EXHIBIT 10.3
[LOGO] Bank of America
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Business Loan Agreement
This Agreement dated as of November 9, 1999, is between Bank of America, N.A.
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(the "Bank") and Sunrise Telecom, Inc. (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Commitment") is Three Million and 00/100 Dollars ($3,000,000.00).
(b) This is a revolving line of credit providing for cash advances and letters
of credit. During the availability period, the Borrower may repay principal
amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
advances under the line of credit plus the outstanding amounts of any
letters of credit, including amounts drawn on letters of credit and not yet
reimbursed, to exceed the Commitment.
1.2 Availability Period. The line of credit is available between the date of
this Agreement and October 1, 2000, or such earlier date as the availability may
terminate as provided in this Agreement (the "Expiration Date"),
1.3 Interest Rate.
(a) Unless the Borrower elects an optional interest rate as described below,
the interest rate is the Bank's Prime Rate.
(b) The Prime Rate is the rate of interest publicly announced from time to time
by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on
various factors, including the Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at, above, or
below the Prime Rate. Any change in the Prime Rate shall take effect at the
opening of business on the day specified in the public announcement of a
change in the Bank's Prime Rate.
1.4 Repayment Terms.
(a) The Borrower will pay interest on November 1, 1999, and then monthly
thereafter until payment in full of any principal outstanding under this
line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest or
other charges outstanding under this line of credit no later than the
Expiration Date. Any interest period for an optional interest rate (as
described below) shall expire no later than the Expiration Date.
1.5 Optional Interest Rates. Instead of the interest rate based on the Bank's
Prime Rate, the Borrower may elect the optional interest rates listed below
during interest periods agreed to by the Bank and the Borrower. The optional
interest rates shall be subject to the terms and conditions described later in
this Agreement. Any principal amount bearing interest at an optional rate under
this Agreement is referred to as a "Portion." The following optional interest
rates are available:
(a) Short Term Fixed Rates.
1.6 Letters of Credit.
(a) This line of credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 180 days but
not to extend more than 90 days beyond the Expiration Date. Each
commercial letter of credit will require drafts payable at sight.
(ii) standby letters of credit with a maximum maturity of 365 days but
not to extend more than 90 days beyond the Expiration Date.
(iii) The amount of letters of credit outstanding at any one time
(including amounts drawn on letters of credit and not yet
reimbursed) may not exceed Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00).
(b) The Borrower agrees:
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(i) any sum drawn under a letter of credit may, at the option of the
Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described
elsewhere in this Agreement.
(ii) if there is a default under this Agreement, to immediately prepay
and make the Bank whole for any outstanding letters of credit.
(iii) the issuance of any letter of credit and any amendment to a letter
of credit is subject to the Bank's written approval and must be in
form and content satisfactory to the Bank and in favor of a
beneficiary acceptable to the Bank.
(iv) to sign the Bank's form Application and Agreement for Commercial
Letter of Credit or Application and Agreement for Standby Letter of
Credit.
(v) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of
credit for the Borrower.
(vi) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
2. OPTIONAL INTEREST RATES
2.1 Optional Rates. Each optional interest rate is a rate per year. Interest
will be paid on the last day of each interest period, and on the first day of
each month during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Prime Rate, unless the
Borrower has designated another optional interest rate for the Portion. No
Portion will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest rates
for interest periods commencing after the default occurs.
2.2 Short Term Fixed Rate. The election of Short Term Fixed Rates shall be
subject to the following terms and requirements:
(a) The "Short Term Fixed Rate" means the fixed interest rate the Bank and the
Borrower agree will apply during the applicable interest period.
(b) The interest period during which the Short Term Fixed Rate will be in
effect will be no shorter than 30 days and no longer than one year.
(c) Each Short Term Fixed Rate Portion will be for an amount not less than the
following:
(i) for interest periods of 91 days or longer, Five Hundred Thousand
Dollars ($500,000).
(ii) for interest periods of between 30 days and 90 days, One Million
Dollars ($1,000,000).
(d) Each prepayment of a Short Term Fixed Rate Portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee as described
below. A "prepayment" is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this Agreement.
[(e) The prepayment fee shall be in an amount sufficient to compensate the Bank
for any loss, cost or expense incurred by it as a result of the prepayment,
including any loss of anticipated profits and any loss or expense arising
from the liquidation or reemployment of funds obtained by it to maintain
such Portion or from fees payable to terminate the deposits from which such
funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing.
For purposes of this paragraph, the Bank shall be deemed to have funded
each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so funded.]
[(f) The prepayment fee shall be equal to the amount (if any) by which:
(i) the additional interest which would have been payable during the
interest period on the amount prepaid had it not been prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank by placing
the amount prepaid on deposit in the domestic certificate of deposit
market, the eurodollar deposit market, or other appropriate money
market
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selected by the Bank for a period starting on the date on which it was
prepaid and ending on the last day of the interest period for such
Portion (or the scheduled payment date for the amount prepaid, if
earlier).]
3. FEES AND EXPENSES
3.1 Fees.
(a) Loan fee. The Borrower agrees to pay a loan fee in the amount of Seven
Thousand Five Hundred and 00/100 Dollars ($7,500,00). This fee is due on or
before the date of this Agreement.
(b) Waiver fee. If the Bank, at its discretion, agrees to waive or amend any
terms of this Agreement, the Borrower will, at the Bank's option, pay the
Bank a fee for each waiver or amendment in an amount advised by the Bank at
the time the Borrower requests the waiver or amendment. Nothing in this
paragraph shall imply that the Bank is obligated to agree to any waiver or
amendment requested by the Borrower. The Bank may impose additional
requirements as a condition to any waiver or amendment.
3.2 Reimbursement Costs.
(a) The Borrower agrees to reimburse the Bank for any expenses it incurs in the
preparation of this Agreement and any agreement or instrument required by
this Agreement. Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of the Bank's in-house
counsel.
