current Assets" shall have the meaning as defined
under GAAP.
CURRENT LIABILITIES. The term "Current Liabilities" shall have the meaning as
defined under GAAP.
CURRENT MATURITIES OF LONG TERM DEBT. The term "Current Maturities of Long Term
Debt" shall have the meaning as defined under GAAP.
DEBT SERVICE COVERAGE RATIO. The term "Debt Service Coverage Ratio" shall mean
the ratio of which the numerator is Borrower's Net Income for the period ended
as of the measuring date, plus depreciation and amortization expense for that
period, and the denominator is Current Maturities of Long Term Debt, as of the
measuring date, plus interest expense for the period ended as of the measuring
date.
DEBT TO TANGIBLE NET WORTH RATIO. The term "Debt to Tangible Net Worth Ratio"
shall mean that ratio of which the numerator is Borrower's Total Liabilities, as
of the measuring date, less Deferred Compensation and less Subordinated Debt as
of the measuring date, and the denominator is Borrower's Tangible Net Worth as
of the measuring date.
DEFAULT RATE. The term "Default Rate" is defined in Section 2.17 of this
Agreement.
DEFERRED COMPENSATION. The term "Deferred Compensation" shall have the meaning
as defined under GAAP.
EFFECTIVE DATE. The term "Effective Date" shall mean the date first set forth in
the Agreement.
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations end ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("XXXX"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq, or other applicable state or federal laws, rules, or regulations
adopted pursuant thereto.
EQUIPMENT. The word "Equipment" means the equipment to be financed by the
Equipment Loan, as set forth in EXHIBIT D attached hereto and made a part
hereof, and as set forth in any Financing Statement Amendment and/or Fixture
Filing Amendment, and as may be more specifically identified by the Equipment
Purchase Documentation.
EQUIPMENT LOAN. The term "Equipment Loan" means that certain loan from Borrower
in the Equipment Note Amount for the purpose of financing the acquisition of the
Equipment.
EQUIPMENT NOTE. The word "Equipment Note" means the Note executed by Borrower in
favor of Lender in the Equipment Note Amount, dated April 25, 2001 together with
all renewals, extensions, modifications, refinancings, consolidations, and
substitutions thereof.
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EQUIPMENT NOTE AMOUNT. The term "Equipment Note Amount" means the principal
amount of EIGHT MILLION EIGHT HUNDRED THIRTY-TWO THOUSAND THREE HUNDRED SIXTEEN
AND NO/100 Dollars ($8,832,316.00).
EQUIPMENT PURCHASE DOCUMENTATION. The term "Equipment Purchase Documentation"
shall mean such purchase orders, invoices, and other documentation as Lender may
reasonably require to specifically identify each item of Equipment and to
evidence that such Equipment has been purchased, delivered, installed and/or
accepted by or to Borrower.
EVENT OF DEFAULT. The words "Event of Default" mean any of the Events of Default
set forth in Section 14 of this Agreement.
FINANCING STATEMENT. The term "Financing Statement" means a UCC-1 Financing
Statement, in form satisfactory to Lender, to be filed in the Office of the
California Secretary of State, describing the Collateral.
FINANCING STATEMENT AMENDMENT. The term "Financing Statement Amendment" means
one or more a UCC-2 Financing Statement Change Forms, each in form satisfactory
to Lender, to be filed in the Office of the California Secretary of State,
amending the Financing Statement to specifically identify the Equipment financed
under the Equipment Loan.
FIXED RATE OPTION. The term "Fixed Rate Option" is defined in Section 2.15 of
this Agreement.
FIXTURE. The word "Fixture" shall have the meaning defined in California Civil
Code Section 660 and as otherwise defined under California law, and, as it
applies to the Equipment, shall mean each item of Equipment that is or will
become a Fixture.
FIXTURE FILING. The term "Fixture Filing" means a UCC-1 Financing Statement, in
form satisfactory to Lender, to be filed in the Office of the County Recorder of
each County of California in which a Fixture is or will be located, describing
the Collateral that is or will become a Fixture.
FIXTURE FILING AMENDMENT. The term "Fixture Filing Amendment" means one or more
a UCC-2 Financing Statement Change Forms, each in form satisfactory to Lender,
to be filed in the Office of the County Recorder of each County of California
where a Fixture Filing is recorded, amending the Fixture Filing to specifically
identify the Equipment financed under the Equipment Loan that is or will become
a Fixture.
GAAP. The word "GAAP" means generally accepted accounting principles.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or any of the other Loan Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which Borrower
is responsible under this Agreement or under any of the other Loan Documents.
