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EXHIBIT 10.29
[FREMONT FINANCIAL LOGO]
FREMONT FINANCIAL CORPORATION
$10,000,000
SECURED REVOLVING CREDIT AND
LETTER OF CREDIT FACILITY
TO
DIGITAL RECORDERS, INC.,
TWINVISION OF NORTH AMERICA, INC. AND
DIGITAL AUDIO CORPORATION
AS OF AUGUST 23, 1999
TABLE OF CONTENTS
ITEM CLOSING DOCUMENT
1 Loan and Security Agreement;
2 Assistant Secretaries Certificate;
3 Conditions Precedent Ride to Loan and Security Agreement;
4 Standby Letter of Credit Supplement to Loan and Security Agreement:
5 Stock Pledge Agreements (3);
6 Trademark Security Agreements (2);
7 Note Pledge Agreement;
8 Collateral Assignment of Rights Under Business Interruption Insurance Policy;
9 Continuing Guarantee;
10 Guarantor's Security Agreement; and
11 Validity Agreement
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of August 23, 1999,
among FREMONT FINANCIAL CORPORATION, a California corporation (Fremont), with a
place of business located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and DIGITAL RECORDERS, INC., a North Carolina corporation
(Digital), with its chief executive office located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-4068 and TWINVISION CORP. OF NORTH AMERICA,
INC., a North Carolina corporation (TwinVision), with its chief executive office
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
DIGITAL AUDIO CORPORATION, a North Carolina corporation (DCA), with its chief
executive office located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (Digital, TwinVision and DCA are hereinafter individually
referred to as a Borrower and collectively as Borrowers).
R E C I T A L S:
Each Borrower has requested that Fremont make available a revolving
credit facility to Borrowers, which facility shall be used by Borrowers to
finance their mutual and collective enterprise of manufacturing and servicing
visual and audible passenger information systems. In order to utilize the
financial powers of each Borrower in the most efficient and economical manner,
and in order to facilitate the financing of each Borrower's needs, Fremont will,
at the request of Borrowers, make loans to Borrowers under the credit facilities
on a combined basis and in accordance with the provisions hereinafter set forth.
Borrowers' business is a mutual and collective enterprise, and Borrowers believe
that the consolidation of all loans under this Agreement will enhance the
aggregate borrowing powers of each Borrower and ease the administration of their
loan relationship with Fremont, all to the mutual advantage of Borrowers.
Fremont's willingness to extend credit to ▇▇▇▇▇▇▇▇▇ and to administer each
▇▇▇▇▇▇▇▇'s collateral security therefor, on a combined basis as more fully set
forth in this Agreement, is done solely as an accommodation to Borrowers and at
Borrowers' request in furtherance of Borrowers' mutual and collective
enterprise.
Each Borrower has agreed to guarantee the obligations of each of the
other Borrowers under this Agreement and each of the other Loan Documents.
NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the parties hereto hereby agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 TERMS. In addition to the terms that are defined
within this Agreement, the following terms shall have the following definitions
when used in this Agreement:
Account Debtor means any Person who is or who may
become obligated under, with respect to, or on account of an Account.
Accounts means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to a
Borrower arising out of the sale or lease of goods or the rendition of services
by such Borrower, whether or not earned by performance, all credit insurance,
guaranties, and other security therefor, as well as all goods returned to or
reclaimed by such Borrower, and such Borrower's Books relating to any of the
foregoing.
Acquisition means any transaction, or any series of
related transactions, by which a Borrower directly or indirectly (i) acquires
any ongoing business or all or substantially all of the assets of any Person,
whether through the purchase of assets, merger or otherwise, (ii) acquires (in
one transaction or as the most recent transaction in a series of transactions)
control of at least a majority in ordinary voting power of the Voting Securities
of a corporation having ordinary voting power for the election of directors, or
(iii) acquires control of 50% or more of the Equity Interests in any other
Person.
Acquisition Documents means all stock purchase
agreements, merger agreements, asset purchase agreements or similar agreements,
documents or instruments entered into by a Borrower in connection with an
Acquisition and all schedules, exhibits and attachments forming a part thereof.
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Acquisition Loan means a Revolving Advance or
Acquisition Term Loan made by Fremont as provided in SECTION 2.1C of this
Agreement for the purpose of financing a Permitted Acquisition.
Acquisition Loan Conditions means each of the
following conditions which must be satisfied before Fremont shall be obligated
to fund an Acquisition Loan: (i) Fremont shall have determined, in its sole
discretion, that the requested Acquisition is a Permitted Acquisition; (ii)
Fremont shall have completed its field examination of the business to be
acquired and shall have found the results of such examination to be satisfactory
in all respects to Fremont and the information obtained may be used by Fremont
in determining applicable advance rates for the acquired business' assets for
purposes hereof; (iii) after giving effect to the funding of such Acquisition
Loan, the aggregate funded amount of all Acquisition Loans, together with any
Pending Acquisition Loans, do not exceed $5,000,000 in the aggregate; and (iv)
to the extent requested by Fremont, Fremont shall have received duly executed
Acquisition Term Notes.
Acquisition Note means any Note executed by a
Borrower in favor of Fremont in connection with an Acquisition.
Acquisition Term Loan has the meaning ascribed to it
in Section 2.1C hereof.
Agreement means this Loan and Security Agreement and
any riders, addenda, extensions, supplements, amendments or modifications to or
in connection with this Loan and Security Agreement.
Applicable Margin means (i) a percentage equal to one
and three-quarters percent (1.75%) with respect to all Loans other than
Confirmed Order Inventory Loans and Acquisition Loans, (ii) a percentage equal
to three and one-half percent (3.50%) with respect to Confirmed Order Inventory
Loans and (iii) a percentage equal to two percent (2.0%) with respect to
Acquisition Loans.
Authorized Representative means any officer, employee
or other representative of a Borrower authorized in writing by such Borrower to
transact business with Fremont.
Bankruptcy Code means the United States Bankruptcy
Code (11 U.S.C. Sections 101 et seq.), as amended, and any successor statute.
Borrower's Books means all of a Borrower's books and
records including all of the following: ledgers; records indicating, summarizing
or evidencing such Borrower's assets (including the Collateral) or liabilities;
all information relating to a Borrower's business operations or financial
condition; and all computer programs (whether owned by such Borrower or in which
it has an interest), disk or tape files, printouts, runs or other computer
prepared information, and the equipment containing such information.
Business Day means any day which is not a Saturday,
Sunday or other day on which banks in the State of Georgia are authorized or
required to close.
Code means the Georgia Uniform Commercial Code, as
amended from time to time.
Collateral means all of the following: the Accounts;
the Equipment; the General Intangibles; the Inventory; the Investment Property;
the Negotiable Collateral; any money or other assets of a Borrower which
hereafter come into the possession, custody or control of Fremont; and all
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the Collateral, and any
and all Accounts, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, money, deposit accounts or other tangible or
intangible property resulting from the sale or other disposition of the
Collateral, or any portion thereof or interest therein, and the proceeds
thereof.
Conditions Precedent Rider means that certain
Conditions Precedent Rider to this Agreement dated as of the date hereof between
Fremont and Borrowers.
Confirmed Order Inventory Loan means any Loan made by
Fremont hereunder based on Confirmed Order Inventory.
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Confirmed Order means an irrevocable order for goods
received by TwinVision or TCS for which TwinVision or TCS has provided to
Fremont such written evidence as Fremont may require from time to time.
Confirmed Order Inventory means Inventory of
TwinVision or TCS that constitute completed components which will be used in
goods for which TwinVision or TCS has received a Confirmed Order and which would
constitute Eligible Inventory except for the fact that it constitutes Confirmed
Order Inventory.
Confirmed Order Inventory Advance Percentage means a
percentage equal to the advance percentages set forth below for the Confirmed
Order Percentage corresponding thereto:
Advance Percentage Confirmed Order Percentage
-------------------------------------------------------
35% Greater than or equal to 150%
30% Less than 150% but greater than or equal to 140%
25% Less than 140% but greater than or equal to 130%
20% Less than 130% but greater than or equal to 120%
10% Less than 120% but greater than or equal to 100%
0% Less than 100%
Confirmed Order Inventory Formula Amount means an
amount equal to the lesser of (1) the Confirmed Order Inventory Advance
Percentage multiplied by the aggregate cost value of Confirmed Order Inventory
or (2) the Confirmed Order Inventory Maximum Amount.
Confirmed Order Inventory Maximum Amount means an
amount equal to (i) $500,000 from the date hereof through November 30, 1999,
(ii) $625,000 from December 1, 1999, through February 28, 2000, and (iii)
$750,000 at all times after February 28, 1999; PROVIDED, THAT the Confirmed
Order Inventory Maximum Amount shall equal $0 at any time (i) an Event of
Default exists or (ii) Borrowers' monthly profit and loss statement delivered to
Fremont in accordance with Section 6.5 hereof evidences that the gross profit
margins on sales of all Inventory of TwinVision and TCS on a combined and
consolidated basis are less than 30%.
Confirmed Order Percentage the percentage derived by
dividing (i) the aggregate dollar amount of all Confirmed Orders by (ii) the
aggregate cost value of the Confirmed Order Inventory.
Daimler/Chrysler means DaimlerChrysler Corporation.
Eligible Accounts means those Accounts created by a
Borrower in the ordinary course of business that arise out of such ▇▇▇▇▇▇▇▇'s
sale of goods or rendition of services, are owing from Account Debtors that are
acceptable to Fremont, strictly comply with all of the representations and
warranties made by such Borrower to Fremont in the Loan Documents; PROVIDED,
HOWEVER, that standards of eligibility may be established and revised from time
to time by Fremont in Fremont's reasonable credit judgment. In determining such
eligibility, Fremont may, but is not obligated to, rely on agings, reports and
schedules of Accounts furnished to Fremont by Borrowers. Eligible Accounts shall
not include any of the following: (a) with respect to Purchased Accounts,
Purchased Accounts that the Account Debtor has failed to pay within thirty (30)
days after the original due date thereof and with respect to all other Accounts,
Accounts that the Account Debtor has failed to pay within sixty (60) days after
the original due date thereof; (b) Accounts that the Account Debtor has failed
to pay within one hundred and twenty (120) days after the original invoice date;
(c) all Accounts owed by any Account Debtor that has failed to pay fifty percent
(50%) or more of the aggregate amount of its Accounts owed to a Borrower within
one hundred twenty (120) days after the original invoice date; (d) Accounts with
respect to which the Account Debtor is an officer, director, employee or agent
of a Borrower; (e) Accounts with respect to which the Account Debtor is a
subsidiary of, related to, affiliated with or has common shareholders, officers
or directors with a Borrower; (f) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, bill
and hold, or which contain other terms by reason of which payment by the Account
Debtor may be conditional; (g) Accounts with respect to which the Account Debtor
is not a resident of the United States or Canada, unless the sale underlying the
Account is backed by an irrevocable letter of credit
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that is issued or confirmed by a bank acceptable to Fremont and that is in form
and substance acceptable to Fremont and payable in the full amount of the
Account in freely convertible United States dollars at a place of payment within
the United States; (h) Accounts with respect to which the Account Debtor is the
United States, or any department, agency or instrumentality of the United
States, unless such Borrower has complied, to the satisfaction of Fremont, with
the Federal Assignment of Claims Act with respect to such Accounts; (i) Accounts
with respect to which the Account Debtor is a state, county or municipality, or
political subdivision or agency thereof, and applicable law disallows or
restricts an assignment of Accounts on which it is the Account Debtor; (j)
Accounts with respect to which a Borrower is or may become liable to the Account
Debtor for goods sold or services rendered by the Account Debtor to such
Borrower or, for any other reason, are subject to any right of offset in favor
of the Account Debtor; (k) Accounts with respect to an Account Debtor (other
than the Specified Account Debtors) whose total obligations to a Borrower exceed
fifteen percent (15%) of all Accounts, to the extent such obligations exceed
such percentage and Accounts with respect to a Specified Account Debtor whose
total obligations to a Borrower exceed the lesser of twenty-five percent (25%)
of all Accounts or $1,000,000, to the extent such obligations exceed such
percentage or amount; (l) Accounts with respect to which the Account Debtor
disputes liability or makes any claim with respect thereto, or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; (m)
Accounts that represent progress ▇▇▇▇▇▇▇▇ or other advance ▇▇▇▇▇▇▇▇ that are due
prior to the completion of performance by a Borrower of the subject contract for
goods or services; (n) Accounts that are payable in currency other than United
States dollars; (o) Accounts that arise from a retail sale of goods to a Person
who is purchasing same primarily for personal, family or household purposes; or
(p) Purchased Accounts.
Eligible Purchased Accounts means those Purchased
Accounts purchased by Borrowers from Transit-Media which represent Accounts
owing from Diamler/Chrysler or Renault (or such other Persons as Fremont may
approve in its sole and absolute discretion) and which would constitute Eligible
Accounts except for the fact that they constitute Purchased Accounts.
Eligible Inventory means Inventory consisting of
first quality finished goods held for sale in the ordinary course of a
Borrower's business and raw materials or components for such finished goods that
strictly comply with all of the representations and warranties made by such
Borrower to Fremont in the Loan Documents; PROVIDED, HOWEVER, that general
criteria for Eligible Inventory may be established and revised from time to time
by Fremont in Fremont's reasonable credit judgment. In determining such
eligibility, Fremont may, but is not obligated to, rely on reports and schedules
of Inventory furnished to Fremont by Borrowers. Eligible Inventory shall not
include any of the following: (a) slow moving, obsolete or defective items; (b)
work in process; (c) spare parts, packaging and shipping materials; (d) supplies
used or consumed in a Borrower's business; (e) goods returned to, repossessed
by, or stopped in transit by a Borrower; (f) Inventory that is in-transit, in
the possession of Persons other than a Borrower or subject to a security
interest or lien in favor of any Person other than Fremont; (h) bill and hold
goods; (g) Inventory which is not subject to Fremont's first priority, perfected
security interest; (h) "seconds"; (i) Inventory acquired on consignment; (j)
Inventory that is subject to any license or other agreement that limits,
conditions or restricts a Borrower's or Fremont's right to sell or otherwise
dispose of such Inventory or is the subject of a claim that such Borrower's use,
marketing, sale or distribution thereof violates the ownership, patent,
copyright, trademark or other rights of a Person other than such Borrower; (k)
LiteVision LC Backed Inventory or (j) Confirmed Order Inventory. Eligible
Inventory shall be valued at the cost value.
Environmental Law means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act of 1976, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the regulations pertaining
to such statutes, and any other safety, health or environmental statutes, laws,
regulations or ordinances of the United States or of any state, county or
municipality in which Borrowers conduct their business or the Collateral is
located.
Equipment means all of a Borrower's present and
hereafter acquired equipment, machinery, machine tools, motors, furniture,
furnishings, fixtures, motor vehicles, rolling stock, processors, tools, parts,
dies, jigs, goods (other than consumer goods, farm products or Inventory),
wherever located, and any interest of such Borrower in any of the foregoing, and
all attachments, accessories, accessions, replacements, substitutions, additions
and improvements to any of the foregoing, wherever located.
Equity Interest means the interest of (i) a
shareholder in a corporation, regardless of whether such interest consists of
common or preferred stock, (ii) a partner (whether general or limited) in a
partnership (whether general, limited or limited liability), (iii) a member in a
limited liability company, or (iv) any other Person having any other form of
equity security.
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ERISA means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
ERISA Affiliate means each trade or business (whether
or not incorporated and whether or not foreign) which is or may hereafter become
a member of a group of which a Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
Event of Default means each of the events specified
in Section 8.
Fremont Expenses means all of the following: costs
and expenses (including taxes, assessments and insurance premiums) required to
be paid by Borrowers under any of the Loan Documents which are paid or advanced
by Fremont; filing, recording, publication, appraisal (including periodic
Collateral appraisals), real estate survey, environmental audit and search fees
assessed, paid or incurred by Fremont in connection with Fremont's transactions
with Borrowers; costs and expenses incurred by Fremont in the disbursement or
collection of funds to or from Borrowers; charges resulting from the dishonor of
checks; costs and expenses paid or incurred by Fremont to cure any Event of
Default or enforce any provision of the Loan Documents, or in the direct
collection of the Accounts or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by Fremont that result from
third party claims against Fremont covered by Borrowers' indemnification of
Fremont in Section 11.4; costs and expenses paid or incurred by Fremont in
enforcing or defending the Loan Documents; and Fremont's reasonable attorneys
fees and expenses incurred (including the reasonable allocated costs of
▇▇▇▇▇▇▇'s in-house counsel) in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing, defending or otherwise
representing Fremont in connection with the Loan Documents or the Obligations
(including reasonable attorneys fees and expenses incurred in connection with a
workout, a restructuring, an action to lift the automatic stay of Section 362 of
the Bankruptcy Code, any other action or participation by Fremont in an
Insolvency Proceeding concerning a Borrower or any guarantor of the Obligations
or any defense or participation by Fremont in any lender liability, preference
or fraudulent conveyance actions).
General Intangibles means all of a Borrower's present
and future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes or regulations, licenses,
franchises, choses or things in action, goodwill, patents and patent
applications, trade names, trademarks and trademark applications, service marks,
copyrights and copyright applications, trade secrets, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
monies due under any royalty or licensing agreements, route lists, infringement
claims, computer programs, computer discs, source codes computer tapes,
literature, reports, catalogs, deposit accounts, insurance premium rebates, tax
refunds and tax refund claims) other than goods and Accounts, and such
Borrower's Books relating to any of the foregoing.
Governmental Approvals means all authorizations,
consents, approvals, licenses and exemptions of, registrations and filings with,
and reports to, all federal, state, county, municipal, provincial or other
government authority (whether foreign or domestic), including any department,
agency, bureau, instrumentality or political subdivision of any such authority.
Hazardous Material means any substance, material,
emission or waste which is or hereafter becomes regulated or classified as a
hazardous substance, hazardous material, toxic substance or solid waste under
any Environmental Law, asbestos, petroleum products, urea formaldehyde,
polychlorinated biphenyls (PCBs), radon and any other hazardous or toxic
substance, material, emission or waste.
Incentive Compensation Plan means that certain
Incentive Compensation Plan dated March 30, 1999, as in effect on the date
hereof and attached hereto as Exhibit A.
Insolvency Proceeding means any proceeding commenced
by or against any Person under any provision of the Bankruptcy Code or under
any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally
with its creditors or proceedings seeking reorganization, liquidation,
arrangement or other similar relief.
Interest Coverage Ratio means for any period, the
ratio of (a) Borrowers' consolidated net income after taxes for such period
(excluding a Borrower's after tax gains or losses on the sale of assets (other
than the sale of Inventory in the ordinary course of business) and excluding
other after tax extraordinary gains or losses), plus depreciation and
amortization deducted in determining net income for such period, plus Interest
Expense for such period to (b) Interest Expense for such period, all as
determined on a consolidated basis in accordance with GAAP.
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Interest Expense means, for any period, the total
interest expense of Borrowers and their subsidiaries during such period,
determined on a consolidated basis in accordance with GAAP.
Inventory means all present and future inventory in
which a Borrower has any interest, including goods held for sale or lease or to
be furnished under a contract of service, such Borrower's present and future raw
materials, work in process, finished goods and materials used in or consumed in
such Borrower's business, goods which have been returned to, repossessed by or
stopped in transit by such Borrower, packing and shipping materials, wherever
located, any documents of title representing any of the above, and such
Borrower's Books relating to any of the foregoing.
Inventory Formula Amount means an amount equal to the
lesser of (1) eight percent (8.0%) of the aggregate value of Eligible Inventory
or (2) Five Hundred Thousand Dollars ($500,000), PLUS the Confirmed Order
Inventory Formula Amount.
Investment Property means all of a Borrower's present
and future investment property, including all certificated and uncertificated
securities, securities entitlements, securities accounts, commodity accounts and
commodity contracts.
IRC means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
Loan Documents means, collectively, this Agreement,
any Notes, any security agreements, pledge agreements, deeds of trust, mortgages
or other encumbrances or agreements which secure the Obligations, any guaranties
of the Obligations, any lock box or blocked account agreements and any other
agreement entered into between Borrowers or any guarantor of the Obligations and
Fremont relating to or in connection with this Agreement.
Loans means all loans and advances of any kind made
by Lender to Borrowers pursuant to this Agreement.
Maximum Rate means the maximum non-usurious rate of
interest permitted by applicable law that at any time, or from time to time, may
be contracted for, taken, reserved, charged or received on the Obligations in
question or, to the extent permitted by applicable law, under such applicable
laws that may hereafter be in effect and which allow a higher maximum
non-usurious interest rate than applicable laws now allow. Notwithstanding any
other provision in this Agreement, the Maximum Rate shall be calculated on a
daily basis (computed on the actual number of days elapsed over a year of 365 or
366 days, as the case may be).
Multiemployer Plan means a multiemployer plan as
defined in ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers
employees of a Borrower or any ERISA Affiliate.
Negotiable Collateral means all of a Borrower's
present and future letters of credit, notes, drafts, instruments, documents,
leases and chattel paper, and such Borrower's Books relating to any of the
foregoing.
Note means any promissory note made by a Borrower to
the order of Fremont concurrently herewith or at any time hereafter, including
any Acquisition Notes.
Obligations means all loans, advances, debts,
liabilities (including all amounts charged to Borrowers' loan account pursuant
to any agreement authorizing Fremont to charge Borrowers' loan account),
obligations, fees, lease payments, guaranties, covenants and duties owing by
Borrowers to Fremont of any kind and description (whether pursuant to or
evidenced by the Loan Documents, by any Note or other instrument or by any other
agreement between Fremont and Borrowers, and irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and all interest thereon,
including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued, and all Fremont Expenses which Borrowers are required to pay
or reimburse pursuant to the Loan Documents, by law or otherwise.
Obligor means each Borrower, each guarantor and each
other Person (other than Fremont) who is at any time liable for the payment in
whole or in part of the Obligations.
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Pending Acquisition Loans means, at any date, the
aggregate principal amount of all Acquisition Loans which have been requested by
Borrowers but which theretofore neither have been advanced by Fremont nor
withdrawn by Borrowers.
Permitted Acquisition means any Acquisition by a
Borrower in which each of the following conditions is satisfied: (i) the
business to be acquired is related or substantially similar to the business of
Borrowers; (ii) immediately before and after giving effect to such Acquisition,
no Event of Default shall exist or result therefrom; (iii) Borrowers shall have
given Fremont not less than 30 days written notice prior of the proposed
Acquisition and shall have provided to Fremont complete and accurate copies of
all term sheets, letters of intent, commitment letters, proposals and drafts of
Acquisition Documents, promptly after Borrowers' receipt thereof; (iv) any debt
payable to the seller in any such Acquisition following the closing of such
Acquisition shall constitute Subordinated Debt; (v) Borrowers' consummation of
the Acquisition shall be in compliance with all applicable laws (and Fremont
shall have received legal opinions to that effect from Borrowers' legal counsel,
if and to the extent so requested by Fremont) and Borrowers shall have obtained
all required Governmental Approvals pertaining to such Acquisition; (vi) any
subsidiary created in connection with or resulting from the Acquisition is
wholly-owned by a Borrower, and, if requested to do so by Fremont, either
executes a joinder agreement in form and substance satisfactory to Fremont by
which such Subsidiary shall become a "Borrower" and bound by all of the terms
hereof or, at ▇▇▇▇▇▇▇'s option, executes a guaranty and guarantor security
agreement in form and substance satisfactory to Fremont; and (vii) Fremont shall
have approved such Acquisition in writing, in its sole and absolute discretion,
prior to the consummation of such Acquisition.
Person means and includes natural persons,
corporations, limited partnerships, general partnerships, limited liability
companies, limited liability partnerships, joint ventures, trusts, land trusts,
business trusts or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
Plan means any plan described in ERISA Section 3(2)
maintained for employees of a Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
Purchased Accounts means those Accounts purchased by
Borrowers from another Person.
Reference Rate means the variable rate of interest,
per annum, published by The Wall Street Journal as the "Prime Rate" and based on
"the base rate on corporate loans posted by at least 75% of the nation's 30
largest banks". The Reference Rate is nothing more nor less than an index for
determining the interest rate payable under the terms of this Agreement. The
Reference Rate is not necessarily the best rate, or any other definition of
rates, offered by the banks that establish the rate or by Fremont. In the event
The Wall Street Journal ceases to publish the "Prime Rate", Fremont, in its
reasonable judgment, may substitute any similar index for the Reference Rate.
Renault means the Renault Group.
Specified Account Debtors means each of North
American Bus Industries, Inc., Nova Bus Incorporated, New Flyer Corporation,
▇▇▇▇▇▇ Corporation, AAI Corporation and Neoplan USA Corporation.
Subordinated Debt means debt of either or both
Borrowers that is fully and absolutely subordinated in right of payment to the
Obligations in a manner satisfactory to Fremont.
Term Loan means any term loan made by Fremont to a
Borrower, evidenced by and repayable in accordance with the terms and conditions
of a Note, including any Acquisition Term Loan.
TCS means Digital's Transit Communications Systems
division.
Transit-Media means Transit-Media GmbH, a German
corporation.
Voting Securities means the Equity Interests of any
class or classes of a corporation or other entity the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar functions).
1.2 CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting and the term
9
"or" has the inclusive meaning generally represented by the phrase "and/or". The
words hereof, herein, hereby, hereunder, and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, exhibit and schedule references are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
any of the other Loan Documents to this Agreement or any of the other Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, restatements, substitutions and
supplements thereto and thereof.
1.3 ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles (GAAP) as in effect from time to time. When used
herein, the term financial statements shall include the notes and schedules
thereto.
1.4 RIDERS, EXHIBITS, ETC. The Conditions Precedent Rider
and any other riders, exhibits, addenda and schedules to this Agreement shall be
deemed incorporated herein by reference.
1.5 CODE. Any terms used in this Agreement, which are
defined in the Code, shall be construed and defined as set forth in the Code
unless otherwise defined herein.
2. ADVANCES, TERMS OF PAYMENT AND NATURE OF EACH BORROWER'S
LIABILITY
2.1 LOANS.
A. REVOLVING ADVANCES. Upon the request of
Borrowers, made at any time during the term hereof, and so long as no Event of
Default exists, Fremont shall, in its sole discretion, make advances (the
Revolving Advances) to Borrowers in an amount equal to (a) eighty-five percent
(85%) of the aggregate outstanding amount of Eligible Accounts, PLUS (b) the
lesser of (1) fifty percent (50%) of the aggregate outstanding amount of
Eligible Purchased Accounts or (2) Five Hundred Thousand Dollars ($500,000),
PLUS the Inventory Formula Amount; PROVIDED, HOWEVER, that in no event shall the
aggregate amount of the outstanding Revolving Advances be greater than, at any
time, the sum of Five Million Dollars ($5,000,000) (the Revolving Advance
Limit); PROVIDED FURTHER, HOWEVER, that in connection with the making of
Acquisition Loans as set forth in SECTION 2.1(C) hereof, Fremont may, in its
sole and absolute discretion, increase the Revolving Advance Limit up to an
aggregate amount not to exceed Ten Million Dollars ($10,000,000). Fremont may
reduce its advance rates on Eligible Accounts, Eligible Purchased Accounts or
Eligible Inventory, reduce the Revolving Advance Limit or establish reserves
with respect to borrowing availability if Fremont determines, in its sole
discretion, that there has occurred, or is likely to occur, an impairment of the
prospect of repayment of all or any portion of the Obligations, the value of the
Collateral or the validity or priority of Fremont's security interests in the
Collateral.
B. RESERVED.
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C. ACQUISITION LOANS. Upon the request of
Borrowers, made at any time during the term hereof, and so long as all of the
Acquisition Loan Conditions and all other conditions set forth herein have been
satisfied, Fremont may, in its sole and absolute discretion, make Acquisition
Loans to Borrowers on any Business Day during the period from the date hereof
through the Business Day before the last day of the term hereof, not to exceed
in aggregate principal amount outstanding at any time the sum of Five Million
Dollars ($5,000,000). Such Acquisition Loans shall be made either as Revolving
Advances (based on lending formulas to be established by Fremont, in its sole
and absolute discretion, on or before the closing date of a Permitted
Acquisition) or Term Loans ( Acquisition Term Loans). Any Acquisition Loans made
as Term Loans shall be subject to the satisfaction of the following conditions:
(a) the aggregate principal amount of all Acquisition Term Loans shall be in an
original principal amount not to exceed (i) seventy percent (70%) of the orderly
liquidation value of any machinery and equipment acquired by Borrowers in a
Permitted Acquisition ( Acquired M&E), PLUS (ii) sixty-five percent (65%) of the
fair market value of any real property acquired by Borrowers in a Permitted
Acquisition ( Acquired Real Property), (b) Fremont shall have received a written
appraisal of the Acquired M&E and Acquired Real Property in form and substance
satisfactory to Fremont from an appraiser acceptable to Fremont, (c) Fremont
shall have a first priority, perfected security interest in or lien upon all
Acquired M&E and Acquired Real Property; (d) with respect to any Acquired Real
Property, Fremont shall have received a mortgage, deed of trust or security
deed, environmental assessment, ALTA survey and a fully paid mortgagee title
insurance policy (or binding commitment to issue a title insurance policy,
marked to Fremont's satisfaction, to evidence the form of such policy) in
standard ALTA form, each in form and substance satisfactory to Fremont and from
Persons acceptable to Fremont; (e) each Acquisition Term Loan shall be evidenced
by an Acquisition Note in a form acceptable to Fremont; and (f) each such
Acquisition Term Loan made based upon the appraised orderly liquidation value of
Acquired M&E as provided hereinabove shall have a repayment schedule of sixty
(60) equal monthly principal payments (but shall be coterminous with this
Agreement) and each such Acquisition Term Loan made based upon the appraised
fair market value Acquired Real Property as provided hereinabove shall have a
repayment schedule of one hundred and twenty (120) equal monthly principal
payments (but shall be coterminous with this Agreement). The Acquisition Loans
shall bear interest as set forth in Section 2.6 hereof. The proceeds of the
Acquisition Loans shall be used by Borrowers solely to (i) provide financing for
a Permitted Acquisition and (ii) pay the fees and transaction expenses
associated with the closing of a Permitted Acquisition. All Acquisition Loans
made by Fremont hereunder shall constitute Obligations and shall be secured by
the Collateral. Borrowers shall not be entitled to repay and reborrow any
Acquisition Term Loans. The occurrence of a default under any Acquisition Note
shall constitute an Event of Default hereunder.
