EXHIBIT 10(i)
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of October 15, 1997
between ▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEES OF THE ▇▇▇▇▇▇ FAMILY TRUST
("Lender"), located at ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
EIP MICROWAVE, INC., a Delaware corporation ("Borrower"), located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 TERMS. In addition to the terms that are defined within this
Agreement, the following terms shall have the following definitions when used
in this Agreement:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of an Account.
"Accounts" means all presently existing and hereafter arising
accounts receivable, contract rights, and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods or the rendition
of services by Borrower, whether or not earned by performance, all credit
insurance, guaranties, and other security therefor, as well as all goods
returned to or reclaimed by Borrower, and Borrower's Books relating to any of
the foregoing.
"Agreement" means this Loan and Security Agreement and any riders,
addenda, extensions, supplements, amendments or modifications to or in
connection with this Loan and Security Agreement.
"Authorized Officer" means any officer of Borrower.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Sections 101 et seq.), as amended, and any successor statute.
"Borrower's Books" means all of Borrower's books and records
including all of the following: ledgers, records indicating, summarizing or
evidencing Borrower's assets (including the Collateral) or liabilities; all
information relating to Borrower's business operations or financial
condition; and all computer programs, disk or tape files, printouts, runs or
other computer prepared information, and the equipment containing such
information.
"Business Day" means any day which is not a Saturday, Sunday or
legal holiday.
"Code" means the California Uniform Commercial Code, as amended
from time to time.
"Collateral" means all of the following: the Accounts; the
Equipment; the General Intangibles; the Inventory; the Negotiable Collateral;
any money or other assets of Borrower which
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hereafter come into the possession, custody or control of Lender; and all
proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Equipment, General Intangibles,
Inventory, Negotiable Collateral, money, deposit accounts or other tangible
or intangible property resulting from the sale or other disposition of the
Collateral, or any portion thereof or interest therein, and the proceeds
thereof.
"Common Stock" means the common stock, $0.01 par value per share,
of Borrower.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, the Hazardous Materials Transportation
Act, the Toxic Substances Control Act, the regulations pertaining to such
statutes, and any other safety, health or environmental statutes, laws,
regulations or ordinances of the United States or of any state, county or
municipality in which Borrower conducts its business or the Collateral is
located.
"Equipment" means all of Borrower's present and hereafter acquired
computers, office machines, equipment, machinery. machine tools, motors,
furniture, furnishings, fixtures, motor vehicles, rolling stock, processors,
tools, parts, dies, jigs, goods (other than consumer goods, farm products or
inventory), wherever located, and any interest of Borrower in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions and improvements to any of the foregoing, wherever
located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a
single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means the events specified in SECTION 8.
"Fair Market Value" per share of Common Stock means: (a) if the
Common Stock is traded on an exchange, then the average closing price at
which a share of Common Stock is traded on the 10 trading days prior to the
date of determination; (b) if the Common Stock is traded over-the-counter on
the NASDAQ System, then the average of the bid and asked closing prices of a
share of Common Stock on said System on the 10 trading days prior to the date
of determination; (c) if the Common Stock is designated a National Market
System security, then the average closing price at which a share of Common
Stock traded on the 10 trading days prior to the date of determination; and
(d) if neither (a), (b) nor (c) applies, then the fair market value of the
Common Stock on the date of determination, as determined by the Board of
Directors of Borrower in good faith (which determination shall be conclusive
and binding on all persons).
"General Intangibles" means all of Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, service marks, trade
secrets, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, monies due under any royalty or
licensing agreements, route lists, infringement claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds and tax refund claims) other
than goods and Accounts, and Borrower's Books relating to any of the
foregoing.
"Hazardous Material" means any substance, material, emission or
waste which is or hereafter becomes regulated or classified as a hazardous
substance, hazardous material, toxic substance or solid waste under any
Environmental Law, asbestos, petroleum products, urea formaldehyde,
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polychlorhated biphenyls (PCBs), radon and any other hazardous or toxic
substance, material, emission or waste.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally
with its creditors or proceedings seeking reorganization, liquidation,
arrangement or other similar relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service, Borrower's present and future raw
materials, work in process, finished goods and materials used in or consumed
in Borrower's business, goods which have been returned to, repossessed by or
stopped in transit by Borrower, packing and shipping materials, wherever
located, any documents of title representing any of the above, and Borrower's
Books relating to any of the foregoing.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lender Expenses" means all of the following: costs and expenses
including taxes, assessments and insurance premiums) required to be paid by
Borrower under any of the Loan Documents which are paid or advanced by
Lender; filing, recording, publication, appraisal (including periodic
Collateral appraisals), real estate survey, environmental audit and search
fees assessed, paid or incurred by Lender in connection with Lender's
transactions with Borrower; costs and expenses incurred by Lender in the
disbursement or collection of funds to or from Borrower; charges resulting
from the dishonor of checks; costs and expenses paid or incurred by Lender to
correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Lender that result from third party claims
against Lender covered by Borrower's indemnification of Lender in SECTION
11.4; costs and expenses paid or incurred by Lender in enforcing or defending
the Loan Documents; and Lender's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing, defending or otherwise representing Lender
in connection with the Loan Documents or the Obligations (including attorneys
fees and expenses incurred in connection with a workout, a restructuring, an
action to lift the automatic stay of Section 362 of the Bankruptcy Code, any
other action or participation by Lender in an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations or any defense or
participation by Lender in any lender liability, preference or fraudulent
conveyance actions).
"Loan Documents" means, collectively, this Agreement, any Notes,
any security agreements, pledge agreements, deeds of trust, mortgages or
other encumbrances or agreements which secure the Obligations, any guaranties
of the Obligations, any lock box or blocked account agreements and any other
agreement entered into between Borrower or any guarantor of the Obligations
and Lender relating to or in connection with this Agreement.
"Multiemployer Plan" means a multiemployer plan as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of
Borrower or any ERISA Affiliate.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit, notes, drafts, instruments, certificated and
uncertificated securities, documents, leases and chattel paper, and
Borrower's Books relating to any of the foregoing.
"Note" means any promissory note made by Borrower to the order of
Lender concurrently herewith or at any time hereafter.
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"Obligations" means loans, advances, debts, liabilities (including
all amounts charged to Borrower's loan account pursuant to any agreement
authorizing Lender to charge Borrower's loan account), obligations, fees,
lease payments, guaranties, covenants and duties owing by Borrower to Lender
of any kind and description (whether pursuant to or evidenced by the Loan
Documents, by any note or other instrument or by any other agreement between
Lender and Borrower, and irrespective of whether for the payment of money),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, including any debt, liability or obligation
owing from Borrower to others which Lender may obtain by assignment or
otherwise, and all interest thereon, including any interest that, but for the
provisions of the Bankruptcy Code, would have accrued, and all Lender
Expenses which Borrower is required to pay or reimburse pursuant to the Loan
Documents, by law or otherwise.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability company, joint
ventures, trusts, land trusts, business trusts or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"Plan" means any plan described in ERISA Section 3(2) maintained
for employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Reference Rate" means the variable rate of interest, per annum,
published by The Wall Street Journal as the "Prime Rate" and based on "the
base rate on corporate loans posted by at least 75% of the nation's 30
largest banks". The Reference Rate is nothing more nor less than an index for
determining the interest rate payable under the terms of this Agreement. The
Reference Rate is not necessarily the best rate, or any other definition of
rates, offered by the banks that establish the rate or by Lender. In the
event The Wall Street Journal ceases to publish the "Prime Rate", Lender may
substitute any similar index for the Reference Rate.
"Term Loan" means any term loan made by Lender to Borrower,
evidenced by and repayable in accordance with the terms and conditions of a
Note.
1.2 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term "including" is not limiting and
the term "or" has the inclusive meaning generally represented by the phrase
"and/or". The words hereof, herein, hereby, hereunder, and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, subsection, clause, exhibit and
schedule references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in any of the other Loan Documents to this
Agreement or any of the other Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions and supplements thereto and thereof.
1.3 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles ("GAAP") as in effect from time to time. When used
herein, the term financial statements shall include the notes and schedules
thereto.
1.4 RIDERS, EXHIBITS, ETC. The Conditions Precedent Rider to this
Agreement and all of the other riders, exhibits, addenda and schedules to
this Agreement shall be deemed incorporated herein by reference.
1.5 CODE. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
2. ADVANCES AND TERMS OF PAYMENT
2.1 LOANS.
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A. REVOLVING ADVANCES; REVOLVING ADVANCE LIMIT. Upon the
request of Borrower, made at any time or from time to time during the term
hereof, and so long as no Event of Default has occurred and is continuing,
Lender shall, in its sole discretion, make advances (the "Revolving
Advances") to Borrower; provided, however, that in no event shall the
aggregate amount of the outstanding Revolving Advances be greater than, at
any time, the sum of Four Hundred Fifty Thousand Dollars ($450,000) (the
"Revolving Advance Limit"). Lender may reduce the Revolving Advance Limit or
establish reserves with respect to borrowing availability if Lender
determines, in its sole discretion, that there has occurred, or is likely to
occur, an impairment of the prospect of repayment of all or any portion of
the Obligations, the value of the Collateral or the validity or priority of
Lender's security interests in the Collateral. The Revolving Advances will be
evidenced by and repayable in accordance with the terms and conditions of a
Note of even date herewith. Any Revolving Advances made by Lender to
Borrower shall constitute Obligations and shall be secured by the Collateral.
