EXHIBIT 10.3
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TBCC
Loan and Security Agreement
Borrowers: Odetics, Inc., a Delaware corporation
Odetics ITS, Inc., a California corporation
Gyyr Incorporated, a California corporation
Mariner Networks, Inc., a Delaware corporation
Xxxxx, Mohaddes Associates, Inc., a California corporation
Address: 0000 X. Xxxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Date: December 28, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower(s) (jointly and severally, the "Borrower"), having its chief
executive office and principal place of business at the address shown above, and
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC")
having its principal office at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx,
Xxxxxxxx 00000 and having an office at 00000 Xxxxxxx Xxxx., Xxxxx 0000, Xxxxxxx
Xxxx, XX 00000. 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 9 below.) The parties
agree as follows:
1. LOANS.
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1.1. Loans. TBCC, subject to the terms and conditions of this Agreement,
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agrees to make loans (the "Loans") to Borrower, from time to time during the
period from the date of this Agreement to the Maturity Date set forth in the
Schedule, at Borrower's request, in an aggregate principal amount at any one
time outstanding not to exceed the Credit Limit shown on the Schedule. If at any
time the total outstanding Loans and other monetary Obligations exceed the
Credit Limit, Borrower shall repay the excess immediately without demand*.
Borrower shall use the proceeds of all Loans solely for lawful general business
purposes.
*provided, however, that if the total outstanding Loans and other monetary
Obligations exceed the Credit Limit because of a change in the manner in which
Eligible Receivables or Eligible Inventory is computed, then Borrower shall have
five (5) Business Days to repay such excess.
1.2. Due Date. The Loans, all accrued interest and all other monetary
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Obligations shall be payable in full on the Maturity Date. Borrower may borrow,
repay and reborrow Loans (other than any Term Loans), in whole or in part, in
accordance with the terms of this Agreement.
1.3. Loan Account. TBCC shall maintain an account on its books in the name
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of Borrower (the "Loan Account"). All Loans and advances made by TBCC to
Borrower or for Borrower's account and all other monetary Obligations will be
charged to the Loan Account. All amounts received by TBCC from Borrower or for
Borrower's account will be credited to the Loan Account. TBCC will send Borrower
a monthly statement reflecting the activity in the Loan Account, and each such
monthly statement shall be an account stated between Borrower and TBCC and shall
be final conclusive and binding absent manifest error.
1.4. Collection of Receivables. Borrower shall remit to TBCC all Collections
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including all checks, drafts and other documents and instruments evidencing
remittances in payment (collectively referred to as "Items of Payment") within
one Business Day after receipt, in the same form as received, with any necessary
indorsements. For purposes of calculating interest due to TBCC, credit will be
given for Collections and all other proceeds of Collateral and other payments to
TBCC three Business Days after receipt of cleared funds. For all purposes of
this Agreement any cleared funds received by TBCC later than 10:00 a.m.
(California time) on any Business Day shall be deemed to have been received on
the following Business Day and any applicable interest or fee shall continue to
accrue. Borrower's Loan Account will be credited only with the net amounts
actually received in payment of Receivables, and such payments shall be credited
to the Obligations in such order as TBCC shall determine in its discretion.
Pending delivery to TBCC, Borrower will not commingle any Items of Payment with
any of its other funds or property, but will segregate them from the other
assets of Borrower and will hold them in trust and for the account and as the
property of TBCC. Borrower hereby agrees to endorse any Items of Payment upon
the request of TBCC.
1.5. Reserves. TBCC may, from time to time, in its Good Faith business
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judgment: (i) establish and modify reserves against Eligible Receivables and
Eligible Inventory, (ii) modify advance rates with respect to Eligible
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Receivables and Eligible Inventory, (iii) modify the standards of eligibility
set forth in the definitions of Eligible Receivables and Eligible Inventory, and
(iv) establish reserves against available Loans.
1.6. Term.
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(a) The term of this Agreement shall be from the date of this Agreement to
the Maturity Date set forth in the Schedule, unless sooner terminated in
accordance with the terms of this Agreement, 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 sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date. On the Maturity Date or on any earlier termination of
this Agreement Borrower shall pay in full all Obligations, and notwithstanding
any termination of this Agreement all of TBCC's security interests and all of
TBCC's other rights and remedies shall continue in full force and effect until
payment and performance in full of all Obligations.
(b) 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 TBCC; or (ii) by TBCC at any time after the occurrence
of an Event of Default, without notice, effective immediately. If this Agreement
is terminated by Borrower or by TBCC under this Section 1.6(b), Borrower shall
pay to TBCC 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. Notwithstanding the foregoing, Borrower shall have no right to
terminate this Agreement at any time that any principal of, or interest on any
of the Loans or any other monetary Obligations are outstanding, except upon
prepayment of all Obligations and the satisfaction of all other conditions set
forth in the Loan Documents.
1.7. Payment Procedures. Borrower hereby authorizes TBCC to charge the Loan
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Account with the amount of all interest, fees, expenses and other payments to be
made hereunder and under the other Loan Documents. TBCC may, but shall not be
obligated to, discharge Borrower's payment obligations hereunder by so charging
the Loan Account. Whenever any payment to be made hereunder is due on a day that
is not a Business Day, the payment may be made on the next succeeding Business
Day and such extension of time shall be included in the computation of the
amount of interest due.
1.8. Conditions to Initial Loan. The obligation of TBCC to make the initial
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Loan is subject to the satisfaction of the following conditions prior to or
concurrent with such initial Loan, and Borrower shall cause all such conditions
to be satisfied by the Closing Deadline set forth in the Schedule:
(a) Except for the filing of termination statements under the Code by the
existing lender to Borrower whose loans are being repaid with the Loan proceeds,
no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection, with the
execution, delivery, performance, validity or enforceability of this Agreement,
or the other Loan Documents or the consummation of the transactions contemplated
hereby or thereby or the continuing operations of the Borrower following the
consummation of such transactions.
(b) TBCC and its counsel shall have performed (i) a review satisfactory to
TBCC of all of the Material Contracts and other assets of the Borrower, the
financial condition of the Borrower, including all of its tax, litigation,
environmental and other potential contingent liabilities, and the corporate and
capital structure of the Borrower and (ii) a pre-closing audit and collateral
review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of the
initial Loan or as of an earlier date acceptable to TBCC, in form and substance
satisfactory to TBCC and its counsel: (i) a Depository Account Agreement (as
TBCC shall designate), duly executed by the Borrower and its bank on TBCC's
standard form; (ii) acknowledgment copies of Uniform Commercial Code financing
statements (naming TBCC as secured party and the Borrower as debtor), duly filed
in all jurisdictions that TBCC deems necessary or desirable to perfect and
protect the Liens created hereunder, and evidence that all other filings,
registrations and recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be necessary to
create, in favor of TBCC, a perfected first priority Lien on the Collateral;
(iii) the opinion of counsel for the Borrower covering such matters incident to
the transactions contemplated by this Agreement as TBCC may specify in its
discretion; (iv) certified copies of all policies of insurance required by this
Agreement and the other Loan Documents, together with loss payee endorsements
for all such policies naming TBCC as lender loss payee and an additional
insured; (v) copies of the Borrower's articles or certificate of incorporation,
certified as true, correct and complete by the secretary of state of Borrower's
state of incorporation within 45 days of the date hereof; (vi) copies of the
bylaws of the Borrower and a copy of the resolutions of the Board of Directors
of the Borrower authorizing the execution, delivery and performance of this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby, attached to which is a certificate of the Secretary or an Assistant
Secretary of the Borrower certifying (A) that such copies of the bylaws and
resolutions are true, complete and accurate copies thereof, have not been
amended or modified since the date of such certificate and are in full force and
effect and (B) the incumbency, names and true signatures of the officers of the
Borrower; (vii) a good standing certificate from the Secretary of State of
Borrower's state of incorporation and each state in which the Borrower is
qualified as a foreign corporation, each dated within ten days of the date
hereof; (viii) the additional documents and agreements, if any, listed in the
Schedule; and (ix) such other agreements and instruments as TBCC deems necessary
in its sole and absolute discretion in connection with the transactions
contemplated hereby.
1.9. Conditions to Lending. The obligation of TBCC to make any Loan is
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subject to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower after due
inquiry, threatened litigation, proceeding, inquiry or other action relating to
this Agreement, or any other Loan Document, or which could be expected to have a
Material Adverse Effect in the judgment of TBCC;
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(b) Borrower shall be in compliance with all Requirements of Law and
Material Contracts, other than such noncompliance that could not have a Material
Adverse Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and shall
constitute first priority Liens, except for Permitted Liens;
(d) All representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct * on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct * as of such earlier date;
*in all material respects
(e) No Default or Event of Default shall have occurred and be continuing
or would result from the making of the requested Loan as of the date of such
request; and
(f) No Material Adverse Effect shall have occurred.
2. INTEREST AND FEES.
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2.1. Interest. Borrower shall pay TBCC interest on all outstanding Loans
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and other monetary Obligations, at the interest rate set forth in the Schedule.
Interest shall be payable monthly in arrears on the first Business Day of each
month, and on the Maturity Date. Following the occurrence and during the
continuance of any Event of Default, the interest rate applicable to all
Obligations shall be increased by two percent per annum.
2.2. Fees. Borrower shall pay TBCC the fees set forth in the Schedule.
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2.3. Calculations. All interest and fees under this Agreement shall be
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calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period for which such interest or fees are payable.
2.4. Taxes. Any and all payments by Borrower under this Agreement or any
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other Loan Document shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
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3.1. Grant of Security Interest. To secure the payment and performance when
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due of all of the Obligations, Borrower hereby grants to TBCC a security
interest in all of its present and future Receivables, Investment Property,
Inventory, Equipment, Other Property, and other Collateral, wherever located*.
*including without limitation all stock of Subsidiaries of Borrower, except
that TBCC's security interest in stock of the UK Sub, as defined in the
Schedule, shall be limited to 65% of such stock. Borrower shall, concurrently,
deliver certificates evidencing all such stock with duly executed stock powers
with respect thereto.
3.2. Other Liens; Location of Collateral. Borrower represents, warrants and
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covenants that all of the Collateral is, and will at all times continue to be,
free and clear of all Liens, other than Permitted Liens and Liens in favor of
TBCC. All Collateral is and will continue to be maintained at the locations
shown on the Schedule.