D. ADVANCE LIMIT. The sum of the Revolving
Advance Limit plus the principal amount of all Term Loans and Acquisition Loans
outstanding from time to time, if any, is referred to herein as the Advance
Limit.
2.2 INITIAL ADVANCE. Fremont agrees that, upon
satisfaction on or before August 31, 1999, of each of the conditions precedent
set forth in the Conditions Precedent Rider and elsewhere in this Agreement,
Fremont shall advance to Borrowers, on Borrowers' request therefor, an amount
not less than Two Hundred Fifty Thousand Dollars ($250,000) as Fremont's initial
Revolving Advance under this Agreement, and all future Revolving Advances under
this Agreement shall be for an amount not less than Three Thousand Dollars
($3,000) and shall be deemed to be and constitute, together with the initial
Revolving Advance, one general obligation of Borrowers and a single loan from
Fremont to Borrowers, and shall be secured by ▇▇▇▇▇▇▇'s security interest in and
lien upon all of the Collateral, and by all other security interests and liens
heretofore, now or at any time or times hereafter granted by Borrowers to
Fremont.
2.3 OVERADVANCES. All Revolving Advances made hereunder
shall be added to and deemed part of the Obligations when made. If, at any time
and for any reason, the aggregate amount of the outstanding Revolving Advances
exceeds the dollar or percentage limitations contained in Section 2.1A (an
Overadvance), then Borrowers shall, upon demand by Fremont, immediately pay to
Fremont, in cash, the amount of such excess.
2.4 OVERADVANCE FEE. Without affecting Borrowers'
obligation to immediately repay to Fremont the amount of each Overadvance in
accordance with the provisions of Section 2.3, in the event Fremont agrees to
permit any Overadvance to exist and continue and in consideration for permitting
such Overadvance to exist and continue, Fremont shall be entitled to charge
Borrowers a fee in an amount equal to Two Hundred Fifty Dollars ($250) per day
for each day any Overadvance exists or, alternatively, such other fee as Fremont
and Borrowers may agree to at the time the Overadvance is made or discovered. If
the fee provided for in this Section 2.4 is held to constitute interest under
applicable law, it shall be deemed to be interest on the total outstanding
principal balance of all the Obligations and not merely interest on the
Overadvance.
2.5 AUTHORIZATION TO MAKE REVOLVING ADVANCES. Borrowers
hereby authorizes ▇▇▇▇▇▇▇ to make Revolving Advances based upon telephonic or
other instructions received from anyone purporting to be an Authorized
Representative, or, at the discretion of Fremont without instructions from or
notice to Borrowers, if such Revolving Advances
11
are necessary to satisfy any Obligations. All requests for Revolving Advances
hereunder shall specify the date on which the requested Revolving Advance is to
be made (which day shall be a day that Fremont is open for business) and the
amount of the requested Revolving Advance. Requests received after 11:00 a.m.
Eastern time on any day shall be deemed to have been made as of the opening of
business on the immediately following Business Day. All Revolving Advances made
under this Agreement shall be conclusively presumed to have been made to, at the
request of, and for the benefit of Borrowers when deposited to the credit of a
Borrower or otherwise disbursed in accordance with the instructions of a
Borrower or in accordance with the terms and conditions of this Agreement.
2.6 INTEREST.
A. BASIC RATE; DEFAULT RATE. Except where
specified to the contrary in any Loan Document, the aggregate outstanding
principal balances of all Obligations shall bear interest at an annual rate
equal to the lesser of (a) the Maximum Rate or (b) the Reference Rate plus the
Applicable Margin. At Fremont's option, the aggregate outstanding principal
balances of all Obligations shall bear interest, from and after written notice
by Fremont to Borrowers of the existence of an Event of Default and without
constituting a waiver of any such Event of Default, at an annual rate equal to
the lesser of (a) the Maximum Rate or (b) the Reference Rate PLUS the Applicable
Margin PLUS three percent (3.0%); provided, however, that in the event an
Insolvency Proceeding is commenced by or against a Borrower, ▇▇▇▇▇▇▇ may charge
such default rate of interest without providing written notice thereof to
Borrowers. Borrowers acknowledge that the default rate of interest reflects a
substantially greater level of risk to Fremont when an Event of Default exists
and that Fremont is entitled to additional compensation for such risk. All
interest payable by Borrowers under the Loan Documents shall be due and payable
on the first day of each calendar month during the term of this Agreement and
shall be computed on the basis of a three hundred sixty (360) day year for the
actual number of days elapsed, based on the aggregate principal amount of the
Obligations that are outstanding on each day. Interest shall continue to accrue
until all of the Obligations are paid in full.
B. INITIAL RATE. The Reference Rate as of the
date of this Agreement is eight percent (8.0%) per annum, and, therefore, the
effective rate of interest hereunder as of the date of this Agreement, expressed
in simple interest terms, is (i) nine and three-quarters percent (9.75%) for all
Loans other than Confirmed Order Loans and Acquisition Loans, (ii) eleven and
one-half percent (11.50%) for Confirmed Order Loans and (iii) ten percent
(10.0%) for Acquisition Loans. The interest rate payable by Borrowers under the
terms of this Agreement shall be adjusted in accordance with any change in the
Reference Rate from time to time on the date of any such change.
C. MINIMUM INTEREST. Notwithstanding anything
to the contrary contained in the Loan Documents, Borrowers shall pay Fremont a
minimum monthly interest charge in respect of the outstanding principal balance
of the Obligations equal to Ten Thousand Dollars ($10,000) per month.
2.7 VERIFICATION AND COLLECTION OF ACCOUNTS. Fremont may,
at any time, (a) notify Account Debtors of Borrowers that the Accounts have been
assigned to Fremont and that ▇▇▇▇▇▇▇ has a security interest in the Accounts;
and (b) contact Account Debtors of Borrowers, either in writing or by telephone,
for the purpose of verifying the validity, amount or any other matter relating
to any Accounts. Fremont may, at any time that an Event of Default exists,
collect the Accounts directly. Unless and until ▇▇▇▇▇▇▇ begins direct collection
of the Accounts or gives Borrowers other written instructions, Borrowers shall
collect all Accounts and the proceeds of other Collateral for the benefit of
Fremont, receive in trust all payments thereon as ▇▇▇▇▇▇▇'s trustee and
immediately deliver said payments to Fremont in their original form as received
by Borrowers (subject to the terms of any lockbox, blocked account or similar
agreement entered into for the purpose of collection of the Accounts).
2.8 CREDITING PAYMENTS. For the purpose of calculating
the availability of Revolving Advances under Section 2.1A, the receipt by
Fremont of any wire transfer of funds, check or other item of payment shall be
applied immediately to provisionally reduce the Obligations, but such receipt
shall not be considered a payment on account unless such wire transfer is of
immediately available federal funds and is made to the appropriate deposit
account of Fremont or unless and until such check or other item of payment is
honored when presented for payment. For the purpose of calculating interest
under Section 2.6A, the receipt by Fremont of any wire transfer of funds, check
or other item of payment shall be deemed to have occurred three (3) Business
Days after the date Fremont actually receives such item of payment. In the event
any check or other item of payment is not honored when presented for payment,
Borrowers shall be deemed not to have made such payment. Notwithstanding
anything to the contrary contained herein, any wire transfer, check or other
item of payment received by Fremont after 11:00 a.m. Eastern time shall be
deemed to have been received by ▇▇▇▇▇▇▇ as of the opening of business on the
immediately following Business Day.
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2.9 RESERVED.
2.10 LOAN ORIGINATION FEE. Borrowers shall pay Fremont a
fee (the Original Loan Origination Fee) in the amount of Fifty Seven Thousand
Five Hundred Dollars ($57,500). The Loan Origination Fee shall be fully earned
and is due and payable on the date that the initial Revolving Advance or Term
Loan is made hereunder. In addition, Borrowers shall pay Fremont an additional
fee (the Acquisition Loan Origination Fee) in an amount equal to one percent
(1.0%) of the principal amount of each Acquisition Loan made by Fremont to
Borrowers under this Agreement, which fee shall be due and payable on the date
any such Acquisition Loan is made.
2.11 UNUSED LINE FEE. If the average outstanding daily
principal balance of Revolving Advances shall be less than the Revolving Advance
Limit (as the same may be increased subsequent to the date hereof as the result
of Acquisition Loans that are not Acquisition Term Loans made by Fremont to
Borrowers) in any calendar month, Borrowers shall pay to Fremont on the first
day of the next succeeding calendar month a fee (the Unused Line Fee) equal to
one-quarter of one percent (.25 %) per annum of the amount by which the
Revolving Advance Limit (as the same may be increased subsequent to the date
hereof as the result of Acquisition Loans that are not Acquisition Term Loans
made by Fremont to Borrowers) exceeds the average outstanding daily principal
balance of Revolving Advances. The Unused Line Fee shall be calculated on the
basis of a three hundred sixty (360) day year for the actual number of days
elapsed and shall be payable for the entire term of this Agreement, including
all renewal terms, or so long as any of the Obligations are outstanding.
2.12 RESERVED.
2.13 RESERVED.
2.14 EXAMINATION FEE. Borrowers shall pay Fremont a fee in
an amount equal to Seven Hundred Dollars ($700) per day per examiner plus
out-of-pocket expenses incurred by Fremont for each field examination of
Borrowers performed by ▇▇▇▇▇▇▇ during the entire term of this Agreement.
2.15 MISCELLANEOUS FEES. Borrowers shall pay Fremont its
customary fees for wire transfers (including a premium for early and late
transfers), returned checks, letter of credit guarantees and any other services
provided by Fremont to Borrowers that are incidental to this Agreement. Upon
Borrowers' request, Fremont shall provide Borrowers with a written schedule of
the amounts of all such miscellaneous fees.
2.16 MAXIMUM CHARGES. Notwithstanding any provision
contained in this Agreement or any of the other Loan Documents, in no
contingency or event whatsoever shall the aggregate of all amounts that are
contracted for, charged or collected pursuant to the terms of this Agreement or
any of the other Loan Documents and that are deemed interest under applicable
law exceed that highest rate permissible under any applicable law. No
agreements, conditions, provisions or stipulations contained in this Agreement
or any of the other Loan Documents or the exercise by Fremont of the right to
accelerate the payment or maturity of all or any portion of the Obligations, or
the exercise of any option whatsoever contained in any of the Loan Documents, or
the prepayment by Borrowers of any of the Obligations, or the occurrence of any
contingency whatsoever, shall entitle Fremont to charge or receive in any event,
interest or any charges, amounts, premiums or fees deemed interest by applicable
law (such interest, charges, amounts, premiums and fees referred to in this
Section 2.16 collectively as Interest) in excess of the Maximum Rate and in no
event shall Borrowers be obligated to pay Interest exceeding the Maximum Rate,
and all agreements, conditions or stipulations, if any, which may in any event
or contingency whatsoever operate to bind, obligate or compel Borrowers to pay
Interest exceeding the Maximum Rate shall be without binding force or effect, at
law or in equity, to the extent only of the excess of Interest over the Maximum
Rate. If any Interest is charged or received in excess of the Maximum Rate
(Excess), Borrowers acknowledge and stipulate that any such charge or receipt
shall be the result of an accident and bona fide error, and such Excess, to the
extent received, shall be applied first to reduce the principal Obligations and
the balance, if any, returned to Borrowers, it being the intent of the parties
hereto not to enter at any time into a usurious or otherwise illegal
relationship. The right to accelerate the maturity of any of the Obligations
does not include the right to accelerate any interest that has not otherwise
accrued on the date of such acceleration, and Fremont does not intend to collect
any unearned interest in the event of any such acceleration. Borrowers recognize
that, with fluctuations in the rates of interest set forth in Section 2.6 and
the Maximum Rate, such an unintentional result could inadvertently occur but for
the agreements of the parties to limit interest to the Maximum Rate and to
apply, credit or return any Excess as provided herein. All monies paid to
Fremont hereunder or under any of the other Loan Document, whether at maturity
or by prepayment, shall be subject to any rebate of unearned interest as and to
the extent required by applicable law. By the execution of this Agreement,
Borrowers covenant that (a) the credit or return of any Excess shall constitute
the acceptance by Borrowers of such Excess, and (b) Borrowers shall not seek or
pursue any other remedy, legal or equitable, against Fremont, based in whole or
in part upon contracting for, charging or receiving any Interest in excess of
the Maximum Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or
13
received by Fremont, all Interest at any time contracted for, charged or
received from Borrowers in connection with this Agreement shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread in
equal parts throughout the full term of the Obligations. Borrowers and Fremont
shall, to the extent permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee or premium rather than as Interest and
(b) exclude voluntary prepayments and the effects thereof. The provisions of
this Section 2.16 shall be deemed to be incorporated into every Loan Document
(whether or not any provision of this Section 2.16 is referred to therein). All
such Loan Documents and communications relating to any Interest owed by
▇▇▇▇▇▇▇▇▇ and all figures set forth therein shall, for the sole purpose of
computing the extent of the Obligations, be automatically recomputed by
▇▇▇▇▇▇▇▇▇, and by any court considering the same, to give effect to the
adjustments or credits required by this Section 2.16. Notwithstanding any
provisions contained in this Agreement or any of the other Loan Documents
providing that interest is to be computed on the basis of a 360 day year,
interest shall never exceed the Maximum Rate computed on the basis of a 365 or
366 year, as the case may be. In no event shall Borrowers be obligated to pay
any of the fees payable under this Agreement to the extent that the amount of
such fees otherwise payable under such sections, when added to the amount of
interest charged under Section 2.6 or otherwise, would result in the assessment
or collection of sums deemed to be Interest in excess of the Maximum Rate (it
being the express intent and understanding of the parties hereto that such fees
not constitute interest or a charge for the use or detention of money).
2.17 MONTHLY STATEMENTS. Fremont shall render monthly
statements to Borrowers of all Obligations, including statements of all
principal, interest, fees and Fremont Expenses charged, and such statements
shall be conclusively presumed to be correct and accurate and constitute an
account stated between Borrowers and Fremont unless, within thirty (30) days
after receipt thereof by Borrowers, Borrowers shall deliver to Fremont, by
registered or certified mail or overnight courier service, at Fremont's address
stated in Section 12, written objection to ▇▇▇▇▇▇▇'s statement specifying the
error or errors, if any, contained in such statements.
2.18 PAYMENT MECHANICS. As an administrative convenience
to Borrowers to ensure the timely payment of amounts owing by Borrowers to
Fremont under this Agreement, Borrowers hereby request Fremont to advance for
the account of Borrowers an amount each month sufficient to pay interest accrued
on the principal amount of the Obligations during the immediately preceding
month and all monthly principal installments or other payments due under a Note
or other Loan Document and amounts from time to time sufficient to pay all fees
and Fremont Expenses owing by Borrowers under this Agreement. Borrowers
authorize Fremont to make a Revolving Advance for Borrowers' account of a sum
sufficient each month to pay, on the due date thereof, all interest accrued on
the principal amount of the Obligations during the immediately preceding month
and all monthly principal installments or other payments due under a Note or
other Loan Document and sums from time to time sufficient to pay, on the due
date thereof, all fees and Fremont Expenses owing by Borrowers under this
Agreement, and Fremont may apply the proceeds of each such Revolving Advance to
the payment of such interest, installments, fees and Fremont Expenses. Each such
Revolving Advance shall thereafter accrue interest at the rate then applicable
under this Agreement. Fremont, however, shall not be obligated to make any such
Revolving Advance and Borrowers acknowledge that ▇▇▇▇▇▇▇ will be particularly
disinclined to do so if an Event of Default or an Overadvance exists at the time
of, or would result from the making of, such Revolving Advance.
2.19 REPAYMENT OF THE OBLIGATIONS. All of the Obligations
shall be payable by Borrowers to Fremont upon the earliest of (a) the receipt by
Fremont or a Borrower of any collections or proceeds of any of the Collateral,
to the extent of such collections or proceeds, (b) the occurrence of an Event of
Default in consequence of which Fremont elects to accelerate the maturity and
payment of the Obligations or (c) termination of the Loan Agreement pursuant to
Section 3.1 or Section 3.2; provided, however, that any portion of the
Obligations payable on demand under any of the Loan Documents shall be paid on
demand. Any outstanding Term Loans shall be due and payable upon termination of
the Loan Agreement.
2.20 BORROWERS' REPRESENTATIVE. Each Borrower hereby
irrevocably appoints Digital as, and Digital shall act under this Agreement as,
the representative of itself and each other Borrower for all purposes under this
Agreement, including, and receiving account statements and other notices and
communications to Borrowers (or any of them) from Fremont. Fremont may rely, and
shall be fully protected in relying, on any Loan request, disbursement
instructions, reports, information or any other notice or communication made or
given by Digital, whether in its own name, on behalf of a Borrower or on behalf
of "the Borrowers," and Fremont shall have no obligation to make any inquiry or
request any confirmation from or on behalf of any other Borrower as to the
binding effect on such Borrower of any such request, instruction, report,
information, notice or communication, nor shall the joint and several character
of ▇▇▇▇▇▇▇▇▇' liability for the Obligations be affected, provided that the
provisions of this SECTION 2.20 shall not be construed so as to preclude a
Borrower from directly requesting Loans or taking other actions permitted to be
taken by "a Borrower" hereunder. Fremont may to maintain a single loan account
14
in the name of "Digital Recorders, Inc." hereunder, and each Borrower expressly
agrees to such arrangement and confirms that such arrangement shall have no
effect on the joint and several character of such ▇▇▇▇▇▇▇▇'s liability for the
Obligations.
2.21 NATURE AND EXTENT OF EACH BORROWER'S LIABILITY.
A. JOINT AND SEVERAL LIABILITY. Each Borrower
shall be liable for, on a joint and several basis, and hereby guarantees the
timely payment by all other Borrowers of, all of the Loans, and other
Obligations, regardless of which Borrowers actually may have received the
proceeds of any Loans or other extensions of credit hereunder or the amount of
such Loans received or the manner in which Fremont accounts for such Loans or
other extensions of credit on its books and records, it being acknowledged and
agreed that Loans to any Borrower inure to the mutual benefit of all Borrowers
and that ▇▇▇▇▇▇▇ is relying on the joint and several liability of Borrowers in
extending the Loans and other financial accommodations hereunder. Each Borrower
hereby unconditionally and irrevocably agrees that upon default in the payment
when due (whether at stated maturity, by acceleration or otherwise) of any
principal of, or interest owed on, any of the Loans or other Obligations, such
Borrower shall forthwith pay the same, without notice or demand.
B. UNCONDITIONAL NATURE OF LIABILITY. Each
Borrower's joint and several liability hereunder with respect to, and guaranty
of, the Loans and other Obligations shall, to the fullest extent permitted by
applicable law, be unconditional irrespective of (i) the validity,
enforceability, avoidance or subordination of any of the Obligations or of any
promissory note or other document evidencing all or any part of the Obligations,
(ii) the absence of any attempt to collect any of the Obligations from any other
Obligor or any Collateral or other security therefor, or the absence of any
other action to enforce the same, (iii) the waiver, consent, extension,
forbearance or granting of any indulgence by Fremont with respect to any of the
Obligations or any instrument or agreement evidencing or securing the payment of
any of the Obligations, or any other agreement now or hereafter executed by any
other Borrower and delivered to Fremont, (iv) the failure by Fremont to take any
steps to perfect or maintain the perfected status of its security interest in or
lien upon, or to preserve its rights to, any of the Collateral or other security
for the payment or performance of any of the Obligations, or Fremont's release
of any Collateral or of its liens upon any Collateral, (v) Fremont' election, in
any proceeding instituted under the Bankruptcy Code, for the application of
Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a
security interest by any other Borrower, as debtor-in-possession under Section
364 of the Bankruptcy Code, (vii) the release or compromise, in whole or in
part, of the liability of any Obligor for the payment of any of the Obligations,
(viii) any amendment or modification of any of the Loan Documents or waiver of
any Default Event of Default thereunder, (ix) any increase in the amount of the
Obligations beyond any limits imposed herein or in the amount of any interest,
fees or other charges payable in connection therewith, or any decrease in the
same, (x) the disallowance of all or any portion of Fremont's claims for the
repayment of any of the Obligations under Section 502 of the Bankruptcy Code, or
(xi) any other circumstance that might constitute a legal or equitable discharge
or defense of any Obligor. At any time an Event of Default exists, Fremont may
proceed directly and at once, without notice to any Obligor, against any or all
of Obligors to collect and recover all or any part of the Obligations, without
first proceeding against any other Obligor or against any Collateral or other
security for the payment or performance of any of the Obligations, and each
Borrower waives any provision that might otherwise require Fremont under
applicable law to pursue or exhaust its remedies against any Collateral or
Obligor before pursuing such Borrower or another Obligor. Each Borrower consents
and agrees that Fremont shall be under no obligation to ▇▇▇▇▇▇▇▇ any assets in
favor of any Obligor or against or in payment of any or all of the Obligations.
C. NO REDUCTION IN LIABILITY FOR OBLIGATIONS.
No payment or payments made by an Obligor or received or collected by Fremont
from any Collateral or any other Person by virtue of any action or proceeding or
any setoff or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Borrower under this Agreement,
each of which shall remain jointly and severally liable for the payment and
performance of all Loans and other Obligations until the Obligations are paid in
full and the Commitment is terminated.
D. CONTRIBUTION. Each Borrower is
unconditionally obligated to repay the Obligations as a joint and several
obligor under this Agreement. If, as of any date, the aggregate amount of
payments made by a Borrower on account of the Obligations and proceeds of such
Borrower's Collateral that are applied to the Obligations exceeds the aggregate
amount of Loan proceeds actually used by such Borrower in its business (such
excess amount being referred to as an "Accommodation Payment"), then each of the
other Borrowers ("Contributing Borrowers") shall be obligated to make
contribution to such Borrower (the "Paying Borrower") in an amount equal to (A)
the product derived by multiplying the sum of each Accommodation Payment of each
Borrower by the Allocable Percentage of the Borrowers from whom contribution is
sought less (B) the amount, if any, of the then outstanding Accommodation
Payment of such Contributing Borrower (such last mentioned amount which is to be
subtracted from the aforesaid product to be increased by any amounts theretofore
paid by such
15
Contributing Borrower by way of contribution hereunder, and to be decreased by
any amounts theretofore received by such Contributing Borrower by way of
contribution hereunder); provided, however, that a Paying Borrower's recovery of
contribution hereunder from the other Borrowers shall be limited to that amount
paid by the Paying Borrower in excess of its Allocable Percentage of all
Accommodation Payments then outstanding of all Borrowers. As used herein, the
term "Allocable Percentage" shall mean, on any date of determinations thereof, a
fraction the denominator of which shall be equal to the number of Borrowers who
are parties to this Agreement on such date and the numerator of which shall be
1; provided, however, that such percentages shall be modified in the event that
contribution from a Borrower is not possible by reason of insolvency, bankruptcy
or otherwise by reducing such Borrower's Allocable Percentage equitably and by
adjusting the Allocable Percentage of the other Borrowers proportionately so
that the Allocable Percentages of all Borrowers at all times equals 100%.
E. SUBORDINATION. Each Borrower hereby
subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have from or against any other Obligor,
and any successor or assign of any other Obligor, including any trustee,
receiver or debtor-in-possession, howsoever arising, due or owing or whether
heretofore, now or hereafter existing, to the payment in full of all of the
Obligations.
3. TERM OF AGREEMENT AND EARLY TERMINATION
3.1 TERM. This Agreement shall become effective in
accordance with Section 14.1 and shall continue in full force and effect for a
term ending four (4) years after the date hereof and shall be deemed
automatically renewed for successive terms of one (1) year thereafter until
terminated as of the end of the initial term or any renewal term (each a Term)
by either party giving the other written notice at least sixty (60) days prior
to the end of the then current Term.
3.2 EARLY TERMINATION. Borrowers, subject to the payment
of the fee described below, may terminate this Agreement other than at the end
of the then current Term by giving Fremont prior written notice of its intention
to effect an early termination of this Agreement. Fremont may terminate this
Agreement at any time that an Event of Default exists. In view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of ▇▇▇▇▇▇▇'s lost
profits as a result of an early termination of this Agreement, in either of the
instances described in the preceding two sentences, Borrowers shall pay to
Fremont, upon the effective date of such early termination and in addition to
all other Obligations, as liquidated damages for the loss of the bargain and not
as a penalty, an early termination fee (the Early Termination Fee) in an amount
equal to: (a) five percent (5.0%) of the Advance Limit if such termination
occurs at any time during the first year of the initial Term; (b) three percent
(3.0%) of the Advance Limit if such termination occurs at any time during the
second year of the initial Term; and (c) one percent (1.0%) of the Advance Limit
if such termination occurs during the third or fourth year of the initial Term
or during any renewal Term. Notwithstanding the foregoing, no Early Termination
Fee shall be payable by Borrowers if (i) Fremont denies Borrowers' request to
provide financing for Borrowers to make a Permitted Acquisition which requires
financing by Fremont of not less than $500,000, (ii) Borrowers obtain such
financing from another financial institution, and (iii) all Obligations then
owing from Borrower to Lender are paid in full simultaneously with the closing
of such financing.
The Early Termination Fee shall be presumed to be the amount of
damages sustained by ▇▇▇▇▇▇▇ as the result of the early termination and
Borrowers agree that it is reasonable under the circumstances currently
existing. The Early Termination Fee shall be deemed included in the Obligations.
Notwithstanding anything herein to the contrary, if and to the extent the Early
Termination Fee constitutes interest under applicable law, the Early Termination
Fee, when added to all other interest contracted for, charged or received under
this Agreement or any other Loan Documents, shall not exceed, and shall be
limited to an amount which constitutes, interest at the Maximum Rate.
3.3 RIGHT OF FIRST REFUSAL. If Borrowers seek to
terminate this Agreement prior to the end of the initial Term in order to
refinance with another lender, Borrowers shall give Fremont the opportunity to
match the pricing and credit structure terms being offered by the refinancing
lender by delivering to Fremont a copy of the written commitment for financing
issued by the refinancing lender. Fremont shall deliver to Borrowers written
notice of its decision within fifteen (15) days after ▇▇▇▇▇▇▇'s receipt of the
commitment. If ▇▇▇▇▇▇▇ decides to match the pricing and credit structure terms
set forth in the commitment, this Agreement and the other Loan Documents shall
be amended accordingly and the Term of this Agreement shall be extended for a
period of four (4) years from the date of the amendment. If ▇▇▇▇▇▇▇ decides not
to match the pricing and credit structure terms set forth in the commitment and
Borrowers proceed with the refinancing and causes an early termination hereof,
Fremont shall be entitled to payment of an Early Termination Fee as provided in
Section 3.2.
3.4 EFFECT OF TERMINATION. Upon termination of this
Agreement, all of the Obligations shall be immediately due and payable in full.
No termination of this Agreement shall relieve or discharge Borrowers of
Borrowers'
16
duties, obligations and covenants hereunder until all of the Obligations have
been fully and indefeasibly paid and satisfied, and ▇▇▇▇▇▇▇'s continuing
security interest in the Collateral shall remain in effect until all of the
Obligations have been fully and indefeasibly paid and satisfied.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby
grants to Fremont a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all Obligations and in order to secure prompt performance by Borrowers
of each and all of its covenants and duties under the Loan Documents. ▇▇▇▇▇▇▇'s
security interest in the Collateral shall attach to all Collateral without
further act on the part of Fremont or Borrowers. Other than sales of Inventory
to buyers in the ordinary course of business, Borrowers have no authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, Borrowers shall, upon the request of Fremont, immediately endorse
and assign such Negotiable Collateral to Fremont and deliver physical possession
of such Negotiable Collateral to Fremont.
4.3 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Borrowers shall execute and deliver to Fremont, concurrently with Borrowers'
execution and delivery of this Agreement and at any time thereafter at the
request of Fremont, all financing statements, continuation financing statements,
fixture filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Fremont may reasonably request, in form satisfactory to Fremont,
to perfect and continue perfected Fremont's security interest in the Collateral
and in order to fully consummate all of the transactions contemplated hereunder
and under the other Loan Documents.
4.4 POWER OF ATTORNEY. Each Borrower hereby irrevocably
designates and appoints Fremont (and any Persons designated by Fremont) as such
Borrower's true and lawful attorney-in-fact, and authorizes Fremont, in either
such ▇▇▇▇▇▇▇▇'s or Fremont's name, to: (a) at any time that an Event of Default
exists (i) demand payment on Accounts or other proceeds of Inventory or other
Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise,
(iii) exercise all of such ▇▇▇▇▇▇▇▇'s rights and remedies to collect any Account
or other Collateral, (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as Fremont deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) notify the post office authorities to change the address for delivery of
such Borrower's mail to an address designated by Fremont, and open all mail
addressed to such Borrower, (viii) make, settle and adjust all claims under such
▇▇▇▇▇▇▇▇'s policies of insurance and endorse the name of such Borrower on any
item of payment for the proceeds of such policies of insurance, and (ix) do all
other acts and things necessary, in Fremont's determination, to fulfill such
Borrower's obligations under this Agreement or any of the other Loan Documents;
and (b) at any time that Fremont determines that it is necessary or appropriate
to preserve, protect, insure or maintain its rights hereunder (i) take control,
in any manner, of any item of payment or proceeds of any Collateral, (ii) sign
such Borrower's name on any of the documents described in Section 4.3 or on any
other similar documents to be executed, recorded or filed in order to perfect or
continue perfected Fremont's security interest in the Collateral and file or
record any of the foregoing documents, (iii) endorse such Borrower's name on any
items of payment or proceeds thereof and deposit the same to the account of
Fremont for application to the Obligations, (iv) sign such Borrower's name on
any invoices, bills of lading, freight bills, chattel paper, documents,
instruments or similar documents or agreements relating to any Accounts or any
goods pertaining thereto or any other Collateral, (v) sign such Borrower's name
on any verification of Accounts and notices thereof to Account Debtors, and (vi)
prepare, file and sign such ▇▇▇▇▇▇▇▇'s name on any proof of claim in bankruptcy
or other similar document against an Account Debtor. The appointment of ▇▇▇▇▇▇▇
as each ▇▇▇▇▇▇▇▇'s attorney-in-fact and each and every one of ▇▇▇▇▇▇▇'s rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and this Agreement has been
terminated.
4.5 RIGHT TO INSPECT. Fremont, through any of its
officers, employees or agents, shall have the right at any time or times during
each Borrower's usual business hours and after notice to such Borrower, or
during the usual business hours of any third party having control over any of
such ▇▇▇▇▇▇▇▇'s Books and after notice to such third party, to inspect such
▇▇▇▇▇▇▇▇'s Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral or such Borrower's financial condition.
