1
Exhibit 10.9
LOAN AND SECURITY AGREEMENT
BORROWER: COM2L, INC.
ADDRESS: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: MAY 30,1997
This Loan and Security Agreement is entered into on the above date between
GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial Corporation
("GBC"), whose address is ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and the borrower named above ("Borrower"), whose chief executive office is
located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") being signed concurrently is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth in
Section 8 below.)
1. LOANS.
1.1 LOANS. GBC will make loans to Borrower (the "Loans"), up to
the amounts (the "Credit Limit") shown on the Schedule*, provided no Default or
Event of Default has occurred and is continuing. If at any time or for any
reason the total of all outstanding Loans and all other Obligations exceeds the
Credit Limit, Borrower shall immediately pay the amount of the excess to GBC,
without notice or demand. **
*MINUS THE AVAILABILITY RESERVES
**"AVAILABILITY RESERVES" SHALL MEAN SUCH AMOUNTS AS GBC MAY FROM TIME
TO TIME ESTABLISH AND REVISE IN ITS GOOD FAITH BUSINESS JUDGMENT TO REFLECT (A)
ANY MATERIAL INCREASE IN DILUTION WITH RESPECT TO THE ACCOUNTS OR ANY MATERIAL
DECLINE IN THE GENERAL CREDITWORTHINESS OF ACCOUNT DEBTORS; AND/OR (B) EVENTS,
CONDITIONS, CONTINGENCIES OR RISKS WHICH MAY SUBSTANTIALLY AFFECT EITHER THE
COLLATERAL OR ANY OTHER PROPERTY WHICH IS SECURITY FOR THE OBLIGATIONS OR ITS
VALUE, OR THE ASSETS, BUSINESS OR PROSPECTS OF BORROWER OR THE SECURITY
INTERESTS AND OTHER RIGHTS OF GBC IN THE COLLATERAL (INCLUDING THE
ENFORCEABILITY, PERFECTION AND PRIORITY THEREOF) AND/OR (C) GBC'S GOOD FAITH
BELIEF THAT ANY COLLATERAL REPORT OR FINANCIAL INFORMATION FURNISHED BY OR ON
BEHALF OF BORROWER TO GBC WAS FALSE OR MISLEADING IN A MATERIAL RESPECT WHEN
MADE.
1.2 INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement or in another written agreement signed
by GBC and Borrower. Interest shall be payable monthly, on the last day of the
month. Interest may, in GBC's discretion, be charged to Borrower's loan account,
and the same shall thereafter bear interest at the same rate as the other Loans.
1.3 FEES. Borrower shall pay GBC the fee(s) shown on the
Schedule, which are in addition to all interest and other sums payable to GBC
and are not refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of
all of the Obligations when due, Borrower hereby grants to GBC a security
interest in all of Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located (collectively, the "Collateral"): All
Inventory, Equipment,
2
Receivables, and General Intangibles, including, without limitation, all of
Borrower's Deposit Accounts, all money, all collateral in which GBC is granted a
security interest pursuant to any other present or future agreement, all
property now or at any time in the future in GBC's possession, and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products of the foregoing, and all books and records
related to any of the foregoing.*
* NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 2.1, SUCH
GRANT OF A SECURITY INTEREST SHALL NOT EXTEND TO, AND THE TERM "COLLATERAL"
SHALL NOT INCLUDE, ANY GENERAL INTANGIBLES OF THE BORROWER (WHETHER OWNED OR
HELD AS LICENSEE OR LESSEE, OR OTHERWISE), TO THE EXTENT THAT (I) SUCH GENERAL
INTANGIBLES ARE NOT ASSIGNABLE OR CAPABLE OF BEING ENCUMBERED AS A MATTER OF LAW
OR UNDER THE TERMS OF THE LICENSE, LEASE OR OTHER AGREEMENT APPLICABLE THERETO
(BUT SOLELY TO THE EXTENT THAT ANY SUCH RESTRICTION SHALL BE ENFORCEABLE UNDER
APPLICABLE LAW), WITHOUT THE CONSENT OF THE LICENSOR OR LESSOR THEREOF OR OTHER
APPLICABLE PARTY THERETO AND (II) SUCH CONSENT HAS NOT BEEN OBTAINED; PROVIDED,
HOWEVER, THAT THE FOREGOING GRANT OF SECURITY INTEREST SHALL EXTEND TO, AND THE
TERM "COLLATERAL" SHALL INCLUDE (A) ANY GENERAL INTANGIBLE WHICH IS A RECEIVABLE
OR A PROCEED OF, OR OTHERWISE RELATED TO THE ENFORCEMENT OR COLLECTION OF, ANY
RECEIVABLE, OR GOODS WHICH ARE THE SUBJECT OF ANY RECEIVABLE, (B) ANY AND ALL
PROCEEDS OF ANY OTHER GENERAL INTANGIBLES WHICH ARE OTHERWISE EXCLUDED TO THE
EXTENT THAT THE ASSIGNMENT OR ENCUMBRANCE OF SUCH PROCEEDS IS NOT SO RESTRICTED,
AND (C) UPON OBTAINING THE CONSENT OF ANY SUCH LICENSOR, LESSOR OR OTHER
APPLICABLE PARTY'S CONSENT WITH RESPECT TO ANY SUCH OTHERWISE EXCLUDED GENERAL
INTANGIBLES, SUCH GENERAL INTANGIBLES AS WELL AS ANY AND ALL PROCEEDS THEREOF
THAT MIGHT THERETOFORE HAVE BEEN EXCLUDED FROM SUCH GRANT OF A SECURITY INTEREST
AND THE TERM "COLLATERAL".
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants that
the following representations will continue to be true, and that Borrower will
at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is
and will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give GBC 30 * days prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
*15
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give GBC at least 30 * days prior
written notice before
2.
