Exhibit 10.1
REVOLVING LOAN AND SECURITY AGREEMENT
This REVOLVING LOAN AND SECURITY AGREEMENT is entered into as of November
1, 2001 by and among COMERICA BANK-CALIFORNIA ("Bank"), a California banking
corporation and iPRINT TECHNOLOGIES, INC., a Delaware corporation, and WOOD
ALLIANCE, S.P. INC. D/B/A WOOD ASSOCIATES, a California corporation
(individually and collectively, jointly and severally, the "Borrowers").
RECITALS
WHEREAS, Borrowers have requested that Bank enter into certain financing
arrangements with Borrowers pursuant to which Bank may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Bank is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Article 1
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have
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the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
chattel paper, contract rights, documents, general intangibles, instruments, and
all other forms of obligations or rights to payment owing to Borrowers arising
out of the sale, lease, license, assignment, or other disposition of property or
the rendering of services by Borrowers, whether or not earned by performance,
and any and all credit insurance, guaranties, supporting obligations, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrowers and each Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means an Advance under the Revolving Facility.
"Affiliate" means any Person, including any Person who is a director,
officer, partner or manager of such Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, any Borrower or
a Subsidiary; (b) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of any Borrower or any
Subsidiary; or (c) five percent (5%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by any Borrower or a
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Revolving Loan and Security Agreement, as
amended, supplemented, or modified from time to time.
"Base Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as
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its "Base Rate," whether or not such announced rate is the lowest rate available
from Bank.
"Base Rate Advance" means any Advance when and to the extent that the
interest rate therefor is determined by a reference to the Base Rate.
"Borrower's Books" means all of Borrowers' books and records including
ledgers, records indicating, summarizing, or evidencing such Borrower's
properties or assets or liabilities, all information relating to Borrowers'
business operations or financial condition, and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Closing Date" means the date of this Agreement.
"Collateral" means all of the following personal property of Borrowers,
wherever located, and now owned or hereafter acquired: (a) all Accounts; (b) all
inventory; and (c) any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions and all cash and non-cash
proceeds of any of the foregoing, in whatever form (including proceeds in the
form of inventory, equipment or any other form of personal property), including
proceeds of proceeds, insurance proceeds and all claims against third parties
for loss or damage to or destruction of any or all of the foregoing.
"Committed Line" means Ten Million and 00/100 Dollars ($10,000,000.00).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (a)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (b) any obligations with respect to undrawn letters of credit
issued for the account of that Person; and (c) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Debt" means (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under Capital Leases;
(e) current liabilities in respect of unfunded vested benefits under Plans
covered by ERISA; (f) obligations under letters of credit; (g) obligations under
acceptance facilities; (h) all Contingent Obligations, and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person or entity, or otherwise to assure a creditor against loss; and (i)
obligations secured by any Liens, whether or not the obligations have been
assumed.
"EBITDA" means, for any period, the following, each calculated for such
period: (a) Net Income (without adjustment of income and franchise taxes); plus
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(b) Interest Expenses paid or accrued; plus (c) amortization
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and depreciation deducted in determining Net Income; provided, however, that
Borrowers shall be permitted nonrecurring, non-cash charges/write-offs which
will be excluded from the EBITDA calculation so long as Borrowers are in
compliance with the Debt to Effective Tangible Net Worth and Current Ratio
covenants set forth herein before and after the one-time charge.
"Effective Tangible Net Worth" means net worth as determined in
accordance with GAAP consistently applied, increased by Subordinated Debt, if
any, and decreased by the following: patents, licenses, goodwill, subscription
lists, organization expenses, trade receivables converted to notes, money due
from Affiliates (including officers, directors, subsidiaries and commonly held
companies).
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrowers' business that comply with all of Borrowers' representations
and warranties to Bank set forth in Section 7.7; provided, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following: (a) Accounts which remain uncollected for more than
ninety (90) days from invoice date; (b) Accounts due from an account debtor that
has suffered the termination of its business operations or existence, or as to
which a dissolution, insolvency or bankruptcy proceeding has been commenced, any
assignment for the benefit of creditors has been made, or a trustee, receiver or
conservator has been appointed for all or any part of the assets of such account
debtor; (c) Accounts due from an account debtor who is an Affiliate of either
Borrower or affiliated with either Borrower in any manner, including, without
limitation, as stockholder, owner, officer, director, agent or employee; (d)
Accounts with respect to which payment is or may be conditional; (e) Accounts
with respect to which the account debtor is not a resident or citizen of,
located in, or subject to service of process in, the United States, and which
are not either (i) covered by credit insurance in form and amount, and by an
insurer, satisfactory to Bank, (ii) supported by one or more letters of credit
that are assignable by their terms and have been delivered to Bank in an amount,
of a tenor, and issued by a financial institution, acceptable to Bank; or (iii)
that Bank approves on a case by case basis; (f) Accounts due from the United
States of America, including, without limitation, any instrumentality, division,
agency, body or department thereof unless Borrowers have complied with the
requirements of the Assignment of Claims Act of 1940, 31 USC ss. 3727 and 41 USC
ss. 15, and the federal regulations issued thereunder; (g) Accounts commonly
known as "xxxx and hold" or a similar arrangement; (h) Accounts due from an
account debtor as to which twenty five percent (25%) percent or more of the
aggregate dollar amount of all outstanding Accounts owing from such account
debtor remain uncollected for more than ninety (90) days from invoice date; (i)
that portion of Accounts due from an account debtor which is in excess of twenty
five percent (25%) percent of Borrowers' aggregate dollar amount of all
outstanding Eligible Accounts; (j) Accounts as to which Borrowers are or may
become liable to the account debtor for any reason but only to the extent of any
amounts owing to the account debtor; (k) Accounts which are not free of all
liens, encumbrances, charges, rights and interest of any kind, except Liens in
favor of Bank and Permitted Liens; (l) Accounts which are supported or
represented by a promissory note, post-dated check or letter of credit unless
such instrument is actually delivered to Bank; (m) Accounts that are payable in
other than United States Dollars; (n) Accounts which are unsuitable as
collateral, as determined by Bank in the exercise of its reasonable sole
discretion.
"Eligible Inventory" means inventory of Borrower held for sale or lease
in the ordinary course of Borrower's business which is: (a) inventory in which
Bank has a first, priority, perfected security interest; (b) not subject to a
security interest, lien or other encumbrance in favor of any other Person except
Permitted Liens; (c) of good and merchantable quality free from material
defects; (d) owned and in the lawful possession of Borrower; and (e) otherwise
acceptable to Bank in its reasonable sole discretion.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" has the meaning set forth in Article 11.
"Funding Date" means the date that amounts are advanced by Bank under
the Revolving Facility.
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"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America, applied on a consistent basis over
the time period in question as to classification of items and amounts.
"Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Interest Expenses" means, without duplication, for any period, the
following, each calculated for such period: (a) interest expenses deducted in
the determination of Net Income (excluding (i) the amortization of fees and
costs with respect to the transactions contemplated hereunder on the date hereof
which have been capitalized as transaction costs; and (ii) the amortization of
any "original issue discount"; and (iii) interest paid in kind); less (b)
interest income included in the determination of Net Income.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"Letter of Credit" means any commercial or standby letter of credit
issued by Bank at the request of or for the account of any Borrower pursuant to
Section 2.3.
"Letter of Credit Obligations" shall mean at any date of determination,
the sum of (a) the aggregate undrawn amount of all Letters of Credit then
outstanding, (b) the aggregate face amount of all Letters of Credit requested
but not yet issued as of such date; and (c) the aggregate amount of
reimbursement obligations which have not been reimbursed by Borrower as of such
date.
"LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
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100% - LIBOR Reserve Percentage
(a) "Base LIBOR" means the rate per annum determined by Bank at which
deposits for the relevant LIBOR Period would be offered to Bank in the
approximate amount of the relevant LIBOR Advance in the inter-bank LIBOR market
selected by Bank, upon request of Bank at 10:00 a.m. California time, on the day
that is the first day of such LIBOR Period.
(b) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage applicable to all Bank's borrowers during the applicable LIBOR
Period.
(c) "LIBOR Business Day" means a Business Day on which dealings in
Dollar deposits may be carried out in the interbank LIBOR market.
(d) "LIBOR Period" means a period commencing on a Business Day, and
continuing for, in every case, either thirty (30), sixty (60), ninety (90) or
one hundred eighty (180) days, as designated by Borrowers, during which all or a
portion of the outstanding principal balance of the Advances bears interest
determined in relation to LIBOR, provided that: (i) if any LIBOR Period would
end on a day that is not a LIBOR Business Day, then such LIBOR Period shall be
extended to the next succeeding LIBOR Business Day; and (ii) no LIBOR Period
shall extend beyond the Revolving Facility Termination Date.
"LIBOR Advance" means any Advance when and to the extent that the
interest rate therefor is determined by a reference to LIBOR.
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"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the UCC or comparable
law of any jurisdiction to evidence any of the foregoing).
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrowers, and any other agreement entered into between any Borrower
and Bank in connection with this Agreement, all as amended or extended from time
to time.
"Material Adverse Effect" means a material adverse effect on (a) the
business operations or condition (financial or otherwise) of Borrowers and their
Subsidiaries taken as a whole; or (b) the ability of Borrowers to repay the
Obligations or otherwise perform their obligations under the Loan Documents.
"Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof; and (b) returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
"Net Income (Loss)" means, for any period, the net income (or loss) of
Borrowers for such period taken as a single accounting period, determined in
accordance with GAAP; provided, that in determining Net Income (Loss) there
shall be excluded: (a) the income (or loss) of any Person (other than a
Subsidiary of Borrower) in which any Person other than Borrower or any of its
Subsidiaries has a joint interest or partnership interest, except to the extent
of the amount of dividends or other distributions actually paid to Borrower or
any of its Subsidiaries by such Person during such period; (b) the income (or
loss) of any Person other than Borrowers accrued prior to the date such Person
becomes a Subsidiary of Borrowers or is merged into or consolidated with either
Borrower or any of its Subsidiaries, or that Person's assets are acquired by a
Borrower or any of its Subsidiaries; (c) the proceeds of any life insurance
policy; (d) gains and losses from the sale, exchange, transfer or other
disposition of assets not in the ordinary course of business, and related tax
effects in accordance with GAAP; (e) any other extraordinary or non-recurring
gains and losses, and related tax effects in accordance with GAAP; and (f) the
income of any Subsidiary of a Borrower to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or of any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary.