Fremont also shall have the right at any time or times during each Borrower's
usual business hours and after notice to such Borrower to inspect and examine
the Inventory and the Equipment and to check and test the same as to quality,
quantity, value and condition. If an Event of Default exists or if Fremont
reasonably believes that an Event of Default exists, ▇▇▇▇▇▇▇ may conduct any of
the inspections referenced in this Section 4.5 at any time without regard to a
Borrower's or any third party's usual business hours and without notice.
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4.6 SECURITY AGREEMENT FILED AS UCC-1 FINANCING
STATEMENT. A carbon, photographic or other reproduction or copy of this
Agreement or of a financing statement is sufficient as, and may be filed in lieu
of, a financing statement.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower makes the following representations and
warranties to Fremont and each such representation and warranty shall be deemed
to be repeated with each Loan made by Fremont and shall be conclusively presumed
to have been relied on by Fremont regardless of any investigation made or
information possessed by ▇▇▇▇▇▇▇. The following representations and warranties
shall be cumulative and in addition to any and all other representations and
warranties which each Borrower shall now or hereafter give, or cause to be
given, to Fremont.
5.1 NO PRIOR ENCUMBRANCES; SECURITY INTERESTS. Such
Borrower has good and indefeasible title to the Collateral, free and clear of
liens, claims, security interests or encumbrances, except for those set forth on
Schedule 5.1 attached hereto and permitted under Section 7.2.
5.2 ACCOUNTS. All of such ▇▇▇▇▇▇▇▇'s Accounts constitute
bona fide existing obligations created by the sale and delivery of Inventory or
the rendition of services to Account Debtors in the ordinary course of such
Borrower's business, and, in the case of Accounts created by the sale and
delivery of Inventory, the Inventory giving rise to such Accounts has been
delivered to the Account Debtor. At the time of the creation of each Eligible
Account or the assignment thereof to Fremont, each such Eligible Account is
unconditionally owed to such Borrower without defense, dispute, offset,
counterclaim or right of return or cancellation and such Borrower has not
received notice of actual or imminent bankruptcy, insolvency or material
impairment of the financial condition of the Account Debtor regarding such
Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is of good
and merchantable quality, free from defects.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory
and Equipment are not stored with a bailee, warehouseman, processor or similar
party unless Fremont has consented thereto in writing and are located only at
the following locations: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
5.5 INVENTORY RECORDS. Such Borrower keeps correct and
accurate records itemizing and describing the kind, type, quality and quantity
of the Inventory and ▇▇▇▇▇▇▇▇'s cost therefor.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE. The chief
executive office of such ▇▇▇▇▇▇▇▇ is located at the address stated in the first
paragraph of this Agreement.
5.7 DUE INCORPORATION AND QUALIFICATION. Such Borrower is
a corporation duly organized and existing and in good standing under the laws of
the state of its incorporation and is qualified or licensed to do business in,
and is in good standing in, any state in which the nature of such Borrower's
business requires such qualification or licensing.
5.8 FICTITIOUS NAMES. Digital is conducting its business
at the present time under the following trade or fictitious names: Digital
Recorders, Digital Audio Company, Transit Communications Systems, Talking Bus;
TwinVision is conducting its business at the present time under the following
trade or fictitious names: None; and DAC is conducting its business at the
present time under the following trade or fictitious names: Digital Audio
Company. Such Borrower has complied with the fictitious name laws of all
jurisdictions in which compliance is required in connection with its use of such
names. During the five (5) years prior to the date of this Agreement, Digital
conducted business under the following trade or fictitious names in addition to
those stated above: Highway Information Services; TwinVision conducted business
under the following trade or fictitious names in addition to those stated above:
None; and DAC conducted business under the following trade or fictitious names
in addition to those stated above: None.
5.9 PERMITS AND LICENSES. Such Borrower holds all
licenses, permits, franchises, approvals and consents as are required in the
conduct of its business and the ownership and operation of its properties.
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5.10 DUE AUTHORIZATION; NO CONFLICT; ENFORCEABILITY. The
execution, delivery and performance of the Loan Documents to which such Borrower
is a party are within such Borrower's corporate powers, have been duly
authorized and are not in conflict with nor constitute a breach of any provision
contained in such Borrower's Articles or Certificate of Incorporation or Bylaws;
nor will they create a default or breach under any material agreement to which
such Borrower is a party. The Loan Documents constitute such Borrower's legal,
valid and binding obligations, enforceable in accordance with their respective
terms.
5.11 LITIGATION. There are no actions or proceedings
pending by or against such Borrower before any court or administrative agency
and such Borrower has no knowledge or notice of any pending, threatened or
imminent litigation, governmental investigations, or claims, complaints, actions
or prosecutions involving such Borrower or any guarantor of the Obligations,
except for ongoing collection matters in which such Borrower is the plaintiff
and such matters as set forth on Schedule 5.11 attached hereto.
5.12 TAXES. All assessments and taxes, whether real,
personal or otherwise, due or payable by, or imposed, levied or assessed against
such Borrower or any of its property or in connection with such Borrower's
business have been paid in full prior to delinquency or the expiration of any
extension period. Digital's federal tax identification number is ▇▇-▇▇▇▇▇▇▇;
TwinVision's federal tax identification number is ▇▇-▇▇▇▇▇▇▇; and DAC's federal
tax identification number is ▇▇-▇▇▇▇▇▇▇.
5.13 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION.
All financial statements relating to such Borrower which have been or may
hereafter be delivered by such Borrower to Fremont have been prepared in
accordance with GAAP and fairly present such Borrower's financial condition as
of the date thereof and such ▇▇▇▇▇▇▇▇'s results of operations for the period
then ended. There has been no material adverse change in the financial condition
of such Borrower since the date of the most recent of such financial statements
submitted to Fremont.
5.14 SOLVENCY. Such Borrower is able to pay its debts
(including trade debts) as they mature, has capital sufficient to carry on its
business and the fair saleable value of its assets exceeds the amount of its
liabilities. No transfer of property is being made by such Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay or defraud either present or future creditors of such Borrower.
5.15 ERISA. Neither such Borrower, nor any ERISA Affiliate
nor any Plan is or has been in violation of any of the provisions of ERISA, any
of the qualification requirements of IRC Section 401(a), or any of the published
interpretations thereof. No lien upon the assets of such Borrower has arisen
with respect to any Plan. No prohibited transaction within the meaning of ERISA
Section 406 or IRC Section 4975(c) has occurred with respect to any Plan.
Neither such Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any Plan or
Multiemployer Plan when due. There is no accumulated funding deficiency in any
Plan, whether or not waived.
5.16 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS. Such
Borrower has complied with all Environmental Laws. Except as disclosed to
Fremont in writing prior to the date of this Agreement, such Borrower has not
caused or permitted any Hazardous Materials to be located, incorporated,
generated, stored, manufactured, transported to or from, released, disposed of
or used at, upon, under or within any premises at which such Borrower conducts
its business, or in connection with such Borrower's business. To the best of
such ▇▇▇▇▇▇▇▇'s knowledge, no prior owner or operator of any premises at which
such Borrower conducts its business has caused or permitted any of the above to
occur at, upon, under or within any of such premises.
5.17 INTELLECTUAL PROPERTY. Such Borrower does not own or
have rights as licensee in or to any trademarks or patents or have any trademark
or patent applications pending, except as set forth on Schedule 5.17 attached
hereto.
5.18 LABOR AND EMPLOYMENT DISPUTES. There are no pending
grievances, disputes or controversies with any union or other organization of
such Borrower's employees, or pending threats of strikes or work stoppages, or
demands for collective bargaining by any union or other organization of such
Borrower's employees.
5.19 YEAR 2000 COMPLIANCE. Such Borrower has taken all
action necessary to assure that there will be no material adverse change to such
Borrower's business by reason of the advent of the year 2000, including that all
of such
19
Borrower's computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after December 31, 1999.
6. AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that during the term of
this Agreement and until payment in full of the Obligations, and unless ▇▇▇▇▇▇▇
shall otherwise consent in writing, such Borrower shall do all of the following:
6.1 ACCOUNTING SYSTEM. Such Borrower at all times shall
maintain a standard and modern system of accounting in accordance with GAAP with
ledger and account cards or computer tapes, disks, printouts and records
pertaining to the Collateral which contain information as may from time to time
be requested by ▇▇▇▇▇▇▇. Such Borrower also shall keep proper books of account
showing all sales, claims and allowances on its Inventory.
6.2 COLLATERAL REPORTS. Such Borrower shall deliver to
Fremont, no later than the fifteenth day of each month during the term of this
Agreement, a detailed aging of the Accounts, a reconciliation statement, a
summary aging, by vendor, of all accounts payable and any book overdraft, copies
of such Borrower's bank account statements and a compliance certificate with
respect to such Borrowers representations, warranties and covenants regarding
the Collateral and such Borrowers officers and directors insurance, all in form
and substance satisfactory to Fremont. Such Borrower shall deliver to Fremont,
as Fremont may from time to time require, collection reports, sales journals,
invoices, original delivery receipts, customers' purchase orders, shipping
instructions, bills of lading and other documentation respecting shipment
arrangements. Absent such a request by ▇▇▇▇▇▇▇, copies of all such documentation
shall be held by such Borrower as custodian for Fremont.
6.3 RETURNS. Returns and allowances, if any, as between
such Borrower and its Account Debtors, shall be permitted by such Borrower on
the same basis and in accordance with the usual and customary practices of such
Borrower as they exist at the time of the execution and delivery of this
Agreement. If any Account Debtor returns any Inventory to such Borrower, such
Borrower shall promptly determine the reason for such return and, if such
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Fremont) in the appropriate amount to such Account Debtor. Such Borrower
shall promptly notify Fremont of all returns and recoveries and of all disputes
and claims.
6.4 INVENTORY REPORTS. Such Borrower shall now and from
time to time hereafter, but not less frequently than monthly, execute and
deliver to Fremont Inventory reports specifying such Borrower's cost and the
wholesale market value of such Borrower's raw materials, work in process and
finished goods, and further specifying such other information as Fremont may
reasonably request. In addition, each of TwinVision and Digital (for TCS) shall
as soon as available, but in any event within thirty (30) days after the end of
each month execute and deliver to Fremont (i) a complete Inventory summary
detailing all Inventory by type, category and item number, (ii) an Inventory
report with respect to all Confirmed Orders specifying such information as may
be requested by Fremont, and in any case the amount of the Confirmed Order, the
date received and the party making such Confirmed Order and (iii) a costed bill
of materials detailing all components of Inventory necessary to complete such
Confirmed Orders. Such Borrower shall submit to Fremont all reports required
under Sections 6.2 and 6.4 in such printed or electronic formats as may be
requested by ▇▇▇▇▇▇▇ from time to time. Fremont, in its sole discretion, may
conduct appraisals on the Inventory at any time, at the sole cost and expense of
Borrowers.
6.5 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Such
Borrower shall deliver to Fremont: (a) as soon as available, but in any event
within thirty (30) days after the end of each month during each of such
Borrower's fiscal years, a company prepared balance sheet and profit and loss
statement covering such Borrower's operations during such period; and (b) as
soon as available, but in any event within ninety (90) days after the end of
each of such Borrower's fiscal years, financial statements of such Borrower for
each such fiscal year, audited by independent certified public accountants
acceptable to Fremont. All such annual financial statements shall include a
balance sheet and profit and loss statement, together with the accountants'
letter to management. Such Borrower shall also deliver ▇▇▇▇▇▇▇▇'s Form 10-Qs,
10-Ks or 8-Ks, and any other filings made by such Borrower with the Securities
and Exchange Commission, if any, as soon as the same become available, and any
other report reasonably requested by Fremont relating to the Collateral or the
financial condition of such Borrower, including financial projections, and a
certificate signed by the chief financial officer of such Borrower to the effect
that all reports, statements or computer prepared information of any kind or
nature delivered or caused to be delivered to Fremont under this Section 6.5
fairly present the financial condition of such Borrower and that there exists on
the date of delivery of such certificate to Fremont no condition or event which
constitutes an Event of Default. If such Borrower is a parent company of one or
more subsidiaries or is a subsidiary of another company, then, in addition to
the financial statements referred to above, such Borrower agrees to deliver
financial statements prepared on a consolidating basis so as to present Borrower
and each such related entity separately, and on a consolidated basis.
20
6.6 LITIGATION. Such Borrower shall promptly notify
Fremont in writing of any litigation, governmental investigations or criminal
prosecutions involving ▇▇▇▇▇▇▇▇, other than collection matters in which such
Borrower is the plaintiff.
6.7 TAX RETURNS, RECEIPTS. Such Borrower shall deliver to
Fremont copies of each of such ▇▇▇▇▇▇▇▇'s federal income tax returns, and any
amendments thereto, within thirty (30) days after the filing thereof with the
Internal Revenue Service. Furthermore, such Borrower shall deliver to Fremont,
promptly upon request by ▇▇▇▇▇▇▇, satisfactory evidence of such ▇▇▇▇▇▇▇▇'s
payment of all federal withholding taxes required to be paid by such Borrower.
6.8 GUARANTOR TAX RETURNS. If requested by ▇▇▇▇▇▇▇, such
Borrower shall cause each guarantor of the Obligations to deliver to Fremont
copies of such guarantor's federal income tax returns within thirty (30) days
after the filing thereof with the Internal Revenue Service.
6.9 TITLE TO EQUIPMENT. Upon ▇▇▇▇▇▇▇'s request, such
Borrower shall immediately deliver to Fremont, properly endorsed, any and all
evidences of ownership of, or certificates of title or applications for title
to, any items of Equipment.
6.10 MAINTENANCE OF EQUIPMENT. Such Borrower shall keep
and maintain the Equipment in good operating condition and repair and shall make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Such Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and the Equipment is now and shall at all times remain
personal property.
6.11 TAXES. All assessments and taxes, whether real,
personal or otherwise, due or payable by, or imposed, levied or assessed against
such Borrower or any of its property or in connection with such Borrower's
business shall be paid in full prior to delinquency or the expiration of any
extension period. Such Borrower shall make due and timely payment or deposit of
all federal, state and local taxes, assessments or contributions required of it
by law and will execute and deliver to Fremont, on demand, appropriate
certificates attesting to the payment or deposit thereof. Such Borrower shall
make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability and local, state and federal income taxes, and shall,
upon request, furnish Fremont with proof satisfactory to Fremont indicating that
such Borrower has made such payments or deposits.
6.12 INSURANCE. Such Borrower, at its expense, shall keep
and maintain the Collateral insured against all risk of loss or damage from
fire, theft, vandalism, malicious mischief, explosion, sprinklers and all other
hazards and risks of physical damage included within the meaning of the term
"extended coverage" in such amounts as are ordinarily insured against by other
similar businesses. Such Borrower shall also keep and maintain comprehensive
general public liability insurance and property damage insurance, and insurance
against loss from business interruption, insuring against all risks relating to
or arising from such Borrower's ownership and use of the Collateral and such
Borrower's other assets and the operation of such Borrower's business. All such
policies of insurance shall be in such form, with such companies and in such
amounts as may be satisfactory to Fremont. Such Borrower shall deliver to
Fremont certified copies of such policies of insurance and evidence of the
payments of all premiums therefor. All such policies of insurance (except those
of public liability and property damage) shall contain a Lender's Loss Payable
endorsement in a form satisfactory to Fremont, naming Fremont as loss payee
thereof (as its interests appear), and shall contain a waiver of warranties. All
proceeds payable under any such policy shall be payable to Fremont to be applied
to the Obligations. All public liability and property damage policies shall name
Fremont as an additional insured. All such policies shall provide that Fremont
shall receive no less than thirty (30) days prior written notice of any
cancellation or termination of such policies.
6.13 NO OFFSETS OR COUNTERCLAIMS. All payments hereunder
and under the other Loan Documents made by or on behalf of such Borrower shall
be made without offset or counterclaim, and such Borrower hereby waives any
right to offset, against the repayment of the Obligations, any claims it may
have against Fremont.
6.14 FREMONT EXPENSES. Such Borrower acknowledges that
Fremont Expenses include, among other things, (a) Fremont's reasonable attorneys
fees and expenses incurred in defending or otherwise representing Fremont
concerning the Loan Documents or the Obligations and (b) charges resulting from
the dishonor of checks. Since Fremont Expenses are a part of the Obligations
which are secured by the Collateral, Fremont shall not be required to discharge
any lien or terminate any security interest in the Collateral unless and until
(y) Borrowers and Fremont execute a mutual general release of liability and
indemnification in favor of and acceptable to Fremont and (z) to the extent
another financial institution
21
refinances the Obligations, such financial institution delivers an agreement,
acceptable to Fremont, to indemnify Fremont for loss arising from checks
delivered to Fremont for collection and payment of the Obligations which are
returned for non-payment or for any other reason.
6.15 COMPLIANCE WITH LAW. Such Borrower shall comply with
the requirements of all applicable laws, rules, regulations and orders of
governmental authorities relating to such Borrower and the conduct of such
▇▇▇▇▇▇▇▇'s business, including the Fair Labor Standards Act and the Americans
with Disabilities Act.
6.16 LOCATION OF INVENTORY AND EQUIPMENT. Such Borrower
shall keep the Inventory and Equipment only at the locations identified in
Section 5.4.
6.17 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS. Such
Borrower shall not permit any lien under any Environmental Law to be filed
against any of the Collateral or any of such ▇▇▇▇▇▇▇▇'s real property, and will
promptly notify Fremont of any proceeding, inquiry or claim relating to any
alleged violation of any Environmental Law, or any alleged loss, damage or
injury resulting from any Hazardous Material. ▇▇▇▇▇▇▇ shall have the right to
join and participate in, as a party if it so elects, any legal or administrative
proceeding initiated against such Borrower or any guarantor of the Obligations
with respect to any Hazardous Material or in connection with any Environmental
Law.
6.18 INTEREST COVERAGE. Borrowers shall at all times
maintain an Interest Coverage Ratio of not less than 1.0 to 1.0, with such ratio
to be calculated quarterly on a cumulative basis for the initial four (4) fiscal
quarters of Borrowers after the date hereof and thereafter to be calculated
quarterly for the four (4) fiscal quarters of Borrowers immediately preceding
the date of determination.
7. NEGATIVE COVENANTS
Each Borrower covenants and agrees that during the term of
this Agreement and until payment in full of the Obligations, such Borrower will
not do any of the following without ▇▇▇▇▇▇▇'s prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit or
otherwise become liable with respect to any indebtedness outside of the ordinary
and usual course of ▇▇▇▇▇▇▇▇'s business, except (a) indebtedness set forth in
such ▇▇▇▇▇▇▇▇'s latest financial statements submitted to Fremont prior to the
date of this Agreement and renewals or extensions of such indebtedness, (b)
Subordinated Debt incurred in connection with a Permitted Acquisition and (c)
the Obligations.
7.2 SECURITY INTERESTS. Create, incur, assume or permit
to exist any security interest, lien, pledge, mortgage or encumbrance on any
Collateral or on any of such Borrower's real property, except (a) the security
interests granted to Fremont by such Borrower, (b) the security interests
disclosed in the UCC searches obtained by Fremont prior to the funding of the
initial Revolving Advance hereunder (other than security interests required to
be terminated pursuant to the Conditions Precedent Rider) and (c) any security
interest which such ▇▇▇▇▇▇▇▇ has disclosed in writing to Fremont and to which
▇▇▇▇▇▇▇ has given its prior written consent.
7.3 EXTRAORDINARY TRANSACTIONS. Enter into any
transaction not in the ordinary and usual course of such Borrower's business,
including the sale, lease or other disposition of, whether by sale or otherwise,
any of Borrower's assets other than sales of Inventory in the ordinary and usual
course of such Borrower's business; or make any advance, loan or capital
contribution to any Person except in the ordinary and usual course of such
Borrower's business; provided, however, that Digital may from time to time make
loans and advances to Transit-Media so long as such loans and advances at any
time outstanding do not exceed Two Hundred Thousand Dollars ($200,000).
7.4 CHANGE NAME. Change such Borrower's name, business
structure or identity, or add any new fictitious name.
7.5 FUNDAMENTAL CHANGES. Enter into any acquisition,
merger, consolidation, reorganization or recapitalization, or reclassify its
capital stock, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or acquire by purchase or otherwise all or
substantially all of the assets, stock or other beneficial ownership interest of
any other Person.
22
7.6 GUARANTY. Guaranty or otherwise become in any way
liable with respect to the obligations of any third party (other than a guaranty
of any other Borrower's Obligations as provided herein) except by endorsement of
instruments or items of payment for deposit to the account of such Borrower for
negotiation and delivery to Fremont.
7.7 RESTRUCTURE. Make any change in Borrower's capital
structure or in the principal nature of such ▇▇▇▇▇▇▇▇'s business operations.
7.8 PREPAYMENTS. Prepay any indebtedness owing to any
third party.
7.9 CHANGE OF OWNERSHIP. Cause, permit or suffer any
transfer, whether direct or indirect, of the ownership of thirty percent (30%)
or more of Borrower's outstanding capital stock or other beneficial ownership
interest in any single transaction or series of transactions.
7.10 COMPENSATION. Pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions, drawing accounts, management
fees or other payments, whether directly or indirectly, in money or otherwise,
during any fiscal year to all of such Borrower's executives, officers,
shareholders, affiliates, and directors (or any relatives thereof) in an
aggregate amount in excess of the amounts set forth in the Incentive
Compensation Plan (as modified from year to year with the prior written consent
of Fremont).
7.11 LOANS TO INSIDERS. Make any loans, advances or
extensions of credit to any officer, director, executive, employee or
shareholder of such Borrower, or any relative of any of the foregoing, or to any
entity which is a subsidiary of, related to, affiliated with or has common
shareholders, officers or directors with Borrower (other than as expressly
permitted in SECTION 7.3 hereof), which when aggregated with all other loans,
advances or extensions of credit to any or all of the above Persons at any time
outstanding during the term of this Agreement, exceeds Twenty Five Thousand
Dollars ($25,000).
7.12 CAPITAL EXPENDITURES. Make any capital expenditure,
or any commitment therefor, in excess of Twenty-Five Thousand Dollars ($25,000)
for any individual transaction or where the aggregate amount of such capital
expenditures, made or committed for in any fiscal year, is in excess of Two
Hundred and Fifty Thousand Dollars ($250,000).
7.13 CONSIGNMENTS. Consign any Inventory; or sell any
Inventory on bill and hold, sale on approval or other conditional terms of sale.
7.14 DISTRIBUTIONS. Make any distribution or declare or
pay any dividends (in cash or in stock) on, or purchase, acquire, redeem or
retire any of such Borrower's capital stock, of any class, whether now or
hereafter outstanding; provided, that, Digital may pay annual dividends to the
holders of its non-voting preferred stock in an amount not to exceed 177,000.
7.15 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify or terminate any agreement currently existing
or at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of such ▇▇▇▇▇▇▇▇'s accounting
records without said accounting firm or service bureau agreeing to provide
Fremont information regarding the Collateral or such Borrower's financial
condition. Each Borrower waives the right to assert a confidential relationship,
if any, it may have with any accounting firm or service bureau in connection
with any information requested by Fremont pursuant to or in accordance with this
Agreement, and agrees that Fremont may contact directly any such accounting firm
or service bureau in order to obtain such information.
7.16 SUSPENSION. Suspend or go out of business.
7.17 LOCATION OF CHIEF EXECUTIVE OFFICE. Relocate its
chief executive office to a new location unless Fremont is given thirty (30)
days prior written notice thereof.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events
shall constitute an "Event of Default" under this Agreement:
8.1 FAILURE TO PAY. Borrowers fail to pay when due any of
the Obligations;
23
8.2 FAILURE TO PERFORM. A Borrower fails or neglects to
timely perform, keep or observe any term, provision, condition, representation,
warranty, covenant or agreement contained in this Agreement, in any of the other
Loan Documents or in any other present or future agreement between such Borrower
and Fremont;
8.3 MISREPRESENTATION. Any representation, warranty or
statement of fact made by a Borrower or any officer, employee, agent or director
of such Borrower to Fremont shall when made or deemed to be made be false or
misleading in any material respect;
8.4 MATERIAL ADVERSE CHANGE. There is a material adverse
change in a Borrower's business or financial condition;
8.5 LEVY OR ATTACHMENT. Any material portion of a
Borrower's assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any judicial officer;
8.6 INSOLVENCY BY ▇▇▇▇▇▇▇▇. An Insolvency Proceeding is
commenced by a Borrower;
8.7 INSOLVENCY AGAINST ▇▇▇▇▇▇▇▇. An Insolvency Proceeding
is commenced against a Borrower;
8.8 INJUNCTION AGAINST BORROWER. A Borrower is enjoined,
restrained or in any way prevented by court order from continuing to conduct all
or any material part of its business affairs;
8.9 GOVERNMENT LIEN. A notice of lien, levy or assessment
is filed of record with respect to any of a Borrower's assets by the United
States government, or any department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental agency, or any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a lien,
whether ▇▇▇▇▇▇ or otherwise, upon any of such Borrower's assets and the same is
not paid on the payment date thereof;
8.10 JUDGMENT. A judgment or other claim for an amount in
excess of Twenty Five Thousand Dollars ($25,000) becomes a lien or encumbrance
on a Borrower's assets;
8.11 CROSS DEFAULT TO MATERIAL AGREEMENTS. There is a
default in any material agreement to which a Borrower is a party with one or
more third parties or by which such Borrower or such Borrower's property or
assets are bound;
8.12 SUBORDINATED DEBT PAYMENTS. A Borrower makes any
payment on account of indebtedness that has been contractually subordinated in
right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination agreement applicable to
such indebtedness;
8.13 LOSS OF GUARANTOR. Any guarantor of the Obligations
dies, revokes or terminates his/her/its guaranty, becomes the subject of an
Insolvency Proceeding, or contests his/her/its obligations under such a
guaranty; or if any such guaranty of the Obligations ceases to be valid or
enforceable for any reason;
8.14 ERISA VIOLATION. A prohibited transaction within the
meaning of ERISA Section 406 or IRC Section 4975(c) shall occur with respect to
a Plan which could have a material adverse effect on the financial condition of
a Borrower; any lien upon the assets of a Borrower in connection with any Plan
shall arise; a Borrower or any ERISA Affiliate shall completely or partially
withdraw from a Multiemployer Plan and such withdrawal could, in the opinion of
Fremont, have a material adverse effect on the financial condition of such
Borrower; a Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which such Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; a Borrower or any of its ERISA Affiliates creates
or permits the creation of any accumulated funding deficiency, whether or not
waived; the voluntary or involuntary termination of any Plan which termination
could, in the opinion of Fremont, have a material adverse effect on the
financial condition of a Borrower; or a Borrower shall fail to notify Fremont
promptly in writing and in any event within ten (10) days of the occurrence of
any event which constitutes an Event of Default under this clause or would
constitute such an Event of Default upon the exercise of Fremont's judgment; or
24
8.15 CRIMINAL PROCEEDINGS. Criminal proceedings are
instituted against a Borrower, any member of such ▇▇▇▇▇▇▇▇'s senior management
or any guarantor of the Obligations that could result in the forfeiture or loss
of Collateral or a material impairment of the financial condition of such
Borrower or any guarantor of the Obligations.
Notwithstanding anything contained in this Section 8 to the
contrary, Fremont shall refrain from exercising its rights and remedies and an
Event of Default shall not be deemed to exist by reason of the occurrence of any
of the events set forth in Sections 8.5, 8.7, 8.8, 8.9 or 8.10 of this Agreement
if, within twenty (20) days after the date thereof, the same is released,
discharged, dismissed, bonded against or satisfied; PROVIDED, HOWEVER, Fremont
shall not be obligated to make Revolving Advances or Acquisition Loans to
Borrower during such period.
9. ▇▇▇▇▇▇▇'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. At any time that an Event of
Default exists, Fremont may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by each Borrower:
(a) Declare all Obligations, whether evidenced
by this Agreement, any of the other Loan Documents or otherwise, immediately due
and payable in full;
(b) Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement, any of the other Loan
Documents or any other agreement between Borrower and Fremont;
(c) Terminate this Agreement and any of the
other Loan Documents as to any future liability or obligation of Fremont, but
without affecting Fremont's rights and security interest in the Collateral and
without affecting Borrowers duties, obligations and covenants hereunder,
including payment of the Obligations;
(d) Settle or adjust disputes and claims
directly with Account Debtors for amounts and upon terms which ▇▇▇▇▇▇▇ considers
advisable and, in such cases, Fremont will credit Borrowers' loan account with
only the net amounts received by Fremont in payment of such disputed Accounts,
after deducting all Fremont Expenses incurred or expended in connection
therewith;
(e) Cause each Borrower to hold all returned
Inventory in trust for Fremont, segregate all returned Inventory from all other
property of such Borrower or in such ▇▇▇▇▇▇▇▇'s possession and conspicuously
label said returned Inventory as the property of Fremont;
(f) Without notice to or demand upon Borrowers
or any guarantor, make such payments and do such acts as Fremont considers
necessary or reasonable to protect its security interest in the Collateral.
Borrowers agree to assemble the Collateral if Fremont so requires and to deliver
or make the Collateral available to Fremont at a place designated by Fremont.
Each Borrower authorizes Fremont to enter any premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest or compromise any encumbrance, charge or lien that
in Fremont's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With respect
to any of ▇▇▇▇▇▇▇▇'s owned premises, each Borrower hereby grants Fremont a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Fremont's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrowers (such notice
being expressly waived) and without constituting a retention of any collateral
in satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrowers held by Fremont (including any amounts received in a
lockbox or blocked account), or (ii) indebtedness at any time owing to or for
the credit or the account of Borrowers held by Fremont;
(h) Hold, as cash collateral, any and all
balances and deposits of Borrowers held by Fremont (including any amounts
received in a lockbox or blocked account) to secure the Obligations;
(i) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale and sell (in the manner
provided for herein) the Collateral. Fremont is hereby granted a license or
other right to use, without charge, each Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of,
25
advertising for sale and selling any Collateral. Each Borrower's rights under
all licenses and all franchise agreements shall inure to Fremont's benefit;
(j) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including any Borrower's
premises) as Fremont determines is commercially reasonable. It is not necessary
that the Collateral be present at any such sale;
(k) Fremont shall give notice of the disposition
of the Collateral as follows:
(1) Fremont shall give the Borrowers
and any other Person entitled to notice under applicable law, a notice in
writing of the time and place of public sale or, if the sale is a private sale
or some other disposition other than a public sale is to be made, then the time
on or after which the private sale or other disposition is to be made;
(2) The notice shall be personally
delivered or mailed, postage prepaid, to Borrowers as provided in Section 12, at
least five (5) calendar days before the date fixed for the sale, or at least
five (5) calendar days before the date on or after which the private sale or
other disposition is to be made, unless the Collateral is perishable or
threatens to decline speedily in value;
(l) Fremont may credit bid and purchase at any
public sale;
(m) Any deficiency that exists after disposition
of the Collateral as provided above shall be paid immediately by Borrowers. Any
excess will be remitted without interest by Fremont to the party or parties
legally entitled to such excess; and
(n) In addition to the foregoing, Fremont shall
have all rights and remedies provided by law and any rights and remedies
contained in any other Loan Documents. All such rights and remedies shall be
cumulative.
