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EXHIBIT 4.1
AMENDED AND RESTATED LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
OBLIGOR #1531733758 NOTE #
AGREEMENT DATE March 29, 1999
CREDIT LIMIT $15,000,000
INTEREST RATE B + 0
OFFICER NO./INITIALS XXXXXXXX X. XXXXX
THIS AGREEMENT is entered into as of March 29, 1999 between Comerica
Bank-California ("Bank") as secured party, whose Headquarter Office is 000 Xxxx
Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 and CIDCO, INCORPORATED
("Borrower"), a California corporation whose chief executive office is located
at 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxxxx 00000. The parties agree as
follows:
1.0 DEFINITIONS.
1.1 "Agreement" as used in this Agreement means and includes this
Amended and Restated Loan & Security Agreement (Accounts and Inventory), any
concurrent or subsequent rider hereto and any extensions, supplements,
amendments or modifications hereto and to any such rider. This Agreement
replaces (i) that certain Revolving Credit Loan Agreement dated August 26, 1994,
as amended and restated by that certain Amended and Restated Revolving Credit
Loan Agreement dated March 2, 1995, as amended from time to time thereafter; and
(ii) that certain LIBOR Addendum to Revolving Credit Loan Agreement dated
October 20, 1997.
1.2 "Bank Expenses" as used in this Agreement means and includes: all
costs or expenses required to be paid by Borrower under this Agreement other
than principal and interest which are paid or advanced by Bank; taxes and
insurance premiums of every nature and kind of Borrower paid by Bank; filing,
recording, publication and search fees, appraiser fees, auditor fees and costs,
and title insurance premiums paid or incurred by Bank in connection with Bank's
transactions with Borrower; costs and expenses incurred by Bank in collecting
the Receivables (with or without suit) to correct any default or enforce any
provision of this Agreement, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, disposing of, preparing for sale and/or
advertising to sell the Collateral, whether or not a sale is consummated; costs
and expenses of suit incurred by Bank in enforcing this Agreement or any portion
hereof, including, but not limited to, expenses incurred by Bank in attempting
to obtain relief from any stay, restraining order, injunction or similar process
which prohibits Bank from exercising any of its rights or remedies; and
reasonable attorneys' fees and expenses incurred by Bank in advising,
structuring, drafting, reviewing, amending, terminating, enforcing, defending or
concerning this Agreement, or any portion hereof or any agreement related
hereto, whether or not suit is brought. Bank Expenses shall include Bank's
in-house legal charges at reasonable rates. Notwithstanding the foregoing or
anything to the contrary herein, Borrower shall not be obligated for Bank
Expense in excess of Seven Thousand Five Hundred and/100 Dollars ($7,500) in
connection with the drafting, reviewing or negotiation of this Agreement.
1.3 "Base Rate" as used in this Agreement means that variable rate of
interest publicly announced by Bank at its headquarters office in San Jose,
California as its "Prime Rate" or "Base Rate" from time to time and which serves
as the basis upon which effective rates of interest are calculated for those
loans making reference thereto.
1.4 "Borrower's Books" as used in this Agreement means and includes all
of Borrower's books and records including, but not limited to: minute books;
ledgers; records indicating, summarizing or evidencing Borrower's assets,
liabilities, Receivables, business operations or financial condition, and all
information relating thereto, computer programs; computer disk or tape files;
computer printouts; computer runs; and other computer prepared information and
equipment of any kind.
1.5 "Borrowing Base" as used in this Agreement means the sum of: (1)
eighty percent (80%) of the net amount of Eligible Accounts after deducting
therefrom all payments by the account debtor, adjustments and credits in favor
of the account debtor applicable thereto ("Accounts Receivable Borrowing Base");
and (2) the amount, if any, of the advances against inventory agreed to be made
pursuant to any Inventory Rider ("Inventory Borrowing Base"), or other rider,
amendment or modification to this Agreement, that may now or hereafter be
entered into by Bank and Borrower, less any issued and outstanding or if not
outstanding, unreimbursed, Letters of Credit.
1.6 "Cash Flow" as used in this Agreement means for any applicable
period of determination, the Net Income (after deduction for income taxes and
other taxes of such person determined by reference to income or profits of such
person) for such period, plus, to the extent deducted in computation of such Net
Income, the amount of depreciation and amortization or other such non-cash
expense and the amount of deferred tax liability during such period, all as
determined in accordance with GAAP. The applicable period of determination will
be quarterly, beginning with the period from N/A to N/A .
