EXHIBIT 10.14
LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of August 16, 1997 (this "Loan
Agreement") between TUT SYSTEMS, INC., a California corporation (herein called
"Borrower"), and IMPERIAL BANK (herein called "Bank").
1. Commitments.
A. FACILITY-A COMMITMENT. Subject to all the terms and conditions of
this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-A
Loan") to Borrower, from time to time and in such amounts as Borrower shall
request pursuant to this Section 1.A., up to an aggregate principal amount
outstanding under the Facility-A Loan Account (as hereinafter defined) not to
exceed the lesser of: (a) seventy percent (70.0%) of Eligible Accounts (as the
same may be adjusted from time to time as provided for under Section 9.B. hereof
the "Borrowing Base") and (b) $2,000,000.00 (the "Facility-A Commitment"). If
at any time or for any reason, the outstanding principal amount of the Facility-
A Loan Account, as such amount may be increased as set forth in Section 1.A.(1)
hereof (as said term is hereinafter defined), is greater than the lesser of: (x)
the Borrowing Base or (y) the Facility-A Commitment, Borrower shall immediately
pay to Bank in cash, the amount of such excess. Any commitment of Bank, pursuant
to the terms of this Loan Agreement, to make Facility-A Loans shall expire on
the Facility-A Maturity Date (as hereafter defined), subject to Bank's right to
renew said commitment in its sole and absolute discretion at Borrower's request.
Any such renewal of said commitment shall not be binding upon Bank unless it is
in writing and signed by an officer of Bank. Provided that no Event of Default
(as hereinafter defined) has occurred and is continuing, all or any portion of
the Facility-A Loans advanced by Bank which are repaid by Borrower shall be
available for reborrowing in accordance with the terms hereof. Borrower promises
to pay to Bank the entire outstanding unpaid principal balance (and all accrued
unpaid interest thereon) of the Facility-A Loan Account on August 15, 1998
("Facility A Maturity Date").
(1) INCREASE IN FACILITY-A COMMITMENT. Provided that no Event of
Default has occurred is continuing, Borrower shall have the option to increase
the Facility-A Commitment to $2,500,000.00, subject to the satisfaction of the
following condition precedent:
(a) Borrower shall have received no later than December 31,
1997, new or additional equity investments from any new or existing shareholders
of Borrower totaling at least Five Million Dollars ($5,000,000.00) ("Next Equity
Round"), and delivered evidence to Bank of such equity investment, in form
satisfactory to Bank.
(2) FACILITY-A LOANS. The amount of each Facility-A loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-A Commitment (herein called the
"Facility-A Loan Account") and Bank shall credit the Facility-A Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-A Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with Section 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day (as hereinafter defined) before the day on which the
Facility-A Loan is to be made. Facility-A Loans may only be used for working
capital purposes.
(3) INTEREST PAYMENTS ON FACILITY-A LOANS. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-A
Loan through the Facility-A Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-A Loan
Account during the immediately preceding month at a rate of interest equal to
three quarters of one percent (0.75%) per annum in excess of the rate of
interest which Bank has announced as its prime lending rate (the "Prime Rate"),
which shall vary concurrently with any change in the Prime Rate. Interest shall
be computed at the above rate on the basis of the actual number of days during
which the principal balance of the Facility-A Loan Account is outstanding
divided by 360, which shall for interest computation porposes be considered one
(1) year.
B. FACILITY-B COMMITMENT. Subject to all the terms and conditions of
this Loan Agreement and prior the termination of its commitment as hereinafter
provided, Bank hereby agrees to make loans (each a "Facility-B Loan") Borrower
in such amounts as Borrower shall request pursuant to this Section 1.B. at any
time from the date hereof
1.
through February 28. 1998 (the "Facility-B Availability End Date"), in an
aggregate principal amount not to exceed 100.000.00 (the "Facility-B
Commitment"). If at any time or for any reason, the outstanding principal amount
of the Facility-B Loan Account (as hereinafter defined) is greater than the
Facility-B Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Facility-B Loans shall expire on the Facility-B
Availability End Date, subject to Bank's right to renew said commitment in its
sole and absolute discretion at Borrower's request. Any such renewal of said
commitment shall not be binding upon Bank unless it is in writing and signed by
an officer of Bank. Facility-B Loans which are repaid by Borrower may not be
reborrowed. Borrower promises to pay to Bank the outstanding unpaid principal
balance (and all accrued unpaid interest thereon) of the Facility-B Loan Account
on February 28, 2000 ("Facility-B Maturity Date").
(1) FACILITY-B LOANS. The amount of each Facility-B Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-B Commitment (herein called the
"Facility-B Loan Account") and Bank shall credit the Facility-B Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-B Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with Section 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day before the day on which the Facility-B Loan is to be
made. The notice shall be signed by an officer of Borrower and include a copy of
the invoice for the capital equipment to be financed. Facility-B Loans may only
be used to purchase capital equipment and will be limited to ninety percent
(90.0%) of the invoice amount for such capital equipment, approved from time to
time by Bank, less any taxes, shipping and freight charges or discounts,
warranty charges, installation expenses and other soft costs.
(2) INTEREST PAYMENTS ON FACILITY-B LOAN. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-B
Loan through the Facility-B Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-B Loan
Account during the immediately preceding month at a rate of interest equal to
one and one-quarter percent (1.25%) per annum in excess of the Prime Rate, which
shall ^^ILLEGIBLE TEXT^^ concurrently with any change in the Prime Rate.
Interest shall be computed at the above rate on the basis of the actual number
of days during which the principal balance of the Facility-B Loan Account is
outstanding divided by 360, which shall for interest computation purposes be
considered one (1) year.
(3) PRINCIPAL REPAYMENT FOLLOWING FACILITY-B AVAILABILITY END
DATE. Borrower further promises to pay to Bank, on or before March 10, 1998 and
on or before the tenth (10th) day of each month thereafter through the Facility-
B Maturity Date, (a) the outstanding principal balance of the Facility-B Loan
Account on the Facility-B Availability End Date in twenty-four (24) equal
monthly installments plus (b) interest on the average daily unpaid principal
balance of the Facility-B Loan Account during the immediately preceding month at
the rate of interest computed in accordance with Section 1.B.(2) hereof.
C. FACILITY-C COMMITMENT. Subject to all the terms and conditions of
this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-C
Loan") to Borrower in such amounts as Borrower shall request pursuant to this
Section 1.C. at any time from the date of closing of the Next Equity Round and
six (6) months following thereafter (the "Facility-C Availability End Date"), in
an aggregate principal amount not to exceed $100,000.00 (the "Facility-C
Commitment"). If at any time or for any reason, the outstanding principle amount
of the Facility-C Loan Account (as hereinafter defined) is greater than the
Facility-C Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Facility-C Loans shall expire on the Facility-C
Availability End Date, subject to Bank's right to renew said commitment in its
sole and absolute discretion at Borrower's request. Any such renewal of said
commitment shall not be binding upon Bank unless it is in writing and signed by
an officer of Bank. Facility-C Loans which are repaid by Borrower may not be
reborrowed. Borrower promises to pay to Bank the outstanding unpaid principal
balance (and all accrued unpaid interest thereon) of the Facility-C Loan Account
on the date that is thirty (30) months from the date of closing the Next Equity
Round, but in no event later than June 20, 2000 ("Facility-C Maturity Date").
(1) FACILITY-C LOANS. The amount of each Facility-C Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-C Commitment (herein entitled the
"Facility-C Loan Account") and Bank shall credit the Facility-C Loan Account
with all loan repayments in respect
2.
hereof made by Borrower. When Borrower desires to obtain Facility-C Loan,
Borrower shall notify Bank (which notice shall be signed by an officer of
Borrower and shall be irrevocable) in accordance with Section 2 hereof, to be
received no later than 3:00 p.m. Pacific time one (1) Banking Day before the day
on which the Facility-C Loan is to be made. The notice shall be signed by an
officer of Borrower and include a copy of the invoice for the capital equipment
to be financed. Facility-C Loans may only be used to purchase capital equipment
and will be limited to ninety percent (90.0%) of the invoice amount for such
capital equipment, approved from time to time by Bank, less any taxes, shipping
and freight charges or discounts, warranty charges, installation expenses and
other soft costs.