9.2 NO WAIVER. No delay on the part of Fremont in
exercising any right, power or privilege under this Agreement shall operate as a
waiver, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or otherwise, preclude other or further exercise
of the right, power or privilege or the exercise of any other right, power or
privilege.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL
If a Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums or otherwise) due to third parties regarding the
Collateral, or fails to make any deposits or furnish any required proof of
payment or deposit, or fails to perform any of such Borrower's other covenants
under the terms of this Agreement or any other Loan Document, then, Fremont may,
in its reasonable credit judgment, do any or all of the following: (a) make any
payment which such Borrower has failed to pay or any part thereof; (b) set up
such reserves in Borrowers loan account as Fremont deems necessary to protect
Fremont from the exposure created by such failure; (c) obtain and maintain
insurance policies of the type described in Section 6.12 and take any action
with respect to such policies as Fremont deems prudent; or (d) take any other
action deemed necessary by Fremont to preserve and protect its interests and
rights under this Agreement or any other Loan Document. Any payments made by
Fremont shall not constitute an agreement by Fremont to make similar payments in
the future or a waiver by Fremont of any Event of Default under this Agreement.
Fremont need not inquire as to, or contest the validity of, any such expense,
tax, security interest, encumbrance or lien and the receipt of notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS AND INDEMNIFICATIONS
11.1 WAIVERS. Each Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, notice of nonpayment at maturity, notice of intention to
accelerate and notice of acceleration, so that Fremont may exercise any and all
rights and remedies under the Loan Agreement or any other Loan Documents, or as
otherwise provided at law or in equity, at any time that an Event of Default
exists, without any further notice, grace or opportunity to cure whatsoever.
Each Borrower further waives notice prior to ▇▇▇▇▇▇▇'s taking possession or
control of the Collateral, any bond or security which might be required by any
court prior to allowing Fremont to exercise any of Fremont's remedies, and the
benefit of all valuation, appraisement and exemption laws. Each Borrower agrees
that, at any
26
time that an Event of Default exists, Fremont may compromise, settle or release
without notice to such Borrower any accounts, documents, instruments, chattel
paper or guaranties at any time held by Fremont on which such Borrower may in
any way be liable.
11.2 NO MARSHALING. Each Borrower, hereby expressly waives
all rights, if any, to require a marshaling of assets by Fremont or to require
that Fremont first resort to some or any portion of the Collateral before
foreclosing upon, selling or otherwise realizing on any other portion thereof.
11.3 FREMONT'S LIABILITY FOR COLLATERAL. So long as
Fremont complies with its obligations, if any, under Section 9207 of the Code,
Fremont shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other Person. All risk of loss, damage or destruction of
the Collateral shall be borne by Borrowers.
11.4 INDEMNIFICATION. Borrowers shall, jointly and
severally, defend, indemnify and hold harmless Fremont, its directors, officers,
agents, employees, participants and assigns, from and against any and all
claims, suits, actions, causes of action, debts, liabilities, damages, losses,
obligations, charges, judgments and expenses, including attorneys fees and
costs, of any nature whatsoever, in any way relating to or arising from the
transactions contemplated by this Agreement or any other Loan Document
(including those relating to or arising from any alleged or actual violation of
any Environmental Law, or any loss, damage or injury resulting from any
Hazardous Material); provided that the foregoing indemnification shall not
extend to liabilities, damages, losses, obligations, judgments and expenses
proximately caused by the gross negligence or willful misconduct of Fremont.
This indemnification provision shall survive the termination of this Agreement.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement, the Loan Documents or any other
agreement entered into in connection herewith shall be in writing and (except
for financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or by
receipted overnight delivery service to Borrower or to Fremont, as the case may
be, at their addresses set forth below:
IF TO BORROWERS: DIGITAL RECORDERS, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
WITH A COPY TO: ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
IF TO FREMONT: FREMONT FINANCIAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.
Building ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Service Center Manager
The parties hereto may change the address at which they are to receive
notices hereunder by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Fremont in connection with Sections 9504 and 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) calendar days after the deposit thereof in the mail or one (1) calendar day
after deposit thereof with an overnight delivery service. Borrowers acknowledge
and agree that notices sent by ▇▇▇▇▇▇▇ in connection with Sections 9504 or 9505
of the Code shall be deemed sent when deposited in the mail or with an overnight
delivery service or otherwise sent by Fremont in accordance with the delivery
methods set forth above.
27
13. DESTRUCTION OF PAPERS DELIVERED TO FREMONT
All documents, schedules, invoices, agings or other papers
delivered to Fremont may be destroyed or otherwise disposed of by Fremont four
(4) months after they are delivered to or received by Fremont unless Borrowers
request, in writing, the return of said documents, schedules, invoices, agings
or other papers and makes arrangements, at Borrowers expense, for their return.
14. GENERAL PROVISIONS
14.1 EFFECTIVENESS; TIME OF THE ESSENCE. This Agreement
and the other Loan Documents shall be binding and deemed effective when executed
by ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇. Time is of the essence of this Agreement and the other
Loan Documents.
14.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; PROVIDED, HOWEVER, that no Borrower may assign this Agreement or any
rights or duties hereunder without ▇▇▇▇▇▇▇'s prior written consent and any
prohibited assignment shall be void and of no effect as against Fremont. No
consent to an assignment by Fremont shall release any Borrower from its
Obligations. Fremont and its successors and assigns may assign this Agreement
and any other Loan Document and its rights and duties hereunder and thereunder.
Fremont reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in ▇▇▇▇▇▇▇'s rights and
benefits hereunder. In connection therewith, Fremont may disclose all documents
and information which Fremont now or hereafter may have relating to a Borrower
or such Borrower's business. Each Borrower expressly consents to any assignment
by Fremont to its wholly owned subsidiary, Fremont Funding Inc., of certain of
▇▇▇▇▇▇▇'s rights hereunder and under the other Loan Documents, including the
beneficial interest in loans made by Fremont, and any subsequent assignment by
Fremont Funding Inc. to LaSalle National Bank (or any successor trustee), as
trustee of the Fremont Small Business Loan Master Trust, of such rights.
14.3 SECTION HEADINGS. Section headings in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose or be given any substantive effect.
14.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Fremont
or Borrowers, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
14.5 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
14.6 AMENDMENTS IN WRITING. Neither this Agreement nor any
provision hereof may be amended, modified, waived or terminated orally or by
course of conduct or pattern of dealing, but only by a written agreement signed
by an authorized officer of Fremont. Any purported amendment, modification,
waiver or termination of this Agreement or any provision hereof that is not in
writing and signed by an authorized officer of Fremont shall be void and of no
effect.
14.7 INTEGRATION. This Agreement, together with the other
Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof. This Agreement, together with the other
Loan Documents, supersedes all prior agreements, understandings and
negotiations, if any, which are merged into this Agreement and the other Loan
Documents.
14.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts each of
which, when executed and delivered, shall be deemed to be an original and all of
which, when taken together, shall constitute but one and the same Agreement.
14.9 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by a Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Fremont of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences
28
and other voidable or recoverable payments of money or transfers of property (a
Voidable Transfer), and if Fremont is required to repay or restore, in whole or
in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Fremont is required or elects to repay or restore, and as to all
reasonable costs, expenses and attorneys fees of Fremont related thereto, the
liability of such Borrower or such guarantor automatically shall be revived,
reinstated and restored and shall exist as though such Voidable Transfer had
never been made.
14.10 CONSULTATION WITH COUNSEL. Each Borrower and Fremont
acknowledge that they have been given the opportunity to consult with counsel
and other advisors of their choice prior to entering into this Agreement.
14.11 LIMITATION OF LIABILITY. No claim may be made by a
Borrower or any other Person against Fremont or the officers, directors,
employees, participants, assignees or agents of Fremont for any special,
indirect, punitive or consequential damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith, and each Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages.
14.12 TELEFACSIMILE EXECUTION. Delivery of an executed
counterpart of this Agreement or any other Loan Document by telefacsimile
transmission shall be equally as effective as delivery of an executed hard copy
of the same. Any party delivering an executed counterpart of this Agreement or
any other Loan Document by telefacsimile transmission shall also deliver an
executed hard copy of the same, but the failure by such party to deliver an
executed hard copy shall not affect the validity, enforceability and binding
effect of this Agreement or such other Loan Document.
14.13 FINANCE LENDER LICENSE. Fremont is licensed as a
Finance Lender by the California Department of Corporations, file number 603
2362.
15. CHOICE OF LAW AND VENUE
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW);
PROVIDED, HOWEVER, THAT THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS LOCATED
SHALL GOVERN WITH RESPECT TO (A) THE CREATION OF LIENS ON COLLATERAL LOCATED IN
SUCH STATE AND (B) THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF FREMONT'S
LIENS UPON ANY PORTION OF THE COLLATERAL LOCATED IN SUCH STATE AND THE
ENFORCEMENT IN SUCH STATE OF FREMONT'S OTHER REMEDIES WITH RESPECT TO THE
COLLATERAL LOCATED IN SUCH STATE.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
COURTS LOCATED IN THE COUNTY OF ▇▇▇▇, STATE OF GEORGIA, THE FEDERAL COURTS WHOSE
VENUE INCLUDES THE COUNTY OF ▇▇▇▇, STATE OF GEORGIA, OR, AT THE SOLE OPTION OF
FREMONT, IN ANY OTHER COURT IN WHICH FREMONT SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. THE PARTIES EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH COURT, AND THE
PARTIES HEREBY WAIVE ANY OBJECTION WHICH EITHER MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION AND HEREBY CONSENT TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT. FURTHERMORE, EACH
BORROWER AND FREMONT EACH WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 15.
29
16. WAIVER OF JURY TRIAL
EACH BORROWER AND FREMONT HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH BORROWER AND
FREMONT REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered in Atlanta, Georgia.
ATTEST: DIGITAL RECORDERS, INC., a North Carolina corporation
-------------------------------------
By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
ATTEST: TWINVISION CORP. OF NORTH AMERICA, INC., a North Carolina corporation
-------------------------------------
By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
ATTEST: DIGITAL AUDIO CORPORATION, a North Carolina corporation
-------------------------------------
By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
FREMONT FINANCIAL CORPORATION, a California corporation
Signed By:
▇▇▇▇▇▇ ▇▇▇▇▇, Vice President
30
ASSISTANT SECRETARY'S CERTIFICATE
I, ▇▇▇▇▇ ▇. ▇▇▇▇, do hereby certify that I am the duly elected and
acting Secretary of DIGITAL RECORDERS, INC., a North Carolina corporation (the
Corporation), that the following is a true and correct copy of the resolutions
duly adopted by the Board of Directors of the Corporation on the 23rd day of
August, 1999, that the same have not in any way been modified or rescinded and
are in full force and effect, and that the resolutions have been adopted in
accordance with the laws of the state of incorporation, the Certificate or
Articles of Incorporation and the Bylaws of the Corporation, and that either no
shareholder consent is required or any necessary shareholder consent has been
obtained:
"RESOLVED, that any one or more of the officers of the
Corporation referred to below be and hereby are authorized and
empowered on behalf of the Corporation to transact any and all business
with Fremont Financial Corporation (Fremont), or ▇▇▇▇▇▇▇'s successors
or assigns, which the Corporation could in any way transact and are
further authorized to execute, acknowledge and deliver on behalf of the
Corporation and in its name to Fremont the following (the Agreements):
1. A Loan and Security Agreement, together with riders,
attachments and addenda thereto, and Secured Promissory
Note(s) in favor of ▇▇▇▇▇▇▇, each in form and content as such
officer deems necessary and appropriate;
2. All security agreements, pledge agreements, financing
statements, deeds of trust, mortgages, assignments and other
instruments of conveyance in favor of Fremont to effect a
grant of a security interest or lien in all or a portion of
the Corporation's assets, including without limitation
accounts, inventory, equipment, general intangibles and real
property; and
3. All documents, instruments, agreements or certificates
ancillary to the aforementioned loan and security
documentation to the benefit of Fremont deemed necessary or
appropriate to consummate the transactions with Fremont
contemplated by the Corporation;
"RESOLVED FURTHER, that the following are the true and correct names,
signatures, and titles of the officers of the Corporation referred to above:
NAMES SIGNATURES TITLES
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President/Chief
----------------------------- Financial Officer
▇▇▇▇▇ ▇. ▇▇▇▇ Assistant Secretary
-----------------------------
"RESOLVED FURTHER, that each of the foregoing officers is hereby
authorized to execute and deliver, for and on behalf of the Corporation, all
such other documents, instruments and agreements and to do all such other acts
and things as, in the opinion of such officer, may be necessary or appropriate
in order to effectuate the intent and purpose of the foregoing resolutions and
to consummate the transactions contemplated by and to be performed by the
Corporation in connection with the Agreements;
"RESOLVED FURTHER, that the acts of said officers, or any of them,
shall at all times receive full faith and credit without the necessity of
inquiry by Fremont as to any of the circumstances attending the same or to the
application of any money loaned pursuant hereto, and that the acts and doings of
said authorized officers or any of them, in respect to the subject matter
hereof, are hereby fully ratified, approved, adopted and confirmed; and
"RESOLVED FURTHER, that the authorizations herein set forth shall
remain in full force and effect and shall apply to all amendments and
modifications of the Agreements until written notice of the modification or
revocation of such authorizations shall be delivered to and actually received by
Fremont, or its successors or assigns, at its office."
IN WITNESS WHEREOF, I have executed this Certificate as Secretary of the
Corporation as of this 23rd day of August, 1999.
By:
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
31
CONDITIONS PRECEDENT RIDER TO LOAN AND SECURITY AGREEMENT
AMONG
FREMONT FINANCIAL CORPORATION
AND
DIGITAL RECORDERS, INC.,
TWINVISION CORP. OF NORTH AMERICA, INC. and
DIGITAL AUDIO CORPORATION
This Conditions Precedent Rider to Loan and Security Agreement
(hereinafter referred to as this "Rider") dated as of this 23rd day of August,
1999, is hereby made a part of and incorporated into that certain Loan and
Security Agreement (hereinafter referred to, together with all supplements and
riders thereto and amendments thereof, as the "Loan Agreement") dated the date
hereof among FREMONT FINANCIAL CORPORATION, a California corporation
(hereinafter referred to as "Fremont"), and DIGITAL RECORDERS, INC., a North
Carolina corporation (Digital), TWINVISION CORP. OF NORTH AMERICA, INC., a North
Carolina corporation (TwinVision) and DIGITAL AUDIO CORPORATION, a North
Carolina corporation (DAC; Digital, TwinVision and DAC are hereinafter
individually referred to as a Borrower and collectively as Borrowers).
1. All capitalized terms contained in this Rider, unless
otherwise defined herein, shall have the meanings ascribed to such terms in the
Loan Agreement.
2. At the request of ▇▇▇▇▇▇▇▇, certain of the Loan Documents have
been executed as of the date of this Rider even though all conditions precedent
to Fremont's funding have not been satisfied. The execution of the Loan
Documents prior to the satisfaction of all conditions is being done as an
accommodation to Borrower and shall in no way obligate Fremont to make loans or
advances to Borrower unless all conditions precedent are fully and completely
satisfied.
3. As used herein, (i) the term "Guarantor" shall refer to
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ International, Inc., a Texas corporation, (ii) the term
"Guarantors' Collateral" shall refer to all of Guarantors personal property,
including, without limitation, all accounts, inventory, equipment and general
intangible, and all products and proceeds thereof, (iii) the term "Validity
Guarantor" shall refer to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of the State of North
Carolina.
4. As conditions precedent to the making of any of the loans
described in the Loan Documents, each of the following conditions shall be
satisfied to the satisfaction of Fremont unless waived by Fremont in writing:
a. No Event of Default shall exist;
b. Borrowers shall have executed and delivered, or caused to
be executed and delivered, each of the Loan Documents and all other
instruments, documents, agreements, waivers, financing statements,
assignments, deeds of trusts mortgages and subordination agreements as
in the opinion of Fremont may be necessary to give effect to the Loan
Agreement, the transactions contemplated thereby or the perfection of
Fremont's security interest in the Collateral;
32
c. Guarantor shall have executed and delivered, or caused to
be executed and delivered, a Continuing Guaranty, in form and substance
acceptable to Fremont, and all other instruments, documents,
agreements, waivers, financing statements, deeds of trust, mortgages
and subordination agreements as in the opinion of Fremont may be
necessary to give effect to such Continuing Guaranty, the transactions
contemplated thereby or the creation and perfection of Fremont's
security interests in the Guarantors' Collateral;
d. Validity Guarantor shall have executed and delivered a
Validity Guaranty, in form and substance acceptable to Fremont;
e. Fremont and Borrowers shall have entered into a Lockbox
Agreement with a bank mutually acceptable to Fremont and Borrowers.
f. Digital shall have delivered to Fremont a stock pledge
agreement, irrevocable stock powers and the original stock certificates
with respect to sixty-five percent (65%) of Digital's equity interests
in Transit-Media.
g. Fremont shall have received from Borrowers' and Guarantors'
counsel an opinion letter in form and substance acceptable to Fremont
in its sole discretion;
h. Borrowers shall have executed, and Fremont shall have
filed, all financing statements deemed necessary or desirable to
Fremont to perfect Fremont's security interest in the Collateral, and
Fremont shall have received assurances satisfactory to it that such
security interests are duly perfected, first priority security
interests;
i. Borrowers shall have delivered to Fremont evidence
satisfactory to Fremont that the Collateral has been insured in such
amounts as may be acceptable to Fremont, in its sole discretion, and in
compliance with the provisions of the Loan Agreement and that Fremont
shall be named as lender loss payee on endorsements in form and
substance satisfactory to Fremont which shall be issued in conjunction
with all such policies of insurance;
j. Each Borrower shall have caused to be delivered to Fremont
a copy of its Articles of Incorporation certified by the Secretary of
State of its state of incorporation and a copy of its By-Laws certified
by its corporate secretary as of the date of the Loan Agreement,
together with a Good Standing Certificate for such Borrower issued by
the Secretary of State of each state in which such Borrower transacts
business.
k. Borrowers shall have delivered to Fremont a disbursement
letter authorizing Fremont to pay all or a portion of the initial
advances under the Loan Documents to Wachovia Bank, N.A. (the "Existing
Secured Lender") in amounts sufficient to satisfy the indebtedness
owing from Borrowers to the Existing Secured Lender;
l. Fremont shall have received payoff letters from the
Existing Secured Lender pursuant to which the Existing Secured Lender
have agreed to deliver terminations of all financing statements filed
against each Borrower or Guarantor and reconveyances or releases of any
deeds of trust or mortgages on the Collateral or Guarantors' Collateral
immediately following receipt of payment of the indebtedness owing from
Borrowers to the Existing Secured Lender;
33
m. Since _________________________, there shall not have
occurred any material adverse change in the business, financial
condition or results of operations of Borrower or the existence or
value of any of the Collateral;
n. At the time of the initial funding under the Loan
Documents, the amount of the revolving loan availability described in
Section 2.1A of the Loan Agreement, shall exceed by an amount of not
less than Seven Hundred and Fifty Thousand Dollars ($750,000) the sum
of (a) the amount of Borrower's indebtedness to the Existing Secured
Lender plus (b) the Loan Origination Fee of Fifty Thousand Dollars
($50,000) described in Section 2.10 of the Loan Agreement, plus (c) the
amount of Borrower's past due trade payables (past due trade payables
being those which are more than ninety (90) days past the original
invoice date) and other past due obligations of Borrower (including
book overdrafts and delinquent payroll taxes);
o. Fremont and its counsel shall have received and found
acceptable all pending litigation between Borrowers and ▇▇▇▇ ▇▇
Industries;
▇. ▇▇▇▇▇▇▇ shall have received a duly executed landlord waiver
agreement, in form and substance satisfactory to Fremont, with respect
to each leased property where Borrower keeps Inventory or Equipment;
q. Fremont shall have received a duly processor agreement, in
form and substance satisfactory to Fremont, with respect to any
inventory at any time in the possession of a processor;
r. Fremont shall have completed its "takeover" audit of
Borrower and the results thereof shall be satisfactory to Fremont, in
its sole discretion; and
s. Borrower shall have delivered to Fremont a note pledge
agreement pursuant to which Borrower shall pledge and collaterally
assign to Fremont, as security for the Obligations, the promissory
note(s) owing by Transit-Media to Borrowers.
5. ▇▇▇▇▇▇▇▇'s failure to fulfill, or cause to be fulfilled, each
of the foregoing conditions precedent to the satisfaction of Fremont on or
before August 31, 1999, shall relieve Fremont of any obligation to consummate
the transactions contemplated by the Loan Documents.
6. The terms and conditions of this Rider are incorporated in and
made a part of the Loan Agreement.
7. This Rider shall be governed in all respects by and construed
in accordance with the internal laws of the State of Georgia. This Rider shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns. Borrower hereby waives notice of Fremont's acceptance
hereof.
IN WITNESS WHEREOF, this Rider has been executed by the parties hereto
as of the date first written above.
34
STANDBY LETTER OF CREDIT SUPPLEMENT
TO LOAN AND SECURITY AGREEMENT
among
FREMONT FINANCIAL CORPORATION
ATTEST: DIGITAL RECORDERS, INC., a North Carolina
corporation
--------------------------- By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
ATTEST: TWINVISION CORP. OF NORTH AMERICA,
INC., a North Carolina corporation
---------------------------- By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
ATTEST: DIGITAL AUDIO CORPORATION, a North
Carolina corporation
---------------------------- By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
FREMONT FINANCIAL CORPORATION,
a California corporation
Signed By:
Print:
---------------------------------
Name:
----------------------------------
Title/Capacity:
------------------------
35
STANDBY LETTER OF CREDIT SUPPLEMENT
TO LOAN AND SECURITY AGREEMENT
AMONG
FREMONT FINANCIAL CORPORATION
AND
DIGITAL RECORDERS, INC.,
TWINVISION CORP. OF NORTH AMERICA, INC. and
DIGITAL AUDIO CORPORATION
This Standby Letter of Credit Supplement ("Supplement") is a supplement
to the Loan and Security Agreement between FREMONT FINANCIAL CORPORATION
("Fremont") and DIGITAL RECORDERS, INC., TWINVISION CORP. OF NORTH AMERICA, INC.
and DIGITAL AUDIO CORPORATION (hereinafter individually referred to as a
"Borrower" and collectively as "Borrowers") dated as of August 23, 1999 (the
"Agreement"). This Supplement is (a) hereby incorporated into the Agreement, (b)
made a part thereof and (c) subject to the other terms, conditions, covenants
and warranties thereof. All terms, including capitalized terms, used herein
shall have the meanings ascribed to them respectively in the Agreement, unless
otherwise defined in this Supplement.
This Supplement will confirm the terms and conditions upon which
Fremont may, from time to time in Fremont's sole discretion, assist Borrowers in
establishing or opening standby letters of credit and extend other financial
accommodations for Borrowers' benefit.
Section 1. CREDIT ACCOMMODATIONS
1.1 Fremont may, in Fremont's sole discretion, from time to time, for
▇▇▇▇▇▇▇▇▇' account, at Borrowers' request: (a) issue, open, or cause the
issuance or opening of Standby Letters of Credit for any purpose approved by
Fremont, and/or (b) assist Borrowers in establishing or opening Standby Letters
of Credit by indemnifying the issuer thereof or guarantying Borrowers' payment
or performance to such issuer in connection therewith. All such Standby Letters
of Credit are referred to herein individually as a "Credit" and collectively as
"Credits."
1.2 The opening or issuance of any Credit shall at all times and in all
respects be in Fremont's sole discretion. The amount and extent of any Credit
and the terms, conditions and provisions thereof shall in all respects be
determined solely by Fremont and shall be subject to change, modification and
revision by Fremont, in Fremont's sole discretion, at any time and from time to
time. The maturity of each Credit shall not exceed the sooner of one hundred and
eighty (180) days after opening or issuance, or the scheduled termination of the
Agreement, except in Fremont's sole discretion.
1.3 Borrowers' loan availability under the Agreement and any other
Supplements thereto shall be reduced by the amount of all outstanding Credits or
such lesser amount as Fremont may elect in Fremont's discretion.
1.4 All outstanding Credits shall be secured by all Collateral in which
Fremont is now or hereafter granted a security interest by Borrowers or any
guarantor of Borrowers' Obligations.
1.5 Except in Fremont's sole discretion, the amount of all Credits and
all other commitments and obligations made or incurred by Fremont for Borrowers'
account in connection therewith shall not exceed Five Hundred Thousand Dollars
($500,000) in the aggregate at any time outstanding.
36
1.6 All indebtedness, liabilities, expenses and obligations of any kind
paid, arising or incurred by Fremont in connection with this Supplement, or
Credit or any documents, drafts and acceptances thereunder, whether present or
future, whether arising or incurred before or after termination or nonrenewal of
this Agreement shall be incurred solely as an accommodation to Borrowers and for
Borrowers' account and constitute part of the Obligations, including without
limitation: (a) all amounts due or which may become due under any Credit or any
drafts or acceptances thereunder; (b) all amounts charged or chargeable to
Fremont or Borrowers by any bank or other issuer of any Credit or any
correspondence which opens, issues or is otherwise involved with any Credit,
including without limitation, all fees, expenses and commissions; and (c)
Fremont's fees, expenses and commissions.
1.7 All such Obligations shall accrue interest at the rate provided for
in the Agreement, commencing on the date any payment is made or obligations
incurred by Fremont, and all such Obligations shall, together with interest
thereon and other sums owed by Borrowers to Fremont hereunder, be payable and
evidenced as provided in the Agreement.
1.8 In addition to all other fees, charges and expenses payable under
the Agreement, this Supplement, and to any bank or other issuer or correspondent
in connection with any Credit, Borrowers agree to pay to Fremont the following
commission for Fremont's services hereunder, which shall be due and payable on
the opening or issuance of each Credit or, if the original term is extended, on
the extension thereof, a charge of two percent (2.0%) per annum of the face
amount of any Credit. ▇▇▇▇▇▇▇▇▇ also agrees to pay to Fremont, Fremont's and any
bank's, other issuer's or correspondent's customary charges for amendments,
extensions and administration relating to any Credit, which charges shall be due
and payable on the date of incurrence and, at Fremont's option may be charged to
any of Borrowers' Obligations.
1.9 Nothing contained herein shall be deemed or construed to grant
Borrowers any right, power or authority to pledge Fremont's credit in any
manner. Fremont shall have no liability of any kind with respect to any Credit
opened or issued by a bank or other issuer or any draft or acceptance with
respect thereto unless and until Fremont shall have first duly delivered
Fremont's guarantee or indemnification in writing with respect thereto, as
provided herein.
Section 2. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Borrower hereby represents, warrants and covenants to Fremont the
following (which shall survive the execution and delivery of this Supplement),
the truth and accuracy of which, or compliance with, being a continuing
condition of the making of loans by Fremont under the Agreement or any
supplement thereto and the extension by Fremont of each Credit and other
financial accommodations pursuant hereto:
2.1 All documents, instruments, notices and statements relating to any
Credit and/or the transaction thereto, if any, shall at Fremont's request, be
promptly delivered to Fremont.
2.2 Such Borrower shall promptly notify Fremont in writing of the
details of any loss, damage, investigation, action, suit, proceeding or claim
relating to the Credit or the transaction relating thereto.
Section 3. INDEMNIFICATION AND RELEASE
3.1 Each Borrower shall and does hereby indemnify Fremont and hold
Fremont harmless from and against, and agrees to pay Fremont on demand the
amount of, any and all losses, costs, claims, demands, causes of action,
liabilities or expenses (collectively, "Liabilities") which Fremont may suffer
or incur arising from or in connection with any transactions or occurrences
relating to any Credit, and any documents, drafts or acceptances thereunder or
relating thereto, including, but not limited to, Liabilities due to any action
taken by any bank or other issuer or correspondent with respect to any Credit.
Each Borrower further agrees to, and does hereby, release and hold Fremont
harmless for any acts, waivers, errors, delays or omissions, whether caused by
Fremont, by any bank or other issuer or correspondent or otherwise with respect
to or relating to any Credit. Borrowers' unconditional obligation to Fremont
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, except for Fremont's own willful misconduct or gross negligence.
37
3.2 The drawer under or beneficiary of any Credit (or any assignee or
transferee thereof) shall be deemed Borrowers' agent and Borrowers assume all
risk, loss, liabilities, charges and expenses with respect to their acts or
omissions.
3.3 If any Credit provides that payment is to be made by any bank,
other issuer or correspondent, Fremont shall not be responsible for the failure
of any of the documents specified in any Credit to come into Fremont's
possession or for any delay in connection therewith, and ▇▇▇▇▇▇▇▇▇' obligation
to make reimbursement shall not be affected by such failure or delay in the
receipt by Fremont of any such documents.
3.4 Borrowers agree that any action taken by Fremont, or any action
taken by any bank or other issuer or correspondent under or in connection with
any Credit, the transaction subject thereto, and any documents, drafts or
acceptances thereunder, shall, notwithstanding any contrary judgments or
instructions expressed or unexpressed by Borrowers or inconsistent therewith, be
conclusive and binding on Borrowers and shall not create any resulting liability
to Fremont, except for Fremont's own willful misconduct or gross negligence. In
furtherance thereof, Fremont shall have the full and sole right and authority
to: (a) clear and resolve any questions of noncompliance of documents; (b) give
any instructions as to acceptance or rejection of any documents; (c) grant any
extensions of the maturity of, time of payment for or time of presentation of,
any drafts, acceptances or documents and (d) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Credits, or documents, drafts or
acceptances thereunder or any letters of credit included in the property subject
to the Credit; all in Fremont's sole name, and any bank or other issuer or
correspondent shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from Fremont, all
without any notice to or any consent from Borrowers.