(b) The Borrower agrees to reimburse the Bank for the cost of periodic audits
and appraisals of the personal property collateral securing this Agreement,
at such intervals as the Bank may reasonably require. The audits and
appraisals may be performed by employees of the Bank or by independent
appraisers.
4. COLLATERAL
4.1 Personal Property. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower. In addition, all personal property
collateral securing this Agreement shall also secure all other present and
future obligations of the Borrower to the Bank (excluding any consumer credit
covered by the federal Truth in Lending law, unless the Borrower has otherwise
agreed in writing). All personal property collateral securing any other present
or future obligations of the Borrower to the Bank shall also secure this
Agreement.
(a) Inventory.
(b) Receivables.
4.2 Personal Property Supporting Guaranty. The obligations of the guarantor,
Hukk Engineering, Inc., to the Bank will be secured by personal property the
guarantor now owns or will own in the future as listed below. The collateral is
further defined in security agreement(s) executed by the guarantor.
(a} Inventory.
(b) Receivables.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates and telefax
requests for the issuance of letters of credit given, or purported to be
given, by any one of the Individuals authorized to sign loan agreements on
behalf of the Borrower, or any other individual designated by any one of
such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 14871-03852, or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower.
(c) The Borrower will indemnify and hold the Bank harmless from all liability,
loss, and costs in connection with any act resulting from telephone or
telefax instructions the Bank reasonably believes are made by any
individual authorized
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by the Borrower to give such instructions. This paragraph will survive this
Agreement's termination, and will benefit the Bank and its officers,
employees, and agents.
5.2 Direct Debit (Pre-Billing). The Borrower agrees that the Bank will debit
the Borrower's deposit account number 14871-03852, or such other of the
Borrower's accounts with the Bank as designated in writing by the Borrower (the
"Designated Account") on the date each payment of principal and interest and any
fees from the Borrower becomes due (the "Due Date"). Approximately 10 days prior
to each Due Date, the Bank will mail to the Borrower a statement of the amounts
that are expected to be due on that Due Date, based on current information (the
"Billed Amount"). The Bank will debit the Designated Account for the Billed
Amount, regardless of the actual amount due on that date (the "Accrued Amount").
If the Billed Amount debited to the Designated Account differs from the Accrued
Amount, the discrepancy will be added or subtracted from the amount due on the
next due date. Regardless of any such discrepancy, interest will continue to
accrue based on the actual amount of principal outstanding without compounding.
The Bank will not pay the Borrower interest on any overpayment. If there are
insufficient funds in the Designated Account on the date the Bank enters any
debit authorized by this Agreement, the debit will be reversed.
5.3 Banking Days. Unless otherwise provided in this Agreement, a banking-day is
a day other than a Saturday or a Sunday on which the Bank is open for business
in California. All payments and disbursements which would be due on a day which
is not a banking day will be due on the next banking day. All payments received
on a day which is not a banking day will be applied to the credit on the next
banking day.
5.4 Additional Costs. The Borrower will pay the Bank, on demand, for the Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments for
credit.
5.5 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used. Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.
5.6 Default Rate. Upon the occurrence of any default under this Agreement,
principal amounts outstanding under this Agreement will at the option of the
Bank bear interest at a rate which is 2 percentage point(s) higher than the rate
of interest otherwise provided under this Agreement. This will not constitute a
waiver of any default.
5.7 Interest Compounding. At the Bank's sole option in each instance, any
interest, fees or costs which are not paid when due under this Agreement shall
bear interest from the due date at the Bank's Prime Rate plus 2 percentage
points. This may result in compounding of interest.
6. CONDITIONS
The Bank must receive any documents and other items it may reasonably require,
including but not limited to the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower under
this Agreement.
6.1 Authorizations. Evidence that the execution, delivery and performance by
the Borrower and each guarantor of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
6.2 Governing Documents. A copy of the Borrower's articles of incorporation.
6.3 Security Agreements. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.
6.4 Evidence of Priority. Evidence that security interests and liens in favor
of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing.
6.5 Guaranty. A guaranty signed by Hukk Engineering, Inc. in the amount of
Three Million Dollars ($3,000,000).
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7. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation:
7.1 Organization of Borrower. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
7.2 Authorization. This Agreement has been duly authorized and is enforceable
without conflict with any laws or any other obligation of the Borrower.
7.3 Good Standing. in each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
7.4 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.
7.5 Permits, Franchises. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.
7.6 Location of Borrower. The Borrower's place of business (or, if the Borrower
has more than one place of business, its chief executive office) is located at
the address listed under the Borrower's signature on this Agreement.
7.7 Year 2000 Compliance. The Borrower has developed and budgeted for a
comprehensive program to address the "year 2000 problem" (that Is, the inability
of computers, as well as embedded microchips in non-computing devices, to
properly perform date-sensitive functions with respect to certain dates prior to
and after December 31, 1999). The Borrower has implemented that program
substantially in accordance with its timetable and budget and reasonably
anticipates that it will substantially avoid the year 2000 problem as to all
computers, as well as embedded microchips in non-computing devices, that are
material to the Borrower's business, properties or operations. The Borrower has
developed adequate contingency plans to ensure uninterrupted and unimpaired
business operation in the event of a failure of its own or a third party's
systems or equipment due to the year 2000 problem, including those of vendors,
customers, and suppliers, as well as a general failure of or interruption in its
communications and delivery infrastructure.
8. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1 Use of Proceeds. To use the proceeds of the credit only for financing short
term operation needs and business acquisitions.
8.2 Financial Information. To provide the following financial information and
statements in form and content acceptable to the Bank, and such additional
information as requested by the Bank from time to time:
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited (with an
unqualified opinion) by a Certified Public Accountant ("CPA") acceptable to
the Bank. The statements shall be prepared on a consolidated basis.