3
opening any additional place of business, changing its chief executive office,
or moving any of the Collateral to a location other than Borrower's Address or
one of the locations set forth on the Schedule***
* 15
** (OTHER THAN (I) IN CONNECTION WITH SALES OR OTHER DISPOSITIONS OF
INVENTORY AND OTHER PRODUCT IN THE ORDINARY COURSE OF BUSINESS, (II) DISPOSAL IN
THE ORDINARY COURSE OF BUSINESS OF ITEMS OF COLLATERAL WHICH HAVE BECOME WORN
OUT OR OBSOLETE OR WHICH ARE PROMPTLY BEING REPLACED, PROVIDED THAT WITHOUT
GBC'S PRIOR WRITTEN CONSENT BORROWER SHALL NOT DISPOSE OF MORE THAN $50,000 OF
COLLATERAL (WITH EACH ITEM OF SUCH COLLATERAL TO BE VALUED AT THE GREATER OF
COST OR FAIR MARKET VALUE) IN ANY FISCAL YEAR, (III) DISPOSAL OF DEMONSTRATION
INVENTORY OUTSIDE THE ORDINARY COURSE OF BUSINESS NOT EXCEEDING IN THE AGGREGATE
$50,000 IN ANY FISCAL YEAR, DISPOSAL OF EQUIPMENT INVENTORY OUTSIDE THE ORDINARY
COURSE OF BUSINESS NOT EXCEEDING IN THE AGGREGATE $50,000 IN ANY FISCAL YEAR,
(IV) MOVEMENT OF EQUIPMENT TO ANY ADDITIONAL LOCATION REPORTED TO GBC AND WITHIN
A JURISDICTION IN WHICH GBC HAS TAKEN ALL NECESSARY ACTION IN ORDER TO PROTECT
AND PERFECT ITS SECURITY INTEREST THEREIN, AND (V) ANY AND ALL MOBILE GOODS
WHICH ARE OF A TYPE NORMALLY USED IN MORE THAN ONE JURISDICTION). IN CONNECTION
WITH OPENING OF NEW SALES OFFICES OUTSIDE OF THE DENVER OFFICE, BORROWER WILL BE
PERMITTED TO PROVIDE GBC NOTICE WITHIN 30 DAYS FOLLOWING THE OPENING OF THE NEW
OFFICE, PROVIDED THAT (I) THE COLLATERAL LOCATED AT SUCH NEW SALES OFFICE SHALL
NOT EXCEED $50,000 UNTIL SUCH NOTICE HAS BEEN GIVEN TO GBC AND GBC HAS TAKEN ALL
NECESSARY ACTION IN ORDER TO PROTECT AND PERFECT ITS SECURITY INTEREST IN ANY
COLLATERAL TO BE LOCATED AT SUCH OFFICE, AND (II) NOT MORE THAN AN AGGREGATE OF
$100,000 OF COLLATERAL SHALL AT ANY TIME BE LOCATED AT NEW SALES OFFICES FOR
WHICH NOTICE HAS NOT YET BEEN GIVEN TO GBC AND FOR WHICH GBC HAS NOT YET TAKEN
ALL NECESSARY ACTION IN ORDER TO PROTECT AND PERFECT ITS SECURITY INTEREST IN
ANY COLLATERAL TO BE LOCATED AT SUCH OFFICES.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GBC and the Collateral against all claims of
others. So long as any Loan is outstanding none of the Collateral now is or will
be affixed to any real property in such a manner, or with such intent, as to
become a fixture*. Borrower is not and will not become a lessee under any real
property lease pursuant to which the lessor may obtain any rights in any of the
Collateral and no such lease now prohibits, restrains, impairs or will prohibit,
restrain or impair Borrower's right to remove any Collateral from the leased
premises **. Whenever any Collateral is located upon premises in which any third
party has an interest (whether as owner, mortgagee, beneficiary under a deed of
trust, lien or otherwise), Borrower shall, whenever requested by GBC, use its
best efforts to cause such third party to execute and deliver to GBC, in form
acceptable to GBC, such waivers and subordinations as GBC shall specify, so as
to ensure that GBC's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect, and will comply *** with all the terms of, any lease of real
property where any of the Collateral now or in the future may be located.
* , UNLESS SUCH COLLATERAL IS COVERED BY A FIXTURE FILING DULY EXECUTED
AND DELIVERED BY THE BORROWER IN FAVOR OF GBC, IS RECORDED WITH RESPECT TO SUCH
REAL PROPERTY, AND PROVIDES GBC'S SECURITY INTEREST/LIEN AGAINST SUCH COLLATERAL
WITH PRIORITY SATISFACTORY TO GBC.
** EXCEPT TO THE EXTENT PROVIDED UNDER LEASES WITH RESPECT TO WHICH THE
LANDLORD HAS ENTERED INTO A LANDLORD'S WAIVER AND AGREEMENT IN RECORDABLE FORM
AND SATISFACTORY TO GBC, ACKNOWLEDGING GBC'S PRIOR SECURITY INTEREST IN THE
COLLATERAL AND PROVIDING ACCESS FOR GBC TO THE COLLATERAL AND THE PREMISES
3.
4
***IN ALL MATERIAL RESPECTS
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, ordinary wear and tear excepted, and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
GBC in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GBC have been, and will be,
prepared in conformity with generally accepted accounting principles and now and
in the future will completely and fairly reflect the financial condition of
Borrower, at the times and for the periods therein stated*. Between the last
date covered by any such statement provided to GBC and the date hereof, there
has been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
* , EXCEPT IN THE CASE OF QUARTERLY FINANCIAL INFORMATION FOR THE
ABSENCE OF FOOTNOTE DISCLOSURE AND SUBJECT TO CHANGES RESULTING FROM NORMAL,
YEAR-END AUDIT ADJUSTMENTS, AND EXCEPT IN THE CASE OF PROJECTIONS OR FORECASTS
FOR THE UNDERSTANDING THAT ALTHOUGH BORROWER HAS PREPARED THE SAME IN GOOD FAITH
UTILIZING ASSUMPTIONS IT BELIEVES TO BE REASONABLE, GBC RECOGNIZES THAT
FORECASTS AND ASSUMPTIONS BY THEIR NATURE INVOLVE APPROXIMATIONS AND
UNCERTAINTIES.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
Borrower may, however, defer payment of any contested taxes, provided that
Borrower (i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (ii)
notifies GBC in writing of the commencement of, and any material development in,
the proceedings, and (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which *
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform GBC in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
4.
5
*IS REASONABLY LIKELY TO
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to GBC as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed, bona fide, existing, unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to GBC as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be, and all
signatories and endorsers have the capacity to contract. All sales and other
transactions underlying or giving rise to each Receivable shall comply * with
all applicable laws and Governmental rules and regulations. ** signatures and
endorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
* IN ALL MATERIAL RESPECTS
** TO THE BEST OF THE BORROWER'S KNOWLEDGE AT THE TIME OF THE SALE, ALL
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to GBC transaction reports and loan requests, schedules and assignments
of all Receivables, and schedules of collections, * all on GBC's standard
forms**; provided, however, that Borrower's failure to execute and deliver the
same shall not affect or limit GBC's security interest and other rights in all
of Borrower's Receivables, nor shall GBC's failure to advance or lend against a
specific Receivable affect or limit GBC's security interest and other rights
therein. *** with each such schedule and assignment, or later if **** requested
by GBC, Borrower shall furnish GBC with copies (or, at GBC's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
original shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave rise
to such Receivables, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to GBC an aged accounts receivable trial
balance in such form and at such intervals as GBC shall request. In addition,
Borrower shall deliver to GBC the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Receivables, immediately upon receipt thereof and in the same form
as received, with all necessary endorsements.