1.7 "Collateral" as used in this Agreement means and includes each and
all of the following: the Receivables; the Intangibles; the negotiable
collateral, the Inventory; all money, deposit accounts and all other assets of
Borrower in which Bank receives a security interest or which hereafter come into
the possession, custody or control of Bank; and the proceeds of any of the
foregoing, including, but not limited to, proceeds of insurance covering the
collateral and any and all Receivables, Intangibles, negotiable collateral,
Inventory, equipment, money, deposit accounts or other tangible and intangible
property of Borrower resulting from the sale or other disposition of the
collateral, and the proceeds thereof. Notwithstanding anything to the contrary
contained herein, collateral shall not include any waste or other materials
which have been or may be designated as toxic or hazardous by Bank.
1.8 "Credit" as used in this Agreement means all obligations, except
those obligations arising pursuant to any other separate contract, instrument,
note, or other separate agreement which, by its terms, provides for a specific
interest rate and term.
1.9 "Current Assets" as used in this Agreement means, as of any
applicable date of determination, all cash, non-affiliated customer receivables,
United States government securities, claims against the United States
government, and inventories.
1.10 "Current Liabilities" as used in this Agreement means, as of any
applicable date of determination, (i) all liabilities of a person that should be
classified as current in accordance with GAAP, including without limitation any
portion of the principal of the Indebtedness classified as current, plus (ii) to
the extent not otherwise included, all liabilities of Borrower to any of its
affiliates whether or not classified as current in accordance with GAAP.
1.11 "Daily Balance" as used in this Agreement means the amount
determined by taking the amount of the Credit owed at the beginning of a given
day, adding any new Credit advanced or incurred on such date, and subtracting
any payments or collections which are deemed to be paid and are applied to Bank
in reduction of the Credit on that date under the provisions of this Agreement.
1.12 "Eligible Accounts" as used in this Agreement means and includes
those accounts of Borrower which are due and payable within thirty (30) days, or
less, from the date of invoice, have been validly assigned to Bank and strictly
comply with all of Borrower's warranties and representations to Bank; but
Eligible Accounts shall not include the following: (a) accounts with respect to
which the account debtor is an officer, employee, partner, joint venturer or
agent of Borrower; (b) accounts with respect to which goods are placed on
consignment, bailment, guaranteed sale or other terms by reason of which the
payment by the account debtor may be conditional. Notwithstanding any provision
to the contrary in this Agreement or in any agreement executed in connection
herewith, nothing in this Agreement or in any agreement executed in connection
herewith shall be deemed to preclude Bank from having a security interest in any
Receivables for the services provided by Borrower to Third Party Consignors or
Bailors in connection with third party goods, products and accessories held by
Borrower in connection with consignment or bailment; (c) accounts with respect
to which the account debtor is not a resident of the United States with the
exception of foreign accounts that have been approved by Bank; (d) accounts with
respect to which the account debtor is the United States or any department,
agency or instrumentality of the United States; (e) accounts with respect to
which the account debtor is any State of the United States or any city, county,
town, municipality or division thereof; (f) accounts with respect to which the
account debtor is a subsidiary of, related to, affiliated or has common
shareholders, officers or directors with Borrower; (g) accounts with respect to
which Borrower is or may become liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower; (h) accounts not paid by an
account debtor within ninety (90) days from the date of invoice; (i) accounts
with respect to which account debtors dispute liability or make any claim, or
have any defense, crossclaim, counterclaim, or offset; (j) accounts with respect
to which any Insolvency Proceeding is filed by or against the account debtor, or
if an account debtor becomes insolvent, fails or goes out of business; (k)
accounts owed by any single account debtor which exceed twenty percent (20%) of
all of the Eligible Accounts; (l) accounts with a particular account debtor on
which over twenty-five percent (25%) of the aggregate amount owing is greater
than one hundred and twenty (120) days from the date of the invoice; (m)
accounts with a particular account debtor on which over fifty percent (50%) of
the aggregate amount owing is past due; and (n) notwithstanding any provisions
herein to the contrary, an allowance is hereby made for a concentration of
thirty-five percent (35%) for the accounts of Southwestern Xxxx, Pacific Xxxx,
GTE and Xxxx Atlantic/Nynex.