(b) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements may be Borrower preapred.
(c) Within 45 days of the period's end, the Borrower's quarterly financial
statements. These financial statements may be Borrower prepared. The
statements shall be prepared on a consolidated basis.
(d) Within the period(s) provided in (c) above, a compliance certificate of the
Borrower signed by an authorized financial officer of the Borrower setting
forth (i) the information and computations (in sufficient detail) to
establish that the Borrower is in compliance with all financial covenants
at the end of the period covered by the financial statements then being
furnished and (ii) whether there existed as of the date of such financial
statements and whether there exists as of the date of the certificate, any
default under this Agreement and, if any such default exists, specifying
the nature thereof and the action the Borrower is taking and proposes to
take with respect thereto.
(e) Within 120 days of Hukk Engineering Inc.'s fiscal year end, Hukk
Engineering, Inc.'s annual financial statements. These financial statements
may be company prepared.
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(f) Within 45 days of the period's end. Hukk Engineering, Inc.'s quarterly
financial statements. These financial statements may be company prepared.
(g) Within 120 days of the Borrower's fiscal year end, the Borrower's annual
budget, including balance sheet, income statement, and cash flow projected
on a monthly basis, These statements may be Borrower prepared.
8.3 Quick Ratio. To maintain a ratio of quick assets to current liabilities of
at least 1.5:1.0.
"Quick assets" means cash plus non-foreign accounts receivable, short-term cash
investments in non-affiliated entities, net trade receivables and marketable
securities not classified as long-term investments. "Current liabilities" shall
include (a) all obligations classified as current liabilities under generally
accepted accounting principles, plus (b) all principal amounts outstanding under
revolving lines of credit, whether classified as current or long-term, which are
not already included under (a) above.
8.4 Total Liabilities to Tangible Net Worth. To maintain a ratio of total
liabilities to tangible net worth not exceeding 0.75:1.0.
"Total liabilities" means the sum of current liabilities plus long term
liabilities.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, deferred receivables, and other
like intangibles, and monies due from affiliates, officers, directors, employees
or shareholders of the Borrower) less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against assets.
8.5 Profitability. To maintain on a consolidated basis a positive net income
after taxes and extraordinary items for each quarterly accounting period and at
fiscal year end.
8.6 Other Debts. Not to have outstanding or incur any direct or contingent
liabilities (other than those to the Bank), or become liable for the liabilities
of others, without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Liabilities and lines of credit in existence on the date of this Agreement
disclosed in writing to the Bank.
(e) Additional debts which do not exceed a total principal amount of One
Million Dollars ($1,000,000) outstanding at any one time.
8.7 Other Liens. Not to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to the
Bank.
(d) Additional liens which secure obligations in a total principal amount not
exceeding One Million Dollars ($1,000,000).
8.8 Capital Expenditures. Not to spend or incur obligations (including the
total amount of any capital leases) for more than Three Million Dollars
($3,000,000) in any single fiscal year to acquire fixed assets.
8.9 Dividends. Not to declare or pay any dividends on any of its shares, and
not to purchase, redeem or otherwise acquire for value any of its shares, or
create any sinking fund in relation thereto, except:
(a) dividends payable in its capital stock;
(b) from earnings available for dividends and earned during the immediately
preceding fiscal year, and in any event, not in excess of Seven Hundred
Fifty Thousand Dollars ($750,000) in any one fiscal year.
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8.10 Change of Ownership. Not to cause, permit, or suffer any change, direct or
indirect, in the Borrower's capital ownership.
8.11 Paydown Period. To reduce the amount of advances outstanding under this
Agreement to[ zero] for a period of at least 30 consecutive days in each line-
year. "Line-year" means the period between the date of this Agreement and
October 1, 2000, and each subsequent one-year period (if any). For the purposes
of this paragraph, "advances" does not include undrawn amounts of outstanding
letters of credit.
8.12 Stock Purchase, Redemption. Not to purchase, redeem or otherwise acquire
for value any of its shares, or create any sinking fund in relation thereto,
except an amount in any fiscal year not to exceed 20% of the Borrower's net
income for the previous fiscal year.
8.13 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over Two Hundred Fifty Thousand Dollars ($250,000) against the
Borrower (or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor) and any
government authority.
(c) any event of default under this Agreement, or any event which, with notice
or lapse of time or both, would constitute an event of default.
(d) any material adverse change in the Borrower's (or any guarantor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.
(e) any change in the Borrower's name, legal structure, place of business, or
chief executive office if the Borrower has more than one place of business.
(f) any actual contingent liabilities of the Borrower (or any guarantor), and
any such contingent liabilities which are reasonably foreseeable.
8.14 Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records. The Bank has no duty to inspect the Borrower's
properties or to examine, audit, or copy books and records and the Bank shall
not incur any obligation or liability by reason of not making any such
inspection or inquiry. In the event that the Bank inspects the Borrower's
properties or examines, audits, or copies books and records, the Bank will be
acting solely for the purposes of protecting the Bank's security and preserving
the Bank's rights under this Agreement. Neither the Borrower nor any other party
is entitled to rely on any inspection or other inquiry by the Bank. The Bank
owes no duty of care to protect the Borrower or any other party against, or to
inform the Borrower or any other party of, any adverse condition that may be
observed as affecting the Borrower's properties or premises, or the Borrower's
business. In the event that the Bank has a duty or obligation under applicable
laws, regulations or legal requirements to disclose any report or findings made
as a result of, or in connection with, any site visit, observation or testing by
the Bank, the Bank may make such a disclosure to the Borrower or any other
party.
8.15 Compliance with Laws. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.
8.16 Perfection of Liens. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.
8.17 Insurance.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to
the Bank and must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance as is usual for the
business it is in.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank
a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
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8.18 Additional Negative Covenants. Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a
limited liability company.