INDEX. The word "Index" means the WALL STREET JOURNAL'S PRIME LENDING RATE. The
Index is not necessarily the lowest rate charged by Lender on its loans. If the
Index becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower.
INITIAL ADVANCE. The term "Initial Advance" means the first Advance under the
Equipment Loan.
INITIAL LOAN DOCUMENTS. The term "Initial Loan Documents" is defined in Section
2.13 of this Agreement.
INTANGIBLE ASSETS. The term "Intangible Assets" shall have the meaning as
defined under GAAP.
LANDLORD. The word "Landlord" means any landlord of any Premises where the
Equipment is or will become a Fixture.
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LANDLORD CONSENT. The term "Landlord Consent" shall mean an agreement, in form
satisfactory to Lender, between Lender and Landlord, granting Lender permission
to remove the Equipment and any other Collateral from the Premises, or granting
the Lender the right to use the Premises to store or sell the Equipment or the
other Collateral located on the Premises.
LENDER. The word "Lender" means FIRST BANK & TRUST, its successors and assigns.
LOAN. The word "Loan" means the Equipment Loan.
LOAN DOCUMENTS. The term "Loan Documents" means the Initial Loan Documents and
any Financing Statement, Financing Statement Amendment, Fixture Filing, Fixture
Filing Amendment, and/or Landlord Consent now or hereafter executed and
delivered to Lender in connection with the Equipment Loan.
LOAN FEE. The term "Loan Fee" means the fee to be paid to Lender by Borrower in
consideration for Lender's commitment to make the Equipment Loan in the amount
of EIGHT THOUSAND EIGHT HUNDRED THIRTY-TWO AND NO/100 Dollars ($8,832.00).
MATURITY DATE. The term "Maturity Date" means the date on which the entire
amount of unpaid principal and accrued but unpaid interest will be immediately
due and payable in full which, unless declared to be immediately due and payable
pursuant to Section 15.1 of the Agreement, shall be APRIL 30, 2006.
NET INCOME. The term "Net Income" shall have the meaning as defined under GAAP.
NET WORTH. The term "Net Worth" shall be total shareholder's equity as defined
under GAAP.
NOTE. The word "Note" means the Equipment Note, together with any and all
renewals, extensions, modifications, refinancings, consolidations, and
substitutions thereof.
PREMISES. The word Premises shall mean any building or other place where the
Equipment and any other Collateral may be located.
QUICK RATIO. The term "Quick Ratio" shall mean a ratio of which the numerator is
equal to Borrower's Current Assets, as of the measuring date, less Borrower's
inventory, as of the measuring date, and the denominator is equal to Borrower's
Current Liabilities, as of the measuring date, less amounts outstanding under
real estate construction loans (to the extent included in current liabilities as
of the measuring date) and less Deferred Compensation not payable within one
year of the measuring date.
RELATED SOFTWARE. The term "Related Software" shall mean Software acquired by
Borrower from the manufacturer of the Equipment in connection with and as part
of Borrower's purchase of the Equipment from the manufacturer of the Equipment.
SOFTWARE. The word "Software" means a computer program and any supporting
documentation and information relating thereto, including the medium on which
such Software is held or stored.
SUBORDINATED DEBT. The term "Subordinated Debt" shall have the meaning as
defined under GAAP.
SUBSEQUENT ADVANCE. The term "Subsequent Advance" means the any Advance under
the Equipment Loan made subsequent to the Initial Advance.
TANGIBLE NET WORTH. The term "Tangible Net Worth" shall mean the Borrower's Net
Worth as of the measuring date, plus Subordinated Debt, less Intangible Assets.
TOTAL LIABILITIES. The term "Total Liabilities" shall have the meaning as
defined under GAAP.
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UNIFORM COMMERCIAL CODE. The term "Uniform Commercial Code" means the California
Uniform Commercial Code, as from time to time amended.
5
EXHIBIT B
[Equipment List]
PROMISSORY NOTE
(EQUIPMENT LOAN)
Borrower: DICON FIBEROPTICS, INC. Lender: FIRST BANK & TRUST
0000 Xxxxxx Xxxxxx 000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
================================================================================
Principal Amount: $8,832,316.00 Initial Rate: 8.00% Date of Note: April 25, 2001
PROMISE TO PAY. DICON FIBEROPTICS, INC., a California corporation ("Borrower")
promises to pay to FIRST BANK & TRUST ("Lender"), or order, the principal amount
of EIGHT MILLION EIGHT HUNDRED THIRTY-TWO THOUSAND THREE HUNDRED SIXTEEN AND
NO/100 Dollars ($8,832,316.00) or so much as may be outstanding, together with
interest on any principal amounts remaining unpaid from time to time from the
date of this Note until payment in full, to be calculated as set forth below.