(2) INTEREST PAYMENTS ON FACILITY-C LOAN. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-C
Loan through the Facility-C Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-C Loan
Account during the immediately preceding month at a rate of interest equal to
one and one-quarter percent (1.25%) per annum in excess of the Prime Rate,
which shall vary concurrently with any change in the Prime Rate. Interest shall
be computed at the above rate on the basis of the actual number of days during
which the principal balance of the Facility-C Loan Account is outstanding
divided by 360, which shall for Interest computation purposes be considered one
(1) year.
(3) PRINCIPAL REPAYMENT FOLLOWING FACILITY-C AVAILABILITY END
DATE. Borrower further promises to pay to Bank, on or before the tenth (10th)
day of the month immediately following the Facility-C Availability End Date, and
on or before the tenth (10th) day of each month thereafter through the Facility-
C Maturity Date, (a) the outstanding principal balance of the Facility-C Loan
Account on the Facility-C Availability End Date in twenty-four (24) equal
monthly installments plus (b) interest on the average daily unpaid principal
balance of the Facility-C Loan Account during the immediately preceding month at
the rate of interest computed in accordance with Section 1.C.(3) hereof.
2. LOAN REQUESTS. Requests for Loans hereunder shall be in writing duly
executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which shall
disclose Borrower is entitled to the amount and type of Loan being requested.
Bank is hereby authorized to charge Borrower's deposit account with Bank for all
sums due Bank under this Loan Agreement.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Xxxxx Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment become due, Borrower shall pay to Bank,
a late charge equal to the lesser of (a) five percent (5.0%) of the amount of
such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be damaged by applicable law, until remitted to Bank;
provided; however, nothing contained in this Section 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the applicable Loan Account
following the Facility-A Maturity Date, the Facility-B Maturity Date and/or the
Facility-C Maturity Date, as applicable. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the applicable Loan
Account.
5. DEFAULT INTEREST. From and after the Facility-A Maturity Date, the
Facility-B Maturity Date and/or the Facility-C Maturity Date, as applicable, or
such earlier date as all sums owing under any Loan Account becomes due and
payable by acceleration or otherwise, or upon the occurrence of an Event of
Default, at the option of Bank all sums owing under the applicable Loan Account
shall bear interest until paid in full at a rate equal to the lesser of (a) five
percent (5.0%) per annum in excess of the then applicable interest rate provided
for in Sections 1.A.(3), 1.B.(2) and 1.C.(3) hereof or (b) the maximum amount
permitted to be charged by applicable law, until all obligations hereunder are
repaid in full or the Event of Default is waived or cured to the satisfaction of
Bank, as applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized sums shall have the meanings set forth
on Exhibit A attached hereto and incorporated herein by reference.
3.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with any applicable law or the terms of any
charter, by-law or other incorporation papers, or of any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected; (b) Borrower is, and at the time the Collateral becomes subject to
Bank's security interest will be, the true and lawful owner of and has, and at
the time the Collateral becomes subject to Bank's security interest will have,
good and clear title to the Collateral, subject only to Bank's rights therein
and to Permitted Liens; (c) Each Account is, and at the time the Account comes
into existence will be, the true and correct statement of a bona fide
indebtedness incurred by the debtor named therein in the amount of the Account
for either merchandise sold or delivered (or being held subject to Borrower's
delivery instructions) to, or services rendered, performed and accepted by, the
account debtor; (d) That there are and will be no defenses, counterclaims, or
setoffs which may be asserted against the Accounts from time to time represented
by Borrower to be Eligible Accounts, except as permitted in the definition
thereof; (e) Any and all financial information, including information relating
to the Collateral, submitted by Borrower to Bank, whether previously or in the
future, is and will be true and correct; (f) There is no litigation or other
proceeding pending or threatened against or affecting Borrower, and Borrower is
not in default with respect to any order, writ, injunction, decree or demand of
any court or other governmental or regulatory authority; (g) (i) The
consolidated balance sheets of Borrower dated as of July 31, 1997, and the
related consolidated profit and loss statements for the fiscal year then ended,
copies of which have heretofore been delivered to Bank by Borrower, and all
other statements and data submitted in writing by Borrower to Bank in connection
with Borrower's request for credit are true and correct, and said balance sheet
and profit and loss statement accurately present the financial condition of
Borrower as of the date thereof and the results of the operations of Borrower
for the period covered thereby, and have been prepared in accordance with GAAP,
(ii) since such date, there have been no material adverse changes in the
financial condition of Borrower, and (iii) Borrower has no knowledge of any
liabilities, contingent or otherwise, which are not reflected in said balance
sheet, and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a Material Adverse
Effect upon its financial condition, operations or business as now conducted;
(h) Borrower has no liability for any delinquent local, state or federal taxes,
and, if Borrower has contracted with any government agency, it has no liability
for renegotiation of profits; and (i) Borrower, as of the date hereof, possesses
all necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with valid trademarks, trade names, copyrights, patents, patent rights and
license rights of others.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank;
which consent not to be unreasonably withheld;
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in Section 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted or other assets
which are obsolete or otherwise considered surplus), or execute any financing
statements covering the Collateral in favor of any secured party or Person other
than Bank;
4.
E. Make any loan or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower);
F. Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or liquidate, dissolve, merge
or consolidate, or commence any proceedings therefore; or, except in the
ordinary and normal course of its business as now conducted, sell (including,
without limitation, the selling of any property or other asset accompanied by
the leasing back of the same) any assets including any fixed assets, any
property, or other assets necessary for the continuance of its business as now
conducted; and
G. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Permit representatives of Bank to conduct an audit of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise all under reasonable procedures
acceptable to Bank and at Borrower's sole expense; provided further that, prior
to an Event of Default, Borrower shall not be responsible for the expense of
more than one (1) such audit, in any fiscal year. Borrower hereby acknowledges
and agrees that upon completion of any such audit, Bank shall have the right to
adjust the Borrowing Base percentage, in its sole and reasonable discretion,
based on its review of the results of such Collateral audit;
C. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any sums
payable by Borrower under any Loan Account or any other obligation secured
hereby enforcing any term or provision of this Loan Agreement or otherwise or in
the checking, handling and collection of the Collateral and the preparation and
enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
business similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon shall at the option of Bank become the
sole property of Bank, such policies and the proceeds of any other insurance
covering or in any way relating to the Collateral, whether now in existence or
hereafter obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of any Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
Section I hereof, as applicable, Borrower shall immediately pay to Bank for
credit to such Loan Amount the amount of such excess;
5.