The occurrence of a default under such Note or under any Note made in
respect of any Revolving Advances shall constitute an Event of Default
hereunder.
B. TERM LOAN. Concurrently with the funding of the initial
Revolving Advance, Lender will make a term Loan to Borrower in the original
principal amount of One Million Dollars ($1,000,000 ), to be evidenced by and
repayable in accordance with the terms and conditions of a Note of even date
herewith. Such Term Loan and any other Term Loan subsequently made by Lender
to Borrower shall constitute Obligations and shall be secured by the
Collateral. The occurrence of a default under such Note or under any Note
made in respect of any subsequent Term Loan shall constitute an Event of
Default hereunder.
C. ADVANCE LIMIT. The sum of the Revolving Advance Limit
PLUS the principal amount of all Term Loans outstanding from time to time, if
any, is referred to herein as the Advance Limit.
2.2 OVERADVANCES. All Revolving Advances made hereunder shall be
added to and deemed part of the Obligations when made. If, at any time and
for any reason, the aggregate amount of the outstanding Revolving Advances
exceeds the dollar limitations contained in SECTION 2.1A (an "Overadvance"),
then Borrower shall, upon demand by Lender, immediately pay to Lender, in
cash, the amount of such excess.
2.3 OVERADVANCE FEE. Without affecting Borrower's obligation to
immediately repay to Lender the amount of each Overadvance in accordance with
the provisions of SECTION 2.2, in the event Lender agrees to permit any
Overadvance to exist and continue, and in consideration for permitting such
Overadvance to exist and continue, Borrower shall pay to Lender a fee in an
amount equal to two percent (2.0%) per month on the amount of the Overadvance
for each day any Overadvance exists. All such fees shall be computed on the
basis of a thirty (30) day month for the actual number of days elapsed.
2.4 AUTHORIZATION TO MAKE REVOLVING ADVANCES. Borrower hereby
authorizes Lender to make the Revolving Advances based upon telephonic or
other instructions received from anyone purporting to be an Authorized
Officer, or at the discretion of Lender without instructions from or notice
to Borrower, if such Revolving Advances are necessary to satisfy any
Obligations. All requests for Revolving Advances hereunder shall specify the
date on which the requested Revolving Advance is to be made (which day shall
be a Business Day) and the amount of the requested Revolving Advance.
Requests received after 11:00 am. Pacific time on any day shall be deemed to
have been made as of the opening of business on the immediately following
Business Day. All Revolving Advances made under this Agreement shall be
conclusively presumed to have been made to, at the request of, and for the
benefit of Borrower when deposited to the credit of Borrower or otherwise
disbursed in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
2.5 INTEREST.
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A. BASIC RATE; DEFAULT RATE. Except where specified to the
contrary in any Loan Document, the aggregate outstanding amount of all
Obligations shall bear interest at the rate of five percent (5%) per annum
above the Reference Rate. The aggregate outstanding amount of all
Obligations shall bear interest, from and after written notice by Lender to
Borrower of the occurrence of an Event of Default and without constituting a
waiver of any such Event of Default, at the rate of eight percent (8%) per
annum above the Reference Rate; PROVIDED, HOWEVER, that in the event an
Insolvency Proceeding is commenced by or against Borrower, Lender may charge
such default rate of interest without providing written notice thereof to
Borrower. All interest payable under the Loan Documents shall be computed on
the basis of a three hundred sixty (360) day year for the actual number of
days elapsed, based on the aggregate amount of the Obligations that are
outstanding on each day. Interest shall continue to accrue until all of the
Obligations are paid in full.
B. INITIAL RATE. The Reference Rate as of the date of this
Agreement is eight and one half percent (8.50%) per annum, and, therefore,
the effective rate of interest hereunder as of the date of this Agreement is
thirteen and one half percent (13.50%) per annum. The interest rate payable
by Borrower under the terms of this Agreement shall be adjusted in accordance
with any change in the Reference Rate from time to time on the date of any
such change. All interest payable by Borrower shall be due and payable on
the first day of each calendar month during the term of this Agreement.
2.6 VERIFICATION AND COLLECTION OF ACCOUNTS. Lender or Lender's
designee may, at any time, with or without notice to Borrower, (a) notify
Account Debtors of Borrower that the Accounts have been assigned to Lender
and that Lender has a security interest in the Accounts; (b) contact Account
Debtors of Borrower, either in writing or by telephone, for the purpose of
verifying the validity, amount or any other matter relating to any Accounts;
and (c) collect the Accounts directly and charge the collection costs and
expenses to Borrower's loan account. Unless and until Lender begins direct
collection of the Accounts or gives Borrower other written instructions,
Borrower shall collect all Accounts and the proceeds of other Collateral for
the benefit of Lender, receive in trust all payments thereon as Lender's
trustee and, if requested by Lender, immediately deliver said payments to
Lender in their original form as received by Borrower (subject to the terms
of any lockbox, blocked account or similar agreement entered into for the
purpose of collection of the Accounts).
2.7 CREDITING PAYMENTS. For the purpose of calculating the
availability of Revolving Advances under SECTION 2.1A, the receipt by Lender
of any wire transfer of funds, check or other item of payment shall be
applied immediately to provisionally reduce the Obligations, but such receipt
shall not be considered a payment on account unless such wire transfer is of
immediately available federal funds and is made to the appropriate deposit
account of Lender or unless and until such check or other item of payment is
honored when presented for payment. In the event any check or other item of
payment is not honored when presented for payment, Borrower shall be deemed
not to have made such payment and interest shall be recalculated accordingly.
Notwithstanding anything to the contrary contained herein, any wire transfer,
check or other item of payment received by Lender after 11:00 am. Pacific
time shall be deemed to have been received by Lender as of the opening of
business on the immediately following Business Day.
2.8 ANNUAL FEE. Borrower shall pay Lender an annual fee (the
"Annual Fee") in the amount of Eleven Thousand Five Hundred Dollars ($11,500).
The Annual Fee shall be fully earned and is due and payable on the date
that the initial Revolving Advance is made hereunder. After the anniversary
of the date of this Agreement, the Annual Fee shall be prorated and paid on a
monthly basis by Borrower for all renewal terms or so long as any of the
Obligations are outstanding.
2.9 FACILITY FEE. Borrower shall pay Lender facility fees (the
"Facility Fees") as follows:
A. A Facility Fee of Seventy Thousand Five Hundred Dollars
($70,500) shall be fully earned on the date that the initial Revolving
Advance is made hereunder and shall be payable
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by Borrower on the date that is three months after the date that the initial
Revolving Advance is made hereunder (the "3-Month Date").
B. If the principal amount of the Obligations outstanding on
the 3-Month Date exceeds $1,000,000, then an additional Facility Fee of
Seventy Thousand Five Hundred Dollars ($70,500) shall be fully earned and
shall be payable by Borrower on the 3-Month Date.
C. If the principal amount of the Obligations outstanding on
the date that is six months after the date that the initial Revolving Advance
is made hereunder (the "6-Month Date") exceeds $1,000,000, then an additional
Facility Fee of One Hundred Forty One Thousand ($141,000) shall be fully
earned and shall be payable by Borrower on the 6-Month Date.
Borrower shall have the right to pay the Facility Fee in cash or by issuance
of Common Stock. The number of shares of Common Stock issuable as payment
for a Facility Fee shall equal (a) the applicable Facility Fee divided by (b)
the Fair Market Value per share of Common Stock on the date such Facility Fee
is payable to Lender.
2.10-2.11 [INTENTIONALLY OMITTED]
2.12 AUDIT FEE. Borrower shall pay Lender an audit fee in an
amount equal to Five Hundred Dollars ($500) for each audit of Borrower
performed by Lender subsequent to the making of the initial Revolving Advance
hereunder.
2.13 LATE REPORTING FEE. Borrower shall pay Lender a fee in an
amount equal to Fifty Dollars ($50) per document per day for each Business
Day any report, financial statement or schedule required to be delivered to
Lender by this Agreement is past due.
2.14 MISCELLANEOUS FEES. Borrower shall pay Lender its customary
fees for wire transfers (including, a premium for early and late transfers),
returned checks, letter of credit guarantees and any other services provided
by Lender to Borrower that are incidental to this Agreement. Upon Borrower's
request, Lender shall provide Borrower with a written schedule of the amounts
of all such miscellaneous fees.
2.15 MAXIMUM CHARGES. In no event shall interest on the
Obligations exceed the highest lawful rate in effect from time to time. It is
not the intention of the parties hereto to make an agreement which violates
any applicable state or federal usury laws. In no event shall Borrower pay
or Lender accept or charge any interest which, together with any other
charges upon the principal or any portion thereof, exceeds the maximum lawful
rate of interest allowable under any applicable state or federal usury laws.
