LOAN AND SECURITY AGREEMENT
Exhibit
10.1
THIS
LOAN AND SECURITY AGREEMENT
(this
“Agreement”)
dated
as of the Effective Date between SILICON
VALLEY BANK,
a
California corporation (“Bank”),
and
GPS
INDUSTRIES, INC.,
a
Nevada corporation (“Borrower”),
provides the terms on which Bank shall lend to Borrower and Borrower shall
repay
Bank. The parties agree as follows:
1.
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ACCOUNTING
AND OTHER TERMS
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Accounting
terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. Capitalized
terms
not otherwise defined in this Agreement shall have the meanings set forth
in
Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such
terms
are defined therein.
2.
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LOAN
AND TERMS OF PAYMENT
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2.1 Promise
to Pay. Borrower
hereby unconditionally promises to pay Bank the outstanding principal amount
of
all Credit Extensions and accrued and unpaid interest thereon as and when
due in
accordance with this Agreement.
2.1.1 Revolving
Advances.
(a) Availability.
Subject
to the terms and conditions of this Agreement, Bank shall make Advances not
exceeding the Availability Amount. Amounts borrowed hereunder may be repaid
and,
prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable
terms and conditions precedent herein.
(b) Termination:
Repayment.
The
Revolving Line terminates on die Revolving Line Maturity Date, when the
principal amount of all Advances, the unpaid interest thereon, and all other
Obligations relating to the Revolving Line shall be immediately due and
payable.
2.2 Overadvances.
If, at
any time, the outstanding principal amount of any Advances exceeds the lesser
of
either the Revolving Line or the Borrowing Base, Borrower shall immediately
pay
to Bank in cash such excess.
2.3 Payment
of Interest on the Credit Extensions.
(a) Interest
Rate.
Subject
to Section 2.3(b), the principal amount outstanding under the Revolving
Line shall accrue interest at a floating per annum rate equal to greater
of
(a) one percent (1.0%) above the Prime Rate, or (b) six percent
(6.0%), which interest shall be payable monthly in accordance with
Section 2.3(f) below.
(b) Default
Rate.
After
an Event of Default, Obligations accrue interest at the Default Rate, The
Default Rate is, at the Bank’s option, (i) the Maximum Lawful Rate, if the
Maximum Lawful rate is established by applicable law, (ii) the interest
rate applicable immediately prior to the occurrence of the Event of Default
plus
five percent (5.00%), if no Maximum Lawful Rate law has been established
by
applicable law; (iii) eighteen percent (18.00%) per annum; or
(iv) such lesser rate of interest as Bank in its sole discretion may choose
to charge; but in no event more than the Maximum Lawful Rate. Bank will not
compute the interest in a manner that would cause Bank to contract for, charge
or receive interest that would exceed the Maximum Lawful Rate or the Maximum
Lawful Amount. As used herein, “Maximum
Lawful Rate”
is
the
maximum rate of interest, and the term “Maximum
Lawful Amount”
means
die maximum amount of interest that is permissible under applicable state
of
federal laws for the type of loan evidenced by the Loan Documents. If the
Maximum Lawful Rate is increased by statute of other governmental action
after
the Effective Date, then the new Maximum Lawful Rate will be applicable to
the
payments from the date of the effective date of the rate change, unless
otherwise prohibited by law.
(i) Spreading
of Interest.
Due to
irregular periodic balances of principal, (he variable nature of the interest
rate, or prepayment, the total interest that will accrue under this Agreement
cannot be determined in advance. Bank does not intend to contract for, charge
or
receive more than the Maximum Lawful Rate or Maximum Lawful Amount permitted
by
applicable state or federal law, and to prevent such an occurrence Bank and
Borrower agree that all amounts of interest, whenever contracted for, charged
or
received by Bank, with respect to the Obligations, will be spread, prorated
or
allocated over the full period of time the Obligations are unpaid, including
the
period of any renewal or extension thereof. If the maturity of the Obligations
is accelerated for any reason whether as a result of an Event of Default
or
otherwise prior to the full stated term, the total amount of interest contracted
for, charged or received to the time of such demand shall be spread, prorated
or
allocated along with any interest thereafter accruing over the full period
of
time that the Obligations thereafter remain unpaid for the purpose of
determining if such interest exceeds the Maximum Lawful Amount.
(ii) Excess
Interest.
At
maturity (whether by acceleration or otherwise) or on earlier final payment
of
the Obligations, Bank shall compute the total amount of interest that has
been
contracted for, charged or received by Bank or payable by Borrower hereunder
and
compare such amount to the Maximum Lawful Amount that could have been contracted
for, charged or received by Bank. If such computation reflects that the total
amount of interest that has been contracted for, charged, received by Bank,
or
payable by Borrower exceeds the Maximum Lawful Amount, then Bank shall apply
such excess to the reduction of the principal balance, and any such excess
remaining thereafter shall be refunded to Borrower. This provision concerning
the crediting or refund of excess interest shall control and take precedence
over all other agreements between Borrower and Bank so that under no
circumstances shall the total interest contracted for, charged or received
by
Bank exceed the Maximum Lawful Amount.
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(c) Adjustment
to Interest Rate.
Changes
to the interest rate of any Credit Extension based on changes to the Prime
Rate
shall be effective on the effective date of any change to the Prime Rate
and to
the extent of any such change.
(d) 360-Day
Year.
Interest shall be computed on the basis of a 360’day year for the actual number
of days elapsed.
(e) Debit
of Accounts.
Bank
may debit any of Borrower’s deposit accounts, including the Designated Deposit
Account, for principal and interest payments or any other amounts Borrower
owes
Bank when due. These debits shall not constitute a set-off.
(f) Payments.
Unless
otherwise provided, interest is payable monthly on the first calendar day
of
each month. Payments of principal and/or interest received after 12:00 p.
m.
Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day,
the
payment is due me next Business Day and additional fees or interest, as
applicable, shall continue to accrue.
2.4 Fees.
Borrower
shall pay to Bank:
2.4.1 Commitment
Fee.
A fully
earned, non-refundable commitment fee of $7,500, on the Effective Date and
on
each anniversary of the Effective Date; and
2.4.2 Bank
Expenses.
All
Bank Expenses (including reasonable attorneys’ fees and expenses, plus expenses,
for documentation and negotiation of this Agreement not to exceed $7,500)
incurred through and after the Effective Date, when due.
2.5 Interest
on Pledged CD; Payment of Interest on Pledged CD.
Each
Pledged CD shall bear interest at the Pledged CD Rate. Xxxxxx shall specify
the
initial CD Interest Period applicable to the Pledged CDs in connection with
the
notice of delivery of Pledged CD in the form of Schedule A attached hereto.
Thereafter, Xxxxxx shall notify Bank not less than five (5) Business Days
prior to the end of each CD Interest Period of the duration of the subsequent
CD
Interest Period with respect to such Pledged CD.
3.
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CONDITIONS
OF LOANS
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3.1 Conditions
Precedent to Initial Credit Extension.
Bank’s
obligation to make the initial Credit Extension is subject to the condition
precedent that Borrower shall consent to or shall have delivered, in form
and
substance satisfactory to Bank, such documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate, including,
without limitation:
(a) duly
executed original signatures to the Loan Documents to which it is a
party;
(b) the
Pledged CD(s) whose aggregate Value shall be equal to or greater than the
Minimum Collateral Value
(c) its
Operating Documents and a Certificate of Existence and Good Standing certified
by the Secretary of State of the State of Nevada as of a date no earlier
than
thirty (30) days prior to the Effective Date;
(d) Xxxxxx’x
Operating Documents and a Certificate of Existence and Good Standing certified
by the Secretary of State of the State of Pennsylvania as of a date no earlier
than thirty (30) days prior to the Effective Date;
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(e) duly
executed original signatures to the completed Borrowing Resolutions for
Borrower;
(f) duly
executed original signatures to the completed Borrowing Resolutions for
Xxxxxx;
(g) certified
copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;
(h) the
Perfection Certificate executed by Borrower;
(i) the
duly
executed original signatures to the Guaranty;
(j) the
insurance policies and/or endorsements required pursuant to Section 6.5
hereof; and
(k) payment
of the fees and Bank Expenses then due as specified in Section 2.4
hereof.