3.3. Receivables.
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(a) Schedules and Other Actions. As often as requested by TBCC, Borrower
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shall execute and deliver to TBCC written schedules of Receivables and Eligible
Receivables (but the failure to execute or deliver any schedule shall not affect
or limit TBCC's security interest in all Receivables). On TBCC's request,
Borrower shall also furnish to TBCC copies of invoices to customers and shipping
and delivery receipts. Borrower shall deliver to TBCC the originals of all
letters of credit, notes, and instruments in its favor and such endorsements or
assignments as TBCC may reasonably request and, upon the request of TBCC,
Borrower shall deliver to TBCC all certificated securities with respect to any
Investment Property, with all necessary indorsements, and obtain such account
control agreements with securities intermediaries and take such other action
with respect to any Investment Property, as TBCC shall request, in form and
substance satisfactory to TBCC. Upon request of TBCC Borrower additionally shall
obtain consents from any letter of credit issuers with respect to the assignment
to TBCC of any letter of credit proceeds.
(b) Records, Collections. Borrower shall report all customer credits to
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TBCC, on the regular reports to TBCC in the form from time to time specified by
TBCC. Borrower shall notify TBCC of all returns and recoveries of merchandise
and of all claims asserted with respect to merchandise, on its regular reports
to TBCC. Borrower shall not settle or adjust any dispute or claim, or grant any
discount, credit or allowance or accept any return of merchandise, except in the
ordinary course of its business, without TBCC's prior written consent.
(c) Representations. Borrower represents and warrants to TBCC that each
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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, the licensing of software or the rendition of
services, in the ordinary course of Borrower's business, and meet the Minimum
Eligibility Requirements set forth in Section 9.1(n) below.
3.4. Inventory. A physical verification of all Inventory wherever located
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will be taken by Borrower at least every twelve months and, in any case, as
often as reasonably requested by TBCC and a copy of such physical verification
shall be promptly submitted to TBCC. Borrower shall also submit to TBCC a copy
of the annual physical Inventory as observed and tested by its public
accountants in accordance with generally accepted auditing standards and GAAP.
If so requested by TBCC, Borrower shall execute and deliver to TBCC, a
confirmatory written instrument, in form and substance satisfactory to TBCC,
listing all its Inventory, but any failure to execute or deliver the same shall
not affect or limit TBCC's security interest in and to the Inventory. Borrower
shall maintain full, accurate and complete records respecting the Inventory
describing the kind, type and quantity of the Inventory and Borrower's cost
therefor, withdrawals therefrom and additions thereto, including a perpetual
inventory for work in process and finished goods.
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3.5. Equipment. Borrower shall at all times keep correct and accurate
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records itemizing and describing the location, kind, type, age and condition of
the Equipment, Borrower's cost therefor and accumulated depreciation thereof and
retirements, sales, or other dispositions thereof. Borrower shall keep all of
its Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, ordinary wear and tear
excepted. No Equipment shall be annexed or affixed to or become part of any
realty, unless the owner of the realty has executed and delivered a Landlord
Waiver in such form as TBCC shall specify. Where Borrower is permitted to
dispose of any Equipment under this Agreement or by any consent thereto
hereafter given by TBCC, Borrower shall do so at arm's length, in good faith and
by obtaining the maximum amount of recovery practicable therefor and without
impairing the operating integrity or value of the remaining Equipment.
3.6. Investment Property. Borrower shall have the right to retain all
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Investment Property payments and distributions, unless and until a Default or an
Event of Default has occurred. If a Default or an Event of Default exists,
Borrower shall hold all payments on, and proceeds of, and distributions with
respect to, Investment Property in trust for TBCC, and Borrower shall deliver
all such payments, proceeds and distributions to TBCC, immediately upon receipt,
in their original form, duly endorsed, to be applied to the Obligations in such
order as TBCC shall determine. Upon the request of TBCC, any such distributions
and payments with respect to any Investment Property held in any securities
account shall be held and retained in such securities account as part of the
Collateral.
3.7 Further Assurances. Borrower will perform any and all steps that
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TBCC may reasonably request to perfect TBCC's security interests in the
Collateral, including, without limitation, executing and filing financing and
continuation statements in form and substance satisfactory to TBCC. TBCC is
hereby authorized by Borrower to sign Borrower's name or file any financing
statements or similar documents or instruments covering the Collateral whether
or not Borrower's signature appears thereon. Borrower agrees, from time to time,
at TBCC's request, to file notices of Liens, financing statements, similar
documents or instruments, and amendments, renewals and continuations thereof,
and cooperate with TBCC, in connection with the continued perfection and
protection of the Collateral. If any Collateral is in the possession or control
of any Person other than a public warehouseman where the warehouse receipt is in
the name of or held by TBCC, Borrower shall notify such Person of TBCC's
security interest therein and, upon request, instruct such Person or Persons to
hold all such Collateral for the account of TBCC and subject to TBCC's
instructions. If so requested by TBCC, Borrower will deliver to TBCC warehouse
receipts covering any Collateral located in warehouses showing TBCC as the
beneficiary thereof and will also cause the warehouseman to execute and deliver
such agreements as TBCC may request relating to waivers of liens by such
warehouseman and the release of the Inventory to TBCC on its demand. Borrower
shall defend the Collateral against all claims and demands of all Persons.
3.8. Power of Attorney. Borrower hereby appoints and constitutes TBCC as
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Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the continuance of an Event of Default, to
convey any item of Collateral to any purchaser thereof, (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue the Lien on any Collateral granted hereunder, (iv) to execute and
deliver to any securities intermediary or other Person any entitlement order,
account control agreement or other notice, document or instrument with respect
to any Investment Property, and (v) to make any payment or take any act
necessary or desirable to protect or preserve any Collateral. TBCC's authority
hereunder shall include, without limitation, the authority to execute and give
receipt for any certificate of ownership or any document, transfer title to any
item of Collateral and take any other actions arising from or incident to the
powers granted to TBCC under this Agreement. This power of attorney is coupled
with an interest and is irrevocable.
4. Representations and Warranties of Borrower. Borrower represents and warrants
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as follows:
4.1. Organization, Good Standing and Qualification. Borrower (i) is a
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corporation duly * organized, validly existing and in good standing under the
laws of the State set forth above, (ii) has the corporate power and authority to
own its properties and assets and to transact the businesses in which it is
engaged and (iii) is duly qualified, authorized to do business and in good
standing in each jurisdiction where it is engaged in business, except to the
extent that the failure to so qualify or be in good standing would not have a
Material Adverse Effect.
*incorporated
4.2. Locations of Offices, Records and Collateral. The address of the
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principal place of business and chief executive office of Borrower is, and the
books and records of Borrower and all of its chattel paper and records relating
to Collateral are maintained exclusively in the possession of Borrower at, the
address of Borrower specified in the heading of this Agreement. Borrower has
places of business, and Collateral is located, only at such address and at the
addresses set forth in the Schedule and at any additional locations reported to
TBCC as provided in Section 5.8(c) as to which TBCC has taken all necessary
action to perfect and protect its security interests in the Collateral at any
such locations.
4.3. Authority. Borrower has the requisite corporate power and authority to
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execute, deliver and perform its obligations under each of the Loan Documents.
All corporate action necessary for the execution, delivery and performance by
Borrower of the Loan Documents has been taken.
4.4. Enforceability. This Agreement is, and, when executed and delivered,
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each other Loan Document will be, the legal, valid and binding obligation of
Borrower enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
4.5. No Conflict. The execution, delivery and performance of each Loan
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Document by Borrower does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract
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and will not result in the imposition of any Liens other than in favor of TBCC.
4.6. Consents and Filings. No consent, authorization or approval of, or
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filing with or other act by, any shareholders of Borrower or any Governmental
Authority or other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement or any other
Loan Document, the consummation of the transactions contemplated hereby or
thereby or the continuing operations of Borrower following such consummation,
except (i) those that have been obtained or made, (ii) the filing of financing
statements under the Uniform Commercial Code and (iii) any necessary filings
with the U.S. Copyright Office and the U.S. Patent and Trademark Office.
4.7. Solvency. Borrower is Solvent and will be Solvent upon the completion
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of all transactions contemplated to occur on or before the date of this
Agreement (including, without limitation, the Loans to be made on the date of
this Agreement).
4.8. Financial Data. Borrower has provided to TBCC complete and accurate
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Financial Statements, which have been prepared in accordance with XXXX
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Borrower has no Contingent
Obligation or liability for taxes, unrealized losses, unusual forward or long-
term commitments or long-term leases, which is not reflected in such Financial
Statements or the footnotes thereto. Since the last date covered by such
Financial Statements, there has been no sale, transfer or other disposition by
Borrower of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the financial condition of Borrower at
said date. Since said date, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of Borrower has been
redeemed, retired, purchased or otherwise acquired for value by Borrower.
4.9. Accuracy and Completeness of Information. All data, reports and
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information previously, now or hereafter furnished by or on behalf of Borrower
to TBCC or the Auditors are or will be true and accurate in all material
respects on the date as of which such data, reports and information are dated or
certified, and not incomplete by omitting to state any material fact necessary
to make such data, reports and information not materially misleading at such
time. There are no facts now known to Borrower which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect and
which have not been disclosed in writing to TBCC.
4.10. No Joint Ventures, Partnerships or Subsidiaries. Borrower is not
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engaged in any joint venture or partnership with any other Person. Borrower has
no Subsidiaries*.
*except as set forth in the Schedule
4.11. Corporate and Trade Name. During the past five years, Borrower has not
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been known by or used any other corporate, trade or fictitious name except for
its name as set forth on the signature page of this Agreement and the other
names specified in the Schedule.
4.12. No Actual or Pending Material Modification of Business. There exists
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no actual or, to the best of Borrower's knowledge after due inquiry, threatened
termination, cancellation or limitation of, or any modification or change in the
business relationship of Borrower with any customer or group of customers whose
purchases individually or in the aggregate are material to the operation of
Borrower's business or with any material supplier.
4.13. No Broker's or Finder's Fees. No broker or finder brought about this
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Agreement or the Loans. No broker's or finder's fees or commissions will be
payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14. Taxes and Tax Returns. Borrower has properly completed and timely filed
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all income tax returns it is required to file. The information filed is complete
and accurate in all material respects. All deductions taken in such income tax
returns are appropriate and in accordance with applicable laws and regulations,
except deductions that may have been disallowed but are being challenged in good
faith and for which adequate reserves have been made in accordance with GAAP.