* AS GBC SHALL REQUEST,
** , OR ON SUCH OTHER FORMS AS SHALL BE REASONABLY SATISFACTORY TO GBC
*** IF AT ANY TIME REQUESTED BY GBC, TOGETHER
**** SO
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has occurred
*. Borrower shall hold all payments on, and proceeds of, Receivables in trust
for GBC, and Borrower shall deliver all such payments and proceeds to GBC,
within one business day after
5.
6
receipt of the same, in their original form, duly endorsed, to be applied to the
Obligations in such order as GBC shall determine.
* AND IS CONTINUING
4.5 DISPUTES. Borrower shall notify GBC promptly of all disputes or
claims relating to Receivables on the regular reports to GBC. Borrower shall not
forgive, or settle any Receivable for less than payment in full, or agree to do
any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on the regular reports provided to GBC; (ii) no Default or Event
of Default has occurred and is continuing; and (iii) taking into account all
such settlements and forgiveness, the total outstanding Loans and other
Obligations will not exceed the Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to GBC). In the event any attempted
return occurs after the occurrence * of any Event of Default, Borrower shall (i)
not accept any return without GBC's prior written consent, (ii) hold the
returned Inventory in trust for GBC, (iii) segregate all returned Inventory from
all of Borrower's other property, (iv) conspicuously label the returned
Inventory as GBC's property, and (v) immediately notify GBC of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on GBC's request deliver such returned Inventory to
GBC.
* AND DURING THE CONTINUANCE
4.7 VERIFICATION. GBC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or GBC or such other name as GBC may choose, * and GBC or its designee
may, at any time, notify Account Debtors that it has a security interest in the
Receivables.
* PROVIDED THAT, IF NO EVENT OF DEFAULT AND NO EVENT WHICH, WITH NOTICE
OR PASSAGE OF TIME OR BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING, SUCH VERIFICATIONS SHALL NOT BE DONE MORE FREQUENTLY THAN
ONCE PER CALENDAR QUARTER
4.8 NO LIABILITY. GBC shall not under any circumstances be responsible
or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall GBC be deemed to be responsible for any of Borrower's
obligations under any contract or agreement giving rise to a Receivable. Nothing
herein shall, however, relieve GBC from liability for its own gross negligence
or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to GBC, * in such form and amounts as GBC may
reasonably require, and Borrower shall provide evidence of such insurance to
GBC, so that GBC is satisfied that such insurance is, at all times, in full
force and effect. All such insurance policies shall name GBC as an additional
loss payee, and shall contain a lenders loss payee endorsement in form
reasonably acceptable to GBC. Upon receipt of the proceeds of any such
insurance, GBC shall apply such proceeds in reduction of the Obligations as GBC
shall determine in its sole discretion, except that, provided no Default or
Event of Default has occurred and
6.
7
is continuing, GBC shall release to Borrower insurance proceeds with respect to
Equipment totaling less than $100,000, which shall be utilized by Borrower for
the replacement of the Equipment with respect to which the insurance proceeds
were paid. GBC may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
GBC may, but is not obligated to, obtain the same at Borrower's expense.
Borrower shall promptly deliver to GBC copies of all reports made to insurance
companies **.
* COVERING SUCH PROPERTY AND RISKS AS IS CUSTOMARILY CARRIED BY
COMPANIES ENGAGED IN SIMILAR BUSINESSES AND OWNING SIMILAR PROPERTIES IN THE
LOCALITIES WHERE THE BORROWER OPERATES, AND
** INVOLVING CLAIMS IN EXCESS OF $50,000
5.2 REPORTS. Borrower, at its expense, shall provide GBC with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as GBC shall from time to time reasonably
specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one business day's notice, GBC, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records.
GBC shall take reasonable steps to keep confidential all information obtained in
any such inspection or audit, but GBC shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Borrower's expense and the charge therefor shall be $600 per person per
day (or such higher amount as shall represent GBC's then current standard charge
for the same), plus reasonable out-of-pockets expenses. Borrower shall not be
charged more than $3,000 per audit (plus reasonable out-of-pockets expenses),
nor shall audits be done more frequently than four times per calendar year,
provided that the foregoing limits shall not apply after the occurrence of a
Default or Event of Default, nor shall they restrict GBC's right to conduct
audits at its own expense (whether or not a Default or Event of Default has
occurred). Borrower will not enter into any agreement with any accounting firm,
service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining GBC's written
consent, which may be conditioned upon such accounting firm, service bureau or
other third party agreeing to give GBC the same rights with respect to access to
books and records and related rights as GBC has under this Agreement.
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to GBC in
the original form in which received by Borrower not later than the following
business day after receipt by Borrower, to be applied to the Obligations in such
order as GBC shall determine; provided that, if no Default or Event of Default
has occurred and is continuing, then Borrower shall not be obligated to remit to
GBC the proceeds of the sale of Equipment which is sold in the ordinary course
of business, in a good-faith arm's length transaction. Except for the proceeds
of the sale of Equipment as set forth above, Borrower shall not commingle
proceeds of Collateral with any of Borrower's other funds or property, and shall
hold such proceeds separate and apart from such other funds and property and in
an express trust for GBC. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without GBC's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity *; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter into
any other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except that Borrower may (a) sell finished Inventory in
the ordinary course of Borrower's business, (b) sell Equipment in the ordinary
course of business, in good-faith arm's length transactions; ** (v) store any
Inventory or other Collateral with any warehouseman or other third party ***;
(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or
other contingent basis ****; (vii) make any loans of any money or other assets
+; (viii) incur any debts, outside the ordinary course of business, which would
have a material, adverse effect on Borrower or on the prospect of repayment of
the Obligations; (ix)
7.
8
guarantee or otherwise become liable with respect to the obligations of another
party or entity ++; (x) pay or declare any dividends on Borrower's stock (except
for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's stock
+++; (xii) make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do any
of the foregoing.