3.5 Without Fremont's express consent and endorsement in writing,
Borrowers agree not to: (a) approve or resolve any questions of non-compliance
of documents; (b) give any instructions as to acceptance or rejection of any
documents or goods; (c) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders; (d) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or (e) agree to amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the application, Credits, or documents, drafts or acceptances thereunder.
3.6 Any rights, remedies, duties or obligations granted or undertaken
by Borrowers to any bank or other issuer or correspondent in any application for
any Credit or any outstanding agreement relating to the opening or issuance of
any Credit or acceptances or otherwise, shall be deemed to have been granted to
Fremont and apply in all respects to Fremont and shall be in addition to any
rights, remedies, duties or obligations contained herein.
[Remainder of page intentionally left blank]
38
3.7 Any duties or obligations undertaken by Fremont to any bank or
other issuer or correspondent in any application for or in connection with any
Credit, including any outstanding agreement relating to the opening or issuance
of any Credit or otherwise, shall be deemed to have been undertaken by Borrowers
and apply in all respects to Borrowers and shall be in addition to the duties or
obligations contained herein.
IN WITNESS WHEREOF, we have caused these presents to be duly executed
as of this day of August, 1999.
BORROWERS:
ATTEST: DIGITAL RECORDERS, INC., a North Carolina
corporation
---------------------------- By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
ATTEST: TWINVISION CORP. OF NORTH AMERICA,
INC., a North Carolina corporation
---------------------------- By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
ATTEST: DIGITAL AUDIO CORPORATION, a North
Carolina corporation
----------------------------
By:
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
[CORPORATE SEAL]
FREMONT FINANCIAL CORPORATION
By:
Print Name:
------------------------------
Title/Capacity:
------------------------------
39
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made and entered into as of this 23rd
day of August, 1999, by and between DIGITAL RECORDERS, INC., a North Carolina
corporation (hereinafter referred to as "Pledgor"), and FREMONT FINANCIAL
CORPORATION, a California corporation (hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Pledgor, TwinVision Corp. of North America, Inc.
("TwinVision"), Digital Audio Corporation ("DAC") and Lender have entered into a
certain Loan and Security Agreement dated as of August 23, 1999, (hereinafter,
together with all amendments thereto, the "Loan Agreement"), pursuant to which
Lender may make loans or extend financial accommodations to or for the benefit
of Pledgor, TwinVision and DAC ("Loans"); and
WHEREAS, to secure the Loans, ▇▇▇▇▇▇▇ has granted a security interest
in and lien upon all or substantially all of its property; and
WHEREAS, a condition to the making of the Loans is ▇▇▇▇▇▇▇'s pledge to
Lender of 65% of the capital stock of TRANSIT-MEDIA, GMBH, a German corporation
(hereinafter the "Company") as security for the Loans and all other liabilities
and obligations of Pledgor, TwinVision and Company to Lender of every kind and
description, whether arising under the Loan Agreement or under any other
instrument or agreement evidencing or securing all or any part of the Loans or
other liabilities (hereinafter jointly called, together with all amendments
thereto, the "Loan Documents");
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to secure the timely payment and performance
of the Loans and all other liabilities of Pledgor and Company to Lender, ▇▇▇▇▇▇▇
agrees as follows:
1. PLEDGE. Pledgor hereby pledges, mortgages, assigns, transfers,
sets over and delivers to Lender, and grants to Lender a security interest in,
sixty-five (65) shares of the capital stock of Company, evidenced by stock
certificate number three (3) and all options for the purchase of shares of the
capital stock of Company (such shares of capital stock being hereinafter called
"Stock"), herewith delivered to Lender accompanied by stock powers ("Powers")
duly executed in blank, with signatures properly guaranteed, and the proceeds
thereof (said Stock and Powers hereinafter collectively called the "Collateral")
as security for the payment of all liabilities and obligations of Pledgor to
Lender of every kind and description, whether now existing or hereafter arising
and whether fixed or contingent, secured or unsecured, joint or
40
several, due or to become due and whether arising under the Loan Agreement or
otherwise (jointly hereinafter called the "Obligations").
Lender shall have no duty with respect to any of the Collateral other
than the duty to use reasonable care in the safe custody of the Collateral in
its possession. Without limiting the generality of the foregoing, Lender shall
be under no obligation to take any steps necessary to preserve the value of any
of the Collateral or to preserve rights in the Collateral against any other
parties, but may do so at its option, and all expenses incurred in connection
therewith shall be for the sole account of Pledgor.
1. VOTING RIGHTS. During the term of this Agreement, and so long
as there shall not occur any event of default under any of the Loan Documents
(any such event of default being herein referred to as "Event of Default"),
Pledgor shall have the right to vote all or any portion of the Stock on all
corporate questions for all purposes not inconsistent with the terms of this
Agreement or the Loan Documents. Upon and after the occurrence of any Event of
Default and ▇▇▇▇▇▇'s acceleration of the maturity of the Obligations in
consequence thereof, Lender shall be entitled to exercise all voting powers
pertaining to the Collateral, and any and all proxies theretofore executed by
Lender shall terminate and thereafter be null and void and of no effect
whatsoever. To that end, if Lender transfers all or any portion of the
Collateral into its name or the name of its nominee, Lender shall, upon the
request of Pledgor, unless an Event of Default shall have occurred, execute and
deliver or cause to be executed and delivered to Pledgor, proxies with respect
to the Collateral.
1. COLLECTION OF DIVIDEND PAYMENTS. During the term of this
Agreement, and so long as there shall not occur or exist any Event of Default,
Pledgor shall have the right to receive and retain any and all sums payable by
Company on account of any of the Collateral except as otherwise provided in the
Loan Documents. Upon and after the occurrence of any Event of Default and
▇▇▇▇▇▇'s acceleration of the Obligations in consequence thereof, all sums
payable by Company on account of any of the Collateral shall be paid to Lender
and any such sum received by Pledgor shall be deemed to be held by Pledgor in
trust for the benefit of Lender and shall be forthwith turned over to Lender for
application by it to the Obligations in such order of application as Lender in
its sole discretion elects.
(a) REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor warrants
and represents that: Pledgor is the legal and beneficial owner of the
Collateral; all of the shares of the Stock have been duly and validly issued,
are fully paid and nonassessable, and are owned by Pledgor free of any liens,
charges or encumbrances except for ▇▇▇▇▇▇'s security interest hereunder and such
security interests as ▇▇▇▇▇▇ has heretofore consented to in writing; the Stock
constitutes 65% of the issued and outstanding capital stock of the Company;
there are no restrictions upon the voting rights or upon the transfer of any of
the Collateral other than as may appear on the face of the certificates
evidencing the Stock; Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Collateral without the consent of any
other party and free of any encumbrances and applicable restrictions imposed by
any governmental agency or regulation; and the execution, delivery and
performance by Pledgor of this Agreement and the exercise by Lender of its
rights and remedies hereunder do not and will
41
not result in the violation of any agreement, indenture or instrument or any
license, judgement, decree, order, law, statute or other governmental rule or
regulation, including, without limitation, any federal or state laws or
regulations governing the sale or exchange of securities.
(a) AFFIRMATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will: warrant and defend at its own expense Lender's right, title,
special property and security interest in and to the Collateral against the
claims of any person or entity; promptly deliver to Lender all written notices,
and will promptly give written notice to Lender of any other notices, received
by Pledgor with respect to the Collateral; and deliver to Lender promptly to
hold under this Agreement any shares of the capital stock of the Company
acquired by Pledgor by virtue of the exercise of any stock options included
within the Collateral.
(a) NEGATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will not sell, convey or otherwise dispose of any of the Collateral or
any interest therein; incur or permit to be incurred any pledge, lien, charge,
or encumbrance or any security interest whatsoever in or with respect to any of
the Collateral or the proceeds thereof, other than the security interest created
hereby and such security interests as Lender has heretofore consented to in
writing; or permit the Company to issue any new stock.
1. SUBSEQUENT CHANGES AFFECTING COLLATERAL. Pledgor represents to
Lender that Pledgor has made its own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, but not
limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
agrees that Lender shall have no responsibility or liability for informing
Pledgor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto. Lender may, at any time that
an Event of Default exists, at its option and without notice to Pledgor,
transfer or register the Collateral or any portion thereof into its or its
nominee's name with or without any indication that such Collateral is subject to
the security interest hereunder.
1. STOCK ADJUSTMENts. If during the term of this Agreement any
stock dividend, reclassification, readjustment or other change is declared or
made in the capital structure of Company, or any option included within the
Collateral is exercised, or both, all new, substituted and additional shares, or
other securities, issued by reason of any such change or exercise shall be
delivered to and held by Lender under the terms of this Agreement in the same
manner as the Collateral originally pledged hereunder.
1. WARRANTS, OPTIONS AND RIGHTS. If during the term of this
Agreement subscription warrants or any other rights or options shall be issued
or exercised in connection with the Collateral, then such warrants, rights and
options shall be immediately assigned by Pledgor to Lender and all new stock or
other securities so acquired by Pledgor shall be immediately assigned to Lender
to be held under the terms of this Agreement in the same manner as the
Collateral originally pledged hereunder.
42
1. REGISTRATION. If Lender determines that it is advisable to
register under or otherwise comply in any way with the Securities Act of 1933 or
any similar Federal or State Law, or if such registration or compliance is
required with respect to the securities included in the Collateral prior to sale
thereof by Lender, then upon or at any time after the occurrence of an Event of
Default, Pledgor will use its best efforts to cause any such registration to be
effectively made, at no expense to Lender, and to continue such registration
effective for such time as may be reasonably necessary in the opinion of ▇▇▇▇▇▇,
and will reimburse Lender for any expense incurred by ▇▇▇▇▇▇, including
reasonable attorney's fees and accountant's fees and expenses, in connection
therewith.
1. CONSENT. Pledgor hereby consents that from time to time,
before or after the occurrence or existence of any Event of Default, with or
without notice to or assent from Pledgor, any other security at any time held by
or available to Lender for any of the Obligations may be exchanged, surrendered,
or released, and any of the Obligations may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released, in whole or
in part, as Lender may see fit, and Pledgor shall remain bound under this
Agreement and under the Loan Agreement notwithstanding any such exchange,
surrender, release, alteration, renewal, extension, continuance, compromise,
waiver or inaction, extension of further credit or other dealing.
1. REMEDIES UPON DEFAULT. Upon and after the occurrence of any
Event of Default, Lender shall have, in addition any other rights given by law
or the rights given hereunder or under the Loan Documents, all of the rights and
remedies with respect to the Collateral of a secured party under the Uniform
Commercial Code as adopted and in force in the State of Georgia. In addition,
with respect to the Collateral, or any part thereof, which shall then be or
shall thereafter come into ▇▇▇▇▇▇'s possession or custody, Lender may sell or
cause the same to be sold at any broker's board or at public or private sale, in
one or more sales or lots, at such price as Lender may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk, and
the purchaser of any or all of the Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever. Unless the Collateral threatens to decline speedily in value or is
or becomes of a type sold on a recognized market, Lender will give Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met if
such notice is mailed to Pledgor, as provided in paragraph 18 below, at least
ten (10) days before the time of the sale or disposition. Any other requirement
of notice, demand or advertisement for sale is, to the extent permitted by law,
waived. Lender may, in its own name, or in the name of a designee or nominee,
buy at any public sale of the Collateral and, if permitted by applicable law,
buy at any private sale thereof. Pledgor will pay to Lender on demand all
expenses (including court costs and reasonable attorneys' fees and expenses)
43
of, or incident to, the enforcement of any of the provisions hereof and all
other charges due against the Collateral, including, without limitation, taxes,
assessments, security interests, liens or encumbrances upon the Collateral and
any expenses, including transfer or other taxes, arising in connection with any
sale, transfer or other disposition of Collateral. In connection with any sale
of Collateral by Lender, Lender shall have the right to execute any document or
form, in its name or in the name of Pledgor, which may be necessary or desirable
in connection with such sale, including, without limitation, Form 144
promulgated by the Securities and Exchange Commission. In view of the fact that
federal and state securities laws may impose certain restrictions on the method
by which a sale of the Collateral may be effected after an Event of Default,
Pledgor agrees that Lender may, from time to time, attempt to sell all or any
part of the Collateral by means of a private placement restricting the bidders
and prospective purchasers to those who will represent and agree that they are
purchasing for investment only and not for distribution. In so doing, Lender may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of investors deemed by ▇▇▇▇▇▇, in its reasonable judgment, to be
responsible parties who might be interested in purchasing the Collateral, and if
Lender solicits such offers from not less than four (4) such investors, then the
acceptance by Lender of the highest offer obtained therefrom shall be deemed to
be a commercially reasonable method of disposing of the Collateral.
1. TERM. This Agreement shall become effective only when accepted
by Lender and, when so accepted, shall constitute a continuing agreement and
shall remain in full force and effect until the Loan Documents are terminated
and all of the Obligations have been fully paid and satisfied, at which time
this Agreement shall terminate and Lender shall deliver to Pledgor, at Pledgor's
expense, such of the Collateral as shall not have been sold or otherwise applied
pursuant to this Agreement.
1. DEFINITIONS. The singular shall include the plural and vice
versa, and any gender shall include any other gender as the text shall indicate.
1. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Pledgor and its administrators, executors, successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns.
1. CONSTRUCTION AND APPLICABLE LAW. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but, if any provision of this
Agreement shall be held to be prohibited or invalid under any applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. This Agreement shall be governed by,
construed under, and enforced in accordance with, the internal laws of the State
of Georgia.
1. FURTHER ASSURANCES. ▇▇▇▇▇▇▇ agrees that it will cooperate with
▇▇▇▇▇▇ and will upon ▇▇▇▇▇▇'s request execute and deliver, or cause to be
executed and delivered, all such other stock powers, instruments, and documents,
and will take all such other action as Lender may reasonably request from time
to time in order to carry out the provisions and purposes hereof, including,
without limitation, delivering to Lender, if requested by Lender upon or after
the occurrence of an Event of Default and ▇▇▇▇▇▇'s acceleration of the
Obligations in
44
consequence thereof, irrevocable proxies with respect to the Stock in form
satisfactory to Lender. Until receipt thereof, this Agreement shall constitute
Pledgor's proxy to Lender or its nominee to vote all shares of the Stock then
registered in Pledgor's name.
1. NOTICES. Except as otherwise provided herein, all notices,
requests and demand to or upon either party hereto, to be effective, shall be in
writing (and, if sent by mail, shall be sent by certified or registered mail,
return receipt requested) or by telegraph or by telex and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given or
delivered when delivered against receipt or three (3) business days after
deposit in the mail, postage prepaid, or in the case of telecopy notice, when
sent, address as follows:
If to Pledgor: Digital Recorders, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: Fremont Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
Building ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
1500 Marquis Two Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Atlanta, Georgia 30303
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change the address to which notices are to be sent to
it by giving written notice of such changed address to the other party in the
manner prescribed by this section.
1. PARAGRAPH HEADINGS. The paragraph headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
45
1. ▇▇▇▇▇▇ APPOINTED ATTORNEY-IN-FACT. Pledgor hereby constitutes
and appoints ▇▇▇▇▇▇, with full power of substitution, ▇▇▇▇▇▇▇'s attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which Lender may deem necessary or advisable
to accomplish the purposes hereof, which appointment is coupled with an interest
and is irrevocable. Without limiting the generality of the foregoing, ▇▇▇▇▇▇
shall have the power to arrange for the transfer, upon or at any time after the
occurrence of an Event of Default, of the Collateral on the books of the Company
to the name of and ▇▇▇▇▇▇'s acceleration of the Obligations in consequence
thereof, Lender or ▇▇▇▇▇▇'s nominee. ▇▇▇▇▇▇▇ agrees to indemnify and save ▇▇▇▇▇▇
harmless from and against any liability or damage which Lender may incur, in
good faith and without gross negligence, in the exercise or performance of any
of ▇▇▇▇▇▇'s powers and duties specifically set forth herein.
1. USE OF LOAN PROCEEDS. Pledgor hereby represents and warrants
that the loan proceeds heretofore and hereafter received by it under the Loan
Agreement are not for the purpose of purchasing, or enabling any other person or
entity to reduce or retire indebtedness which was originally incurred to
purchase, any "margin security" as that term is defined in Regulation G
promulgated by the Board of Governors of the Federal Reserve System.
1. WAIVERS. PLEDGOR HEREBY WAIVES: NOTICE OF ACCEPTANCE OF THIS
AGREEMENT; NOTICE OF EXTENSIONS OF CREDIT, LOANS, ADVANCES OR OTHER FINANCIAL
ASSISTANCE BY ▇▇▇▇▇▇ TO COMPANY; THE RIGHT TO TRIAL BY JURY (WHICH ▇▇▇▇▇▇ ALSO
WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM CONCERNING THIS
AGREEMENT; PRESENTMENT AND DEMAND FOR PAYMENT OF ANY OF THE OBLIGATIONS; PROTEST
AND NOTICE OF DISHONOR OR DEFAULT WITH RESPECT TO ANY OF THE OBLIGATIONS; AND
ALL OTHER NOTICES TO WHICH THE PLEDGOR MIGHT OTHERWISE BE ENTITLED EXCEPT AS
HEREIN OTHERWISE EXPRESSLY PROVIDED.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ has signed, sealed and delivered this
Agreement, as of the day and year first above written.
PLEDGOR:
ATTEST: DIGITAL RECORDERS, INC.
By:
----------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL]
[Signatures continued on following page]
Accepted and agreed to
in Atlanta, Georgia, as of this
23rd day of August, 1999
LENDER:
FREMONT FINANCIAL CORPORATION
By:
Title:
46
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made and entered into as of this 23rd
day of August, 1999, by and between DIGITAL RECORDERS, INC., a North Carolina
corporation (hereinafter referred to as "Pledgor"), and FREMONT FINANCIAL
CORPORATION, a California corporation (hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Pledgor, TwinVision Corp. of North America, Inc.
("TwinVision"), Digital Audio Corporation ("DAC") and Lender have entered into a
certain Loan and Security Agreement dated as of August 23, 1999, (hereinafter,
together with all amendments thereto, the "Loan Agreement"), pursuant to which
Lender may make loans or extend financial accommodations to or for the benefit
of Pledgor, TwinVision and DAC ("Loans"); and
WHEREAS, to secure the Loans, ▇▇▇▇▇▇▇ has granted a security interest
in and lien upon all or substantially all of its property; and
WHEREAS, a condition to the making of the Loans is ▇▇▇▇▇▇▇'s pledge to
Lender of 100% of the capital stock of TWINVISION CORP. OF NORTH AMERICA, INC.,
a North Carolina corporation (hereinafter the "Company") as security for the
Loans and all other liabilities and obligations of Pledgor, TwinVision and
Company to Lender of every kind and description, whether arising under the Loan
Agreement or under any other instrument or agreement evidencing or securing all
or any part of the Loans or other liabilities (hereinafter jointly called,
together with all amendments thereto, the "Loan Documents");
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to secure the timely payment and performance
of the Loans and all other liabilities of Pledgor and Company to Lender, ▇▇▇▇▇▇▇
agrees as follows:
1. PLEDGE. Pledgor hereby pledges, mortgages, assigns, transfers,
sets over and delivers to Lender, and grants to Lender a security interest in,
one hundred (100) shares of the capital stock of Company, evidenced by stock
certificate number two (2) and all options for the purchase of shares of the
capital stock of Company (such shares of capital stock being hereinafter called
"Stock"), herewith delivered to Lender accompanied by stock powers ("Powers")
duly executed in blank, with signatures properly guaranteed, and the proceeds
thereof (said Stock and Powers hereinafter collectively called the "Collateral")
as security for the payment of all liabilities and obligations of Pledgor to
Lender of every kind and description, whether now existing or hereafter arising
and whether fixed or contingent, secured or unsecured,
47
joint or several, due or to become due and whether arising under the Loan
Agreement or otherwise (jointly hereinafter called the "Obligations").
Lender shall have no duty with respect to any of the Collateral other
than the duty to use reasonable care in the safe custody of the Collateral in
its possession. Without limiting the generality of the foregoing, Lender shall
be under no obligation to take any steps necessary to preserve the value of any
of the Collateral or to preserve rights in the Collateral against any other
parties, but may do so at its option, and all expenses incurred in connection
therewith shall be for the sole account of Pledgor.
1. VOTING RIGHTS. During the term of this Agreement, and so long
as there shall not occur any event of default under any of the Loan Documents
(any such event of default being herein referred to as "Event of Default"),
Pledgor shall have the right to vote all or any portion of the Stock on all
corporate questions for all purposes not inconsistent with the terms of this
Agreement or the Loan Documents. Upon and after the occurrence of any Event of
Default and ▇▇▇▇▇▇'s acceleration of the maturity of the Obligations in
consequence thereof, Lender shall be entitled to exercise all voting powers
pertaining to the Collateral, and any and all proxies theretofore executed by
Lender shall terminate and thereafter be null and void and of no effect
whatsoever. To that end, if Lender transfers all or any portion of the
Collateral into its name or the name of its nominee, Lender shall, upon the
request of Pledgor, unless an Event of Default shall have occurred, execute and
deliver or cause to be executed and delivered to Pledgor, proxies with respect
to the Collateral.
1. COLLECTION OF DIVIDEND PAYMENTS. During the term of this
Agreement, and so long as there shall not occur or exist any Event of Default,
Pledgor shall have the right to receive and retain any and all sums payable by
Company on account of any of the Collateral except as otherwise provided in the
Loan Documents. Upon and after the occurrence of any Event of Default and
▇▇▇▇▇▇'s acceleration of the Obligations in consequence thereof, all sums
payable by Company on account of any of the Collateral shall be paid to Lender
and any such sum received by Pledgor shall be deemed to be held by Pledgor in
trust for the benefit of Lender and shall be forthwith turned over to Lender for
application by it to the Obligations in such order of application as Lender in
its sole discretion elects.
(a) REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor warrants
and represents that: Pledgor is the legal and beneficial owner of the
Collateral; all of the shares of the Stock have been duly and validly issued,
are fully paid and nonassessable, and are owned by Pledgor free of any liens,
charges or encumbrances except for ▇▇▇▇▇▇'s security interest hereunder and such
security interests as ▇▇▇▇▇▇ has heretofore consented to in writing; the Stock
constitutes 100% of the issued and outstanding capital stock of the Company;
there are no restrictions upon the voting rights or upon the transfer of any of
the Collateral other than as may appear on the face of the certificates
evidencing the Stock; Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Collateral without the consent of any
other party and free of any encumbrances and applicable restrictions imposed by
any governmental agency or regulation; and the execution, delivery and
performance by Pledgor of this Agreement and the exercise by Lender of its
rights and remedies hereunder do not and will
48
not result in the violation of any agreement, indenture or instrument or any
license, judgement, decree, order, law, statute or other governmental rule or
regulation, including, without limitation, any federal or state laws or
regulations governing the sale or exchange of securities.
(a) AFFIRMATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will: warrant and defend at its own expense Lender's right, title,
special property and security interest in and to the Collateral against the
claims of any person or entity; promptly deliver to Lender all written notices,
and will promptly give written notice to Lender of any other notices, received
by Pledgor with respect to the Collateral; and deliver to Lender promptly to
hold under this Agreement any shares of the capital stock of the Company
acquired by Pledgor by virtue of the exercise of any stock options included
within the Collateral.
(a) NEGATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will not sell, convey or otherwise dispose of any of the Collateral or
any interest therein; incur or permit to be incurred any pledge, lien, charge,
or encumbrance or any security interest whatsoever in or with respect to any of
the Collateral or the proceeds thereof, other than the security interest created
hereby and such security interests as Lender has heretofore consented to in
writing; or permit the Company to issue any new stock.
1. SUBSEQUENT CHANGES AFFECTING COLLATERAL. Pledgor represents to
Lender that Pledgor has made its own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, but not
limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
agrees that Lender shall have no responsibility or liability for informing
Pledgor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto. Lender may, at any time that
an Event of Default exists, at its option and without notice to Pledgor,
transfer or register the Collateral or any portion thereof into its or its
nominee's name with or without any indication that such Collateral is subject to
the security interest hereunder.
1. STOCK ADJUSTMENTS. If during the term of this Agreement any
stock dividend, reclassification, readjustment or other change is declared or
made in the capital structure of Company, or any option included within the
Collateral is exercised, or both, all new, substituted and additional shares, or
other securities, issued by reason of any such change or exercise shall be
delivered to and held by Lender under the terms of this Agreement in the same
manner as the Collateral originally pledged hereunder.
1. WARRANTS, OPTIONS AND RIGHTS. If during the term of this
Agreement subscription warrants or any other rights or options shall be issued
or exercised in connection with the Collateral, then such warrants, rights and
options shall be immediately assigned by Pledgor to Lender and all new stock or
other securities so acquired by Pledgor shall be immediately assigned to Lender
to be held under the terms of this Agreement in the same manner as the
Collateral originally pledged hereunder.
49
1. REGISTRATION. If Lender determines that it is advisable to
register under or otherwise comply in any way with the Securities Act of 1933 or
any similar Federal or State Law, or if such registration or compliance is
required with respect to the securities included in the Collateral prior to sale
thereof by Lender, then upon or at any time after the occurrence of an Event of
Default, Pledgor will use its best efforts to cause any such registration to be
effectively made, at no expense to Lender, and to continue such registration
effective for such time as may be reasonably necessary in the opinion of ▇▇▇▇▇▇,
and will reimburse Lender for any expense incurred by ▇▇▇▇▇▇, including
reasonable attorney's fees and accountant's fees and expenses, in connection
therewith.
1. CONSENT. Pledgor hereby consents that from time to time,
before or after the occurrence or existence of any Event of Default, with or
without notice to or assent from Pledgor, any other security at any time held by
or available to Lender for any of the Obligations may be exchanged, surrendered,
or released, and any of the Obligations may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released, in whole or
in part, as Lender may see fit, and Pledgor shall remain bound under this
Agreement and under the Loan Agreement notwithstanding any such exchange,
surrender, release, alteration, renewal, extension, continuance, compromise,
waiver or inaction, extension of further credit or other dealing.
1. REMEDIES UPON DEFAULT. Upon and after the occurrence of any
Event of Default, Lender shall have, in addition any other rights given by law
or the rights given hereunder or under the Loan Documents, all of the rights and
remedies with respect to the Collateral of a secured party under the Uniform
Commercial Code as adopted and in force in the State of Georgia. In addition,
with respect to the Collateral, or any part thereof, which shall then be or
shall thereafter come into ▇▇▇▇▇▇'s possession or custody, Lender may sell or
cause the same to be sold at any broker's board or at public or private sale, in
one or more sales or lots, at such price as Lender may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk, and
the purchaser of any or all of the Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever. Unless the Collateral threatens to decline speedily in value or is
or becomes of a type sold on a recognized market, Lender will give Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met if
such notice is mailed to Pledgor, as provided in paragraph 18 below, at least
ten (10) days before the time of the sale or disposition. Any other requirement
of notice, demand or advertisement for sale is, to the extent permitted by law,
waived. Lender may, in its own name, or in the name of a designee or nominee,
buy at any public sale of the Collateral and, if permitted by applicable law,
buy at any private sale thereof. Pledgor will pay to Lender on demand all
expenses (including court costs and reasonable attorneys' fees and expenses)
50
of, or incident to, the enforcement of any of the provisions hereof and all
other charges due against the Collateral, including, without limitation, taxes,
assessments, security interests, liens or encumbrances upon the Collateral and
any expenses, including transfer or other taxes, arising in connection with any
sale, transfer or other disposition of Collateral. In connection with any sale
of Collateral by Lender, Lender shall have the right to execute any document or
form, in its name or in the name of Pledgor, which may be necessary or desirable
in connection with such sale, including, without limitation, Form 144
promulgated by the Securities and Exchange Commission. In view of the fact that
federal and state securities laws may impose certain restrictions on the method
by which a sale of the Collateral may be effected after an Event of Default,
Pledgor agrees that Lender may, from time to time, attempt to sell all or any
part of the Collateral by means of a private placement restricting the bidders
and prospective purchasers to those who will represent and agree that they are
purchasing for investment only and not for distribution. In so doing, Lender may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of investors deemed by ▇▇▇▇▇▇, in its reasonable judgment, to be
responsible parties who might be interested in purchasing the Collateral, and if
Lender solicits such offers from not less than four (4) such investors, then the
acceptance by Lender of the highest offer obtained therefrom shall be deemed to
be a commercially reasonable method of disposing of the Collateral.
1. TERM. This Agreement shall become effective only when accepted
by Lender and, when so accepted, shall constitute a continuing agreement and
shall remain in full force and effect until the Loan Documents are terminated
and all of the Obligations have been fully paid and satisfied, at which time
this Agreement shall terminate and Lender shall deliver to Pledgor, at Pledgor's
expense, such of the Collateral as shall not have been sold or otherwise applied
pursuant to this Agreement.
1. DEFINITIONS. The singular shall include the plural and vice
versa, and any gender shall include any other gender as the text shall indicate.
1. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Pledgor and its administrators, executors, successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns.
1. CONSTRUCTION AND APPLICABLE LAW. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but, if any provision of this
Agreement shall be held to be prohibited or invalid under any applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. This Agreement shall be governed by,
construed under, and enforced in accordance with, the internal laws of the State
of Georgia.
1. FURTHER ASSURANCES. ▇▇▇▇▇▇▇ agrees that it will cooperate with
▇▇▇▇▇▇ and will upon ▇▇▇▇▇▇'s request execute and deliver, or cause to be
executed and delivered, all such other stock powers, instruments, and documents,
and will take all such other action as Lender may reasonably request from time
to time in order to carry out the provisions and purposes hereof, including,
without limitation, delivering to Lender, if requested by Lender upon or after
the occurrence of an Event of Default and ▇▇▇▇▇▇'s acceleration of the
Obligations in
51
consequence thereof, irrevocable proxies with respect to the Stock in form
satisfactory to Lender. Until receipt thereof, this Agreement shall constitute
Pledgor's proxy to Lender or its nominee to vote all shares of the Stock then
registered in Pledgor's name.
1. NOTICES. Except as otherwise provided herein, all notices,
requests and demand to or upon either party hereto, to be effective, shall be in
writing (and, if sent by mail, shall be sent by certified or registered mail,
return receipt requested) or by telegraph or by telex and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given or
delivered when delivered against receipt or three (3) business days after
deposit in the mail, postage prepaid, or in the case of telecopy notice, when
sent, address as follows:
If to Pledgor: Digital Recorders, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq..