3.2 Conditions
Precedent to all Credit Extensions.
Bank’s
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) except
as
otherwise provided in Section 3.4(a), timely receipt of an executed
Payment/Advance Form;
(b) the
representations and warranties in Section 5 shall be true in all material
respects on the date of the Payment/Advance Form and on the Funding Date
of each
Credit Extension; provided, however, that such materiality qualifier shall
not
be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof; and provided, further that
those
representations and warranties expressly referring to a specific date shall
be
true, accurate and complete in all material respects as of such date, and
no
Event of Default shall have occurred and be continuing or result from the
Credit
Extension. Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties in Section 5 remain true
in
all material respects; provided, however, that such materiality qualifier
shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific
date
shall be true, accurate and complete in all material respects as of such
date;
and
(c) in
Bank’s
sole discretion, there has not been any material impairment in the general
affairs, management, results of operation, financial condition or the prospect
of repayment of the Obligations, or there has not been any material adverse
deviation by Borrower from the most recent business plan of Borrower presented
to and accepted by Bank.
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3.3 Covenant
to Deliver.
(a) Borrower
agrees to deliver to Bank each item required to be delivered to Bank under
this
Agreement as a condition to any Credit Extension. Borrower expressly agrees
that
a Credit Extension made prior to the receipt by Bank of any such item shall
not
constitute a waiver by Bank of Borrower’s obligation to deliver such item, and
any such Credit Extension in die absence of a required item shall be made
in
Bank’s sole discretion.
(b) As
soon
as possible and in any event within thirty (30) days of the Effective Date,
Borrower shall deliver to Bank (i) Borrower’s financial projections, as
approved by Borrower’s board of directors, for calendar year 2008, and
(ii) a Certificate of Existence and Authorization to Transact Business in
Texas, each certified by the Secretary of State of the State of Texas, and
a
Certificate of Good Standing, certified by the Comptroller of the State of
Texas.
3.4 Procedures
for Borrowing.
Subject
to the prior satisfaction of all other applicable conditions to the making
of an
Advance set forth in this Agreement, to obtain an Advance, Borrower shall
notify
Bank (which notice shall be irrevocable) by electronic mail, facsimile, or
telephone by 12:00 p.m. Pacific time on the Funding Date of the Advance.
Together with any such electronic or facsimile notification, Borrower shall
deliver to Bank by electronic mail or facsimile a completed Payment/Advance
Form
executed by a Responsible Officer or his or her designee. Bank may rely on
any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Bank shall credit Advances to the Designated Deposit Account.
Bank
may make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due.
4.
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CREATION
OF SECURITY INTEREST
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4.1 Grant
of Security Interest.
Borrower
hereby grants Bank, to secure the payment and performance in foil of all
of the
Obligations, a continuing security interest in, and pledges to Bank, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof. Borrower represents, warrants,
and covenants that the security interest granted herein is and shall at all
times continue to be a first priority perfected security interest in the
Collateral (subject only to Permitted Liens that may have superior priority
to
Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort
claim, Borrower shall promptly notify Bank in a writing signed by Borrower
of
the general details thereof and grant to Bank in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance reasonably satisfactory
to Bank.
If
this
Agreement is terminated. Bank’s Lien in the Collateral shall continue until the
Obligations (other man inchoate indemnity obligations) are repaid in full
in
cash. Upon payment in full in cash of the Obligations and at such time as
Bank’s
obligation to make Credit Extensions has terminated. Bank shall, at Borrower’s
sole cost and expense, promptly release its Liens in the Collateral and all
rights therein shall revert to Borrower.
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4.2 Authorization
to File Financing Statements.
Borrower
hereby authorizes Bank to file financing statements, without notice to Borrower,
with all appropriate jurisdictions to perfect or protect Bank’s interest or
rights hereunder, including a notice that any disposition of the Collateral
(other than pursuant to the terms hereof), by either Borrower or any other
Person, shall be deemed to violate the rights of Bank under the Code. Such
financing statements may indicate the Collateral as “all
assets of the Debtor”
or
words of similar effect, or as being of an equal or lesser scope, or with
greater detail, all in Bank’s discretion.
5.
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REPRESENTATIONS
AND WARRANTIES
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Borrower
represents and warrants as follows:
5.1 Due
Organization, Authorization; Power and Authority.
Borrower
is duly existing and in good standing in its jurisdiction of formation and
is
qualified and licensed to do business and is in good standing in any
jurisdiction (or has promptly applied for qualification when and where required)
in which the conduct of its business or its ownership of property requires
that
it be qualified except where the failure to do so could not reasonably be
expected to have a material adverse effect on Borrower’s business. In connection
with this Agreement, Borrower has delivered to Bank a completed certificate
signed by Borrower, entitled “Perfection
Certificate”.
Borrower represents and warrants to Bank that (a) Borrower’s exact legal
name is that indicated on the Perfection Certificate and on the signature
page
hereof, (b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower’s place of business, or, if more than
one, its chief executive office as well as Borrower’s mailing address (if
different . than its chief executive office); (e) Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction
of formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on
the Perfection Certificate pertaining to Borrower and each of its Subsidiaries
is accurate and complete (it being understood and agreed that Borrower may
from
time to time update certain information in the Perfection Certificate after
me
Effective Date to the extent permitted by one or more specific provisions
in
this Agreement). If Borrower is not now a Registered Organization but later
becomes one, Borrower shall promptly notify Bank of such occurrence and provide
Bank with Borrower’s organizational identification number.
The
execution, delivery and performance by Borrower of the Loan Documents to
which
it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority
by
which Borrower or any its Subsidiaries or any of their property or assets
may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and
are in
fall force and effect or (v) constitute an event of default under any
material agreement by which Borrower is bound. Borrower is not in default
under
any agreement to which it is a party or by which it is bound in which the
default could have a material adverse effect on Borrower’s
business,
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5.2 Collateral.
Borrower
has good title to, has rights in, and the power to transfer each item of
the
Collateral upon which it purports to xxxxx x Xxxx hereunder, free and clear
of
any and all Liens except Permitted Liens. Borrower has no deposit accounts
other
than the deposit accounts with Bank, the deposit accounts, if any, described
in
the Perfection Certificate delivered to Bank in connection herewith, or of
which
Borrower has given Bank notice and taken such actions as are necessary to
give
Bank a perfected security interest therein, The Accounts are bona fide, existing
obligations of the Account Debtors.
The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than
as
provided in the Perfection Certificate or as permitted pursuant to
Section 7.2. In the event that Borrower, after the date hereof, intends to
store or otherwise deliver any portion of me Collateral to a bailee, then
Borrower will first receive the written consent of Bank and such bailee must
execute and deliver a bailee agreement in form and substance satisfactory
to
Bank in its sole discretion,
All
Inventory is in all material respects of good and marketable quality, free
from
material defects other than that Inventory that is held for refurbishment
or
repair.