All taxes, assessments, fees and other governmental charges for periods
beginning prior to the date of this Agreement have been timely paid (or, if not
yet due, adequate reserves therefor have been established in accordance with
GAAP) and Borrower has no liability for taxes in excess of the amounts so paid
or reserves so established. No deficiencies for taxes have been claimed,
proposed or assessed by any taxing or other Governmental Authority against
Borrower and no notice of any tax Lien has been filed. There are no pending or
threatened audits, investigations or claims for or relating to any liability for
taxes and there are no matters under discussion with any Governmental Authority
which could result in an additional liability for taxes. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Borrower. Borrower is not a
party to and does not have any obligations under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
4.15. No Judgments or Litigation. Except as set forth in the Schedule, no
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judgments, orders, writs or decrees are outstanding against Borrower, nor is
there now pending or, to the knowledge of Borrower after due inquiry, threatened
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against Borrower that (i) could individually or in the
aggregate be likely in the reasonable business judgment of TBCC to have a
Material Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of this Agreement, any other Loan Document or the consummation of
the transactions contemplated hereby or thereby.
4.16. Investments; Contracts. Borrower (i) has not committed to make any
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Investment; (ii) is not a party to any indenture, agreement, contract,
instrument or lease or subject to any charter, by-law or other corporate
restriction or any injunction, order, restriction or decree, which would
materially and adversely affect its business, operations, assets or financial
condition; (iii) is not a party to any take or pay contract as to which it is
the purchaser; or (iv) has no material contingent or long-term liability,
including
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management contracts (excluding employment contracts of full-time individual
officers or employees), which could have a Material Adverse Effect.
4.17. No Defaults; Legal Compliance. Borrower is not in default under any
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term of any Material Contract or in violation of any Requirement of Law, nor is
Borrower subject to any investigation with respect to a claimed violation of any
Requirement of Law.
4.18. Rights in Collateral; Priority of Liens. All Collateral is owned or
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leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid, enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.
4.19. Intellectual Property. Set forth in the written Representations and
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Warranties of Borrower previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. To the best of its knowledge after due
inquiry, Borrower has not infringed any patent, trademark, service-xxxx,
tradename, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use would
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
4.20. Labor Matters. There are no existing or threatened strikes, lockouts or
-------------
other disputes relating to any collective bargaining or similar agreement to
which Borrower is a party which would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
4.21. Licenses and Permits. Borrower has obtained and holds in full force and
--------------------
effect, all franchises, licenses, leases, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights and approvals which
are necessary or advisable for the operation of its business as presently
conducted and as proposed to be conducted, except where the failure to possess
any of the foregoing (individually or in the aggregate) would not have a
Material Adverse Effect.
4.22. Government Regulation. Borrower is not subject to regulation under the
---------------------
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated by this Agreement and the other Loan
Documents.
4.23. Business and Properties. The business of Borrower * affected by any
-----------------------
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be expected
to have a Material Adverse Effect.
*has not been
4.24. Affiliate Transactions. Borrower is not a party to or bound by any
----------------------
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair and
reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
4.25. Survival of Representations. All representations made by Borrower in
---------------------------
this Agreement and in any other Loan Document executed and delivered by it in
connection herewith shall survive the execution and delivery hereof and thereof
and the closing of the transactions contemplated hereby and thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until termination of this Agreement
--------------------------------------
and payment and satisfaction of all Obligations:
5.1. Corporate Existence. Borrower shall (i) maintain its corporate
-------------------
existence, (ii) maintain in full force and effect all material licenses, bonds,
franchises, leases, trademarks, qualifications and authorizations to do
business, and all material patents, contracts and other rights necessary or
advisable to the profitable conduct of its business, and (iii) continue in, and
limit its operations to, the same lines of business as presently conducted by
it.
5.2. Maintenance of Property. Borrower shall keep all property useful and
-----------------------
necessary to its business in good working order and condition (ordinary wear and
tear excepted) in accordance with its past operating practices.
5.3. Affiliate Transactions. Borrower shall conduct transactions with any of
----------------------
its Affiliates on an arm's-length basis or other basis no less favorable to
Borrower and which are approved by the board of directors of Borrower.
5.4. Taxes. Borrower shall pay when due (i) all tax assessments, and other
-----
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy or
-------- -------
claim has become a Lien on any of the property of Borrower, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
made therefor as required in accordance with GAAP.
5.5. Requirements of Law. Borrower shall comply with all Requirements of Law
-------------------
applicable to it, including, without limitation, all applicable Federal, State,
local or foreign laws and regulations, including, without limitation, those
relating to environmental matters, employee matters, the Employee Retirement
Income Security Act of 1974, and the collection, payment and deposit of
employees' income, unemployment and social security taxes, provided that
--------
Borrower shall not be deemed in violation hereof if Borrower's failure to comply
with any of the foregoing would not require more than $50,000 to cure the same.
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TBCC Loan and Security Agreement
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5.6. Insurance. Borrower shall maintain public liability insurance, business
---------
interruption insurance, third party property damage insurance and replacement
value insurance on its assets (including the Collateral) under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to TBCC in its commercially reasonable
judgment, all of which policies covering the Collateral shall name TBCC as an
additional insured and lender loss payee in case of loss, and contain other
provisions as TBCC may reasonably require to protect fully TBCC's interest in
the Collateral and any payments to be made under such policies.
5.7. Books and Records; Inspections. Borrower shall (i) maintain books and
------------------------------
records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and (ii)
provide TBCC and its agents access to the premises of Borrower at any time and
from time to time, during normal business hours and upon reasonable notice under
the circumstances, and at any time on and after the occurrence of a Default or
Event of Default, for the purposes of (A) inspecting and verifying the
Collateral, (B) inspecting and copying (at Borrower's expense) any and all
records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
the Auditors. Borrower shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Borrower on a regular basis or for a special
inspection if TBCC deems the same appropriate*. If TBCC's own employees are
used, Borrower shall also pay therefor $600 per person per day (or such other
amount as shall represent TBCC's then current standard charge for the same), or,
if outside examiners or accountants are used, Borrower shall also pay TBCC such
sum as TBCC may be obligated to pay as fees therefor*.
*provided that all such expenses shall be included in the Collateral
Monitoring Fee provided for in the Schedule and shall not be charged separately,
unless an Event of Default has occurred and is continuing
5.8. Notification Requirements. Borrower shall give TBCC the following
-------------------------
notices and other documents:
(a) Notice of Defaults. Borrower shall give TBCC written notice of any
------------------
Default or Event of Default within two Business Days after becoming aware of the
same.
(b) Proceedings or Adverse Changes. Borrower shall give TBCC written
------------------------------
notice of any of the following, promptly, and in any event within five Business
Days after Borrower becomes aware of any of the following: (i) any proceeding
being instituted or threatened by or against it in any federal, state, local or
foreign court or before any commission or other regulatory body involving a sum,
together with the sum involved in all other similar proceedings, in excess of
$50,000 in the aggregate, (ii) any order, judgment or decree being entered
against Borrower or any of its properties or assets involving a sum, together
with the sum of all other orders, judgments or decrees, in excess of $50,000 in
the aggregate, and (iii) any actual or prospective change, development or event
which has had or could reasonably be expected to have a Material Adverse Effect.
(c) Change of Name or Chief Executive Office; Opening Additional Places of
----------------------------------------------------------------------
Business. Borrower shall give TBCC at least 30 days prior written notice of any
--------
change of Borrower's corporate name or its chief executive office or of the
opening of any additional place of business.
(d) Casualty Loss. Borrower shall (i) provide written notice to TBCC,
-------------
within ten Business Days, of any material damage to, the destruction of or any
other material loss to any asset or property owned or used by Borrower other
than any such asset or property with a net book value (individually or in the
aggregate) less than $10,000 or any condemnation, confiscation or other taking,
in whole or in part, or any event that otherwise diminishes so as to render
impracticable or unreasonable the use of such asset or property owned or used by
Borrower together with the amount of the damage, destruction, loss or diminution
in value and (ii) diligently file and prosecute its claim or claims for any
award or payment in connection with any of the foregoing.
(e) Intellectual Property. Borrower shall promptly give TBCC written
---------------------
notice of any copyright registration made by it, any rights Borrower may obtain
to any copyrightable works, new trademarks or any new patentable inventions, and
of any renewal or extension of any trademark registration, or if it shall
otherwise become entitled to the benefit of any patent or patent application or
trademark or trademark application.
(f) Deposit Accounts and Security Accounts. Borrower shall promptly give
--------------------------------------
TBCC written notice of the opening of any new bank account or other deposit
account, and any new securities account.
5.9. Qualify to Transact Business. Borrower shall qualify to transact
----------------------------
business as a foreign corporation in each jurisdiction where the nature or
extent of its business or the ownership of its property requires it to be so
qualified or authorized and where failure to qualify or be authorized would have
a Material Adverse Effect.
5.10. Financial Reporting. Borrower shall timely deliver to TBCC the
-------------------
following financial information: the information set forth in the Schedule, and,
when requested by TBCC in its good-faith judgment, any further information
respecting Borrower or any Collateral. Borrower authorizes TBCC to communicate
directly with its officers, employees and Auditors and to examine and make
abstracts from its books and records. Borrower authorizes its Auditors to
disclose to TBCC any and all financial statements, work papers and other
information of any kind that they may have with respect to Borrower and its
business and financial and other affairs. Borrower shall deliver a letter
addressed to the Auditors requesting them to comply with the provisions of this
paragraph when requested by TBCC.
5.11. Payment of Liabilities. Borrower shall pay and discharge, in the
----------------------
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Borrower in
accordance with GAAP.
5.12. Patents, Trademarks, Etc. Borrower shall do and cause to be done all
------------------------
things necessary to preserve, maintain and keep in full force and effect all of
its registrations of trademarks, service marks and other marks, trade names and
other trade rights, patents, copyrights and other
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TBCC Loan and Security Agreement
-----------------------------------------------------------------
intellectual property in accordance with prudent business practices.
5.13. Proceeds of Collateral. Without limiting any of the other terms of this
----------------------
Agreement, and without implying any consent to any sale or other transfer of
Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC.
5.14. Solvency. Borrower shall be Solvent at all times.
--------
6. NEGATIVE COVENANTS. Until termination of this Agreement and payment and
------------------
satisfaction of all Obligations:
6.1. Contingent Obligations. Borrower will not, directly or indirectly,
----------------------
incur, assume, or suffer to exist any Contingent Obligation, excluding
indemnities given in connection with this Agreement or the other Loan Documents
in favor of TBCC or in connection with the sale of Inventory or other asset
dispositions permitted hereunder.