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: Fremont Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
Building ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
1500 Marquis Two Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Atlanta, Georgia 30303
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change the address to which notices are to be sent to
it by giving written notice of such changed address to the other party in the
manner prescribed by this section.
1. PARAGRAPH HEADINGS. The paragraph headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
52
1. ▇▇▇▇▇▇ APPOINTED ATTORNEY-IN-FACT. Pledgor hereby constitutes
and appoints ▇▇▇▇▇▇, with full power of substitution, ▇▇▇▇▇▇▇'s attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which Lender may deem necessary or advisable
to accomplish the purposes hereof, which appointment is coupled with an interest
and is irrevocable. Without limiting the generality of the foregoing, ▇▇▇▇▇▇
shall have the power to arrange for the transfer, upon or at any time after the
occurrence of an Event of Default, of the Collateral on the books of the Company
to the name of and ▇▇▇▇▇▇'s acceleration of the Obligations in consequence
thereof, Lender or ▇▇▇▇▇▇'s nominee. ▇▇▇▇▇▇▇ agrees to indemnify and save ▇▇▇▇▇▇
harmless from and against any liability or damage which Lender may incur, in
good faith and without gross negligence, in the exercise or performance of any
of ▇▇▇▇▇▇'s powers and duties specifically set forth herein.
1. USE OF LOAN PROCEEDS. Pledgor hereby represents and warrants
that the loan proceeds heretofore and hereafter received by it under the Loan
Agreement are not for the purpose of purchasing, or enabling any other person or
entity to reduce or retire indebtedness which was originally incurred to
purchase, any "margin security" as that term is defined in Regulation G
promulgated by the Board of Governors of the Federal Reserve System.
1. WAIVERS. PLEDGOR HEREBY WAIVES: NOTICE OF ACCEPTANCE OF THIS
AGREEMENT; NOTICE OF EXTENSIONS OF CREDIT, LOANS, ADVANCES OR OTHER FINANCIAL
ASSISTANCE BY ▇▇▇▇▇▇ TO COMPANY; THE RIGHT TO TRIAL BY JURY (WHICH ▇▇▇▇▇▇ ALSO
WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM CONCERNING THIS
AGREEMENT; PRESENTMENT AND DEMAND FOR PAYMENT OF ANY OF THE OBLIGATIONS; PROTEST
AND NOTICE OF DISHONOR OR DEFAULT WITH RESPECT TO ANY OF THE OBLIGATIONS; AND
ALL OTHER NOTICES TO WHICH THE PLEDGOR MIGHT OTHERWISE BE ENTITLED EXCEPT AS
HEREIN OTHERWISE EXPRESSLY PROVIDED.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ has signed, sealed and delivered this
Agreement, as of the day and year first above written.
PLEDGOR:
ATTEST: DIGITAL RECORDERS, INC.
By:
-------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL]
[Signatures continued on following page]
Accepted and agreed to
in Atlanta, Georgia, as of this
23rd day of August, 1999
LENDER:
FREMONT FINANCIAL CORPORATION
By:
Title:
53
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made and entered into as of this 23rd
day of August, 1999, by and between DIGITAL RECORDERS, INC., a North Carolina
corporation (hereinafter referred to as "Pledgor"), and FREMONT FINANCIAL
CORPORATION, a California corporation (hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Pledgor, TwinVision Corp. of North America, Inc.
("TwinVision"), Digital Audio Corporation ("DAC") and Lender have entered into a
certain Loan and Security Agreement dated as of August 23, 1999, (hereinafter,
together with all amendments thereto, the "Loan Agreement"), pursuant to which
Lender may make loans or extend financial accommodations to or for the benefit
of Pledgor, TwinVision and DAC ("Loans"); and
WHEREAS, to secure the Loans, ▇▇▇▇▇▇▇ has granted a security
interest in and lien upon all or substantially all of its property; and
WHEREAS, a condition to the making of the Loans is ▇▇▇▇▇▇▇'s pledge to
Lender of 100% of the capital stock of DIGITAL AUDIO CORPORATION, a North
Carolina corporation (hereinafter the "Company") as security for the Loans and
all other liabilities and obligations of Pledgor, TwinVision and Company to
Lender of every kind and description, whether arising under the Loan Agreement
or under any other instrument or agreement evidencing or securing all or any
part of the Loans or other liabilities (hereinafter jointly called, together
with all amendments thereto, the "Loan Documents");
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to secure the timely payment and performance
of the Loans and all other liabilities of Pledgor and Company to Lender, ▇▇▇▇▇▇▇
agrees as follows:
1. PLEDGE. Pledgor hereby pledges, mortgages, assigns, transfers,
sets over and delivers to Lender, and grants to Lender a security interest in,
one hundred (100) shares of the capital stock of Company, evidenced by stock
certificate number two (2) and all options for the purchase of shares of the
capital stock of Company (such shares of capital stock being hereinafter called
"Stock"), herewith delivered to Lender accompanied by stock powers ("Powers")
duly executed in blank, with signatures properly guaranteed, and the proceeds
thereof (said Stock and Powers hereinafter collectively called the "Collateral")
as security for the payment of all liabilities and obligations of Pledgor to
Lender of every kind and description, whether now existing or hereafter arising
and whether fixed or contingent, secured or unsecured,
54
joint or several, due or to become due and whether arising under the Loan
Agreement or otherwise (jointly hereinafter called the "Obligations").
Lender shall have no duty with respect to any of the Collateral other
than the duty to use reasonable care in the safe custody of the Collateral in
its possession. Without limiting the generality of the foregoing, Lender shall
be under no obligation to take any steps necessary to preserve the value of any
of the Collateral or to preserve rights in the Collateral against any other
parties, but may do so at its option, and all expenses incurred in connection
therewith shall be for the sole account of Pledgor.
1. VOTING RIGHTS. During the term of this Agreement, and so long
as there shall not occur any event of default under any of the Loan Documents
(any such event of default being herein referred to as "Event of Default"),
Pledgor shall have the right to vote all or any portion of the Stock on all
corporate questions for all purposes not inconsistent with the terms of this
Agreement or the Loan Documents. Upon and after the occurrence of any Event of
Default and ▇▇▇▇▇▇'s acceleration of the maturity of the Obligations in
consequence thereof, Lender shall be entitled to exercise all voting powers
pertaining to the Collateral, and any and all proxies theretofore executed by
Lender shall terminate and thereafter be null and void and of no effect
whatsoever. To that end, if Lender transfers all or any portion of the
Collateral into its name or the name of its nominee, Lender shall, upon the
request of Pledgor, unless an Event of Default shall have occurred, execute and
deliver or cause to be executed and delivered to Pledgor, proxies with respect
to the Collateral.
1. COLLECTION OF DIVIDEND PAYMENTS. During the term of this
Agreement, and so long as there shall not occur or exist any Event of Default,
Pledgor shall have the right to receive and retain any and all sums payable by
Company on account of any of the Collateral except as otherwise provided in the
Loan Documents. Upon and after the occurrence of any Event of Default and
▇▇▇▇▇▇'s acceleration of the Obligations in consequence thereof, all sums
payable by Company on account of any of the Collateral shall be paid to Lender
and any such sum received by Pledgor shall be deemed to be held by Pledgor in
trust for the benefit of Lender and shall be forthwith turned over to Lender for
application by it to the Obligations in such order of application as Lender in
its sole discretion elects.
(a) REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor warrants
and represents that: Pledgor is the legal and beneficial owner of the
Collateral; all of the shares of the Stock have been duly and validly issued,
are fully paid and nonassessable, and are owned by Pledgor free of any liens,
charges or encumbrances except for ▇▇▇▇▇▇'s security interest hereunder and such
security interests as ▇▇▇▇▇▇ has heretofore consented to in writing; the Stock
constitutes 100% of the issued and outstanding capital stock of the Company;
there are no restrictions upon the voting rights or upon the transfer of any of
the Collateral other than as may appear on the face of the certificates
evidencing the Stock; Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Collateral without the consent of any
other party and free of any encumbrances and applicable restrictions imposed by
any governmental agency or regulation; and the execution, delivery and
performance by Pledgor of this Agreement and the exercise by Lender of its
rights and remedies hereunder do not and will
55
not result in the violation of any agreement, indenture or instrument or any
license, judgement, decree, order, law, statute or other governmental rule or
regulation, including, without limitation, any federal or state laws or
regulations governing the sale or exchange of securities.
(a) AFFIRMATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will: warrant and defend at its own expense Lender's right, title,
special property and security interest in and to the Collateral against the
claims of any person or entity; promptly deliver to Lender all written notices,
and will promptly give written notice to Lender of any other notices, received
by Pledgor with respect to the Collateral; and deliver to Lender promptly to
hold under this Agreement any shares of the capital stock of the Company
acquired by Pledgor by virtue of the exercise of any stock options included
within the Collateral.
(a) NEGATIVE COVENANTS OF PLEDGOR. Until all of the Obligations
have been satisfied in full and the Loan Documents terminated, Pledgor covenants
that it will not sell, convey or otherwise dispose of any of the Collateral or
any interest therein; incur or permit to be incurred any pledge, lien, charge,
or encumbrance or any security interest whatsoever in or with respect to any of
the Collateral or the proceeds thereof, other than the security interest created
hereby and such security interests as Lender has heretofore consented to in
writing; or permit the Company to issue any new stock.
1. SUBSEQUENT CHANGES AFFECTING COLLATERAL. Pledgor represents to
Lender that Pledgor has made its own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, but not
limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
agrees that Lender shall have no responsibility or liability for informing
Pledgor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto. Lender may, at any time that
an Event of Default exists, at its option and without notice to Pledgor,
transfer or register the Collateral or any portion thereof into its or its
nominee's name with or without any indication that such Collateral is subject to
the security interest hereunder.
1. STOCK ADJUSTMENTS. If during the term of this Agreement any
stock dividend, reclassification, readjustment or other change is declared or
made in the capital structure of Company, or any option included within the
Collateral is exercised, or both, all new, substituted and additional shares, or
other securities, issued by reason of any such change or exercise shall be
delivered to and held by Lender under the terms of this Agreement in the same
manner as the Collateral originally pledged hereunder.
1. WARRANTS, OPTIONS AND RIGHTS. If during the term of this
Agreement subscription warrants or any other rights or options shall be issued
or exercised in connection with the Collateral, then such warrants, rights and
options shall be immediately assigned by Pledgor to Lender and all new stock or
other securities so acquired by Pledgor shall be immediately assigned to Lender
to be held under the terms of this Agreement in the same manner as the
Collateral originally pledged hereunder.
56
1. REGISTRATION. If Lender determines that it is advisable to
register under or otherwise comply in any way with the Securities Act of 1933 or
any similar Federal or State Law, or if such registration or compliance is
required with respect to the securities included in the Collateral prior to sale
thereof by Lender, then upon or at any time after the occurrence of an Event of
Default, Pledgor will use its best efforts to cause any such registration to be
effectively made, at no expense to Lender, and to continue such registration
effective for such time as may be reasonably necessary in the opinion of ▇▇▇▇▇▇,
and will reimburse Lender for any expense incurred by ▇▇▇▇▇▇, including
reasonable attorney's fees and accountant's fees and expenses, in connection
therewith.
1. CONSENT. Pledgor hereby consents that from time to time,
before or after the occurrence or existence of any Event of Default, with or
without notice to or assent from Pledgor, any other security at any time held by
or available to Lender for any of the Obligations may be exchanged, surrendered,
or released, and any of the Obligations may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released, in whole or
in part, as Lender may see fit, and Pledgor shall remain bound under this
Agreement and under the Loan Agreement notwithstanding any such exchange,
surrender, release, alteration, renewal, extension, continuance, compromise,
waiver or inaction, extension of further credit or other dealing.
1. REMEDIES UPON DEFAULT. Upon and after the occurrence of any
Event of Default, Lender shall have, in addition any other rights given by law
or the rights given hereunder or under the Loan Documents, all of the rights and
remedies with respect to the Collateral of a secured party under the Uniform
Commercial Code as adopted and in force in the State of Georgia. In addition,
with respect to the Collateral, or any part thereof, which shall then be or
shall thereafter come into ▇▇▇▇▇▇'s possession or custody, Lender may sell or
cause the same to be sold at any broker's board or at public or private sale, in
one or more sales or lots, at such price as Lender may deem best, and for cash
or on credit or for future delivery, without assumption of any credit risk, and
the purchaser of any or all of the Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever. Unless the Collateral threatens to decline speedily in value or is
or becomes of a type sold on a recognized market, Lender will give Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met if
such notice is mailed to Pledgor, as provided in paragraph 18 below, at least
ten (10) days before the time of the sale or disposition. Any other requirement
of notice, demand or advertisement for sale is, to the extent permitted by law,
waived. Lender may, in its own name, or in the name of a designee or nominee,
buy at any public sale of the Collateral and, if permitted by applicable law,
buy at any private sale thereof. Pledgor will pay to Lender on demand all
expenses (including court costs and reasonable attorneys' fees and expenses)
57
of, or incident to, the enforcement of any of the provisions hereof and all
other charges due against the Collateral, including, without limitation, taxes,
assessments, security interests, liens or encumbrances upon the Collateral and
any expenses, including transfer or other taxes, arising in connection with any
sale, transfer or other disposition of Collateral. In connection with any sale
of Collateral by Lender, Lender shall have the right to execute any document or
form, in its name or in the name of Pledgor, which may be necessary or desirable
in connection with such sale, including, without limitation, Form 144
promulgated by the Securities and Exchange Commission. In view of the fact that
federal and state securities laws may impose certain restrictions on the method
by which a sale of the Collateral may be effected after an Event of Default,
Pledgor agrees that Lender may, from time to time, attempt to sell all or any
part of the Collateral by means of a private placement restricting the bidders
and prospective purchasers to those who will represent and agree that they are
purchasing for investment only and not for distribution. In so doing, Lender may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of investors deemed by ▇▇▇▇▇▇, in its reasonable judgment, to be
responsible parties who might be interested in purchasing the Collateral, and if
Lender solicits such offers from not less than four (4) such investors, then the
acceptance by Lender of the highest offer obtained therefrom shall be deemed to
be a commercially reasonable method of disposing of the Collateral.
1. TERM. This Agreement shall become effective only when accepted
by Lender and, when so accepted, shall constitute a continuing agreement and
shall remain in full force and effect until the Loan Documents are terminated
and all of the Obligations have been fully paid and satisfied, at which time
this Agreement shall terminate and Lender shall deliver to Pledgor, at Pledgor's
expense, such of the Collateral as shall not have been sold or otherwise applied
pursuant to this Agreement.
1. DEFINITIONS. The singular shall include the plural and vice
versa, and any gender shall include any other gender as the text shall indicate.
1. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Pledgor and its administrators, executors, successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns.
1. CONSTRUCTION AND APPLICABLE LAW. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but, if any provision of this
Agreement shall be held to be prohibited or invalid under any applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. This Agreement shall be governed by,
construed under, and enforced in accordance with, the internal laws of the State
of Georgia.
1. FURTHER ASSURANCES. ▇▇▇▇▇▇▇ agrees that it will cooperate with
▇▇▇▇▇▇ and will upon ▇▇▇▇▇▇'s request execute and deliver, or cause to be
executed and delivered, all such other stock powers, instruments, and documents,
and will take all such other action as Lender may reasonably request from time
to time in order to carry out the provisions and purposes hereof, including,
without limitation, delivering to Lender, if requested by Lender upon or after
the occurrence of an Event of Default and ▇▇▇▇▇▇'s acceleration of the
Obligations in
58
consequence thereof, irrevocable proxies with respect to the Stock in form
satisfactory to Lender. Until receipt thereof, this Agreement shall constitute
Pledgor's proxy to Lender or its nominee to vote all shares of the Stock then
registered in Pledgor's name.
1. NOTICES. Except as otherwise provided herein, all notices,
requests and demand to or upon either party hereto, to be effective, shall be in
writing (and, if sent by mail, shall be sent by certified or registered mail,
return receipt requested) or by telegraph or by telex and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given or
delivered when delivered against receipt or three (3) business days after
deposit in the mail, postage prepaid, or in the case of telecopy notice, when
sent, address as follows:
If to Pledgor: Digital Recorders, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq..
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: Fremont Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
Building ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
1500 Marquis Two Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Atlanta, Georgia 30303
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change the address to which notices are to be sent to
it by giving written notice of such changed address to the other party in the
manner prescribed by this section.
1. PARAGRAPH HEADINGS. The paragraph headings herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
59
1. ▇▇▇▇▇▇ APPOINTED ATTORNEY-IN-FACT. Pledgor hereby constitutes
and appoints ▇▇▇▇▇▇, with full power of substitution, ▇▇▇▇▇▇▇'s attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which Lender may deem necessary or advisable
to accomplish the purposes hereof, which appointment is coupled with an interest
and is irrevocable. Without limiting the generality of the foregoing, ▇▇▇▇▇▇
shall have the power to arrange for the transfer, upon or at any time after the
occurrence of an Event of Default, of the Collateral on the books of the Company
to the name of and ▇▇▇▇▇▇'s acceleration of the Obligations in consequence
thereof, Lender or ▇▇▇▇▇▇'s nominee. ▇▇▇▇▇▇▇ agrees to indemnify and save ▇▇▇▇▇▇
harmless from and against any liability or damage which Lender may incur, in
good faith and without gross negligence, in the exercise or performance of any
of ▇▇▇▇▇▇'s powers and duties specifically set forth herein.
1. USE OF LOAN PROCEEDS. Pledgor hereby represents and warrants
that the loan proceeds heretofore and hereafter received by it under the Loan
Agreement are not for the purpose of purchasing, or enabling any other person or
entity to reduce or retire indebtedness which was originally incurred to
purchase, any "margin security" as that term is defined in Regulation G
promulgated by the Board of Governors of the Federal Reserve System.
1. WAIVERS. PLEDGOR HEREBY WAIVES: NOTICE OF ACCEPTANCE OF THIS
AGREEMENT; NOTICE OF EXTENSIONS OF CREDIT, LOANS, ADVANCES OR OTHER FINANCIAL
ASSISTANCE BY ▇▇▇▇▇▇ TO COMPANY; THE RIGHT TO TRIAL BY JURY (WHICH ▇▇▇▇▇▇ ALSO
WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM CONCERNING THIS
AGREEMENT; PRESENTMENT AND DEMAND FOR PAYMENT OF ANY OF THE OBLIGATIONS; PROTEST
AND NOTICE OF DISHONOR OR DEFAULT WITH RESPECT TO ANY OF THE OBLIGATIONS; AND
ALL OTHER NOTICES TO WHICH THE PLEDGOR MIGHT OTHERWISE BE ENTITLED EXCEPT AS
HEREIN OTHERWISE EXPRESSLY PROVIDED.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ has signed, sealed and delivered this
Agreement, as of the day and year first above written.
PLEDGOR:
ATTEST: DIGITAL RECORDERS, INC.
By:
----------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL]
[Signatures continued on following page]
Accepted and agreed to
in Atlanta, Georgia, as of this
23rd day of August, 1999
LENDER:
FREMONT FINANCIAL CORPORATION
60
TRADEMARK SECURITY AGREEMENT
THIS AGREEMENT is made as of this 23rd day of August, 1999, between
DIGITAL RECORDERS, INC., a North Carolina corporation having its principal place
of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and FREMONT FINANCIAL CORPORATION, a California corporation having
an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ ("Lender").
W I T N E S S E T H:
WHEREAS, the Company desires to obtain loans from Lender pursuant to a
certain Loan and Security Agreement, dated as of the date hereof among the
Company, the other borrowers noted therein and Lender (as at any time amended,
the "Loan Agreement"); and
WHEREAS, ▇▇▇▇▇▇ is willing to make loans to the Company from time to
time, in ▇▇▇▇▇▇'s discretion, provided the Company executes this Agreement;
WHEREAS, the Company has contemporaneously herewith pursuant to the
Loan Agreement, granted to Lender a lien upon and security interest in the
Company's now existing or hereafter acquired inventory, machinery, equipment,
equipment formulations, manufacturing procedures, quality control procedures and
product specifications relating to products sold under the Trademarks (as
hereinafter defined);
NOW, THEREFORE, for Ten Dollars ($10.00) and other valuable
consideration, and in consideration of the premises, the Company hereby agrees
with ▇▇▇▇▇▇ as follows:
1. All capitalized terms used herein and in the Recitals hereto,
unless otherwise defined, shall have the meanings ascribed to them in the Loan
Agreement. Whenever the word "including" is used in this Agreement, it shall
mean "including, without limitation."
2. To secure the payment and performance of the Obligations, the
Company hereby pledges, assigns and grants to Lender a continuing security
interest in and lien upon all of the following property of the Company, whether
now owned or existing or hereafter acquired (the "Collateral"):
a. All trademarks, trademark registrations, trade names and
trademark applications, including each trademark and application listed on
Schedule A attached hereto and made a part hereof (as the same may be amended
from time to time), and (i) all renewals thereof, (ii) all income, royalties,
damages and payments now or hereafter due or payable with respect thereto,
including damages and payments for past or future infringement or
61
dilution thereof or injury to the associated goodwill, (iii) the right to sue
for past, present and future infringement or dilution thereof or injury to the
associated goodwill, and (iv) all rights corresponding thereto throughout the
world (all of the foregoing trademarks, trademark registrations, trade names and
applications, together with the items described in clauses (i)-(iv), are
hereinafter collectively referred to as the "Trademarks");
a. the goodwill of the Company's business connected with and
symbolized by each Trademark; and
a. all products and proceeds of the foregoing.
1. The Company represents and warrants that:
a. Each of the Trademarks is subsisting and has not been adjudged
invalid or unenforceable;
a. Upon filing of this Agreement in the United States Patent and
Trademark Office, this Agreement will create a legal and valid perfected lien
upon and security interest in the Collateral (other than foreign trademarks),
enforceable against Borrower and all third Persons in accordance with its terms;
a. No claim has been made that the use of any of the Trademarks
does or may violate the rights of any third person; and
a. The Company has the unqualified right to enter into this
Agreement and perform its terms.
1. The Company covenants and agrees that:
a. Each of the Trademarks is valid and enforceable;
a. The Company is the sole and exclusive owner of the entire
right, title and interest in and to each of the Collateral, free and clear of
any liens, charges and encumbrances, including pledges, assignments, licenses,
registered user agreements and covenants by the Company not to sue third
Persons;
a. The Company will maintain the quality of the products
associated with the Trademarks, at a level consistent with the quality at the
time of this Agreement, and will provide Lender quarterly with a certificate to
that effect in the form attached hereto as Exhibit 1 executed by an officer of
the Company;
a. The Company will lessen the quality of the products associated
with the Trademarks without ▇▇▇▇▇▇'s prior written consent; and
a. The Company has used and will continue to use for the duration
of this Agreement, proper statutory notice in connection with its use of the
Trademarks, and has made
62
and will make all appropriate filings with the United States Patent and
Trademark Office to maintain the Trademark registrations in existence, including
filing an affidavit of use with the United States Patent and Trademark Office
during the sixth year of registration for each Trademark as required by law.
1. The Company hereby grants to Lender and its employees and
agents the right upon prior notice to the Company to visit the Company's plants
and facilities which manufacture, inspect or store products sold under any of
the Trademarks and to inspect the products and quality control records relating
thereto at reasonable times during regular business hours. The Company shall do
any and all acts required by Lender to ensure the Company's compliance with
paragraph 4(c) of this Agreement.
1. The Company agrees that, until all of the Obligations have
been satisfied in full, it will not enter into any agreement (including any
license agreement) which is inconsistent with the Company's duties under this
Agreement.
1. If, before the Obligations have been satisfied in full, the
Company shall obtain rights to any new trademarks, or become entitled to the
benefit of any trademark application or trademark or any renewal of any
Trademark, the provisions of paragraph 2 hereof shall automatically apply
thereto, and the Company shall give to Lender prompt notice thereof in writing.
1. The Company authorizes ▇▇▇▇▇▇ to modify this Agreement by
amending Schedule A to include any future trademarks and trademark applications
within the definition of Trademarks under paragraph 2 or paragraph 7 hereof.
1. Upon and at any time after the occurrence of an Event of
Default (as defined in the Loan Agreement), Lender shall have, in addition to
all other rights and remedies given it by this Agreement, all rights and
remedies under applicable law and all rights and remedies of a secured party
under the Uniform Commercial Code as adopted and then in force in the State of
Georgia. Without limiting the generality of the foregoing, Lender may
immediately, without notice or demand, each of which the Company hereby waives,
collect directly any payments due the Company in respect of the Collateral, or
sell at public or private sale or otherwise realize upon all or from time to
time, any of the Collateral. The Company hereby agrees that ten (10) days
written notice to the Company of any public or private sale or other disposition
of any of the Collateral shall be reasonable notice; provided, however, that no
notice shall be required hereunder if not otherwise required by applicable law.
At any such sale or disposition, Lender may, to the extent permitted by
applicable law, purchase the whole or any part of the Collateral sold, free from
any right of redemption on the part of the Company, which right the Company
hereby waives and releases. After deducting from the proceeds of such sale or
other disposition of the Collateral all costs and expenses incurred by ▇▇▇▇▇▇
in enforcing its rights hereunder (including all attorneys' fees and legal
expenses), Lender shall apply the remainder of such proceeds to the payment of
the Obligations in such order and manner as Lender in its sole discretion may
determine. Any remainder of the proceeds after payment in full
63
of the Obligations shall be paid over to the Company. If any deficiency shall
arise, the Company and each guarantor of the Obligations shall remain jointly
and severally liable to Lender therefor.
1. The Company hereby makes, constitutes and appoints Lender and
any officer or agent of Lender as Lender may select as the Company's true and
lawful attorney-in-fact, with full power to do any or all of the following if an
Event of Default shall occur and be continuing: to endorse the Company's name on
all applications, documents, papers and instruments necessary for Lender to use
the Trademarks, or to grant or issue any exclusive or nonexclusive license under
the Trademarks to any other Person, or to assign, pledge, convey or otherwise
transfer title in or dispose of the Collateral to any other Person. The Company
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney shall be irrevocable until all of the
Obligations shall have been satisfied in full and the Loan Agreement shall have
been terminated.
1. At such time as all of the Obligations shall have been
satisfied finally and in full and the Loan Agreement shall have been terminated,
Lender shall execute and deliver to the Company, without representation,
warranty or recourse, at the Company's expense, all releases and other
instruments necessary to terminate Lender's security interest in the Collateral,
subject to any disposition thereof which may have been made by Lender pursuant
to the terms of this Agreement, the Loan Agreement or any other Loan Document.
1. Any and all fees, costs and expenses, of whatever kind or
nature, including reasonable attorneys' fees and legal expenses, incurred by
Lender in connection with the preparation of this Agreement and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
fees, encumbrances or otherwise protecting, maintaining, or preserving the
Collateral, or in defending or prosecuting any actions or proceedings arising
out of or related to the Collateral, shall be borne and paid by the Company (it
being the intent of the Company and Lender that the Company shall be responsible
for the payment of all sums, fees, costs and expenses, including all renewal
fees with respect to the Trademarks) or, if paid Lender, shall be paid by the
Company on demand to Lender and until so paid shall be added to the principal
amount of the Obligations and shall bear interest at the rate prescribed in the
Loan Agreement.
1. The Company shall use its best efforts to detect any
infringers of the Trademarks and shall notify Lender in writing of infringements
detected. The Company shall have the duty, through counsel acceptable to Lender,
to prosecute diligently any trademark application of the Trademarks pending as
of the date of this Agreement or thereafter until the Obligations shall have
been paid in full, to make federal application on registrable but unregistered
Trademarks, to file and prosecute opposition and cancellation proceedings, to
file and prosecute lawsuits to enforce the Trademarks and to do any and all acts
which are deemed necessary or desirable by Lender to preserve and maintain all
rights in the Trademarks. Any expenses incurred in connection with such
applications or proceedings shall be borne by the Company. The Company shall not
abandon any right to file a trademark application, or any pending trademark
application or Trademark without the consent of Lender.
64
1. Without limiting the obligations of the Company described in
paragraph 13 hereof, after ▇▇▇▇▇▇'s receipt of notice from the Company as
provided in paragraph 13, or if Lender reasonably believes the act of any Person
constitutes an infringement of any Trademark, or a violation of any right of the
Company or Lender therein, or an unlawful or unauthorized thereof, Lender shall
have the right (but shall not be obligated) to take such steps and institute
such suits or proceedings as Lender shall deem necessary or advisable in its own
name, or in the name of the Company or in the names of Lender and the Company
jointly, to enforce the Trademarks and any license thereunder, or to protect the
rights of the parties thereunder, in which event the Company shall at the
request of Lender do any and all lawful acts (including bringing suit) and
execute any and all proper documents required by Lender to aid such enforcement,
and the Company shall promptly, upon demand, reimburse and indemnify Lender for
all costs and expenses incurred in the exercise of ▇▇▇▇▇▇'s rights under this
paragraph 14. Nothing herein shall be deemed to prohibit the Company from
bringing any such suit in its own name at any time that an Event of Default does
not exist, if Lender declines to institute such suit.
1. If the Company fails to comply with any of its obligations
hereunder, to the extent permitted by applicable law, Lender may do so in the
Company's name or in ▇▇▇▇▇▇'s name, but at the Company's expense, and the
Company agrees to reimburse Lender in full for all expenses, including
attorneys' fees and legal expenses, incurred by ▇▇▇▇▇▇ in prosecuting, defending
or maintaining the Trademarks or ▇▇▇▇▇▇'s interest therein pursuant to this
Agreement.
1. No course of dealing between the Company and Lender, nor any
failure to exercise, nor any delay in exercising, on the part of Lender, any
right, power or privilege hereunder or under the Loan Agreement shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
1. All of ▇▇▇▇▇▇'s rights and remedies with respect to the
Collateral, whether established by this Agreement, by the Loan Agreement, by any
other agreements or by Applicable Law shall be cumulative and may be exercised
singularly or concurrently.
1. The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
1. This Agreement is subject to modification only by a writing
signed by the parties, except as provided in paragraph 8 hereof.
1. The benefits and burdens of this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of ▇▇▇▇▇▇ and upon the
successors of the Company. The Company shall not assign its rights or delegate
its duties hereunder without the prior written consent of ▇▇▇▇▇▇.
65
1. Notice of acceptance hereof is hereby waived by the Company.
1. This Agreement has been negotiated, executed and delivered at
and shall be deemed to have been made in Atlanta, Georgia. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of Georgia.
1. THE COMPANY AND LENDER EACH WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE COLLATERAL.
WITNESS the execution hereof under seal as of the day and year first
above written.