VARIABLE INTEREST RATE. Subject to Borrower exercising the Fixed Rate Option
provided herein, the interest rate on this Note is subject to change from time
to time based on changes in an independent index which is the WALL STREET
JOURNAL'S PRIME LENDING RATE (the "INDEX"). The Index is not necessarily the
lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. The interest rate change will not occur more often than each
DAY. Borrower understands that Lender may make loans based on other rates as
well. THE INDEX CURRENTLY IS SEVEN AND ONE HALF PERCENT (7.50%). THE INTEREST
RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A
RATE OF ONE HALF OF ONE PERCENTAGE POINT (00.50%) OVER THE INDEX, RESULTING IN
AN INITIAL RATE OF EIGHT PERCENT (8.00%). Interest will accrue daily on the
outstanding principal balance on a 365/360 basis; that is, by applying the ratio
of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PAYMENT. Principal shall be payable in sixty (60) monthly installments
commencing on MAY 31, 2001, and on the last day of each month thereafter. The
monthly principal installments shall be established at the amount necessary to
fully amortize the Advances in sixty (60) equal monthly installments. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest commencing on MAY 31, 2001, and on the last day of each month
thereafter. Should interest not be timely paid, it shall become a part of the
principal and thereafter bear interest as provided herein. The entire amount of
unpaid principal and accrued but unpaid interest will be immediately due and
payable on APRIL 30, 2006 (the "MATURITY DATE") Unless otherwise agreed or
required by applicable law, payments will be applied first to any unpaid
collection costs and any late charges, then to any unpaid interest, and any
remaining amount to principal. Both principal and interest are payable in lawful
money of the United States of America in same day funds at Lender's address
shown above or at such other place as Lender may designate in writing. Whenever
any payment to be made under this Note is stated to be due on a day other than a
Business Day (meaning any day other than Saturday, Sunday, or public holiday or
the equivalent for banks generally under the laws of California), that payment
may be made on the next succeeding Business Day, and the extension of time will
in that case be included in the computation of payment of interest.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Unless agreed to by Lender in writing,
early payments will be applied to principal and will not relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Borrower agrees not to send Lender payments marked "paid in full," "without
recourse," or similar
1
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender's rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that indicates
that the payment constitutes "payment in full" of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a
disputed amount must be mailed or delivered to: FIRST BANK & TRUST, Corporate
Banking Group, 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000.
ANNUAL FIXED RATE OPTION. Provided that no Event of Default exists and has not
been cured, and subject to the provisions of the section of this Note entitle
"Interest After Default", effective APRIL 30, 2001, and annually on APRIL 30 of
each year thereafter, Borrower may, at Borrower's option, elect to fix the
interest rate on the Equipment Loan for a twelve month period at a rate of
one-half of one percentage point (00.50%) per annum in excess of the Index at
that date (the "Fixed Rate Option"). Notice of Borrower's election of the Fixed
Rate Option must be given to Lender on or before APRIL 25 of each year in order
to elect the Fixed Rate Option for the next twelve month period. Unless Borrower
elects the Fixed Rate Option, effective APRIL 30 of each year, the interest
accrue for the succeeding twelve months at the variable interest rate as
provided herein above.
DEPOSIT INCENTIVE RATE. Provide that Borrower has not elected the Fixed Rate
Option, and subject to the provisions of the section of this Note entitled
"Interest After Default", commencing May 31, 2001, and on the last day of each
month thereafter, and provided that no Event of Default exists and remains
uncured, Lender will reduce the interest rate to be otherwise charged under the
Equipment Loan for the next month as follows: (i) by one-quarter of one percent
(00.25%) per annum, when the daily collected balances in Borrower's
demand deposit accounts with Lender have averaged over the preceding ninety (90)
days in excess of $1,000,000, or (ii) by one half of one percent per annum
(00.50%), when the daily collected balances in Borrower's demand deposit
accounts with Lender have averaged over the preceding ninety (90) days in excess
of $2,000,000.
LOAN AGREEMENT. In addition to all other terms and conditions set forth herein,
the Note is subject to and governed by that certain Equipment Loan and Security
Agreement of even date herewith (the "LOAN AGREEMENT"). All capitalized terms
not defined herein shall have the meaning ascribed in the Loan Agreement.