6.2. Corporate Changes. Borrower will not, directly or indirectly, merge or
------------------
consolidate with any Person, or liquidate or dissolve (or suffer any liquidation
or dissolution).
6.3. Change in Nature of Business. Borrower will not at any time make any
----------------------------
material change in the lines of its business as carried on at the date of this
Agreement or enter into any new line of business.
6.4. Sales of Assets. Borrower will not, directly or indirectly, in any
---------------
fiscal year, sell, transfer or otherwise dispose of any assets, or grant any
option or other right to purchase or otherwise acquire any assets other than (i)
Equipment with an aggregate value of less than $25,000 the proceeds of which
shall be paid to TBCC and applied to the Obligations, (ii) sales of Inventory in
the ordinary course of business and (iii) licenses or sublicenses on a non-
exclusive basis of intellectual property in the ordinary course of Borrower's
business.
6.5. Cancellation of Debt. Borrower will not cancel any claim or debt owed
--------------------
to it, except in the ordinary course of business.
6.6. Loans to Other Persons. Borrower will not at any time make loans or
----------------------
advance any credit (except to trade debtors in the ordinary course of business)
to any Person in excess of $25,000 in the aggregate at any time for all such
loans.
6.7. Liens. Borrower will not, directly or indirectly, at any time create,
-----
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.
6.8. Dividends, Stock Redemptions. Borrower will not, directly or
----------------------------
indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or rights
to purchase any such capital stock, whether now or hereafter outstanding
(Stock), or make any payment on account of or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Borrower, except for dividends paid solely in stock of the
Borrower.
6.9. Investments in Other Persons. Borrower will not, directly or
----------------------------
indirectly, at any time make or hold any Investment in any Person (whether in
cash, securities or other property of any kind) other than Investments in Cash
Equivalents*.
*, and other than (i) existing Investments in existing wholly-owned
Subsidiaries, and (ii) new Investments in existing wholly-owned Subsidiaries in
the ordinary course of business.
6.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
----------------------------------------------------------------
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's business) permitting third party management
rights with respect to Borrower's business.
6.11. Fiscal Year. Borrower will not change its fiscal year.
-----------
6.12. Accounting Changes. Borrower will not at any time make or permit any
------------------
change in accounting policies or reporting practices, except as required by
GAAP.
6.13. Broker's or Finder's Fees. Borrower will not pay or incur any broker's
-------------------------
or finder's fees in connection with this Agreement or the transactions
contemplated hereby.
6.14. Unusual Terms of Sale. Borrower will not sell goods or products on
---------------------
extended terms, consignment terms, on a progress billing or xxxx and hold basis,
or on any other unusual terms.
6.15. Amendments of Material Contracts. Borrower will not amend, modify,
--------------------------------
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could have a Material Adverse Effect.
6.16. Sale and Leaseback Obligations. Borrower will not at any time create,
------------------------------
incur or assume any obligations as lessee for the rental of real or personal
property in connection with any sale and leaseback transaction.
6.17. Acquisition of Stock or Assets. Borrower will not acquire or commit or
------------------------------
agree to acquire all or any stock, securities or assets of any other Person
other than Inventory and Equipment acquired in the ordinary course of business*.
*and other than acquisitions of new wholly-owned Subsidiaries made with
TBCC's prior written consent (which shall not be unreasonably withheld). Such
consent by TBCC may be conditioned on such new Subsidiary executing and
delivering a Continuing Guaranty of all of the Obligations in such form as TBCC
shall reasonably specify and a Security Agreement granting TBCC a first-priority
security
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TBCC Loan and Security Agreement
-----------------------------------------------------------------
interest in the assets of such Subsidiary (subject to permitted liens defined in
a manner comparable to that set forth in this Agreement) in such form as TBCC
shall reasonably specify (together with UCC-1 financing statements, certified
resolutions and other related documents in such form as TBCC shall reasonably
specify.
7. EVENTS OF DEFAULT.
-----------------
7.1. Events of Default. The occurrence of any of the following events shall
-----------------
constitute an Event of Default:
(a) Borrower shall fail to pay any principal, interest, fees, expenses or
other Obligations when payable, whether at stated maturity, by acceleration, or
otherwise; or
(b) Borrower shall default in the performance or observance of any
agreement, covenant, condition, provision or term contained in Section 1.1, 1.2,
1.4, 3.3, 5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this
Agreement, or Borrower shall fail to perform any non-monetary Obligation which
by its nature cannot be cured; or
(c) Borrower shall default in the performance or observance of any other
agreement, covenant, condition, provision or term of this Agreement (other than
those referred to in Section 7.1(a) above or Section 7.1(b) above) or any other
Loan Document, and such failure continues uncured for a period of five Business
Days after the date it occurs; or
(d) Borrower or any Guarantor shall dissolve, wind up or otherwise cease
to conduct its business; or
(e) Borrower or any Guarantor shall become the subject of (i) an
Insolvency Event except as set forth in clause (e) of the definition of
Insolvency Event or (ii) an Insolvency Event as set forth in clause (e) of the
definition of Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower or any
Guarantor to TBCC, under this Agreement or otherwise, shall be incorrect or
misleading in any material respect when made or deemed made; or
(g) A change in the ownership or control * of the voting stock of the
Borrower compared to such ownership on the date of this Agreement; or
*in one transaction or a series of related transactions of more than 50%
(h) any judgment or order for the payment of money shall be rendered
against Borrower and shall not be stayed, vacated, bonded or discharged within
thirty days; or
(i) any defined "Event of Default" shall occur under any other Loan
Document; or Borrower or any Guarantor shall deny or disaffirm its obligations
under any of the Loan Documents or any Liens granted in connection therewith or
shall otherwise challenge any of its obligations under any of the Loan
Documents; or any Liens granted in any of the Collateral shall be determined to
be void, voidable or invalid, are subordinated or are not given the priority
contemplated by this Agreement; or
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or
(k) the Auditors for Borrower shall deliver a Qualified opinion on any
Financial Statement; or
(l) Borrower or any Guarantor (i) shall fail to pay any Indebtedness owing
to TBCC under any other agreement with TBCC or note or instrument in favor of
TBCC, when due (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise), or (ii) shall otherwise be in breach of or
default in any of its obligations under any such agreement, note or instrument
with respect to any such Indebtedness; or
(m) Borrower or any Guarantor (i) shall fail to pay any Indebtedness in
excess of * owing to any Person other than TBCC or any interest or premium
thereon, when due (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise), or (ii) shall otherwise be in breach or
default in any of its obligations under any agreement with respect to any such
Indebtedness, if the effect of such breach, default or failure to pay is to
cause such Indebtedness to become due or redeemed or permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to declare such Indebtedness due or require such Indebtedness to be
redeemed prior to its stated maturity; or
*$100,000
(n) the occurrence of any event or condition that, in TBCC's * judgment,
could reasonably be expected to have a Material Adverse Effect.
*reasonable
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2. Remedies. Upon the occurrence and during the continuance of an Event of
--------
Default, TBCC shall have all rights and remedies under applicable law and the
Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except with
respect to any Event of Default with respect to Borrower set forth in Section
7.1(e), in which case all Obligations shall automatically become immediately due
and payable) without presentment, demand, protest or any other action or
obligation of TBCC;
(b) Cease making any Loans or other extensions of credit to Borrower of
any kind;
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue credits,
or bring suit on the Receivables and other Collateral (in the name of Borrower
or TBCC) and otherwise administer and collect the Receivables and other
Collateral;
(e) Collect, receive, dispose of and realize upon any Investment Property,
including withdrawal of any and all funds from any securities accounts;
(f) Sell, assign and deliver the Receivables and other Collateral, with or
without advertisement, at public or pri-
-9-
TBCC Loan and Security Agreement
-----------------------------------------------------------------
vate sale, for cash, on credit or otherwise, subject to applicable law;
(g) Foreclose on the security interests created pursuant to the Loan
Documents by any available procedure, take possession of any or all of the
Collateral, with or without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same; and
(h) Bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by Borrower, if permitted under
applicable law. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten days' notice shall constitute reasonable
notification. Borrower will assemble the Collateral and make it available at
such locations as TBCC may specify, whether at the premises of Borrower or
elsewhere, and will make available to TBCC the premises and facilities of
Borrower for the purpose of TBCC's taking possession of or removing the
Collateral or putting the Collateral in salable form.
(i) Borrower recognizes that TBCC may be unable to make a public sale of
any or all of the Investment Property, by reasons of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale. *
*Notwithstanding anything to the contrary in any Patent and Trademark
Security Agreement or other agreement, TBCC shall give Borrower at least 20 days
prior written notice of any foreclosure sale of Patent 151.
7.3. Receivables. Upon the occurrence and during the continuance of an Event
------------
of Default, or at any time that TBCC believes in good faith that fraud has
occurred or that Borrower has failed to deliver the proceeds of Receivables or
other Collateral to TBCC as required by this Agreement or any other Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable, and (ii) notify
account debtors on the Receivables and other Collateral that the Receivables and
Collateral have been assigned to TBCC, and that payments in respect thereof
shall be made directly to TBCC. If an Event of Default has occurred and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate, as its attorney-in-fact, at Borrower's sole cost and expense, to
exercise, all of the following powers, which are coupled with an interest and
are irrevocable, until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (B) to receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as TBCC
may designate; and (C) to take or bring, in the name of TBCC or Borrower, all
steps, actions, suits or proceedings deemed by TBCC necessary or desirable to
enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
7.4. Right of Setoff. In addition to all rights of offset that TBCC may have
---------------
under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have the right to appropriate and apply to
the payment of the Obligations of Borrower all deposits and other obligations
then or thereafter owing by TBCC to or for the credit or the account of
Borrower. In the event that TBCC exercises any of its rights under this Section,
TBCC shall provide notice to Borrower of such exercise, provided that the
failure to give such notice shall not affect the validity of the exercise of
such rights.
7.5. License for Use of Software and Other Intellectual Property. After the
-----------------------------------------------------------
occurrence and during the continuance of an Event of Default, unless expressly
prohibited by any licensor thereof, TBCC is hereby granted a license to use all
computer software programs, data bases, processes, trademarks, tradenames and
materials used by Borrower in connection with its businesses or in connection
with the Collateral.