Borrower
is the sole owner of its intellectual property, except for non-exclusive
licenses granted to its customers in the ordinary course of business. Each
patent is valid and enforceable, and no part of the intellectual property
has
been judged invalid or unenforceable, in whole or in part, and to the best
of
Borrower’s knowledge, no claim has been made (other than as disclosed in the
Perfection Certificate) that any part of the intellectual property violates
the
rights of any third party except to the extent such claim could not reasonably
be expected to have a material adverse effect on Borrower’s business. Except as
noted on the Perfection Certificate, Borrower is not a party to, nor is bound
by, any material license or other agreement with respect to which Borrower
is
the licensee (a) that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower’s interest in such license or agreement
or any other property, or (b) for which a default under or termination of
could interfere with the Bank’s right to sell any Collateral. Borrower shall
provide written notice to Bank within ten (10) days of entering or becoming
bound by any such license or agreement (other than over-the-counter software
that is commercially available to the public). Borrower shall take such steps
as
Bank requests to obtain the consent of, or waiver by, any person whose consent
or waiver is necessary for (x) all such licenses or agreements to be deemed
“Collateral”
and
for
Bank to have a security interest in it that might otherwise be restricted
or
prohibited by law or by the terms of any such license or agreement, whether
now
existing or entered into in the future, and (y) Bank to have the ability in
the event of a liquidation of any Collateral to dispose of such Collateral
in
accordance with Bank’s rights and remedies under this Agreement and the other
Loan Documents.
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5.3 Accounts
Receivable; Inventory.
For any
Eligible Account in any Borrowing Base Certificate, all statements made and
all
unpaid balances appearing in all invoices, instruments and other documents
evidencing such Eligible Accounts are and shall be true and correct and all
such
invoices, instruments and other documents, and all of Borrower’s Books are
genuine and in all respects what they purport to be. Whether or not an Event
of
Default has occurred and is continuing. Bank may notify any Account Debtor
owing
Borrower money of Bank’s security interest in such funds and verify the amount
of such Eligible Account. All sales and other transactions underlying or
giving
rise to each Eligible Account shall comply in all material respects with
all
applicable laws and governmental rules and regulations. Borrower has no
knowledge of any actual or imminent Insolvency Proceeding of any Account
Debtor
whose accounts are Eligible Accounts in any Borrowing Base Certificate. To
the
best of Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine,
and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.
5.4 Litigation.
Other
than as disclosed in the perfection Certificate, there are no actions or
proceedings pending or, to the knowledge of the Responsible Officers, threatened
in writing by or against Borrower or any of its Subsidiaries involving more
than
Fifty Thousand Dollars ($50,000).
5.5 No
Material Deviation in Financial Statements.
All
consolidated financial statements for Borrower and any of its Subsidiaries
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.6 Solvency.
The fair
salable value of Borrower’s assets (including goodwill minus disposition costs)
exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.
5.7 Regulatory
Compliance. Borrower is not an “investment company” or a company “controlled” by
an “investment company” under the Investment Company Act of 1940, as amended.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the Federal Reserve Board
of
Governors). Borrower has complied in all material respects with the Federal
Fair
Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding
company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding
Company Act of 2005. Borrower has not violated any laws, ordinances or rules,
the violation of which could reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’
properties or assets has been used by Borrower or any Subsidiary or, to the
best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Government Authorities that are necessary to continue their respective
businesses as currently conducted.
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5.8 Subsidiaries;
Investments.
Borrower
does not own any stock, partnership interest or other equity securities except
for Permitted Investments.
5.9 Tax
Returns and Payments; Pension Contributions.
Borrower
has timely filed all required tax returns and reports, and Borrower has timely
paid all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower. Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to
pay the taxes by appropriate proceedings promptly and diligently instituted
and
conducted, (b) notifies Bank in writing of the commencement of, and any
material development in, me proceedings, (c) posts bonds or takes any other
steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than
a
“Permitted Lien”, Borrower is unaware of any claims or adjustments proposed for
any of Borrower’s prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid all amounts necessary
to
fund all present pension, profit sharing and deferred compensation plans
in
accordance with their terms, and Borrower has not withdrawn from participation
in, and has not permitted partial or complete termination of, or permitted
me
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any liability of Borrower, including
any
liability to the Pension Benefit Guaranty Corporation or its successors or
any
other governmental agency.
5.10 Use
of Proceeds.
Borrower
shall use the proceeds of the Credit Extensions solely as working capital,
and
to fund its general business requirements and not for personal, family,
household or agricultural purposes.
5.11 Full
Disclosure.
No
written representation, warranty or Other statement of Borrower in any
certificate or written statement given to Bank, as of the date such
representation, warranty, or other statement was made, taken together with
all
such written certificates and written statements given to Bank, contains
any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions
are not
viewed as facts and that actual results during the period or periods covered
by
such projections and forecasts may differ from the projected or forecasted
results).
6.
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AFFIRMATIVE
COVENANTS
|
Borrower
shall do all of the following:
6.1 Government
Compliance.
(a) Maintain
its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected
to
have a material adverse effect on Borrower’s business or operations. Borrower
shall comply, and have each Subsidiary comply, with all laws, ordinances
and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower’s business.
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(b) Obtain
all of the Governmental Approvals necessary for the performance by Borrower
of
its obligations under the Loan Documents to which it is a party and the grant
of
a security interest to Bank in all of its property. Borrower shall promptly
provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial
Statements, Reports, Certificates.
(a) Deliver
to Bank: (i) as soon as available, but no later than thirty (30) days after
the last day of each month, a company prepared consolidated and consolidating
balance sheet and income statement covering Borrower’s and each of its
Subsidiary’s operations for such month certified by a Responsible Officer and in
a form acceptable to Bank; (ii) as soon as available, but no later than one
hundred eighty (180) days after the last day of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm acceptable to Bank in its
reasonable discretion; (iii) within five (5) days of delivery, copies
of all statements, reports and notices made available to Borrower’s security
holders or to any holders of Subordinated Debt; (iv) in the event that
Borrower becomes subject to the reporting requirements under the Securities
Exchange Act of 1934, as amended, within five (5) days of filing, all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on Borrower’s or another website on the Internet;
(v) a prompt report of any legal actions pending or threatened against
Borrower or any of its Subsidiaries that could result in damages or costs
to
Borrower or any of its Subsidiaries of Fifty Thousand Dollars ($50,000) or
more;
(vi) prompt notice of an event that materially and adversely affects the
value of the intellectual property; (vii) a prompt report of any complaints
filed with the Texas Workforce Commission (“TWC”)
against Borrower in die aggregate of Twenty-Five Thousand Dollars ($25,000)
or
more; and (viii) budgets, sales projections, operating plans and other
financial information reasonably requested by Bank.
(b) Within
thirty (30) days after the last day of each month, deliver to Bank an aged
listings of accounts receivable and accounts payable (by invoice
date).
(c) Allow
Bank to audit Borrower’s Collateral at Borrower’s expense.
6.3 Inventory;
Returns.
Keep all
Inventory in good and marketable condition, free from material defects other
than that Inventory held for refurbishment or repair. Returns and allowances
between Borrower and its Account Debtors shall follow Borrower’s customary
practices as they exist at the Effective Date. Borrower must promptly notify
Bank of all returns, recoveries, disputes and claims that involve more than
Fifty Thousand Dollars ($50,000).
6.4 Taxes;
Pensions.
Timely
file, and require each of its Subsidiaries to timely file, all required tax
returns and reports and timely pay, and require each of its Subsidiaries
to
timely file, all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by Borrower and each of its Subsidiaries, except for
deferred payment of any taxes contested pursuant to the terms of Section
5.9
hereof, and shall deliver to Bank, on demand, appropriate certificates attesting
to such payments, and pay all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their
terms.
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10
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6.5 Insurance.
Keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Bank may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to Bank. All property policies shall have a lender’s loss
payable endorsement showing Bank as lender loss payee and waive subrogation
against Bank, and all liability policies shall show, or have endorsements
showing, Bank as an additional insured. All policies (or the loss payable
and
additional insured endorsements) shall provide that the insurer shall endeavor
to give Bank at least twenty (20) days notice before canceling, amending,
or
declining to renew its policy. At Bank’s request. Borrower shall deliver
certified copies of policies and evidence of all premium payments. If Borrower
fails to obtain insurance as required under this Section 6.5 or to pay any
amount or famish any required proof of payment to third persons and Bank,
Bank
may make all or part of such payment or obtain such insurance policies required
in this Section 6.5, and take any action under the policies Bank deems
prudent
6.6 Operating
Accounts.
(a) Maintain
all of its and all of its Subsidiaries’ primary operating and other deposit
accounts and securities accounts for operations in the United States with
Bank
and Bank’s Affiliates.
(b) For
each
Collateral Account that Borrower at any time maintains, Borrower shall cause
the
applicable bank or financial institution (other than Bank) at or with which
any
Collateral Account is maintained to execute and deliver a Control Agreement
or
other appropriate instrument with respect to such Collateral Account to perfect
Bank’s Lien in such Collateral Account in accordance with the terms hereunder.
The provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s employees and identified to Bank by
Borrower as such.
6.7 Intentionally
Omitted.
6.8 Protection
and Registration of Intellectual Property Rights.
Borrower
shall: (a) protect, defend and maintain the validity and enforceability of
its intellectual property; (b) promptly advise Bank in writing of material
infringements of its intellectual property; and (c) not allow any
intellectual property material to Borrower’s business to be abandoned, forfeited
or dedicated to the public without Bank’s written consent. If Borrower
(i) obtains any patent, registered trademark or servicemark, registered
copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (ii) applies for any
patent or the registration of any trademark or servicemark, then Borrower
shall
immediately provide written notice thereof to Bank and shall execute such
intellectual property security agreements and other documents and take such
other actions as Bank shall request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor
of
Bank in such property. If Borrower decides to register any copyrights or
mask
works in the United States Copyright Office, Borrower shall: (x) provide
Bank with at least fifteen (15) days prior written notice of Borrower’s intent
to register such copyrights or mask works together with a copy of the
application it intends to file with the United States Copyright Office
(excluding exhibits thereto); (y) execute an intellectual property security
agreement and such other documents and take such other actions as Bank may
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Bank in the copyrights or
mask
works intended to be registered with the United States Copyright Office;
and
(z) record such intellectual property security agreement with the United
States Copyright Office contemporaneously with filing the copyright or mask
work
applications) with the United States Copyright Office. Borrower shall promptly
provide to Bank copies of all applications that it files for patents or for
the
registration of trademarks, servicemarks, copyrights or mask works, together
with evidence of the recording of the intellectual property security agreement
necessary for Bank to perfect and maintain a first priority perfected security
interest in such property.
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11
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6.9 Litigation
Cooperation.
From the
date hereof and continuing through the termination of this Agreement, make
available to Bank, without expense to Bank, Borrower and its officers, employees
and agents and Borrower’s books and records, to the extent that Bank may deem
them reasonably necessary to prosecute or defend any third-party suit or
proceeding instituted by or against Bank with respect to any Collateral or
relating to Borrower.
6.10 Further
Assurances.
Execute
any further instruments and take farther action as Bank reasonably requests
to
perfect or continue Bank’s Lien in the Collateral or to effect the purposes of
this Agreement, Deliver to Bank, within five (5) days after the same are
sent or received, copies of all correspondence, reports, documents and oilier
filings with any Governmental Authority regarding compliance with or maintenance
of Governmental Approvals or Requirements of Law or that could reasonably
be
expected to have a material effect on any of the Governmental Approvals or
otherwise on the operations of Borrower or any of its Subsidiaries.
7.
|
NEGATIVE
COVENANTS
|
Borrower
shall not do any of the following without Bank’s prior written
consent:
7.1 Dispositions.
Convey,
sell, lease, transfer or otherwise dispose of (collectively, “Transfer”),
or
permit any of its Subsidiaries to Transfer, all or any part of its business
or
property, except for Transfers (a) of Inventory in the ordinary course of
business; (b) of worn-out or obsolete Equipment that does not constitute
Financed Equipment; and (c) in connection with Permitted Liens and
Permitted Investments.
7.2 Changes
in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower and such Subsidiary,
as applicable, or reasonably related thereto; (b) liquidate or dissolve; or
(c) (i) have a change in management or (ii) enter into any transaction
or series of related transactions in which the stockholders of Borrower who
were
not stockholders immediately prior to the first such transaction own more
than
10% of the voting stock of Borrower immediately after giving effect to such
transaction or related series of such transactions (other than by the sale
of
Borrower’s equity securities in a public offering or to venture capital
investors so long as Borrower identifies to Bank the venture capital investors
prior to the closing of the transaction). Borrower shall not, without at
least
thirty (30) days prior written notice to Bank: (1) add any new offices
or business locations, including warehouses (unless such new offices or business
locations contain less than Ten Thousand Dollars ($10,000) in Borrower’s assets
or property), (2) change its jurisdiction of organization, (3) change
its organizational structure or type, (4) change its legal name, or
(5) change any organizational number (if any) assigned by its jurisdiction
of organization.
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7.3 Mergers
or Acquisitions.
Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with
any
other Person, or acquire, or permit any of its Subsidiaries to acquire, a]!
or
substantially all of the capital stock or property of another Person. A
Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.
7.4 Indebtedness.
Create,
incur, assume, or be liable for any Indebtedness, or permit any Subsidiary
to do
so, other than Permitted Indebtedness.
7.5 Encumbrance.
Create,
incur, allow, or suffer any Lien on any of its property, or assign or convey
any
right to receive income, including the sale of any Accounts, or permit any
of
its Subsidiaries to do so, except for Permitted Liens, permit any Collateral
not
to be subject to the first priority security interest granted
herein.
7.6 Maintenance
of Collateral Accounts.
Maintain
any Collateral Account except pursuant to the terms of Section 6.6.(b)
hereof.
7.7 Distributions;
Investments.
(a) Pay any dividends or make any distribution or payment or redeem, retire
or purchase any capital stock; or (b) directly or indirectly make any
Investment other than Permitted Investments, or permit any of its Subsidiaries
to do so.
7.8 Transactions
with Affiliates.
Directly
or indirectly enter into or permit to exist any material transaction with
any
Affiliate of Borrower, except for transactions that are in the ordinary course
of Borrower’s business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm’s length transaction with
a non-affiliated Person.
7.9 Subordinated
Debt.
(a) Make or permit any payment on any Subordinated Debt, except under the
terms of the subordination, intercreditor, or other similar agreement to
which
such Subordinated Debt is subject, or (b) amend any provision in any
document relating to the Subordinated Debt which would increase the amount
thereof or adversely affect the subordination thereof to Obligations owed
to
Bank.
7.10 Compliance.
Become
an “investment company” or a company controlled by an “investment
company”,
under
the Investment Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System), or use the proceeds of any Credit Extension for that purpose; fail
to
meet the minimum funding requirements of ERISA, permit a Reportable Event
or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with
the
Federal Fair Labor Standards Act or violate any other law or regulation,
if the
violation could reasonably be expected to have a material adverse effect
on
Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation
plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
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8.
|
EVENTS
OF DEFAULT
|
Any
one
of the following shall constitute an event of default (an “Event
of Default”)
under
this Agreement:
8.1 Payment
Default.
Borrower
fails to (a) make any payment of principal or interest on any Credit
Extension on its due date, or (b) pay any other Obligations within
three (3) Business Days after such Obligations are due and payable (which
three (3) day grace period shall not apply to payments due on the Revolving
Line Maturity Date. During the cure period, the failure to cure the payment
default is not an Event of Default (but no Credit Extension will be made
during
the cure period);
8.2 Covenant
Default.