* (PROVIDED THAT BORROWER MAY MERGE INTO ANOTHER CORPORATION FOR
PURPOSES OF EFFECTING A REINCORPORATION INTO ANOTHER STATE AFTER GBC HAS
NOTIFIED BORROWER IN WRITING THAT ALL STEPS NECESSARY TO PROTECT THE VALIDITY
AND PERFECTION OF GBC'S FIRST-PRIORITY SECURITY INTEREST IN THE COLLATERAL,
SUBJECT TO PERMITTED LIENS, HAVE BEEN TAKEN)
** (C) LICENSE, SUBLICENSE AND GRANT DISTRIBUTION AND SIMILAR RIGHTS IN
THE ORDINARY COURSE OF BUSINESS, AND (D) SELL OR DISPOSE OF ASSETS IN THE
ORDINARY COURSE OF BUSINESS WHICH HAVE BECOME WORN OUT OR OBSOLETE OR WHICH ARE
PROMPTLY BEING REPLACED, AND ASSETS (OTHER THAN RECEIVABLES) OUTSIDE THE
ORDINARY COURSE OF BUSINESS NOT EXCEEDING IN THE AGGREGATE $50,000 (WITH EACH
SUCH ASSET TO BE VALUED AT THE GREATER OF COST OR FAIR MARKET VALUE) IN ANY
FISCAL YEAR
*** EXCEPT AFTER GBC HAS NOTIFIED BORROWER IN WRITING THAT ALL STEPS
NECESSARY TO PROTECT THE VALIDITY, PERFECTION AND ENFORCEABILITY OF GBC'S
FIRST-PRIORITY SECURITY INTEREST IN THE INVENTORY, SUBJECT TO PERMITTED LIENS,
HAS BEEN TAKEN AND EXCEPT FOR INVENTORY IN AN AGGREGATE AMOUNT OF $1,000,000
STORED AT CELESTICA AND OTHER INVENTORY LEFT FOR TESTING WITH CUSTOMERS IN THE
ORDINARY COURSE OF BUSINESS
**** OTHER THAN INVENTORY BEING TESTED BY CUSTOMERS IN THE ORDINARY
COURSE OF BUSINESS
+ OTHER THAN LOANS TO OR GUARANTEES OF THE OBLIGATIONS OF EMPLOYEES IN
CONNECTION WITH RECRUITING, RELOCATION OR OTHER PURPOSES, NOT TO EXCEED $100,000
IN THE AGGREGATE OUTSTANDING AT ANY TIME, AND LOANS ARISING AS THE RESULT OF
ACCEPTING PROMISSORY NOTES FROM EMPLOYEES FOR THE PURCHASE BY SUCH EMPLOYEES OF
STOCK OF THE BORROWER
++ OTHER THAN ENDORSEMENTS OF INSTRUMENTS OR ITEMS OF PAYMENT FOR
COLLECTION IN THE ORDINARY COURSE OF BUSINESS, OBLIGATIONS PURSUANT TO THE
BORROWER'S BYLAWS OR IN INDEMNIFICATION AGREEMENTS, TO INDEMNIFY OFFICERS,
DIRECTORS AND EMPLOYEES OF THE BORROWER IN CONNECTION WITH THE PERFORMANCE OF
THEIR DUTIES FOR THE BORROWER AND THE GUARANTEES DESCRIBED ABOVE
+++ EXCEPT THAT BORROWER MAY REPURCHASE OR REDEEM SHARES OF ITS STOCK
FOR UP TO $100,000 IN THE AGGREGATE IN ANY FISCAL YEAR, IN CONNECTION WITH AN
EMPLOYEE STOCK PURCHASE PROGRAM, PROVIDED NO EVENT OF DEFAULT AND NO EVENT
WHICH, WITH NOTICE OR PASSAGE OF TIME OR BOTH, WOULD CONSTITUTE AN EVENT OF
DEFAULT UNDER THE LOAN AGREEMENT, HAS OCCURRED AND IS CONTINUING
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against GBC with respect to any Collateral or in any manner
relating to Borrower, Borrower shall without expense to GBC, make available
Borrower and its officers, employees and agents, and Borrower's books and
records*, without charge, to the extent that GBC may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
* SUBJECT TO THE PRESERVATION OF THE ATTORNEY-CLIENT PRIVILEGE
5.7 NOTIFICATION OF CHANGES. Borrower will * notify GBC in writing of
any change in its ** officers or directors, the opening of any new bank account
or other deposit account, and any material adverse change in the business or
financial affairs of Borrower.
8.
9
* WITHIN A REASONABLE TIME PERIOD
** EXECUTIVE
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
GBC, to execute all documents and take all actions, as GBC may deem reasonably
necessary or useful in order to perfect and maintain GBC's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GBC and hold GBC
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
* attorneys' fees), of every nature, character and description, which GBC may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Borrower or its employees, any relationship or agreement between GBC and
Borrower, any actual or alleged failure of GBC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GBC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GBC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GBC) **.
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
* REASONABLE
** PROVIDED THAT THE FOREGOING INDEMNITY SHALL NOT EXTEND TO LOST
PROFITS OF GBC OR TO CONSEQUENTIAL DAMAGES WHICH MAY BE SUFFERED BY GBC
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than *
days prior to the next Maturity Date, that such party elects to terminate this
Agreement effective on the next Maturity Date.
* 30
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to GBC; or (ii) by GBC at any time after
the occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by GBC under this Section 6.2,
Borrower shall pay to GBC a termination fee (the "Termination Fee") in the
amount shown on the Schedule. The Termination Fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding letters of
credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GBC, then on such date Borrower shall provide to GBC
cash collateral in an amount equal to % * of the face amount of all such letters
of credit plus all interest, fees and costs due or (in GBC's estimation) likely
to become
9.
10
due in connection therewith, to secure all of the Obligations relating to said
letters of credit, pursuant to GBC's then standard form cash pledge agreement.
Notwithstanding any termination of this Agreement, all of GBC's security
interests in all of the Collateral and all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that, without limiting the fact that
Loans are subject to the discretion of GBC, GBC may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of GBC, nor shall any such termination
relieve Borrower of any Obligation to GBC, until all of the Obligations have
been paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, GBC shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be reasonably required to terminate GBC's security interests.
* 100%
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give GBC immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to GBC by Borrower or any of
Borrower's officers, employees or agents, now or in the future, shall be untrue
or misleading in a material respect *; or (b) Borrower shall fail to pay when
due any Loan or ** any interest thereon or any other monetary Obligation; or (c)
the total Loans and other Obligations outstanding at any time shall exceed the
Credit Limit ***; or (d) Borrower shall fail to perform any non-monetary
Obligation which by its nature cannot be cured; or (e) Borrower shall fail to
perform any other non-monetary Obligation, which failure is not cured within 5
business days after the date performance is due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral **** which is not cured within 10 days
after the occurrence of the same; or (g) any default or event of default occurs
under any obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing, by the holder of the Permitted Lien
+; or (h) Borrower breaches any material contract or obligation, which has or
may reasonably be expected to have a material adverse effect on Borrower's
business or financial condition; or (i) dissolution, termination of existence,
insolvency or business failure of Borrower or any Guarantor; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower or any Guarantor under any reorganization, bankruptcy,
insolvency, arrangement. readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any Guarantor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 45 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing; or (1) revocation or termination of, or limitation or
denial of liability upon, any pledge of any certificate of deposit, securities
or other property or asset pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits or
terminates its subordination agreement; or (n) there shall be a change in the
record or beneficial ownership of the outstanding shares of stock of Borrower ++
without the prior written consent of GBC +++; or (o) Borrower shall generally
not pay its debts as they become due, or Borrower shall conceal, remove or
transfer any part of its property, with intent to hinder, delay or defraud its
creditors, or make or suffer any transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p)
there shall be a material adverse change in Borrower's business or financial
condition. GBC may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred.