"Obligations" means all present and future obligations owing by
Borrowers to Bank, including but not limited to the Revolving Facility, whether
or not for the payment of money, whether or not evidenced by any note or other
instrument, whether direct or indirect, absolute or contingent, due or to become
due, joint or several, primary or secondary, liquidated or unliquidated, secured
or unsecured, original or renewed or extended, whether arising before, during or
after the commencement of any Insolvency Proceeding in which a Borrower is a
debtor, including but not limited to any obligations arising pursuant to letters
of credit or acceptance transactions, overdrafts, or any other financial
accommodations; and all principal, interest, fees, attorneys' fees and
accountants' fees chargeable to Borrowers or incurred by Bank in connection with
this Agreement and/or the transaction(s) related hereto.
"Permitted Debt" means: (a) Debt of Borrowers in favor of Bank arising
under this Agreement or any other Loan Document; (b) Debt existing on the
Closing Date and disclosed to Bank in writing but no voluntary prepayments
thereof; (c) Subordinated Debt; (d) accounts payable to trade creditors for
goods or services incurred in the ordinary course of business, as presently
conducted, and paid within the specified time, unless contested in good faith
and by appropriate proceedings; and (e) Debt of Borrowers secured by Permitted
Liens.
"Permitted Investment" means: (a) Investments existing on the Closing
Date disclosed to Bank in writing; (b) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(c) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating
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obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc., (d) certificates of deposit maturing no more than one (1) year
from the date of investment therein issued by Bank; (e) Investments in
Subsidiaries not to exceed One Million and 00/100 Dollars ($1,000,000.00) in any
fiscal year; (f) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of account debtors; (g) Investments
consisting of credit extensions to account debtors who are not Affiliates, in
the ordinary course of Borrowers' business; (h) joint ventures and strategic
alliances provided that such Investments do not exceed the aggregate amount of
Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) in any fiscal year.
"Permitted Liens" means the following: (a) Any Liens existing on the
Closing Date and disclosed in Schedule 10.4 or arising under this Agreement or
the other Loan Documents; (b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Bank's security interests; (c) Liens (i) upon or in any equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price (to
include for this purpose, shipping, tax and installation charges financed by the
Person holding the security interest) of such equipment and software of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition and installation of such equipment and related software, or (ii)
existing on such equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment; (d) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (a) through (c) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (e) Liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default;
(f) Liens consisting of leases or subleases and licenses or sublicenses or
licenses in any material respect with the business of Borrowers; (g) Liens
securing claims of materialmen, mechanics, carriers, warehousemen, landlords and
other like Persons imposed without action of such parties, either not delinquent
or being contested in good faith by appropriate proceedings; (h) Liens incurred
or deposits made in the ordinary course of the Borrowers' business in connection
with worker's compensation, unemployment insurance, social security and other
like laws; and (i) other Liens not described above arising in the ordinary
course of business and not having or not reasonably likely to have a Material
Adverse Effect.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Projections" means Borrowers forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, consistent with Borrowers' historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
"Reinvestment Rates" mean the per annum rates of interest equal to one
half of one percent (0.5%) above the rates of interest reasonably determined by
Bank to be in effect not more than seven (7) days prior to the Prepayment Date
in the secondary market for United States Treasury Obligations in amounts and
with maturities which correspond (as closely as possible) to the LIBOR Advance
being prepaid.
"Responsible Officer" means each of the Chairman, President/Chief
Executive Officer, or the Chief Financial Officer/Vice President of Finance and
Accounting.
"Revolving Facility" means the facility under which Borrowers may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Securities Account" means that certain securities account no.
________________ maintained by Borrower at Bank.
"Subordinated Debt" means any debt incurred by Borrowers that is
subordinated to the debt owing by Borrowers to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
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"Subsidiary" means any corporation or partnership in which (a) any
general partnership interest or (b) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrowers, either directly or through an Affiliate.
"Termination Date" means the earlier of (a) acceleration of the
Obligations for any reason under the terms of this Agreement; or (b) the date on
which Bank elects to terminate this Agreement pursuant to the terms herein.
"UCC" means the Uniform Commercial Code as in effect in the State of
California, as the same may be amended from time to time.
"Value" means, as determined by Bank in good faith, with respect to
Inventory, the lower of (a) cost computed on a first in first out basis in
accordance with GAAP, or (b) market value.
1.2 Accounting Terms. All accounting terms not specifically defined herein
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shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the term "financial
statements" shall include the notes and schedules thereto.
1.3 Other Definitional Provisions. References to "Sections", "subsections",
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"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in this Agreement may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments (including any of the Loan Documents) shall be deemed to
include subsequent amendments, assignments, and other modifications thereto,
references to Persons include their respective permitted successors and assigns
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. Terms not specifically defined herein shall have the meanings given
in the UCC.
ARTICLE 2
REVOLVING FACILITY
2.1 Revolving Facility. Subject to and upon the terms and conditions of
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this Agreement, Bank agrees to make Advances to Borrowers (pursuant to Section
2.1 hereof) and issue Letters of Credit (pursuant to Section 2.3 hereof) under a
revolving line of credit (the "Revolving Facility") from time to time in amounts
requested by any Borrower up to an aggregate outstanding principal amount equal
to the lesser of: (a) the Committed Line, less the Letter of Credit Obligations;
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or (b) the Borrowing Base, less the Letter of Credit Obligations. Subject to the
----
terms and conditions of this Agreement, Borrowers may borrow and reborrow under
this Section 2.1, provided that each LIBOR Advance shall be in an amount not
less than Five Hundred Thousand and 00/100 Dollars ($500,000.00).
2.1.1 Borrowing Base. Borrowing Base shall mean an amount equal to the
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sum of: (a) Eighty percent (80%) of the Net Amount of Eligible Accounts; plus
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(b) Fifty percent (50%) of the Value of Eligible Inventory. Notwithstanding
anything to the contrary contained herein, loans made under this subsection
2.1.1(b) shall not exceed the lesser of (i) Two Million and 00/100 Dollars
($2,000,000.00); or (ii) two (2) times the value of the Securities Account.
2.1.2 Reduction of Lending Formula. Bank may, in its discretion, from
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time to time, upon not less than five (5) Business Days prior notice to
Borrowers, (a) reduce the lending formula with respect to Eligible Accounts to
the extent that Bank reasonably determines in good faith that: (i) the dilution
with respect to the Accounts for any period (based on the ratio of (1) the
aggregate amount of reductions in Accounts other than as a result of payments in
cash to (2) the aggregate amount of total sales) has increased in any material
respect or may be
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reasonably anticipated to increase in any material respect above historical
levels, or (ii) the general creditworthiness of account debtors has declined, or
(b) reduce the lending formula with respect to Eligible Inventory to the extent
that Bank reasonably determines that: (i) the number of days of the turnover of
the Inventory for any period has changed in any material respect, or (ii) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (iii) the nature and quality of the inventory has deteriorated.
2.2 Revolving Facility Note. Borrowers' obligation to repay Advances made
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under the Revolving Facility shall be evidenced by a promissory note executed by
Borrowers, substantially in the form of Exhibit A hereto.
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2.3 Letters of Credit.
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2.3.1 Issuance. Subject to, and upon the terms and conditions contained
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herein, at the request of any Borrower, Bank agrees from time to time during the
term of this Agreement to issue Letters of Credit for the account of the
requesting Borrower containing terms and conditions acceptable to Bank,
provided, however that no commercial Letter of Credit shall have an expiration
date beyond one hundred twenty (120) days.
2.3.2 Letter of Credit Sublimits. No Letters of Credit shall be issued
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unless, on the date of the proposed issuance of any Letter of Credit, the
Advances available to Borrowers under the Revolving Facility are equal to one
hundred percent (100%) of the face amount of such Letters of Credit. Except in
Bank's discretion, the amount of all Letter of Credit Obligations shall not at
any time exceed One Million and 00/100 Dollars ($1,000,000.00).
2.3.3 Letter of Credit Reserve. Upon the issuance of a commercial Letter
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of Credit, Bank shall create a reserve under the Revolving Facility in an amount
equal to fifty percent (50%) of the face amount of the commercial Letter of
Credit. The amount of such reserve may be amended by Bank from time to time. The
availability of funds under the Revolving Facility shall be reduced by the
amount of such reserve for so long as such commercial Letter of Credit remains
outstanding.
2.3.4 Letter of Credit Agreement. Each Letter of Credit shall be subject
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to the additional terms and conditions of the Letter of Credit Agreement and
related documents, if any, required by Bank in connection with the issuance
thereof (each, a "Letter of Credit Agreement"). Each draft paid by Bank under a
Letter of Credit shall be deemed an Advance under the Revolving Facility and
shall be repaid by Borrowers in accordance with the terms and conditions of this
Agreement applicable to such Advances; provided, however, that if the Revolving
Facility is not available, for any reason whatsoever, at the time any draft is
paid by Bank, or if Advances in the full amount of the Letter of Credit are not
available under the Revolving Facility at such time due to any limitation on
borrowings set forth herein, then that amount of the Letter of Credit in excess
of any available Advances shall be immediately due and payable, together with
interest thereon, from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrowers, at the rate of interest applicable to
Advances. In such event, Borrowers agree that Bank, at Bank's sole discretion,
may debit any Borrower's deposit account with Bank for the amount of any such
draft.
2.3.5 Letter of Credit Fees. Borrowers shall pay to Bank fees upon the
---------------------
issuance or amendment of each Letter of Credit and upon the payment by Bank of
each draft under any Letter of Credit determined in accordance with Bank's
standard fees and charges in effect at the time any Letter of Credit is issued
or amended or any draft is paid.
2.4 Manner of Borrowing. Borrowers shall give Bank written or telephonic
-------------------
notice (effective upon receipt) of any Advances under this Agreement, at least
two (2) Business Days before each LIBOR Advance, and at least one (1) Business
Day before each Base Rate Advance, specifying: (a) the date of such Advance; (b)
the amount of such Advance; (c) the type of Advance (LIBOR or Base); and (d) in
the case of a LIBOR Advance, the duration of the LIBOR Period applicable
thereto. Each such notification shall be promptly confirmed by a Payment/Advance
Form in substantially the form of Exhibit B hereto. Bank is authorized to make
---------
Advances under this Agreement, based upon instructions received from a
Responsible Officer. Bank shall be entitled to rely on any telephonic notice
8
given by a person who Bank reasonably believes to be a Responsible Officer, and
Borrowers shall indemnify and hold Bank harmless for any damages or loss
suffered by Bank as a result of such reliance. Bank will credit the amount of
Advances made under Section 2.1 to Borrower's deposit account.