Should any provision of this Agreement or any existing or future Notes or
Loan Documents between the parties be construed to require the payment of
interest which, together with any other charges upon the principal or any
portion thereof, exceeds the maximum lawful rate of interest, then any such
excess shall be applied to the remaining principal balance, if any, and the
remainder refunded to Borrower.
3. TERM OF AGREEMENT AND EARLY TERMINATION
3.1 TERM. This Agreement shall become effective in accordance
with Section 14.1 and shall continue in full force and effect for a term
ending one (1) year after the date hereof and shall be deemed automatically
renewed for successive terms of one (1) month thereafter until terminated as
of the end of the initial term or any renewal term (each a "Term") by either
party giving the other at least sixty (60) days written notice.
3.2 EARLY TERMINATION. Borrower, subject to the payment of the
fee described below, may terminate this Agreement other than at the end of
the then current Term by giving Lender prior
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written notice of its intention to effect an early termination of this
Agreement. Lender may terminate this Agreement at any time upon or after the
occurrence of an Event of Default. In view of the impracticability and
extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Lender's lost profits as a
result of an early termination of this Agreement, in either of the instances
described in the preceding two sentences, Borrower shall pay to Lender, upon
the effective date of such early termination and in addition to all other
Obligations, an early termination fee (the "Early Termination Fee") in an
amount equal to Eight Thousand Dollars ($8,000) per month for the period
commencing on the effective date of such early termination and ending on the
first anniversary of the date hereof. No Early Termination Fee is payable for
an early termination following the first anniversary of the date hereof. The
Early Termination Fee shall be presumed to be the amount of damages sustained
by Lender as the result of the early termination and Borrower agrees that it
is reasonable under the circumstances currently existing. The Early
Termination Fee shall be deemed included in the Obligations. Notwithstanding
anything herein to the contrary, if and to the extent the Early Termination
Fee constitutes interest under applicable law, the Early Termination Fee,
when added to all other interest contracted for, charged or received under
this Agreement or any other Loan Documents, shall not exceed, and shall be
limited to an amount which constitutes, interest at the maximum lawful rate
of interest allowable under applicable law.
3.3 EFFECT OF TERMINATION. Upon termination of this Agreement,
all of the Obligations shall be immediately due and payable in full. No
termination of this Agreement shall relieve or discharge Borrower of
Borrower's duties, obligations and covenants hereunder until all of the
Obligations have been fully and indefeasibly paid and satisfied, and Lender's
continuing security interest in the Collateral shall remain in effect until
all of the Obligations have been fully and indefeasibly paid and satisfied.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Lender
a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each
and all of its covenants and duties under the Loan Documents. Lender's
security interest in the Collateral shall attach to all Collateral without
further act on the part of Lender or Borrower. Other than sales of Inventory
(including Inventory consisting of Equipment but not Equipment used in the
production of goods sold by Borrower) to buyers in the ordinary course of
business, Borrower has no authority, express or implied, to dispose of any
item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, upon the request of Lender, immediately endorse and assign
such Negotiable Collateral to Lender and deliver physical possession of such
Negotiable Collateral to Lender.
4.3 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall
execute and deliver to Lender, concurrently with Borrower's execution and
delivery of this Agreement and at any time thereafter at the request of
Lender, all financing statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Lender may reasonably request, in form satisfactory to Lender,
to perfect and continue perfected Lender's security interest in the
Collateral and in order to fully consummate all of the transactions
contemplated hereunder and under the other Loan Documents.
4.4 POWER OF ATTORNEY. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and any of Lender's officers,
employees or agents designated by Lender) as Borrower's true and lawful
attorney-in-fact, and Lender, or Lender's agent. may, without notice to
Borrower and in either Borrower's or Lender's name, but at the cost and
expense of Borrower, at such time
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or times as Lender in its sole discretion may determine: (a) demand payment
of the Accounts from the Account Debtors, enforce payment of the Accounts by
legal proceedings or otherwise, and generally exercise all of Borrower's
rights and remedies with respect to the collection of the Accounts; (b) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (c) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection
with any of the Collateral; (d) sign Borrower's name on any of documents
described in Section 4.3 or on any other similar documents to be executed,
recorded or filed in order to perfect or continue perfected Lender's security
interest in the Collateral; (e) sign Borrower's name on any invoices, bills
of lading, freight bills, chattel paper, documents, instruments or similar
documents or agreements relating to the Accounts, Inventory or other
Collateral, drafts against Account Debtors, schedules and assignments of
Accounts, verifications of Accounts and notices to Account Debtors; (f) send
requests for verification of Accounts; (g) endorse Borrower's name on any
checks, notes, acceptances, money orders, drafts or other items of payment or
proceeds relating to any Collateral that may come into Lender's possession
and deposit the same to the account of Lender for application to the
Obligations; (h) do all other acts and things necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement or any
of the other Loan Documents; (i) at any time that an Event of Default has
occurred and is continuing, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Lender,
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; (j) at any
time that an Event of Default has occurred and is continuing, use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral and to which Borrower has access; (k) at any time
that an Event of Default has occurred and is continuing, make, settle and
adjust all claims under Borrower's policies of insurance, make all
determinations and decisions with respect to such policies of insurance and
endorse the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance; (l) at any time that
an Event of Default has occurred and is continuing, sell or assign any of the
Accounts and other Collateral upon such terms, for such amounts and at such
time or times as Lender deems advisable; and (m) at any time that an Event of
Default has occurred and is continuing, settle, adjust or compromise disputes
and claims respecting the Accounts directly with Account Debtors, for amounts
and upon terms that Lender determines to be reasonable, and, in furtherance
thereof, execute and deliver any documents and releases that Lender
determines to be necessary. The appointment of Lender as Borrower's
attorney-in-fact and each and every one of Lender's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have
been fully repaid and performed and this Agreement has been terminated.
4.5 RIGHT TO INSPECT. Lender, through any of its officers,
employees or agents, shall have the right at any time or times during
Borrower's usual business hours, or during the usual business hours of any
third party having control over any of Borrower's Books. to inspect
Borrower's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral or Borrower's financial condition. Lender
also shall have the right at any time or times during Borrower's usual
business hours to inspect and examine the Inventory and the Equipment and to
check and test the same as to quality, quantity, value and condition. If an
Event of Default has occurred or if Lender reasonably believes that an Event
of Default has occurred, Lender may conduct any of the inspections referenced
in this SECTION 4.5 at any time without regard to Borrower's or any third
party's usual business hours.
5. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to
Lender and each such representation and warranty shall be deemed to be
repeated with each Revolving Advance made by Lender and shall be conclusively
presumed to have been relied on by Lender regardless of any investigation
made or information possessed by Lender. The following representations and
warranties shall be cumulative and in addition to any and all other
representations and warranties which Borrower shall now or hereafter give, or
cause to be given, to Lender.
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5.1 NO PRIOR ENCUMBRANCES; SECURITY INTERESTS. Borrower has good
and indefeasible title to the Collateral, free and clear of liens, claims,
security interests or encumbrances, except (a) the security interests granted
to Lender by Borrower, (b) the security interests disclosed in the UCC
searches attached hereto as SCHEDULE A and (c) any security interest which
Borrower has disclosed in writing to Lender and to which Lender has given its
prior written consent.
5.2 ACCOUNTS. All of Borrower's Accounts constitute bona fide
vesting obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, and, in the case of Accounts created by the sale and delivery of
Inventory, the Inventory giving rise to such Accounts has been delivered to
the Account Debtor.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, processor or similar
party unless Lender has consented thereto in writing and are located only at
the following locations: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, and ▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
however demonstration units typically are not stored at this location and are
in the possession of sales personnel, representatives and/or customers in the
ordinary course of business.
5.5 INVENTORY RECORDS. Borrower keeps correct and accurate
records itemizing and describing the kind, type, quality and quantity of the
inventory and Borrower's cost therefor.
5.6 LOCATION OF PRINCIPAL OFFICE. The principal office of
Borrower is located at the address stated in the first paragraph of this
Agreement.
5.7 DUE INCORPORATION AND QUALIFICATION. Borrower is a
corporation duly organized and existing and in good standing under the laws
of the state of its incorporation and is qualified or licensed to do business
in, and is in good standing in, any state in which the failure to be
qualified or licensed and in good standing could have a material adverse
effect on Borrower's business or the Collateral.
5.8 FICTITIOUS NAME(S). Borrower is conducting its business at
the present time under the following trade or fictitious name(s) : none.
Borrower has complied with the fictitious name laws of all jurisdictions in
which compliance is required in connection with its use of such name(s).
During the five (5) years prior to the date of this Agreement, Borrower
conducted business under the following trade or fictitious name(s) in
addition to those stated above: none
5.9 PERMITS AND LICENSES. Borrower holds all licenses, permits,
franchises, approvals and consents as are required in the conduct of its
business and the ownership and operation of its properties.