ATTEST: DIGITAL RECORDERS, INC.
("Company")
By:
---------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL]
Accepted in Atlanta, Georgia:
FREMONT FINANCIAL CORPORATION
("Lender")
By:
Title:
[Acknowledgment appearing on following page]
STATE OF GEORGIA ss.
ss.
COUNTY OF ▇▇▇▇▇▇ ▇▇.
BEFORE ME, the undersigned authority, on this day personally appeared
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President of Digital Recorders, Inc., to me known to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for
66
the purposes and consideration therein expressed, in the capacity therein
stated, and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 23rd day of
August, 1999.
Notary Public
My Commission Expires:____________
[NOTARIAL SEAL]
STATE OF GEORGIA )
)
COUNTY OF ▇▇▇▇▇▇ )
BEFORE ME, the undersigned authority, on this day personally appeared
▇▇▇▇▇▇ ▇▇▇▇▇ of Fremont Financial Corporation, known to me to be the person
whose name is subscribed to the foregoing instrument, and acknowledged to me
that he executed the same for the purposes and consideration therein expressed,
in the capacity therein stated, and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 23rd day of August,
1999.
Notary Public
My Commission Expires:_______________
[NOTARIAL SEAL]
67
EXHIBIT 1
CERTIFICATE
The undersigned officer of DIGITAL RECORDERS, INC. (the "Company"),
DOES HEREBY CERTIFY to FREMONT FINANCIAL CORPORATION ("Lender") that the quality
of the products associated with the Trademarks listed on Schedule A of the
Trademark Security Agreement dated August 23, 1999, between the Company and
Lender (as amended from time to time to include future trademarks and trademark
applications) (the "Agreement"), has been maintained at a level consistent with
the quality of such products at the time of the execution of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate,
this ____ day of _______________, ____.
DIGITAL RECORDERS, INC.
By:
Title:____________________________
68
SCHEDULE A
Registrations -
United States Patent and Trademark Office
Trademark
of Service Mark Registration No. Registration Date
-------------------------------------------------------------------------------
MISCELLANEOUS DESIGN 2,095,970 September 9, 1997
(Bus Logo) (Next Stop Main &
Elm Metro's Talking Bus)
TWINVISION 2,166,426 June 16, 1998
TALKING BUS 1,796,858 October 5, 1993
Pending Applications
United States Patent and Trademark Office
Trademark
or Service Mark
----------------
Serial No.
----------------
Filing Date
----------------
DIGITAL RECORDERS 75/065,509 February 20, 1996
MAKING YOUR LIFE A 75/667,028 March 29, 1999
LITTLE EASIER
ADVANCED TECHNOLOGY-
ENHANCING MOBILITY 75/667,030 March 24, 1999
DRI 75/696,318 May 3, 1999
DAC and DESIGN 75/763,900 July 29, 1999
69
TRADEMARK SECURITY AGREEMENT
THIS AGREEMENT is made as of this 23rd day of August, 1999, between
TWINVISION CORP. OF NORTH AMERICA, INC., a North Carolina corporation having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and FREMONT FINANCIAL CORPORATION, a California
corporation having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender").
W I T N E S S E T H:
WHEREAS, the Company desires to obtain loans from Lender pursuant to a
certain Loan and Security Agreement, dated as of the date hereof among the
Company, the other borrowers noted therein and Lender (as at any time amended,
the "Loan Agreement"); and
WHEREAS, ▇▇▇▇▇▇ is willing to make loans to the Company from time to
time, in ▇▇▇▇▇▇'s discretion, provided the Company executes this Agreement;
WHEREAS, the Company has contemporaneously herewith pursuant to the
Loan Agreement, granted to Lender a lien upon and security interest in the
Company's now existing or hereafter acquired inventory, machinery, equipment,
equipment formulations, manufacturing procedures, quality control procedures and
product specifications relating to products sold under the Trademarks (as
hereinafter defined);
NOW, THEREFORE, for Ten Dollars ($10.00) and other valuable
consideration, and in consideration of the premises, the Company hereby agrees
with ▇▇▇▇▇▇ as follows:
1. All capitalized terms used herein and in the Recitals hereto,
unless otherwise defined, shall have the meanings ascribed to them in the Loan
Agreement. Whenever the word "including" is used in this Agreement, it shall
mean "including, without limitation."
1. To secure the payment and performance of the Obligations, the
Company hereby pledges, assigns and grants to Lender a continuing security
interest in and lien upon all of the following property of the Company, whether
now owned or existing or hereafter acquired (the "Collateral"):
a. all trademarks, trademark registrations, trade names and
trademark applications, including each trademark and application listed on
Schedule A attached hereto and made a part hereof (as the same may be amended
from time to time), and (i) all renewals thereof, (ii) all income, royalties,
damages and payments now or hereafter due or payable with respect thereto,
including damages and payments for past or future infringement or dilution
thereof or
70
injury to the associated goodwill, (iii) the right to sue for past, present and
future infringement or dilution thereof or injury to the associated goodwill,
and (iv) all rights corresponding thereto throughout the world (all of the
foregoing trademarks, trademark registrations, trade names and applications,
together with the items described in clauses (i)-(iv), are hereinafter
collectively referred to as the "Trademarks");
a. the goodwill of the Company's business connected with and
symbolized by each Trademark; and
a. all products and proceeds of the foregoing.
1. The Company represents and warrants that:
a. Each of the Trademarks is subsisting and has not been adjudged
invalid or unenforceable;
a. Upon filing of this Agreement in the United States Patent and
Trademark Office, this Agreement will create a legal and valid perfected lien
upon and security interest in the Collateral (other than foreign trademarks),
enforceable against Borrower and all third Persons in accordance with its terms;
a. No claim has been made that the use of any of the Trademarks
does or may violate the rights of any third person; and
a. The Company has the unqualified right to enter into this
Agreement and perform its terms.
1. The Company covenants and agrees that:
a. Each of the Trademarks is valid and enforceable;
a. The Company is the sole and exclusive owner of the entire
right, title and interest in and to each of the Collateral, free and clear of
any liens, charges and encumbrances, including pledges, assignments, licenses,
registered user agreements and covenants by the Company not to sue third
Persons;
a. The Company will maintain the quality of the products
associated with the Trademarks, at a level consistent with the quality at the
time of this Agreement, and will provide Lender quarterly with a certificate to
that effect in the form attached hereto as Exhibit 1 executed by an officer of
the Company;
a. The Company will lessen the quality of the products associated
with the Trademarks without ▇▇▇▇▇▇'s prior written consent; and
71
a. The Company has used and will continue to use for the duration
of this Agreement, proper statutory notice in connection with its use of the
Trademarks, and has made and will make all appropriate filings with the United
States Patent and Trademark Office to maintain the Trademark registrations in
existence, including filing an affidavit of use with the United States Patent
and Trademark Office during the sixth year of registration for each Trademark as
required by law.
1. The Company hereby grants to Lender and its employees and
agents the right upon prior notice to the Company to visit the Company's plants
and facilities which manufacture, inspect or store products sold under any of
the Trademarks and to inspect the products and quality control records relating
thereto at reasonable times during regular business hours. The Company shall do
any and all acts required by Lender to ensure the Company's compliance with
paragraph 4(c) of this Agreement.
1. The Company agrees that, until all of the Obligations have
been satisfied in full, it will not enter into any agreement (including any
license agreement) which is inconsistent with the Company's duties under this
Agreement.
1. If, before the Obligations have been satisfied in full, the
Company shall obtain rights to any new trademarks, or become entitled to the
benefit of any trademark application or trademark or any renewal of any
Trademark, the provisions of paragraph 2 hereof shall automatically apply
thereto, and the Company shall give to Lender prompt notice thereof in writing.
1. The Company authorizes ▇▇▇▇▇▇ to modify this Agreement by
amending Schedule A to include any future trademarks and trademark applications
within the definition of Trademarks under paragraph 2 or paragraph 7 hereof.
1. Upon and at any time after the occurrence of an Event of
Default (as defined in the Loan Agreement), Lender shall have, in addition to
all other rights and remedies given it by this Agreement, all rights and
remedies under applicable law and all rights and remedies of a secured party
under the Uniform Commercial Code as adopted and then in force in the State of
Georgia. Without limiting the generality of the foregoing, Lender may
immediately, without notice or demand, each of which the Company hereby waives,
collect directly any payments due the Company in respect of the Collateral, or
sell at public or private sale or otherwise realize upon all or from time to
time, any of the Collateral. The Company hereby agrees that ten (10) days
written notice to the Company of any public or private sale or other disposition
of any of the Collateral shall be reasonable notice; provided, however, that no
notice shall be required hereunder if not otherwise required by applicable law.
At any such sale or disposition, Lender may, to the extent permitted by
applicable law, purchase the whole or any part of the Collateral sold, free from
any right of redemption on the part of the Company, which right the Company
hereby waives and releases. After deducting from the proceeds of such sale or
other disposition of the Collateral all costs and expenses incurred by ▇▇▇▇▇▇ in
enforcing its rights hereunder (including all attorneys' fees and legal
expenses), Lender shall apply the remainder of such proceeds to the payment of
the Obligations in such order and manner as
72
Lender in its sole discretion may determine. Any remainder of the proceeds after
payment in full of the Obligations shall be paid over to the Company. If any
deficiency shall arise, the Company and each guarantor of the Obligations shall
remain jointly and severally liable to Lender therefor.
1. The Company hereby makes, constitutes and appoints Lender and
any officer or agent of Lender as Lender may select as the Company's true and
lawful attorney-in-fact, with full power to do any or all of the following if an
Event of Default shall occur and be continuing: to endorse the Company's name on
all applications, documents, papers and instruments necessary for Lender to use
the Trademarks, or to grant or issue any exclusive or nonexclusive license under
the Trademarks to any other Person, or to assign, pledge, convey or otherwise
transfer title in or dispose of the Collateral to any other Person. The Company
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney shall be irrevocable until all of the
Obligations shall have been satisfied in full and the Loan Agreement shall have
been terminated.
1. At such time as all of the Obligations shall have been
satisfied finally and in full and the Loan Agreement shall have been terminated,
Lender shall execute and deliver to the Company, without representation,
warranty or recourse, at the Company's expense, all releases and other
instruments necessary to terminate Lender's security interest in the Collateral,
subject to any disposition thereof which may have been made by Lender pursuant
to the terms of this Agreement, the Loan Agreement or any other Loan Document.
1. Any and all fees, costs and expenses, of whatever kind or
nature, including reasonable attorneys' fees and legal expenses, incurred by
Lender in connection with the preparation of this Agreement and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
fees, encumbrances or otherwise protecting, maintaining, or preserving the
Collateral, or in defending or prosecuting any actions or proceedings arising
out of or related to the Collateral, shall be borne and paid by the Company (it
being the intent of the Company and Lender that the Company shall be responsible
for the payment of all sums, fees, costs and expenses, including all renewal
fees with respect to the Trademarks) or, if paid Lender, shall be paid by the
Company on demand to Lender and until so paid shall be added to the principal
amount of the Obligations and shall bear interest at the rate prescribed in the
Loan Agreement.
1. The Company shall use its best efforts to detect any
infringers of the Trademarks and shall notify Lender in writing of infringements
detected. The Company shall have the duty, through counsel acceptable to Lender,
to prosecute diligently any trademark application of the Trademarks pending as
of the date of this Agreement or thereafter until the Obligations shall have
been paid in full, to make federal application on registrable but unregistered
Trademarks, to file and prosecute opposition and cancellation proceedings, to
file and prosecute lawsuits to enforce the Trademarks and to do any and all acts
which are deemed necessary or desirable by Lender to preserve and maintain all
rights in the Trademarks. Any expenses incurred in connection with such
applications or proceedings shall be borne by the
73
Company. The Company shall not abandon any right to file a trademark
application, or any pending trademark application or Trademark without the
consent of Lender.
1. Without limiting the obligations of the Company described in
paragraph 13 hereof, after ▇▇▇▇▇▇'s receipt of notice from the Company as
provided in paragraph 13, or if Lender reasonably believes the act of any Person
constitutes an infringement of any Trademark, or a violation of any right of the
Company or Lender therein, or an unlawful or unauthorized thereof, Lender shall
have the right (but shall not be obligated) to take such steps and institute
such suits or proceedings as Lender shall deem necessary or advisable in its own
name, or in the name of the Company or in the names of Lender and the Company
jointly, to enforce the Trademarks and any license thereunder, or to protect the
rights of the parties thereunder, in which event the Company shall at the
request of Lender do any and all lawful acts (including bringing suit) and
execute any and all proper documents required by Lender to aid such enforcement,
and the Company shall promptly, upon demand, reimburse and indemnify Lender for
all costs and expenses incurred in the exercise of ▇▇▇▇▇▇'s rights under this
paragraph 14. Nothing herein shall be deemed to prohibit the Company from
bringing any such suit in its own name at any time that an Event of Default does
not exist, if Lender declines to institute such suit.
1. If the Company fails to comply with any of its obligations
hereunder, to the extent permitted by applicable law, Lender may do so in the
Company's name or in ▇▇▇▇▇▇'s name, but at the Company's expense, and the
Company agrees to reimburse Lender in full for all expenses, including
attorneys' fees and legal expenses, incurred by ▇▇▇▇▇▇ in prosecuting, defending
or maintaining the Trademarks or ▇▇▇▇▇▇'s interest therein pursuant to this
Agreement.
1. No course of dealing between the Company and Lender, nor any
failure to exercise, nor any delay in exercising, on the part of Lender, any
right, power or privilege hereunder or under the Loan Agreement shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
1. All of ▇▇▇▇▇▇'s rights and remedies with respect to the
Collateral, whether established by this Agreement, by the Loan Agreement, by any
other agreements or by Applicable Law shall be cumulative and may be exercised
singularly or concurrently.
1. The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
1. This Agreement is subject to modification only by a writing
signed by the parties, except as provided in paragraph 8 hereof.
1. The benefits and burdens of this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of ▇▇▇▇▇▇ and upon
the successors of the
74
Company. The Company shall not assign its rights or delegate its duties
hereunder without the prior written consent of ▇▇▇▇▇▇.
1. Notice of acceptance hereof is hereby waived by the Company.
1. This Agreement has been negotiated, executed and delivered at
and shall be deemed to have been made in Atlanta, Georgia. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of Georgia.
1. THE COMPANY AND LENDER EACH WAIVES THE RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE COLLATERAL.
WITNESS the execution hereof under seal as of the day and year first
above written.
ATTEST: TWINVISION CORP. OF NORTH
AMERICA, INC. ("Company")
By:
---------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL]
Accepted in Atlanta, Georgia:
-----------------------------
FREMONT FINANCIAL CORPORATION
("Lender")
By:
Title:
[Acknowledgment appearing on following page]
STATE OF GEORGIA ss.
ss.
COUNTY OF ▇▇▇▇▇▇ ▇▇.
BEFORE ME, the undersigned authority, on this day personally appeared
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President of TwinVision Corp. of North America, Inc.,
to me known to be the
75
person whose name is subscribed to the foregoing instrument, and acknowledged to
me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the act and deed of said
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 23rd day of August,
1999.
Notary Public
My Commission Expires:_______________
[NOTARIAL SEAL]
STATE OF GEORGIA )
)
COUNTY OF ▇▇▇▇▇▇ )
BEFORE ME, the undersigned authority, on this day personally appeared
▇▇▇▇▇▇ ▇▇▇▇▇ of Fremont Financial Corporation, known to me to be the person
whose name is subscribed to the foregoing instrument, and acknowledged to me
that he executed the same for the purposes and consideration therein expressed,
in the capacity therein stated, and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 23rd day of August,
1999.
Notary Public
My Commission Expires:_______________
[NOTARIAL SEAL]
76
EXHIBIT 1
CERTIFICATE
The undersigned officer of TWINVISION CORP. OF NORTH AMERICA, INC. (the
"Company"), DOES HEREBY CERTIFY to FREMONT FINANCIAL CORPORATION ("Lender") that
the quality of the products associated with the Trademarks listed on Schedule A
of the Trademark Security Agreement dated August 23, 1999, between the Company
and Lender (as amended from time to time to include future trademarks and
trademark applications) (the "Agreement"), has been maintained at a level
consistent with the quality of such products at the time of the execution of the
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate, this
day of _______________, _____.
TWINVISION CORP. OF NORTH
AMERICA, INC.
By:
Title:
--------------------------
77
SCHEDULE A
Registrations -
United States Patent and Trademark Office
Trademark
of Service Mark Registration No. Registration Date
-------------------------------------------------------------------------------
NO BULK, NO BALLAST,
NO PROBLEM 2,213,355 December 22, 1998
▇▇▇▇▇ 2,166,496 June 16, 1998
LEDOT 2,219,526 January 19, 1999
TALKING BUS 1,796,858 October 5, 1993
Pending Applications
United States Patent and Trademark Office
Trademark
or Service Mark
---------------
Serial No.
----------------
Filing Date
---------------
BUDGET VISION 75/323,315 July 11, 1997
78
NOTE PLEDGE AGREEMENT
FOR TEN DOLLARS ($10.00) and other valuable consideration, receipt
whereof is acknowledged, DIGITAL RECORDERS, INC. ("Borrower"), a North Carolina
corporation, hereby assigns and pledges to FREMONT FINANCIAL CORPORATION
("Lender"), a California corporation, and hereby grants to Lender a security
interest in, that certain Promissory Note ("Note") dated August 20, 1999, made
by TRANSIT-MEDIA, GMBH, ("Maker"), a German corporation, as maker, to Borrower,
as holder, in the original principal amount of FIVE MILLION FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($5,500,000), all indebtedness evidenced thereby,
and all of Borrower's rights to payment under the Note, the original of which
Note is annexed hereto and is concurrently herewith delivered to Lender. This
pledge of the Note and the security interest granted to Lender herein is to
secure the payment of all debts, liabilities and obligations of Borrower,
TwinVision Corp. of North America, Inc. ("TwinVision") and Digital Audio
Corporation ("DAC") to Lender, whether now existing or hereafter incurred or
arising, and whether direct or indirect, absolute or contingent, joint or
several, due or to become due, including, without limitation, all debts,
liabilities and obligations now or hereafter owing by Borrower, TwinVision and
DAC to Lender under that certain Loan and Security Agreement dated as of August
23, 1999, among Borrower, TwinVision, DAC and Lender. All such debts,
liabilities and obligations are hereinafter jointly called the "Indebtedness."
For so long as any portion of the Indebtedness remains unpaid, Borrower
shall not (i) amend or modify the Note; (ii) renew the Note or extend its
maturity; (iii) waive any default under the Note; (iv) forgive any of the
indebtedness evidenced by the Note; or (v) agree to convert any of the
indebtedness evidenced by the Note into, or exchange any of such indebtedness
for, any equity or other indebtedness; and, if Borrower shall in breach hereof
agree to any such amendment, modification, renewal, extension, waiver,
forgiveness, conversion or exchange, then the same shall be void and of no force
or effect. All amounts paid or payable on account of the Note shall be paid
directly to Lender at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address as Lender may direct in writing, and any
excess held or received by Lender after payment in full of the Indebtedness
shall be turned over to Borrower.
An event of default shall be deemed to exist hereunder upon the
occurrence of any one or more of the following events or conditions: (a)
Borrower shall fail to pay any of the Indebtedness when due (whether due at
stated maturity, on demand, by acceleration or otherwise); (b) Borrower shall
default in the observance or performance of its covenants hereunder; (c) an
event of default shall occur under the Loan Agreement; or (d) Lender shall
reasonably and in good ▇▇▇▇▇ ▇▇▇▇ itself insecure. Upon or after the occurrence
of any one or more of the aforesaid events of default, all of the Indebtedness
shall, at the option of Lender and without any notice to or demand upon Borrower
of any kind, become immediately due and payable, and Lender shall thereupon have
any and all rights and remedies afforded to a secured party under the Uniform
Commercial Code as adopted and in force in the State of Georgia,
79
together with every right and remedy available to Lender under any other
applicable law. In addition to, and without limiting the generality of the
foregoing, Lender shall have the right at any time or times, without
advertisement or publication (unless required by law), to sell or otherwise
dispose of the Note at public or private sale, for cash, upon credit or upon
such other terms as Lender deems advisable in its sole discretion, or otherwise
to realize upon the whole or from time to time any part of the Note, Borrower
remaining liable for any deficiency.
Borrower hereby waives, to the extent permitted by applicable law:
demand, protest, notice of protest, notice of default or dishonor, notice of
payments and non-payments, and notice of any default, release, compromise,
settlement, extension or renewal of all commercial paper, instruments or
guaranties at any time held by Lender on which Borrower may in any way be
liable; and notice of any action taken by Lender unless expressly required by
this Agreement or by law; and notice of ▇▇▇▇▇▇'s acceptance of this Agreement.
Neither the failure nor any delay on the part of Lender to exercise any right,
remedy, power or privilege hereunder shall operate as a waiver thereof or give
rise to any estoppel, nor be construed as an agreement to modify the terms of
this Agreement, nor shall any single or partial exercise by Lender of any right,
remedy, power or privilege preclude any other or further exercise by Lender of
the same or of any other right, remedy, power or privilege.
This Agreement constitutes and expresses the entire understanding
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior inconsistent agreements, understandings, inducements or
conditions, whether express or implied, oral or written. Neither this Agreement
nor any portion or provision hereof may be changed, altered, waived, modified,
supplemented, discharged, cancelled, terminated or amended orally or in any
manner other than by an agreement in writing signed by the parties hereto.
This Agreement shall terminate upon the payment in full of the Note or
the indefeasible payment in full of the Indebtedness, whichever shall first
occur.
The rights, remedies, powers and privileges of Lender hereunder shall
inure to the benefit of the successors and assigns of ▇▇▇▇▇▇, and the duties and
obligations of the Borrower hereunder shall bind the successors and assigns of
▇▇▇▇▇▇▇▇.
This Agreement shall be governed in all respects by and construed in
accordance with the internal laws of the State of Georgia.
▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇▇ EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED IN ANY
WAY TO THIS AGREEMENT.
80
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Agreement to be signed,
sealed and delivered in Atlanta, Georgia, as of August 23, 1999.
DIGITAL RECORDERS, INC.
ATTEST: ("Borrower")
By: By:
------------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL] Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Accepted in Atlanta, Georgia, as of this 23rd day of August, 1999.
FREMONT FINANCIAL CORPORATION
("Lender")
By:
Title:
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
[Acknowledgment and Agreement on following page]
81
ACKNOWLEDGMENT AND AGREEMENT
The undersigned hereby acknowledges receipt of a copy of the within and
foregoing, consents to the terms thereof and agrees to make all payments on
account of the Note directly to Lender until further written notice from ▇▇▇▇▇▇.
Payment in respect of the Note on or after the date hereof shall not discharge
or operate to satisfy any indebtedness evidenced by the Note unless such payment
is made to and received by Lender.
This 23rd day of August, 1999.
TRANSIT-MEDIA, GMBH
("Maker")
By:
Title:
Address:
------------------------------
------------------------
------------------------
82
COLLATERAL ASSIGNMENT OF RIGHTS UNDER
BUSINESS INTERRUPTION INSURANCE POLICY
FOR VALUE RECEIVED, the undersigned, DIGITAL RECORDERS, INC., a North
Carolina corporation ("Undersigned"), having its mailing address, principal
place of business and chief executive office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇, hereby assigns, transfers and sets over to
FREMONT FINANCIAL CORPORATION, a California corporation ("Assignee"), having an
office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
all of the Undersigned's right, title and interest in and to the proceeds of
Policy No. 1MP3013340662 issued by Fidelity & Guaranty Insurance Company, having
an office in Raleigh, North Carolina (herein called the "Insurer") in the face
of amount of $780,000 and any supplementary contracts issued in connection
therewith (said policy and contracts being herein jointly called the "Policy"),
said Policy insuring the losses sustained from the interruption of Undersigned's
business at any time or times under the Policy and all claims, options,
privileges, rights, title and interest therein and thereunder subject to all the
terms and conditions of the Policy. The Undersigned, by executing this
Assignment and the Assignee by its acceptance hereof, agree to the following
terms and conditions:
1. It is expressly agreed that, without detracting from the
generality of the foregoing, this Assignment includes an assignment of the right
to collect from the Insurer the insurance proceeds of the Policy upon a claim
pursuant to the terms of the Policy due to the interruption of Undersigned's
business at any time or times. In no event shall the Policy be terminated by the
Undersigned except upon at least thirty (30) days prior written notice to
Assignee.
1. This Assignment is made to secure, and the Policy is to be
held as collateral security for, the full and prompt payment and performance of
any and all indebtedness and obligations of every kind and description of the
Undersigned to Assignee, whether now existing or hereafter incurred or arising,
and whether direct or indirect, primary or secondary, absolute or contingent,
due or to become due, joint or several, including, without limitation, all
indebtedness of the Undersigned at any time or times owing to Assignee under or
in connection with that certain Loan and Security Agreement among the
Undersigned, the other borrowers noted therein and Assignee dated August 23,
1999. The foregoing agreement, together with all amendments thereto and
extensions and renewals thereof and all other agreements executed by the
Undersigned in connection therewith, are herein referred to as the "Financing
Documents" and all indebtedness and obligations of the Undersigned to Assignee
arising under the Financing Documents or otherwise are herein jointly referred
to as the "Liabilities," which term shall include, without limitation, any
Liabilities which are from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred.
1. The Undersigned hereby represents, warrants and covenants to
and with the Assignee as follows:
83
(a) The Undersigned owns and has full power and authority to
pledge and assign the Policy;
(a) The Policy is and will be genuine and free from forgery,
counterfeit and all adverse liens, claims, defaults, and defenses;
(a) The Insurer has authority and capacity to contract under the
Policy, and the Policy constitutes the legal, valid and binding obligation of
the Insurer enforceable in accordance with its terms; and
(a) If the Undersigned receives any supplementary contracts issued
in connection with the Policy, the Undersigned will immediately deliver same to
the Assignee to be held by the Assignee hereunder in the same manner as the
Policy originally assigned hereunder;
1. The Assignee covenants and agrees with the Undersigned that
any balance of sums received hereunder from the Insurer remaining after payment
of the then existing Liabilities, matured or unmatured, shall be paid by the
Assignee to the persons entitled thereto under the terms of the Policy had this
Assignment not been executed.
1. The Insurer is hereby authorized by the Undersigned to
recognize the Assignee's claims to rights under this Assignment without
investigating the reason for any action taken by the Assignee, or the validity
or the amount of the Liabilities or the existence of any default under the
Financing Documents, or the application to be made by the Assignee of any
amounts to be paid to the Assignee by the Insurer with respect to the Policy.
The sole signature of the Assignee shall be sufficient for the exercise of any
rights under the Policy assigned hereby and the sole receipt of the Assignee for
any sums received shall be a full discharge and release therefor to the Insurer.
Checks for all or any part of the sums payable under the Policy and assigned
hereunder shall be drawn to the exclusive order of the Assignee if, when and in
such amounts requested by the Assignee.
1. The Assignee shall be under no obligation to pay any premium
on the Policy, but any such amounts so paid by the Assignee from its own funds
shall become a part of the Liabilities hereby secured, shall be due immediately,
and shall bear interest at the highest lawful rate per annum in effect under the
Financing Documents.
1. Upon the transfer of all or any part of the Liabilities, the
Assignee may transfer all or any part of its interest in the Policy, and the
transferee shall be vested with all the rights and powers of the Assignee
hereunder with respect to the interest in the Policy so transferred; but with
respect to any remaining interest in the Policy not so transferred, the Assignee
shall retain all rights and powers hereby given.
1. The exercise of any right, option, privilege or power given
herein to the Assignee shall be at the option of the Assignee, and the Assignee
may exercise any such right, option, privilege or power without notice to,
assent by, or affecting the liability of, or releasing any interest hereby
assigned by, the Undersigned.
2. The Assignee may take or release other security, may release
any party primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or
84
indulgences with respect to the Liabilities, or may apply to the Liabilities, in
such order as the Assignee shall determine, the proceeds of the Policy hereby
assigned or any amount received on account of the Policy by the exercise of any
right permitted under this Assignment, without resorting or regard to other
security. The rights, powers and remedies given to the Assignee by this
Assignment shall be in addition to all rights, powers and remedies given to the
Assignee by virtue of any statute or rule of law and all such rights, powers and
remedies are cumulative and not alternative, and may be exercised and enforced
successively or concurrently. Any forbearance, delay or failure by the Assignee
in enforcing any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of any
right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of the Assignee hereunder shall
continue in full force and effect until such right, power or remedy is
specifically waived by an instrument in writing executed by the Assignee.
1. Words importing the singular number hereunder shall include
the plural number and vice versa, and any pronoun used herein shall be deemed to
cover all genders. The terms "Undersigned" and "Assignee" as used in this
Assignment shall include the respective successors, representatives, receivers,
trustees and assigns of those parties.
1. If any provision hereof or the application thereof shall to
any extent be invalid or unenforceable, the remainder of this Assignment, or the
application of such provision to circumstances other than those to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Assignment shall be valid and shall be enforced to the fullest extent
permitted by law.
1. The laws of the State of Georgia shall govern the construction
of and the interests, rights and duties of the parties to this Assignment. This
Assignment shall remain in full force and effect until all of the Liabilities
have been fully paid and the Financing Documents have been terminated.
IN WITNESS WHEREOF, the Undersigned has duly executed and delivered
this Assignment in duplicate original, as of August 23, 1999.
ATTEST: DIGITAL RECORDERS, INC.
("Undersigned")
By:
----------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE]
85
CONTINUING GUARANTY
(▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ International, Inc.)
To induce FREMONT FINANCIAL CORPORATION, a California corporation
(Fremont), to grant credit to DIGITAL AUDIO CORPORATION, a North Carolina
corporation (Borrower), and in consideration thereof and of any loans, advances,
or other financial accommodations heretofore or hereafter granted by Fremont to
or for the account of Borrower, the undersigned, ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INTERNATIONAL,
INC., a Texas corporation (hereinafter called Guarantor) unconditionally
guaranties the full and prompt payment and performance by Borrower of all of
▇▇▇▇▇▇▇▇'s Indebtedness (as hereinafter defined) and obligations to Fremont,
whether now existing or hereafter arising from time to time, and promise to pay
to Fremont, or order, on demand, in lawful money of the United States, all of
Borrower's Indebtedness to Fremont, and all costs and expenses, including
attorneys fees and legal expenses, paid or incurred by Fremont in endeavoring to
collect the Indebtedness, or any part thereof, and in enforcing this Continuing
Guaranty.