10.
11
* AS OF THE DATE MADE
** , WITHIN THREE DAYS OF THE DUE DATE,
*** AND THE BORROWER SHALL FAIL TO REPAY AN AMOUNT EQUAL TO THE EXCESS
WITHIN ONE BUSINESS DAY OF DEMAND
**** WITH A VALUE IN EXCESS OF $10,000
+ , PROVIDED THAT IF THE AMOUNT INVOLVED IS LESS THAN $50,000 THEN THE
SAME SHALL NOT BE AN EVENT OF DEFAULT UNLESS AND UNTIL THE HOLDER OF THE
PERMITTED LIEN COMMENCES ANY ACTION TO ENFORCE ITS LIEN AGAINST ANY COLLATERAL
++ SUCH THAT THERE SHALL BE A CHANGE IN THE GROUP OF PERSONS WHO
PRESENTLY, IN THE AGGREGATE, HOLD MORE THAN 50% OF THE STOCK OF THE BORROWER
+++ OTHER THAN PURSUANT TO AN INITIAL PUBLIC OFFERING
7.2 REMEDIES. Upon the occurrence and during the continuance of any
Event of Default, and at any time thereafter *, GBC, at its option, and without
notice or demand of any kind (all of which are hereby expressly waived by
Borrower)** , may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other
document or agreement; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes GBC
without judicial process to enter onto any of Borrower's premises without
interference to search for, take possession of, keep, store, or remove any of
the Collateral, and remain on the premises or cause a custodian to remain on the
premises in exclusive control thereof, without charge for so long as GBC deems
it reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should GBC seek
to take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that GBC
retain possession of, and not dispose of, any such Collateral until after trial
or final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to GBC at places designated by GBC which are reasonably
convenient to GBC and Borrower, and to remove the Collateral to such locations
as GBC may deem advisable; (e) Complete the processing, manufacturing or repair
of any Collateral prior to a disposition thereof and, for such purpose and for
the purpose of removal, GBC shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time GBC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GBC shall have the right to conduct
such disposition on Borrower's premises without charge, for such time or times
as GBC deems reasonable, or on GBC's premises, or elsewhere and the Collateral
need not be located at the place of disposition. GBC may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes GBC to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with
11.
12
respect to any item of the Collateral or proceeds thereof, and, in GBC's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Receivables, General Intangibles and the like for less than face value; and (h)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by GBC with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of GBC's rights and remedies, from and after
the occurrence of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional *** percent per annum.
* WHILE AN EVENT OF DEFAULT IS CONTINUING
** ,EXCEPT THAT GBC SHALL GIVE BORROWER ONE GENERAL NOTICE, CONCURRENTLY
WITH OR PRIOR TO EXERCISING ANY OF THE FOLLOWING REMEDIES, WHICH NOTICE MAY BE
GIVEN VIA FACSIMILE (WHICH WILL BE DEEMED TO HAVE BEEN GIVEN THE DAY OF
ELECTRONIC CONFIRMATION OF DELIVERY VIA FACSIMILE (OR IF THAT DAY IS NOT A
BUSINESS DAY, THEN THE NEXT BUSINESS DAY AFTER ELECTRONIC CONFIRMATION OF
DELIVERY VIA FACSIMILE)), STATING, IN GENERAL TERMS, THAT "GBC IS PROCEEDING TO
EXERCISE ITS RIGHTS AND REMEDIES" OR WORDS OF SIMILAR EFFECT (BUT NO SUCH NOTICE
SHALL BE REQUIRED IF EXIGENT CIRCUMSTANCES MAKE IT UNDULY DIFFICULT OR
IMPRACTICAL TO GIVE ANY SUCH NOTICE)
*** TWO
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
GBC agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by GBC,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, GBC may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. GBC shall be free to employ other methods of
noticing and selling the Collateral, in its discretion, if they are commercially
reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of
any Event of Default, without limiting GBC's other rights and remedies, Borrower
grants to GBC an irrevocable power of attorney coupled with an interest,
authorizing and permitting GBC (acting through any of its employees, attorneys
or agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but GBC agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that GBC may, in its sole discretion, deem advisable in
order to perfect and maintain GBC's security interest in the Collateral, or in
order to exercise a right of Borrower or GBC, or in order to fully consummate
all the transactions contemplated under this Agreement, and all other present
and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of GBC's Collateral or in which GBC has an interest; (c) Execute on
behalf of Borrower, any invoices relating to any Receivable, any draft against
any Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other
lien, or assignment or satisfaction of mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral: endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into GBC's
possession; (e) Endorse all checks and other forms of remittances received by
GBC; (f) Pay, contest or settle any lien, charge, encumbrance, security interest
and adverse claim in or to any of the Collateral, or any judgment based thereon,
or otherwise take any action to terminate or discharge the same; Grant
extensions of time to pay, compromise claims and settle Receivables and
12.
13
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give GBC the same rights of access and other rights with respect
thereto as GBC has under this Agreement; and (k) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other present or future
agreements. Any and all reasonable sums paid and any and all reasonable costs,
expenses, liabilities, obligations and reasonable attorneys' fees incurred by
GBC with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall GBC's rights under the foregoing power of attorney or any of GBC's other
rights under this Agreement be deemed to indicate that GBC is in control of the
business, management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by GBC first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GBC for any deficiency. If GBC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GBC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GBC of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, GBC shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" and "this Agreement" means this Loan and Security Agreement
and all modifications and amendments thereto, extensions thereof, and
replacements therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
13.