7.6. No Marshalling; Deficiencies; Remedies Cumulative. The net cash
-------------------------------------------------
proceeds resulting from TBCC's exercise of any of its rights with respect to
Collateral, including any and all Collections (after deducting all of TBCC's
reasonable expenses related thereto), shall be applied by TBCC to such of the
Obligations in such order as TBCC shall elect in its sole and absolute
discretion, whether due or to become due. Borrower shall remain liable to TBCC
for any deficiencies and TBCC shall remit to Borrower or its successor or
assign, any surplus resulting therefrom. The remedies specified in this
Agreement are cumulative, may be exercised in such order and with respect to
such Collateral as TBCC may deem desirable and are not intended to be exclusive,
and the full or partial exercise of any of them shall not preclude the full or
partial exercise of any other available remedy under this Agreement, under any
other Loan Document, at equity or at law.
7.7. Waivers. Borrower hereby waives any bonds, security or sureties
-------
required by any statute, rule or any other law as an incident to any taking of
possession by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document including the taking of possession of
any Collateral or the giving of notice to any account debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the other
Loan Documents have been negotiated by the parties and Borrower acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
7.8. Right to Make Payments. In the event that Borrower shall fail to
----------------------
purchase or maintain insurance required hereunder, or to pay any tax,
assessment, government charge or levy, except as the same may be otherwise
permitted hereunder, or in the event that any Lien prohibited hereby shall not
be paid in full or discharged, or
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TBCC Loan and Security Agreement
-----------------------------------------------------------------
in the event that Borrower shall fail to perform or comply with any other
covenant, promise or obligation to TBCC hereunder or under any other Loan
Document, TBCC may (but shall not be required to) perform, pay, satisfy,
discharge or bond the same for the account of Borrower, and all amounts so paid
by TBCC shall be treated as a Loan hereunder to Borrower and shall constitute
part of the Obligations.
8. ASSIGNMENTS AND PARTICIPATIONS.
------------------------------
8.1. Assignments. Borrower shall not assign this Agreement or any right or
-----------
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of its
rights and obligations under this Agreement and the other Loan Documents.
8.2. Participations. TBCC may sell participations in or to all or a portion
--------------
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of the Loans); provided, however, that TBCC's
obligations under this Agreement shall remain unchanged.
8.3. Disclosure. TBCC may, in connection with any permitted assignment or
----------
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower.
9. DEFINITIONS.
-----------
9.1. General Definitions. As used herein, the following terms shall have the
-------------------
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
(a) Affiliate means as to any Person, any other Person who directly or
---------
indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person.
(b) Agreement means this Loan and Security Agreement, as amended,
---------
supplemented or otherwise modified from time to time.
(c) Auditors means a nationally recognized firm of independent public
--------
accountants selected by Borrower and reasonably satisfactory to TBCC.
(d) Bankruptcy Code means Title 11 of the United States Code entitled
---------------
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
(e) Borrowing means a borrowing of Loans.
---------
(f) Business Day means any day other than a Saturday, Sunday or any other
------------
day on which commercial banks in Chicago, Illinois are required or permitted by
law to close.
(g) Cash Equivalents means (i) securities issued, guaranteed or insured
----------------
by the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; and (iv) other
instruments, commercial paper or investments acceptable to TBCC in its sole
discretion.
(h) Collateral means Receivables, Investment Property, Inventory,
----------
Equipment, and Other Property, and all additions and accessions thereto and
substitutions and replacements therefor and improvements thereon, and all
proceeds (whether cash or other property) and products thereof, including,
without limitation, all proceeds of insurance covering the same and all tort
claims in connection therewith, and all records, files, computer programs and
files, data and writings relating to the foregoing, and all equipment containing
the foregoing.
(i) Collections means all cash, funds, checks, notes, instruments, any
-----------
other form of remittance tendered by account debtors in respect of payment of
Receivables and any other payments received by Borrower with respect to any
other Collateral.
(j) Compliance Certificate means a certificate as to compliance with the
----------------------
Obligations, on TBCC's standard form (in effect from time to time).
(k) Contingent Obligation means any direct, indirect, contingent or non-
---------------------
contingent guaranty or obligation for the Indebtedness of another Person, except
endorsements in the ordinary course of business.
(l) Default means any of the events specified in Section 7.1, whether or
-------
not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(m) Eligible Inventory means Inventory of Borrower which TBCC in its sole
------------------
discretion deems eligible for borrowing, based on such considerations as TBCC in
its sole discretion may deem appropriate from time to time and less any such
reserves as TBCC, in its sole discretion, may require. Without limiting the fact
that the determination of which Inventory is eligible for borrowing is a matter
of TBCC's sole discretion, the following are the minimum requirements for
Inventory to be Eligible Inventory: (i) the Inventory must consist of * in good,
new and salable condition which is not perishable, not obsolete or
unmerchantable, and is not comprised of raw materials, work in process,
packaging materials or supplies; (ii) the Inventory must meet all applicable
governmental standards; (iii) the Inventory must have been manufactured in
compliance with the Fair Labor Standards Act; (iv) the Inventory must conform in
all respects to the warranties and representations set forth in this Agreement;
(v) the Inventory must at all times be subject to TBCC's duly perfected, first
priority security interest; and (vi) the Inventory must be in Borrower's
exclusive possession, separately identifiable from goods of others, and situated
at
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TBCC Loan and Security Agreement
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Borrower's chief executive office or at one of the other
Borrower locations set forth on the Schedule. The value of Eligible Inventory
shall be computed at the lower of cost (computed on a "first in, first out"
basis) or wholesale market value.
*tape decks and video cameras
(n) Eligible Receivables means and includes only those Receivables which
--------------------
TBCC in its sole discretion deems eligible for borrowing, based on such
considerations as TBCC in its sole discretion may deem appropriate from time to
time and less any such reserves as TBCC, in its sole discretion, may require.
Without limiting the fact that the determination of which Receivables are
eligible for borrowing is a matter of TBCC's sole discretion, the following (the
"Minimum Eligibility Requirements") are the minimum requirements for a
---------------------------------
Receivable to be an Eligible Receivable: (i) the Receivable must not be
outstanding for more than 90 days from its invoice date, (ii) the Receivable
must not represent progress xxxxxxxx, or be due under a fulfillment or
requirements contract with the account debtor, (iii) the Receivable must not be
subject to any contingencies (including Receivables arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
account debtor may be conditional), (iv) the Receivable must not be owing from
an account debtor with whom the Borrower has any dispute (whether or not
relating to the particular Receivable), (v) the Receivable must not be owing
from an Affiliate of Borrower, (vi) the Receivable must not be owing from an
account debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to TBCC, or which, fails or goes out
of a material portion of its business, (vii) the Receivable must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to TBCC's satisfaction, with the United
States Assignment of Claims Act), (viii) the Receivable must not be owing from
an account debtor located outside the United States or Canada (unless pre-
approved by TBCC in its discretion in writing, or backed by a letter of credit
satisfactory to TBCC, or FCIA insured satisfactory to TBCC), (ix) the Receivable
must not be owing from an account debtor to whom Borrower is or may be liable
for goods purchased from such account debtor or otherwise, (x) the Receivable
must not violate any representation or warranty set forth in this Agreement, and
(xi) the Receivable must not be one in which TBCC does not have a first-
priority, valid, perfected Lien. Without limiting the generality of the
foregoing, Borrower must be in compliance with all requirements of the Loan
Documents regarding registration with the U.S. Copyright Office of any
copyrightable software in order for any Receivable arising from any licensing of
such software to constitute an Eligible Receivable hereunder. Receivables owing
from one account debtor will not be deemed Eligible Receivables to the extent
they exceed 30% of the total eligible Receivables outstanding. In addition, if
more than 50% of the Receivables owing from an account debtor are outstanding
more than 90 days from their invoice date (without regard to unapplied credits)
or are otherwise not eligible Receivables, then all Receivables owing from that
account debtor will be deemed ineligible for borrowing. * TBCC may, from time to
time, in its sole discretion, revise the Minimum Eligibility Requirements, upon
written notice to the Borrower.
*Receivables for services which have been fully performed, but which have
not yet been billed as a result of dates specified in the contract with the
Account Debtor as to when during a month xxxxxxxx will be made, may be Eligible
Receivables if they meet all of the other Minimum Eligibility Requirements and
are deemed eligible for Borrower by TBCC as set forth above and are not unbilled
for more than 90 days after the date the services were performed (the "Unbilled
Eligible Receivables").
(o) Equipment means all machinery, equipment, furniture, fixtures,
---------
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in which Borrower may have any interest as lessee or
otherwise (to the extent of such interest), together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutes for any of the
foregoing.
(p) Event of Default means the occurrence of any of the events specified
----------------
in Section 7.1.
(q) Financial Statements means the balance sheets, profit and loss
--------------------
statements, statements of cash flow, and statements of changes in intercompany
accounts, if any, for the period specified, prepared in accordance with GAAP and
consistent with prior practices.
(r) GAAP means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination. Whenever any accounting term is
used herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
(s) Good Faith means "good faith" as defined in the Uniform Commercial
----------
Code, from time to time in effect in the State of Illinois.
(t) Governing Documents means the articles or certificate of
-------------------
incorporation and by-laws of Borrower.
(u) Governmental Authority means any nation or government, any state or
----------------------
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
(v) Guarantor means any present or future guarantor of any or all of the
---------
Obligations.
(w) Indebtedness means, with respect to any Person, as of the date of
------------
determination any indebtedness, liability or obligation of such Person
(including without limitation obligations under capital leases and Contingent
Obligations).
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TBCC Loan and Security Agreement
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(x) Insolvency Event means, with respect to any Person, the occurrence
----------------
of any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law
or take any corporate or similar act in furtherance thereof, or (e) such Person,
or a substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for its dissolution,
reorganization, and such proceeding is not dismissed or stayed within sixty
days, or the appointment of a receiver, trustee, custodian or liquidator, and
such receiver is not dismissed within sixty days.
(y) Inventory means all present and future goods intended for sale,
---------
lease or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same.
(z) Investment in any Person means, as of the date of determination
----------
thereof, any payment or contribution, or commitment to make a payment or
contribution, by any Person including, without limitation, property contributed
or committed to be contributed by any Person, on its account for or in
connection with its acquisition of any stock, bonds, notes, debentures,
partnership or other ownership interest or any other security of the Person in
whom such Investment is made or any evidence of indebtedness by reason of a
loan, advance, extension of credit, guaranty or other similar obligation for any
debt, liability or indebtedness of such Person in whom the Investment is made.