2.5 Conversions and Renewals. Borrowers may elect from time to time to
------------------------
convert all or a part of an Advance or to renew all or part of an Advance by
giving Bank at least two (2) Business Days before conversion into a Base Rate
Advance, and at least two (2) Business Days before the conversion into or
renewal of a LIBOR Advance, specifying: (a) the renewal or conversion date; (b)
the amount of the Advance to be converted or renewed; (c) in the case of
conversions, the type of Advance to be converted into (Base or LIBOR); and (d)
in the case of renewals of or a conversion into a LIBOR Advance, the duration of
the LIBOR Period applicable thereto; provided that (i) the minimum amount of
LIBOR Advances renewed or converted shall be Five Hundred Thousand and 00/100
Dollars ($500,000.00); (ii) the minimum principal amount of LIBOR Advances
outstanding after a renewal or conversion shall be Five Hundred Thousand and
00/100 Dollars ($500,000.00); and (iii) LIBOR Advances can be converted only on
the last day of the LIBOR Period for such LIBOR Advance. If Borrowers shall fail
to give Bank the notice as specified above for the renewal or conversion of a
LIBOR Advance prior to the end of the LIBOR Period with respect thereto, such
LIBOR Advance shall automatically be converted into a Base Rate Advance on the
last day of the LIBOR Period for such LIBOR Advance.
2.6 Interest. Borrowers shall pay interest to Bank on the outstanding and
--------
unpaid principal balance of the Advances made under the Revolving Facility at a
rate per annum equal to the interest rates set forth below:
If the Borrower's Base Rate Advances shall bear LIBOR Advances shall bear interest
Quarterly EBITDA is: interest at a floating rate per at a fixed rate per annum equal to:
annum equal to:
Less than $0.00 Base Rate plus 0.50% Not Available
Greater than $0.00 Base Rate LIBOR plus 275 basis points
All interest calculations shall be on a basis of a three hundred and sixty
(360)-day year for the actual days elapsed. Daily interest shall consist of the
product of the outstanding principal balance of the Revolving Facility times the
annual interest rate then in effect divided by 360, then multiplied by the
number of days for which the daily interest calculation is made. Interest paid
for any partial month shall be prorated based on a thirty (30)-day month and the
actual number of day elapsed. Interest shall be compounded monthly.
2.6.1 Adjusted Rate. Any change in the interest rate resulting from a
-------------
change in the Base Rate shall be effective as of the opening of business on the
day on which such change in the Base Rate becomes effective.
2.6.2 Default Rate. From and after the Termination Date, Advances under
------------
the Revolving Facility shall bear interest at a rate equal to three percentage
points (3%) more than the interest rate that would have been applicable
hereunder. Anything herein to the contrary notwithstanding, interest at the
default rate shall be due and payable on demand but shall accrue from the
Termination Date until all Advances are paid in full.
2.7 Repayment Terms. Interest only shall be due and payable on the unpaid
---------------
principal balance of the Revolving Facility, without claim, notice, presentment
or demand, in consecutive monthly installments on the first (1st) day of each
month commencing on the first (1st) day of the first (1st) full calendar month
following the Funding Date.
2.7.1 Application of Payments. Each payment received by Bank shall be
-----------------------
credited as of its due date, without regard to its date of receipt by Bank,
first (1st) to interest accrued and unpaid as of such due date and the remainder
to principal, and interest shall cease upon the principal so credited.
2.8 Overadvances. If the outstanding amount of any component of the
------------
Advances, or the aggregate amount of the outstanding Advances and Letter of
Credit Obligations exceed the amounts available under the
9
lending formulas set forth in Section 2.1, the sublimits for Letters of Credit
set forth in Section 2.3.2 or the Committed Line, as applicable, such event
shall not limit, waive or otherwise affect any rights of Bank in that
circumstance or on any future occasions and Borrower shall, upon demand by Bank,
which may be made at any time or from time to time, immediately repay to Bank
the entire amount of any such excess(es) for which payment is demanded.
2.9 Termination of Revolving Facility. The Revolving Facility shall
---------------------------------
terminate on the Termination Date, at which time all unpaid principal, all
unpaid and accrued interest, and all other amounts due under the Revolving
Facility shall be immediately due and payable.
2.10 Statements. With respect to each Advance, Bank is hereby authorized to
----------
note the date, principal amount, interest rate and LIBOR Period applicable
thereto, and any payments made thereon, on its books and records (either
manually or by electronic entry), which notations shall be conclusive evidence
of the information noted in the absence of manifest error. A failure by Bank to
record any such information shall not impair the Borrowers' liability to make
payment when due. Bank shall render to Borrowers each month a statement setting
forth the balance in Borrowers' loan account maintained by Bank for Borrowers
pursuant to the provisions of this Agreement, including principal, interest,
fees, costs and expenses. Each such statement shall be subject to subsequent
adjustment by Bank but shall, absent manifest errors or omissions, be considered
correct and deemed accepted by Borrowers and conclusively binding upon Borrowers
as an account stated except to the extent that Bank receives a written notice
from Borrowers of any specific exceptions of Borrowers thereto within thirty
(30) days after the date such statement has been mailed by Bank. Until such time
as Bank shall have rendered to Borrowers a written statement as provided above,
the balance in Borrowers' loan account shall be presumptive evidence of the
amounts due and owing to Bank by Borrowers.
2.11 Use of Proceeds. The proceeds of the Advances hereunder shall be used
---------------
by Borrowers for working capital. Borrowers will not, directly or indirectly,
use any part of such proceeds for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock, or for any purpose which violates,
or in inconsistent with, Regulation X of such Board of Governors.
ARTICLE 3
LIBOR PROVISIONS
3.1 Hold Harmless and Indemnification. Borrowers agree to indemnify Bank
---------------------------------
and to hold Bank harmless from, and to reimburse Bank on demand for, all losses
and expenses which Bank sustains or incurs as a result of (a) any payment of a
LIBOR Advance prior to the last day of the LIBOR Period for such LIBOR Advance
for any reason, including termination of this Agreement; (b) any termination of
a LIBOR Period in accordance with this Agreement; or (c) any failure by
Borrowers, for any reason, to borrow any portion of a LIBOR Advance after having
given notice to Bank that it had selected such LIBOR Advance.
3.2 Funding Losses. The indemnification and hold harmless provisions set
--------------
forth in Section 3.1 shall include, without limitation, all losses and expenses
arising from interest and fees that Bank pays to lenders of funds it obtains in
order to fund the loans to Borrowers on the basis of LIBOR and all losses
incurred in liquidating or re-deploying deposits from which such funds were
obtained and loss of profit for the period after termination. A written
statement by Bank to Borrowers of such losses and expenses shall be conclusive
and binding, absent manifest error, for all purposes, provided that Borrowers
shall have the right to request reasonable information in support of such
statement. This obligation shall survive the termination of this Agreement and
the payment of the Obligations.
3.3 Regulatory Developments Or Other Circumstances Relating To Illegality
---------------------------------------------------------------------
or Impracticality of LIBOR. If any Regulatory Development or other circumstance
--------------------------
relating to the interbank Euro-dollar markets shall, at any time, in Bank's
reasonable determination, make it unlawful or impractical for Bank to fund or
maintain, during any LIBOR Period, or to determine or charge interest rates
based upon LIBOR, Bank shall give notice of
10
such circumstances to Borrowers and: (a) in the case of a LIBOR Period in
progress, Borrowers shall, if requested by Bank, promptly pay any interest which
had accrued prior to such request and the date of such request shall be deemed
to be the last day of the term of the LIBOR Period; and (b) no LIBOR Period may
be designated thereafter until Bank determines that such would be practical.
3.4 Additional Costs. Borrowers shall pay to Bank from time to time, upon
----------------
Bank's request, such amounts as Bank determines are reasonably needed to
compensate Bank for any costs it incurred which are attributable to Bank
resulting from Regulatory Developments having made or maintained a LIBOR Advance
or to Bank's obligation to make a LIBOR Advance, or any reduction in any amount
receivable by Bank hereunder with respect to any LIBOR Advance or such
receivable (being herein called "Additional Costs"), resulting from any
Regulatory Developments, which (a) change the basis of taxation of any amounts
payable to Bank hereunder with respect to net income of Bank for any LIBOR
Advance by the jurisdiction where Bank is headquartered or the jurisdiction
where Bank extends the LIBOR Advance; (b) impose or modify any reserve, special
deposit, or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, Bank (including any
LIBOR Advance or any deposits referred to in the definition of LIBOR); or (c)
impose any other condition affecting this Agreement (or any of such extension of
credit or liabilities). Bank shall notify Borrowers of any event occurring after
the date hereof which entitles Bank to compensation pursuant to this Section as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Determinations by Bank for purposes of this
paragraph, shall be conclusive, provided that such determinations are made on a
reasonable basis provided that Borrowers shall have the right to request
reasonable information regarding any Regulatory Development.
3.5 Prepayment. Bank does not have to accept any prepayment of any LIBOR
----------
Advance except as described below or as required under applicable law. Borrowers
may prepay a Base Rate Advance at any time without paying any Prepayment Amount,
as defined below. Borrowers may prepay a LIBOR Advance at any time, as long as
Bank is provided written notice of the prepayment at least five (5) Business
Days prior to the date of prepayment (the "Prepayment Date"). The notice of
prepayment shall contain the following information: (a) the Prepayment Date; and
(b) the amount of principal to be prepaid. On the Prepayment Date, Borrowers
shall pay to Bank, in addition to the other amounts then due, the Prepayment
Amount described below. Bank, in its sole discretion, may accept any prepayment
of principal even if not required to do so under this Agreement and may deduct
from the amount to be applied against the LIBOR Advance the other amounts
required as part of the Prepayment Amount.
3.5.1 The Prepaid Principal Amount (as defined below) will be applied to
the LIBOR Advance as Bank shall determine in its sole discretion.
3.5.2 If Bank exercises its right to accelerate the payment of the
Obligations prior to maturity based upon an Event of Default, Borrower shall pay
to Bank, in addition to the other amounts then due, on the date specified by
Bank as the Prepayment Date, the Prepayment Amount.
3.5.3 Bank's determination of the Prepayment Amount shall be conclusive
in the absence of obvious error or fraud. If requested in writing by Borrowers,
Bank shall provide Borrowers a written statement specifying the Prepayment
Amount.