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain
and preserve its existence in the State of its incorporation and any other
state(s) in which Borrower conducts its business, except with respect to such
other state(s), as the failure to do so would not have a Material Adverse
Effect;
I. Maintain public liability, property damage and workers
compensation on insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Maintain its primary banking accounts with Bank; and
N. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis,
consistent with previous years. Compliance with the financial covenants shall be
calculated and monitored on a monthly basis, except as shall be expressly stated
to the contrary. Borrower affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth (meaning all
assets, excluding any value for goodwill, trademarks, patents, copyrights,
organization, expense and other similar intangible items, less all liabilities,
plus Subordinated Debt) of not less than $4,000,000.00 and beginning with the
month ending December 31, 1997, of not less than $5,000,000.00;
B. At all times maintain a Maximum Ratio of Total Liabilities
(meaning all liabilities, excluding Subordinated Debt) to Tangible Net Worth (as
defined in Section 10.A. hereof) not to exceed 1.00:1.00;
C. At all times maintain a Minimum Quick Ratio (meaning all cash
plus Accounts divided by current liabilities) of not less than 1.25:1.00 and
beginning with the month ending December 31, 1997, of not less than 1.50:1.00;
D. As soon as it is available, but not later than twenty (20) days
after and as of the end of each month, deliver to Bank an internally-prepared
financial statement consisting of a balance sheet and profit and loss
statement, in form
6.
satisfactory to Bank, and a Compliance Certificate in the form of Exhibit B
attached hereto and incorporated herein by this reference, certified by an
officer of Borrower;
E. As soon as it is available, but not later than ninety (90) days
after the end of Borrower's fiscal year, deliver to Bank unqualified copies of
Borrower's consolidated financial statements together with changes in financial
position audited by an independent certified public accountant selected by
Borrower but acceptable to Bank;
F. So long as the Facility-A Commitment shall be outstanding or any
amounts remain outstanding and unpaid under the Facility-A Loan Account, as soon
as it is available, but not later than twenty (20) days after and as of the end
of each month, deliver to Bank, in such form and detail as Bank may require,
statements showing aging of the Accounts and Borrower's accounts payable,
together with a Borrowing Base Certificate in the form of Exhibit C attached
hereto and incorporated herein by this reference, certified by an officer of
Borrower. Notwithstanding the foregoing, as a condition to any request for a
Facility-A Loan, Borrower shall have delivered to Bank said aging statements as
well as a Borrowing Base Certificate covering the most recent month then ended
prior to the date of Borrower's request for an advance for a Facility-A Loan;
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$100,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of
in respect of the Commitments, a loan fee in the amount of Six Thousand Seven
Hundred Fifty Dollars ($6,750.00).
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, breach be made in any
warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under Section 8,
Subsection 9.A., 9.B., 9.C., 9.F., 9.G., 9.H. and 9.I., Subsections 10.A.,
10.B., 10.C., 10.D., 10.E. and 10.F. of this Loan Agreement and sections 1 and 2
of the General Security Agreement; (c) Any statement, warranty or representation
made by Borrower at any time proves false; (d) Borrower defaults in the
repayment of any principal of or the payment of any interest on any indebtedness
exceeding in the aggregate principal amount of $50,000.00 or breaches or
violates any term or provision of any promissory note, loan agreement,mortage,
indenture or other evidence of such indebtedness pursuant to which amounts
outstanding in the aggregate exceed $50,000,00 if the effect of such breaches is
to permit the acceleration of such indebtedness, whether or not waived by the
note holder or obligee, and such failure shall not have been cured to Bank's
satisfaction within fifteen (15) calendar days after Borrower shall become aware
thereof, whether by written notice from Bank or otherwise, or there has in fact
been an acceleration of such indebtedness; (e) Borrower becomes insolvent or
makes an assignment for the benefit of creditors; (f) Any proceeding be
commenced by Borrower under any bankruptcy, reorganization, arrangement,
readjustment of debt or moratorium law or statute or, any such a proceeding is
commenced against Borrower and is not dismissed or stayed within ten (10) days
(provided that no Loans will be made prior to the dismissal of such proceeding);
(g) Any money judgment, writ of attachment, garnishment, execution or other
legal process be entered against Borrower or issued against any material
property of Borrower which is not fully covered by insurance (subject to
reasonable deductibles) and remains unvacated, unbonded, unstayed or unpaid or
undischarged for more than fifteen (15) days (whether or not consecutive) or in
any event later than five (5) days prior to the date of any proposed sale
thereunder, or if any assessment for taxes against Borrower other than against
any of its real property, is made by the Federal or State government or any
department thereof; or (h) Any change in Borrower's financial condition,
prospects or operations which has a Material Adverse Effect. Upon the occurrence
and during the continuance of an event of Default, Bank may, at its option and
without demand first made and without notice to Borrower, do any one or more of
the following: (i) Terminate its obligation to make loans to Borrower as
provided in Section 1 hereof; (ii) Declare all sums secured hereby immediately
due and payable;
7.
(iii) Immediately take possession of the Collateral wherever it may be found,
using all legally permissible means to do so, or require Borrower to assemble
the Collateral and make it available to Bank at a place designated by Bank which
is reasonably convenient to Borrower and Bank, and Borrower waives all claims
for damages due to or arising from or connected with any such taking; (iv)
Proceed in the foreclosure of Bank's security interest and sale of the
Collateral in any manner permitted by law, or provided for herein; (v) Sell,
lease or otherwise dispose of the Collateral at public or private sale, with or
without having the Collateral at the place of sale, and upon terms and in such
manner as Bank may determine, and Bank may purchase same at any such sale; (vi)
Retain the Collateral in full satisfaction of the obligations secured thereby to
the extent permitted under the Uniform Commercial Code; or (vii) Exercise any
remedies of a secured party under the Uniform Commercial Code. Prior to any such
disposition, Bank may, at its option, cause any of the Collateral to be repaired
or reconditioned in such manner and to such extent as Bank may deem advisable,
and any sums expended therefor by Bank shall be repaid by Borrower and secured
hereby. Bank shall have the right to enforce one or more remedies hereunder,
successively or concurrently, and any such action shall not estop or prevent
Bank from pursuing any further remedy which it may have hereunder or by law. If
a sufficient sum is not realized from any such disposition of the Collateral to
pay all obligations secured by this Loan Agreement, Borrower hereby promises and
agrees to pay Bank any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. GOVERNING LAW; JUDICIAL REFERENCE
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law)
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Xxxxx County, if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP (S) 170.6. The referee shall (x) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (y) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgement
shall be entered pursuant to CCP (S) 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by
8.
filing a petition for a hearing and/or trial. All discovery permitted by this
Loan Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new proceeding or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the referee
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S) 1280 through (S) 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
E. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such Agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
9.
BANK: BORROWER:
IMPERIAL BANK TUT SYSTEMS, INC.,
A CALIFORNIA CORPORATION
BY: [SIGNATURE ILLEGIBLE] BY: /s/ Xxxxxx X. Xxxxxxxx
------------------------------ ---------------------------------
NAME: [SIGNATURE ILLEGIBLE] NAME: Xxxxxx X. Xxxxxxxx
---------------------------- ------------------------------
TITLE: ASSISTANT VICE PRESIDENT TITLE: CFO
---------------------------- ------------------------------
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBIT A: DEFINITIONS
SCHEDULE 1 TO EXHIBIT A: LIST OF SPECIFIC PERMITTED INDEBTEDNESS
SCHEDULE 2 TO EXHIBIT A: LIST OF SPECIFIC PERMITTED LIENS
EXHIBIT B: COMPLIANCE CERTIFICATE
EXHIBIT C: BORROWING BASE CERTIFICATE
10.
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder ("including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the Intellectual Property Security Agreement or otherwise.
"COMMITMENTS" means, collectively, the Facility-A Commitment, the Facility-
B Commitment and the Facility-C Commitment extended to Borrower pursuant to
Section 1.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or
to make payment for any products, materials or supplies or for any
transportation, services or lease regardless of the non-delivery or non-
furnishing thereof, in any such case if the purpose or intent of such agreement
is to provide assurance that such obligation will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected (in whole or in part) against loss in respect
thereof. The amount of any Contingent Obligation of any Person shall be deemed
to be an amount equal to the maximum amount of such Person's Liability with
respect to the stated or determinable amount of the primary obligation for which
such Contingent Obligation is incurred or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its sole
reasonable discretion shall determine are eligible from time to time; provided,
however, that in no event shall Eligible Accounts include the following:
(1) all Accounts under which payment is not received within the
earlier Of (a) 90 days from the applicable invoice date and (b) 60 days
from the applicable payment due date;
(2) all Accounts against which the account debtor or any other Person
obligated to make payments thereon asserts any defense, offset,
counterclaim or other right to avoid or reduce the liability represented by
the Accounts;
Exhibit A
Page 1 of 5
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
(5) Accounts due from an account debtor if more than twenty-five
percent (25.0%) of the aggregate amount of Accounts of such account debtor
have at that time remained unpaid for more than the earlier of (a) ninety
(90) days from the applicable invoice date and (b) sixty (60) days from the
applicable payment due date;
(6) Accounts with respect to international transactions unless either
(a) such Accounts are insured or covered by a letter of credit in a manner
and form acceptable to the Bank or (b) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds twenty-five percent (25.0%) of the total accounts receivable
balance ("Concentration Limit"); provided, however, the Concentration
Limit for Accounts of one account debtor, selected by Borrower and approved
by Bank, shall be forty percent (40.0%);
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offer exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"Event of Default" has the meaning set forth in Section 12.