(d) sell, assign, lease, transfer or otherwise dispose of any assets for less
than fair market value, or enter into any agreement to do so.
(e) sell, assign, lease, transfer or otherwise dispose of all or a substantial
part of the Borrower's business or the Borrower's assets except in the
ordinary course of the Borrower's business.
(f) enter into any sale and leaseback agreement covering any of its fixed
assets.
(g) acquire or purchase a business or its assets for a consideration, including
assumption of direct or contingent debt, in excess of One Million Five
Hundred Thousand Dollars ($1,500,000) in the aggregate.
8.19 Bank as Principal Depository. To maintain the Bank as its principal
depository bank, including for the maintenance of business, cash management,
operating and administrative deposit accounts.
9. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. "Hazardous substances" means any substance,
material or waste that is or becomes designated or regulated as "toxic,"
"hazardous," "pollutant," or "contaminant" or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including without limitation petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.
10. DEFAULT
If any of the following events occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
10.1 Failure to Pay. The Borrower fails to make a payment under this Agreement
when due.
10.2 Lien Priority. The Bank fails to have an enforceable first lien (except
for any prior liens to which the Bank has consented in writing) on or security
interest in any property given as security for this Agreement (or any guaranty).
10.3 False Information. The Borrower (or any guarantor) has given the Bank
false or misleading information or representations.
10.4 Bankruptcy. The Borrower (or any guarantor) files a bankruptcy petition, a
bankruptcy petition is filed against the Borrower (or any guarantor) or the
Borrower (or any guarantor) makes a general assignment for the benefit of
creditors.
10.5 Receivers. A receiver or similar official is appointed for the Borrower's
(or any guarantor's) business, or the business is terminated.
10.6 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade
creditors against the Borrower (or any guarantor) in an aggregate amount of Two
Hundred Fifty Thousand Dollars ($250,000) or more in excess of any insurance
coverage.
10.7 Judgments. Any judgments or arbitration awards are entered against the
Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) or more in
excess of any insurance coverage.
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10.8 Government Action. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.
10.9 Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in the Borrower's (or any guarantor's) business
condition (financial or otherwise), operations, properties or prospects, or
ability to repay the credit.
10.10 Cross-default. Any default occurs under any agreement in connection with
any credit the Borrower (or any guarantor) or any of the Borrower's related
entities or affiliates has obtained from anyone else or which the Borrower (or
any guarantor) or any of the Borrower's related entities or affiliates has
guaranteed.
10.11 Default under Related Documents. Any guaranty, subordination agreement,
security agreement, deed of trust, or other document required by this Agreement
is violated or no longer in effect.
10.12 Other Bank Agreements. The Borrower (or any guarantor) fails to meet the
conditions of, or fails to perform any obligation under any other agreement the
Borrower (or any guarantor) has with the Bank or any affiliate of the Bank.
10.13 Other Breach Under Agreement. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article. This includes any failure or
anticipated failure by the Borrower to comply with any financial covenants set
forth in this Agreement, whether such failure is evidenced by financial
statements delivered to the Bank or is otherwise known to the Borrower or the
Bank.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
11.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.
11.2 California Law. This Agreement is governed by California law.
11.3 Successors and Assigns. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.
11 4 Arbitration.
11.5 Severability; Waivers. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. !f the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
11.6 Attorneys' Fees. The Borrower shall reimburse the Bank for any reasonable
costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. In the event that any case is commenced by or against the
Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar
or successor statute, the Bank is entitled to recover costs and reasonable
attorneys' fees incurred by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case. As used in this paragraph,
"attorneys' fees" includes the allocated costs of the Bank's in-house counsel.
11.7 One Agreement This Agreement and any related security or other agreements
required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank and
the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
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In the event of any conflict between this Agreement and any other agreements
required by this Agreement. this Agreement will prevail.
11.8 Indemnification. The Borrower will indemnify and hold the Bank harmless
from any loss, liability, damages, judgments, and costs of any kind relating to
or arising directly or indirectly out of (a) this Agreement or any document
required hereunder, (b) any credit extended or committed by the Bank to the
Borrower hereunder, and (c) any litigation or proceeding related to or arising
out of this Agreement, any such document, or any such credit. This indemnity
includes but is not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries
and all of their directors, officers, employees, agents, successors, attorneys,
and assigns. This indemnity will survive repayment of the Borrower's obligations
to the Bank. All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.
11.9 Prior Agreement Superseded. This Agreement supersedes the Business Loan
Agreement entered into as of July 24, 1998 between the Bank and the Borrower,
and any credit outstanding thereunder shall be deemed to be outstanding under
this Agreement.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America, N.A., Sunrise telecom, Inc.
X /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ X /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------- ------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President By: ▇▇▇▇ ▇▇▇▇▇, President/Chief
Executive Officer
X /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Address where notices to the Bank are to ------------------------------
be sent: By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Treasurer
San ▇▇▇▇ Commercial Banking Office #01487 Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ 22 Great Oaks
San Jose, CA 95113 ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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QSLA (01/98) -10- 100699-1Q-RTIRITIL
[LOGO] Bank of America
================================================================================
To: Continuing Guaranty
Borrowers: Sunrise Telecom, Inc.
Bank of America, N.A.
Guarantors: Hukk Engineering, Inc.
(1) For valuable consideration, the undersigned ("Guarantors") jointly and
severally unconditionally guarantee and promise to pay to Bank of America, N.A.
("Bank"), or order, on demand, in lawful money of the United States, any and all
indebtedness of Sunrise Telecom, Inc. ("Borrowers") to Bank. The word
"indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations, and liabilities of Borrowers or any one or
more of them to Bank, heretofore, now, or hereafter made, incurred or created,
whether voluntary or involuntary and however arising, whether direct or acquired
by Bank by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrowers may be liable individually or jointly with others, or whether recovery
upon such indebtedness may be or hereafter become barred by any statute of
limitations, or whether such indebtedness may be or hereafter become otherwise
unenforceable.