5.10 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of the Loan Documents to which Borrower is a party are within
Borrower's corporate powers, have been duly authorized and are not in
conflict with nor constitute a breach of any provision contained in
Borrower's Articles or Certificate of Incorporation or Bylaws, nor will they
create a default under any material agreement to which Borrower is a party.
5.11 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower has
no knowledge or notice of any pending, threatened or imminent litigation,
governmental investigations, or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of the Obligations, except for ongoing
collection matters in which Borrower is the plaintiff and such matters as
have been disclosed to Lender in writing.
5.12 TAXES. All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against Borrower
or any of its property or in connection with Borrower's business have been
paid in full prior to delinquency or the expiration of any extension period.
10
5.13 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. All
financial statements relating to Borrower which have been or may hereafter be
delivered by Borrower to Lender have been prepared in accordance with GAAP
and fairly present Borrower's financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has been no
material adverse change in the financial condition of Borrower since the date
of the most recent of such financial statements submitted to Lender.
5.14 SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay or defraud either present or
future creditors of Borrower.
5.15 ERISA. Neither Borrower, nor any ERISA Affiliate nor any Plan
is or has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a), or any of the published
interpretations thereof. No lien upon the assets of Borrower has arisen with
respect to any Plan. No prohibited transaction within the meaning of ERISA
Section 406 or IRC Section 4975(c) has occurred with respect to any Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any Plan
or Multiemployer Plan when due. There is no accumulated funding deficiency
in any Plan, whether or not waived.
5.16 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS. Borrower has
complied with all Environmental Laws. Except as previously disclosed to
Lender in writing, Borrower has not caused or permitted any Hazardous
Materials to be located, incorporated, generated, stored, manufactured,
transported to or from, released, disposed of or used at, upon, under or
within any premises at which Borrower conducts its business, or in connection
with Borrower's business. To the best of Borrower's knowledge, no prior
owner or operator of any premises at which Borrower conducts its business has
caused or permitted any of the above to occur at, upon, under or within any
of such premises.
5.17 INTELLECTUAL PROPERTY. Borrower does not own or have rights
as licensee in or to any trademarks or patents or have any trademark or
patent applications pending, except as disclosed in SCHEDULE B attached
hereto.
5.18 LABOR AND EMPLOYMENT DISPUTES. There are no pending
grievances, disputes or controversies with any union or other organization of
Borrower's employees, or pending threats of strikes or work stoppages, or
demands for collective bargaining by any union or other organization of
Borrower's employees.
5.19 SENIOR INDEBTEDNESS. Borrower shall perform and comply with
all obligations with respect to any senior indebtedness to which the
Obligations under the Loan Documents are subordinated.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that during the term of this
Agreement and until payment in full of the Obligations, and unless Lender
shall otherwise consent in writing (which consent may be granted or denied in
Lender's sole and absolute discretion), Borrower shall do all of the
following:
6.1 ACCOUNTING SYSTEM. Borrower at all times shall maintain a
standard and modern system of accounting in accordance with GAAP with ledger
and account cards or computer tapes, disks, printouts and records pertaining
to the Collateral which contain information as may from time to time be
requested by Lender. Borrower also shall keep proper books of account
showing all sales, claims and allowances on its Inventory.
11
6.2 COLLATERAL REPORTS. Borrower shall deliver to Lender, no
later than the fifteenth day of each month during the term of this Agreement,
a detailed aging of the Accounts, a reconciliation statement and a summary
aging, by vendor, of all accounts payable and any book overdraft. Borrower
shall deliver to Lender, as Lender may from time to time require, collection
reports, sales journals, invoices, original delivery receipts, customers'
purchase orders, shipping instructions, bills of lading and other
documentation respecting shipment arrangements. Absent such a request by
Lender, copies of all such documentation shall be held by Borrower as
custodian for Lender.
6.3 RETURNS. Returns and allowances, if any, as between Borrower
and its Account Debtors, shall be permitted by Borrower on the same basis and
in accordance with the usual and customary practices of Borrower as they
exist at the time of the execution and delivery of this Agreement. If any
Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and, if Borrower accepts such return,
issue a credit memorandum (with a copy to be sent to Lender) in the
appropriate amount to such Account Debtor. Borrower shall promptly notify
Lender of all returns and recoveries and of all disputes and claims.
6.4 DESIGNATION OF INVENTORY. Borrower shall now and from time to
time hereafter. but not less frequently than monthy, execute and deliver to
Lender a designation of Inventory specifying Borrower's cost and the
wholesale market value of Borrower's raw materials, work in process and
finished goods, and further specifying such other information as Lender may
reasonably request.
6.5 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Lender: (a) as soon as available, but in any event within thirty
(30) days after the end of each of Borrower's fiscal quarters during each of
Borrower's fiscal years, a company prepared balance sheet and profit and loss
statement covering Borrower's operations during such period; and (b) as soon
as available, but in any event within ninety (90) days after the end of each
of Borrower's fiscal years, financial statements of Borrower for each such
fiscal year, audited by independent certified public accountants acceptable
to Lender. Notwithstanding the foregoing, Lender reserves the right to
require Borrower to provide Lender with company prepared financial statements
on a monthly (rather than quarterly) basis. All such annual financial
statements shall include a balance sheet and profit and loss statement,
together with the accountants' letter to management. Borrower shall also
deliver Borrower's Form 10-Qs, 10-Ks or 8-Ks, and any other filings made by
Borrower with the Securities and Exchange Commission, if any, as soon as the
same become available, and any other report reasonably requested by Lender
relating to the Collateral or the financial condition of Borrower, including
financial projections, and a certificate signed by the chief financial
officer or chief executive officer of Borrower to the effect that all
reports, statements or computer prepared information of any kind or nature
delivered or caused to be delivered to Lender under this Section 6.5 fairly
present the financial condition of Borrower and that there exists on the date
of delivery of such certificate to Lender no condition or event which
constitutes an Event of Default.
6.6 LITIGATION. Borrower shall promptly notify Lender in writing
of any litigation, governmental investigations or criminal prosecutions
involving Borrower, other than collection matters in which Borrower is the
plaintiff.
6.7 TAX RETURNS, RECEIPTS. Borrower shall deliver to Lender
copies of each of Borrower's federal income tax returns, and any amendments
thereto, within thirty (30) days after the filing thereof with the Internal
Revenue Service. Furthermore, Borrower shall deliver to Lender, promptly
upon request by Lender, satisfactory evidence of Borrower's payment of all
federal withholding taxes required to be paid by Borrower.
6.8 GUARANTOR TAX RETURNS. Borrower shall cause each guarantor of
the Obligations to deliver to Lender copies of such guarantor's federal
income tax returns within thirty (30) days after the filing thereof with the
Internal Revenue Service.
12
6.9 TITLE TO EQUIPMENT. Upon Lender's request, Borrower shall
immediately deliver to Lender, properly endorsed, any and all evidences of
ownership of, or certificates of title or applications for title to, any
items of Equipment.
6.10 MAINTENANCE OF EQUIPMENT. Borrower shall keep and maintain
the Equipment in good operating condition and repair and shall make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Borrower shall not
permit any item of Equipment to become a fxture to real estate or an
accession to other property, and the Equipment is now and shall at all times
remain personal property.
6.11 TAXES. All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against Borrower
or any of its property or in connection with Borrower's business shall be
paid in full prior to delinquency or the expiration of any extension period.
Borrower shall make due and timely payment or deposit of all federal, state
and local taxes, assessments or contributions required of it by law and will
execute and deliver to Lender, on demand, appropriate certificates attesting
to the payment or deposit thereof. Borrower shall make timely payment or
deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws conceming F.I.C.A., F.U.T.A., state
disability and local, state and federal income taxes, and shall, upon
request, fumish Lender with proof satisfactory to Lender indicating that
Borrower has made such payments or deposits.
6.12 INSURANCE. Borrower, at its expense, shall keep and maintain
the Collateral insured against all risk of loss or damage from fire, theft,
vandalism, malicious mischief, explosion, sprinklers and all other hazards
and risks of physical damage included within the meaning of the term
"extended coverage" in such amounts as are ordinarily insured against by
other similar businesses. Borrower shall also keep and maintain
comprehensive general public liability insurance and property damage
insurance, and insurance against loss from business interruption, insuring
against all risks relating to or arising from Borrower's ownership and use of
the Collateral and Borrower's other assets and the operation of Borrower's
business. All such policies of insurance shall be in such form, with such
companies and in such amouns as may be satisfactory to Lender. Borrower
shall deliver to Lender certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All such policies of
insurance (except those of public liability and property damage) shall
contain a Lender's Loss Payable endorsement in a form satisfactory to Lender,
naming Lender as sole loss payee thereof, and shall contain a waiver of
warranties. All proceeds payable under any such policy shall be payable to
Lender to be applied to the Obligations.
6.13 NO OFFSETS OR COUNTERCLAIMS. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower shall be made
without offset or counterclaim, and Borrower hereby waives any right to
offset, against the repayment of the Obligations, any claims it may have
against Lender.