(aa) Investment Property means any and all investment property of Borrower,
-------------------
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising.
(bb) Lien means any lien, claim, charge, pledge, security interest,
----
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(cc) Loan Account has the meaning specified in Section 1.3.
------------
(dd) Loan Documents means this Agreement and all present and future
--------------
documents and instruments delivered or to be delivered by Borrower or any of its
Affiliates or any Guarantor under, in connection with or relating to this
Agreement, as each of the same may be amended, supplemented or otherwise
modified from time to time.
(ee) Loans means the loans and financial accommodations made by TBCC
-----
hereunder.
(ff) Material Adverse Effect means (i) a material adverse effect on the
-----------------------
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower*, (ii) the impairment of
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or of TBCC to enforce the Obligations or realize upon the
Collateral or (iii) a material adverse effect on the value of the Collateral or
the amount which TBCC would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of the
Collateral.
*and their Subsidiaries taken as a whole
(gg) Material Contract means any contract or other arrangement to which
-----------------
Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material Adverse
Effect.
(hh) Obligations means and includes all loans (including the Loans),
-----------
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to TBCC of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document or any other
agreement executed in connection herewith or therewith, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired. The term includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of credit fees, reasonable attorneys' fees, and any
other sum properly chargeable to Borrower under this Agreement, the other Loan
Documents or any other agreement executed in connection herewith or therewith.
(ii) Other Property means all present and future: instruments, documents,
--------------
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to receive proceeds of letters of
credit, deposit accounts, chattel paper, certificates, insurance policies,
insurance proceeds, leases, computer tapes, causes of action, judgments, claims
against third parties, leasehold rights in any personal property, books,
ledgers, files and records, general intangibles (including without limitation,
all contract rights, tax refunds, rights to receive tax refunds, patents, patent
applications, copyrights (registered and unregistered), royalties, licenses,
permits, franchise rights, authorizations, customer lists, rights of
indemnification, contribution and subrogation, computer programs, discs and
software, trade secrets, computer service contracts, trademarks, trade names,
service marks and names, logos,
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TBCC Loan and Security Agreement
-----------------------------------------------------------------
goodwill, deposits, choses in action, designs, blueprints, plans, know-how,
telephone numbers and rights thereto, credits, reserves, and all forms of
obligations whatsoever now or hereafter owing to Borrower), all property at any
time in the possession or under the control of TBCC, and all security given by
Borrower to TBCC pursuant to any other Loan Document or agreement.
(jj) Permitted Liens means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords, carriers,
warehousemen, mechanics, laborers, materialmen and other like Persons arising by
operation of law in the ordinary course of business for sums which are not yet
due and payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables, Investment Property, Inventory or Other
Property), (iii) zoning restrictions, easements, encroachments, licenses,
restrictions or covenants on the use of property which do not materially impair
either the use of the property in the operation of the business of Borrower or
the value of the property, (iv) rights of general application reserved to or
vested in any municipality or other governmental, statutory or public authority
to control or regulate property, or to use property in a manner which does not
materially impair the use of the property for the purposes for which it is held
by Borrower, (v) state and municipal Liens for personal property taxes which are
not yet due and payable, (vi) Purchase Money Liens*.
*, (vii) Liens in favor of TBCC and any of its affiliates, (viii) Liens in
existence as of the date hereof and listed on Exhibit A hereto, and (ix) Liens
created in connection with the refinancing of Indebtedness secured by Permitted
Liens, provided that the amount of Indebtedness secured by any such Lien shall
not be increased as a result of such refinancing, and provided that no such Lien
shall extend to property or assets which were not encumbered by the Permitted
Lien securing the Indebtedness refinanced
(kk) Person means any individual, sole proprietorship, partnership, joint
------
venture, limited liability company, trust, unincorporated organization, joint
stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
(ll) Plan means any employee benefit plan, program or arrangement
----
maintained or contributed to by Borrower or with respect to which it may incur
liability.
(mm) Purchase Money Lien means a Lien on any item of Equipment created
-------------------
substantially simultaneously with the acquisition of such Equipment for the
purpose of financing such acquisition, provided that such Lien shall attach only
to the Equipment acquired.
(nn) Qualification or Qualified means, with respect to any report of
------------- ---------
Auditors covering Financial Statements, a material qualification to such report
(i) resulting from a limitation on the scope of examination of such Financial
Statements or the underlying data, (ii) as to the capability of Borrower to
continue operations as a going concern or (iii) which could be eliminated by
changes in Financial Statements or notes thereto covered by such report (such as
by the creation of or increase in a reserve or a decrease in the carrying value
of assets) and which if so eliminated by the making of any such change and after
giving effect thereto would result in a Default or an Event of Default.
(oo) Receivables means all present and future accounts and accounts
-----------
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
(pp) Requirement of Law means (a) the Governing Documents, (b) any law,
------------------
treaty, rule, regulation, order or determination of an arbitrator, court or
other Governmental Authority or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on Borrower or any of its property.
(qq) Schedule means the Schedule to this Agreement being signed
--------
concurrently by Borrower and TBCC, as amended from time to time.
(rr) Solvent means when used with respect to any Person that as of the
-------
date as to which such Person's solvency is to be measured: (a) the fair salable
value of its assets is in excess of the total amount of its liabilities
(including contingent liabilities as valued in accordance with applicable law)
as they become absolute and matured; (b) it has sufficient capital to conduct
its business; and (c) it is able to meet its debts as they mature.
(ss) Subsidiary means, as to any Person, a corporation or other entity in
----------
which that Person directly or indirectly owns or controls shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or appoint other managers of such corporation or other
entity.
9.2. Accounting Terms and Determinations. Unless otherwise defined or
-----------------------------------
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the Financial Statements delivered to TBCC on or before the date of this
Agreement. All accounting determinations for purposes of determining compliance
with this Agreement shall be made in accordance with GAAP as in effect on the
date of this Agreement and applied on a basis consistent in all material
respects with the audited Financial Statements delivered to TBCC on or before
the date of this Agreement. The Financial Statements required to be delivered
hereunder, and all financial records, shall be maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
Financial Statements delivered to TBCC on or before the date of this Agreement,
the Compliance Certificates required to be delivered pursuant to this Agreement
shall include calculations setting forth the adjustments necessary to
demonstrate how Borrower is in compliance with the Financial Covenants (if any)
based upon GAAP as in effect on the date of this Agreement.
9.3. Other Terms; Headings; Construction. Unless otherwise defined herein,
-----------------------------------
terms used herein that are defined in the Uniform Commercial Code, from time to
time in
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TBCC Loan and Security Agreement
-----------------------------------------------------------------
effect in the State of Illinois, shall have the meanings set forth therein. Each
of the words "hereof," "herein," and "hereunder" refer to this Agreement as a
whole. The term "including", whenever used in this Agreement, shall mean
"including (but not limited to)". An Event of Default shall "continue" or be
"continuing" unless and until such Event of Default has been waived or cured
within the grace period specified therefor under Section 7.1. References to
Articles, Sections, Annexes, Schedules, and Exhibits are internal references to
this Agreement, and to its attachments, unless otherwise specified. The headings
and any Table of Contents are for convenience only and shall not affect the
meaning or construction of any provision of this Agreement. 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 TBCC or Borrower under any rule of construction or otherwise.
10. GENERAL PROVISIONS.
-------------------
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER AND
--------------------------
TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED
ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT TBCC SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY TBCC IN GOOD
FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY TBCC. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
10.3. SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT
------------------
CORPORATION SYSTEM, 0000 XXXXXX XXXXXX, XXXXXXXXXX, XXXXXXXX 00000, AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE BORROWER
-----------------------
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST
TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.5. Delays; Partial Exercise of Remedies. No delay or omission of TBCC to
------------------------------------
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof. No single or partial exercise by TBCC of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
10.6. Notices. Except as otherwise provided herein, all notices and
-------
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, by overnight delivery service, with all charges
prepaid, or by telecopier followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by telecopier transmission, when receipt
of such transmission is acknowledged. Borrower's and TBCC's telecopier numbers
for purpose of notice hereunder are set forth in the Schedule; each party's
number may be changed by written notice to the other party.
10.7. Indemnification; Reimbursement of Expenses of Collection. Borrower
--------------------------------------------------------
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated, to
defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors, officers, agents, employees, advisors,
shareholders, attorneys and Affiliates (each, an "Indemnified Party") from and
-------------------
against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or expenses (including,
without limitation, reasonable fees and disbursements of counsel, experts,
consultants and other professionals) incurred by any of them (collectively,
"Claims") (except, in the case of each Indemnified Party, to the extent that any
--------
Claim is determined in a final and non-appealable judgment by a
-15-
TBCC Loan and Security Agreement
-----------------------------------------------------------------
court of competent jurisdiction to have directly resulted from such Indemnified
Party's gross negligence or willful misconduct) arising out of or by reason of
(i) any litigation, investigation, claim or proceeding which arises out of or is
related to (A) Borrower, or this Agreement, any other Loan Document or the
transactions contemplated hereby or thereby, (B) any actual or proposed use by
Borrower of the proceeds of the Loans, or (C) TBCC's entering into this
Agreement or any other Loan Document or any other agreements and documents
relating hereto, including, without limitation, amounts paid in settlement,
court costs and the reasonable fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding, (ii)
any remedial or other action taken by Borrower in connection with compliance by
Borrower, or any of its properties, with any federal, state or local
environmental laws, rules or regulations, and (iii) any pending, threatened or
actual action, claim, proceeding or suit by any shareholder or director of
Borrower or any actual or purported violation of Borrower's charter, by-laws or
any other agreement or instrument to which Borrower is a party or by which any
of its properties is bound. In addition and without limiting the generality of
the foregoing, Borrower shall, upon demand, pay to TBCC all reasonable costs and
expenses incurred by TBCC (including the reasonable fees and disbursements of
counsel and other professionals) in connection with the preparation, execution,
delivery, administration, modification and amendment of the Loan Documents, and
pay to TBCC all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by TBCC in
order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the Obligations
or otherwise administer this Agreement, foreclose or otherwise realize upon the
Collateral or any part thereof, 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 TBCC's security interest in, the Collateral; and otherwise
represent TBCC in any litigation relating to Borrower. Without limiting the
generality of the foregoing, Borrower shall pay TBCC a fee with respect to each
wire transfer in the amount of $15 plus all bank charges and a fee of $15 for
all returned checks plus all bank charges. If either TBCC 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. If and to the extent that the Obligations of
Borrower hereunder are unenforceable for any reason, Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of the Obligations
which is permissible under applicable law. Borrower's obligations under Section
2.4 and this Section shall survive any termination of this Agreement and the
other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any of the other Obligations.