14
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Eligible Receivables" means unconditional Receivables arising in the
ordinary course of Borrower's business from the completed sale of goods or
rendition of services, which GBC, in its sole judgment, shall deem eligible for
borrowing, based on such considerations as GBC may from time to time deem
appropriate.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against GBC, rights to purchase or sell real
or personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all insurance
policies and claims (including life insurance, key man insurance, credit
insurance, liability insurance, property insurance and other insurance), tax
refunds and claims, computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including all raw
materials, work in process, finished goods and goods in transit), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"LIBOR Rate" means (i) the one-month London Interbank Offered Rate for
deposits in U.S. dollars, as shown each day in The Wall Street Journal (Eastern
Edition) under the caption "Money Rates - London Interbank Offered Rates
(LIBOR)"; or (ii) if the Wall Street Journal does not publish such rate, the
offered one-month rate for deposits in U.S. dollars which appears on the Reuters
Screen LIBOR Page as of 10:00 a.m., New York time, each day, provided that if at
least two rates appear on the Reuters Screen LIBOR Page on any day, the "LIBOR
Rate" for such day shall be the arithmetic mean of such rates; or (iii) if the
Wall Street Journal does not publish such rate on a particular day and no such
rate appears on the Reuters Screen LIBO Page on such day, the rate per annum at
which deposits in U.S. dollars are offered to the principal London office of The
Chase Manhattan Bank, in the London interbank market at approximately 11:00
A.M., London time, on such day in an amount approximately equal to the
outstanding principal amount of the Loans, for a period of one month, in each of
the foregoing cases as determined in good faith by GBC, which determination
shall be conclusive absent manifest error.
14.
15
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, loan fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and GBC.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens which are subordinate to the security interest in favor of
GBC and are consented to in writing by GBC (which consent shall not be
unreasonably withheld); (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above *,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods**. GBC will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on GBC's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of GBC, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
* OR CLAUSE (IV) ABOVE
** ,(IX) LIENS OR SECURITY INTERESTS EXISTING AS OF THE DATE HEREOF AND
DISCLOSED IN THE SCHEDULE; (X) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, UNLESS
THE JUDGMENT IT SECURES IS NOT FULLY COVERED BY INSURANCE AND HAS NOT BEEN
DISCHARGED WITHIN 15 DAYS OF THE ENTRY THEREOF; (XI) EASEMENTS, RIGHTS OF WAY,
SERVITUDES OR ZONING OR BUILDING RESTRICTIONS AND OTHER MINOR ENCUMBRANCES ON
REAL PROPERTY AND IRREGULARITIES IN THE TITLE TO SUCH PROPERTY WHICH DO NOT IN
THE AGGREGATE MATERIALLY IMPAIR THE USE OR VALUE OF SUCH PROPERTY OR RISK THE
LOSS OR FORFEITURE OF TITLE THERETO; AND (XII) LIENS WHICH CONSTITUTE BANKER'S
LIENS, RIGHTS OF SET-OFF OR SIMILAR RIGHTS AND REMEDIES AS TO DEPOSIT ACCOUNTS
OR OTHER FUNDS MAINTAINED WITH ANY BANK OR OTHER FINANCIAL INSTITUTION, WHETHER
ARISING BY OPERATION OF LAW OR PURSUANT TO CONTRACT; PROVIDED THAT (A) SUCH
DEPOSIT ACCOUNT IS NOT A DEDICATED CASH COLLATERAL ACCOUNT, AND (B) IS NOT
INTENDED BY THE BORROWER TO PROVIDE COLLATERAL TO THE DEPOSITORY INSTITUTION
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All
15.
16
other terms contained in this Agreement, unless otherwise indicated, shall have
the meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by GBC (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by GBC on account of the Obligations three Business Days after receipt
by GBC of immediately available funds. GBC shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to GBC in its discretion, and GBC may charge Borrower's Loan
account for the amount of any item of payment which is returned to GBC unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in GBC's sole discretion reversed and
re-applied, to the Obligations, in such order and manner as GBC shall determine
in its sole discretion.
9.3 CHARGES TO ACCOUNT. GBC may, in its discretion, require that
Borrower pay monetary Obligations in cash to GBC, or charge them to Borrower's
Loan account, in which event they will bear interest at the same rate applicable
to the Loans.
9.4 MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by GBC), * unless Borrower
notifies GBC in writing to the contrary within sixty days after each account is
rendered, describing the nature of any alleged errors or admissions.
* ABSENT MANIFEST ERROR,
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to GBC or Borrower at the addresses shown in the heading to
this Agreement, or at any other address designated in writing by one party to
the other party. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one business
day following delivery to the private delivery service, or * business days
following the deposit thereof in the United States mail, with postage prepaid.
* THREE
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GBC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8 WAIVERS. The failure of GBC at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and GBC shall
16.
17
not waive or diminish any right of GBC later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent, and whether or not similar. None of
the provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to GBC shall be deemed to have been waived by
any act or knowledge of GBC or its agents or employees, but only by a specific
written waiver signed by an authorized officer of GBC and delivered to Borrower.
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by GBC on which Borrower is or
may in any way be liable, and notice of any action taken by GBC, unless
expressly required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GBC.
9.10 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 ATTORNEYS FEES AND COSTS. Borrower shall reimburse GBC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by GBC, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GBC incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors, commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GBC's
security interest in, the Collateral; and otherwise represent GBC in any
litigation relating to Borrower. If either GBC or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which GBC may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GBC; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GBC, and any prohibited assignment shall be
void. No consent by GBC to any assignment shall release Borrower from its
liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing, whatsoever, occurred, done, omitted or suffered to be
done by GBC, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after * the first act, occurrence or omission upon
which such claim or cause of action,
17.
18
or any part thereof, is based, and the service of a summons and complaint on an
officer of GBC, or on any other person authorized to accept service on behalf of
GBC, within thirty (30) days thereafter. Borrower agrees that such one-year
period is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by the written consent of GBC in
its sole discretion. This provision shall survive any termination of this Loan
Agreement or any other present or future agreement.