1.13 "Event of Default" as used in this Agreement means those events
described in Section 7 contained herein below.
1.14 "Fixed Charges" as used in this Agreement means and include for
any applicable period of determination, the sum, without duplication, of (a) all
interest paid or payable during such period by a person on debt of such person,
plus (b) all payments of principal or other sums paid or payable during such
period by such person with respect to debt of such person having a final
maturity more than one year from the date of creation of such debt, plus (c) all
debt discount and expense amortized or required to be amortized during such
period by such person, plus (d) the maximum amount of all rents and other
payments paid or required to be paid by such person during such period under any
lease or other contract or arrangement providing for use of real or personal
property in respect of which such person is obligated as a lessee, user or
obligor, plus (e) all dividends and other distributions paid or payable by such
person or otherwise accumulating during such period on any capital stock of such
person, plus (f) all loans or other advances made by such person during such
period to any Affiliate of such person. The applicable period of determination
will be N/A , beginning with the period from N/A to N/A .
1.15 "GAAP" as used in this Agreement means as of any applicable
period, generally accepted accounting principles in effect during such period.
1.16 "Insolvency Proceeding" as used in this Agreement means and
includes any proceeding or case commenced by or against Borrower, or any
guarantor of Borrower's Obligations, or any of Borrower's account debtors, under
any provisions of the Bankruptcy Code, as amended, or any other bankruptcy or
insolvency law, including but not limited to assignments for the benefit of
creditors, formal or informal moratoriums, composition or extensions with some
or all creditors, any proceeding seeking a reorganization, arrangement or any
other relief under the Bankruptcy Code, as amended, or any other bankruptcy or
insolvency law.
1.17 "Intangibles" as used in this Agreement means and includes all of
Borrower's present and future general Intangibles and other personal property
(including, without limitation, any and all rights in any legal proceedings,
goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings,
purchase orders, computer programs, computer disk, computer tapes, literature,
reports, catalogs and deposit accounts) other than goods and Receivables, as
well as Borrower's Books relating to any of the foregoing.
1.18 "Inventory" as used in this Agreement means and includes all
present and future inventory in which Borrower has any interest, including, but
not limited to, goods held by Borrower for sale or lease or to be furnished
under a contract of service and all of Borrower's present and future raw
materials, work in process, finished goods, advertising materials, and packing
and shipping materials, wherever located and any documents of title representing
any of the above, and any equipment, fixtures or other property used in the
storing, moving, preserving, identifying, accounting for and shipping or
preparing for the shipping of inventory, and any and all other items hereafter
acquired by Borrower by way of substitution, replacement, return, repossession
or otherwise, and all additions and accessions thereto, and the resulting
product or mass, and any documents of title respecting of the above, but
excluding third party goods, products and accessories held by Borrower in
connection with consignment or bailment. Notwithstanding any provision to the
contrary in this Agreement or in any agreement executed in connection herewith,
nothing in this Agreement or in any agreement executed in connection herewith
shall be deemed to preclude Bank from having a security interest in any
Receivables for the services provided by Borrower to Third Party Consignors or
Bailors in connection with third party goods, products and accessories held by
Borrower in connection with consignment or bailment.
1.19 "Judicial Officer or Assignee" as used in this Agreement means and
includes any trustee, receiver, controller, custodian, assignee for the benefit
of creditors or any other person or entity having powers or duties like or
similar to the powers and duties of trustee, receiver, controller, custodian or
assignee for the benefit of creditors.
1.20 "Letter of Credit Subfeature" as used in this Agreement means
standby letters of credit issued by Bank for the account of Borrower in an
aggregate amount not to exceed at any one time the maximum sums permitted in
Section 2.1 hereof, which Letter of Credit Subfeature shall be used by Borrower
to obtain letters of credit having terms not to exceed twelve (12) months and
which shall mature not more than sixty (60) days prior to the maturity date set
forth in this Agreement. Any issued and outstanding or if not outstanding,
unreimbursed letters of credit issued under the Letter of Credit Subfeature
shall be included in the Borrowing Base and shall reduce the amount available to
Borrower hereunder.