10.8. Amendments and Waivers. Any provision of this Agreement or any other
----------------------
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and signed by Borrower and TBCC and then any such amendment or
waiver shall be effective only to the extent set forth therein. The failure of
TBCC 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 TBCC shall not waive or diminish any right of TBCC 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 TBCC shall be deemed to
have been waived by any act or knowledge of TBCC or its agents or employees, but
only by a specific written waiver signed by an authorized officer of TBCC and
delivered to Borrower.
10.9. Counterparts; Telecopied Signatures. This Agreement and any waiver or
-----------------------------------
amendment hereto may be executed in counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
10.10. Severability. In case any provision in or obligation under this
------------
Agreement or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.11. 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.
10.12. Maximum Rate. Notwithstanding anything to the contrary contained
------------
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to TBCC for the use, forbearance, or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the performance or payment of any covenant or obligation contained herein or
therein, exceed the maximum non-usurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
on the Obligations, under the laws of the State of Illinois (or the laws of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and which
allow a higher maximum non-usurious interest rate than under the laws of the
State of Illinois (or such other jurisdiction), in any case after taking into
ac-
-16-
TBCC Loan and Security Agreement
-----------------------------------------------------------------
count, to the extent permitted by applicable law, any and all relevant payments
or charges under this Agreement and the other Loan Documents executed in
connection herewith, and any available exemptions, exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever, fulfillment
of any provisions of this Agreement or any of the other Loan Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance TBCC should ever receive anything of
value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to TBCC for the use, forbearance, or detention of
the Obligations and other indebtedness of Borrower to TBCC shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such indebtedness.
The terms and provisions of this Section shall control every other provision of
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13. Entire Agreement; Successors and Assigns. This Agreement and the
----------------------------------------
other Loan Documents constitute the entire agreement between the parties,
supersede any prior written and verbal agreements between them, and shall bind
and benefit the parties and their respective successors and permitted assigns.
There are no oral understandings, oral representations or oral agreements
-------------------------------------------------------------------------
between the parties which are not set forth in this Agreement or in other
-------------------------------------------------------------------------
written agreements signed by the parties in connection herewith.
---------------------------------------------------------------
10.14. MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER 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: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
Borrower:
ODETICS, INC.
By /s/ Xxxxxxx X. Xxxxx
--------------------
Title COO
--------------------
By: /s/ Xxxx Xxxxxxx
--------------------
Title: Chairman and CEO
--------------------
Borrower:
ODETICS ITS, INC.
By /s/ Xxxxxxx X. Xxxxx
--------------------
Title CFO
--------------------
By: /s/ Xxxx Xxxxxxx
--------------------
Title: CEO
--------------------
Borrower:
GYYR INCORPORATED
By /s/ Xxxxxxx X. Xxxxx
--------------------
Title CFO
--------------------
By: /s/
--------------------
Title: VP
--------------------
-17-
TBCC Loan and Security Agreement
-----------------------------------------------------------------
Borrower:
MARINER NETWORKS, INC.
By /s/ Xxxxxxx X. Xxxxx
--------------------
Title CFO
--------------------
By: /s/ Xxxxx X. Xxxxxx
--------------------
Title: President
--------------------
Borrower:
XXXXX, MOHADDES ASSOCIATES, INC.
By /s/ Xxxxxxx X. Xxxxx
--------------------
Title Vice President
--------------------
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By /s/
--------------------
Title Senior VP and General Manager
-----------------------------
-18-
Exhibit A
Existing Liens (Section 9.1(jj))
--------------------------------------------------------------------------------
TBCC
Schedule to
Loan and Security Agreement
Borrowers: Odetics, Inc., a Delaware corporation
Odetics ITS, Inc., a California corporation
Gyyr Incorporated, a California corporation
Mariner Networks, Inc., a Delaware corporation
Xxxxx, Mohaddes Associates, Inc., a California corporation
Date: December 28, 1998
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION (TBCC) and the above borrower
(Borrower) of even date.
1. CREDIT LIMIT (Section 1.1):
An amount not to exceed the lesser of (1) or (2) below:
(1) $17,000,000 ("Dollar Limit"), at any one time
outstanding; or
(2) an amount equal to the sum of (a), (b), (c), (d)
and (e) below:
(a) 85% of the amount of Borrower's Eligible
Receivables (as defined in Section 9.1(n) above)
(other than Unbilled Eligible Receivables), plus
(b) the lesser of (i) $2,000,000, or (ii) 85% of
the amount of Borrower's Unbilled Eligible
Receivables (as defined in Section 9.1(n)
above), plus
(c) the lesser of (i) $2,000,000, or (ii) 50% of
the Value of Borrower's Eligible Inventory (as
defined in Section 9.1(m) above), plus
(d) the lesser of (i) $2,000,000, or (ii) 70%
(the "Equipment Advance Rate") of the appraised
orderly liquidation value of Eligible Equipment
(as defined below), plus
(e) $1,000,000 (the "Non-Formula Loans").
(a). UK Sub. Receivables of Borrower's subsidiary,
------
Odetics Europe Ltd., a UK company (the "UK Sub") may
be included as Eligible Receivables, provided that (i)
they meet the other requirements for Eligible
Receivables, and (ii) the Guaranty and Security
Agreementy referred to in Section 9(a) below have been
executed and delivered and are in full force and
effect, and (iii) TBCC has a first-priority, perfected
security interest in all such Receivables,
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
and (iv) Loans with respect to Eligible Receivables of the UK Sub
shall be limited to $1,500,000. With respect to the Eligible
Receivables of the UK Sub, Receivables owing from one account
debtor will not be deemed Eligible Receivables to the extent they
exceed $500,000.
(b). Value. "Value", as used above, means the lower of cost or
-----
wholesale market value of Borrower's Eligible Inventory.
(c). Loans Separate. Loans will be made separately to each Borrower
--------------
based on the Eligible Receivables, Eligible Inventory and
Eligible Equipment of each Borrower. Non-Formula Loans and Loans
based on the on the Eligible Receivables of the UK Sub will be
made to Odetics, Inc. (the "Parent").
(d). Equipment. "Eligible Equipment" shall mean Equipment which
---------
TBCC in its sole discretion deems eligible for borrowing, based
on such considerations as TBCC in its sole discretion may deem
appropriate from time to time and less any such reserves as TBCC,
in its sole discretion, may require. Without limiting the fact
that the determination of which Equipment is eligible for
borrowing is a matter of TBCC's sole discretion, the following
are the minimum requirements for Equipment to be Eligible
Equipment: (i) the Equipment must be in good condition and
repair; (ii) the Equipment must meet all applicable governmental
standards; (iii) the Equipment must conform in all respects to
the warranties and representations set forth in this Agreement;
(iv) the Equipment must at all times be subject to TBCC's duly
perfected, first priority security interest; and (v) the
Equipment must be in Borrower's exclusive possession, and
situated at Borrower's chief executive office or at one of the
other Borrower locations set forth on this Schedule.
(e). Appraisals. Appraisals of the orderly liquidation value of the
----------
Eligible Equipment may be done from time to time, at TBCC's
option, at the cost of Borrower, and by an appraiser selected by
TBCC, but no more frequently than once every six-months (except
that such limitation on the frequency of appraisals shall not
apply if an Event of Default or an event which, with notice or
passage of time or both, would constitute an Event of Default,
has occurred and is continuing).
(f). Reduction in Equipment Advance Rate. The Equipment Advance Rate
-----------------------------------
shall be reduced by 23.3 percentage points on December 31, 1999
and on December 31 of each year thereafter, until it is reduced
to zero. Borrower may, however, at its option, request in writing
a reappraisal of the orderly liquidation value of the Eligible
Equipment by giving written notice thereof to TBCC on or before
November 1 of each year, and in that event the Equipment Advance
Rate will not be reduced the following December 31, but the
Equipment Advance Rate will be applied to the appraised orderly
liquidation value of Eligible Equipment as determined by the new
appraisal. Appraisals under this Section shall be at the cost of
Borrower, by appraisers selected by TBCC, and such appraisals
shall be satisfactory to TBCC in its discretion.
-2-
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
Example. If the beginning appraised orderly
-------
liquidation value of Eligible Equipment was
$2,000,000, then the Loans available under Section
1(2)(d) above would be 70% of said amount or
$1,400,000. On December 31, 1999, the Equipment
Advance Rate would be reduced by 23.3 percentage
points from 70% to 46.7%, and the Loans available
under Section 1(2)(d) above would then be 46.7%,
of $2,000,000 or $934,000. However, if Borrower
made a written request to TBCC by November 1, 1999
for a reappraisal, then there would be no
reduction in the Equipment Advance Rate. If the
new appraisal of the Eligible Equipment was
$2,000,000, then the Loans available under
Section 1(2)(d) above would be 70% of said
$2,000,000 or $1,400,000.
Letter of Credit
Sublimit TBCC, in its Good Faith business judgment, will from time
to time during the term of this Agreement issue letters
of credit for the account of the Borrower ("Letters of
Credit"), in an aggregate amount at any one time
outstanding not to exceed $2,000,000, upon the request of
the Borrower, provided that, on the date the Letters of
Credit are to be issued, Borrower has available to it
Loans in an amount equal to or greater than the face
amount of the Letters of Credit to be issued. Prior to
the issuance of any Letters of Credit, Borrower shall
execute and deliver to TBCC such documentation relating
thereto as TBCC shall specify (the "Letter of Credit
Documentation"). Fees for the Letters of Credit shall be
as provided in the Letter of Credit Documentation.
The Dollar Limit and the Loans available to Borrower
under this Agreement at any time shall be reduced by the
total face amount of all Letters of Credit from time to
time outstanding.