6.14 LENDER EXPENSES. Borrower shall immediately and without
demand reimburse Lender for all sums expended by Lender which constitute
Lender Expenses and Borrower hereby authorizes and approves all Revolving
Advances and payments by Lender for items constituting Lender Expenses.
Borrower acknowledges that Lender Expenses include, among other things, (a)
Lender's reasonable attorneys fees and expenses incurred in defending or
otherwise representing Lender concerning the Loan Documents or the
Obligations and (b) charges resulting from the dishonor of checks. Since
Lender Expenses are a part of the Obligations which are secured by the
Collateral, Lender shall not be required to discharge any lien or terminate
any security interest in the Collateral unless and until (y) Borrower and
Lender execute a mutual general release of liability and indemnification in
favor of and acceptable to Lender and (z) to the extent another financial
institution refinances the Obligations, such financial institution delivers
an agreement. acceptable to Lender, to indemnify Lender for loss arising from
checks delivered to Lender for collection and payment of the Obligations
which are returned for non-payment or for any other reason.
13
6.15 COMPLIANCE WITH LAW. Borrower shall comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental authorities relating to Borrower and the conduct of Borrower's
business, including the Fair Labor Standards Act and the Americans with
Disabilities Act.
6.16 LOCATION OF INVENTORY AND EQUIPMENT. Borrower shall keep the
Inventory and Equipment only at the locations identified in SECTION 5.5.
6.17 ENVIRONMENTAL LAWS AND HAZARDOUS MATERIALS. Borrower shall
not permit any lien under any Environmental Law to be filed against any of
the Collateral or any of Borrower's real property in which Lender holds a
lien, and will promptly notify Lender of any proceeding, inquiry or claim
relating to any alleged violation of any Environmental Law, or any alleged
loss, damage or injury resulting from any Hazardous Material. Lender shall
have the right to join and participate in, as a party if it so elects, any
legal or administrative proceeding initiated against Borrower or any
guarantor of the Obligations with respect to any Hazardous Material or in
connection with any Environmental Law.
6.18 MANUFACTURING, DEVELOPMENT AND PROFITABILITY MILESTONES.
A. Commencing January 1, 1998, Borrower's sales of products
under the OEM Purchase Agreement dated May 28, 1997, shall be at least
$200,000 per quarter.
B. Borrower shall perform all of its obligations under the
Collaboration Agreement with Work GmbH and, unless the Collaboration
Agreement is otherwise terminated, Borrower shall use best efforts to cause
Work GmbH to deliver five fully functional pilot run Modules to Borrower
under the terms of the Collaboration Agreement no later than March 30, 1998.
C. Commencing with the three months ending August 31, 1998,
Borrower shall maintain positive net income on a rolling three month basis
(excluding any fees payable under this Agreement).
7. NEGATIVE COVENANTS
Borrower covenants and agrees that during the term of this
Agreement and until payment in full of the Obligations, Borrower will not do
any of the following without Lender's prior written consent (which consent
may be granted or denied in Lender's sole and absolute discretion):
7.1 INDEBTEDNESS. Create, incur, assume, permit or otherwise
become liable with respect to any indebtedness ouside of the ordinary and
usual course of Borrower's business, except (a) indebtedness set forth in
Borrower's latest financial statements submitted to Lender prior to the date
of this Agreement and renewals or extensions of such indebtedness and (b) the
Obligations.
7.2 LIENS. Create, incur, assume or permit to exist any security
interest, lien, pledge, mortgage or encumbrance on any Collateral or on any
of Borrower's real property in which Lender holds a lien, except (a) the
security interests granted to Lender by Borrower, (b) the security interests
disclosed in the UCC searches attached hereto as SCHEDULE A and (c) any
security interest which Borrower has disclosed in writing to Lender and to
which Lender has given its prior written consent.
7.3 EXTRAORDINARY TRANSACTIONS. Enter into any transaction not in
the ordinary and usual course of Borrower's business, including the sale,
lease or other disposition of, whether by sale or otherwise, any of
Borrower's assets other than sales of Inventory (including Inventory
consisting of Equipment but not Equipment used in the production of goods
sold by Borrower) in the ordinary and usual course of Borrower's business; or
make any advance, loan or capital contribution to any Person except in the
ordinary and usual course of Borrower's business.
14
7.4 CHANGE NAME. Change Borrower's name, business structure or
identity, or add any new fictitious name.
7.5 FUNDAMENTAL CHANGES. Enter into any acquisition, merger,
consolidation. reorganization or recapitalization, or reclassify its capital
stock, or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or acquire by purchase or otherwise all or substantially all of
the assets, stock or other beneficial ownership interest of any other Person.
7.6 GUARANTY. Guaranty or otherwise become in any way liable with
respect to the obligations of any third party except by endorsement of
instruments or items of payment for deposit to the account of Borrower for
negotiation and delivery to Lender.
7.7 RESTRUCTURE. Make any change in Borrower's capital structure
or in the principal nature of Borrower's business operations.
7.8 PREPAYMENTS. Prepay any indebtedness owing to any third
party.
7.9 [INTENTIONALLY OMITTED]
7.10 COMPENSATION. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts, management fees or
other paymants, whether directly or indirectly, in money or otherwise, during
any fiscal year to all of Borrower's executives, officers, shareholders,
affiliates, and directors (or any relatives thereof) in an aggregate amount
in excess of one hundred thirty percent (130 %) of those paid in the prior
fiscal year.
7.11 LOANS TO INSIDERS. Make any loans, advances or extensions of
credit to any officer, director, executive, employee or shareholder of
Borrower, or any relative of any of the foregoing, or to any entity which is
a subsidiary of, related to, affiliated with or has common shareholders,
officers or directors with Borrower, which when aggregated with all other
loans, advances or extensions of credit to any or all of the above Persons at
any time outstanding during the term of this Agreement, exceeds Ten Thousand
Dollars ($10,000 ).
7.12 CAPITAL EXPENDITURES. Make any capital expenditure, or any
commitment therefor, in excess of Four Hundred Thousand Dollars ($400,000)
for any individual transaction or where the aggregate amount of such capital
expenditures, made or committed for in any fiscal year, is in excess of Four
Hundred Thousand Dollars ($400,000).
7.13 CONSIGNMENTS. Consign any Inventory; or sell any Inventory on
▇▇▇▇ and hold, sale on approval or other conditional terms of sale.
7.14 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or in stock) on, or purchase, acquire, redeem or retire
any of Borrower's capital stock, of any class, whether now or hereafter
outstanding.
7.15 ACCOUNTING METHODS. Modify or change its method of accounting
or enter into, modify or terminate any agreement currently existing or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Lender
information regarding the Collateral or Borrower's fnancial condition.
Borrower waives the right to assert a confidential relationship, if any, it
may have with any accounting firm or service bureau in connection with any
information requested by Lender pursuant to or in accordance with this
Agreement, and agrees that Lender may contact directly any such accounting
firm or service bureau in order to obtain such information.
7.16 SUSPENSION. Suspend or go out of business.
15
7.17 LOCATION OF PRINCIPAL OFFICE. Relocate its principal office
to a new location unless Lender is given thirty (30) days prior written
notice thereof.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an "Event of Default" under this Agreement.