* BORROWER LEARNS OF, OR IN THE EXERCISE OF REASONABLE DILIGENCE SHOULD
HAVE LEARNED OF,
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and GBC acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against GBC or Borrower under any rule of
construction or otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of GBC and Borrower shall
be governed by the laws of the State of California. As a material part of the
consideration to GBC to enter into this Agreement, Borrower (i) agrees that all
actions and proceedings relating directly or indirectly to this Agreement shall,
at GBC's option, be litigated in courts located within California, and that the
exclusive venue therefor shall be Los Angeles County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding,
9.17 CONFIDENTIALITY. GBC COVENANTS AND AGREES, ON A CONTINUING BASIS,
TO USE REASONABLE EFFORTS TO MAINTAIN THE CONFIDENTIALITY OF AND NOT TO DISCLOSE
TO ANY PERSON OTHER THAN ITS OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND
ACCOUNTANTS AND AFFILIATES, AND SUCH OTHER PERSONS TO WHOM GBC SHALL AT ANY TIME
BE REQUIRED TO MAKE SUCH DISCLOSURE IN ACCORDANCE WITH APPLICABLE LAW, ANY AND
ALL PROPRIETARY, TRADE SECRET OR CONFIDENTIAL INFORMATION PROVIDED TO OR
RECEIVED BY GBC FROM OR ON ACCOUNT OF BORROWER OR ANY AFFILIATE OF BORROWER,
INCLUDING BUSINESS PLANS AND FORECASTS, NON-PUBLIC FINANCIAL INFORMATION,
CONFIDENTIAL OR SECRET PROCESSES, FORMULAE, DEVICES OR CONTRACTUAL INFORMATION,
CUSTOMER LISTS, EMPLOYEE RELATION MATTERS, AND ANY OTHER INFORMATION THE
DISCLOSURE OF WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
IMPACT ON THE BUSINESS, FINANCES OR OPERATIONS OF BORROWER OR ITS AFFILIATES,
PROVIDED, HOWEVER, THE FOREGOING PROVISIONS SHALL NOT BE EFFECTIVE REGARDING THE
DISPOSITION OF COLLATERAL AFTER AN EVENT OF DEFAULT.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GBC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
18.
19
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER,IN ALL OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
COM21, INC.
BY
-------------------------------
PRESIDENT OR VICE PRESIDENT
BY
-------------------------------
SECRETARY OR ASS'T SECRETARY
GBC:
GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION
BY
-------------------------------
TITLE
------------------------------
19.
20
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: COM21, INC.
ADDRESS: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: MAY 30, 1997
This Schedule is an integral part of the Loan and Security Agreement between
GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL CORPORATION
("GBC") and the above-borrower ("Borrower") of even date.
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of (a) or (b) below:
(a) $5,000,000 at any one time outstanding; or
(b) The sum of the following:
(i) Receivable Loans. 80% of the amount of
Borrower's Eligible Receivables (as defined in
Section 8 above), plus
(ii) Term Loan. The unpaid principal balance of
the Term Loan in the original principal amount
of $2,000,000 being made concurrently herewith
by GBC to Borrower (the "Term Loan") and
evidenced by the Secured Promissory Note ("Term
Note") of even date herewith made by Borrower to
the order of GBC.
2. INTEREST.
INTEREST RATE (Section 1.2):
The interest rate in effect throughout each calendar
month during the term of this Agreement shall be the
highest "LIBOR Rate" in effect during such month,
plus 4.875% per annum, provided that the interest
rate in effect in each month shall not be less than
9% per annum, and provided that the interest charged
for each month shall be a minimum of $6,000,
regardless of the amount of the Obligations
outstanding. Interest shall be calculated on the
basis of a 360-day year for the actual number of
days elapsed. "LIBOR Rate" has the meaning set forth
in Section 8 above.
3. FEES (Section 1.3/Section 6.2):
Loan Fee: $50,000, payable concurrently herewith.
20.
21
GREYROCK BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
Termination Fee: $6,000 per month for each month (or portion thereof)
from the effective date of termination to the
Maturity Date
NSF Check Charge: $15.00 per item.
Wire Transfers: $15.00 per transfer.
4. MATURITY DATE
(Section 6.1): MAY 31, 1998, subject to automatic renewal as
provided in Section 6.1 above, and early termination
as provided in Section 6.2 above.
==================================================================
5. REPORTING. (Section 5.2):
Borrower shall provide GBC with the following:
1. Annual financial statements, as soon as
available, and in any event within 90 days
following the end of Borrower's fiscal year,
certified by independent certified public
accountants acceptable to GBC.
2. Quarterly unaudited financial statements, as
soon as available, and in any event within
30 days after the end of each fiscal quarter
of Borrower.
3. Monthly unaudited financial statements, as
soon as available, and in any event within
30 days after the end of each month.
4. Monthly Receivable agings, aged by invoice
date, within 10 days after the end of each
month.
5. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers within 10 days after the end of
each month.
6. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): None
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): None
EXISTING TRADE
NAMES OF BORROWER
21.
22
GREYROCK BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
(Section 3.2): None
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇
MATERIAL ADVERSE
LITIGATION (Section 3.10): None
7. OTHER COVENANTS:
Borrower shall at all times comply with all of
the following additional covenants:
(1) WARRANTS. The Borrower shall provide GBC with
five-year warrants to purchase 50,000 shares of
Series F Preferred Stock of the Borrower, on the
terms set forth in the Warrant to Purchase Stock and
related documents being executed concurrently with
this Agreement, at $4.00 per share (which Borrower
represents and warrants is the last price at which
Borrower issued and sold its Series F Preferred
Stock, which were sales of over 5,000,000 shares
during the period April 4, 1996 to May 7, 1996).
Such warrants shall contain such terms and
provisions as Borrower and GBC shall agree. Said
warrants shall be deemed fully earned on the date
hereof, shall be in addition to all interest and
other fees, and shall be non-refundable.
Borrower: GBC:
COM21, INC. GREYROCK BUSINESS CREDIT,
a Division of NationsCredit
Commercial Corporation
By__________________________________________
President By_____________________________
Title__________________________
By__________________________________________
Secretary or Ass't Secretary
22.
23
WARRANT TO PURCHASE STOCK
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Warrant to Purchase 50,000 Issue Date: May 30, 1997
Shares of the Series F Preferred Expiration Date: May 30, 2002
Stock of Com21, Inc. Initial Exercise Price: $4.00 per share
THIS WARRANT CERTIFIES THAT, for the agreed upon value
of $1.00 and for other good and valuable
consideration, GREYROCK BUSINESS CREDIT, A DIVISION OF
NATIONSCREDIT COMMERCIAL CORPORATION ("Holder") is
entitled to purchase the number of fully paid and
non-assessable shares of the class of securities (the
"Shares") of Com21, Inc. (the "Company") at the
initial exercise price per Share (the "Warrant Price")
all as set forth above and as adjusted pursuant to
Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this
Warrant. The address of the Holder is ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and the address
of the Company is ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant at any time on
or prior to the Expiration Date, in whole or in part, for amounts not less than
ten thousand (10,000) shares (as adjusted pursuant to Article 2 of this Warrant)
by delivering a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a certified bank check, bank draft or wire transfer of
immediately available funds in an amount equal to the Warrant Price then in
effect multiplied by the number of Shares being Purchased for the Shares being
purchased.
1.2 CONVERSION RIGHT. In lieu of exercising, this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number Of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.4.
1.3 [Reserved]
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.
24
WARRANT TO PURCHASE STOCK
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at Holder's expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the Acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. [Reserved]
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 [Reserved]
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking
2.