"Facility-A Maturity Date" has the meaning set forth in Section 1.A.
"Facility-B Maturity Date" has the meaning set forth in Section 1.B.
"Factuality-C Maturity Date" has the meaning set forth in Section 1.C.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
(Tangible and Intangible Personal Property) dated of even date herewith, made by
Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding, indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (1) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such person of the nature described in clauses (a), (b), (c), (d),
(e) above, that is secured by a Lien on assets of such Person and which is non-
recourse to the credit of such Person, ^^ILLEGIBLE TEXT^^ but to the extent of
the fair market value of the assets so subject to the Lien, (g) obligations of
such Person arising under
Exhibit A
Page 2 of 5
acceptance facilities or under facilities for the discount of accounts
receivable of such Person, (h) any obligation of such person to reimburse the
issuer of any letter of credit issued for the account of such Person upon which
a draw has been made, and (i) any lease having the effect of indebtedness
whether or not the same shall be treated as such on the balance sheet of
Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement dated of even date herewith, made by Borrower in
favor of Bank.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN ACCOUNT OR LOAN ACCOUNTS" means individually and collectively, the
Facility-A Loan Account, the Facility-B Loan Account and the Facility-C Loan
Account.
"LOAN DOCUMENTS" means this Loan Agreement, the General Security Agreement
the IP Security Agreement and that certain Agreement to Provide Insurance (Real
or Personal Property) dated of even date herewith, each as executed by Borrower
in favor of Bank, together with all other documents entered into or delivered
pursuant to any of the foregoing, in each case as originally executed or as the
same may from time to time be supplied, modified or amended,
"LOANS" means individually and collectively, the Facility-A Loans, the
Facility-B Loans and the Facility-C Loans advanced pursuant to Section 1.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform material Obligations, (d) materially impairs or
could reasonably be expected to materially impair the value or priority of mk's
security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Document.
"Permitted Indebtedness" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Document;
(2) the existing Indebtness and Contingent Obligations disclose on
Schedule 1 attached hereto and incorporated herein by this reference
provided that the principal amount thereof is not increased the terms
therefore are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course of
business and to the extent otherwise permitted hereunder;
Exhibit A
Page 3 of 5
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"Permitted Liens" means the following:
(1) liens and security interests existing as of this date and
disclosed in Schedule 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(3) liens and security interests (a) upon or in any equipment acquired
or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition
of such equipment and in an amount not greater than the purchase price
thereof or (b) existing on such equipment at the time of its acquisition,
provided that the lien and security interest is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business
not interfering in any material respect with the business of Borrower and
any interest or title of a lessor or licensor under any lease or license,
as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, provided that the payment thereof
is not yet required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder, and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, or governmental agency.
Exhibit A
Page 4 of 5
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
Exhibit A
Page 5 of 5
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT is executed on August 16, 1997 (this
"Security Agreement"), by TUT SYSTEMS, INC., a California corporation
(hereinafter called "Grantor"). In consideration of financial accommodations
given, to be given or continued, Grantor hereby grants to IMPERIAL BANK
(hereinafter called "Bank") a security interest in (a) all property (i)
delivered to Bank by Grantor, (ii) which shall be in Bank's possession or
control in any matter or for any purpose, (iii) described below or (iv) now
owned or hereafter acquired by Grantor of the type or class described below
and/or in any exhibit or supplementary schedule hereto, or in any financing
statement filed by Bank and executed by or on behalf of Grantor; and (b) the
proceeds, increase and products of such property, all accessions thereto, and
all property which Grantor may receive on account of such collateral
(collectively referred to as "Collateral") to secure payment and performance of
all of Grantor's present or future debts or obligations to Bank, whether
absolute or contingent (hereafter referred to as "Debt"). See Exhibit A attached
hereto and incorporated herein by this reference for a description of the
Collateral. The Collateral which is not in Bank's possession will be located at
the locations set forth on Exhibit B attached hereto and incorporated herein by
this reference. Unless otherwise defined herein, initially capitalized terms
used herein shall have the meanings given them in the California Uniform
Commercial Code, as defined in that certain Loan Agreement dated as of the date
hereof entered into by and among Grantor and Bank (the 'Loan Agreement") or as
defined in Exhibit A hereto.
Grantor hereby represents, warrants and agrees:
1. Grantor will immediately pay (a) any Debt when due, (b) Bank's costs
of collecting the Debt, of protecting, insuring or realizing on Collateral, and
any expenditure of Bank pursuant hereto, including attorneys' fees and expenses,
with interest at the rate of twenty-four percent (24%) per year, or the rate
applicable to the Debt, whichever is less, from the date of expenditure, and (c)
any deficiency after realization of Collateral.
2. Grantor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefor, and will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Grantor's possession or the possession of its
contract manufacturers (unless specifically otherwise agreed to by Bank in
writing), Grantor will:
(a) Have or has possession of the Collateral at the location disclosed to
Bank and will not remove the Collateral from said location, except for sales in
the ordinary course of Borrower's business.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it if
necessary and otherwise deal with the Collateral in all such ways as are
considered good practice by owners of like property, use it lawfully and only as
permitted by insurance policies, and permit Bank to inspect the Collateral at
any reasonable time in accordance with the terms of the Loan Agreement.
(d) Not sell, contract to sell, lease, encumber or transfer the Collateral
(other than the disposition of such inventory Collateral in the ordinary course
of Borrower's business and other assets which are obsolete or otherwise
considered surplus) until the Debt has been paid or performed in full, even
though Bank has a security interest in the proceeds of such Collateral.
1.
4. As to Collateral which is inventory and accounts, Grantor:
(a) May, until notice from Bank after the occurrence and during the
continuance of an Event of Default, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and collect the
cash proceeds thereof.
(b) Will, upon notice from Bank after the occurrence and during the
continuance of an Event of Default, deposit all cash proceeds as received in a
demand deposit account with Bank, containing only such proceeds and deliver
statements identifying units of inventory disposed of, accounts which gave rise
to proceeds, and all acquisitions and returns of inventory as required by Bank.
(c) Will receive in trust after the occurrence and during the continuance
of an Event of Default, schedule on forms satisfactory to Bank and, upon notice
from Bank, deliver to Bank all non-cash proceeds other than inventory received
in trade.
(d) So long as there does not exist an Event of Default, may obtain
release of Bank's interest in individual units of inventory upon request
therefore, payment to Bank of the release price of such units shown on any
Collateral schedule supplementary hereto, and compliance herewith as to proceeds
thereof.
5. As to Collateral which are Accounts, Chattel Paper, General
Intangibles and Proceeds described in Section 4(c) above, Grantor warrants,
represents and agrees:
(a) All such Collateral is genuine, enforceable in accordance with its
terms and conditions precedent (except as disclosed to and accepted by Bank in
writing), and is supported by consecutively numbered invoices to, or rights
against the debtors thereon. Grantor will supply Bank with duplicate invoices or
other evidence of Grantor's rights on Bank's request.
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract.
(c) All Chattel Paper is in compliance with applicable law as to form,
content and manner of preparation and execution and has been properly
registered, recorded, and/or filed to protect Grantor's interest thereunder.
(d) If an account debtor shall also be indebted to Grantor on another
obligation, any payment made by such account debtor not specifically designate
to be applied on any particular obligation shall be considered to be a payment
on the account in which Bank has a security interest. Should any remittance
include a payment not on an account, it shall be delivered to Bank and, if no
Event of Default has occurred, Bank shall pay Grantor the amount of such
payment.