8.1 FAILURE TO PAY. Borrower fails to pay when due and payable,
or when declared due and payable, any portion of the Obligations (whether
principal, interest, fees and charges due Lender, reimbursement of Lender
Expenses, or other amounts constituting Obligations);
8.2 FAILURE TO PERFORM. Borrower fails or neglects to perform,
keep or observe any term, provision, condition, representation, warranty,
covenant or agreement contained in this Agreement, in any of the other Loan
Documents or in any other present or future agreement between Borrower and
Lender;
8.3 MISREPRESENTATION. Any misstatement or misrepresentation now
or hereafter exists in any warranty, representation, statement or report made
to Lender by Borrower or any officer, employee, agent or director of
Borrower, or if any such warranty or representation is withdrawn by any of
them;
8.4 MISREPRESENTATION OF COLLATERAL. Any writing, document,
aging, certificate or other evidence of the Accounts shall be incomplete,
incorrect or misleading at the time the same is furnished to Lender; or
Borrower shall fail to immediately remit to Lender proceeds of Accounts and
other Collateral, pursuant to the terms of SECTION2.6;
8.5 MATERIAL ADVERSE CHANGE. There is a material adverse change
in Borrower's business or financial condition;
8.6 MATERIAL IMPAIRMENT. There is a material impairment of the
prospect of repayment of any portion of the Obligations owing to Lender or a
material impairment of the value or priority of Lender's security interests
in the Collateral;
8.7 LEVY OR ATTACHMENT. Any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any judicial officer;
8.8 INSOLVENCY BY BORROWER. An Insolvency Proceeding is commenced
by Borrower;
8.9 INSOLVENCY AGAINST BORROWER. An Insolvency Proceeding is
commenced against Borrower;
8.10 INJUNCTION AGAINST BORROWER. Borrower is enjoined, restrained
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.11 GOVERNMENT LIEN. A notice of lien, levy or assessment is
filed of record with respect to any of Borrower's assets by the United States
government, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency, or any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a
lien, whether ▇▇▇▇▇▇ or otherwise, upon any of Borrower's assets and the same
is not paid on the payment date thereof;
8.12 JUDGMENT. A judgment is entered against Borrower;
16
8.13 CROSS DEFAULT TO MATERIAL AGREEMENTS. There is a default in
any material agreement to which Borrower is a party with one or more third
parties or by which Borrower or Borrower's property or assets are bound;
8.14 SUBORDINATED DEBT PAYMENTS. Borrower makes any payment on
account of indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment
is permitted by the terms of the subordination agreement applicable to such
indebtedness;
8.15 LOSS OF GUARANTOR. Any guarantor of the Obligations dies,
terminates his/her/its guaranty, becomes the subject of an Insolvency
Proceeding, or contests his/her/its obligations under such a guaranty; or if
any such guaranty of the Obligations ceases to be valid or enforceable for
any reason;
8.16 ERISA VIOLATION. A prohibited transaction within the meaning
of ERISA Section 406 or IRC Section 4975(c) shall occur with respect to a
Plan which could have a material adverse effect on the financial condition of
Borrower; any lien upon the assets of Borrower in connection with any Plan
shall arise; Borrower or any ERISA Affiliate shall completely or partially
withdraw from a Multiemployer Plan and such withdrawal could, in the opinion
of Lender, have a material adverse effect on the financial condition of
Borrower, Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which Borrower or any of its ER1SA Affiliates
may be required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived; the voluntary or involuntary termination of any Plan which
termination could, in the opinion of Lender, have a material adverse effect
on the financial condition of Borrower, or Borrower shall fail to notify
Lender promptly and in any event within ten (10) days of the occurrence of
any event which constitutes an Event of Default under this clause or would
constitute such an Event of Default upon the exercise of Lender's judgment;
or
8.17 CRIMINAL PROCEEDINGS. Criminal proceedings are instituted
against Borrower, any member of Borrower's senior management or any guarantor
of the Obligations that could result in the forfeiture or loss of Collateral
or a material impairment of the financial condition of Borrower or any
guarantor of the Obligations.
Notwithstanding anything contained in this SECTION 8 to the
contrary, Lender shall refrain from exercising its rights and remedies and an
Event of Default shall not be deemed to have occurred by reason of the
occurrence of any of the events set forth in SECTIONS 8.7, 8.9, 8.11 or 8.12
of this Agreement if, within ten (10) days from the date thereof, the same is
released, discharged, dismissed, bonded against or satisfied; provided,
however, Lender shall not be obligated to make Revolving Advances to Borrower
during such period.
9. LENDER'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default, Lender 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;
(a) Declare all Obligations, whether evidenced by this
Agreement, any of the other Loan Documents or otherwise, immediately due and
payable in full;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, any of the other Loan Documents or
any other agreement between Borrower and Lender;
17
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Lender, but without
affecting Lender's rights and security interest in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Lender considers advisable
and, in such cases, Lender will credit Borrower's loan account with only the
net amounts received by Lender in payment of such disputed Accounts, after
deducting all Lender Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for Lender, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of Lender;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Lender considers necessary
or reasonable to protect its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Lender so requires and to deliver or
make the Collateral available to Lender at a place designated by Lender.
Borrower authorizes Lender to enter any premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest or compromise any encumbrance, charge or
lien that in Lender'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 Borrower's owned premises, Borrower hereby grants
Lender a license to enter into possession of such premises and to occupy the
same, without charge, in order to exercise any of Lender's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived) and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Lender (including any amounts received in a
lockbox or blocked account), or (ii) indebtedness at any time owing to or for
the credit or the account of Borrower held by Lender;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Lender (including any amounts received in a
lockbox or blocked account) to secure the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale and sell (in the manner provided for
herein) the Collateral. Lender is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in completing production of, advertising for sale and selling
any Collateral. Borrower's rights under all licenses and all franchise
agreements shall inure to Lender's benefit;
(j) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Lender determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Lender shall give notice of the disposition of the
Collateral as follows:
(1) Lender shall give the Borrower and each holder of a
security interest in the Collateral who has filed with Lender a written
request for notice, a notice in writing of the time and place of public sale
or, if the sale is a private sale or some other disposition other than a
public sale is to be made, then the time on or after which the private sale
or other disposition is to be made;
18
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least five (5)
calendar days before the date fixed for the sale, or at least five (5)
calendar days before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is perishable or threatens
to decline speedily in value. Notice to Persons other than Borrower claiming
an interest in the Collateral shall be sent to such addresses as they have
furnished to Lender:
(3) If the sale is to be a public sale, Lender shall
also give notice of the time and place by publishing a notice one time at
least five (5) calendar days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be held;
(l) Lender may credit bid and purchase at any public sale;
(m) Any deficiency that exists after disposition of the
Collateral as provided above shall be paid immediately by Borrower. Any
excess will be remitted without interest by Lender to the party or parties
legally entitled to such excess; and
(n) In addition to the foregoing, Lender shall have all
rights and remedies provided by law and any rights and remedies contained in
any other Loan Documents. All such rights and remedies shall be cumulative.
9.2 NO WAIVER. No delay on the part of Lender in exercising any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege under
this Agreement or otherwise, preclude other or further exercise of the right,
power or privilege or the exercise of any other right, power or privilege.
19
10. TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums or otherwise) due to third parties regarding the
Collateral, or fails to make any deposits or furnish any required proof of
payment or deposit, or fails to perform any of Borrower's other covenants
under the terms of this Agreement, then in its discretion and without prior
notice to Borrower, Lender may do any or all of the following: (a) make any
payment which Borrower has failed to pay or any part thereof; (b) set up such
reserves in Borrower's loan account as Lender deems necessary to protect
Lender from the exposure created by such failure; (c) obtain and maintain
insurance policies of the type described in SECTION 6.12 and take any action
with respect to such policies as Lender deems prudent; or (d) take any other
action deemed necessary by Lender to preserve and protect its interests and
rights under this Agreement. Any payments made by Lender shall not constitute
an agreement by Lender to make similar payments in the future or a waiver by
Lender of any Event of Default under this Agreement. Lender need not inquire
as to, or contest the validity of, any such expense, tax, security interest,
encumbrance or lien and the receipt of notice for the payment thereof shall
be conclusive evidence that the same was validly due and owing.
11. WAIVERS AND INDEMNIFICATIONS
11.1 WAIVERS. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of
any default, notice of nonpayment at maturity, notice of intention to
accelerate and notice of acceleration, so that Lender may exercise any and
all rights and remedies under the Loan Agreement or any other Loan Documents,
or as otherwise provided at law or in equity, immediately upon the occurrence
of any Event of Default, without any further notice, grace or opportunity to
cure whatsoever. Borrower further waives notice prior to Lender's taking
possession or control of the Collateral, any bond or security which might be
required by any court prior to allowing Lender to exercise any of Lender's
remedies, and the benefit of all valuation. appraisement and exemption laws.
Borrower agrees that Lender may compromise, settle or release without notice
to Borrower any accounts, documents, instruments, chattel paper or guaranties
at any time held by Lender on which Borrower may in any way be liable.
11.2 NO MARSHALING. Borrower, on its own behalf and on behalf of
its successors and assigns. hereby expressly waives all rights, if any, to
require a marshaling of assets by Lender or to require that Lender first
resort to some or any portion of the Collateral before foreclosing upon,
selling or otherwise realizing on any other portion thereof.
11.3 LENDER'S LIABILITY FOR COLLATERAL. So long as Lender complies
with its obligations, if any, under Section 9207 of the Code, Lender shall
not in any way or manner be liable or responsible for: (a) the safekeeping of
the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding
agency or other Person. All risk of loss, damage or destruction of the
Collateral shall be borne by Borrower.
11.4 INDEMNIFICATION. Borrower shall defend, indemnify and hold
harmless Lender, its directors, officers. agents, employees, participants and
assigns, from and against any and all claims, demands, costs, suits, actions,
causes of action, liabilities, damages, losses, obligations, judgments and
expenses, including attorneys fees and costs, of any nature whatsoever, in
any way relating to or arising from the transactions contemplated by this
Agreement or any other Loan Document (including those relating to or arising
from any alleged or actual violation of any Environmental Law, or any loss,
damage or injury resulting from any Hazardous Material); provided that the
foregoing indemnification shall not extend to liabilities, damages, losses,
obligations, judgments and expenses arising from the gross negligence or
willful misconduct of Lender. This indemnification provision shall survive
the termination of this Agreement. The indemnities provided for herein shall
not require payment as a condition to recovery.