(2) The liability of Guarantors under this Guaranty (exclusive of liability
under any other guaranties executed by Guarantors) shall not exceed at any one
time the total of (a) Three Million and 00/100 Dollars ($3,000,000.00), for the
principal amount of the indebtedness and (b) all interest, fees, and other costs
and expenses relating to or arising out of the indebtedness or such part of the
indebtedness as shall not exceed the foregoing limitation. It is provided,
however, that the amount guaranteed under this Guaranty shall not exceed the
Maximum Guaranteed Amount. "Maximum Guaranteed Amount" means the greater of: (x)
the "reasonably equivalent value" received by Guarantors in exchange for or in
connection with Guarantors' execution of this Guaranty; or (y) ninety percent
(90%) of the excess of (i) a "fair valuation" of the amount of the assets of
Guarantors as of the applicable date of determination of the incurrence of
Guarantors' obligations under this Guaranty over (ii) a "fair valuation" of
Guarantors' debts as of such date. For purposes of the definition of "Maximum
Guaranteed Amount", "reasonably equivalent value", "fair valuation" and the
calculation of assets and other property and debts shall be determined in
accordance with applicable federal and California state laws governing the
determination of the insolvency of a debtor and to further the intent of the
parties not to render Guarantors insolvent or to leave Guarantors with an
unreasonably small amount of capital in relation to their business, in all cases
at the applicable date for determination of the incurrence of Guarantors'
obligations under this Guaranty. Bank may permit the indebtedness to exceed
Guarantors' liability, and may apply any amounts received from any source, other
than from Guarantors, to the unguaranteed portion of the indebtedness. This is a
continuing guaranty relating to any indebtedness, including that arising under
successive transactions which shall either continue the indebtedness or from
time to time renew it after it has been satisfied. Any payment by Guarantors
shall not reduce their maximum obligation hereunder, unless written notice to
that effect be actually received by Bank at or prior to the time of such
payment.
(3) If any Borrower is a partnership and any Guarantor is a general partner
of that partnership, then such Guarantor shall not be liable under this Guaranty
for any indebtedness of such Borrower which is secured by real property;
provided, however, that such Guarantor shall remain liable under partnership law
for all the indebtedness of such Borrower.
(4) The obligations hereunder are joint and several, and independent of the
obligations of Borrowers, and a separate action or actions may be brought and
prosecuted against Guarantors whether action is brought against Borrowers or
whether Borrowers be joined in any such action or actions; and Guarantors waive
the benefit of any statute of limitations affecting their liability hereunder.
(5) Guarantors authorize Bank, without notice or demand and without
affecting their liability hereunder, from time to time, either before or after
revocation hereof, to (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; (b) receive and hold security for the payment of this Guaranty
or any of the indebtedness, and exchange, enforce, waive, release, fail to
perfect, sell, or otherwise dispose of any such security; (c) apply such
security and direct the order or manner of sale thereof as Bank in its
discretion may determine; and (d) release or substitute any one or more of the
endorsers or guarantors.
(6) Guarantors waive any right to require Bank to (a) proceed against
Borrowers; (b) proceed against or exhaust any security held from Borrowers; or
(c) pursue any other remedy in Bank's power whatsoever. Guarantors waive any
defense arising by reason of any disability or other defense of Borrowers, or
the cessation from any cause whatsoever of the liability of Borrowers, or any
claim that Guarantors' obligations exceed or are more burdensome than those of
Borrowers. Until the indebtedness shall have been paid in full, even though the
indebtedness is in excess of Guarantors' liability hereunder, Guarantors waive
any right of subrogation, reimbursement, indemnification, and contribution
(contractual, statutory, or otherwise) including, without limitation, any claim
or right of subrogation under the Bankruptcy Code (Title 11, United States Code)
or any successor statute, arising from the existence or performance of this
Guaranty and Guarantors waive any right to enforce any remedy which Bank now has
or may hereafter have against Borrowers and waive any benefit of, and any right
to participate in, any security now or hereafter held by Bank. Guarantors waive
all presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
Indebtedness.
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N-121 M (03/97) -1- 100699-5-RTIRITIL
(7) (a) Guarantors understand and acknowledge that if Bank forecloses,
either by judicial foreclosure or by exercise of power of sale, any deed of
trust securing the indebtedness, that foreclosure could impair or destroy any
ability that Guarantors may have to seek reimbursement, contribution, or
indemnification from Borrowers or others based on any right Guarantors may have
of subrogation, reimbursement, contribution, or indemnification for any amounts
paid by Guarantors under this Guaranty. Guarantors further understand and
acknowledge that in the absence of this paragraph, such potential impairment or
destruction of Guarantors' rights, if any, may entitle Guarantors to assert a
defense to this Guaranty based on Section 580d of the California Code of Civil
Procedure as interpreted in Union Bank ▇. ▇▇▇▇▇▇▇, 265 Cal. App. 2d. 40 (1968).
---------------------
By executing this Guaranty, Guarantors freely, irrevocably, and unconditionally:
(i) waive and relinquish that defense and agree that Guarantors will be fully
liable under this Guaranty even though Bank may foreclose, either by judicial
foreclosure or by exercise of power of sale, any deed of trust securing the
indebtedness; (ii) agree that Guarantors will not assert that defense in any
action or proceeding which Bank may commence to enforce this Guaranty; (iii)
acknowledge and agree that the rights and defenses waived by Guarantors in this
Guaranty include any right or defense that Guarantors may have or be entitled to
assert based upon or arising out of any one or more of Sections 580a, 580b,
580d, or 726 of the California Code of Civil Procedure or Section 2848 of the
California Civil Code; and (iv) acknowledge and agree that Bank is relying on
this Waiver in creating the indebtedness, and that this waiver is a material
part of the consideration which Bank is receiving for creating the indebtedness.