3.5.4 The following (the "Prepayment Amount") shall be due and payable
in full on the Prepayment Date: (a) if the face amount of the LIBOR Advance
exceeds Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) then the
Prepayment Amount is the sum of: (i) the amount of the principal balance of the
LIBOR Advance which Borrower has elected to prepay or which Bank has required
Borrowers to prepay because of acceleration, as the case may be (the "Prepaid
Principal Amount"); (ii) interest accruing on the Prepaid Principal Amount up
to, but not including, the Prepayment Date; (iii) Five Hundred and 00/100
Dollars ($500.00); plus (iv) the present value, discounted at the Reinvestment
Rates of the positive amount by which (x) the interest Bank would have earned
had the Prepaid Principal Amount not been paid prior to the end of the LIBOR
Period at the applicable interest rate exceeds (y) the interest Bank would earn
by reinvesting the Prepaid Principal Amount at the Reinvestment Rates; or (b) if
the principal amount of the LIBOR Advance being prepaid is Seven Hundred Fifty
11
Thousand and 00/100 Dollars ($750,000.00) or less, then the Prepayment Amount is
the sum of: (i) the amount of the LIBOR Advance which Borrower has elected to
prepay or the LIBOR Advance which Bank has required Borrower to prepay because
of acceleration, as the case may be (the "Prepaid Principal Amount"); (ii)
interest accruing on the Prepaid Principal Amount up to, but not including, the
Prepayment Date; plus (iii) an amount equal to two percent (2%) of the Prepaid
Principal Amount.
3.6 PREPAYMENT AMOUNT. BORROWERS ACKNOWLEDGE AND AGREE THAT: (A) THERE IS
-----------------
NO RIGHT TO PREPAY THE LIBOR ADVANCE IN WHOLE OR IN PART, WITHOUT PAYING THE
PREPAYMENT AMOUNT, EXCEPT AS OTHERWISE REQUIRED UNDER APPLICABLE LAW; (B)
BORROWERS SHALL BE LIABLE FOR PAYMENT OF THE PREPAYMENT AMOUNT IF BANK EXERCISES
ITS RIGHT TO ACCELERATE PAYMENT OF THE OBLIGATIONS, INCLUDING WITHOUT
LIMITATION, ACCELERATION UNDER A DUE-ON-SALE PROVISION; AND (C) BANK HAS MADE
EACH LIBOR ADVANCE IN RELIANCE ON THESE AGREEMENTS.
_______________________________ _________________________________
Borrower's Initials Borrower's Initials
ARTICLE 4
FEES, LOCKBOX ACCOUNT AND CREDITING OF PAYMENTS
4.1 Crediting Payments. Prior to the occurrence of an Event of Default,
------------------
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrowers specify. After the occurrence of
an Event of Default, the receipt by Bank of any wire transfer of funds, check,
or other item of payment shall be immediately applied to conditionally reduce
Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon California time shall be deemed to have been received
by Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
4.2 Lockbox Account. During the continuance of an Event of Default,
---------------
Borrowers shall, at Borrowers' expense and in the manner requested by Bank from
time to time, direct that remittances and all other collections and proceeds of
Accounts and other Collateral be deposited into a non-interest bearing lock box
account maintained in Bank's name solely to be used during the continuance of an
Event of Default ("Lockbox Account"). In connection therewith, Borrowers shall
execute such lockbox agreement ("Lockbox Agreement") as Bank shall require.
During the continuance of an Event of Default, Borrowers shall maintain the
Lockbox Account with Bank, and Borrowers hereby grant to Bank a security
interest in the Lockbox Account into which the proceeds of all Collateral shall
be deposited immediately upon their receipt.
4.2.1 Monies Received. Borrowers and all of its affiliates,
---------------
subsidiaries, shareholders, directors, employees or agents shall collect and
enforce payment of all Collateral, provided, however, that during the
continuance of an Event of Default, Borrowers and all of their affiliates,
subsidiaries, shareholders, directors, employees or agents shall, acting as
trustee for Bank, receive, as the property of Bank, any monies, checks, notes,
drafts, or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Lockbox Account, or remit the same or cause the same to be
remitted, in kind, to Bank and the same shall not be commingled with Borrower's
own funds.
4.3 Closing Fee. Borrowers shall pay to Bank as a closing fee the amount of
-----------
Fifteen Thousand and 00/100 Dollars ($15,000.00), which fee shall be fully
earned as of and payable on the date hereof.
12
4.4 Facility Fee. Borrowers shall pay to Bank annually on each anniversary
------------
of the date hereof a facility fee in an amount equal to one-half of one percent
(0.50%) of the Committed Line while this Agreement is in effect and for so long
thereafter as any of the Advances or Letter of Credit Obligations are
outstanding, which fee shall be fully earned as of and payable in advance on
each anniversary of the date hereof.
ARTICLE 5
CONDITIONS OF LOANS
5.1 Conditions Precedent to Initial Advance. The obligation of Bank to
---------------------------------------
extend any credit contemplated by this Agreement is subject to the fulfillment
to Bank's satisfaction of all of the following conditions:
5.1.1 Approval of Bank Counsel. All legal matters incidental to the
------------------------
extension of credit by Bank shall be satisfactory to counsel of Bank.
5.1.2 Documentation. Bank shall have received, in form and substance
-------------
satisfactory to Bank, each of the following, duly executed by the appropriate
parties and in form and substance acceptable to Bank
(a) this Agreement;
(b) the Revolving Facility Note;
(c) a certificate of the Secretaries of Borrowers with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(d) a certificate of the Responsible Officers of Borrowers regarding
the Merger;
(e) UCC-1 Financing Statement;
(f) the Lockbox Agreement; and
(g) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
5.1.3 Financial Condition. There shall have been no material adverse
-------------------
change, as determined by Bank, in the financial condition or business of
Borrowers, nor any material decline, as determined by Bank, in the market value
of any Collateral required hereunder or a substantial or material portion of the
assets of Borrowers.
5.1.4 Audit. Bank shall have performed and deemed satisfactory the
-----
results of an audit of Borrowers' Accounts and inventory.
5.1.5 Insurance. Borrowers shall have delivered to Bank evidence of
---------
insurance coverage on all Borrowers' property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
5.1.6 Security Interests. Bank shall have received evidence, in form and
------------------
substance satisfactory to Bank, that Bank has valid, perfected, first priority
security interest in and lien upon the Collateral and any other property which
is intended to be security for the Obligations, subject only to Permitted Liens.
5.1.7 Other Documents. Bank shall have received, in form and substance
---------------
satisfactory to Bank, all consents, waivers, acknowledgments and other
agreements from third persons which Bank may reasonably deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Loan Documents, including without limitation,
acknowledgments by lessors, mortgagees and warehousemen of Bank's security
interests in the
13
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Bank access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral.
5.1.8 Merger of Wood Associates. The merger of and Wood Alliance, S.P.
-------------------------
Inc. d/b/a Wood Associates, a California corporation, ("Wood") with and into
Metal Combination Corp., a California corporation (the "Merger") shall have been
consummated in accordance with the terms of the Merger Documents. The agreement
of merger and each schedule, exhibit, document, instrument and certificate
incorporated therein or delivered in connection therewith, are referred to as
the "Merger Documents".
5.1.9 Merger Documents. Bank (a) shall have received true and complete
----------------
executed or conformed copies of the Merger Documents and any amendments thereto;
(b) the Merger Documents shall be in full force and effect and no material term
or condition thereof shall have been amended, modified or waived after the
execution thereof (other than solely to extend the date by which the Merger is
required to occur); (c) neither Wood nor Metal Combination Corp., a California
corporation, shall have failed to perform any material obligation or covenant
required by the Merger Documents to be performed or complied with by it on or
before the date hereof; and (d) Bank shall have received a certificate of
Borrowers, executed by a Responsible Officer, to the effect set forth in clauses
(a), (b) and (c) above.
5.1.10 Wood Line of Credit. Borrowers shall have paid or shall pay with
-------------------
an Advance, Wood's prior line of credit with Bank and all other obligations of
Wood to Bank to a current status satisfactory to Bank.
5.1.11 Lockbox Account. Borrowers shall have opened the Lockbox Account
---------------
with Bank for collection or proceeds of all Collateral during the continuance of
an Event of Default.
5.2 Subsequent Credit. The obligation of Bank to make each extension of
-----------------
credit requested by Borrowers hereunder shall be subject to the fulfillment to
Bank's satisfaction of each of the following conditions:
5.2.1 Compliance. The representations and warranties contained herein
----------
and each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
5.2.2 No Material Adverse Change. There shall have been no material
--------------------------
adverse change, as determined by Bank, in the financial condition or business of
Borrowers, nor any material decline, as determined by Bank, in the market value
of any Collateral required hereunder or a substantial or material portion of the
assets of Borrowers.
5.2.3 Documentation. Bank shall have received all additional documents
-------------
which may be required in connection with such extension of credit.
ARTICLE 6
CREATION OF SECURITY INTEREST
6.1 Grant of Security Interest. In order to secure prompt repayment of any
--------------------------
and all Obligations, and in order to secure prompt performance by Borrowers of
each of its covenants and duties under the Loan Documents, Borrowers grant and
pledge to Bank a continuing security interest in all presently existing and
hereafter acquired or arising Collateral. Except as set forth in Schedule 6.1,
such security interest constitutes a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof.
14
6.2 Perfection of Security Interests. Borrowers authorize Bank to file a
--------------------------------
financing statement describing the Collateral.
6.3 Delivery of Additional Documentation Required. Borrowers shall from
---------------------------------------------
time to time execute and deliver to Bank, at the reasonable request of Bank, all
negotiable documents and instruments, all financing statements and other
documents that Bank may reasonably request, in form satisfactory to Bank, to
perfect and continue perfected Bank's security interests in the Collateral and
in order to fully consummate all of the transactions contemplated under the Loan
Documents.