20
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement, the Loan Documents or any other
agreement entered into in connection herewith shall be in writing and (except
for financial statements and other informational documents which may be sent
by first-class mail, postage prepaid) shall be personally delivered or sent
by registered or certified mail, postage prepaid, return receipt requested,
or by receipted overnight delivery service to Borrower or to Lender, as the
case may be, at their addresses set forth below:
If to Borrower: EIP MICROWAVE, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
If to Lender: ▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇ ▇. ▇▇▇▇▇▇,
TRUSTEES OF THE ▇▇▇▇▇▇ FAMILY TRUST
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this SECTION 12, other
than notices by Lender in connection with Sections 9504 and 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or
three (3) calendar days after the deposit thereof in the mail. Borrower
acknowledges and agrees that notices sent by Lender in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or otherwise sent by Lender in accordance with the delivery methods set
forth above.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings or other papers
delivered to Lender may be destroyed or otherwise disposed of by Lender four
(4) months after they are delivered to or received by Lender unless Borrower
requests, in writing, the return of said documents, schedules, invoices,
agings or other papers and makes arrangements, at Borrower's expense, for
their retum.
14. GENERAL PROVISIONS
14.1 EFFECTIVENESS. This Agreement and the other Loan Documents
shall be binding and deemed effective when executed by Borrower and Lender.
14.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or
any rights hereunder without Lender's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment
by Lender shall release Borrower from its Obligations. Lender may assign
this Agreement and its rights and duties hereunder. Lender reserves the
right to sell, assign, transfer, negotiate or grant participations in all or
any part of, or any interest in Lender's rights and benefits hereunder. In
connection therewith, Lender may disclose all documents and information which
Lender now or hereafter may have relating to Borrower or Borrower's business.
14.3 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each paragraph applies equally to this
entire Agreement.
14.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Lender or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
21
14.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific provision.
14.6 AMENDMENTS IN WRITING. Neither this Agreement nor any
provision hereof shall be amended, modified, waived or terminated orally or
by course of conduct or pattern of dealing, but only by a written agreement
signed by an authorized representative of Lender. Any purported amendment,
modification, waiver or termination of this Agreement or any provision hereof
that is not in writing and signed by an authorized representative of Lender
shall be void and of no effect.
14.7 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire agreement between the parties with respect to
the subject matter hereof. This Agreement, together with the other Loan
Documents, supersedes all prior agreements, understandings and negotiations,
if any, which are merged into this Agreement and the other Loan Documents.
14.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts each of which,
when executed and delivered, shall be deemed to be an original and all of
which, when taken together, shall constitute but one and the same Agreement.
14.9 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations
or the transfer by either or both of such parties to Lender of any property
of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences and other voidable or recoverable
payments of money or transfers of property (a "Voidable Transfer"), and if
Lender is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that
Lender is required or elects to repay or restore, and as to all reasonable
costs, expenses and attorneys fees of Lender related thereto, the liability
of Borrower or such guarantor automatically shall be revived, reinstated and
restored and shall exist as though such Voidable Transfer had never been
made.
14.10 CONSULTATION WITH COUNSEL. Borrower and Lender acknowledge
that they have been given the opportunity to consult with counsel and other
advisors of their choice prior to entering into this Agreement.
14.11 LIMITATION OF LIABILITY. No claim may be made by Borrower or
any other Person against Lender or the officers, directors, employees or
agents of Lender for any special, indirect, punitive or consequential damages
in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith,
and Borrower hereby waives, releases and agrees not to ▇▇▇ upon any claim for
any such damages.
14.12 TELEFACSIMILE EXECUTION. Delivery of an executed counterpart
of this Agreement or any other Loan Document by telefacsimile transmission
shall be equally as effective as delivery of an executed hard copy of the
same. Any party delivering an executed counterpart of this Agreement or any
other Loan Document by telefacsimile transmission shall also deliver an
executed hard copy of the same, but the failure by such party to deliver an
executed hard copy shall not affect the validity, enforceability and binding
effect of this Agreement or such other Loan Document.
15. CHOICE OF LAW AND VENUE
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA; PROVIDED, HOWEVER, THAT THE LAWS OF THE STATE IN WHICH THE
COLLATERAL IS LOCATED SHALL GOVERN WITH RESPECT TO (A)
22
THE CREATION OF LIENS ON COLLATERAL LOCATED lN SUCH STATE AND (B) THE METHOD,
MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIENS UPON ANY PORTION OF
THE COLLATERAL LOCATED IN SUCH STATE AND THE ENFORCEMENT IN SUCH STATE OF
LENDER'S OTHER REMEDIES WITH RESPECT TO THE COLLATERAL LOCATED IN SUCH STATE.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY 1N THE STATE
COURTS LOCATED IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, THE FEDERAL
COURTS WHOSE VENUE INCLUDES THE COUNTY OF ORANGE, STATE OF CALIFORNIA, OR, AT
THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. THE PARTIES EXPRESSLY SUBMIT AND CONSENT IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY
SUCH COURT, AND THE PARTIES HEREBY WAIVE ANY OBJECTION WHICH EITHER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION AND HEREBY CONSENT TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT.
FURTHERMORE, BORROWER AND LENDER EACH WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 15.
16. WAIVER OF JURY TRIAL
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER
AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of October 15, 1997.
EIP MICROWAVE, INC., ▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇ ▇. ▇▇▇▇▇▇,
a Delaware corporation TRUSTEES OF THE ▇▇▇▇▇▇ FAMILY TRUST
Signed by: /s/ Lewsis ▇. ▇▇▇▇▇▇ Signed by: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------- -------------------
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title/Capacity: President Title/Capacity: Trustee
Signed by: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Print Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title/Capacity: Trustee
24
SCHEDULE A TO THE
LOAN AND SECURITY AGREEMENT
UCC SEARCHES
25
SCHEDULE B TO THE
LOAN AND SECURITY AGREEMENT
INTELLECTUAL PROPERTY
Borrower does not own or have rights as licensee in or to any trademarks or
patents or have any trademark or patent applications pending, except as
disclosed below.
26
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
TERM NOTE
$1,000,000 October 15, 1997
FOR VALUE RECEIVED, the undersigned, EIP MICROWAVE, INC., a Delaware
corporation ("Borrower"), hereby promises to pay ▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇ ▇.
▇▇▇▇▇▇, TRUSTEES OF THE ▇▇▇▇▇▇ FAMILY TRUST ("Lender"), or order, at 2
Inverness, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address as the
holder hereof may specify in writing, the principal sum of One Million
Dollars ($1,000,000), or such lesser principal amount as is outstanding from
time to time, plus interest in the manner and upon the terms and conditions
set forth below.
1. DEFINED TERMS. Any and all initially capitalized terms used herein
shall have the meanings ascribed to them in that certain Loan and Security
Agreement dated as of October 15, 1997 (the "Loan Agreement"), unless
specifically defined herein.
2. RATE OF INTEREST. The outstanding principal balance of this
Secured Promissory Note (this "Note") shall bear interest at the rate of five
percent (5.0%) per annum above the Reference Rate. The Reference Rate as of
the date of this Note is eight and one half percent (8.50%) per annum, and,
therefore, the effective rate of interest hereunder as of the date of this
Note is thirteen and one-half percent (13.50 %) per annum. The interest rate
payable under the terms of this Note shall be adjusted in accordance with any
change in the Reference Rate from time to time on the date of any such
change. Any interest not paid when due may be compounded by adding it to the
principal and thereafter shall bear interest at the rate provided herein.
Upon the occurrence of an Event of Default under the Loan Agreement, at
Lender's option, the rate of interest on this Note, without constituting a
waiver of any such Event of Default, shall be increased to eight percent (8.0
%) per annum above the Reference Rate. All interest payable under this Note
shall be computed on the basis of a three hundred sixty (360) day year for
the actual number of days elapsed. Interest shall continue to accrue until
this Note is paid in full.
3. SCHEDULE OF PAYMENTS; COTERMINOUS WITH LOAN AGREEMENT. Principal
and interest shall be due and payable on the dates and in the manner set
forth below:
(a) The unpaid principal balance of this Note and all accrued
interest and other charges shall be due and payable in full on the first
anniversary of the date hereof.
(b) All interest payable by Borrower shall be due and payable on
the first day of each month commencing on the first day of the month
following the date hereof and continuing thereafter until this Note is paid
in full.
(c) Notwithstanding anything to the contrary in this Note or any
of the other Loan Documents, all unpaid principal, accrued interest and other
charges owing under this Note shall be due and payable in full upon the
termination of the Loan Agreement for any reason whatsoever.
4. PREPAYMENT. Borrower shall be entitled to prepay this Note in
whole or in part from time to time. In conjunction with a termination of the
Loan Agreement which constitutes an early termination pursuant to Section 3.2
of the Loan Agreement, the unpaid principal amount of this Note shall be
subject to the Early Termination Fee described in Section 3.2 of the Loan
Agreement. Any such Early Termination Fee in respect of the unpaid principal
amount of this Note shall be presumed to be the amount
27
of damages sustained by Lender as the result of the prepayment and Borrower
agrees that it is a reasonable fee under the circumstances currently
existing.