1. DEFINITIONS. The word Indebtedness is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of Borrower (including any interest which, but for the application
of the provisions of the U.S. Bankruptcy Code, would have accrued on such
amounts), heretofore, now or hereafter made, incurred, created, or arising,
whether direct or indirect, absolute or contingent, voluntary or involuntary,
due or to become due, liquidated or unliquidated, determined or undetermined,
secured or unsecured, however created, arising, or evidenced, whether Borrower
may be liable thereon individually or jointly with others, and whether Borrower
or any other party or person has any right or power to assert any claim or
defense to the validity or enforceability of the Indebtedness.
2. TERMINATION. This Continuing Guaranty is continuing, unlimited,
absolute, and unconditional. This Continuing Guaranty may be terminated by
Guarantor only by an express, written notice to Fremont of termination, and no
notice of termination shall be effective until it is actually received by
Fremont. No notice of termination shall affect or impair the obligations of
Guarantor with respect to any Indebtedness existing on the date Fremont receives
such notice, any interest thereon, or any expenses paid or incurred by Fremont
in endeavoring to collect the Indebtedness or any part thereof, or in enforcing
this Continuing Guaranty. No notice of termination by Guarantor shall affect or
impair the obligations of any other guarantor of the Indebtedness. No payment by
Guarantor shall reduce the Guarantor's obligations hereunder unless written
notice to that effect is received by Fremont at or prior to Fremont's receipt of
such payment.
3. OBLIGATIONS. Guarantor's obligations hereunder are independent of
the obligations of ▇▇▇▇▇▇▇▇, and a separate action or actions may be brought and
prosecuted against Guarantor, irrespective of whether an action is brought
against Borrower or whether ▇▇▇▇▇▇▇▇ is joined in any such action or actions.
Guarantor waives the benefit of any statute of limitations affecting Guarantor's
liability hereunder or the enforcement hereof.
4. INDEMNITY. Guarantor agrees to indemnify and hold Fremont harmless
from and against all claims, actions, causes of action, demands, obligations,
liabilities, losses, costs, and expenses in connection with, on account of, or
in any way relating to or arising from Fremont's transactions with Borrower;
provided that the foregoing indemnification shall not extend to liabilities,
damages, losses, obligations, judgments and expenses arising from the gross
negligence or willful misconduct of Fremont.
5. CONTINUATION OF TERMS. This Continuing Guaranty shall not be
affected or impaired by any modifications, supplements, extensions or amendments
of any contract or agreement to which the parties thereto may hereafter agree,
nor by any modifications, releases or other alterations of any of the
Indebtedness hereby guarantied or of any security therefor, nor by any
agreements or arrangements whatever with Borrower or anyone else.
6. AUTHORIZATION. Guarantor authorizes Fremont, without notice or
demand and without affecting Guarantor's liability hereunder, from time to time
and any number of times, to take any or all of the following actions:
(a) renew, compromise, extend, accelerate or
otherwise change the time for payment of, or otherwise change
the terms of the Indebtedness or any part thereof, including
increase or decrease of the rate of interest thereon;
86
(b) take and hold security for the payment of this
Continuing Guaranty or the Indebtedness, and exchange,
enforce, waive and release any such security;
(c) apply such security and direct the order or
manner of sale thereof as Fremont in its discretion may
determine;
(d) release or substitute any other guarantors,
sureties, or endorsers of the Indebtedness; and
(e) assign, without notice, this Continuing Guaranty
in whole or in part, or Fremont's rights hereunder, to anyone
at any time.
7. WAIVERS. Guarantor waives all rights and defenses arising out of an
election of remedies by Fremont, even though that election of remedies, such as
nonjudicial foreclosure with respect to security for the Indebtedness guarantied
hereunder, has destroyed ▇▇▇▇▇▇▇▇▇'s rights of subrogation and reimbursement
against ▇▇▇▇▇▇▇▇. Guarantor waives any right of subrogation, contribution,
indemnity or reimbursement that Guarantor has or may have against Borrower with
respect to the Indebtedness guarantied hereunder until such time as the
Indebtedness guarantied hereunder has been indefeasibly paid in full. Guarantor
waives any right to require Fremont to (a) proceed against Borrower; (b) proceed
against or exhaust any security held from Borrower; or (c) pursue any other
remedy in Fremont's power whatsoever. Guarantor waives any defense arising by
reason of any disability or other defense of Borrower or by reason of the
cessation from any cause whatsoever of the liability of Borrower. Guarantor
agrees that nothing shall discharge or satisfy the liability of Guarantor
hereunder except the full and indefeasible payment and performance of all of
▇▇▇▇▇▇▇▇'s Indebtedness and obligations to Fremont with interest. ▇▇▇▇▇▇▇▇'s
Indebtedness and obligations shall not be considered indefeasibly paid until all
payments to Fremont are no longer subject to any right, by any person, to
invalidate or set aside such payments or to seek to recoup the amount of such
payments or to declare such payments to be fraudulent or preferential. In the
event any portion of any such payments shall be set aside or restored, then
Guarantor shall be liable for the full amount Fremont is required to repay, plus
any costs and expenses (including attorneys fees) paid by Fremont in connection
therewith. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all Indebtedness of Borrower to Fremont. All monies or other
property of Guarantor at any time in Fremont's possession may be held by Fremont
as security for any and all obligations of Guarantor to Fremont however and
whenever arising, whether absolute or contingent, whether due or to become due
and whether under this Continuing Guaranty or otherwise. ▇▇▇▇▇▇▇▇▇ also agrees
that Fremont's books and records showing the account between Fremont and
▇▇▇▇▇▇▇▇ shall be admissible in any action or proceeding and shall be binding
upon Guarantor for the purpose of establishing the items therein set forth and
shall constitute prima facie proof thereof. Guarantor waives all presentments,
demands for performance, notices of non-performance, protests, notices of
protest, notices of dishonor, notices of default, notices of acceptance of this
Continuing Guaranty and of the existence, creation or incurrence of new or
additional indebtedness, notice of any and all favorable and unfavorable
information, financial or other, about Borrower, heretofore, now or hereafter
learned or acquired by Fremont and all other notices to which Guarantor might
otherwise be entitled.
8. MAINTENANCE OF INFORMATION. Guarantor hereby represents to Fremont
that Guarantor is and will remain informed of the financial condition of
▇▇▇▇▇▇▇▇ and of all other circumstances which bear upon the risk of non-payment
of ▇▇▇▇▇▇▇▇'s Indebtedness and any other obligations of Borrower guarantied
hereby. ▇▇▇▇▇▇▇▇▇ agrees that Fremont is not obligated to inform ▇▇▇▇▇▇▇▇▇ of
any such circumstances, whether now existing or hereafter arising, and that
Fremont is not required to inquire into the powers of Borrower or the officers,
directors, partners or agents acting or purporting to act on its behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guarantied hereunder.
9. ATTORNEYS FEES. Guarantor agrees to pay reasonable attorneys fees
(including the allocated costs of Fremont's in-house counsel) and all other
costs and expenses which may be incurred by Fremont in the enforcement of this
Continuing Guaranty or any claim hereunder or under any other instrument or
guaranty.
10. AMENDMENTS IN WRITING. No termination or modification of this
Continuing Guaranty shall be effective for any purpose unless it is in writing
and executed by an officer of Fremont authorized to do so.
87
11. DEMAND PAYMENT. Guarantor agrees that upon the occurrence of an
Event of Default (as defined in the Loan and Security Agreement between Borrower
and Fremont), Guarantor, immediately following a demand for payment from
Fremont, shall pay Fremont the full amount of the Indebtedness guarantied
hereunder.
12. SUCCESSORS AND ASSIGNS. The termination or dissolution of Guarantor
shall not terminate this Continuing Guaranty. This Continuing Guaranty shall be
binding upon the successors and assigns of Guarantor and shall inure to the
benefit of Fremont, its successors and assigns, including without limitation
Fremont Funding Inc. and LaSalle National Bank (or any successor thereto), as
trustee of the Fremont Small Business Loan Master Trust.
13. SECURITY. This Continuing Guaranty is secured by substantially all
of the assets of Guarantor, including, without limitation, all of Guarantor's
accounts, equipment, inventory, general intangibles and books and records and
all products and proceeds thereof.
14. CHOICE OF LAW AND VENUE. THE VALIDITY OF THIS CONTINUING GUARANTY,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT AND THE RIGHTS OF FREMONT AND
GUARANTOR SHALL BE DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF GEORGIA.
▇▇▇▇▇▇▇▇▇ AND FREMONT AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS CONTINUING GUARANTY SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE COURTS LOCATED IN THE COUNTY OF ▇▇▇▇▇▇, STATE OF GEORGIA, THE FEDERAL
COURTS WHOSE VENUE INCLUDES THE COUNTY OF ▇▇▇▇▇▇, STATE OF GEORGIA, OR, AT THE
SOLE OPTION OF FREMONT, IN ANY OTHER COURT IN WHICH FREMONT SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. GUARANTOR AND FREMONT EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH
COURT, AND GUARANTOR AND FREMONT HEREBY WAIVE ANY OBJECTION WHICH EITHER MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION AND HEREBY CONSENT TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT.
FURTHERMORE, GUARANTOR AND FREMONT EACH WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 14.
15. WAIVER OF JURY TRIAL. ▇▇▇▇▇▇▇▇▇ AND FREMONT HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS CONTINUING GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. ▇▇▇▇▇▇▇▇▇ AND FREMONT REPRESENT THAT THEY HAVE REVIEWED THIS WAIVER AND
KNOWINGLY AND VOLUNTARILY WAIVE THEIR JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS CONTINUING
GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the undersigned ▇▇▇▇▇▇▇▇▇ has executed this
Continuing Guaranty as of this 23rd day of August, 1999.
GUARANTOR:
▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INTERNATIONAL, INC.,
ATTEST: a Texas corporation
By:__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
88
Address:
------- ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
AFFIRMATION AND ACKNOWLEDGMENT BY CORPORATE GUARANTOR BEFORE NOTARY PUBLIC
STATE OF GEORGIA )
) ss.
COUNTY OF ▇▇▇▇▇▇ )
Affirmed/Sworn to and subscribed before me by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
of ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ International, Inc., as of this 23rd day of August, 1999.
WITNESS my hand and official seal.
Signature:
---------------------------
My Commission Expires: (Notarial)
----------------
Address:
-----------------------------
City/State/Zip:
----------------------
89
SECURITY AGREEMENT
(▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INTERNATIONAL, INC.)
THIS AGREEMENT is made as of this 23rd day of August, 1999, by and
between ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INTERNATIONAL, INC. ("Debtor"), a Texas corporation
having an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
and FREMONT FINANCIAL CORPORATION ("Lender"), a California corporation having an
office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇:
1. GRANT OF SECURITY INTEREST. For valuable consideration,
receipt whereof is acknowledged, Debtor hereby grants to Lender a continuing
security interest in and lien upon all of the following described property of
Debtor, whether now in existence or hereafter created or acquired and
wheresoever situated, as well as in the cash and non-cash proceeds thereof,
including, without limitation, insurance proceeds (all such property being
hereinafter collectively referred to as the "Collateral"):
(a) All of Debtor's accounts, contract rights, documents,
instruments, chattel paper and investment property;
(a) All of Debtor's general intangibles, including, without
limitation, all patents, trademarks, copyrights, service marks, tradenames,
software, and tax refund claims;
(a) All of Debtor's inventory, including, without limitation, all
raw materials, work in process and finished goods and all materials used or
consumed in the manufacturing, processing, advertising, packaging or shipping of
inventory;
(a) All of Debtor's machinery, equipment, fixtures, furnishings,
furniture and motor vehicles, and any and all replacements, additions,
accessions, and substitutions thereof or thereto; and
(a) All of ▇▇▇▇▇▇'s books and records pertaining to any of the
foregoing.
The security interest granted hereby is to secure the payment and
performance of the following (collectively, the "Indebtedness"): (i) all
indebtedness, liabilities and obligations of Debtor to Lender of every kind and
description, whether direct or indirect, joint or several, absolute or
contingent, due or to become due, now existing or hereafter arising, including,
without limitation: (A) all indebtedness, liabilities and obligations now or
hereafter owing by Debtor to Lender under a certain Continuing Guaranty from
Debtor to Lender dated as of August 23, 1999, pursuant to which Debtor has
unconditionally guaranteed payment of all present and future indebtedness of
Digital Recorders, Inc. ("Digital") to Lender, (B) all indebtedness, liabilities
and obligations now or hereafter owing by Debtor to Lender under a certain
Continuing Guaranty from Debtor to Lender dated as of August 23, 1999, pursuant
to which Debtor has unconditionally guaranteed payment of all present and future
indebtedness of TwinVision Corp. of North America, Inc. ("TwinVision") to
Lender, (C)all indebtedness, liabilities and obligations now or hereafter owing
by Debtor to Lender under a certain Continuing Guaranty from Debtor to Lender
dated as of August 23, 1999, pursuant to which Debtor has unconditionally
guaranteed payment of all present and future indebtedness of Digital Audio
Corporation ("DAC"; Digital, TwinVision and DAC are hereinafter collectively
referred to as "Borrowers") to Lender (such Continuing Guaranties, as at any
time amended, being hereinafter collectively referred to as the "Guaranties"),
and
90
(D) all indebtedness, liabilities and obligations now or hereafter owing by
Debtor to Lender under this Agreement; and (ii) all indebtedness, liabilities
and obligations now or hereafter owing by Borrowers under any present or future
loan agreement, security agreement, guaranty or other agreement with or in favor
of Lender (jointly called "Loan Documents").
1. REPRESENTATIONS, COVENANTS AND WARRANTIES OF DEBTOR. Debtor
hereby represents, covenants, warrants, and agrees to and with ▇▇▇▇▇▇ as
follows:
(a) Debtor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and has as the office at
which it maintains its books and records at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇;
(a) Debtor is and will remain solvent in the sense that the fair
saleable value of all of its assets does, and will at all times, exceed the
total amount of its liabilities, including contingent liabilities, and Debtor
does pay and will at all times pay its debts as they mature;
(a) All risk of loss of the Collateral hereunder shall be upon
Debtor;
(a) Debtor shall keep the Collateral free and clear from any and
all security interests, unpaid charges, attachments, levies, and liens of every
kind, except for the security interest granted hereunder to ▇▇▇▇▇▇;
(a) Debtor shall not change its name, its principal place of
business or its chief executive office without having given Lender at least
sixty (60) days prior written notice;
(a) Debtor shall use, keep and maintain the Collateral at its
principal place of business as shown above, and shall neither move the
Collateral therefrom nor dispose of any of the Collateral except for sales of
inventory in the ordinary course of business;
(a) Debtor shall keep and maintain all tangible items of
Collateral in saleable condition, and Debtor agrees that the Collateral may be
inspected and examined by Lender or its agents at any reasonable time, upon
reasonable notice, and that Lender shall have the right to inspect, audit,
examine, check, or make copies of, or extracts from, the books, files, accounts,
and all other records of Debtor pertaining to Debtor's business or any of the
Collateral;
(a) Debtor shall preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation and
shall comply with the requirements of all applicable laws, rules, regulations
and orders of any governmental authority, the noncompliance with which would
materially and adversely affect its properties, business or credit;
(a) Debtor shall keep all tangible items of the Collateral fully
insured against loss and damage by fire, windstorm, water, theft, malicious
mischief, and extended coverage in such amounts and by such companies as shall
be acceptable to Lender. Such policies of insurance or certificates evidencing
such policies shall be deposited by Debtor with Lender. All such policies shall
contain a loss payable clause, in a form satisfactory to Lender, naming Lender
as loss payee. Unless written consent to the contrary is first obtained from
Lender, all proceeds payable under any such policy shall be payable in any event
to Lender (regardless of whether an event of default has occurred hereunder).
Each such policy of insurance or endorsement shall contain a clause requiring
the insurer to give Lender not less than thirty (30) days' written notice before
any such policy shall be altered or
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cancelled. Lender may act as ▇▇▇▇▇▇'s agent in adjusting or compromising any
loss under any such insurance policy and in collecting and receiving the
proceeds from any such policy. In the event of any loss under any such policy of
insurance, the insurer named therein is hereby authorized and directed by ▇▇▇▇▇▇
to make payment for such loss to Lender, rather than to Debtor and ▇▇▇▇▇▇
jointly. If Debtor shall default in its obligation hereunder to insure the
Collateral in a manner satisfactory to Lender, then Lender shall have the right
(but not the obligation) to procure such insurance and to charge the costs of
same to Debtor, which costs shall be added to and become a part of the unpaid
principal amount of the Indebtedness, shall bear interest at the highest rate
provided for under the Loan Documents, shall be secured by the Collateral, and
shall be repayable to Lender ON DEMAND;
(a) Debtor has never carried on business, trade as, been known as,
used or incorporated under any name other than the name appearing on the first
page of this Agreement;
(a) Debtor shall provide to Lender such financial information
concerning Debtor as Lender may from time to time request, including, without
limitation, monthly, quarterly and annual financial statements, which shall in
each case be certified to Lender by the chief financial officer of Debtor;
(a) Debtor shall not merge or consolidate with, nor shall Debtor
acquire all or substantially all of the capital stock or assets of, any person
or entity;
(a) There are no actions, suits or proceedings now pending or, to
Debtor's knowledge, threatened against Debtor or affecting any of Debtor's
properties, the adverse result of which would in any material respect affect the
property, financial condition or operations of Debtor, and Debtor shall promptly
notify Lender of the commencement of any action, suit or proceeding against
Debtor; and
(a) Debtor will execute, or cause to be executed, and deliver to
Lender any and all documents necessary to give effect to this Agreement,
including specifically all necessary financing statements, landlord waivers,
mortgagee waivers and subordination agreements, and Debtor shall reimburse
Lender for the costs of filing or recording any such documents in all public
offices deemed necessary by ▇▇▇▇▇▇.
1. EVENTS OF DEFAULT. It is understood and agreed that an event
of default shall be deemed to have occurred under this Agreement, and Lender
shall be entitled to take such actions as are elsewhere provided herein, in the
event that Debtor fails to pay any of the Indebtedness to Lender when due
(whether due on demand, at stated maturity, by acceleration or otherwise); or
any representation, warranty or covenant made by Debtor herein or in any other
existing or future agreement with Lender shall prove to have been false in any
material respect when made or is breached, violated, or not complied with; or a
petition shall be filed by or against Debtor for an order for relief under the
Bankruptcy Code; or Borrowers shall default in the observance or performance of
any covenant or condition set forth in any of the Loan Documents; or any
guarantor of the Indebtedness shall revoke or attempt to revoke its guaranty or
shall become insolvent:
1. RIGHTS AND REMEDIES UPON DEFAULT. Upon or at any time after
the occurrence of any one or more of the events of default specified in
paragraph 3 hereof, all of the Indebtedness shall, at the option of Lender and
without any notice to or demand upon Debtor of any kind, become immediately due
and payable, and Lender shall thereupon have and may exercise from time to time
any and all rights and remedies afforded to a secured party under the Uniform
Commercial Code as adopted and in force in the State of Georgia, together with
every right and remedy available to Lender under any
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other applicable law. In addition to, and without limiting the generality of the
foregoing, Lender shall have the following rights and remedies:
(a) The right at any time to notify any account debtor on any
Collateral to make all payments owing to Debtor directly to Lender for
application to the Indebtedness and to collect all amounts owing from any such
account debtor;
(a) The right at any time or times, without advertisement or
publication (unless required by law), to sell, lease or otherwise dispose of any
or all of the Collateral at public or private sale, for cash, upon credit or
upon such other terms as Lender deems advisable in its sole discretion, or
otherwise to realize upon the whole or from time to time any part of the
Collateral in which Lender shall have a security interest hereunder, Debtor
remaining liable for any deficiency. Lender may bid and be the purchaser at any
such sale if permitted by law;
(a) The right to conduct any such sales of Collateral on Debtor's
premises or elsewhere and the right to use Debtor's premises without charge for
such time or times as Lender may see fit;
(a) The right to require Debtor, at Debtor's expense, to assemble
the Collateral and make it available to Lender at a place reasonably convenient
to both parties. Alternatively, Lender may peaceably by its own means or with
judicial assistance enter Debtor's premises and take possession of the
Collateral or dispose of the Collateral on Debtor's premises without resistance
or interference by ▇▇▇▇▇▇;
(a) The right to incur reasonable attorney's fees and expenses in
exercising any of the rights, remedies, powers or privileges provided hereunder,
and the right (but not the obligation) to pay, satisfy and discharge, or to
bond, deposit or indemnify against, any tax or other lien which in the opinion
of Lender or its counsel may in any manner or to any extent be a lien upon any
of the Collateral, all of which fees, payments and expenses shall become part of
▇▇▇▇▇▇'s expenses of retaking, holding, preparing for sale and the like, and
shall be added to and become a part of the principal amount of the Indebtedness;
and
(a) The right to apply the proceeds realized from any collection,
sale, lease or other disposition of any of the Collateral first to the costs,
expenses and attorneys' fees incurred by ▇▇▇▇▇▇ in the collection of any
Indebtedness or in connection with the repossession, preparation for sale,
protection, removal, storage, sale and delivery of the Collateral; secondly, to
interest due upon the principal amount of the Indebtedness; and thirdly, to the
principal amount of the Indebtedness. If any deficiency shall arise, Debtor
shall remain bound and liable to Lender therefor.
Lender shall not be liable or responsible to Debtor in any way for the
safeguarding of any of the Collateral, for any loss or damage thereto, for any
diminution in the value thereof, or for any act or default of any carrier,
warehouseman, forwarding agency, or other person whomsoever, but the same shall
be at all times at Debtor's risk.
All rights, remedies, powers, and privileges of Lender hereunder are
cumulative and not alternative, and may be exercised concurrently or seriatim,
and are in addition to and not in lieu of any other rights of Lender at law, in
equity, under statute or under any other agreement with Debtor.
1. WAIVERS. In addition to the other waivers contained herein and
in any other agreement between Debtor and Lender, Debtor hereby expressly
waives, to the extent permitted by law:
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demand, protest, notice of protest, notice of default or dishonor, notice of
payments and nonpayments, or of any default, release, compromise, settlement,
extension or renewal of all commercial paper, instruments or guaranties at any
time held by Lender on which Debtor may in any way be liable; notice or hearing
in connection with, and the requirement to post a bond as a condition to, the
issuance of an immediate writ of possession with respect to any of the
Collateral (such waiver being made as permitted by O.C.G.A. ss.44-14-260(3));
and notice of any action taken by ▇▇▇▇▇▇ unless expressly required by this
Agreement or by law.
1. INDULGENCES NOT WAIVERS. Neither the failure nor any delay on
the part of Lender to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver thereof or give rise to any estoppel, nor be construed
as an agreement to modify the terms of this Agreement, nor shall any single or
partial exercise by Lender of any right, remedy, power or privilege preclude any
other or further exercise by Lender of the same or of any other right, remedy,
power, or privilege; nor shall any waiver by Lender of any right, remedy, power
or privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence. No
waiver by a party hereunder shall be effective unless it is in writing and
signed by the party making such waiver, and then only to the extent specifically
stated in such writing.
(a) NOTICE. All notices, requests and demands to or upon a party
hereto shall be in writing and sent by personal delivery against receipt,
overnight courier or certified or registered mail, return receipt requested, or
telecopier transmission and shall be deemed to have been validly served, given
or delivered when delivered against receipt, when presented at the noticed
party's address or when received at the office of the noticed party by telecopy
transmission, as set forth below:
If to Lender: Fremont Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
Building ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
1500 Marquis Two Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Atlanta, Georgia 30303
Attention: ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Debtor: ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇, P.A.
94
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by like notice
given in accordance with this paragraph 7; provided, however, that any notice,
request or demand to or upon Lender shall not be effective until received by
Lender.
The parties hereby agree that a notice sent as specified in this
paragraph at least seven (7) calendar days before the date of any intended
public sale or the date after which any private sale or other intended
disposition of the Collateral is to be made by Lender shall be deemed to be
reasonable notice of such sale or other disposition. All notice is hereby waived
with respect to any of the Collateral which threatens to decline speedily in
value or is of a type customarily sold on a recognized market.
1. DEFINITIONS AND APPLICABLE LAW. All items comprising the
Collateral shall be defined in accordance with the appropriate definitions
appearing in the Uniform Commercial Code as in force in the State of Georgia and
such definitions are hereby incorporated herein by reference and made a part
hereof. This Agreement shall be governed in all respect by, and construed in
accordance with, the laws of the State of Georgia, including, without
limitation, the Uniform Commercial Code of the State of Georgia.
1. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, waived, modified, supplemented, discharged, cancelled,
terminated, or amended orally or in any manner other than by an agreement in
writing signed by the parties hereto.
1. PARAGRAPH HEADINGS. The paragraph headings in this Agreement
are for convenience of reference only; they form no part of this Agreement and
shall not affect its interpretation.
1. SEVERABILITY. The provisions of this Agreement are independent
of and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof, but this
Agreement shall be construed as if such invalid or unenforceable provision had
never been contained herein.
1. SUCCESSORS AND ASSIGNS. The rights, remedies, powers, and
privileges of Lender hereunder shall inure to the benefit of the successors and
assigns of ▇▇▇▇▇▇, and the duties and obligations of Debtor hereunder shall bind
the successors and assigns of Debtor.
1. TERM OF AGREEMENT. This Agreement shall continue in full force
and effect until all of the Indebtedness has been satisfied in full and the Loan
Documents have been terminated.
1. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and
95
delivered shall be deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument. In proving this
Agreement in any judicial proceeding, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom such
enforcement is sought.
1. FORUM SELECTION. Lender and Debtor agree that the United
States District Court for the Northern District of Georgia, Atlanta Division,
and the Superior Court of ▇▇▇▇ County, Georgia, or, at the option of Lender, any
court in which Lender shall initiate legal or equitable proceedings and which
has subject matter jurisdiction over the matter in controversy, shall have
jurisdiction to hear and determine any claims or disputes between Debtor and
Lender pertaining directly or indirectly to this Agreement, the Guaranties or to
any matter arising therefrom. The choice of forum set forth herein shall not be
deemed to preclude the enforcement of any judgment obtained in such forum or the
taking of any action by Lender under this Agreement or the Guaranties to enforce
same or to realize upon any of the Collateral in any appropriate jurisdictions.
1. MISCELLANEOUS. Time is of the essence of this Agreement.
Lender may assign, or sell participations in, its right, title and interest
herein, in any of the Indebtedness, in the Collateral, and in any agreements or
instruments now or hereafter evidencing or securing any of the Indebtedness at
any time or times without notice to or the consent of Debtor. This Agreement
shall not become effective until accepted by Lender in Atlanta, Georgia, but
Debtor hereby waives notice of such acceptance by ▇▇▇▇▇▇. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, DEBTOR AND ▇▇▇▇▇▇ EACH HEREBY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM CONCERNING THIS
AGREEMENT.
IN WITNESS WHEREOF, ▇▇▇▇▇▇ has caused this Agreement to be signed,
sealed and delivered in Atlanta, Georgia, as of the day and year first written
above.
ATTEST: ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INTERNATIONAL, INC.
("Debtor")
By:
---------------------------------- ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President
▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[CORPORATE SEAL]
Accepted in Atlanta, Georgia, as of
August 23, 1999.
FREMONT FINANCIAL CORPORATION
("Lender")
By:
Title:
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VALIDITY GUARANTY
This ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated as of August 23, 1999, is made by ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ("Guarantor"), the Chief Financial Officer and Vice President of the
Borrowers (as defined below) in favor of FREMONT FINANCIAL CORPORATION, a
California corporation ("Fremont").
Guarantor is an officer of Digital Recorders, Inc., a North Carolina
corporation, TwinVision of North America, Inc., a North Carolina corporation and
Digital Audio Corporation, a North Carolina corporation, (individually, a
"Borrower" and collectively, the "Borrowers").
All capitalized terms shall have the meaning given to them in the Loan
and Security Agreement (the "Loan Agreement") dated as of August 23, 1999,
between ▇▇▇▇▇▇▇▇ and Fremont.
1. To induce Fremont to grant credit to Borrowers and in
consideration thereof and of any loans, advances, financial accommodations
heretofore or hereafter granted by Fremont to or for the account of Borrowers,
Guarantor, in his capacity as an officer of Borrowers, hereby warrants,
covenants and guarantees as follows:
a. All facts, figures and representations given by Guarantor
or any officers or employees of any Borrower under the supervision of
Guarantor with respect to the value of such Borrower's Accounts,
Inventory and any other items of Collateral or with respect to any
other fact contained in any report required under the Loan Documents
are, and at all times will be, true and correct in all material
respects.
b. To the best of Guarantor's knowledge, each Borrower's
Eligible Accounts represents, and hereafter will represent, a right to
payment in respect of a bona fide sale of goods or rendering of
services, not subject to any rights of offset, counterclaim,
cancellation, or return.
c. Guarantor shall not, and shall cause the officers and
employees of any Borrower under the supervision of Guarantor to not, do
anything to impede or interfere with the normal collection and payment
of the Accounts.
d. Guarantor shall not, and shall cause the officers and
employees of any Borrower under the supervision of Guarantor to not,
sell any of such Borrower's Inventory except in the ordinary course of
business.
2. Guarantor authorizes Fremont, without notice or demand and
without affecting its liability hereunder, from time to time, to:
a. renew, compromise, extend, accelerate or otherwise change
the time for payment of, or otherwise change the terms of, the other
Loan Documents;
b. release or substitute any other guarantors of the
Obligations; and
c. assign, without notice, this Validity Guaranty in whole or
in part and/or Fremont's rights hereunder to anyone at any time.
3. THE VALIDITY OF THIS VALIDITY GUARANTY, ITS CONSTRUCTION,
INTERPRETATION AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA GUARANTOR AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS VALIDITY GUARANTY SHALL BE LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN COUNTY OF ▇▇▇▇▇▇, STATE OF GEORGIA, OR, AT THE SOLE
OPTION OF FREMONT, IN ANY OTHER COURT IN WHICH FREMONT SHALL INITIATE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. GUARANTOR WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT GUARANTOR MAY HAVE TO ASSERT THE
97
DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 5.
4. GUARANTOR WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, THE RIGHT TO A TRIAL BY JURY.
IN WITNESS WHEREOF, the undersigned ▇▇▇▇▇▇▇▇▇ has executed this
Validity Guaranty as of the date first above written.
GUARANTOR: WITNESS:
Signed By: Signed By:
Print Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Print Name: