Exhibit 10.4
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Comerica
Comerica Bank-California
REVOLVING CREDIT NOTE
$18,000,000.00 June 13, 2002
Palo Alto, California
FOR VALUE RECEIVED, the undersigned, ▇▇▇▇, ▇▇▇▇▇▇ & ASSOCIATES, INC., a
Delaware corporation, ("Borrower"), HEREBY PROMISES TO PAY to the order of
COMERICA BANK-CALIFORNIA (the "Bank") at its Principal Office located at ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as
Bank may from time to time designate in writing, in lawful money of the United
States and in immediately available funds, the principal amount of Eighteen
Million and 00/l00 Dollars ($18,000,000.00) or so much thereof as may be
advanced from time to time, together with interest from the date of disbursement
computed on the principal balances hereof from time to time outstanding as set
forth in the Revolving Loan And Security Agreement dated the date hereof by and
between Bank and Borrower (the "Loan Agreement").
This Revolving Credit Note is the Revolving Credit Note referred to in,
and is entitled to the benefits of, the Loan Agreement. The Loan Agreement,
among other things, contains provisions for acceleration of the maturity of this
Revolving Credit Note upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity of this
Revolving Credit Note upon the terms and conditions specified in the Loan
Agreement. This Revolving Credit Note is also secured by the Loan Agreement,
reference to which is hereby made for a description of the collateral provided
for under the Loan Agreement and the rights of Borrower and Bank in respect to
such collateral. The Loan Agreement is incorporated herein by this reference in
its entirety. Capitalized terms used but not otherwise defined herein are used
in this Revolving Credit Note as defined in the Loan Agreement.
Borrower further promises to pay interest on the unpaid principal amount
hereof outstanding from time to time from the date hereof until payment in full
hereof at the rate (or rates) from time to time applicable to the Advances as
determined in accordance with the Loan Agreement; provided, however, that upon
the occurrence and during the continuance of an Event of Default, Borrower
shall, to the extent provided in the Loan Agreement, pay to Bank interest on the
outstanding principal balance of the Advances and all other Obligations at the
rate of interest applicable upon the occurrence and during the continuance of an
Event of Default as determined in accordance with the Loan Agreement. Interest
shall be calculated on the basis of a three hundred sixty (360)-day year for the
actual days elapsed.
If a payment hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day, and interest shall be payable thereon during such extension at the
rate specified above. Credit shall be given solely for the purpose of
calculating interest earned by Bank for any checks, drafts, or similar items of
payment received by Bank in accordance with the Loan Agreement, and such checks,
drafts or similar items of payment shall not constitute payments of amounts due
hereunder except as expressly provided in the Loan Agreement.
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Borrower hereby waives demand, presentment and protest, and notice of
demand, presentment, protest and nonpayment and (except to the extent expressly
required by the Loan Documents) any other notice or formality to the full extent
permitted by law.
If any payment of principal or interest under this Revolving Credit Note
shall not be made within fifteen (15) calendar days of the date due, a late
charge of three percent (3%) of the overdue amount may be charged by Bank for
the purpose of defraying the expenses incident to handling such delinquent
payments. ▇▇▇▇▇▇▇▇ acknowledges and agrees that it is extremely difficult and
impractical to ascertain the extent of such expenses and that proof of actual
damages would be costly or inconvenient. ▇▇▇▇▇▇▇▇ therefore agrees that such
late charge represents a reasonable sum considering all of the circumstances
existing on the date of this Revolving Credit Note and represents a fair and
reasonable estimate of the costs that will be sustained by Bank due to the
failure of Borrower to make timely payments. Such late charge shall be paid
without prejudice to the right of Bank to collect any other amounts provided to
be paid or to declare a default under this Revolving Credit Note or under the
Loan Agreement or from exercising any of the other rights and remedies of Bank,
including, without limitation, the right to declare the entire balance of
principal and accrued interest then remaining unpaid immediately due and
payable; provided, that the payment of any such charges and expenses under this
Revolving Credit Note shall not be in addition to similar charges contained in
the Loan Documents.
In no event shall interest accrue or be payable hereon in excess of the
maximum applicable amount of interest, if any, permitted on the date hereof by
the laws of the State of California.
If this Revolving Credit Note is not paid when due, whether at its
specified or accelerated maturity date, Borrower promises to pay all costs of
collection and enforcement of this Revolving Credit Note, including, but not
limited to, reasonable attorneys' fees and costs, incurred by Bank hereof on
account of such collection or enforcement, whether or not suit is filed hereon.
Principal and interest shall be payable in lawful money of the United
States without setoff, demand or counterclaim. Borrower waives the defense of
the statute of limitations in any action on this Revolving Credit Note.
Presentment, notice of dishonor, and protest are waived by all makers, sureties,
guarantors and endorsers of this Revolving Credit Note.
Subject to Section 15.11 of the Loan Agreement, Bank may provide any
financial or other information, data or material in Bank's possession relating
to Borrower, the Loan, or this Revolving Credit Note to Bank's parent,
affiliate, subsidiary, participants or service providers, without further notice
to Borrower.
This Revolving Credit Note shall be governed and construed in accordance
with the laws of the State of California.
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Bank shall not be required, and Borrower hereby waives any and all
rights to require Bank, to prosecute or seek to enforce any remedies against
Borrower or any other party liable to Bank on account of the Obligations and/or
to require Bank to seek to enforce or resort to any remedies with respect to any
security interests, liens, or encumbrances granted to Bank by Borrower or any
other party on account of the Obligations.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Revolving Credit Note as of the date and year first above written.
▇▇▇▇, ▇▇▇▇▇▇ & ASSOCIATES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------
Its: CFO
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[LOGO]
Comerica
Comerica Bank-California
REVOLVING LOAN AND SECURITY AGREEMENT
This REVOLVING LOAN AND SECURITY AGREEMENT is entered into as of
June 13, 2002 by and between COMERICA BANK-CALIFORNIA ("Bank"), a California
banking corporation and ▇▇▇▇, ▇▇▇▇▇▇ & ASSOCIATES, INC., a Delaware corporation
("Borrower").
RECITALS
WHEREAS, ▇▇▇▇▇▇▇▇ has requested that Bank enter into certain
financing arrangements with Borrower pursuant to which Bank may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Bank is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Advance" or "Advances" means an Advance under the Revolving
Facility.
"Affiliate" means any Person, including any Person who is a
director, executive, officer, partner or manager of such Person: (a) which
directly or indirectly controls, or is controlled by, or is under common control
with, the Borrower or a Subsidiary; (b) which directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of the Borrower or any Subsidiary; or (c) five percent (5%) or more of the
voting stock of which is directly or indirectly beneficially owned or held by
the Borrower or a Subsidiary. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Revolving Loan and Security Agreement, as
amended, supplemented, or modified from time to time.
"Availability Reserves" shall mean, as of any date of
determination, such amounts as Bank may from time to time establish and revise
in good faith reducing the amount of Advances which would otherwise be available
to Borrower under the lending formula(s)
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150 YEARS
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provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Bank in good faith, do or may affect either (i) the
Collateral or its value, (ii) the assets, business or prospects of Borrower, or
(iii) the security interests and other rights of Bank in the Collateral
(including the enforceability, perfection and priority thereof); or (b) to
reflect Bank's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower to Bank is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Bank determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both, constitute an Event
of Default.
"Bank Expenses" means (a) all costs and expenses (including,
without limitation, taxes and insurance premiums) required to be paid by
Borrower under this Agreement or under any of the other Loan Documents that are
paid or advanced by Bank; (b) filing, recording, publication, and search fees
paid or incurred by Bank in connection with Bank's transactions with Borrower;
(c) costs and expenses incurred by Bank to correct any default or enforce any
provision of the Loan Documents or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, and preparing for sale and/or
advertising to sell the Collateral, whether or not a sale is consummated; (d)
costs and expenses of suit incurred by Bank in enforcing or defending the Loan
Documents or any portion thereof; and (e) Bank's reasonable attorney fees and
expenses incurred (before or after execution of this Agreement) in advising Bank
with respect to, or in structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending, or otherwise concerning, the Loan Documents
or any portion thereof, irrespective of whether suit is brought.
"Base Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "Base Rate," whether or not such announced
rate is the lowest rate available from Bank.
"Base Rate Advance" means any Advance when and to the extent that
the interest rate therefor is determined by a reference to the Base Rate.
"Borrower's Books" means all of ▇▇▇▇▇▇▇▇'s books and records
including ledgers, records indicating, summarizing, or evidencing Borrower's
properties or assets or liabilities, all information relating to Borrower's
business operations or financial condition, and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1.1
hereof.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Cash Flow Coverage Ratio" shall mean the ratio, as of any
applicable period of determination, the numerator of which is Net Income; plus
depreciation; plus amortization; plus (or minus) the increase (or decrease) in
the deferred taxability; minus dividends and, to the extent that and so long as
Borrower is an entity that is not directly subject to Federal income taxation
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with respect to which any earnings are attributable ratably to each Person with
an ownership interest in Borrower, minus any distributions to each such Person
in an amount necessary to pay each such Person's income tax resulting from such
ownership interest, at the greater of actual draws or net income times the
highest prevailing personal tax rate, and the denominator of which is the
current portion of long term debt plus the current portion of Capital Lease
payments for the same period of determination.
"Closing Date" means the date on which each of the conditions set
forth in Section 5.1 are satisfied or waived.