(a) Borrower
fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6,
6.10, or violates any covenant in Section 7; or
(b) Borrower
fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan
Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure the default within ten (10)
days after the occurrence thereof; provided, however, that if the default
cannot
by its nature be cured within the ten (10) day period or cannot after
diligent attempts by Borrower be cured within such ten (10) day period, and
such default is likely to be cured within a reasonable time, then Borrower
shall
have an additional period (which shall not in any case exceed thirty (30)
days)
to attempt to cure such default, and within such reasonable time period the
failure to cure the default shall not be deemed an Event of Default (but
no
Credit Extensions shall be made during such cure period). Grace periods provided
under this section shall not apply, among other things, to financial covenants
or any other covenants set forth in subsection (a) above;
8.3 Material
Adverse Change.
A
Material Adverse Change occurs;
8.4 Attachment;
Levy; Restraint on Business.
(a) The
service of process seeking to attach, by trustee or similar process, any
funds
of Borrower or of any entity under control of Borrower (including a Subsidiary)
on deposit with Bank or any Bank Affiliate, or (ii) a notice of lien, levy,
or assessment is filed against any of Borrower’s assets by any government
agency, and the same under subclauses (i) and (ii) hereof are not, within
ten (10) days after the occurrence thereof, discharged or stayed (whether
through the posting of a bond or otherwise); provided, however, no Credit
Extensions shall be made during any ten (10) day cure period;
and
(b) any
material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver, or (ii) any court order enjoins,
restrains, or prevents Borrower from conducting any part of its
business;
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14
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8.5 Insolvency.
(a) Borrower is unable to pay its debts (including trade debts) as they
mature or otherwise becomes insolvent; (b) Borrower begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and
not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall
be made while of any of the conditions described in clause (a) exist and/or
until any Insolvency Proceeding is dismissed);
8.6 Other
Agreements.
There is
a default in any agreement to which Borrower or any Guarantor is a party
with a
third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness
in an
amount in excess of Fifty Thousand Dollars ($50,000) or that could have a
material adverse effect on Borrower’s or any Guarantor’s business;
8.7 Judgments.
One or
more judgments, orders, or decrees for die payment of money in an amount,
individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000)
(not covered by independent third-party insurance as to which liability has
been
accepted by such insurance carrier) shall be rendered against Borrower and
shall
remain unsatisfied, unvacated, or unstayed for a period of ten (10) days
after the entry thereof (provided that no Credit Extensions will be made
prior
to the satisfaction, vacation, or stay of such judgment, order, or
decree);
8.8 Misrepresentations.
Borrower
or any Person acting for Borrower makes any representation, warranty, or
other
statement now or later in this Agreement, any Loan Document or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan
Document, and such representation, warranty, or other statement is incorrect
in
any material respect when made;
8.9 Subordinated
Debt.
A
default or breach occurs under any agreement between Borrower and any creditor
of Borrower that signed a subordination, intercreditor, or other similar
agreement with Bank, or any creditor that has signed such an agreement with
Bank
breaches any terms of such agreement; or
8.10 Guaranty.
(a) Any guaranty of any Obligations terminates or ceases for any reason to
be in full force and effect; (b) any Guarantor does not perform any
obligation or covenant under any guaranty of the Obligations; (c) any
circumstance described in Sections 8.3, 8,4, 8.5, 8.7, or 8.8 occurs with
respect to any Guarantor, or (d) the death of any Guarantor.
8.11 Governmental
Approvals.
Any
Governmental Approval shall have been (a) revoked, rescinded, suspended,
modified in an adverse manner or not renewed in the ordinary course for a
full
term or (b) subject to any decision by a Governmental Authority that
designates a hearing with respect to any applications for renewal of any
of such
Governmental Approval or that could result in the Governmental Authority
taking
any of the actions described in clause (a) above, and such decision or such
revocation, rescission, suspension, modification or non-renewal (i) has, or
could reasonably be expected to have, a Material Adverse Change, or
(ii) adversely affects the legal qualifications of Borrower or any of its
Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal
could
reasonably be expected to affect the status of or legal qualifications of
Borrower or any of its Subsidiaries to hold any Governmental Approval in
any
other jurisdiction.
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15
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9.
|
BANK’S
RIGHTS AND REMEDIES
|
9.1 Rights
and Remedies.
While an
Event of Default occurs and continues Bank may, without notice or demand,
do any
or all of the following:
(a) declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);
(b) stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;
(c) demand
that Borrower (i) deposits cash with Bank in an amount equal to the
aggregate amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;
(d) settle
or
adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower
money of Bank’s security interest in such funds, and verify the amount of such
account;
(e) make
any
payments and do any acts it considers necessary or reasonable to protect
the
Collateral and/or its security interest in the Collateral. Borrower shall
assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take
and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to
enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;
(f) apply
to
the Obligations any (i) balances and deposits of Borrower it holds, or
(ii) any amount held by Bank owing to or for the credit or the account of
Borrower;
(g) ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge. Borrower’s labels,
patents, copyrights, mask works, rights of use of any name, trade secrets,
trade
names, trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with
Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;
(h) place
a
“hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant
to
any Control Agreement or similar agreements providing control of any
Collateral;
(i) demand
and receive possession of Borrower’s Books; and
(j) exercise
all rights and remedies available to Bank under the Loan Documents or at
law or
equity, including all remedies provided under the Code (including disposal
of
the Collateral pursuant to the terms thereof).
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16
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9.2 Power
of Attorney.
Borrower
hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable
upon the occurrence and during the continuance of an Event of Default, to:
(a) endorse Borrower’s name on any checks or other forms of payment or
security; (b) sign Borrower’s name on any invoice or xxxx of lading for any
Account or drafts against Account Debtors; (c) settle and adjust disputes
and claims about the Accounts directly with Account Debtors, for amounts
and on
terms Bank determines reasonable; (d) make, settle, and adjust all claims
under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits. Borrower hereby appoints
Bank
as its lawful attorney-in-fact to sign Borrower’s name on any documents
necessary to perfect or continue the perfection of Bank’s security interest in
the Collateral regardless of whether an Event of Default has occurred until
all
Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed
and
Bank’s obligation to provide Credit Extensions terminates.
9.3 Protective
Payments.
If
Borrower fails to obtain the insurance called for by Section 6.5 or fails
to pay any premium thereon or fails to pay any other amount which Borrower
is
obligated to pay under this Agreement or any other Loan Document, Bank may
obtain such insurance or make such payment, and all amounts so paid by Bank
are
Bank Expenses and immediately due and payable, bearing interest at the then
highest applicable rate, and secured by the Collateral. Bank will make
reasonable efforts to provide Borrower with notice of Bank obtaining such
insurance at the time it is obtained or within a reasonable time thereafter.
No
payments by Bank are deemed an agreement to make similar payments in the
future
or Bank’s waiver of any Event of Default.
9.4 Application
of Payments and Proceeds.
Borrower
shall have no right to specify the order or the accounts to which Bank shall
allocate or apply any payments required to be made by Borrower to Bank or
otherwise received by Bank under this Agreement when any such allocation
or
application is not specified elsewhere in this Agreement. If an Event of
Default
has occurred and is continuing. Bank may apply any funds in its possession,
whether from Borrower account balances, payments, proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral,
or
otherwise, to the Obligations in such order as Bank shall determine in its
sole
discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency.
If
Bank, in its good faith business judgment, directly or indirectly enters
into a
deferred payment or other credit transaction with any purchaser at any sale
of
Collateral, Bank shall have the option, exercisable at any time, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank
of
cash therefor.
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17
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9.5 Bank’s
Liability for Collateral.
So long
as Bank complies with reasonable banking practices regarding the safekeeping
of
the Collateral in the possession or under the control of Bank, Bank shall
not be
liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier,
warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage
or destruction of the Collateral.
9.6 No
Waiver; Remedies Cumulative.
Bank’s
failure, at any time or times, to require strict performance by Borrower
of any
provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Bank thereafter to demand, strict performance and
compliance herewith or therewith. No waiver hereunder shall be effective
unless
signed by Bank and then is only effective for the specific instance and purpose
for which it is given. Bank’s rights and remedies under this Agreement and the
other Loan Documents are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing
waiver. Bank’s delay in exercising any remedy is not a waiver, election, or
acquiescence.
9.7 Demand
Waiver.
Borrower
waives demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper,
and
guarantees held by Bank on which Borrower is liable.
10.
|
NOTICES
|
All
notices, consents, requests, approvals, demands, or other communication by
any
party to this Agreement or any other Loan Document must be in writing and
shall
be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the
U.S. mail, first class, registered or certified mail return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by electronic
mail or facsimile transmission; (c) one (1) Business Day after deposit with
a reputable overnight courier with all charges prepaid; or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed
to
the party to be notified and sent to the address, facsimile number, or email
address indicated below. Bank or Borrower may change its mailing or electronic
mail address or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Section 10.
If
to Borrower:
|
0000
- 000xx
Xxxxxx
Xxxxx 000
Xxxxxx,
XX, Xxxxxx X0X 0X0
Attn: Chief
Executive Officer
Fax: 000-000-0000
Email: c/o
xxx.xxxxxx@xxxxxxxxxxxxx.xxx
|
If
to Bank:
|
Silicon
Valley Bank
0000
X. XxXxx Xxxxxxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attn: Xxxxxxx
Xxxxxx
Fax: 000-000-0000
Email: xxxxxxx@xxxxxx.xxx
|
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11.
|
CHOICE
OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL
REFERENCE
|
Texas
law
governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Bank each submit to die exclusive jurisdiction of the State
and
Federal courts in Texas; provided, however, that nothing in this Agreement
shall
be deemed to operate to preclude Bank from bringing suit or taking other
legal
action in any other jurisdiction to realize on the Collateral or any other
security for the Obligations, or to enforce a judgment or other court order
in
favor of Bank. Borrower expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court, and Borrower
hereby waives any objection that it may have based upon lack of personal
jurisdiction, improper venue, or forum non conveniens and hereby consents
to the
granting of such legal or equitable relief as is deemed appropriate by such
court. Borrower hereby waives personal service of the summons, complaints,
and
other process issued in such action or suit and agrees that service of such
summons, complaints, and other process may be made by registered or certified
mail addressed to Borrower at the address set forth in Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier
to
occur of Borrower’s actual receipt thereof or three (3) days after deposit
in the U. S. mails, proper postage prepaid.
TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF
OR
BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER
IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12.
|
GENERAL
PROVISIONS
|
12.1 Successors
and Assigns.
This
Agreement binds and is for the benefit of the successors and permitted assigns
of each party, Borrower may not assign this Agreement or any rights or
obligations under it without Bank’s prior written consent (which may be granted
or withheld in Bank’s discretion). Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation
in all
or any part of, or any interest in. Bank’s obligations, rights, and benefits
under this Agreement and the other Loan Documents,
12.2 INDEMNIFICATION.
BORROWER
AGREES TO INDEMNIFY, DEFEND AND HOLD BANK AND ITS DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS. ATTORNEYS, OR ANY OTHER PERSON AFFILIATED WITH OR
REPRESENTING BANK (EACH, AN “INDEMNIFIED
PERSON”)
HARMLESS AGAINST: (A) ALL OBLIGATIONS, DEMANDS, CLAIMS, AND LIABILITIES
(COLLECTIVELY, “CLAIMS”)
ASSERTED BY ANY OTHER PARTY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
BY
THE LOAN DOCUMENTS; AND (B) ALL LOSSES OR BANK EXPENSES INCURRED, OR PAID
BY SUCH INDEMNIFIED PERSON FROM, FOLLOWING, OR ARISING FROM TRANSACTIONS
BETWEEN
BANK AND BORROWER (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES), EXCEPT
FOR CLAIMS AND/OR LOSSES DIRECTLY CAUSED BY SUCH INDEMNIFIED PERSON’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
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12.3 Time
of Essence.
Time is
of the essence for the performance of all Obligations in this
Agreement.
12.4 Severability
of Provisions.
Each
provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.
12.5 Correction
of Loan Documents.
Bank may
correct patent errors and fill in any blanks in this Agreement and the other
Loan Documents consistent with the agreement of the parties.
12.6 Amendments
in Writing; Integration.
All
amendments to this Agreement must be in writing and signed by both Bank and
Borrower. This Agreement and the Loan Documents represent the entire agreement
about this subject matter and supersede prior negotiations or agreements.
AH
prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.
12.7 Counterparts.
This
Agreement may be executed in any number of counterparts and by different
parties
on separate counterparts, each of which, when executed and delivered, are
an
original, and all taken together, constitute one Agreement.
12.8 Survival.
All
covenants, representations and warranties made in this Agreement continue
in
full force until this Agreement has terminated pursuant to its terms and
all
Obligations (other than indicate indemnity obligations and any other obligations
which, by their terms, are to survive the termination of this Agreement)
have
been satisfied. The obligation of Borrower in Section 12.2 to indemnify
Bank shall survive until me statute of limitations with respect to such claim
or
cause of action shall have run.
12.9 Confidentiality.
In
handling any confidential information. Bank shall exercise the same degree
of
care that it exercises for its own proprietary information, but disclosure
of
information may be made: (a) to Bank’s Subsidiaries or Affiliates;
(b) to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however. Bank shall use commercially reasonable efforts
to
obtain such prospective transferee’s or purchaser’s agreement to the terms of
this provision); (c) as required by law, regulation, subpoena, or other
order; (d) to Bank’s regulators or as otherwise required in connection with
Bank’s examination or audit; (e) as Bank considers appropriate in
exercising remedies under the Loan Documents; and (f) to third-party
service providers of Bank so long as such service providers have executed
a
confidentiality agreement with Bank with terms no less restrictive than those
contained herein. Confidential information does not include information that
either; (i) is in the public domain or in Bank’s possession when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank; or
(ii) is disclosed to Bank by a third party, if Bank does not know that the
third party is prohibited from disclosing the information. Notwithstanding
anything contained herein to me contrary, the term “confidential information”
shall not include, and Bank may disclose without limitation of any kind,
any
information with respect to the “tax treatment” and “tax structure” (in each
case within the meaning of Treasury Regulation Section 1.6011-4) of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analysis) that are provided to Bank relating to such
tax
treatment or tax structure.
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20
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Bank
may
use confidential information for any purpose, including, without limitation,
for
the development of client databases, reporting purposes, and market analysis,
so
long as Bank does not disclose Borrower’s identity or the identity of any person
associated with Borrower unless otherwise expressly permitted by this Agreement
The provisions of the immediately preceding sentence shall survive me
termination of this Agreement.
12.10 Attorneys’
Fees, Costs and Expenses.
In any
action or proceeding between Borrower and Bank arising out of or relating
to the
Loan Documents, the prevailing party shall be entitled to recover its reasonable
attorneys’ fees and other costs and expenses incurred, in addition to any other
relief to which it may be entitled.
12.11 Right
of Setoff.
Borrower
hereby grants to Bank a Lien and a right of setoff as security for all
Obligations to Bank, whether now existing or hereafter arising upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of Bank (including a subsidiary of Bank) or in transit to any of
them.