6.4 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrowers' usual business hours, to inspect Borrowers' Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrowers' financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
6.5 Accounts. Bank's security interest in Accounts shall attach to all
--------
Accounts without further act on the part of Bank or Borrowers. Upon request from
Bank, Borrowers shall provide Bank with schedules describing all Accounts
created or acquired by Borrowers (including without limitation agings listing
the names and addresses of, and amounts owing by date by account debtors), and
shall execute and deliver written assignments of all Accounts to Bank all in a
form acceptable to Bank, provided, however, Borrowers' failure to execute and
deliver such schedules and/or assignments shall not affect or limit Bank's
security interest and other rights in and to the Accounts. Together with each
schedule, Borrowers shall furnish Bank with copies of Borrowers' customers'
invoices or the equivalent, and original shipping or delivery receipts for all
merchandise sold, and Borrowers warrant the genuineness thereof. Upon the
occurrence and during the continuance of an Event of Default, Bank or Bank's
designee may notify customers or account debtors of Bank's security interest in
the Collateral and direct such customers or account debtors to make payments
directly to Bank, but unless and until Bank does so or gives Borrowers other
written instructions, Borrowers shall collect all Accounts for Bank, receive in
trust all payments thereon as Bank's trustee, and, deposit such collections in
the Lockbox Account. During the continuance of an Event of Default, if so
requested by Bank, Borrowers shall immediately deliver said payments to Bank in
their original form as received from the account debtor and all letters of
credit, advices of credit, instruments, documents, chattel paper or any similar
property evidencing or constituting Collateral. Notwithstanding anything to the
contrary contained herein, during the continuance of an Event of Default, if
sales of inventory are made for cash, Borrowers shall immediately deliver to
Bank, in identical form, all such cash, checks, or other forms of payment which
Borrowers receive. The receipt of any check or other item of payment by Bank
shall not be considered a payment on account until such check or other item of
payment is honored when presented for payment, in which event, said check or
other item of payment shall be deemed to have been paid to Bank three (3)
calendar days after the date Bank actually receives such check or other item of
payment.
6.6 Inventory. Bank's security interest in inventory shall attach to all
---------
inventory without further act on the part of Bank or Borrowers. Upon the
occurrence of an Event of Default, Borrowers will at Borrowers' expense pledge,
assemble and deliver such inventory to Bank or to a third party as Bank's
bailee; or hold the same in trust for Bank's account or store the same in a
warehouse in Bank's name; or deliver to Bank documents of title representing
said inventory; or evidence of Bank's security interest in some other manner
acceptable to Bank. Until the occurrence and during the continuance an Event of
Default by Borrowers under this Agreement, Borrowers may, subject to the
provisions hereof and consistent herewith, sell the inventory, but only in the
ordinary course of Borrowers' business. A sale of inventory in Borrowers'
ordinary course of business does not include an exchange or a transfer in
partial or total satisfaction of a debt owing by Borrowers.
6.7 Attorney in Fact. Effective only during the continuance of an Event of
----------------
Default, Borrowers appoint Bank or any other person whom Bank may designate as
Borrowers' attorney-in-fact, with power to endorse Borrowers' name on any
checks, notes, acceptances, money order, drafts or other forms of payment or
security that may come into Bank's possession; to sign Borrowers' name on any
invoice or xxxx of lading relating to any Accounts, on drafts against account
debtors, on schedules and assignments of Accounts, on verifications of Accounts
and on notices to account debtors; to establish a lock box arrangement and/or to
notify the post office authorities to change the address for delivery of
Borrower's mail addressed to Borrower to an address designated by
15
Bank, to receive and open all mail addressed to any Borrower, and to retain all
mail relating to the Collateral and forward all other mail to Borrowers; to
send, whether in writing or by telephone, requests for verification of Accounts;
and to do all things necessary to carry out this Agreement. Neither Bank nor its
attorney-in-fact will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law. This power being coupled with an interest,
is irrevocable so long as any Accounts in which Bank has a security interest
remain unpaid and until the Indebtedness has been fully satisfied.
6.8 Discharge Liens. In order to protect or perfect any security interest
---------------
which Bank is granted hereunder, Bank may, in its sole discretion, discharge any
lien or encumbrance or bond the same, pay any insurance, maintain guards,
warehousemen, or any personnel to protect the Collateral, pay any service
bureau, or, obtain any records, and all costs for the same shall be added to the
Obligations and shall be payable on demand.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
7.1 Incorporation, Good Standing, and Due Qualification. Each Borrower is a
---------------------------------------------------
corporation duly incorporated, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; has the corporate power and
authority to own its assets and to transact the business in which it is now
engaged or proposed to be engaged in; and is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required.
7.2 Corporate Power and Authority. The execution, delivery, and performance
-----------------------------
by each Borrower of the Loan Documents to which each is a party have been duly
authorized by all necessary corporate action and do not and will not (a) require
any consent or approval of the stockholders of any Borrower; (b) contravene
Borrowers' charter or bylaws; (c) violate any provision of any law, rule,
regulation (including, without limitation, Regulations U and X of the Board of
Governors of the federal Reserve System), order, writ, judgment, injunction,
decree, determination, or award presently in effect having applicability to any
Borrower; (d) result in a breach of or constitute a default under indenture or
loan or credit agreement or any other agreement, lease, or instrument to which a
Borrower is a party or by which either of their properties may be bound or
affected; (e) result in, or require, the creation or imposition of any Lien,
upon or with respect to any of the properties now owned or hereafter acquired by
Borrowers; and (f) cause Borrowers to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
or any such indenture, agreement, lease, or instrument.
7.3 Legally Enforceable Agreement. This Agreement is, and each of the other
-----------------------------
Loan Documents when delivered under this Agreement will be, legal, valid, and
binding obligations of the Borrowers, as the case may be, enforceable against
the Borrowers, as the case may be, in accordance with their respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors' rights
generally.
7.4 Ownership and Liens. Borrowers and each Subsidiary have title to, or
-------------------
valid leasehold interests in, all of their properties and assets, real and
personal, including the properties and assets and leasehold interests reflected
in the financial statements previously delivered by Borrowers to Bank (other
than any properties or assets disposed of in the ordinary course of business),
and none of the properties and assets owned by Borrowers of any Subsidiary and
none of their leasehold interests is subject to any Lien, except Permitted
Liens.
7.5 Other Agreements. Neither Borrower is a party to any indenture, loan,
----------------
or credit agreement, or to any lease or other agreement or instrument or subject
to any charter or corporate restriction which could have a Material Adverse
Effect. Neither Borrower is in default in any material respect in the
performance, observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument material to its business to
which it is a party.
16
7.6 Labor Disputes and Acts of God. Neither the business nor the properties
------------------------------
of Borrowers are affected by any fire, explosion, accident, strike, lockout, or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy, or other casualty (whether or not covered by insurance),
materially and adversely affecting such business or properties or the operation
of Borrower.
7.7 Provisions Concerning Accounts.
------------------------------
7.7.1 Representations. Borrowers represent and warrant that each Account
---------------
at the time of its assignment to Bank (a) will be owned solely by Borrower; (b)
will be for a liquidated amount maturing as stated in Borrower's Books; (c) will
be a bona fide existing obligation created by the finale sale and delivery of
goods or the rendition of services to account debtors by Borrower in the
ordinary course of business; and (d) will not be subject to any known deduction,
offset, counterclaim, return privilege, or other condition, except as reflected
on Borrowers' Books. Borrowers shall not redate any invoices or reissue new
invoices in full or partial satisfaction of old invoices. Borrowers shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time the account from such account debtor is created; and, in
accordance with prudent credit policies, the account debtor will be able timely
to discharge all of its indebtedness to Borrowers. Allowances, if any, as
between Borrowers and their customers will be on the same basis and in
accordance with the usual customary practices of Borrowers as they exist on the
date of this Agreement.
7.7.2 Returns and Repossessions. Borrowers shall notify Bank within
-------------------------
three (3) Business Days of occurrence of all returns, repossessions, and
recoveries of merchandise and of all claims asserted by account debtors in
excess of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per month
in the aggregate.
7.8 Provisions Concerning Inventory.
-------------------------------
7.8.1 Locations. Schedule 7.8.1 is a true and correct listing showing
---------
all places where inventory is located (except for inventory in transit),
including, without limitation, facilities leased and operated by Borrowers and
locations neither owned nor leased by Borrowers, and showing all such places
where inventory of Borrowers have been located in the past four (4) months. Such
list indicates whether the premises are those of warehouseman or other party.
Without the prior written consent of Bank, no inventory shall be moved from
locations on Schedule 7.8.1 except for the purpose of sale in the ordinary
course of business.
7.8.2 Merchantable Inventory. All inventory consisting of raw materials
----------------------
and finished goods is now and at all times hereafter shall be of good and
merchantable quality, free from defects material defects.
7.8.3 Books and Records. Borrowers do now keep and hereafter at all
-----------------
times shall keep correct and accurate records itemizing and describing the kind,
type, quality, and quantity of the inventory, and its cost therefor; all such
records shall be available upon demand to Bank for inspection and copying.
7.8.4 Warehouses and Landlords. Collateral is not now and shall not at
------------------------
any time hereafter be stored with a bailee, warehouse, or similar party without
Bank's prior written consent. If any Collateral is so stored, Borrowers will
join with Bank, concurrent with storing such Collateral, in notifying such third
party of Bank's security interest in the stored inventory and obtaining an
acknowledgement from such third party that it is holding the Collateral for the
benefit of Bank. In addition, Borrower shall cause any such bailee, warehouse,
or similar party to issue and deliver to Bank, in a form acceptable to Bank,
negotiable documents in Bank's name evidencing the storage of the Collateral.
All such negotiable documents do and will evidence ownership of the Collateral
stored by the issuers thereof, and the holder thereof is and will continue to be
the owner of good and marketable title of same, free and clear of any Liens or
encumbrances. All such negotiable documents are and will be genuine, valid, and
enforceable by the holder thereof in accordance with their terms, and all
statements thereon are and will be true and accurate in all respects.
7.9 Litigation. Except as disclosed to Bank in writing, there are no
----------
actions or proceedings pending by or against Borrowers or any Subsidiary before
any court or administrative agency in which an adverse decision could
17
have a Material Adverse Effect or a material adverse effect on Borrowers'
interest or Bank's security interest in the Collateral. Borrowers do not have
knowledge of any such pending or threatened actions or proceedings.
7.10 No Material Adverse Change in Financial Statements. All financial
--------------------------------------------------
statements related to Borrowers that have been delivered by Borrowers to Bank
fairly present in all material respects each Borrower's financial condition as
of the date thereof and Borrowers' results of operations for the period then
ended. There has not been a material adverse change in the financial condition
of Borrowers since the date of the most recent of such financial statements
submitted to Bank.
7.11 Solvency. Borrowers are solvent and able to pay their debts (including
--------
trade debts) as they mature.