"Collateral" means all of the personal property of Borrower,
wherever located, and now owned or hereafter acquired, including (a) all
accounts; (b) all chattel paper; (c) all inventory; (d) all equipment (e) all
instruments; (f) all investment property; (g) all documents; (h) all deposit
accounts; (i) all letter of credit rights; (j) all general intangibles; (k) all
fixtures; (1) all Intellectual Property Collateral; and (m) any and all claims,
rights and interests in any of the foregoing and all substitutions for,
additions and accessions and all cash and non-cash proceeds of any of the
foregoing, in whatever form (including proceeds in the form of inventory,
equipment or any other form of personal property), including proceeds of
proceeds, insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the foregoing.
"Committed Line" means Eighteen Million and 00/l00 Dollars
($18,000,000.00).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (a) any indebtedness; dividend, surety or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (b) any obligations with respect to undrawn letters of credit
issued for the account of that Person; and (c) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means all copyrights and applications for copyright,
domestic or foreign, together with the underlying works of authorship (including
titles), whether or not the underlying works of authorship have been published
and whether said copyrights are statutory or arise under the common law, and all
other rights and works of authorship, all rights, claims, and demands in any way
relating to any such copyrights or works, including royalties and rights to sue
for past, present, or future infringement, and all rights of renewal and
extension of copyright.
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"Debt" means (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under Capital Leases;
(e) current liabilities in respect of unfunded vested benefits under Plans
covered by ERISA; (f) obligations under letters of credit; (g) obligations under
acceptance facilities; (h) all Contingent Obligations, and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person or entity, or otherwise to assure a creditor against loss; and (i)
obligations secured by any Liens, whether or not the obligations have been
assumed.
"Effective Tangible Net Worth" means consolidated net worth as
determined in accordance with GAAP consistently applied; plus Subordinated Debt,
if any, less all intangibles, including goodwill, capitalized organizational and
financing costs, Patents, Copyrights, Trademarks, licenses, subscription lists,
trade receivables converted to notes, money due from Affiliates (including
officers, directors, subsidiaries and commonly held companies), and investments
in Persons not one hundred percent (100%) owned by Borrower.
"Eligible Accounts" means those accounts that arise in the ordinary
course of ▇▇▇▇▇▇▇▇'s business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 7.7; provided, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment. Unless otherwise agreed to by Bank, Eligible Accounts shall
not include the following: (a) accounts which remain uncollected for more than
ninety (90) days from invoice date; (b) accounts due from an account debtor that
has suffered a business failure or the termination of its existence, or as to
which a dissolution, insolvency or bankruptcy proceeding has been commenced, any
assignment for the benefit of creditors has been made, or a trustee, receiver or
conservator has been appointed for all or any part of the assets of such account
debtor; (c) accounts due from an account debtor who is an Affiliate of Borrower
or affiliated with Borrower in any manner, including, without limitation, as
stockholder, owner, officer, director, agent or employee; (d) accounts with
respect to which payment is or may be conditional; (e) accounts with respect to
which the account debtor is not a resident or citizen of, located in, or subject
to service of process in, the United States, and which are not either (i)
covered by credit insurance in form and amount, and by an insurer, satisfactory
to Bank, (ii) supported by one or more letters of credit or acceptances that are
assignable by their terms and have been delivered to Bank in an amount, of a
tenor, and issued by a financial institution, acceptable to Bank; or (iii) that
Bank approves on a case by case basis; (f) accounts due from the United States
of America, including, without limitation, any instrumentality, division,
agency, body or department thereof; unless Borrower shall have complied with the
requirements of the Assignment of Claims Act of 1940, 31 USC (S) 3727 and 41 USC
(S) 15, and the federal regulations issued thereunder; (g) accounts commonly
known as "bill and hold" or a similar arrangement; (h) accounts due from an
account debtor as to which twenty five percent (25%) percent or more of the
aggregate dollar amount of all outstanding accounts owing from such account
debtor remain uncollected for more than ninety (90) days from invoice date; (i)
that portion of accounts due from an account debtor which is in excess of twenty
percent (20%) percent of Borrower's aggregate dollar amount of all outstanding
Eligible Accounts; (j) accounts with respect to which account debtors dispute
liability or make any claim, or have any defense, crossclaim, counterclaim, or
offset; (k) accounts which are not free of all liens, encumbrances, charges,
rights and interest of any kind, except in favor of Bank; (l) accounts which are
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supported or represented by a promissory note, post-dated check or letter of
credit unless such instrument is actually delivered to Bank; (m) accounts that
are payable in other than United States Dollars; and (n) accounts which are
unsuitable as collateral, as determined by Bank in the exercise of its
reasonable sole discretion.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"Event of Default" has the meaning set forth in Article XI.
"Funding Date" means the date that amounts are first advanced by Bank
under the Revolving Facility.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America, applied on a consistent basis
over the time period in question as to classification of items and amounts.
"Guarantors" mean each Subsidiary.
"Guaranty" means the guaranty in the form of Exhibit B attached
hereto.
"Guarantor Security Agreement" means the security agreement in the
form of Exhibit C attached hereto.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means the following properties and
assets owned or held by Borrower or in which Borrower otherwise has any
interest, now existing or here-after acquired or arising: (a) all Patents; (b)
all Copyrights; (c) all Trademarks; (d) all trade secrets, confidential
information, customer lists, license rights, advertising materials, operating
manuals, methods, processes, know-how, sales literature, drawings,
specifications, blue prints, descriptions, inventions, name plates, and
catalogs; and (e) the entire goodwill of or associated with the businesses now
or hereafter conducted by Borrower connected with and symbolized by any of the
aforementioned properties and assets.
"Intellectual Property Security Agreement" means the intellectual
property security agreement in the form of Exhibit D attached hereto
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole one-eighth (l/8) of one percent (1%)) and determined pursuant to
the following formula:
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LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
(a) "Base LIBOR" means the rate per annum determined by Bank at which
deposits for the relevant LIBOR Period would be offered to Bank in the
approximate amount of the relevant LIBOR Advance in the inter-bank LIBOR market
selected by Bank, upon request of Bank at 10:00 a.m. California time, on the day
that is the first (1/st/) day of such LIBOR Period.
(b) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable LIBOR Period.
(c) "LIBOR Business Day" means a Business Day on which dealings in
Dollar deposits may be carried out in the interbank LIBOR market.
(d) "LIBOR Period" means a period commencing on a Business Day, and
continuing for, in every case, either thirty (30), sixty (60), ninety (90) or
one hundred eighty (180) days, as designated by Borrower, during which all or a
portion of the outstanding principal balance of the Advances bears interest
determined in relation to LIBOR, provided that: (i) if any LIBOR Period would
end on a day that is not a LIBOR Business Day, then such LIBOR Period shall be
extended to the next succeeding LIBOR Business Day; and (ii) no LIBOR Period
shall extend beyond the Revolving Facility Termination Date.
"LIBOR Advance" means any Advance when and to the extent that the
interest rate therefor is determined by a reference to LIBOR.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the UCC or comparable
law of any jurisdiction to evidence any of the foregoing).
"Loan Documents" means, collectively, this Agreement, the Revolving
Facility Note, each Guaranty, each Guaranty Security Agreement, each
Intellectual Property Security Agreement, the Stock Pledge Agreement, and any
other document, instrument, or agreement entered into between Borrower, any
Guarantor and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (a) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole; or (b) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts; less (a) sales, excise or similar taxes included in the
amount thereof; and (b) returns,
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discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.
"Net Income (Loss)" means, for any period, the net income (or loss) of
Borrower for such period taken as a single accounting period, determined in
accordance with GAAP; provided, that in determining Net Income (Loss) there
shall be excluded: (a) the income (or loss) of any Person (other than a
Subsidiary of Borrower) in which any Person other than Borrower or any of its
Subsidiaries has a joint interest or partnership interest, except to the extent
of the amount of dividends or other distributions actually paid to Borrower or
any of its Subsidiaries by such Person during such period; (b) the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary of
Borrower or is merged into or consolidated with Borrower or any of its
Subsidiaries, or that Person's assets are acquired by Borrower or any of its
Subsidiaries; (c) the proceeds of any life insurance policy; (d) gains and
losses from the sale, exchange, transfer or other disposition of assets not in
the ordinary course of business, and related tax effects in accordance with
GAAP; (e) any other extraordinary or non-recurring gains and losses, and related
tax effects in accordance with GAAP; and (f) the income of any Subsidiary of
Borrower to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Subsidiary.
"Obligations" means (a) the performance of all obligations of Borrower
under this Agreement and all of the other Loan Documents; (b) all extensions,
renewals, modifications, amendments, and refinancings of any of the foregoing;
(c) all Bank Expenses; (d) all loans, advances, indebtedness, and other
obligations owed by Borrower to Bank of every description whether now existing
or hereafter arising (including those owed by Borrower to others and acquired by
Bank by purchase, assignment, or otherwise), including but not limited to
Borrower's obligations arising under the Loan Documents, whether or not for the
payment of money, whether or not evidenced by any note or other instrument,
whether direct or indirect, absolute or contingent, due or to become due, joint
or several, primary or secondary, liquidated or unliquidated, secured or
unsecured, original or renewed or extended, whether arising before, during or
after the commencement of any insolvency proceeding in which Borrower is a
debtor, any obligations arising pursuant to any letter of credit transactions
and any other financial accommodations, obligations to perform or forbear from
performing acts, and all overdrafts on accounts (as such term is defined in
Section 4104 of the UCC) maintained with Bank.
"Patents" means all patents and patent applications, domestic or
foreign, all licenses relating to any of the foregoing, and all income and
royalties with respect to any licenses, all rights to sue for past, present or
future infringement thereof, all rights arising therefrom and pertaining thereto
and all reissues, divisions, continuations, renewals, extensions, and
continuations-in-part thereof.