5. RIGHT OF ACCELERATION. Upon Borrower's failure to make any payment
under this Note when due or the occurrence of any other Event of Default
under the Loan Agreement, Lender may, at its election and without notice to
Borrower, declare the entire balance hereof immediately due and payable in
full.
6. LATE CHARGE. If any installment of principal or interest is not
paid within ten (10) days of the date on which it is due, Lender may assess a
late charge equal to ten percent (10.0%) of the amount of such late payment.
This charge is a result of the reasonable endeavor by Borrower and Lender to
estimate Lender's added costs and damages resulting from Borrower's failure
to make timely payments under this Note; hence, Borrower agrees that the
charge shall be presumed to be the amount of damage sustained by Lender since
it is impracticable to determine the actual amount necessary to reimburse
Lender for its damages.
7. SECURITY. Borrower understands and agrees that this Note is
secured by, among other things, the security interests granted to Lender
under the Loan Agreement and other Loan Documents, and that this Note is
subject to all the terms and conditions thereof including without limitation
the remedies specified therein.
8. WAIVERS. Borrower hereby waives presentment for payment, protest,
demand, notice of dishonor, notice of nonpayment, notice of maturity, notice
of intent to accelerate, notice of acceleration, presentment for the purpose
of accelerating maturity and diligence in collection.
9. SUCCESSORS AND ASSIGNS. This Note shall bind and inure to the
benefit of the respective successors and assigns of Borrower and Lender;
PROVIDED, HOWEVER, that Borrower may not assign this Note or any rights or
duties hereunder without Lender's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Lender
shall release Borrower from its obligations hereunder. Lender and its
successors and assigns may assign this Note and its rights and duties
hereunder. Lender reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in Lender's
rights and benefits hereunder. In connection therewith, Lender may disclose
all documents and information which Lender now or hereafter may have relating
to Borrower or Borrower's business.
10. GENERAL PROVISIONS.
(a) If this Note is not paid when due, Borrower promises to pay
all costs of collection, foreclosure fees and reasonable attorneys fees
incurred by Lender, whether or not suit is filed hereon.
(b) This Note may not be changed, modified, amended or terminated
except by a writing duly executed by Borrower and Lender.
(c) No waiver of any rights under this Note is valid or effective
unless made in writing and signed by Lender.
(d) No delay or omission on the part of Lender in exercising any
right shall operate as a waiver thereof or of any other right.
(e) A waiver by Lender upon any one occasion shall not be
construed as a bar or waiver of any right or remedy on any future occasion.
(f) Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall nevertheless
remain effective.
28
(g) Section headings used in this Note are solely for convenience
of reference, shall not constitute a part of this Note for any other purpose
and shall not affect the construction of this Note.
11. CHOICE OF LAW AND VENUE.
THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED
IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, THE FEDERAL COURTS WHOSE VENUE
INCLUDES THE COUNTY OF ORANGE, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF
LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH COURT, AND
BORROWER HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT. FURTHERMORE,
BORROWER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
11.
12. WAIVER OF JURY TRIAL.
BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER REPRESENTS THAT
IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered in Milpitas, California.
BORROWER:
EIP MICROWAVE, INC.,
a Delaware corporation,
Signed By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title/Capacity: President
29
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF
1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
REVOLVING ADVANCES NOTE
$450,0000 October 15, 1997
FOR VALUE RECEIVED, the undersigned, EIP MICROWAVE, INC., a Delaware
corporation ("Borrower"), hereby promises to pay ▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇ ▇.
▇▇▇▇▇▇, TRUSTEES OF THE ▇▇▇▇▇▇ FAMILY TRUST ("Lender"), or order, at 2
Inverness, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address as the
holder hereof may specify in writing, the principal sum of Four Hundred Fifty
Thousand Dollars ($450,000), or such lesser principal amount of Revolving
Advances as is outstanding from time to time, plus interest in the manner and
upon the terms and conditions set forth below.
1. DEFINED TERMS. Any and all initially capitalized terms used herein
shall have the meanings ascribed to them in that certain Loan and Security
Agreement dated as of October 15, 1997 (the "Loan Agreement"), unless
specifically defined herein.
2. RATE OF INTEREST. The outstanding principal balance of this
Secured Promissory Note (this "Note") shall bear interest at the rate of five
percent (5.0%) per annum above the Reference Rate. The Reference Rate as of
the date of this Note is eight and one half percent (8.50%) per annum, and,
therefore, the effective rate of interest hereunder as of the date of this
Note is thirteen and one-half percent (13.50 %) per annum. The interest rate
payable under the terms of this Note shall be adjusted in accordance with any
change in the Reference Rate from time to time on the date of any such
change. Any interest not paid when due may be compounded by adding it to the
principal and thereafter shall bear interest at the rate provided herein.
Upon the occurrence of an Event of Default under the Loan Agreement, at
Lender's option, the rate of interest on this Note, without constituting a
waiver of any such Event of Default, shall be increased to eight percent (8.0
%) per annum above the Reference Rate. All interest payable under this Note
shall be computed on the basis of a three hundred sixty (360) day year for
the actual number of days elapsed. Interest shall continue to accrue until
this Note is paid in full.
3. SCHEDULE OF PAYMENTS; COTERMINOUS WITH LOAN AGREEMENT. Principal
and interest shall be due and payable on the dates and in the manner set
forth below:
(a) The unpaid principal balance of this Note and all accrued
interest and other charges shall be due and payable in full on the first
anniversary of the date hereof.
(b) All interest payable by Borrower shall be due and payable on
the first day of each month commencing on the first day of the month
following the date hereof and continuing thereafter until this Note is paid
in full.
(c) Notwithstanding anything to the contrary in this Note or any
of the other Loan Documents, all unpaid principal, accrued interest and other
charges owing under this Note shall be due and payable in full upon the
termination of the Loan Agreement for any reason whatsoever.
4. PREPAYMENT. Borrower shall be entitled to prepay this Note in
whole or in part from time to time.
30
5. RIGHT OF ACCELERATION. Upon Borrower's failure to make any payment
under this Note when due or the occurrence of any other Event of Default
under the Loan Agreement, Lender may, at its election and without notice to
Borrower, declare the entire balance hereof immediately due and payable in
full.
6. LATE CHARGE. If any installment of principal or interest is not
paid within ten (10) days of the date on which it is due, Lender may assess a
late charge equal to ten percent (10.0%) of the amount of such late payment.
This charge is a result of the reasonable endeavor by Borrower and Lender to
estimate Lender's added costs and damages resulting from Borrower's failure
to make timely payments under this Note; hence, Borrower agrees that the
charge shall be presumed to be the amount of damage sustained by Lender since
it is impracticable to determine the actual amount necessary to reimburse
Lender for its damages.
7. SECURITY. Borrower understands and agrees that this Note is
secured by, among other things, the security interests granted to Lender
under the Loan Agreement and other Loan Documents, and that this Note is
subject to all the terms and conditions thereof including without limitation
the remedies specified therein.
8. WAIVERS. Borrower hereby waives presentment for payment, protest,
demand, notice of dishonor, notice of nonpayment, notice of maturity, notice
of intent to accelerate, notice of acceleration, presentment for the purpose
of accelerating maturity and diligence in collection.
9. SUCCESSORS AND ASSIGNS. This Note shall bind and inure to the
benefit of the respective successors and assigns of Borrower and Lender;
PROVIDED, HOWEVER, that Borrower may not assign this Note or any rights or
duties hereunder without Lender's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Lender
shall release Borrower from its obligations hereunder. Lender and its
successors and assigns may assign this Note and its rights and duties
hereunder. Lender reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in Lender's
rights and benefits hereunder. In connection therewith, Lender may disclose
all documents and information which Lender now or hereafter may have relating
to Borrower or Borrower's business.
10. GENERAL PROVISIONS.
(a) If this Note is not paid when due, Borrower promises to pay
all costs of collection, foreclosure fees and reasonable attorneys fees
incurred by Lender, whether or not suit is filed hereon.
(b) This Note may not be changed, modified, amended or terminated
except by a writing duly executed by Borrower and Lender.
(c) No waiver of any rights under this Note is valid or effective
unless made in writing and signed by Lender.
(d) No delay or omission on the part of Lender in exercising any
right shall operate as a waiver thereof or of any other right.
(e) A waiver by Lender upon any one occasion shall not be
construed as a bar or waiver of any right or remedy on any future occasion.
(f) Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall nevertheless
remain effective.
(g) Section headings used in this Note are solely for convenience
of reference, shall not constitute a part of this Note for any other purpose
and shall not affect the construction of this Note.
31
11. CHOICE OF LAW AND VENUE.
THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED
IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, THE FEDERAL COURTS WHOSE VENUE
INCLUDES THE COUNTY OF ORANGE, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF
LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN ANY SUCH COURT, AND
BORROWER HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY SUCH COURT. FURTHERMORE,
BORROWER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
11.
12. WAIVER OF JURY TRIAL.
BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER REPRESENTS THAT
IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered in Milpitas, California.
BORROWER:
EIP MICROWAVE, INC.,
a Delaware corporation,
Signed By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title/Capacity: President
32