(b) Guarantors waive any rights and defenses that are or may become
available to Guarantors by reason of Sections 2787 to 2855, inclusive, of the
California Civil Code.
(c) Guarantors waive all rights and defenses that Guarantors may have
because any of the indebtedness is secured by real property. This means, among
other things: (I) Bank may collect from Guarantors without first foreclosing on
any real or personal property collateral pledged by Borrowers; and (ii) if Bank
forecloses on any real property collateral pledged by Borrowers: (1) the amount
of the indebtedness may be reduced only by the price for which that collateral
is sold at the foreclosure sale, even if the collateral is worth more than the
sale price, and (2) Bank may collect from Guarantors even if Bank, by
foreclosing on the real property collateral, has destroyed any right Guarantors
may have to collect from Borrowers. This is an unconditional and irrevocable
waiver of any rights and defenses Guarantors may have because any of the
indebtedness is secured by real property. These rights and defenses include, but
are not limited to, any rights or defenses based upon Section 580a, 580b, 580d,
or 726 of the California Code of Civil Procedure.
(d) Guarantors waive any right or defense they may have at law or
equity, including California Code of Civil Procedure Section 580a, to a fair
market value hearing or action to determine a deficiency judgment after a
foreclosure.
(e) No provision or waiver in this Guaranty shall be construed as
limiting the generality of any other waiver contained in this Guaranty.
(8) Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Borrowers such information concerning
Borrowers' financial conditions or business operations as Guarantors may
require, and that Bank has no duty at any time to disclose to Guarantors any
information relating to the business operations or financial conditions of
Borrowers.
(9) To secure all of Guarantors' obligations hereunder, Guarantors assign
and grant to Bank a security interest in all moneys, securities, and other
property of Guarantors now or hereafter in the possession of Bank, all deposit
accounts of Guarantors maintained with Bank, and all proceeds thereof. Upon
default or breach of any of Guarantors' obligations to Bank, Bank may apply any
deposit account to reduce the indebtedness and may foreclose any collateral as
provided in the Uniform Commercial Code and in any security agreements between
Bank and Guarantors.
(10) Any obligations of Borrowers to Guarantors, now or hereafter existing,
including but not limited to any obligations to Guarantors as subrogees of Bank
or resulting from Guarantors' performance under this Guaranty, are hereby
subordinated to the indebtedness. Such obligations of Borrowers to Guarantors if
Bank so requests shall be enforced and performance received by Guarantors as
trustees for Bank, and the proceeds thereof shall be paid over to Bank on
account of the indebtedness, but without reducing or affecting in any manner the
liability of Guarantors under the provisions of this Guaranty.
(11) This Guaranty may be revoked at any time by Guarantors in respect to
future transactions, unless there is a continuing consideration as to such
transactions which Guarantors do not renounce. Such revocation shall be
effective upon actual receipt by Bank, at the address shown below or at such
other address as may have been provided to Guarantors by Bank, of written notice
of revocation. Revocation shall not affect any of Guarantors' obligations or
Bank's rights with respect to transactions which precede Bank's receipt of such
notice, regardless of whether or not the indebtedness related to such
transactions, before or after revocation, has been renewed, compromised,
extended, accelerated, or otherwise changed as to any of its terms, including
time for payment or increase or decrease of the rate of interest thereon, and
regardless of any other act or omission of Bank authorized hereunder. Revocation
by any one or more of Guarantors shall not affect any obligations of any
nonrevoking Guarantors. If this Guaranty is revoked, returned, or canceled, and
subsequently any payment or transfer of any interest in property by Borrowers to
Bank is rescinded or
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N-121 M (03/97) -2- 100699-5-RTIRITIL
must be returned by Bank to Borrowers, this Guaranty shall be reinstated with
respect to any such payment or transfer, regardless of any such prior
revocation, return, or cancellation.
(12) Where any one or more of Borrowers are corporations, partnerships, or
limited liability companies, it is not necessary for Bank to inquire into the
powers of Borrowers or of the officers, directors, partners, members, managers,
or agents acting or purporting to act on their behalf, and any indebtedness made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
(13) (a) Guarantors, authorize Bank to verify or check any information
given by Guarantors to Bank, check Guarantors' credit references, verify
employment, and obtain credit reports.
(b) Guarantors authorize Bank to disclose to any of Bank's affiliates
any information given by Guarantors to Bank in connection with Bank's extension
of credit to Borrowers provided that (i) such information will be used by such
affiliate only in connection with evaluating Borrowers' request or application
for a product or service offered by such affiliate and (ii) Guarantors may at
any time revoke this authorization. Such revocation shall be effective upon
actual receipt by Bank, at the address shown below or at such other address as
may have been provided to Guarantors by Bank, of written notice of such
revocation.
(c) Guarantors acknowledge and agree that the authorizations provided
in subparagraphs (a) and (b) of-this paragraph apply to any individual general
partners of any Guarantor and to any Guarantor's spouse and any such general
partner's spouse if such Guarantor or such general partner is married and lives
in a community property state.
(14) Bank may, without notice to Guarantors and without affecting
Guarantors' obligations hereunder, assign the indebtedness and this Guaranty, in
whole or in part. Guarantors agree that Bank may disclose to any assignee or
purchaser, or any prospective assignee or purchaser, of all or part of the
indebtedness any and all information in Bank's possession concerning Guarantors,
this Guaranty, and any security for this Guaranty,
(15) Guarantors agree to pay all reasonable attorneys' fees, including
allocated costs of Bank's in-house counsel, and all other costs and expenses
which may be incurred by Bank (a) in the enforcement of this Guaranty or (b) in
the preservation, protection, or enforcement of any rights of Bank in any case
commenced by or against Guarantors under the Bankruptcy Code (Title 11, United
States Code) or any similar or successor statute.