"Permitted Debt" means: (a) Debt of Borrower in favor of Bank arising
under this Agreement or any other Loan Document; (b) Debt disclosed in Schedule
10.3, but no voluntary prepayments, renewals, extensions, or refinancing thereof
without the prior written consent of Bank; (c) Debt not in excess of Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00) in aggregate principal amount
and refinancings thereof provided that the principal amount
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thereof is not increased beyond the amount outstanding thereunder on the date
hereof; (d) Subordinated Debt; (e) accounts payable to trade creditors for goods
or services incurred in the ordinary course of business, as presently conducted,
and paid within the specified time, unless contested in good faith and by
appropriate proceedings; and (f) Debt of ▇▇▇▇▇▇▇▇ secured by purchase-money
Liens permitted hereunder.
"Permitted Investment" means: (a) Investments existing on the Closing
Date disclosed in Schedule 10.6; (b) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(c) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., (d)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank; and (e) investments in Subsidiaries made in
the ordinary course of business, as presently conducted not in excess of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00).
"Permitted Liens" means the following: (a) any Liens existing on the
Closing Date and disclosed in Schedule 10.4 or arising under this Agreement or
the other Loan Documents; (b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, and for which appropriate reserves are
maintained; (c) Liens (i) upon or in any equipment acquired or held by Borrower
or any of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; (d) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (a) through (c)
above, provided that any extension, renewal or replacement Lien shall be limited
to the property encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, consistent with Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
"Reinvestment Rates" mean the per annum rates of interest equal to one
half of one percent (0.5%) above the rates of interest reasonably determined by
Bank to be in effect not more than seven (7) days prior to the Prepayment Date
in the secondary market for United States Treasury Obligations in amounts and
with maturities which correspond (as closely as possible) to the LIBOR Advance
being prepaid.
8
"Responsible Officer" means each of the (a) Chairman and Chief
Executive Officer; or (b) the Vice President, Chief Financial Officer, and
Secretary; or (c) Executive Vice President of Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Stock Pledge Agreement" means the stock pledge agreement in the form
of Exhibit E attached hereto.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means ICPlanet, a Delaware corporation; TKI
Consulting, Inc., a Minnesota corporation; Huntington Acquisition Corporation, a
Delaware corporation; Interactive Acquisition Corporation, a Delaware
corporation; TKO Personnel Inc., a California corporation; and Group-IPEX, Inc.,
a California corporation.
"Termination Date" means the earlier of (a) acceleration of the
Obligations for any reason under the terms of this Agreement; or (b) May 1,
2004.
"Trademarks" means all state (including common law), federal and
foreign trademarks, service marks, and trade names, and applications for
registration of such trademarks, service marks and trade names, all licenses
relating to any of the foregoing and all income and royalties with respect to
any licenses, whether registered or unregistered and wherever registered, all
rights to sue for past, present, or future infringement or unconsented use
thereof, all rights arising therefrom and pertaining thereto and all reissues,
extensions and renewals thereof.
"UCC" means the Uniform Commercial Code as in effect in the State of
California, as the same may be amended from time to time.
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the, term "financial
statements" shall include the notes and schedules thereto.
1.3 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in this Agreement may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," " includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments
9
(including any of the Loan Documents) shall be deemed to include subsequent
amendments, assignments, and other modifications thereto, references to Persons
include their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations. Terms not
specifically defined herein shall have the meanings given in the UCC.
ARTICLE II
REVOLVING FACILITY
2.1 Revolving Facility. Subject to and upon the terms and conditions of
this Agreement, ▇▇▇▇ agrees to make Advances to ▇▇▇▇▇▇▇▇ (pursuant to Section
2.1 hereof) under a revolving line of credit (the "Revolving Facility") from
time to time in amounts requested by Borrower up to an aggregate outstanding
principal amount equal to the lesser of: (a) the Committed Line; or (b) the
Borrowing Base. Subject to the terms and conditions of this Agreement, Borrower
may borrow and reborrow under this Section 2.1, provided that each LIBOR Advance
shall be in an amount not less than Five Hundred Thousand and 00/l00 Dollars
($500,000.00).
2.1.1 Borrowing Base. Borrowing Base shall mean an amount equal to the
sum of: (a) Eighty percent (80%) of the Net Amount of Eligible Accounts; less
(c) any Availability Reserves.
2.2 Revolving Facility Note. ▇▇▇▇▇▇▇▇'s obligation to repay Advances made
under the Revolving Facility shall be evidenced by a promissory note (the
"Revolving Facility Note") executed by Borrower substantially in the form of the
attached Exhibit A.
2.3 Manner of Borrowing. Borrower shall give Bank written or telephonic
notice (effective upon receipt) of any Advances under this Agreement, at least
two (2) Business Days before each LIBOR Advance, and at least one (1) Business
Day before each Base Rate Advance, specifying: (a) the date of such Advance
which shall be a Business Day in the case of a Base Rate Advance, or a LIBOR
Business Day in the case of a LIBOR Advance; (b) the amount of such Advance; (c)
the type of Advance (LIBOR or Base); and (d) in the case of a LIBOR Advance, the
duration of the LIBOR Period applicable thereto. Bank is authorized to make
Advances under this Agreement, based upon instructions received from a
Responsible Officer. Bank shall be entitled to rely on any telephonic notice
given by a person who Bank reasonably believes to be a Responsible Officer, and
Borrower shall indemnify and hold Bank harmless for any damages or loss suffered
by Bank as a result of such reliance. Bank will credit the amount of Advances
made under Section 2.1 to Borrower's deposit account maintained at Bank.
2.4 Conversions and Renewals. Borrower may elect from time to time to
convert all or a part of an Advance or to renew all or part of an Advance by
giving Bank at least two (2) Business Days before conversion into a Base Rate
Advance, and at least two (2) Business Days before the conversion into or
renewal of a LIBOR Advance, specifying: (a) the renewal or conversion date; (b)
the amount of the Advance to be converted or renewed; (c) in the case of
conversions, the type of Advance to be converted into (Base or LIBOR); and (d)
in the case of renewals of or a conversion into a LIBOR Advance, the duration of
the LIBOR Period applicable
10
thereto; provided that (i) the minimum amount of LIBOR Advances renewed or
converted shall be Five Hundred Thousand and 00/l00 Dollars ($500,000.00); (ii)
the minimum principal amount of LIBOR Advances outstanding after a renewal or
conversion shall be Five Hundred Thousand and 00/l00 Dollars ($500,000.00); and
(iv) LIBOR Advances can be converted only on the last day of the LIBOR Period
for such LIBOR Advance. If Borrower shall fail to give Bank the notice as
specified above for the renewal or conversion of a LIBOR Advance prior to the
end of the LIBOR Period with respect thereto, such LIBOR Advance shall
automatically be converted into a Base Rate Advance on the last day of the LIBOR
Period for such LIBOR Advance.
2.5 Interest. Borrower shall pay interest to Bank on the outstanding and
unpaid principal balance of the Advances made under the Revolving Facility at a
rate per annum equal to the interest rates set forth below:
2.5.1 Base Rate Advance. Each Base Rate Advance shall bear interest on
the outstanding principal amount thereof, at a floating rate per annum equal to
the Base Rate; and
2.5.2 LIBOR Advance. Each LIBOR Advance shall bear interest on the
outstanding principal amount thereof, for each day during each LIBOR Period
applicable thereto, at a fixed rate per annum equal to LIBOR plus two and three
quarters percent (2.75%); provided, however that if Borrower earns Net Income in
excess of Zero and 00/l00 Dollars ($0.00) in a fiscal quarter, then each LIBOR
Advance shall bear interest on the outstanding principal amount thereof, for
each day during each LIBOR Period applicable thereto, at a fixed rate per annum
equal to LIBOR plus two and one quarter percent (2.25%).
2.5.3 Calculation of Interest. All interest calculations shall be on a
basis of a three hundred and sixty (360)-day year for the actual days elapsed.
Interest paid for any partial month shall be prorated based on a thirty (30)-day
month and the actual number of day elapsed.
2.5.4 Adjusted Rate. Any change in the interest rate resulting from a
change in the Base Rate shall be effective as of the opening of business on the
day on which such change in the Base Rate becomes effective.
2.5.5 Default Rate. From and after the Termination Date, Advances under
the Revolving Facility shall bear interest at a rate equal to the Base Rate plus
three percent (3%). Anything herein to the contrary notwithstanding, interest at
the default rate shall be due and payable on demand but shall accrue from the
Termination Date until all Advances are paid in full.
2.6 Repayment Terms. Interest only shall be due and payable on the unpaid
principal balance of the Revolving Facility, without claim, notice, presentment
or demand, in consecutive monthly installments on the first (1st) day of each
month commencing on the first (1st) day of the first (1st) full calendar month
following the Funding Date.
2.6.1 Application of Payments. Each payment received by Bank shall be
credited as of its due date, without regard to its date of receipt by Bank,
first (1st) to interest accrued and unpaid as of such due date and the remainder
to principal, and interest shall cease upon the principal so credited.
11
2.7 Overadvances. If the outstanding amount of any component of the
Advances, or the aggregate amount of the outstanding Advances exceed the amounts
available under the lending formulas set forth in Section 2.1, or the Committed
Line, as applicable, such event shall not limit, waive or otherwise affect any
rights of Bank in that circumstance or on any future occasions and Borrower
shall, upon demand by Bank, which may be made at any time or from time to time,
immediately repay to Bank the entire amount of any such excess(es) for which
payment is demanded.
2.8 Termination of Revolving Facility. The Revolving Facility shall
terminate on the Termination Date, at which time all unpaid principal, all
unpaid and accrued interest, and all other amounts due under the Revolving
Facility shall be immediately due and payable.