7.12 ERISA. Borrowers are in compliance in all material respects with all
-----
applicable provisions of ERISA; Borrowers have not violated any provision of any
defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrowers (each, a "Plan"); no Reportable Event as defined in
ERISA has occurred and is continuing with respect to any Plan initiated by
Borrowers; Borrowers have met the minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and under
GAAP.
7.13 Investment Company Act. Neither Borrower is an "investment company" or
----------------------
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940. Neither Borrower is engaged principally, or as
one of the important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations G, T and U of the Board of Governors of the Federal Reserve System).
Borrowers have complied with all the provisions of the Federal Fair Labor
Standards Act. Borrowers have not violated any statutes, laws, ordinances or
rules applicable to it, violation of which could have a Material Adverse Effect.
7.14 Environmental Condition. Except as disclosed by Borrowers to Bank in
-----------------------
writing prior to the date hereof, each Borrower is in compliance in all material
respects with all applicable Federal or state environmental, hazardous waste,
health and safety statutes and any rules or regulations adopted pursuant
thereto, which govern or affect any Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of either Borrower is the subject of any
Federal or state investigation evaluating whether any remedial action involving
a material expenditure is needed to respond to a release of any toxic or
hazardous waste or substance into the environment. Each Borrower has no material
contingent liability in connection with any release of any toxic or hazardous
waste or substance into the environment.
7.15 Taxes. Borrowers have filed all tax returns (federal, state, and
-----
local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
7.16 Subsidiaries. Borrowers do not own any stock, partnership interest or
------------
other equity securities of any Person, except for Permitted Investments.
7.17 Government Consents. Borrowers have obtained all consents, approvals
-------------------
and authorizations of, made all declarations or filings with, and given all
notices to, all governmental authorities that are necessary for the continued
operation of Borrowers' business as currently conducted.
7.18 Full Disclosure. No representation, warranty or other statement made
---------------
by Borrowers in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
18
ARTICLE 8
AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrowers shall do all of the following:
8.1 Good Standing. Each Borrower shall maintain, and cause each Subsidiary
-------------
to maintain, its corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrowers shall
maintain, and cause each Subsidiary to maintain, to the extent consistent with
prudent management of Borrowers' business, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
8.2 Government Compliance. Borrowers shall meet, and shall cause each
---------------------
Subsidiary to meet the minimum funding requirements of ERISA with respect to any
employee benefit plans subject to ERISA. Borrowers shall comply, and shall cause
each Subsidiary to comply, with all statutes, laws, ordinances and government
rules and regulations to which it is subject, noncompliance with which could
have a Material Adverse Effect or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral.
8.3 Financial Statements. Borrowers shall deliver to Bank:
--------------------
8.3.1 Monthly Financial Statements. As soon as available and in any
----------------------------
event within within thirty (30) days after the end of each month, consolidated
and consolidating balance sheets of Borrowers and their Subsidiaries as of the
end of such fiscal year, and consolidated and consolidating statements of income
and retained earnings of Borrowers and their Subsidiaries for such month, and
consolidated and consolidating statements of changes in financial position of
the Borrowers and their Subsidiaries for such month, all in reasonable detail
and all prepared in accordance with GAAP consistently applied. Notwithstanding
the foregoing, once EBITDA is greater than Zero and 00/100 Dollars ($0.00), then
Borrower shall only be required to provide Bank the following financial
statements
(a) Quarterly Reports. As soon as available and in any event within
-----------------
five (5) days of filing, Borrowers shall deliver their Form 10-Q Quarterly
Report filed pursuant to the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute, and the rules and regulations issued
thereunder ("Exchange Act"), all as the same may be in effect at the time; and
(b) Annual Report. As soon as available and in any event within five
-------------
(5) days of filing, Borrower shall deliver its Form 10-K Annual Report filed
pursuant to the Exchange Act.
8.3.2 Projections. As soon as available and in any event no later than
-----------
thirty (30) days after the end of each fiscal quarter of Borrowers, Borrowers
will deliver Projections of Borrowers for the forthcoming fiscal year, provided,
however, that upon Borrowers having Net Income greater than Zero and 00/100
Dollars ($0.00), such Projections shall be delivered on an annual basis no later
than thirty (30) days after the end of such fiscal year.
8.4 Acquisitions. Prior to any acquisition of a Person by any Borrower,
------------
Borrowers shall have delivered to Bank (a) a fair saleable value balance sheet
and income statement reasonably acceptable to Bank in form and substance
satisfactory to Bank and setting forth valuations of Borrowers and their
Subsidiaries on a consolidated basis certifying that Borrowers are in compliance
with the terms of this Agreement; and (b) the unaudited consolidated balance
sheet of Borrowers and their Subsidiaries giving effect to the acquisition
together with a certificate of Borrowers, executed by a Responsible Officer in
such Person's capacity as an officer of Borrowers, in form and substance
satisfactory to Bank certifying that, after giving effect to the acquisition,
(i) the fair saleable value of the assets of Borrowers, on a going concern
basis, will exceed the probable liability on their debts; (ii) that Borrowers
will be able to pay their debts as they mature, (iii) that Borrowers will not
have unreasonably small capital to conduct its business; and (iv) that Borrowers
shall be in compliance with the terms of this Agreement, together with
attachments demonstrating the basis of such conclusions.
19
8.5 Securities Account. Borrowers shall at all times maintain a minimum
------------------
balance of Two Million and 00/100 Dollars ($2,000,000.00) in the Securities
Account. If the balance in the Securities Account drops below this amount for
any reason, including payment of a Permitted Lien, Borrowers shall replenish the
balance to not less than Two Million and 00/100 Dollars ($2,000,000.00) within
five (5) Business Days.
8.5.1 Statements. Borrowers will deliver to Bank, within five (5) days
----------
of receipt, copies of all statements and confirmations for the Securities
Account.
8.6 Monthly A/R and A/P Agings. Borrowers shall, from time to time
--------------------------
hereafter but not less often than monthly, execute and deliver to Bank no later
than fifteen (15) days after the last day of each month, (a) a detailed aging of
Accounts by total, a summary of aging of Accounts by customer, and a
reconciliation statement; and (b) a detailed aging of accounts payable.
8.7 Inventory Reports. At Bank's request, Borrowers shall from time to
-----------------
time, but not less than monthly, execute and deliver to Bank no later than
fifteen (15) days after the last day of each month, Bank's form of inventory
report specifying Borrowers' cost and the resale price of Borrowers' raw
materials, work in process, and finished goods and such other information as
Bank may reasonably request.
8.8 Monthly Borrowing Base Certificate. Borrowers shall deliver to Bank, on
----------------------------------
a monthly basis, a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto.
---------
8.9 Audit of Accounts and Inventory. Bank shall have the right during
-------------------------------
normal business hours and upon reasonable notice to Borrowers, to conduct audits
of Borrowers' Accounts and inventory on an annual basis during the term of this
Agreement, and upon an Event of Default as frequent as Bank may determine in its
reasonable discretion.
8.10 Taxes. Borrowers shall make, and shall cause each Subsidiary to make,
-----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrowers or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrowers.
8.11 Insurance.
---------
8.11.1 Borrowers, at their expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrowers'
business is conducted on the datehereof. Borrowers shall also maintain insurance
relating to Borrowers' ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrowers'.
8.11.2 All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrowers shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
20
8.12 Principal Depository. Borrowers shall maintain their principal
--------------------
depository and operating accounts with Bank.
8.13 Further Assurances. At any time and from time to time Borrowers shall
------------------
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
ARTICLE 9
FINANCIAL COVENANTS
9.1 Current Ratio. Borrowers shall maintain, on a consolidated basis, as of
-------------
the last day of each calendar month, a ratio of current assets to current
liabilities of at least 1.00:1.00.
9.2 Effective Tangible Net Worth Ratio. Borrowers shall maintain, on a
----------------------------------
consolidated basis, as of the last day of each month, a ratio of Debt to
Effective Tangible Net Worth of not more than 2.50:1.00.
9.3 EBITDA. Borrowers shall maintain, on a consolidated basis, as of the
------
last day of each quarter, EBITDA not greater than negative Three Million and
00/100 Dollars (-$3,000,000.00). As of March 31, 2002, Borrower shall maintain,
as of the last day of each quarter, EBITDA not greater than negative One Million
and 00/100 (-$1,000,000.00). As of June 30, 2002, Borrower shall maintain, as of
the last day of each quarter, EBITDA greater than Zero and 00/100 Dollars
($0.00).
ARTICLE 10
NEGATIVE COVENANTS
Borrowers covenant and agree that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Advances, Borrowers will not do
any of the following without the prior written consent of Bank:
10.1 Sale of Assets. Sell, lease, assign, transfer, or otherwise dispose
--------------
of, any of their now owned or hereafter acquired assets (including, without
limitation, shares of stock and indebtedness of Subsidiaries, Accounts, and
leasehold interests), except: (a) inventory disposed of in the ordinary course
of business; (b) the sale or other disposition of assets no longer used or
useful in the conduct of its business; or (c) that any Subsidiary may sell,
lease, assign, or otherwise transfer its assets to Borrowers.
10.2 Mergers or Acquisitions. Wind up, liquidate or dissolve itself,
-----------------------
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all of substantially all
of the assets or the business of any Person, or permit any Subsidiary to do so,
except that (a) any Subsidiary may merge into or transfer assets to the
Borrowers; and (b) any subsidiary may merge into or consolidate with or transfer
assets to any other Subsidiary.
10.3 Debt. Create, incur, assume or be or remain liable with respect to any
----
Debt, or permit any Subsidiary so to do, other than Permitted Debt.
10.4 Encumbrances. Create, incur, assume or suffer to exist any Lien with
------------
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
10.5 Distributions. Declare or pay any dividends; or purchase, redeem,
-------------
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets, or in obligations of the Borrowers; or allocate or
otherwise set apart any sum for the
21
payment of any dividend or distribution on, or for the purchase, redemption, or
retirement of any shares of its capital stock; or make any other distribution by
reduction of capital or otherwise in respect of any shares of its capital stock;
or permit any of its Subsidiaries to purchase or otherwise acquire for value any
stock of the Borrowers or another Subsidiary, except that the Borrowers (a) may
declare and deliver dividends and make distributions payable solely in common
stock of the Borrowers; and (b) may purchase or otherwise acquire shares of
their capital stock by exchange for or out of the proceeds received from a
substantially concurrent issue of new shares of its capital stock.
10.6 Investments. Make, or permit any Subsidiary to make, any loan or
-----------
advance to any Person, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person, or participate as a
partner or joint venture with any other Person, except Permitted Investments.
10.7 Transactions with Affiliates. Enter into any transaction, including,
----------------------------
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate, or permit any Subsidiary to enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
10.8 Guaranties, Etc. Assume, guarantee, endorse, or otherwise be or become
---------------
directly or contingently responsible or liable, or permit any Subsidiary to
assume, guarantee, endorse, or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods, or services, or to supply or advance any
funds, assets, goods, or services, or an agreement to maintain or cause such
Person to maintain a minimum working capital or net worth or otherwise to assure
the creditors of any Person against loss), for obligations of any Person, except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
10.9 Subordinated Debt. Make any payment in respect of any Subordinated
-----------------
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
10.10 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such 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 law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
ARTICLE 11
EVENTS OF DEFAULT
Any one or more of the following events shall constitute an "Event of
Default" by Borrower under this Agreement:
11.1 Payment Default. Borrowers shall fail to pay when due any principal,
---------------
interest, fees or other amounts payable under any of the Loan Documents.
22
11.2 Misrepresentation. Any financial statement or certificate furnished to
-----------------
Bank in connection with, or any representation or warranty made by Borrowers or
any other party under this Agreement or any other Loan Document shall prove to
be incorrect, false or misleading in any material respect when furnished or
made.
11.3 Covenant Default. Any default in the performance of or compliance with
----------------
any Obligation, agreement or other provision contained in this Agreement (other
than those described in sections 11.1 and 11.2) and such default is not cured
within ten (10) Business Days after Borrowers receive notice thereof or any
officer of Borrowers becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrowers be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrowers
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Advances will be required to be made during such
cure period).
11.4 Default Under Loan Documents. Any default in the payment or
----------------------------
performance of any obligation, or any defined event of default, under any of the
Loan Documents other than this Agreement.
11.5 Material Adverse Change. If there occurs a material adverse change in
-----------------------
Borrowers' business or financial condition, or if there is a material impairment
of the prospect of repayment of any portion of the Obligations or a material
impairment of the value or priority of Bank's security interests in the
Collateral.
11.6 Attachment. If any material portion of Borrowers' assets is attached,
----------
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) Business Days, or if any
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of any Borrower's assets, or if a notice of lien, levy, or assessment is filed
of record with respect to any Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10)
Business Days after Borrower receives notice thereof, provided that none of the
foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by
Borrowers (provided that no Advances will be required to be made during such
cure period).
11.7 Insolvency. If Borrowers fail to generally pay their debts as they
----------
become due, or if an Insolvency Proceeding is commenced by any Borrower, or if
an Insolvency Proceeding is commenced against any Borrower and is not dismissed
or stayed within thirty (30) Business Days (provided that no Advances will be
made prior to the dismissal of such Insolvency Proceeding).
11.8 Other Agreements. Any default in the payment or performance of any
----------------
Obligation, or any defined event of default, under the terms of any contract or
instrument (other than any of the Loan Documents) pursuant to which Borrowers
have incurred any debt or other liability to any person or entity, including
Bank, resulting in a right of the other party to such agreement to accelerate
the maturity of any indebtedness in an amount in excess of Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00); provided, however, that the Event of
Default under this Section 11.8 shall be automatically cured for purposes of
this Agreement upon the cure or waiver of the default under such other
agreement.
11.9 Subordinated Debt. If Borrowers make any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank.
11.10 Judgments. The filing of a notice of judgment lien against either
---------
Borrower; or the recording of any abstract of judgment against either Borrower
in any county in which Borrowers have an interest in real property; or the
service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets
23
of Borrowers; or the entry of a judgment against Borrowers; and with respect to
any of the foregoing, the amount in dispute is in excess of Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00).
11.11 Guaranty. Any guaranty of all or a portion of the Obligations ceases
--------
for any reason to be in full force and effect, or any guarantor fails to perform
any obligation under any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now or hereafter in
any warranty or representation set forth in any guaranty of all or a portion of
the Obligations or in any certificate delivered to Bank in connection with such
guaranty.
ARTICLE 12
BANK'S RIGHTS AND REMEDIES
12.1 Rights and Remedies. If an Event of Default shall occur and be
-------------------
continuing, (a) any Obligations of Borrowers under any of the Loan Documents,
any term thereof to the contrary notwithstanding, shall at Bank's option and
without notice become immediately due and payable without presentment, demand,
protest or notice of dishonor, all of which are hereby expressly waived by
Borrowers; (b) the obligation, if any, of Bank to permit further borrowings
hereunder shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit accommodation from Bank subject hereto and to exercise
any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All remedies of Bank in connection with each of the Loan
Documents may be exercised during the continuance of an Event of Default, are
cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity. During the continuance of an Event
of Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrowers:
12.1.1 Demand that Borrowers (a) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrowers shall forthwith deposit and pay such amounts; and (b) pay in
advance all Letters of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit;
12.1.2 Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
12.1.3 Without notice to or demand upon Borrowers, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the Collateral
if Bank so requires, and to make the Collateral available to Bank as Bank may
designate. Borrowers authorize Bank to enter the premises where the Collateral
is located, after reasonable notice, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any Borrower's owned premises, Borrowers
hereby grant Bank a license to enter into possession of such premises and to
occupy the same, without charge, in order to exercise any of Bank's rights or
remedies provided herein, at law, in equity, or otherwise;
12.1.4 Without notice to Borrowers set off and apply to the Obligations
any and all (a) balances and deposits of Borrowers held by Bank; or (b)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Bank; or
12.1.5 Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely pursuant to
the provisions of this Section 12.1, to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any
24
Collateral and, in connection with Bank's exercise of its rights under this
Section 12.1, Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit.
12.2 Power of Attorney. Effective only upon the occurrence and during the
-----------------
continuance of an Event of Default, Borrowers hereby irrevocably appoint Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse a
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign a Borrower's name on any invoice or xxxx
of lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrowers' policies of insurance; and (e) settle and adjust disputes
and claims respecting the Accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of a Borrower on any of the
documents described in Section 6.3 upon an Event of Default. The appointment of
Bank as Borrowers' attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
12.3 Accounts Collection. At any time during the occurrence of an Event of
-------------------
Default, Bank may notify any Person owing funds to Borrowers of Bank's security
interest in such funds and verify the amount of such Account. Borrowers shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
12.4 Bank Expenses. If Borrowers fail to pay any amounts or furnish any
-------------
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 8.11 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
12.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower, except
where such loss, damage or destruction results from the gross negligence of
willful misconduct of Bank.
12.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
-------------------
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as provided under
the UCC, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrowers' part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it.
12.7 Demand; Protest. Borrowers waive demand, protest, notice of protest,
---------------
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of Accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrowers may in any way be liable.
25
ARTICLE 13
NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrowers or to Bank, as the case may be, at its addresses
set forth below:
If to Borrowers: iPRINT TECHNOLOGIES, INC.
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: CFO
FAX: (000) 000-0000
If to Bank: COMERICA BANK-CALIFORNIA
000 Xxxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
ARTICLE 14
CHOICE OF LAW; VENUE; AND JURY TRIAL WAIVER
This Agreement and all transactions contemplated hereunder and/or
evidenced hereby shall be governed by, construed under, and enforced in
accordance with the internal laws of the State of California, without regard to
principles of conflicts of law. Borrowers and Bank hereby submit to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Xxxxx, State of California. BORROWERS AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
ARTICLE 15
GENERAL PROVISIONS
15.1 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrowers without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrowers to
26
sell, transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank's obligations, rights and benefits hereunder.
15.2 Term. This Agreement shall become effective on the Closing Date and,
----
subject to Section 15.10, shall continue in full force and effect for a term
ending on the Termination Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
15.3 Indemnification. Borrowers shall defend, indemnify and hold harmless
---------------
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrowers whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
Neither Bank nor any indemnified party may enter into any settlement or other
compromise with respect to any claim covered by the indemnity set forth herein
without Borrowers' prior written consent, which shall not be unreasonably
withheld and if a claim is settled or compromised without such consent,
Borrowers shall not be obligated to provide indemnification hereunder. If Bank
or any other indemnified party obtains recovery of any of the amounts that
Borrowers have paid to them pursuant to the indemnity set forth herein, Bank or
such other indemnified party, as applicable, shall promptly pay to Borrowers the
amount of such recovery.
15.4 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Agreement.
15.5 Severability of Provisions. In the event any one or more of the
--------------------------
provisions contained in this Agreement is held to be invalid, illegal or
unenforceable in any respect, then such provision shall be ineffective only to
the extent of such prohibition or invalidity, and the validity, legality, and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
15.6 Amendments. Neither this Agreement nor any provisions hereof may be
----------
changed, waived, discharged or terminated, nor may any consent to the departure
from the terms hereof be given, orally (even if supported by new consideration),
but only by an instrument in writing signed by all parties to this Agreement.
Any waiver or consent so given shall be effective only in the specific instance
and for the specific purpose for which given.
15.7 Entire Agreement. This Agreement, together with the Loan Documents
----------------
embodies the entire agreement and understanding among and between the parties
hereto, and supersedes all prior or contemporaneous agreements and
understandings between said parties, verbal or written, express or implied,
relating to the subject matter hereof. No promises of any kind have been made by
Bank or any third party to induce Borrowers to execute this Agreement. No course
of dealing, course of performance or trade usage, and no parol evidence of any
nature, shall be used to supplement or modify any terms of this Agreement.
15.8 Waiver. No failure to exercise and no delay in exercising any right,
------
power, or remedy hereunder shall impair any right, power, or remedy which Bank
may have, nor shall any such delay be construed to be a waiver of any of such
rights, powers, or remedies, or any acquiescence in any breach or default
hereunder; nor shall any waiver by Bank of any breach or default by Borrowers
hereunder be deemed a waiver of any default or breach subsequently occurring.
All rights and remedies granted to Bank hereunder shall remain in full force and
effect notwithstanding any single or partial exercise of, or any discontinuance
of action begun to enforce, any such right or remedy. The rights and remedies
specified herein are cumulative and not exclusive of each other or of any rights
or remedies which Bank would otherwise have.
27
15.9 Interpretation. This Agreement and all agreements relating to the
--------------
subject matter hereof are the product of negotiation and preparation by and
among each party and its respective attorneys, and shall be construed
accordingly. The parties waive the provisions of California Civil Code ss.1654.