(16) Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall be deemed
to have been used in the singular where the context and construction so require;
and when there is more than one Borrower named herein, or when this Guaranty is
executed by more than one Guarantor, the words "Borrowers" and "Guarantors"
respectively shall mean all and any one or more of them.
(17) This Guaranty shall be governed by and construed according to the laws
of the State of California, to the jurisdiction of which the parties hereto
submit.
(18) (a) Any controversy or claim between or among the parties, including
but not limited to those arising out of or relating to this Guaranty or any
agreements or instruments relating hereto or delivered in connection herewith
and any claim based on or arising from an alleged tort, shall at the request of
any party be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Guaranty, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrators shall give effect to statutes of limitation in determining any
claim, except as expressly waived hereunder by Guarantors. Any controversy
concerning whether an issue is arbitrable shall be determined by the
arbitrators. Judgment upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.
(b) Notwithstanding the provisions of subparagraph (a), no controversy
or claim shall be submitted to arbitration without the consent of all parties
if, at the time of the proposed submission, such controversy or claim arises
from or relates to an obligation to Bank which is secured by real property
collateral located in California. If all parties do not consent to submission of
such a controversy or claim to arbitration, the controversy or claim shall be
determined as provided in subparagraph (c).
(c) A controversy or claim which is not submitted to arbitration as
provided and limited in subparagraphs (a) and (b) shall, at the request of any
party, be determined by a reference in accordance with California Code of Civil
Procedure Section 638 et seq. If such an election is made, the parties shall
------
designate to the court a referee or referees selected under the auspices of the
AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings.
The presiding referee of the panel, or the referee if there is a single referee,
shall be an active attorney or retired judge. Judgment upon the award rendered
by such referee or referees shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure
Sections 644 and 645.
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(d) No provision of this paragraph shall limit the right of any party
to this Guaranty to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or to
obtain provisional or ancillary remedies from a court of competent jurisdiction
before, after, or during the pendency of any arbitration or other proceeding.
The exercise of a remedy does not waive the right of either party to resort to
arbitration or reference. At Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under the deed
of trust or mortgage or by judicial foreclosure.
Date: 11/9 , 1999
---------------- ----
Witnessed: Hukk Engineering Inc.
X /s/ ????? X /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------ --------------------------------------
Witness By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Secretary Treasurer
X
------------------------------- --------------------------------------
Address By:
X
------------------------------ ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-------------------------------
Address
Address for Notices:
Bank of America, N.A.
San ▇▇▇▇ Commercial Banking Office #01487
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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N-121 M (03/97) -4- 100699-5-RTIRITIL
[LOGO] Bank of America
================================================================================
Security Agreement (Receivables and Inventory)
1. THE SECURITY.
The undersigned Hukk Engineering, Inc. ("Borrower") hereby assigns and grants to
Bank of America, N.A. ("Bank") a security interest in the following described
property ("Collateral"):
A. All of the following, whether now owned or hereafter acquired by
Borrower: accounts, contract rights, chattel paper, instruments,
deposit accounts, and general intangibles.
B. All inventory now owned or hereafter acquired by Borrower.
C. All negotiable and nonnegotiable documents of title now owned or
hereafter acquired by Borrower.
D. All rights under contracts of insurance now owned or hereafter
acquired by Borrower covering any of the above-described property.
E. All proceeds, product, rents and profits now owned or hereafter
acquired by Borrower of any of the above-described property.
F. All books and records now owned or hereafter acquired by Borrower
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory ("Books and Records").
2. THE INDEBTEDNESS.
The collateral secures and will secure all Indebtedness of Borrower to Bank. For
the purposes of this Agreement, "Indebtedness" means all loans and advances made
by Bank to Borrower and all other obligations and liabilities of Borrower to
Bank, whether now existing or hereafter incurred or created, whether voluntary
or involuntary, whether due or not due, whether absolute or contingent, or
whether incurred directly or acquired by Bank by assignment or otherwise. Unless
Borrower shall have otherwise agreed in writing, Indebtedness, for the purposes
of this Agreement, shall not include "consumer credit" subject to the disclosure
requirements of the Federal Truth in Lending Act or any regulations promulgated
thereunder.
3. BORROWER'S COVENANTS.
Borrower covenants and warrants that unless compliance is waived by Bank in
writing:
A. Borrower will properly preserve the Collateral; defend the Collateral
against any adverse claims and demands; and keep accurate Books and
Records.
B. Borrower has notified Bank in writing of, and will notify Bank in
writing prior to any change in the locations of (i) Borrower's place of
business or Borrower's chief executive office if Borrower has more than
one place of business and (ii) any Collateral, including the Books and
Records.
C. Borrower will notify Bank in writing prior to any change in Borrower's
name, identity or business structure.
D. Borrower will maintain and keep in force insurance covering Collateral
designated by Bank against fire and extended coverages. Such insurance
shall require losses to be paid on a replacement cost basis, be issued
by insurance companies acceptable to Bank and include a loss payable
endorsement in favor of Bank in a form acceptable to Bank.
E. Borrower has not granted and will not grant any security interest in any
of the Collateral except to Bank, and will keep the Collateral free of
all liens, claims, security interests and encumbrances of any kind or
nature, except the security interest of Bank.
F. Borrower will not sell, lease, agree to sell or lease, or otherwise
dispose of, or remove from Borrower's place of business (i) any
inventory except in the ordinary course of business as heretofore
conducted by Borrower, or (ii) any other Collateral except with the
prior written consent of Bank.
G. Borrower will promptly notify Bank in writing of any event which affects
the value of any Collateral, the ability of Borrower or Bank to dispose
of any Collateral, or the rights and remedies of Bank in relation
thereto, including but not limited to, the levy of any legal process
against any Collateral and the adoption of any marketing order,
arrangement or procedure affecting the Collateral, whether governmental
or otherwise.