At any time after the occurrence and during the continuance of an Event of
Default, without demand or notice, Bank may setoff the same or any part thereof
and apply the same to any liability or Obligation of Borrower even though
unmatured and regardless of the adequacy of any oilier collateral securing
me
Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
13.
|
DEFINITIONS
|
13.1 Definitions.
As used
in this Agreement, the following terms have the following meanings:
“Account”
is
any
“account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable
and
other sums owing to Borrower.
“Account
Debtor”
is
any
“account debtor” as defined in the Code with such additions to such term as may
hereafter be made.
“Advance”
or
“Advances”
means
an advance (or advances) under the Revolving Line.
“Affiliate”
of
any
Person is a Person that owns or controls directly or indirectly the Person,
any
Person that controls or is controlled by or is under common control with
the
Person, and each of that Person’s senior executive officers, directors, partners
and, for any Person that is a limited liability company, that Person’s managers
and members.
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21
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“Agreement”
is
defined m the preamble hereof.
“Availability
Amount”
is
(a) the lesser of (i) the Revolving Line or (ii) the amount
available under the Borrowing Base minus (b) the outstanding principal
balance of any Advances.
“Bank”
is
defined in the preamble hereof.
“Bank
Expenses”
are
all
audit fees and expenses, costs, and expenses (including reasonable attorneys’
fees and expenses) for preparing, amending, negotiating, administering,
defending and enforcing the Loan Documents (including, without limitation,
those
incurred in connection with appeals or Insolvency Proceedings) or otherwise
incurred with respect to Borrower.
“Borrower”
is
defined in the preamble hereof.
“Borrower’s
Books”
are
all
Borrower’s books and records including ledgers, federal and state tax returns,
records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or
any
equipment containing such information.
“Borrowing
Base”
is
the
lesser of (a) the maximum principal amount guaranteed by Guarantor pursuant
to the Guaranty, plus the amount of the Pledged CD, or
(b) $3,000,000.
“Borrowing
Resolutions”
are,
with respect to any Person, those resolutions substantially in the form attached
hereto as Exhibit C.
“Business
Day”
is
any
day that is not a Saturday, Sunday or a day on which Bank is
closed.
“Cash
Equivalents”
means
(a) marketable direct obligations issued or unconditionally guaranteed by
the United States or any agency or any State thereof having maturities of
not
more than one (1) year from the date of acquisition; (b) commercial
paper maturing no more than one (1) year after its creation and having the
highest rating from either Standard & Poor’s Ratings Group or Xxxxx’x
Investors Service, Inc. ; and (c) Bank’s certificates of deposit issued
maturing no more than one (1) year after issue.
“CD
Interest Determination Date”
shall
mean the date of delivery of a Pledged CD and the date of the commencement
of
each CD Interest Period.
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22
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“CD
Interest Period”
shall
mean the period commencing initially on the date of delivery of a Pledged
CD and
thereafter on the date immediately following the end of any such initial
period
or subsequent period, and ending on the last Business Day of the month ending
approximately 7,30,60,90,180,270 or 360 days thereafter.
“Code”
is
the
Uniform Commercial Code, as me same may, from time to time, be enacted and
in
effect in the State of Texas; provided, that, to the extent that the Code
is
used to define any term herein or in any Loan Document and such term is defined
differently in different Articles or Divisions of the Code, the definition
of
such term contained in Article or Division 9 shall govern; provided farther,
that in the event that, by reason of mandatory provisions of law, any or
all of
the attachment, perfection, or priority of, or remedies with respect to,
Bank’s
Lien on any Collateral is governed by the Uniform Commercial Code in effect
in a
jurisdiction other than the State of Texas, the term “Code”
shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes on the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions
relating to such provisions.
“Collateral”
is
any
and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral
Account”
is
any
Deposit Account, Securities Account, or Commodity Account.
“Commodity
Account”
is
any
“commodity
account”
as
defined in the Code with such additions to such term as may hereafter be
made.
“Compliance
Certificate”
is
that
certain certificate in the form attached hereto as Exhibit D.
“Contingent
Obligation”
is,
for
any Person, any direct or indirect liability, contingent or not, of that
Person
for (a) any indebtedness, lease, dividend, letter of credit or other
obligation of another such as an obligation directly or indirectly guaranteed,
endorsed, co-made, discounted or sold with recourse by that Person, or for
which
that Person is directly or indirectly liable; (b) any obligations for
undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; but “Contingent
Obligation”
does
not include endorsements in the ordinary course of business. The amount of
a
Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
me maximum reasonably anticipated liability for it determined by the Person
in
good faith; but the amount may not exceed the maximum of the obligations
under
any guarantee or other support arrangement
“Control
Agreement”
is
any
control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and Bank pursuant to which Bank obtains control (within
the
meaning of the Code) over such Deposit Account, Securities Account, or Commodity
Account.
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23
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“Credit
Extension”
is
any
Advance or any other extension of credit by Bank for Borrower’s benefit.
“Default
Rate”
is
defined in Section 2.3(b).
“Deposit
Account”
is
any
“deposit
account”
as
defined in me Code with such additions to such term as may hereafter be
made.
“Designated
Deposit Account”
is
Borrower’s deposit account, account number ________, maintained with
Bank.
“Dollars,”
“dollars”
and
“$”
each
mean lawful money of the United States.
“Effective
Date”
is
the
date Bank executes this Agreement as indicated on the signature page
hereof.
“Equipment”
is
all
“equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest
in any
of the foregoing.
“ERISA”
is
the
Employee Retirement Income Security Act of 1974, and its
regulations.
“Event
of Default”
is
defined in Section 8.
“Funding
Date”
is
any
date on which a Credit Extension is made to or on account of Borrower which
shall be a Business Day.
“GAAP”
is
generally accepted accounting principles set forth in die opinions and
pronouncements of the Accounting Principles Board of the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person
as
may be approved by a significant segment of the accounting profession, which
are
applicable to the circumstances as of the date of determination.
“General
Intangibles”
is
all
“general intangibles” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, trademarks, service
marks
and, to the extent permitted under applicable law, any applications therefor,
whether registered or not, any trade secret rights, including any rights
to
unpatented inventions, payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists,
telephone numbers, domain names, claims, income and other tax refunds, security
and other deposits, options to purchase or sell real or personal property,
rights in all litigation presently or hereafter pending (whether in contract,
tort or otherwise), insurance policies (including without limitation key
man,
property damage, and business interruption insurance), payments of insurance
and
rights to payment of any kind.
“Governmental
Approval”
is
any
consent, authorization, approval, order, license, franchise, permit,
certificate, accreditation, registration, filing or notice, of, issued by,
from
or to, or other act by or in respect of, any Governmental
Authority.
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24
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“Governmental
Authority”
is
any
nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, central bank
or
other entity exercising executive, legislative, judicial, taxing, regulatory
or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization.
“Guarantor”
is
any
present or future guarantor of the Obligations, including Xxxxxxx X.
Xxxx.
“Guaranty”
is
that
certain Guaranty Agreement dated of even date herewith by Guarantor to and
for
me benefit of Bank.
“Xxxxxx”
is
Xxxxxx, Inc., a Pennsylvania corporation.
“Indebtedness”
is
(a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and
letters of credit, (b) obligations evidenced by notes, bonds, debentures or
similar instruments, (c) capital lease obligations, and (d) Contingent
Obligations.
“Indemnified
Person”
is
defined in Section 12.2.
“Insolvency
Proceeding”
is
any
proceeding by or against any Person under the United States Bankruptcy Code,
or
any other bankruptcy or insolvency law, including assignments for the benefit
of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
“Interest
Expense”
means
for any fiscal period, interest expense (whether cash or non-cash) determined
in
accordance with GAAP for the relevant period ending on such date, including,
in
any event, interest expense with respect to any Credit Extension and other
Indebtedness of Borrower, including, without limitation or duplication, all
commissions, discounts, or related amortization and other fees and charges
with
respect to letters of credit and bankers’ acceptance financing and the net costs
associated with interest rate swap, cap, and similar arrangements, and the
interest portion of any deferred payment obligation (including leases of
all
types).