(e) Grantor agrees that following the occurrence and during the
continuance of an Event of Default, Grantor shall not compromise, settle or
adjust any Account or renew or extend the time of payment thereof without Bank's
prior written consent.
(f) Until Bank exercises its rights to collect the Accounts pursuant to
Section I1 hereof, Grantor will collect with diligence all Grantor's Accounts.
Any collection of Accounts by Grantor, whether in the form of cash, checks,
notes, or other instruments for the payment of money (properly endorsed or
assigned where required to enable Bank to collect same), shall be in trust for
Bank. If an Event of Default has occurred and is continuing, Grantor shall keep
all such collections separate and apart from all other funds and property so as
to be capable of identification as the property of Bank and deliver said
collections daily to Bank in the identical form received. The proceed of such
collections when received by Bank may be applied by Bank directly to the payment
of the applicable Loan Account or to any other obligation same hereby. Any
credit given by Bank upon receipt of said proceeds shall be conditional credit
subject to collection. Returned items at Bank's option may be charged to
Grantor's deposit account with Bank. All collections of the Accounts shall be
set forth on an itemized schedule, showing the name of the account debtor, the
amount of each payment and such other information as Bank may request.
2.
(g) Until Bank exercises its rights to collect the Accounts pursuant to
Section 11 hereof, Grantor may continue its present policies with respect to
returned merchandise and adjustments. However, Grantor shall immediately notify
Bank of all cases involving repossessions, and material loss or damage of or to
merchandise represented by the Accounts.
6. Grantor owns all of the Collateral absolutely and no other person has
or claims any interest in any of the Collateral, except for Permitted Liens and
as disclosed to and accepted by Bank in writing. Grantor will defend any
proceeding which may affect title to or Bank's security interest in any of the
Collateral, and will indemnify and hold Bank free and harmless from all costs
and expenses of Bank's defense.
7. Grantor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments (except for taxes not yet due and
payable or which are contested in good faith and for which Grantor has set aside
adequate reserves) now or hereafter imposed on or affecting the Collateral and,
if the Collateral is in Grantor's possession, the realty on which the Collateral
is located.
8. Grantor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank (to
the extent customarily maintained by businesses similar to Borrower's), and
hereby assigns such policies to Bank, agrees to deliver them to Bank at Banks
request, and authorizes Bank to make any claim thereunder, to cancel the
insurance upon Grantor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Grantor should fail to
deliver the required insurance policy or policies to Bank, Bank may, at
Grantor's cost and expense, without any duty to do so, get and pay for insurance
naming as the insured, at Bank's option, either both Grantor and Bank, or only
Bank, and the cost thereof shall be secured by this Security Agreement, and
shall be repayable as provided in Section 1 above.
9. Grantor will give Bank any information it reasonably requires in
accordance with the terms of the Loan Documents. All information at any time
supplied to Bank by Grantor (including, but not limited to, the value and
condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) is correct and complete, and Grantor
will notify Bank of any adverse change in such information. Grantor will
promptly notify Bank of any change of Grantor's residence, chief executive
office or mailing address.
10. At any time and from time to time, upon the written request of Bank,
and at the sole expense of Grantor, Grantor shall promptly and duly execute and
deliver any and all such further instruments and documents and take such further
action as Bank may reasonably deem desirable to obtain the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, (a) using its best efforts to secure all consents and
approvals necessity or appropriate for the grant of a security interest to Bank
in any Contract or License held by Grantor or in which Grantor has any rights
not heretofore assigned, (b) filing any financing or continuation statements
under the UCC with respect to the security interests granted hereby, (c) filing
or cooperating with Bank in filing any forms or other documents required to be
filed with the United States Patent and Trademark Office, United States
Copyright Office, or any filings in any foreign jurisdiction or under any
international treaty, required to secure or protect Bank's interest in the
Collateral, (d) transferring Collateral to Bank's possession (if a security
interest in such Collateral can be perfected by possession), (e) placing the
interest of Bank as lienholder on the certificate of title (or other evidence of
ownership) of any vehicle owned by Grantor or in or with respect to which
Grantor holds a beneficial interest and (f) using its best efforts to obtain
waivers of liens from landlords and mortgagees. Grantor also hereby authorizes
Bank to file any such financing or continuation statement without the signature
of Grantor. If any amount payable under or in connection with any of the
Collateral is or shall become evidenced by any Instrument, such Instrument,
other than checks and notes received in the ordinary course of business, shall
be duly endorsed in a manner satisfactory to Bank and delivered to Bank promptly
upon Grantor's receipt thereof.
11. Upon the occurrence and during the continuation of an Event of
Default Bank may, without prior notice to Grantor, collect the Collateral and
may give notice of assignment of Accounts to any and all account debtors and
Grantor does hereby make, constitute and appoint Bank its irrevocable, true and
lawful attorney-in-fact with power to do any act which Grantor is obligated
hereby to do, to exercise such rights as Grantor may exercise, to use such
equipment as Grantor might use, to enter Grantor's premises to give notice of
Bank's security interest, and to collect Collateral and proceeds and to execute
and file in Grantor's name any financing statements and amendments thereto
required to perfect Bank's security
3.
interest hereunder, all to protect and preserve the Collateral and Bank's rights
hereunder. Without limiting the generality of the foregoing, after and during
the continuance of an Event of Default, Bank may:
(a) Endorse the name of Grantor, collect and receive delivery or payment
of Instruments and Documents constituting Collateral.
(b) Demand, xxx for, give acquaintances for, make extension agreements
with respect to or affecting Collateral, exchange it for other Collateral,
release persons liable thereon or take security for the payment thereof, and
compromise, prosecute or defend any action, claim, proceeding or other disputes
in connection therewith.
(c) Use or operate Collateral for the purpose of preserving Collateral or
its value and for preserving or liquidating Collateral.
12. Discharge of Grantor except for full payment, or any extension,
forbearance, change of rate of interest, or acceptance, release or substitution
of Collateral or any impairment or suspension of Bank's rights against Grantor,
or any transfer of Grantor's interest to another shall not affect the liability
of Grantor hereunder. Until the Debt shall have been paid or performed in full,
Bank's rights shall continue even if the Debt is deemed unenforceable. Grantor
hereby waives: (a) any right to require Bank to proceed against Grantor before
any other, or to pursue any other remedy; (b) presentment, protest and notice of
protest, demand and notice of nonpayment, demand or performance, notice of sale,
and advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid or performed
in full; and (d) any right of subrogation to Bank until the Debt shall have been
paid or performed in full.
13. After and during the continuance of an Event of Default, at Bank's
option, without demand or notice, all or any part of the Debt shall immediately
become due and payable. Bank shall have all rights given by law, and may sell,
in one or more sales, Collateral in any county where Bank has an office. Bank
may purchase at such sale. Sales for cash or on credit to a wholesaler, retailer
or user of the Collateral, or at public or private auction, are all to be
considered commercially reasonable. Bank may require Grantor to assemble the
Collateral and make it available to Bank at the entrance to the location where
the Collateral is stored, or at a place designated by Bank.
14. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of Grantor
or right of Bank to modify this Security Agreement, or waive any other similar
default.
15. Upon the transfer of all or any pan of the Debt, Bank may transfer
all or any part of the Collateral. Bank may deliver all or any pan of the
Collateral to any Grantor at any time. Any such transfer or delivery shall
discharge Bank from all liability and responsibility with respect to such
Collateral transferred or delivered. This Security Agreement benefits Bank's
successors and assigns and binds Grantor's heirs, legatees, personal
representatives, successors and assigns. Time is of the essence. This Security
Agreement, the other Loan Documents and the exhibit(s) attached hereto contain
the entire security agreement between Bank and Grantor. Grantor will execute any
additional agreements, assignments or documents reasonably required by Bank to
carry this Security Agreement into effect.
16. If one or more Grantor signs this Security Agreement, their liability
hereunder shall be joint and several. Any Grantor who is married hereby agrees
that recourse may be had against his or her separate property for the Debt.
17. This Security Agreement shall be governed by and construed in
accordance with the laws of the State of California, to the jurisdiction of
whose courts Grantor hereby agrees to submit. Grantor agrees that service of
process may be accomplished by any means authorized by California law. All words
used herein in the singular shall be considered to have been used in the plural
where the context and construction so require.
4.
18. Grantor hereby acknowledges receiving a copy of this Security
Agreement and waives all rights to receive from Bank a copy of any financing
statement or financing change statement filed, or any verification statement
received, at any time in respect of this Security Agreement.
GRANTOR
Tut Systems, Inc.
a California corporation
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------
Printed Name: Xxxxxx X. Xxxxxxxx
----------------------
Title: CFO
------------------------------
5.
EXHIBIT A
DESCRIPTION OF COLLATERAL
A. Collateral. This Exhibit A covers all right, title and interest of
Grantor in, to and under all of the following, wherever located and whether now
owned or hereafter owned or acquired (collectively, the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Deposit Accounts of Grantor;
(e) All Documents of Grantor;
(f) All Equipment of Grantor;
(g) All Fixtures of Grantor;
(h) All General Intangibles of Grantor;
(i) All Instruments of Grantor;
(j) All Inventory of Grantor;
(k) All Investment Property of Grantor;
(l) All Licenses of Grantor;
(m) All property of Grantor held by Bank or any other party for whom
Bank is acting as agent hereunder, including, without limitation, all property
of every description now or hereafter in the possession or custody of or in
transit to Bank or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Grantor, or as
to which Grantor may have any right or power;
(n) All other goods and personal property of Grantor whether tangible
or intangible and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, Grantor and wherever located; and
(o) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing.
B. Defined Terms. Unless otherwise defined herein, the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Accounts" means any "account," as such term is defined in Section 9106 of
the UCC, now owned or hereafter ire by Grantor and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments ) now owned or hereafter received or quire by or
belonging or owing to Grantor (including, without limitation, under say trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Grantor or from any other transaction, whether or not the same
involves the sale of goods or services by Grantor (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Grantor's rights in, to and under all
EXHIBIT A
PAGE 1 OF 4
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Grantor's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Grantor under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Grantor (whether or not yet earned by performance on the pan
of Grantor or in connection with any other transaction), now in existence or
hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
"Chattel Paper" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Grantor.
"Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel paper, Documents or
Instruments) in or under which Grantor may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
"Copyright License" means all of the following now owned or hereafter
acquired by Grantor: any agreement granting any right in or to any Copyright or
Copyright registration (whether Grantor is the license or the licensor
thereunder) including, without limitation, licenses pursuant to which Grantor
has obtained the exclusive right to use a copyright owned by a third party.
"Copyrights" means all of the following in which Grantor now holds or
hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or of any other country; (ii) registrations, applications and recordings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country or political subdivision thereof;
(iii) any continuations, renewals or extensions thereof; (iv) any registrations
to be issued in any pending applications; (v) prior versions of works covered by
copyright and all works based upon, derived from, or incorporating such works;
(vi) income, royalties, damages, claims, and payments now and hereafter due and
payable with respect to copyrights including, without limitation, damages and
payments for past, present, or future infringement; (vii) rights to xxx for
past, present and future infringements of copyright; and (viii) any other rights
corresponding to any of the foregoing rights throughout the world.
"Deposit Account" means any "deposit account" as such term is defined in
Section 9105(e) of the UCC, and should include, without limitation, any demand,
time, savings passbook or like account, now or hereafter maintained by or for
the benefit of Grantor, or in which Grantor now holds or hereafter acquires any
interest, with a bank, savings and loan association, credit union or like
organization (including Bank) and all funds and amounts therein, whether or not
restricted or designated for a particular purpose.
"Documents" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Grantor.
"Equipment" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Grantor and, in any
event, shall include, without limitation, all machinery, equipment, furnishings,
vehicle, computers and other electronic data-processing and any other office
equipment of any nature whatsoever, any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, installed thereto except for equipment under permitted items.
"Fixtures" means "fixtures," as such term is defined in Section 9313(I)(a)
of the UCC, now or hereafter owned or acquired by Grantor and, in any event,
shall include, without limitation, regardless of where located, all of the
fixtures, systems, machinery, apparatus, equipment and fittings of every kind
and nature whatsoever and all appurtenances and additions thereto and
substitutions or replacements thereof, now or hereafter attached or affixed to
or constituting a part of, or located in or upon, real property wherever
located, including, without limitation, nil heating, electrical, mechanical,
lighting, lifting, plumbing, ventilating, air-conditioning and air cooling,
refrigerating, food preparation, incinerating and power, loading and unloading,
signs, escalators, elevators, boilers, communication, switchboards, sprinkler
and other fire
EXHIBIT A
PAGE 2 OF 4
prevention and extinguishing fixtures, systems, machinery, apparatus and
equipment, and all engines, motors, dynamos, machinery, pipes, pumps, tanks,
conduits and ducts constituting a part of any of the foregoing, together with
all right, title and interest of Grantor in and to all extensions, improvements,
betterments, renewals, substitutes, and replacements of, and all additions and
appurtenances to any of the foregoing property, and all conversions of the
security constituted thereby, immediately upon any acquisition or release
thereof or any such conversion, as the case may be.
"General Intangibles" means any "general intangibles," as such term is
defined in Section 9106 of the UCC, now owned or hereafter acquired by Grantor
and, in any event, shall include, without limitation, all right, title and
interest which Grantor may now or hereafter have in or under any Contract, all
customer lists, Copyrights, Trademarks, Patents, rights or Intellectual
Property, interests in partnerships, joint ventures and other business
associations, Licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, recipes, experience, processes, models, drawings,
materials and records, goodwill (including, without limitation, the goodwill
associated with any Trademark, Trademark registration or Trademark licensed
under any Trademark License), claims in or under insurance policies, including
unearned premiums, uncertificated securities, deposit accounts, rights to
receive tax refunds and other payments and rights of indemnification.
"Instruments" means any "instrument," as such term is defined in Section
9105(1)0) of the UCC now owned or hereafter acquired by Grantor, including,
without limitation, all notes, certificated securities, and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" means all Copyrights, Patents, Trademarks, trade
secrets, customer lists, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
recipes, experience, processes, models, drawings, materials and records.
"Inventory" means any "inventory," as such term is defined in Section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by,
Grantor and, in any event, shall include, without limitation, all inventory,
merchandise, goods and Other personal property which are held by or on behalf of
Grantor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Grantor's business, or
the processing, packaging, promotion, delivery or shipping of the same, and all
furnished goods whether or not such inventory is listed on any schedules,
assignments or reports furnished to Bank from time to time and whether or not
the same is in transit Or in the constructive, actual or exclusive occupancy or
possession of Grantor or is held by Grantor or by others for Grantor's account,
including, without limitation, all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers and all
inventory which may be located on premises of Grantor or of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents or other
persons.
"Investment Property" means any "investment property," as such term is
defined in Section 9115(I)(f)of the UCC, now owned or hereafter acquired by
Grantor, including, without limitation, a security, whether certificated or
uncertificated, a Security entitlement, a securities account, a commodity
contract or a commodity account.
"License" means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by Grantor.
"Patent License" means any of the following now owned or hereafter acquired
by Grantor: any written agreement granting any right with respect to any
invention on which a Patent is in existence.
"Patents" means all of the following in which Grantor now holds or
hereafter acquire any interest: (a) letters patent of the United States or any
other county, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other
EXHIBIT A
PAGE 3 OF 4
country or any political subdivision thereof; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all xxxxx patents, divisionals,
and patents of addition; and (d) all patents to issue in any such applications.
"Proceeds" means "proceeds," as such term is defined in Section 9-306(1) of
the UCC and, in any event, shall include, without limitation, (a) any and all
Accounts, Chattel Paper, Instruments, cash or other proceeds payable to Grantor
from time to time in respect of the Collateral, (b) any and all proceeds of any
insurance,, indemnity, warranty or guaranty payable to Grantor from time to time
with respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to Grantor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any pan of the Collateral above by any governmental body, authority, bureau
or agency (or any person acting under color of governmental authority), (d) any
claim of Grantor against third parties (i) for past, present or future
infringement of any Patent or Patent License, (ii) for past, present or future
infringement of any Copyright or Copyright License, (iii) for past, present or
future infringement or dilution of any Trademark or Trademark License or for
injury to the goodwill associated with any Trademark, Trademark registration or
Trademark licensed under any Trademark License, (e) all certificates, dividends,
cash, Instruments and other property received or distributed in respect of or in
exchange for any Investment Property and (f) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral or any
Contract.
"Trademark License" means any written agreement granting any right in and
to any Trademark or Trademark registration (whether Grantor is the license or
the licensor thereunder).
"Trademarks" means any of the following now owned or hereafter acquire by
Grantor: (a) any and all trademarks, trade names, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings thereof, and
any applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof (the
"Marks"), (b) any reissues, extensions or renewals thereof, (c) the goodwill of
the business symbolized by or associated with Marks, (d) income, royalties,
damages and payments now and hereafter due and/or payable with respect to Marks,
including, without limitation, damages, claims and recoveries for past, present
or future infringement, misappropriation, or dilution, and (e) rights to xxx for
past, present and future infringements of Marks.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
-------- -------
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Bank's security interest in any collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
EXHIBIT A
PAGE 4 OF 4
EXHIBIT B
LOCATION OF COLLATERAL NOT IN BANK'S POSSESSION
1. 0000 Xxxxxx Xxx, Xxxxxxxx Xxxx, XX 00000.
2. Please add other address locations, if any. If none, please indicate "None"
below:
(See attached list from (FP Insurance Brokers)
EXHIBIT I
PAGE 1 OF 1
COLLATERAL ASSIGNMENT, PATENT MORTGAGE AND SECURITY AGREEMENT
THIS COLLATERAL ASSIGNMENT, PATENT MORTGAGE AND SECURITY AGREEMENT is made
as of August 16, 1997 ("Assignment"), by and between TUT SYSTEM, INC., a
California corporation ("Assignor"), and IMPERIAL BANK ("Assignee").
RECITALS
A. Assignee has agreed to lend to Assignor certain funds (the "Loan"),
and Assignor desires to borrow such funds from Assignee pursuant to the terms of
a Loan Agreement dated of even date. herewith (as the
same may be modified, amended, supplemented or restated from time to time, the
"Loan Agreement").
B. In order to induce Assignee to make the Loan, Assignor has agreed to
assign certain intangible property to Assignee for purposes of securing the
obligations of Assignor to Assignee.
Now, THEREFORE, the parties hereto agree as follows:
1. ASSIGNMENT, PATENT MORTGAGE AND GRANT OF SECURITY INTEREST. As
collateral as security for the prompt and complete payment and performance of
all of Assignor's present or future indebtedness, obligations and liabilities to
Assignee, including, without limitation, such indebtedness, obligations and
liabilities under the Loan Agreement and the other documents executed in
connection therewith (as the same may be modified, amended, supplemented or
restated from time to time, collectively, the "Loan Documents"), Assignor hereby
assigns, transfers, conveys and grants a security interest and mortgage to
Assignee, as security, in and to Assignor's entire right, title and interest in,
to and under the following, now or hereafter existing, created, acquired or held
by Assignor (all of which shall collectively be called the "Collateral"):
(a) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether. or not the same also
constitutes a trade secret, including, without limitation, those set forth on
Exhibit A attached hereto and incorporated herein by this reference
(collectively, the "Copyrights").
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products;
(c) Any and all design rights which may be available to Assignor;
(d) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-pan of the same, including, without limitation,
those set forth on Exhibit B attached hereto and incorporated herein by this
reference (collectively, the "Patents")
(e) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Assignor connected with and symbolized by
such trademarks, including, without limitation, those set forth on Exhibit C
attached hereto and incorporated herein by this reference (collectively, the
"Trademarks");
(f) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
1.
(h) All amendments, renewals and extensions of any of the Copyrights,
Patents or Trademarks; and
(i) All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE
CONSTRUED AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ALL
OF ASSIGNOR'S PRESENT OR FUTURE INDEBTEDNESS, OBLIGATIONS AND LIABILITIES TO
ASSIGNEE, INCLUDING, WITHOUT LIMITATION, SUCH INDEBTEDNESS, OBLIGATIONS AND
LIABILITIES UNDER THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.
2. AUTHORIZATION AND REQUEST. Assignor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this conditional assignment.
3. COVENANTS AND WARRANTIES. Assignor represents, warrants, covenants and
agrees as follows:
(a) Assignor is now the sole owner of the Collateral, except for non-
exclusive licenses granted by Assignor to its customers in the ordinary and
normal course of business as now conducted;
(b) Performance of this Assignment does not conflict with or result
in a breach of any agreement to which Assignor is party or by which Assignor is
bound, except to the extent that certain intellectual property agreements
prohibit the assignment of the rights thereunder to a third party without the
licensor's or other party's consent and this Assignment constitutes as
assignment;
(c) During the term of this Assignment, Assignor will not sell,
transfer, assign or otherwise encumber any interest in the Collateral, except
for (i) non-exclusive licenses granted by Assignor in the ordinary and normal
course of its business as now conducted or as set forth in this Assignment and
(ii) subject to Assignor's execution of appropriate documents, in form
acceptable to Assignee, to perfect or continue the perfection of Assignee's
interest in the Collateral, transfers to affiliates of Assignor,
(d) To its knowledge, each of the Patents is valid and enforceable,
and no part of the Collateral has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Collateral violates
the rights of any third party;
(e) Assignor shall promptly advise Assignee of any material changes
in the composition of the Collateral, including but not limited to any
subsequent ownership right of Assignor in or to any Copyright, Patent or
Trademark not specified in this Assignment;
(f) Assignor shall (i) protect, defend and maintain the validity and
enforceability of the Copyrights, Patents and Trademarks, (ii) use its best
efforts to detect infringements of the Copyrights, Patents and Trademarks and
promptly advise Assignee in writing of material infringements detected and iii)
not allow any Copyrights, Patents or Trademarks to be abandoned, forfeited or
dedicated to the public without the written consent of Assignee, which shall not
be unreasonably withheld, unless Assignor determines that reasonable business
practices suggest that abandonment is appropriate;
(g) Assignor shall promptly register the most recent version of
Assignor's material Copyrights, if not so already registered as Assignee may
reasonably request from time to time based on its review of the Quarterly Report
(as hereinafter defined) and shall, from time to time, execute and file such
other instruments, and take such further actions as Assignee may reasonably
request from time to time to perfect or continue the perfection of Assignee's
interest in the Collateral;
2.
(h) This Assignment creates, and in the case of after acquired
Collateral, this Assignment will create at the time Assignor first has rights in
such after acquired Collateral, in favor of Assignee a valid and perfected first
priority security interest in the Collateral in the United States securing the
payment and performance of all present or future indebtedness, obligations and
liabilities of Assignor to Assignee, including, without limitation, such
indebtedness, obligations and liabilities under the Loan Agreement and the other
Loan Documents, upon making the filings referred to in Section 3(i) below,
subject only to Permitted Liens (as defined in the Loan Agreement);
(i) To its knowledge, except for, and upon, the filings with, as
applicable, (1) the United States Patent and Trademark office with respect to
the Patents and Trademarks, (2) the Register of Copyrights with respect to the
Copyrights and (3) the UCC Division of the California Secretary of State,
necessary to perfect the security interests and assignment created hereunder,
and except as has been already made or obtained, no authorization, approval or
other action by, and no notice to or filing with, any United States governmental
authority or United States regulatory body is required either (a) for the grant
by Assignor of the security interest granted hereby or for the execution,
delivery or performance of this Assignment by Assignor in the United States or
(b) for the perfection in the United States or the exercise by Assignee of its
rights and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to
Assignee by or on behalf of Assignor with respect to the Collateral is accurate
and complete in all material respects;
(k) Assignor shall not enter into any agreement that would materially
impair or conflict with Assignor's obligations hereunder without Assignee's
prior written consent, which consent shall not be unreasonably withheld.