1.21 "Net Income" as used in this Agreement means the net income (or
loss) of a person for any period determined in accordance with GAAP but
excluding in any event:
(a)any gains or losses on the sale or other disposition, not
in the ordinary course of business, of investments or fixed or capital assets,
and any taxes on the excluded gains and any tax deductions or credits on account
on any excluded losses; and
(b)in the case of Borrower, net earnings of any Person in
which Borrower has an ownership interest, unless such net earnings shall have
actually been received by Borrower in the form of cash distributions.
1.22 "Obligations" as used in this Agreement means and includes any and
all loans, advances, overdrafts, debts, liabilities (including, without
limitation, any and all amounts charged to Borrower's account pursuant to any
agreement authorizing Bank to charge Borrower's account), obligations, lease
payments, guaranties, covenants and duties owing by Borrower to Bank of any kind
and description whether advanced pursuant to or evidenced by this Agreement; by
any note or other instrument; or by any other written agreement between Bank and
Borrower and whether or not for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which Bank may have obtained by
assignment, participation, purchase or otherwise, and further including, without
limitation, all interest not paid when due and all Bank Expenses which Borrower
is required to pay or reimburse by this Agreement, by law, or otherwise.
1.23 "Permitted Liens" as used in this Agreement means and includes all
of the following:
(a) Liens in favor of Bank securing the Obligations of
Borrower to Bank;
(b) Liens securing claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons imposed
without action of such parties, provided that the payment thereof is not yet
required;
(c) Liens incurred or deposits made in the ordinary course of
business of Borrower in connection with workers' compensation, unemployment
insurance, social security and other like laws;
(d) Additional purchase money security interests in personal
property acquired after the date of this Agreement with the consent of Bank;
(e) Any liens existing as of the date hereof as reflected on
Schedule A hereto;
(f) Leases, subleases, licenses and sublicenses granted to
others in the ordinary course of business not interfering in any material
respect with the conduct of the business of Borrower, and any interest or title
of a lessor, sublessor, licensor or sublicensor or under any lease, sublease,
license or sublicense;
(g) Liens arising from judgments, decrees or attachments to
the extent and only so long as such judgment, decree or attachment has not
caused or resulted in an Event of Default;
(h) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar liens affecting real
property not interfering in any material respect with the ordinary conduct of
the business of Borrower;
(i) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods;
(j) Liens which constitute rights of set-off of a customary
nature of bankers' liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with arrangements entered into
with banks in the ordinary course of business; and
(k) Liens incurred in connection with the extension, renewal
or refinancing of the Obligations secured by liens of the type described herein
above, provided that any extension, renewal or replacement lien shall be limited
to the property encumbered by the existing lien and the principal amount of the
Obligations being extended, renewed or refinanced does not increase.
1.24 "Person" or "person" as used in this Agreement means and includes
any individual, corporation, partnership, joint venture, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.
1.25 "Receivables" as used in this Agreement means and includes all
presently existing and hereafter arising accounts, instruments, documents,
chattel paper, general intangibles, all other forms of obligations owing to
Borrower, all of Borrower's rights in, to and under all purchase orders
heretofore or hereafter received, all moneys due to Borrower under all contracts
or agreements (whether or not yet earned or due), all merchandise returned to or
reclaimed by Borrower and Borrower's books (except minute books) relating to any
of the foregoing, but excluding the proceeds of third party goods, products,
accessories or inventory having been held by Borrower in consignment or
bailment. Notwithstanding any provision to the contrary in this Agreement or in
any agreement executed in connection herewith, nothing in this Agreement or in
any agreement executed in connection herewith shall be deemed to preclude Bank
from having a security interest in any Receivables for the services provided by
Borrower to Third Party Consignors or Bailors in connection with third party
goods, products and accessories held by Borrower in connection with consignment
or bailment.
1.26 "Subordinated Debt" as used in this Agreement means Indebtedness
of Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content satisfactory to Bank.
1.27 "Subordination Agreement" as used in this Agreement means a
subordination agreement in form satisfactory to Bank making all present and
future Indebtedness of Borrower to N/A subordinate to Indebtedness.
1.28 "Tangible Effective Net Worth" as used in this Agreement means net
worth as determined in accordance with GAAP consistently applied, increased by
subordinated debt if any, and decreased by the following: patents, licenses,
goodwill, subscription lists, organization expenses, trade receivables converted
to notes, and money due from affiliates (including officers, directors,
subsidiaries and commonly held companies).