2.9 Statements. With respect to each Advance, Bank is hereby authorized to
note the date, principal amount, interest rate and LIBOR Period applicable
thereto, and any payments made thereon, on its books and records (either
manually or by electronic entry), which notations shall be conclusive evidence
of the information noted in the absence of manifest error. A failure by Bank to
record any such information shall not impair the Borrower's liability to make
payment when due. Bank shall render to Borrower each month a statement setting
forth the balance in Borrower's loan account maintained by Bank for Borrower
pursuant to the provisions of this Agreement, including principal, interest,
fees, costs and expenses. Each such statement shall be subject to subsequent
adjustment by Bank but shall, absent manifest errors or omissions, be considered
correct and deemed accepted by Borrower and conclusively binding upon Borrower
as an account stated except to the extent that Bank receives a written notice
from Borrower of any specific exceptions of Borrower thereto within thirty (30)
days after the date such statement has been mailed by Bank. Until such time as
Bank shall have rendered to Borrower a written statement as provided above, the
balance in Borrower's loan account shall be presumptive evidence of the amounts
due and owing to Bank by ▇▇▇▇▇▇▇▇.
2.10 Use of Proceeds. The proceeds of the Advances hereunder shall be used
by Borrower for working capital. Borrower will not, directly or indirectly, use
any part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock, or for any purpose which violates,
or in inconsistent with, Regulation X of such Board of Governors.
ARTICLE III
LIBOR PROVISIONS
3.1 Hold Harmless and Indemnification. ▇▇▇▇▇▇▇▇ agrees to indemnify Bank
and to hold Bank harmless from, and to reimburse Bank on demand for, all losses
and expenses which Bank sustains or incurs as a result of (a) any payment of a
LIBOR Advance prior to the last day of the LIBOR Period for such LIBOR Advance
for any reason, including termination of this Agreement; (b) any termination of
a LIBOR Period in accordance with this Agreement; or (c) any failure by
▇▇▇▇▇▇▇▇, for any reason, to borrow any portion of a LIBOR Advance after having
given notice to Bank that it had selected such LIBOR Advance.
12
3.2 Funding Losses. The indemnification and hold harmless provisions set
forth in Section 3.1 shall include, without limitation, all losses and expenses
arising from interest and fees that Bank pays to lenders of funds it obtains in
order to fund the loans to Borrower on the basis of LIBOR and all losses
incurred in liquidating or re-deploying deposits from which such funds were
obtained and loss of profit for the period after termination. A written
statement by Bank to Borrower of such losses and expenses shall be conclusive
and binding, absent manifest error, for all purposes. This obligation shall
survive the termination of this Agreement and the payment of the Obligations.
3.3 Regulatory Developments Or Other Circumstances Relating To Illegality
or Impracticality of LIBOR. If any Regulatory Development or other circumstance
relating to the interbank Euro-dollar markets shall, at any time, in Bank's
reasonable determination, make it unlawful or impractical for Bank to fund or
maintain, during any LIBOR Period, or to determine or charge interest rates
based upon LIBOR, Bank shall give notice of such circumstances to Borrower and:
(a) in the case of a LIBOR Period in progress, Borrower shall, if requested by
Bank, promptly pay any interest which had accrued prior to such request and the
date of such request shall be deemed to be the last day of the term of the LIBOR
Period; and (b) no LIBOR Period may be designated thereafter until Bank
determines that such would be practical.
3.4 Additional Costs. Borrower shall pay to Bank from time to time, upon
Bank's request, such amounts as Bank determines are needed to compensate Bank
for any costs it incurred which are attributable to Bank resulting from
Regulatory Developments having made or maintained a LIBOR Advance or to Bank's
obligation to make a LIBOR Advance, or any reduction in any amount receivable by
Bank hereunder with respect to any LIBOR Advance, or any such receivable (being
herein called "Additional Costs"), resulting from any Regulatory Developments,
which (a) change the basis of taxation of any amounts payable to Bank hereunder
with respect to net income of Bank for any LIBOR Advance by the jurisdiction
where Bank is headquartered or the jurisdiction where Bank extends the LIBOR
Advance; (b) impose or modify any reserve, special deposit, or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, Bank (including any LIBOR Advance or any
deposits referred to in the definition of LIBOR); or (c) impose any other
condition affecting this Agreement (or any of such extension of credit or
liabilities). Bank shall notify Borrower of any event occurring after the date
hereof which entitles Bank to compensation pursuant to this Section as promptly
as practicable after it obtains knowledge thereof and determines to request such
compensation. Determinations by Bank for purposes of this paragraph, shall be
conclusive, provided that such determinations are made on a reasonable basis.
3.5 Prepayment. Bank does not have to accept any prepayment of any LIBOR
Advance except as described below or as required under applicable law. Borrower
may prepay a Base Rate Advance at any time without paying any Prepayment Amount,
as defined below. Borrower may prepay a LIBOR Advance at any time, as long as
Bank is provided written notice of the prepayment at least five (5) Business
Days prior to the date of prepayment (the "Prepayment Date"). The notice of
prepayment shall contain the following information: (a) the Prepayment Date; and
(b) the amount of principal to be prepaid. On the Prepayment Date, Borrower
shall pay to Bank, in addition to the other amounts then due, the Prepayment
Amount described below. Bank, in its sole discretion, may accept any prepayment
of principal even if
13
not required to do so under this Agreement and may deduct from the amount to be
applied against the LIBOR Advance the other amounts required as part of the
Prepayment Amount.
3.5.1 The Prepayment Amount (as defined below) will be applied to the
LIBOR Advance as Bank shall determine in its sole discretion.
3.5.2 If Bank exercises its right to accelerate the payment of the
Obligations prior to maturity based upon an Event of Default, Borrower shall pay
to Bank, in addition to the other amounts then due, on the date specified by
Bank as the Prepayment Date, the Prepayment Amount.
3.5.3 Bank's determination of the Prepayment Amount shall be conclusive
in the absence of obvious error or fraud. If requested in writing by ▇▇▇▇▇▇▇▇,
Bank shall provide Borrower a written statement specifying the Prepayment
Amount.
3.5.4 The following (the "Prepayment Amount") shall be due and payable
in full on the Prepayment Date: (a) if the face amount of the LIBOR Advance
exceeds Seven Hundred Fifty Thousand and 00/l00 Dollars ($750,000.00) then the
Prepayment Amount is the sum of: (i) the amount of the principal balance of the
LIBOR Advance which Borrower has elected to prepay or which Bank has required
Borrower to prepay because of acceleration, as the case may be (the "Prepaid
Principal Amount"); (ii) interest accruing on the Prepaid Principal Amount up
to, but not including, the Prepayment Date; (iii) Five Hundred and 00/l00
Dollars ($500.00); plus (iv) the present value, discounted at the Reinvestment
Rates of the positive amount by which (x) the interest Bank would have earned
had the Prepaid Principal Amount not been paid prior to the end of the LIBOR
Period at the applicable interest rate exceeds (y) the interest Bank would earn
by reinvesting the Prepaid Principal Amount at the Reinvestment Rates; or (b) if
the principal amount of the LIBOR Advance being prepaid is Seven Hundred Fifty
Thousand and 00/l00 Dollars ($750,000.00) or less, then the Prepayment Amount is
the sum of: (i) the Prepaid Principal Amount; (ii) interest accruing on the
Prepaid Principal Amount up to, but not including, the Prepayment Date; plus
(iii) an amount equal to two percent (2%) of the Prepaid Principal ▇▇▇▇▇▇.
3.6 PREPAYMENT AMOUNT. BORROWER ACKNOWLEDGE(S) AND AGREE(S) THAT: (A) THERE
IS NO RIGHT TO PREPAY THE LIBOR ADVANCE IN WHOLE OR IN PART, WITHOUT PAYING THE
PREPAYMENT AMOUNT, EXCEPT AS OTHERWISE REQUIRED UNDER APPLICABLE LAW; (B)
BORROWER SHALL BE LIABLE FOR PAYMENT OF THE PREPAYMENT AMOUNT IF BANK EXERCISES
ITS RIGHT TO ACCELERATE PAYMENT OF THE OBLIGATIONS, INCLUDING WITHOUT
LIMITATION, ACCELERATION UNDER A DUE-ON-SALE PROVISION; (C) BORROWER WAIVE(S)
ANY RIGHTS UNDER SECTION 2954.10 THE CALIFORNIA CIVIL CODE, OR ANY SUCCESSOR
STATUTE; AND (D) BANK HAS MADE EACH LIBOR ADVANCE IN RELIANCE ON THESE
AGREEMENTS.
/s/ Mak
-------------------------------
Borrower's Initials
14
ARTICLE IV
FEES, LOCKBOX ACCOUNT AND CREDITING OF PAYMENTS
4.1 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon California time shall be deemed to have been received
by Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
4.2 Lockbox Account. Borrower shall, at ▇▇▇▇▇▇▇▇'s expense, direct that
remittances and all other collections and proceeds of accounts and other
Collateral be deposited into a non-interest bearing lock box account maintained
in Bank's name ("Lockbox Account"). In connection therewith, Borrower shall
execute such lockbox agreement ("Lockbox Agreement") as Bank shall require.
Borrower shall maintain the Lockbox Account with Bank, and Borrower hereby
grants to Bank a security interest in the Lockbox Account over which Borrower
shall have no control and into which the proceeds of all Collateral shall be
deposited immediately upon their receipt.
4.2.1 Monies Received. Upon establishment of the Lockbox Account,
Borrower and all of its affiliates, subsidiaries, shareholders, directors,
employees or agents shall, acting as trustee for Bank, receive, as the property
of Bank, any monies, checks, notes, drafts, or any other payment relating to
and/or proceeds of accounts or other Collateral which come into their possession
or under their control and immediately upon receipt thereof, shall deposit or
cause the same to be deposited in the Lockbox Account, or remit the same or
cause the same to be remitted, in kind, to Bank. In no event shall the same be
commingled with ▇▇▇▇▇▇▇▇'s own funds.
4.2.2 Payments in Full Checks. Borrower authorizes Bank to accept,
indorse and deposit on behalf of Borrower any checks tendered by an account
debtor "in full payment" of its obligation to Borrower. Borrower shall not
assert against Bank any claim arising therefrom, irrespective of whether such
action by Bank effects an accord and satisfaction of ▇▇▇▇▇▇▇▇'s claims, under
(S)3-311 of the UCC, or otherwise.
4.3 Collateral Control Account. Bank may, on occasion, agree to permit
Borrower to maintain a deposit account at another financial institution,
provided Bank (a) has been notified thereof by Borrower and Bank has given
written notice of Bank's security interest therein to the financial institution
where such account is located; and (b) such account is a blocked account to
which only Bank may have access.
15
4.4 Commitment Fee. ▇▇▇▇▇▇▇▇ agrees to pay to the Bank (a) a commitment
fee on the Committed Line from the date of this Agreement until the Termination
Date at the rate of 0.15% per annum, which fee shall be fully earned as of and
payable on the first (1/st/) day of each quarter during the term of this
Agreement; and (b) Bank Expenses incurred for such quarter.
4.5 Early Termination Fee. If this Agreement is terminated, for whatever
reason, prior to May 1, 2004, then Borrower shall pay to Bank an early
termination fee of Sixty Thousand and 00/100 Dollars ($60,000.00) (the "Early
Termination Fee"), provided, however that the Early Termination Fee shall reduce
by Five Thousand and 00/100 Dollars ($5,000.00) per month commencing May 1,
2003.
4.6 Unused Line Fee. ▇▇▇▇▇▇▇▇ agrees to pay to the Bank an unused line fee
on the average daily unused portion of the Committed Line at the following rates
per annum:
--------------------------------------------------------------------------------
Condition Rate
--------------------------------------------------------------------------------
If Borrower's quarterly Net Income is less than 0.25%
Zero and 00/100 Dollars ($0.00).
--------------------------------------------------------------------------------
If Borrower's quarterly Net Income is more 0.15%
than Zero and 00/100 Dollars ($0.00)
--------------------------------------------------------------------------------
If Borrower maintains a money market deposit 0.00%
account with Bank with a balance of at least
Four Million and 00/100 Dollars
($4,000,000.00).
--------------------------------------------------------------------------------
commencing on the first (1/st/) day of the first (1/st/) quarter following the
Funding Date, which fee shall be fully earned as of and payable on the first
(1/st/) day of each quarter during the term of this Agreement.
ARTICLE V
CONDITIONS OF LOANS
5.1 Conditions Precedent to Initial Advance. The obligation of Bank to
extend any credit contemplated by this Agreement is subject to the fulfillment
to Bank's satisfaction of all of the following conditions:
5.1.1 Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to counsel of Bank.
5.1.2 Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed by the appropriate
parties and in form and substance acceptable to Bank
(a) this Agreement;
16
(b) the Revolving Facility Note;
(c) Bank shall have received the charter and bylaws of
each of Borrower and Guarantors, the resolutions of each of the Borrower and
Guarantors authorizing the execution, delivery and performance of this
Agreement, and specimen signatures of the persons authorized to execute this
Agreement on behalf of the Borrower and the Guarantors, in each case certified
by the secretary of the Borrower or the Guarantor, as relevant, all in form and
substance satisfactory to the Agent;
(d) a Guaranty duly executed by each Guarantor;
(e) a Guarantor Security Agreement duly executed by each
Guarantor;
(f) an Intellectual Property Security Agreement duly
executed by ▇▇▇▇▇▇▇▇ and each Guarantor;
(g) the Stock Pledge Agreement duly executed by
▇▇▇▇▇▇▇▇;
(h) the Lockbox Agreement;
(i) UCC-1 Financing Statements; and
(j) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
5.1.3 Financial Condition. There shall have been no material
adverse change, as determined by Bank, in the financial condition or business of
Borrower or any Guarantor, nor any material decline, as determined by Bank, in
the market value of any Collateral required hereunder or a substantial or
material portion of the assets of Borrower or any Guarantor. Borrower shall be
in compliance with the financial covenants set forth in Article IX of this
Agreement.
5.1.4 Audit. Bank shall have performed and deemed satisfactory
the results of an audit of ▇▇▇▇▇▇▇▇'s accounts and inventory.
5.1.5 Reviews. Bank shall have performed and deemed satisfactory
the review of ▇▇▇▇▇▇▇▇'s current accounts receivable agings and ▇▇▇▇▇▇▇▇'s
financial results for the first (1/st/) quarter of 2002.
5.1.6 Insurance. Borrower shall have delivered to Bank evidence
of insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
5.1.7 Security Interests. Bank shall have received evidence, in
form and substance satisfactory to Bank, that Bank has a valid, perfected, first
priority security interest in and lien upon the Collateral and any other
property which is intended to be security for the
17
Obligations, subject only to the security interests and liens permitted herein
or in the other Loan Documents.
5.1.8 Other Documents. Bank shall have received, in form and substance
satisfactory to Bank, all consents, waivers, acknowledgments and other
agreements from third persons which Bank may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Loan Documents, including without limitation, acknowledgments by
lessors, mortgagees and warehousemen of Bank's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Bank access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral.
5.2 Subsequent Credit. The obligation of Bank to make each extension of
credit requested by ▇▇▇▇▇▇▇▇ hereunder shall be subject to the fulfillment to
Bank's satisfaction of each of the following conditions:
5.2.1 Compliance. The representations and warranties contained herein
and each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
5.2.2 No Material Adverse Change. There shall have been no material
adverse change, as determined by Bank, in the financial condition or business of
Borrower or any Guarantor, nor any material decline, as determined by Bank, in
the market value of any Collateral required hereunder or a substantial or
material portion of the assets of Borrower or any Guarantor.
5.2.3 Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE VI
CREATION OF SECURITY INTEREST
6.1 Grant of Security Interest. In order to secure prompt repayment of any
and all Obligations, and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents, Borrower grants and
pledges to Bank a continuing security interest in all presently existing and
hereafter acquired or arising Collateral. Except as set forth in Schedule 6.1,
such security interest constitutes a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof.
6.2 Perfection of Security Interests. Borrower authorizes Bank to file a
financing statement describing the Collateral. Borrower shall cooperate with
Bank in obtaining control
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with respect to Collateral consisting of: (a) deposit accounts; (b) investment
property; (c) letter of credit rights; and (d) electronic chattel paper.
6.2.1 Intellectual Property. Contemporaneously with the execution and
delivery of this Agreement, and in furtherance of the pledging, assignment,
transfer, hypothecation, set over, and grant by Borrower to Bank of a security
interest in the Collateral, Borrower shall execute and deliver the Intellectual
Property Security Agreement to Bank.
6.3 Delivery of Additional Documentation Required. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all negotiable
documents and instruments, all financing statements and other documents that
Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank's security interests in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents.
6.4 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
6.5 Accounts. Bank's security interest in accounts shall attach to all
accounts without further act on the part of Bank or Borrower. Upon request from
Bank, Borrower shall provide Bank with schedules describing all accounts created
or acquired by Borrower (including without limitation agings listing the names
and addresses of, and amounts owing by date by account debtors), and shall
execute and deliver written assignments of all accounts to Bank all in a form
acceptable to Bank provided, however, ▇▇▇▇▇▇▇▇'s failure to execute and deliver
such schedules and/or assignments shall not affect or limit Bank's security
interest and other rights in and to the accounts. Together with each schedule,
Borrower shall furnish Bank with copies of Borrower's customers' invoices or the
equivalent, and original shipping or delivery receipts for all merchandise sold,
and Borrower warrants the genuineness thereof. Upon the occurrence of an Event
of Default, Bank or Bank's designee may notify customers or account debtors of
Bank's security interest in the Collateral and direct such customers or account
debtors to make payments directly to Bank, but unless and until Bank does so or
gives Borrower other written instructions, Borrower shall collect all accounts
for Bank, receive in trust all payments thereon as Bank's trustee, and, deposit
such collections in the Lockbox Account, if applicable. If so requested to do so
from Bank, ▇▇▇▇▇▇▇▇ shall immediately deliver said payments to Bank in their
original form as received from the account debtor and all letters of credit,
advices of credit, instruments, documents, chattel paper or any similar property
evidencing or constituting Collateral Notwithstanding anything to the contrary
contained herein, if sales of inventory are made for cash, Borrower shall
immediately deliver to Bank, in identical form, all such cash, checks, or other
forms of payment which Borrower receives. The receipt of any check or other item
of payment by Bank shall not be considered a payment on account until such check
or other item of payment is honored when presented for payment, in which event,
said check or other item of payment shall be deemed to have been paid to Bank
three (3) calendar days after the date Bank actually receives such check or
other item of payment.
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6.6 Attorney in Fact. Effective only upon the occurrence of an Event of
Default, Borrower appoints Bank or any other person whom Bank may designate as
▇▇▇▇▇▇▇▇'s attorney-in-fact, with power to endorse ▇▇▇▇▇▇▇▇'s name on any
checks, notes, acceptances, money order, drafts or other forms of payment or
security that may come into Bank's possession; to sign ▇▇▇▇▇▇▇▇'s name on any
invoice or bill of lading relating to any accounts, on drafts against account
debtors, on schedules and assignments of accounts, on verifications of accounts
and on notices to account debtors; to establish a lock box arrangement and/or to
notify the post office authorities to change the address for delivery of
▇▇▇▇▇▇▇▇'s mail addressed to Borrower to an address designated by Bank, to
receive and open all mail addressed to Borrower, and to retain all mail relating
to the Collateral and forward all other mail to Borrower; to send, whether in
writing or by telephone, requests for verification of accounts; and to do all
things necessary to carry out this Agreement. Borrower ratifies and approves all
acts of the attorney-in-fact. Neither Bank nor its attorney-in-fact will be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law. This power being coupled with an interest, is irrevocable so long as any
accounts in which Bank has a security interest remain unpaid and until the
Indebtedness has been fully satisfied. In connection with all surety instruments
issued or caused to be issued or created by Bank under this Agreement, upon an
Event of Default, Borrower hereby appoints Bank, or its designee, as its
attorney, with full power and authority (a) to sign and/or endorse Borrower's
name upon any warehouse or other receipts, letter of credit applications and
acceptances; (b) to sign Borrower's name on bills of lading; (c) to clear
inventory through the United States of America Customs Department in the name of
Borrower or Bank or Bank's designee, and to sign and deliver to United States of
America Customs officials powers of attorney in the name of Borrower for such
purpose; and (d) to complete in Borrower's name or Bank's, or in the name of
Bank's designee, any order, sale or transaction, obtain the necessary documents
in connection therewith, and collect the proceeds thereof. Neither Bank nor its
attorneys will be liable for any acts or omissions nor for any error of judgment
or mistakes of fact or law, except for Bank's or its attorney's gross negligence
or willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any suretyship instrument remains outstanding.
6.7 Discharge Liens. In order to protect or perfect any security interest
which Bank is granted hereunder, Bank may, in its sole discretion, discharge any
lien or encumbrance or bond the same, pay any insurance, maintain guards,
warehousemen, or any personnel to protect the Collateral, pay any service
bureau, or, obtain any records, and all costs for the same shall be added to the
Obligations and shall be payable on demand.
6.8 Contracts. Anything herein to the contrary notwithstanding: (a)
Borrower shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed; (b) the exercise by Bank of any of the rights hereunder shall not
release Borrower from any of its duties or obligations under the contracts and
agreements included in the Collateral; and (c) Bank shall not have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Bank be obligated to perform
any of the obligations or duties of Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
7.1 Incorporation, Good Standing, and Due Qualification. Borrower and each
Subsidiary is a corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required
7.2 Corporate Power and Authority. The execution, delivery, and performance
by ▇▇▇▇▇▇▇▇ and each Subsidiary of the Loan Documents to which it is a party
have been duly authorized by all necessary corporate action and do not and will
not (a) require any consent or approval of the stockholders of Borrower or any
Subsidiary; (b) contravene ▇▇▇▇▇▇▇▇'s or any Subsidiary's charter or bylaws; (c)
violate any provision of any law, rule, regulation (including, without
limitation, Regulations U and X of the Board of Governors of the federal Reserve
System), order, writ, judgment, injunction, decree, determination, or award
presently in effect having applicability to Borrower or any Subsidiary; (d)
result in a breach of or constitute a default under indenture or loan or credit
agreement or any other agreement, lease, or instrument to which Borrower or any
Subsidiary is a party or by which it or its properties may be bound or affected;
(e) result in, or require, the creation or imposition of any Lien, upon or with
respect to any of the properties now owned or hereafter acquired by Borrower;
and (f) cause Borrower or any Subsidiary to be in default under any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination, or
award or any such indenture, agreement, lease, or instrument.
7.3 Legally Enforceable Agreement. This Agreement is, and each of the other
Loan Documents when delivered under this Agreement will be legal, valid, and
binding obligations of Borrower and each Subsidiary, in accordance with their
respective terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally.
7.4 Ownership and Liens. Borrower has title to, or valid leasehold
interests in, all of its properties and assets, real and personal, including the
properties and assets and leasehold interests reflected in the financial
statements previously delivered by Borrower to Bank (other than any properties
or assets disposed of in the ordinary course of business), and none of the
properties and assets owned by Borrower and none of its leasehold interests is
subject to any Lien, except such as may be permitted pursuant to Section 10.4 of
this Agreement.
7.5 Other Agreements. Borrower nor any Subsidiary is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument or subject to any charter or corporate restriction which could have a
Material Adverse Effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of Borrower, or the ability of Borrower or
any Subsidiary to carry out its obligations under the Loan Documents to which it
is a party. Borrower nor any Subsidiary is in default in any respect in the
performance, observance, or
21
fulfillment of any of the obligations, covenants, or conditions contained in any
agreement or instrument material to its business to which it is a party.
7.6 Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower or any Subsidiary are affected by any fire, explosion,
accident, strike, lockout, or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), materially and adversely affecting such
business or properties or the operation of Borrower.
7.7 Provisions Concerning Accounts.
7.7.1 Representations. Borrower represents and warrants that each
account at the time of its assignment to Bank (a) will be owned solely by
▇▇▇▇▇▇▇▇; (b) will be for a liquidated amount maturing as stated in Borrower's
Books; (c) will be a bona fide existing obligation created by the final sale and
delivery of goods or the rendition of services to account debtors by Borrower in
the ordinary course of business; and (d) will not be subject to any known
deduction, offset, counterclaim, return privilege, or other condition, except as
reflected on ▇▇▇▇▇▇▇▇'s Books. Borrower shall not redate any invoices or reissue
new invoices in full or partial satisfaction of old invoices. Borrower shall
have received no notice of actual or imminent bankruptcy or insolvency of any
account debtor at the time the account from such account debtor is created; and,
in accordance with prudent credit policies, the account debtor will be able
timely to discharge all of its indebtedness to Borrower. Allowances, if any, as
between Borrower and its customers will be on the same basis and in accordance
with the usual customary practices of Borrower as they exist on the date of this
Agreement.
7.7.2 Disputes. Borrower shall notify Bank within three (3) Business
Days of occurrence of all claims asserted by account debtors in excess of Twenty
Five Thousand and 00/100 Dollars ($25,000.00) per month in the aggregate.
7.8 Litigation. Except as set forth in Schedule 7.8, there are no actions
or proceedings pending by or against Borrower or any Subsidiary before any court
or administrative agency in which an adverse decision could have a Material
Adverse Effect or a material adverse effect on Borrower's interest or Bank's
security interest in the Collateral. Borrower does not have knowledge of any
such pending or threatened actions or proceedings.
7.9 No Material Adverse Change in Financial Statements. All financial
statements related to Borrower that have been delivered by Borrower to Bank
fairly present in all material respects Borrower's financial condition as of the
date thereof and ▇▇▇▇▇▇▇▇'s results of operations for the period then ended.
There has not been a material adverse change in the financial condition of
Borrower since the date of the most recent of such financial statements
submitted to Bank.
7.10 Solvency. Borrower is solvent and able to pay its debts (including
trade debts) as they mature.
7.11 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of ERISA; Borrower has not violated any provision of any
defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrower (each, a "Plan");
22
no Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under GAAP.
7.12 Investment Company Act. Borrower is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940. Borrower is not engaged principally, or as one
of the important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations G, T
and U of the Board of Governors of the Federal Reserve System). ▇▇▇▇▇▇▇▇ has
complied with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or rules applicable to
it, violation of which could have a Material Adverse Effect.
7.13 Environmental Condition. Except as disclosed by Borrower to Bank
in writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable Federal or state environmental, hazardous waste,
health and safety statutes and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
7.14 Taxes. ▇▇▇▇▇▇▇▇ has filed all tax returns (federal, state, and
local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies thereon to be due, including interest and
penalties.
7.15 Subsidiaries. Set forth in Schedule 7.15 is a complete and
accurate list of the Subsidiaries of Borrower, showing the jurisdiction of
incorporation of each and showing the percentage of the Borrower's ownership of
the outstanding stock of each Subsidiary. All of the outstanding capital stock
of each such Subsidiary has been validly issued, is fully paid and
nonassessable, and is owned by the Borrower free and clear of all Liens.
7.16 Government Consents. ▇▇▇▇▇▇▇▇ has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all governmental authorities that are necessary for the
continued operation of ▇▇▇▇▇▇▇▇'s business as currently conducted.
7.17 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
8.1 Good Standing. Borrower shall maintain, and shall cause each
Subsidiary to maintain, its corporate existence and good standing in its
jurisdiction of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify could have a Material Adverse Effect. Borrower
shall maintain, and shall cause each Subsidiary maintain, to the extent
consistent with prudent management of Borrower's and Subsidiary's business, in
force all licenses, approvals and agreements, the loss of which could have a
Material Adverse Effect.
8.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
8.3 Financial Statements. Borrower shall deliver to Bank:
8.3.1 Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of Borrower,
consolidated and consolidating balance sheets of Borrower and its Subsidiaries
as of the end of such fiscal year, consolidated and consolidating statements of
income and retained earnings of the Borrower and its Subsidiaries for such
fiscal year, and consolidated and consolidating statements of changes in
financial position of the Borrower and its Subsidiaries for such fiscal year,
all in reasonable detail and standing in comparative form the respective figures
for the corresponding dates and period in the prior fiscal year and all prepared
in accordance with GAAP consistently applied and as to the consolidated
statements accompanied by an opinion thereon acceptable to Bank by certified
public accountants selected by Borrower and acceptable to Bank.
8.3.2 SEC Filings. Within five (5) days after the date of filing with
the Securities and Exchange Commission, copies of any of the Borrower's Form
10-K Annual Reports, Form 10-Q Quarterly Reports and Form 8-K Current Reports
(other than Form 8-K Current Reports describing transactions by Affiliates
involving stock of Borrower).