H. If any Collateral is or becomes the subject of any negotiable document
of title including any warehouse receipt or ▇▇▇▇ of lading, Borrower
shall immediately deliver such document to Bank.
I. Until Bank exercises its rights to make collection, Borrower will
diligently collect all Collateral.
4. ADDITIONAL OPTIONAL REQUIREMENTS.
Borrower agrees that Bank may at its option at any time, whether or not Borrower
is in default:
A. Require Borrower to segregate all collections and proceeds of the
Collateral so that they are capable of identification and deliver daily
such collections and proceeds to Bank in kind.
B. Require Borrower to deliver to Bank (i) copies of or extracts from the
Books and Records, and (ii) information on any contracts or other
matters affecting the Collateral.
C. Examine the Collateral, including the Books and Records, and make copies
of or extracts from the Books and Records, and for such purposes enter
at any reasonable time upon the property where any Collateral or any
Books and Records are located.
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D. Require Borrower to deliver to Bank any instruments or chattel paper.
E. Require Borrower to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory.
F. Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
G. Require Borrower to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
H. Demand and collect any payments and proceeds of the Collateral. In
connection therewith Borrower irrevocably authorizes Bank to endorse or
sign Borrower's name on all checks, drafts, collections, receipts and
other documents, and to take possession of and open the mail addressed
to Borrower and remove therefrom any payments and proceeds of the
Collateral.
5. DEFAULTS.
Any one or more of the following shall be a default hereunder:
A. Borrower fails to pay any indebtedness when due.
B. Borrower breaches any term, provision, warranty or representation under
this Agreement or under any other obligation of Borrower to Bank.
C. Any custodian, receiver or trustee is appointed to take possession,
custody or control of all or a substantial portion of the property of
Borrower or of any guarantor of any indebtedness.
D. Borrower or any guarantor of any indebtedness becomes insolvent, or is
generally not paying or admits in writing its inability to pay its debts
as they become due, fails in business, makes a general assignment for
the benefit of creditors, dies or commences any case, proceeding or
other action under any bankruptcy or other law for the relief of, or
relating to, debtors.
E. Any case, proceeding or other action is commenced against Borrower or
any guarantor of any indebtedness under any bankruptcy or other law for
the relief of, or relating to, debtors.
F. Any involuntary lien of any kind or character attaches to any
Collateral.
G. Any financial statements, certificates, schedules or other information
now or hereafter furnished by Borrower to Bank proves false or incorrect
in any material respect.
6. BANK'S REMEDIES AFTER DEFAULT.
In the event of any default Bank may do any one or more of the following:
A. Declare any indebtedness immediately due and payable, without notice or
demand.
B. Enforce the security interest given hereunder pursuant to the Uniform
Commercial Cede and any other applicable law.
C. Enforce the security interest of Bank in any deposit account of Borrower
maintained with Bank by applying such account to the Indebtedness.
D. Require Borrower to assemble the Collateral, including the Books and
Records, and make them available to Bank at a place designated by Bank.
E. Enter upon the property where any Collateral, including any Books and
Records are located and take possession of such Collateral and such
Books and Records, and use such property (including any buildings and
facilities) and any of Borrower's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease, market for sale or lease,
sell or [ease, or otherwise dispose of, any Collateral.
▇. ▇▇▇▇▇ extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Borrower.
G. Use or transfer any of Borrower's rights and interest in any
Intellectual Property now owned or hereafter acquired by Borrower, if
Bank deems such use or transfer necessary or advisable in order to take
possession of, hold, preserve, process, assemble, prepare for sale or
lease, market for sale or lease, sell or lease, or otherwise dispose of,
any Collateral. Borrower agrees that any such use or transfer shall be
without any additional consideration to Borrower. As used in this
paragraph, "Intellectual Property" includes, but is not limited to, all
trade secrets, computer software, service marks, trademarks, trade
names, trade styles, copyrights, patents, applications for any of the
foregoing, customer lists, working drawings, instructional manuals, and
rights in processes for technical manufacturing, packaging and labelling
in which Borrower has any right or interest, whether by ownership,
license, contract or otherwise.
H. Have a receiver appointed by any court of competent jurisdiction to take
possession of the Collateral.
I. Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Borrower hereby irrevocably constitutes
and appoints Bank as Borrower's attorney-in-fact to perform all acts and
execute all documents in connection therewith.
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7. MISCELLANEOUS.
A. Any waiver, expressed or implied, of any provision hereunder and any
delay or failure by Bank to enforce any provision shall not preclude
Bank from enforcing any such provision thereafter,
B. Borrower shall, at the request of Bank, execute such other agreements,
documents, instruments, or financing statements in connection with
this Agreement as Bank may reasonably deem necessary.
C. All notes, security agreements, subordination agreements and other
documents executed by Borrower or furnished to Bank in connection with
this Agreement must be in form and substance satisfactory to Bank.
D. This Agreement shall be governed by and construed according to the
laws of the State of California, to the jurisdiction of which the
parties hereto submit.
E. All rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies otherwise provided by law. Any
single or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other right or
remedy.
F. All terms not defined herein are used as set forth in the Uniform
Commercial Code.
G. In the event of any action by Bank to enforce this Agreement or to
protect the security interest of Bank in the Collateral, or to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, Borrower agrees to pay immediately the
costs and expenses thereof, together with reasonable attorney's fees
and allocated costs for in-house legal services.
H. Any Borrower who is married agrees that such Borrower's separate
property shall be liable for payment of the indebtedness if such
Borrower is personally liable for the indebtedness.
Date: 11/9 , 1999
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Bank of America, N.A. Borrower:
Hukk Engineering, Inc.
X /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ X /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------- ------------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Secretary/
Treasurer
X
------------------------------------
By:
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