15.10 Survival. All covenants, representations and warranties made in this
--------
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Bank have run, provided that so long as the obligations set
forth in the first sentence of this Section 15.10 have been satisfied, and Bank
has no commitment to make any Advances or to make any other loans to Borrower,
Bank shall release all security interests granted hereunder and redeliver all
Collateral held by it in accordance with applicable law.
15.11 Loan Information. Borrowers agree that Bank may provide information
----------------
relating to this Agreement or relating to Borrowers to Bank's parent,
affiliates, subsidiaries and service providers.
15.12 Costs and Expenses. Borrowers agree to pay on demand all reasonable
------------------
costs and expenses incurred by Bank in connection with the preparation,
execution, delivery, filing, and administration of the Loan Documents, and of
any amendment, modification, or supplement to the Loan Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Bank, incurred in connection with advising the Bank as to its rights and
responsibilities hereunder. Borrowers also agree to pay all such reasonable
costs and expenses, including court costs, incurred in connection with
enforcement of the Loan Documents, or any amendment, modification, or supplement
thereto, whether by negotiation, legal proceedings, or otherwise. This provision
shall survive termination of this Agreement.
15.13 Joint and Several Liability. The liability of Borrowers hereunder
---------------------------
shall be joint and several.
15.14 Suretyship Waivers. Each Borrower hereby waives its rights of
------------------
subrogation, reimbursement, indemnification, and contribution and any other
rights and defenses that are or may become available to any Borrower by reason
of Sections 2787 to 2855, inclusive of the California Civil Code, provided,
however, that any amendment to this Agreement, or any alteration of the
Obligations, shall require the consent, in writing, of all parties to this
Agreement as provided in Section 15.6.
15.14.1 No Marshalling. Each Borrower irrevocably waives any right to
--------------
compel Bank to marshal assets of any Borrower, whether such rights arise under
California Civil Code ss.ss.2899 and 3433 or otherwise.
15.15 Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if all
signatures were upon the same instrument. Delivery of an executed counterpart of
the signature page to this Agreement by telefacsimile shall be effective as
delivery of a manually executed counterpart of this Agreement, and any party
delivering such an executed counterpart of the signature page to this Agreement
by telefacsimile to any other party shall thereafter also promptly deliver a
manually executed counterpart of this Agreement to such other party, provided
that the failure to deliver such manually executed counterpart shall not affect
the validity, enforceability, or binding effect of this Agreement.
28
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Loan and
Security Agreement to be executed as of the date first above written.
iPRINT TECHNOLOGIES, INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Title: CFO
---------------------------------------
WOOD ALLIANCE, S.P. INC. D/B/A WOOD ASSOCIATES
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Title: CFO
---------------------------------------
COMERICA BANK - CALIFORNIA
/s/ Xxxxxxx Xxxxx
--------------------------------------------
By: Xxxxxxx Xxxxx
Its: Assistant Vice President
29
SCHEDULE TO LOAN
AND SECURITY AGREEMENT
This is the Schedule referred to in the Loan and Security Agreement dated as of
November 1, 2001 (the "Agreement") by and among Comerica Bank-California, iPrint
Technologies, Inc. ("iPrint") and Wood Alliance, S.P. Inc. d/b/a Wood Associates
("Wood") (iPrint and Wood, collectively the "Borrowers").
The inclusion of any information or item that the Borrowers are not required to
disclose under the Agreement shall not establish any threshold of materiality
and shall not effect either the interpretation of the Agreement or the scope of
the disclosure obligations under the Agreement. The terms used herein, unless
otherwise defined within the Schedule, are defined within the Agreement.
Section 6.1; Grant of Security Interest:
iPrint Technologies, Inc.
Financing
Statement No. Secured Party Comment
------------- ------------------------------ ------------------------------
0006761043* Silicon Valley Bank Letter of Credit dated 1/21/00
0006761062* Silicon Valley Bank Letter of Credit dated 1/7/00
0106860232 Xxxxxxxx Scotsman, Inc. Lease of Mobil Office
* The Borrowers believe that these Letters of Credit have expired and,
therefore, the liens should be terminated.
Wood Associates, Inc.
Financing
Statement No. Secured Party Comment
------------- ------------------------------------ ------------------------------
93258653 Comerica Bank
0029960239 CDW Leasing LLC
0109960788 Fidelity Leasing Inc.
0115260043 Fidelity Leasing Inc.
0127760339 Xxxxxx X. Xxxxxxxxx, trustee in
bankruptcy of the estate of Storm
Technology, Inc.
1
Section 10.4; Permitted Liens:
iPrint Technologies, Inc.
Financing
Statement No. Secured Party Comment
------------- ------------------------------------ ------------------------------
0006761043 Silicon Valley Bank Letter of Credit dated 1/21/00
0006761062 Silicon Valley Bank Letter of Credit dated 1/7/00
0106860232 Xxxxxxxx Scotsman, Inc. Lease of Mobil Office
Wood Associates, Inc.
Financing
Statement No. Secured Party Comment
------------- ------------------------------------ ------------------------------
93258653 Comerica Bank
0029960239 CDW Leasing LLC
0109960788 Fidelity Leasing Inc.
0115260043 Fidelity Leasing Inc.
0119060089 iPrint Technologies, Inc.
0124960389 iPrint Technologies, Inc.
0127760339 Xxxxxx X. Xxxxxxxxx, trustee in
bankruptcy of the estate of Storm
Technology, Inc.
0127860149 iPrint Technologies, Inc.
0128860799 iPrint Technologies, Inc.
0000000000 iPrint Technologies, Inc.
Section 7.8.1; Inventory Locations:
0000 Xxxxxx Xxxxx, Xxx Xxxx, XX 00000
000 Xxxxxxxx Xxxx-Xxxxx, Xxxxxxx XX 00000
0000 Xxxxxxxx Xxx, Xxxxx 000, Xxxxxxx XX 00000
0000 X. Xxxxx Xxxxxx, Xxxxx X0 Xxxxxxxxx, XX 00000
2
REVOLVING NOTE
$10,000,000.00 November 1, 0000
Xxx Xxxx, Xxxxxxxxxx
FOR VALUE RECEIVED, IPRINT TECHNOLOGIES, INC., a Delaware corporation and
WOOD ALLIANCE, S.P. INC. D/B/A WOOD ASSOCIATES, a California corporation
(individually and collectively, jointly and severally, the "Borrowers"), jointly
and severally HEREBY PROMISE TO PAY to the order of COMERICA BANK-CALIFORNIA
(the "Bank") at its Principal Office located at 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxxxxxxxxx 00000, or at such other place as Bank may from time to time
designate in writing, in lawful money of the United States and in immediately
available funds, the principal amount of TEN MILLION AND 00/100 DOLLARS
($10,000,000.00) or so much thereof as may be advanced from time to time,
together with interest from the date of disbursement computed on the principal
balances hereof from time to time outstanding as set forth in the Revolving Loan
and Security Agreement dated the date hereof by and between Bank and Borrowers
(the "Loan Agreement").
This Revolving Note is the Revolving Note referred to in, and is entitled
to the benefits of, the Loan Agreement. The Loan Agreement, among other things,
contains provisions for acceleration of the maturity of this Revolving Note upon
the happening of certain stated events upon the terms and conditions specified
in the Loan Agreement. This Revolving Note is also secured by the Loan
Agreement, reference to which is hereby made for a description of the collateral
provided for under the Loan Agreement and the rights of Borrowers and Bank in
respect to such collateral. The Loan Agreement is incorporated herein by this
reference in its entirety. Capitalized terms used but not otherwise defined
herein are used in this Revolving Note as defined in the Loan Agreement.
Borrowers further promise to pay interest on the unpaid principal amount
hereof outstanding from time to time from the date hereof until payment in full
hereof at the rate (or rates) from time to time applicable to the Advances as
determined in accordance with the Loan Agreement; provided, however, that upon
the occurrence and during the continuance of an Event of Default, Borrowers
shall, to the extent provided in the Loan Agreement, pay to Bank interest on the
outstanding principal balance of the Advances and all other Obligations at the
rate of interest applicable upon the occurrence and during the continuance of an
Event of Default as determined in accordance with the Loan Agreement. Interest
shall be calculated on the basis of a three hundred sixty (360)-day year for the
actual days elapsed.
If a payment hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. Credit shall be given solely for the purpose of
calculating interest earned by Bank for any checks, drafts, or similar items of
payment received by Bank in accordance with the Loan Agreement, and such checks,
drafts or similar items of payment shall not constitute payments of amounts due
hereunder except as expressly provided in the Loan Agreement.
Borrowers hereby waive demand, presentment and protest, and notice of
demand, presentment, protest and nonpayment. Except as otherwise provided in the
Loan Agreement or other Loan Documents, Borrowers waive all rights to notice and
hearing of any kind upon the occurrence of an Event of Default prior to the
exercise by Bank of its rights to repossess the Collateral without judicial
process or to replevy, attach or levy upon the Collateral without notice or
hearing.
In no event shall interest accrue or be payable hereon in excess of the
maximum applicable amount of interest, if any, permitted on the date hereof by
the laws of the State of California.
If this Revolving Note is not paid when due, whether at its specified or
accelerated maturity date, Borrowers promises to pay all costs of collection and
enforcement of this Revolving Note, including, but not limited to, reasonable
attorneys' fees and costs, incurred by Bank hereof on account of such collection
or enforcement,
whether or not suit is filed hereon.
Principal and interest shall be payable in lawful money of the United
States without setoff, demand or counterclaim. Borrowers waive the defense of
the statute of limitations in any action on this Revolving Note. Presentment,
notice of dishonor, and protest are waived by all makers, sureties, guarantors
and endorsers of this Revolving Note. Such parties expressly consent to any
extension of the time of payment hereof or any installment hereof, to any
renewal, and to the release of any or all of the security given for the payment
of this Revolving Note or the release of any party liable for this obligation.
This Revolving Note shall be governed and construed in accordance with the
laws of the State of California.
Bank shall not be required, and Borrowers hereby waive any and
all rights to require Bank, to prosecute or seek to enforce any remedies against
Borrowers or any other party liable to Bank on account of the Obligations and/or
to require Bank to seek to enforce or resort to any remedies with respect to any
security interests, liens, or encumbrances granted to Bank by Borrowers or any
other party on account of the Obligations.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Revolving Note as of the date and year first above written.
IPRINT TECHOLOGIES, INC.
By:
-------------------------------
Its:
-------------------------------
WOOD ALLIANCE, S.P. INC. D/B/A WOOD ASSOCIATES
By:
--------------------------------
Its:
-------------------------------