2. INTEREST.
(Section 2.1): The interest rate in effect throughout each calendar
month during the term of this Agreement shall be the
highest "Base Rate" in effect during such month, plus 2%
per annum, provided that (i) the interest rate applicable
to the Non-Formula Loans shall be the highest "Base Rate"
in effect during such month, plus 4% per annum, and (ii)
the interest rate in effect in each month shall not be
less than 9% per annum, and (iii) the interest charged
for each month shall be a minimum of $20,000, 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. "Base Rate" shall mean
---------
the higher of (a) the highest prime, base or equivalent
rate of interest announced from time to time by Citibank,
N.A., First National Bank of Chicago and Bank of America
National Trust and Savings Association (which may not be
the lowest rate of interest charged by such bank) and (b)
the published annualized rate for 90-day dealer
commercial paper which appears in the "Money Rates"
section of The Wall Street Journal.
-----------------------
3. FEES
(Section 2.2):
Loan Fees: $170,000, payable concurrently herewith and
fully earned on the date hereof, plus $85,000 payable and
fully earned on the first anniversary of the date hereof.
-3-
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
Collateral Monitoring Fee: $25,000 per year, payable in
advance, on the date hereof and on each anniversary of the
date hereof.
Termination Fee: An amount equal to $20,000 multiplied by
each month (or portion thereof) from the effective date of
termination to the Maturity Date, which Termination Fee
shall be payable on the date of termination, provided that
no Termination Fee shall be payable if Borrower terminates
this Agreement effective on the first anniversary of the
date hereof and give TBCC written notice of termination at
least 60 days before the first anniversary of the date
hereof. Such termination shall be subject to all of the
provisions of Section 1.6 above.
4. MATURITY DATE (Section 1.6): December 31, 2000 (the "Maturity Date"),
subject to automatic renewal and early
termination as provided in Section 1.6 above.
5. REPORTING (Section 5.10): Borrower shall provide TBCC with the following
reports:
(a). Monthly Financial Statements. Monthly unaudited
----------------------------
financial statements, as soon as available, and
in any event within 30 days after the end of each
month.
(b). Monthly Receivable Agings. Monthly Receivable
-------------------------
agings, aged by invoice date, within 10 days
after the end of each month.
(c). Monthly Payable Agings. Monthly accounts
----------------------
payable agings, aged by invoice date, and
outstanding or held check registers within 10
days after the end of each month.
(d). Monthly Inventory Reports. Monthly perpetual
-------------------------
inventory reports for the Inventory valued on a
first-in, first-out basis at the lower of cost or
market (in accordance with generally accepted
accounting principles) or such other inventory
reports as are reasonably requested by TBCC, all
within 30 days after the end of each month.
(e). Monthly Compliance Certificates. As soon as
-------------------------------
available, but not later than thirty days after
the end of each month, a Compliance Certificate,
with an attached schedule of calculations
demonstrating compliance or indicating non-
compliance with any Financial Covenants.
(f). Quarterly Financial Statements. Quarterly
------------------------------
unaudited financial statements, as soon as
available, and in any event within 30 days after
the end of each fiscal quarter of Borrower.
(g). Annual Financial Statements. As soon as
---------------------------
available, but not later than 90 days after the
end of the Borrower's fiscal year, (A) Borrower's
annual audited Financial Statements; (B) a
comparison in reasonable detail to the prior
year's audited Financial Statements; (C) the
Auditors' opinion without Qualification, a
Management Letter and a statement indicating that
the Auditors have not obtained knowledge of the
existence of any Default or Event of Default
during their audit; (D) a narrative
-4-
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
discussion of Borrower's financial condition and
results of operations and the liquidity and capital
resources for such fiscal year.
6. BORROWER INFORMATION:
(a) Prior Names of Borrower (Section 4.11): As set forth
in the Representations and Warranties of the Parent
dated September 18, 1998 (the "Representations").
(b) Prior Trade Names of Borrower (Section 4.11): As set
forth in the Representations.
(c) Existing Trade Names of Borrower (Section 4.11): As set
forth in the Representations.
(d) Other Places of Business and Locations of Collateral
(Section 4.2): As set forth in the Representations.
7. FACSIMILE NUMBERS:
Borrower: (000) 000-0000
TBCC: (000) 000-0000
8. CLOSING DEADLINE (Section 1.8): December 31, 1998
9. ADDITIONAL PROVISIONS:
(a) Guaranty. Within 21 days after the date hereof,
Borrower shall cause the UK Sub to execute and deliver
to TBCC a Continuing Guaranty, in such form as TBCC
shall specify, with respect to all of the Obligations,
and a security agreement granting TBCC a first-
priority, perfected security interest in all of the
assets of the UK Sub, in such form as TBCC shall
specify, and Borrower shall cause the UK Sub to deliver
and cause to be delivered all such certificates,
opinions and other documents and take all such other
actions in connection therewith as TBCC shall specify
in its reasonable discretion. Borrower shall cause
such Guaranty and Security Agreement to continue in
full force and effect throughout the term of this Loan
Agreement and so long as any portion of the Obligations
remains outstanding.
(b) Copyright Filings. Concurrently, Borrower is executing
and delivering to TBCC a Security Agreement in
Copyrighted Works (the "Copyright Agreement"). Within
60 days after the date hereof, Borrower shall (i) cause
all of its computer software, the licensing of which
results in Receivables, to be registered with the
United States Copyright Office, (ii) complete the
Exhibits to the Copyright Agreement with all of the
information called for with respect to such software,
(iii) cause the Copyright Agreement to be recorded in
the United States Copyright Office, and (iv) provide
evidence of such recordation to TBCC.
-5-
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
(c) Real Estate-Negative Pledge. Borrower shall not permit
any liens or encumbrances to exist on Borrower's real
property located at 0000 X. Xxxxxxxxxx Xxx., Xxxxxxx,
Xxxxxxxxxx, except for liens for taxes not delinquent
and covenants, conditions and restrictions. Within 45
days after the date hereof, Borrower shall provide TBCC
with a preliminary title report confirming the
foregoing.
(d) Financial Covenants.
(1) Working Capital. As of the end of each fiscal
quarter of Parent ending during the term of this
Agreement, Parent shall maintain an excess of current
assets over current liabilities of not less than
$10,000,000 (on a consolidated basis with its U.S.
Subsidiaries). Current assets and current liabilities
shall be determined in accordance with GAAP.
(2) Unsecured Indebtedness. Parent shall not
permit its total outstanding trade debt (on a
consolidated basis with its U.S. Subsidiaries) to
exceed $12,000,000 at any time outstanding.
(3) Secured Indebtedness. During the period from
the date hereof through December 31, 1999, and during
each twelve-month period thereafter, Parent (on a
consolidated basis with its U.S. Subsidiaries) shall
limit total Indebtedness incurred during each such
period, which is secured by Permitted Liens (other than
Indebtedness to TBCC), to an aggregate amount for all
such Indebtedness not to exceed $1,500,000 during each
such period.
(e) Corporate Structure. Borrower represents and warrants
that its corporate structure is as follows:
Odetics, Inc., a Delaware corporation, owns 100%
of the issued and outstanding stock of the
following Subsidiaries:
Odetics ITS, Inc., a California corporation
Gyyr Incorporated, a California corporation
Mariner Networks, Inc., a Delaware
corporation
Xxxxx, Mohaddes Associates, Inc., a
California corporation
Odetics Europe Ltd., a UK company
(f) Sale of Stock or Assets.
(1) Paydown of Loans. In the event any Borrower sells
-----------------
or transfers stock of any Subsidiary or transfers any
of its assets outside the ordinary course of business
(which sale shall be subject to Section 6.4 of this
Loan Agreement as well as this Section 9(f)), then the
following shall apply:
(A) Borrower shall pay to TBCC an amount equal to
all outstanding Loans made with respect to all
Receivables, Inventory and Equipment, which belong
to such Subsidiary or which are included in any
such asset sale, to repay such Loans in full upon
such sale; and
-6-
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
(B) Borrower shall pay to TBCC an additional
amount equal to the lesser of one-third of such
Loan payment or an amount equal to the outstanding
Non-Formula Loans, which sum shall be applied to
the outstanding Non-Formula Loans; and
(C) Thereafter, the amount of Non-Formula Loans
available to the Borrower shall be permanently
reduced by an amount equal to one-third of the
Loan Payment made under Section 9(f)(1)(A) above.
(2) Example. The following is an example of the
--------
operation of this Section 9(f):
If Borrower sold all of the stock of Gyyr
Incorporated, and the outstanding Loans with
respect to the Receivables, Inventory and
Equipment of Gyyr Incorporated under the formulas
in Section 1 of this Schedule were $1,500,000,
then Borrower would pay to TBCC (i) $1,500,000 to
pay all outstanding Loans with respect to the
Receivables, Inventory and Equipment of Gyyr
Incorporated, and (ii) $500,000 (one-third of the
$1,500,000) to be applied to the outstanding Non-
Formula Loans.
If at that date the Non-Formula Loans were only
$250,000, then the payment on such Non-Formula
Loans would be $250,000 to pay them in full.
Thereafter, the Non-Formula Loans would be limited
to $500,000 (i.e. $1,000,000 minus $500,000) (even
if the amount of the Non-Formula Loans paid off
was only $250,000).
(g) Additional Equity. Without limiting any of the other
conditions precedent set forth in this Agreement, prior
to the first disbursement of the Loans, Borrower shall
provide evidence to TBCC that it has received not less
than $2,000,000 in net cash proceeds from the issuance
and sale after December 15, 1998 of Borrower's equity
and/or subordinated debt securities to investors
acceptable to TBCC in its discretion. Subordinated
debt securities shall be fully subordinated to the
Obligations on terms and conditions satisfactory to
TBCC in its discretion and shall be unsecured.
Borrower: Borrower:
ODETICS, INC. ODETICS ITS, INC.
By /s/ Xxxxxxx X. Xxxxx By /s/ Xxxxxxx X. Xxxxx
------------------------------------ -------------------------------
President or Vice President President or Vice President
(Signatures continue)
-7-
TRANSAMERICA Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
Borrower: Borrower:
GYYR INCORPORATED MARINER NETWORKS, INC.
By /s/ Xxxxxxx X. Xxxxx By /s/ Xxxxxxx X. Xxxxx
---------------------------------- ---------------------------------
President or Vice President President or Vice President
Borrower: TBCC:
XXXXX, MOHADDES ASSOCIATES, INC. TRANSAMERICA BUSINESS CREDIT
CORPORATION
By /s/ Xxxxxxx X. Xxxxx By /s/
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President or Vice President Title Senior VP and General
Manager
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