8.3.3 Accountant's Report. Simultaneously with the delivery of the
annual financial statements referred to in Section 8.3.1, a certificate of the
independent public accountants who audited such statements to the effect that,
in making the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which constitutes a Default or
Event of Default, or if such accountants shall have obtained knowledge of any
such condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof.
24
8.3.4 Compliance Certificate. Together with the delivery of the
annual and quarterly financial statements referenced in Sections 8.3.1 and 8.3.2
of this Agreement, Borrower shall deliver to Lender a certificate of Borrower's
chief financial officer or chief accounting officer, in the form of the attached
Exhibit A, (a) setting forth in reasonable detail the calculations required to
establish whether the Borrower was in compliance with (i) the requirements of
Article IX, inclusive; and (ii) the payment of payroll taxes, on the date of
such certificate; and (b) stating whether any Event of Default exists on the
date of such certificate and, if any Event of Default then exists, setting forth
the details thereof and the action which the Borrower is taking or proposes to
take with respect thereto.
8.4 Monthly A/R and A/P Agings. Borrower shall, from time to time
hereafter but not less often than monthly, execute and deliver to Bank no later
than thirty (30) days after the last day of each month, (a) a detailed aging of
accounts by total, a summary of aging of accounts by customer, and a
reconciliation statement; and (b) a detailed aging of accounts payable.
8.5 Monthly Borrowing Base Certificate. Borrower shall from time to
time, but not less than monthly, execute and deliver to Bank, no later than
thirty (30) days after the last day of each month, a Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of Schedule 8.5
hereto.
8.6 Projections. As soon as available and in any event no later
than thirty (30) days after the end of each fiscal quarter of Borrower, Borrower
shall deliver Projections of Borrower for the forthcoming fiscal year, provided,
however, that upon Borrower having Net Income greater than Zero and 00/100
Dollars ($0.00) for two (2) consecutive quarters, such Projections shall be
delivered on an annual basis no later than thirty (30) days after the end of
such fiscal year.
8.7 Audit of Accounts. Bank shall have the right to conduct audits
of ▇▇▇▇▇▇▇▇'s accounts on an annual basis during the term of this Agreement, and
upon an Event of Default as frequent as Bank may determine in its reasonable
discretion.
8.8 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by ▇▇▇▇▇▇▇▇.
8.9 Insurance.
8.9.1 Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts,
25
as ordinarily insured against by other owners in similar businesses conducted in
the locations where ▇▇▇▇▇▇▇▇'s business is conducted on the date hereof.
Borrower shall also maintain insurance relating to Borrower's ownership and use
of the Collateral in amounts and of a type that are customary to businesses
similar to Borrower's.
8.9.2 All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, ▇▇▇▇▇▇▇▇ shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
8.10 Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
8.11 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
ARTICLE IX
FINANCIAL COVENANTS
9.1 Current Ratio. Borrower shall maintain, as of the last day of each
fiscal quarter of Borrower, a ratio of current assets to current liabilities of
at least 2.00:1.00.
9.2 Minimum Effective Tangible Net Worth. Borrower shall maintain, as
of the last day of each fiscal quarter of Borrower, Effective Tangible Net Worth
of at least Forty One Million Five Hundred Thousand and 00/100 Dollars
($41,500,000.00); provided, however that commencing September 30, 2002, such
amount shall increase, on a cumulative basis, by an amount equal to eighty
percent (80%) of net income after taxes in the trailing four (4) fiscal quarter
period (with no deduction for losses).
9.3 Debt to Effective Tangible Net Worth Ratio. Borrower shall
maintain, as of the last day of each fiscal quarter of Borrower, a ratio of Debt
to Effective Tangible Net Worth of not more than 1.75:1.00.
9.4 Cash Flow Coverage Ratio. Commencing September 30, 2002, Borrower
shall maintain, as of the last day of each fiscal quarter of Borrower, a Cash
Flow Coverage Ratio of at least 1.75:1.00, measured on a quarterly basis and
annualized.
9.5 Profitability. Borrower shall not incur, for its second fiscal
quarter of 2002, a Net Loss in excess of One Million Six Hundred Thousand and
00/l00 Dollars ($1,600,000.00); and Borrower shall earn, commencing May 1, 2002,
Borrower shall have a minimum Net Income of One and 00/100 Dollars ($1.00)
measured on a fiscal year to date basis and monthly basis. Commencing November
1, 2002, and for each month thereafter, Borrower shall have a minimum
26
Net Income of One and 00/100 Dollars ($1.00) measured on a fiscal year to date
basis and monthly basis.
ARTICLE X
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
▇▇▇▇▇▇▇▇ will not do any of the following without the prior written consent of
Bank, which consent shall not be unreasonably withheld:
10.1 Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of, any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries, accounts,
and leasehold interests), except: (a) inventory disposed of in the ordinary
course of business; (b) the sale or other disposition of assets no longer used
or useful in the conduct of its business; or (c) that any Subsidiary may sell,
lease, assign, or otherwise transfer its assets to Borrower or another
Subsidiary.
10.2 Mergers or Acquisitions. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all of substantially all
of the assets or the business of any Person, or permit any Subsidiary to do so,
except that (a) any Subsidiary may merge into or transfer assets to the
Borrower; and (b) any subsidiary may merge into or consolidate with or transfer
assets to any other Subsidiary.
10.3 Debt. Create, incur, assume or be or remain liable with respect to
any Debt, or permit any Subsidiary so to do, other than Permitted Debt.
10.4 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
10.5 Distributions. Declare or pay any dividends; or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets, or in obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock; or permit any of its Subsidiaries to
purchase or otherwise acquire for value any stock of the Borrower or another
Subsidiary, except that the Borrower (a) may declare and deliver dividends and
make distributions payable solely in common stock of the Borrower; (b) may
purchase or otherwise acquire shares of its capital stock by exchange for or out
of the proceeds received from a substantially concurrent issue of new shares of
its capital stock; and (c) may purchase or otherwise acquire shares of its
capital stock in connection with Borrower's existing stock repurchase program up
to an aggregate amount equal to Two Million and 00/100 Dollars ($2,000,000.00).
27
10.6 Investments. Make, or permit any Subsidiary to make, any loan or
advance to any Person, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person, or participate as a
partner or joint venture with any other Person, except Permitted Investments.
10.7 Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
10.8 Guaranties, Etc. Assume, guarantee, endorse, or otherwise be or
become directly or contingently responsible or liable, or permit any Subsidiary
to assume, guarantee, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or an agreement to maintain or
cause such Person to maintain a minimum working capital or net worth or
otherwise to assure the creditors of any Person against loss), for obligations
of any Person, except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
10.9 Capital Expenditures. Borrower will not make any expenditures
for fixed or capital assets if, after giving effect thereto, the aggregate of
all such expenditures made by Borrower would exceed One Million Five Hundred
Thousand and 00/100 Dollars ($1,500,000.00) during any fiscal year of Borrower.
10.10 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
10.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
ARTICLE XI
EVENTS OF DEFAULT
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Any one or more of the following events shall constitute an
"Event of Default" by Borrower under this Agreement:
11.1 Payment of Revolving Facility Note. Borrowers or any Guarantor
fails to pay any installment of principal or interest with respect to the
Revolving Facility Note on the due date thereof.
11.2 Payment of Other Obligations. Borrower or any Guarantor fails to
make payment of any of the Obligations (other than those evidenced by the
Revolving Facility Note) when due (whether due at stated maturity, on demand,
upon acceleration or otherwise).
11.3 Misrepresentation. Any financial statement or certificate
furnished to Bank in connection with, or any representation or warranty made by
Borrower, any Guarantor or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in any material
respect when furnished or made.
11.4 Covenant Default. Any default in the performance of or compliance
with any Obligation, agreement or other provision contained in this Agreement
(other than those described in sections 11.1, 11.2 and 11.3) and such default is
not cured within ten (10) Business Days after Borrower receives notice thereof
or any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Advances will be required to be made during such
cure period).
11.5 Default Under Loan Documents. Any default in the payment or
performance of any obligation, or any defined event of default, under any of the
Loan Documents other than this Agreement.
11.6 Material Adverse Change. If there occurs a material adverse
change in Borrower's or any Guarantor's business or financial condition, or if
there is a material impairment of the prospect of repayment of any portion of
the Obligations or a material impairment of the value or priority of Bank's
security interests in the Collateral.
11.7 Attachment. If any material portion of Borrower's or any
Guarantor's assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any trustee, receiver or
person acting in a similar capacity and such attachment, seizure, writ or
distress warrant or levy has not been removed, discharged or rescinded within
ten (10) Business Days, or if Borrower or any Guarantor is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs, or if a judgment or other claim becomes a
lien or encumbrance upon any material portion of Borrower's assets, or if a
notice of lien, levy, or assessment is filed of record with respect to any of
Borrower's or any Guarantor's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or
29
governmental agency, and the same is not paid within ten (10) Business Days
after Borrower or such Guarantor receives notice thereof, provided that none of
the foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by
Borrower or such Guarantor (provided that no Advances will be required to be
made during such cure period).
11.8 Insolvency. If an Insolvency Proceeding is commenced by Borrower
or any Guarantor, or if an Insolvency Proceeding is commenced against Borrower
or any Guarantor and is not dismissed or stayed within ten (10) Business Days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding).
11.9 Other Agreements. Any default in the payment or performance of
any Obligation, or any defined event of default, under the terms of any contract
or instrument (other than any of the Loan Documents) pursuant to which Borrower
or Guarantor has incurred any debt or other liability in excess of Two Hundred
Fifty Thousand and 00/100 Dollars ($250,000.00) to any person or entity.