Assignor shall not permit the inclusion in any material contract to which it
becomes a party of any provisions that could or might in any way prevent the
creation of a security interest in Assignor's rights and interests in any
property included within the definition of the Collateral acquired under such
contracts, except that certain contracts may contain anti-assignment provisions
that could in effect prohibit the creation of a security interest in such
contracts; and
(l) Upon any executive officer of Assignor obtaining actual knowledge
thereof, Assignor will promptly notify Assignee in writing of any event that
materially adversely affects the value of any Collateral, the ability of
Assignor to dispose of any Collateral or the rights and remedies of Assignee in
relation thereto, including the levy of any legal process against any of the
Collateral.
4. ASSIGNEE'S RIGHTS. Assignee shall have the right, but not the
obligation, to take, at Assignor's sole expense, any actions that Assignor is
required under this Assignment to take but which Assignor fails to take, after
(15) days' notice to Assignor. Assignor shall reimburse and indemnify Assignee
for all reasonable costs and reasonable expenses incurred in the reasonable
exercise of its rights under this Section 4.
5. INSPECTION RIGHTS. Assignor hereby grants to Assignee and its
employees, representatives and Meats the right to visit, during reasonable hours
upon prior reasonable written notice to Assignor, any of Assignor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Assignor and as often as may be
reasonably requested.
6. FURTHER ASSURANCES; ATTORNEY IN FACT
(a) On a quarterly basis, Assignor agrees to deliver to Assignee a
report, in form acceptable to Assignee and certified by an officer of Assignor,
which lists all Copyrights, Patents and Trademarks that are material to the
operation of Assignor's business on an on-going basis, and in which Assignee
does not already have a perfected security interest (the "Quarterly Report");
provided, however, Assignor may provide a general description of the Copyrights
by type. Based upon review of the Quarterly Report, Assignee shall, in its
reasonable discretion, identify which Copyrights, Patents and Trademarks it
deems material to the operation of Assignor's business on an on-going basis or
the value of the Collateral.
3.
(b) On a continuing basis, Assignor will make, execute, acknowledge
and deliver, and file and record in the proper filing and recording places in
the United States, all such instruments, including appropriate financing and
continuation statements and collateral agreements and filings with the United
States Patent and Trademark Office and the Register of Copyrights, and take all
such action as may reasonably be necessary or advisable, or as reasonably
requested by Assignee, to perfect Assignee's security interest in all
Copyrights, Patents and Trademarks, which Assignee reasonably identifies
pursuant to Section 6(a) above as material to the operation of Assignor's
business on an on-going basis or the value of the Collateral, and otherwise to
carry out the intent and purposes of this Assignment, or for assuring and
confirming to Assignee the grant or perfection of a security interest in all
Collateral.
(c) Assignor hereby irrevocably appoints Assignee as Assignor's
attorney-in-fact, with full authority in the place and stead of Assignor and in
the name of Assignor, from time to time in Assignee's discretion, to take any
action and to execute any instrument which Assignee may reasonably deem
necessary or advisable to accomplish the purposes of this Assignment, including
(i) to modify, in its reasonable discretion, this Assignment without first
obtaining Assignor's approval of or signature to such modification by amending
Exhibit A, Exhibit B and Exhibit C thereof, as appropriate, to include reference
to any material right, title or interest in any Copyrights, Patents or
Trademarks acquired by Assignor after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Assignor no longer has or claims any right, title or
interest, (ii) to file, in its reasonable discretion, one or more financing-or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Assignor where permitted by law and (iii)
after the occurrence and during the continuance of an Event of Default, to
transfer the Collateral into the name of Assignee or a third party to the extent
permitted under the California Uniform Commercial Code.
7. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Assignment:
(a) An Event of Default occurs under the Loan Agreement or any of the
other Loan
Documents; or
(b) Assignor breaches any warranty or agreement in any material
respect made by Assignor in this Assignment and, as to any breach that is
capable of cure, Assignor fails to cure such breach within fifteen (15) days of
the occurrence of such breach if notice thereof has been given to Assignor.
8. REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, Assignee shall have the right to exercise all the remedies of a
secured party under the California Uniform Commercial Code, Including, without
limitation, the right to require Assignor to assemble the Collateral and any
tangible property to which Assignee has a security interest and to make it
available to Assignee at a place designated by Assignee. Assignee shall have a
nonexclusive, royalty free license to use the Copyrights, Patents and Trademarks
to the extent reasonably necessary to permit Assignee to exercise its rights and
remedies upon the occurrence and during the continuance of an Event of Default.
Assignor will pay any expenses (including reasonable attorneys' fees) incurred
by Assignee in connection with the exercise of any of Assignee's rights
hereunder, including, without limitation, any expense Incurred in disposing of
the Collateral. All of Assignee's rights and remedies with respect to the
Collateral shall be cumulative.
9. INDEMNITY. Assignor agrees to defend, indemnify and hold harmless
Assignee 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 Assignment and (b) all
losses or expenses In any way suffered, incurred, or paid by Assignee as a
result of or in any way arising out of, following or consequential to
transactions between Assignee and Assignor, whether under this Assignment or
otherwise (including, without limitation, reasonable attorneys' fees and
reasonable expenses), except for losses arising from or out of Assignee's gross
negligence or willful misconduct.
4.
10. REASSIGNMENT. At such time as Assignor shall completely satisfy all
of the obligations secured hereunder, Assignee shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to revest in Assignor full title to the property assigned hereunder,
subject to any disposition thereof which may have been made by Assignee pursuant
hereto.
11. NO FAILURE OR DELAY. No failure or delay on the part of Assignee, in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof.
12. ATTORNEYS' FEES. If any action relating to this Assignment is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements.
13. AMENDMENTS. This Assignment may be amended only by a written
instrument signed by both parties hereto.
14. COUNTERPARTS. This Assignment may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such Assignment shall become effective upon the execution of a counterpart
hereof or thereof by each of the panics hereto and telephonic notification that
such executed counterparts has been received by Assignor and Assignee.
15. GOVERNING LAW. This Assignment shall be governed by, and construed in
accordance With, the internal laws of the State of California, without regard to
principles of conflicts of law.
16. JUDICIAL REFERENCE. The terms and provisions of Section 15 of the
Loan Agreement are incorporated herein by this reference and made a part hereof.
17. CONFLICT. In the event of a conflict between any term and/or
provision contained in this Assignment with any term and/or provision contained
in the General Security Agreement (as defined in the Loan Agreement), the term
and/or provision of this Assignment shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the
day and year first above written.
ASSIGNEE ASSIGNOR
IMPERIAL BANK TUT SYSTEMS, INC.
A CALIFORNIA CORPORATION
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------- -------------------------------------
Printed Name: /s/ [SIGNATURE ILLEGIBLE] Printed Name: /s/ Xxxxxx X. Xxxxxxxx
---------------------------- ---------------------------------------
Title: ASSISTANT VICE PRESIDENT Title: CFO
---------------------------- ---------------------------------
Address of Assignee Address of Assignor
0000 Xxxx Xxxx Xxxx, Xxxxx 000 0000 Xxxxxx Xxx
Xxxxx Xxxx, Xxxxxxxxxx 00000 Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx Attention: Xxxxxx Xxxxxxxx
5.