“Inventory”
is
all
“inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.
“Investment”
is
any
beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution
to
any Person.
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25
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“Investor
Support”
means
it is the clear intention of Borrower’s investors to continue to fund the
Borrower in the amounts and timeframe necessary to enable Borrower to satisfy
the Obligations as they become due and payable.
“IP
Agreement”
is
that
certain Intellectual Property Security Agreement executed and delivered by
Borrower to Baric dated of even date herewith
“Lien”
is
a
claim, mortgage, deed of trust, levy, charge, pledge, security interest or
other
encumbrance of any land, whether voluntarily incurred or arising by operation
of
law or otherwise against any property,
“Loan
Documents”
are,
collectively, this Agreement, the Perfection Certificate, the IP Agreement,
any
note, or notes or guaranties executed by Borrower or any Guarantor, and any
other present or future agreement between Borrower any Guarantor and/or for
the
benefit of Bank in connection with this Agreement, all as amended, restated,
or
otherwise modified.
“Material
Adverse Change”
is
(a) a material impairment in the perfection or priority of Bank’s Lien in
the Collateral or in the value of such Collateral; (b) a material adverse
change in the business, operations, or condition (financial or otherwise)
of
Borrower; (c) a material impairment of the prospect of repayment of any
portion of the Obligations; or (d) Bank determines, based upon information
available to it and in its reasonable judgment, that there is a reasonable
likelihood that Borrower shall fail to comply with one or more of the financial
covenants in Section 6 during the next succeeding financial reporting
period,
“Minimum
Collateral Value”
means
an aggregate principal amount equal to $1,500,000.
“Obligations”
are
Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under
this
Agreement, the Loan Documents, or otherwise, including, without limitation,
all
obligations relating to letters of credit (including reimbursement obligations
for drawn and undrawn letters of credit), cash management services, and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned
to
Bank, and the performance of Borrower’s duties under the Loan
Documents.
“Operating
Documents”
are,
for any Person, such Person’s formation documents, as certified with the
Secretary of State of such Person’s state of formation on a date that is no
earlier than 30 days prior to the Effective Date, and, (a) if such Person
is a corporation, its bylaws in current form, (b) if such Person is a
limited liability company, its limited liability company agreement (or similar
agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current
amendments or modifications thereto.
“Payment/Advance
Form”
is
that
certain form attached hereto as Exhibit B.
“Perfection
Certificate”
is
defined in Section 5.1.
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26
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“Permitted
Indebtedness”
is:
(a) Borrower’s
Indebtedness to Bank under this Agreement and the other Loan
Documents;
(b) Indebtedness
existing on the Effective Date and shown on the Perfection
Certificate;
(c) Subordinated
Debt;
(d) unsecured
Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Indebtedness
incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;
(f) Indebtedness
secured by Permitted Liens; and
(g) extensions,
refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (f) above, provided that the principal
amount
thereof is not increased or the terms thereof are not modified to impose
more
burdensome terms upon Borrower or its Subsidiary, as the case may
be.
“Permitted
Investments”
are:
(a) Investments
shown on the Perfection Certificate and existing on die Effective
Date;
(b) Cash
Equivalents;
(c) Investments
consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
Borrower;
(d) Investments
consisting of deposit accounts in which Bank has a perfected security
interest;
(e) Investments
accepted in connection with Transfers permitted by Section 7.1;
(f) Investments
of Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed $50,000 in the aggregate in any fiscal
year;
(g) Investments
consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of
Directors;
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27
-
(h) investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in
the
ordinary course of business;
(i) Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary
course of business; provided that this paragraph (i) shall not apply to
Investments of Borrower in any Subsidiary;
“Permitted
Liens”
are:
(a) Liens
existing on the Effective Date and shown on the Perfection Certificate or
arising under this Agreement and the other Loan Documents;
(b) Liens
for
taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, provided that no notice of any such Lien
has
been filed or recorded under the Internal Revenue Code of 1986, as amended,
and
the Treasury Regulations adopted thereunder;
(c) purchase
money Liens (i) on Equipment (other than Financed Equipment) acquired or
held by Borrower incurred for financing the acquisition of the Equipment
securing no more than $50,000 in the aggregate amount outstanding, or
(ii) existing on Equipment (other than Financed Equipment) when acquired,
if the Lien is confined to the property and improvements and the proceeds
of the
Equipment;
(d) Liens
of
carriers, warehousemen, suppliers, or other Persons that are possessory in
nature arising in the ordinary course of business so long as such Liens attach
only to Inventory and which are not delinquent or remain payable without
penalty
or which are being contested in good faith and by appropriate proceedings
which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens
to
secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course
of
business (other than Liens imposed by ERISA);
(f) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured
by
Liens described in (a) through (c), but any extension, renewal or replacement
Lien must be limited to the property encumbered by the existing Lien and
the
principal amount of the indebtedness may not increase;
(g) leases
or
subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other
than
real property or intellectual property) granted in the ordinary course of
Borrower’s business, if the leases, subleases, licenses and sublicenses do not
prohibit granting Bank a security interest;
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28
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(h) non-exclusive
license of intellectual property granted to third parties in the ordinary
course
of business;
(i) Liens
arising from attachments or judgments, orders, or decrees in circumstances
not
constituting an Event of Default under Sections 8.4 and 8.7;
and
(j) Liens
in
favor of other financial institutions arising in connection with Borrower’s
deposit and/or securities accounts held at such institutions, provided that
Bank
has a perfected security interest in the amounts held in such deposit and/or
securities accounts.
“Person”
is
any
individual, sole proprietorship, partnership, limited liability company,
joint
venture, company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
“Pledged
CD”
shall
mean any and all certificates of deposit issued to Borrower by
Bank.
“Pledged
CD Rate”
shall
mean, for any CD Interest Determination Date, Bank’s prevailing commercial rate
in effect on such date
“Prime
Rate”
is
Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.
“Requirement
of Law”
is
as
to any Person, the organizational or governing documents of such Person,
and any
law (statutory or common), treaty, rule or regulation or determination of
an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or
any of its property is subject.
“Responsible
Officer”
is
any
of the Chief Executive Officer, President, Chief Financial Officer and
Controller of Borrower.
“Revolving
Line”
is
an
Advance or Advances in an amount equal to Three Million Dollars
($3,000,000).
“Revolving
Line Maturity Date”
is
February __, 2010.
“Securities
Account”
is
any
“securities account” as defined in the Code with such additions to such term as
may hereafter be made.
“Subordinated
Debt”
is
indebtedness incurred by Borrower subordinated to all of Borrower’s now or
hereafter indebtedness to Bank (pursuant to a subordination, intercreditor,
or
other similar agreement in form and substance satisfactory to Bank entered
into
between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary”
means,
with respect to any Person, any Person of which more than 50.0% of the voting
stock or other equity interests (in the case of Persons other than corporations)
is owned or controlled directly or indirectly by such Person or one or more
of
Affiliates of such Person.
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29
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“Transfer”
is
defined in Section 7.1.
“Value”
shall
mean with respect to any Pledged CD on any date, a dollar value at the face
amount thereof.
THE
WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature
page follows.]
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30
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IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be executed as of the Effective
Date.
BORROWER: | ||
a
Nevada corporation
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|
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By: | ||
Name: | ||
Title: |
BANK: | ||
SILICON
VALLEY BANK
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|
|
|
By: | ||
Name: | ||
Title: | ||
Effective Date: |
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31
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