COLLATERAL. This Note is secured by the Collateral set forth in the Loan
Agreement.
LINE OF CREDIT. This Note evidences a non-revolving line of credit in that
advances made under this Note may not be re-borrowed once repaid. Advances under
this Note shall be requested in writing by Borrower as provided in the Loan
Agreement. The unpaid principal balance owing on this Note at any time may be
evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. If Lender has notified Borrower of an Event
of Default under Section 14.8 of the Loan Agreement and if the Event of Default
has not been cured within the time required under Section 14.8 of the Loan
Agreement, Lender, without notice to Borrower, may terminate any obligation to
make any further Advance under this Note.
LATE CHARGE. If any payment required to be made by Borrower under this Note has
not been made when due, then, on the date ten (10) days after the date the
payment was due, a late charge by way of damages will be immediately due.
Borrower recognizes that default by it in making the payments agreed to be paid
when due will result in Lender incurring additional expense in servicing the
loan (including processing and accounting expenses and other administrative
costs and expenses). Borrower agrees that if for any reason it fails to pay when
due any amount due under this Note, Lender will be entitled to damages for the
detriment caused, but that it is extremely difficult and impractical to
ascertain the extent of the damages. Borrower therefore agrees that an amount
equal to five percent (5.000%) of the payment the undersigned fails to pay
within ten (10) days after the date it is due, or $5.00, which ever is greater,
is a reasonable estimate of the damages to Lender, and the undersigned agrees to
pay that on demand for each failure to so pay within ten (10) days. Acceptance
of any late charge will not constitute a waiver of default with respect to the
overdue payment, and will not prevent Lender from exercising any other rights
available under this Note or the Related Documents.
DEFAULT. The words "Event of Default" shall mean any of the Events of Default
set forth in Section 14 of the Loan Agreement.
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INTEREST AFTER DEFAULT. Notwithstanding the sections of this Note entitled
"Annual Fixed Rate Option" and "Deposit Incentive Rate", if any Event of Default
occurs and remains uncured beyond any period allowed to cure such Event of
Default as provided in the Loan Agreement, Lender, at Lender's option, may
increase the interest rate under this Note to four percentage points (4.000%)
over the interest rate to be otherwise charged under this Note.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
LENDER'S RIGHTS. If Lender has notified Borrower of an Event of Default under
Section 14.8 of the Loan Agreement and if the Event of Default has not been
cured within the time required under Section 14.8 of the Loan Agreement, Lender
shall have all rights and remedies set forth in the Loan Agreement, including
but not limited to the right to declare the entire unpaid principal balance on
this Note and all accrued unpaid interest immediately due and payable.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' fees and Lender's legal expenses,
including expert witness and consultant fees and related expenses, incurred in
connection with the enforcement of this Note. Lender may pay someone else to
help enforce this Note, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Borrower also shall pay all court costs and such additional
fees as may be directed by the court. In any legal action or proceeding brought
by either party to enforce or interpret this Note, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and costs.
APPLICABLE LAW. This Note has been delivered to Lender and accepted by Lender in
the State of California. If there is a lawsuit, Borrower and Lender agree to
submit to the jurisdiction of the courts of Contra Costa County, State of
California. This Note shall be governed by and construed in accordance with the
laws of the State of California.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's successors and assigns, and shall inure to the benefit of Lender
and Lender's successors and assigns. Borrower shall not, however, have the right
to assign Borrower's rights or obligations under this Note or any interest
therein, without the prior written consent of Lender.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower understands and agrees
that, with or without notice to Borrower, Lender may with respect to Borrower
(a) waive, subordinate, fail or decide not to perfect, and release any security,
with or without the substitution of new collateral; (b) apply such security and
direct the order or manner of sale thereof, including without limitation, any
non-judicial sale permitted by the terms of the Loan Agreement, as Lender in its
discretion may determine; and (c) determine how, when and what application of
payments and credits shall be made on any indebtedness. Borrower, to the extent
allowed by law, waives any applicable statute of limitations, presentment,
demand for payment, and notice of dishonor.
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BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS PROMISSORY NOTE AND
BORROWER AGREES TO ITS TERMS.
THIS PROMISSORY NOTE IS DATED AS OF THE DATE FIRST SET FORTH ABOVE.
BORROWER: DICON FIBEROPTICS, INC., a California corporation
By: /s/ HO-XXXXX XXX
------------------------------------
Ho-Xxxxx Xxx, Ph.D., President & CEO
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