11.10 Subordinated Debt. If Borrower or any Guarantor makes any
payment on account of Subordinated Debt, except to the extent such payment is
allowed under any subordination agreement entered into with Bank.
11.11 Judgments. The filing of a notice of judgment lien against
Borrower or any Guarantor; or the recording of any abstract of judgment against
Borrower or any Guarantor in any county in which Borrower or any Guarantor has
an interest in real property; or the service of a notice of levy and/or of a
writ of attachment or execution, or other like process, against the assets of
Borrower or any Guarantor; or the entry of a judgment against Borrower or any
Guarantor; and with respect to any of the foregoing, the amount in dispute is in
excess of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00).
11.12 Guaranty. Any Guaranty of all or a portion of the Obligations
ceases for any reason to be in full force and effect, or any Guarantor fails to
perform any obligation under any Guaranty of all or a portion of the
Obligations, or any material misrepresentation or material misstatement exists
now or hereafter in any warranty or representation set forth in any Guaranty of
all or a portion of the Obligations or in any certificate delivered to Bank in
connection with such Guaranty.
11.13 Insecurity. There shall exist or occur any event or condition
which Bank in good faith believes impairs, or is substantially likely to impair,
the prospect of payment or performance by Borrower of its obligations under any
of the Loan Documents.
ARTICLE XII
BANK'S RIGHTS AND REMEDIES
12.1 Rights and Remedies. If an Event of Default shall occur, (a) any
Obligations of Borrower under any of the Loan Documents, any term thereof to the
contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to permit further borrowings hereunder shall
30
immediately cease and terminate; and (c) Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to resort to any or all security for any
credit accommodation from Bank subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank in connection with each of the Loan Documents may be
exercised at any time by Bank and from time to time after the occurrence of an
Event of Default, are cumulative and not exclusive, and shall be in addition to
any other rights, powers or remedies provided by law or equity. Bank may, at its
election, without notice of its election and without demand, do any one or more
of the following, all of which are authorized by Borrower:
12.1.1 Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
12.1.2 Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower authorizes Bank to enter the
premises where the Collateral is located, after reasonable notice, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or lien which in Bank's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to any of
▇▇▇▇▇▇▇▇'s owned premises, Borrower hereby grants Bank a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
12.1.3 Without notice to Borrower set off and apply to the
Obligations any and all (a) balances and deposits of Borrower held by Bank; or
(b) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank; or
12.1.4 Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 12.1, to use, without charge,
▇▇▇▇▇▇▇▇'s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 12.1,
▇▇▇▇▇▇▇▇'s rights under all licenses and all franchise agreements shall inure to
Bank's benefit.
12.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as ▇▇▇▇▇▇▇▇'s true and
lawful attorney to: (a) send requests for verification of accounts or notify
account debtors of Bank's security interest in the accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign ▇▇▇▇▇▇▇▇'s name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of accounts, verifications of accounts, and notices to account
debtors; (d) make, ▇▇▇▇▇▇, and adjust all claims under and decisions with
respect to ▇▇▇▇▇▇▇▇'s policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of
31
attorney to sign the name of ▇▇▇▇▇▇▇▇ on any of the documents described in
Section 6.3 upon an Event of Default. The appointment of Bank as ▇▇▇▇▇▇▇▇'s
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
12.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
12.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 8.9 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
12.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
12.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the UCC, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.
12.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
32
ARTICLE XIII
NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: ▇▇▇▇, ▇▇▇▇▇▇ & ASSOCIATES
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
FAX:(▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: COMERICA BANK-CALIFORNIA
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
ARTICLE XIV
CHOICE OF LAW; VENUE; AND JURY TRIAL WAIVER
This Agreement and all transactions contemplated hereunder and/or
evidenced hereby shall be governed by, construed under, and enforced in
accordance with the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa ▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
ARTICLE XV
GENERAL PROVISIONS
33
15.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by ▇▇▇▇▇▇▇▇ without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
15.2 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 15.10, shall continue in full force and effect for a
term ending on the Termination Date. Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
15.3 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
15.4 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
15.5 Severability of Provisions. In the event any one or more of the
provisions contained in this Agreement is held to be invalid, illegal or
unenforceable in any respect, then such provision shall be ineffective only to
the extent of such prohibition or invalidity, and the validity, legality, and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
15.6 Amendments. Neither this Agreement nor any provisions hereof may
be changed, waived, discharged or terminated, nor may any consent to the
departure from the terms hereof be given, orally (even if supported by new
consideration), but only by an instrument in writing signed by all parties to
this Agreement. Any waiver or consent so given shall be effective only in the
specific instance and for the specific purpose for which given.
15.7 Entire Agreement. This Agreement, together with the Loan
Documents embodies the entire agreement and understanding among and between the
parties hereto, and supersedes all prior or contemporaneous agreements and
understandings between said parties, verbal or written, express or implied,
relating to the subject matter hereof. No promises of any kind have been made by
Bank or any third party to induce Borrower to execute this Agreement. No course
of dealing, course of performance or trade usage, and no parol evidence of any
nature, shall be used to supplement or modify any terms of this Agreement.
34
15.8 Waiver. No failure to exercise and no delay in exercising any
right, power, or remedy hereunder shall impair any right, power, or remedy which
Bank may have, nor shall any such delay be construed to be a waiver of any of
such rights, powers, or remedies, or any acquiescence in any breach or default
hereunder; nor shall any waiver by Bank of any breach or default by Borrower
hereunder be deemed a waiver of any default or breach subsequently occurring.
All rights and remedies granted to Bank hereunder shall remain in full force and
effect notwithstanding any single or partial exercise of, or any discontinuance
of action begun to enforce, any such right or remedy. The rights and remedies
specified herein are cumulative and not exclusive of each other or of any rights
or remedies which Bank would otherwise have. Any waiver, permit, consent or
approval by Bank of any breach or default hereunder must be in writing and shall
be effective only to the extent set forth in such writing and only as to that
specific instance.
15.9 Interpretation. This Agreement and all agreements relating to
the subject matter hereof are the product of negotiation and preparation by and
among each party and its respective attorneys, and shall be construed
accordingly. The parties waive the provisions of California Civil Code (S)1654.
15.10 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities shall
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run, provided that so long as the
obligations set forth in the first sentence of this Section 15.10 have been
satisfied, and Bank has no commitment to make any Advances or to make any other
loans to Borrower, Bank shall release all security interests granted hereunder
and redeliver all Collateral held by it in accordance with applicable law.
15.11 Loan Information. Borrower agrees that Bank may provide
information relating to this Agreement or relating to Borrower to Bank's
parent, affiliates, subsidiaries and service providers. The Bank agrees to hold
any confidential information that it may receive from the Borrower pursuant to
this Agreement in confidence, except for disclosure: (a) to other lenders or
Affiliates of any Bank; (b) to legal counsel and accountants for the Borrower
or the Bank; (c) to other professional and service advisors to the Borrower or
the Bank, provided that the recipient has accepted such information subject to
a confidentiality agreement substantially similar to this Section 15.11; (d) to
regulatory officials having jurisdiction over the Bank, provided that the Bank
agrees to notify the Borrower of any such disclosures unless prohibited by
applicable law, or in connection with any legal proceeding to which the Bank
and the Borrower are adverse parties; (e) as required by law or legal process;
and (f) to another Person in connection with a disposition or proposed
disposition to that Person of all or part of the Bank's interests hereunder or
a participation interest in its Advances. For purposes of the foregoing,
"confidential information" shall mean all projections, information relating to
acquisitions, information relating to the Borrower's businesses and other
information respecting the Borrower or its subsidiaries reasonably considered
by the Borrower to be confidential, other than (i) information previously filed
with any governmental agency and available to the public, (ii) information
previously published in any public medium from a source other than, directly or
indirectly, the Bank, and (iii) information previously disclosed by the
Borrower to any person not associated with the
35
Borrower which does not owe a professional duty of confidentiality to the
Borrower or which has not executed an appropriate confidentiality agreement with
the Borrower. Nothing in this Section shall be construed to create or give rise
to any fiduciary duty of the Bank to the Borrower.
15.12 Cost and Expenses. ▇▇▇▇▇▇▇▇ agrees to pay on demand all
costs and expenses incurred by Bank in connection with the preparation,
execution, delivery, filing, and administration of the Loan Documents, and of
any amendment, modification, or supplement to the Loan Documents, including,
without limitation, the fees and out-of-pocket expenses of counsel for the Bank,
incurred in connection with advising the Bank as to its rights and
responsibilities hereunder. ▇▇▇▇▇▇▇▇ also agrees to pay all such costs and
expenses, including court costs, incurred in connection with enforcement of the
Loan Documents, or any amendment, modification, or supplement thereto, whether
by negotiation, legal proceedings, or otherwise. This provision shall survive
termination of this Agreement.
15.13 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
all signatures were upon the same instrument. Delivery of an executed
counterpart of the signature page to this Agreement by telefacsimile shall be
effective as delivery of a manually executed counterpart of this Agreement, and
any party delivering such an executed counterpart of the signature page to this
Agreement by telefacsimile to any other party shall thereafter also promptly
deliver a manually executed counterpart of this Agreement to such other party,
provided that the failure to deliver such manually executed counterpart shall
not affect the validity, enforceability, or binding effect of this Agreement.
36
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Loan
and Security Agreement to be executed as of the date first above written.
▇▇▇▇, ▇▇▇▇▇▇ & ASSOCIATES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
----------------------------
Title: CFO
-------------------------
COMERICA BANK - CALIFORNIA
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇
Its: Assistant Vice President
37