25
WARRANT TO PURCHASE STOCK
all such action as may be reasonably necessary or appropriate to protect
Holder's rights under this Article against impairment.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying to Holder an amount computed
by multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant, as such value is determined in accordance with Section 1.4 hereof.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant and payment of the aggregate purchase price
(other than in connection with a purchase under Section 1.2 hereof), and all
securities, if any, issuable upon conversion of the Shares, shall, upon Issuance
and payment of the aggregate purchase price for all of the Shares purchased
(other than in connection with an exercise hereunder pursuant to Section 1.2
hereof) be duly authorized, validly issued, fully paid and non-assessable, and
free of any liens and encumbrances except for restrictions on transfer provided
for herein or under applicable federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"). The Company agrees that the Shares or, if the Shares are converted into
common stock of the Company, such common stock, shall be subject to the
registration rights set
forth on Exhibit A.
ARTICLE 4. MISCELLANEOUS
3.
26
WARRANT TO PURCHASE STOCK
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel (i) if the transfer is to any corporation that on its own or
through other intermediate corporations has an effective complete ownership
interest in 100% of the stock of the Holder, or if the transfer is to any
wholly-owned subsidiary of any such entity or to any wholly-owned subsidiary of
Holder, or (ii) if there is no question as to the availability of current
information as referenced in Rule 144(c) (as reasonably determined by the
Company), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holders notice of proposed
sale as filed with the SEC.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable), provided
that the Holder shall be permitted to effect no more than five (5) transfers of
the Warrant during the term of this Warrant and each such transfer shall be in
the minimum number of 10,000 Shares. The Company shall have the right to refuse
to transfer any portion of this Warrant to any person who directly competes with
the Company, as such refusal is determined by the Company in its reasonable
discretion. Holder further agrees that, upon the specific written request of the
Company or its underwriters relating to the initial public offering of the
common stock of the Company, the Holder will not sell or otherwise transfer the
Warrant or the Shares during the 180 day period following the effective date of
the registration statement of the Company in connection with such initial public
offering.
4.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be shall be in writing and shall be given
either personally or by reputable private delivery service or by regular
first-class mail, or certified mail return receipt requested, addressed to each
such party at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. All notices
shall be deemed to have been given upon delivery in the case of notices
personally delivered, or at the expiration of one business day following
delivery to the private delivery service, or three business days following the
deposit thereof in the United States mail, with postage prepaid.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
4.9 NO RIGHTS AS SHAREHOLDER. This Warrant, as distinct from the Shares
for which this Warrant is exercisable,
4.
27
WARRANT TO PURCHASE STOCK
will not entitle Holder to any of the rights of a stockholder of the Company.
4.10 SURVIVAL. The representations and warranties set forth in this
Warrant by the Company (other than with respect to Section 3.1(a) after the date
hereof) and the Holder shall survive the date of this Warrant and will expire
upon the earlier of (a) the Expiration Date or (b) the date that the Holder has
exercised this Warrant for all of the Shares purchasable pursuant to the terms
hereof.
ARTICLE 5. REPRESENTATIONS AND COVENANTS OF THE HOLDER.
5.1 Holder hereby represents and warrants to the Company as follows:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Holder's rights contained herein
will be acquired for investment and not with a view to the sale or distribution
of any part thereof, and the Holder has no present intention of selling or
engaging in any public distribution of the same except pursuant to a
registration or exemption.
(b) Private Issue. The Holder understands (i) that the Preferred Stock
issuable upon exercise of this Warrant is not registered under the 1933 Act or
qualified under applicable state securities laws on the ground that the issuance
contemplated by this Warrant will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth herein.
(c) Disposition of Holder's Rights. In no event will the Holder make a
disposition of any of its rights to acquire Preferred Stock or Preferred Stock
issuable upon exercise of such rights unless and until (i) it shall have
notified the Company of the proposed disposition, and (ii) if requested by the
Company and as limited by the provisions set forth in Section 4.3 hereof, it
shall have furnished the Company with an opinion of counsel (which counsel may
either be inside or outside counsel to the Holder) satisfactory to the Company
and its counsel to the effect that (A) appropriate action necessary for
compliance with the 1933 Act has been taken, or (B) an exemption from the
registration requirements of the 1933 Act is available. Notwithstanding the
foregoing, the restrictions imposed upon the transferability of any of its
rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of
such rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Holder at its
request by the staff of the Securities and Exchange Commission or a ruling shall
have been issued to the Holder at its request by such Commission stating that no
action shall be recommended by such staff or taken by such Commission, as the
case may be, if such security is transferred without registration under the 1933
Act in accordance with the conditions set forth in such letter or ruling and
such letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Holder or holder of a share of Preferred Stock then
outstanding as to which such restrictions have terminated shall be entitled to
receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating, the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Holder understands that if the Company
does not register with the Securities and Exchange Commission pursuant to
Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Holder also understands that any sale of its rights of the Holder to
purchase Preferred Stock or Preferred Stock which might be made by it in
reliance upon Rule 144 under the 1933 Act may be made only in accordance with
the terms and conditions of that Rule.
(f) Accredited Investor. Holder is an "accredited investor" within the
meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in
effect.
5.
28
WARRANT TO PURCHASE STOCK
(g) Due Incorporation, etc. Holder is a corporation duly organized,
validly existing, and in good standing under the laws of its state of
organization.
(h) Information. Holder has had access to sufficient information about
the Company, and has had the opportunity to ask questions and has received
answers about the Company, to make an informed investment decision.
COM21, INC.
By _______________________________________
Chairman of the Board, President or
Vice President
By _______________________________________
Secretary of Ass't Secretary
6.
29
WARRANT TO PURCHASE STOCK
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______ shares of the
Common/Series ______ Preferred [strike one] Stock of __________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into Shares
in the manner specified in the Warrant. This conversion is exercised with
respect to __________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
-----------------------------
(NAME)
-----------------------------
-----------------------------
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
--------------------------------
(Signature)
--------------------------------
(Date)
EXHIBIT A
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "Registrable Securities" entitled to "piggy back"
registration rights and the Holder shall be deemed to be a "Holder" (for
purposes of piggyback registration rights only) pursuant to the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
Amended and Restated Information and Registration Rights Agreement dated
April 4, 1996
The Company agrees that no amendments will be made to the Agreement which
would have a disproportionately adverse impact on Holder's registration rights
thereunder when compared with the registration rights of the other holders of
registration rights under the Agreement, without the consent of Holder.
All parties understand and agree that the registration rights of Holder as
granted hereunder shall be limited to those set forth in Section 7 of the
Agreement (regarding piggyback registration) and related sections and the Holder
shall have no rights under Section 6 of the Agreement (regarding demand
registration rights).
7.