1.29 "Tangible Net Worth" as used in this Agreement means, as of any
applicable date of determination:
(a) the net book value of all assets of a person (other than
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, goodwill and similar intangible assets) after all appropriate
deductions in accordance with GAAP (including, without limitation, reserves for
doubtful receivables, obsolescence, depreciation and amortization), minus
(b) all total liabilities of such person.
1.30 "Third Party Consignor or Xxxxxx" as used in this Agreement means
any Person who places any goods, products, accessories or inventory with
Borrower to be held by Borrower in consignment or bailment.
1.31 "Total Liabilities" as used in this Agreement means the total of
all items of Indebtedness, obligation or liability which, in accordance with
GAAP consistently applied, would be included in determining the Total
Liabilities of Borrower as of the date Total Liabilities is to be determined,
including without limitation (a) all obligations secured by any mortgage,
pledge, security interest or other lien on property owned or acquired, whether
or not the obligations secured thereby shall have been assumed; (b) all
obligations which are capitalized lease obligations; and (c) all guaranties,
endorsements or other contingent or surety obligations with respect to
Indebtedness of others, whether or not reflected on the balance sheets of
Borrower, including without limitation any obligation to furnish funds, directly
or indirectly through the purchase of goods, supplies, services, or by way of
stock purchase, capital contribution, advance or loan or any obligation to enter
into a contract for any of the foregoing.
1.32 "Working Capital" as used in this Agreement means, as of any
applicable date of determination, Current Assets less Current Liabilities.
1.33 Any and all terms used in this Agreement shall be construed and
defined in accordance with the meaning and definition of such terms under and
pursuant to the California Uniform Commercial Code (hereinafter referred to as
the "Code") as amended.
2.0 LOAN AND TERMS OF PAYMENT
For value received, Borrower promises to pay to the order of Bank such
amount, as provided for below, together with Interest, as provided for below.
2.1 Upon the request of Borrower, made at any time and from time to
time during the term hereof, and so long as no Event of Default has occurred and
is continuing, Bank shall lend to Borrower an amount equal to the Borrowing
Base; provided, however, that in no event shall Bank be obligated to make
advances to Borrower under this Section 2.1 whenever the Daily Balance exceeds,
at any time, either the lower of (i) the Borrowing Base plus any amounts
outstanding under the Letter of Credit Subfeature; or (ii) the sum of Ten
Million and 00/100 Dollars ($10,000,000), except that such amount may be
increased to a maximum sum of Fifteen Million and 00/100 Dollars ($15,000,000),
provided that any amount in excess of Ten Million and 00/100 Dollars
($10,000,000) shall be secured by cash pledged by Borrower to Bank. Any amounts
in excess of the permitted amounts herein shall be referred to herein as an
"Overadvance".
2.2 Except as hereinbelow provided, the Credit shall bear interest, on
the Daily Balance owing, at a rate of zero (0) percentage points per annum above
the Base Rate (the "Rate"). The Credit shall bear interest, from and after the
occurrence and during the continuance of an Event of Default and without
constituting a waiver of any such Event of Default, on the Daily Balance owing,
at a rate three (3) percentage points per annum above the Rate. All interest
chargeable under this Agreement that is based upon a per annum calculation shall
be computed on the basis of a three hundred sixty (360) day year for actual days
elapsed.
The Base Rate as of the date of this Agreement is seven and three
quarters percent (7.75%) per annum. In the event that the Base Rate announced
is, from time to time hereafter, changed, adjustment in the Rate shall be made
and based on the Base Rate in effect on the date of such change. The Rate, as
adjusted, shall apply to the Credit until the Base Rate is adjusted again. The
minimum interest payable by Borrower under this Agreement shall in no event be
less than N/A per month. All interest payable by Borrower under the Credit shall
be due and payable on the first business day of each calendar month during the
term of this Agreement and Bank may, at its option, elect to treat such interest
and any and all Bank Expenses as advances under the Credit, which amounts shall
thereupon constitute Obligations and shall thereafter accrue interest at the
rate applicable to the Credit under the terms of the Agreement.
2.3 Without affecting Borrower's obligation to repay immediately any
Overadvance in accordance with Section 2.1 hereof, all Overadvances shall bear
additional interest on the amount thereof at a rate equal to three (3)
percentage points per annum in excess of the first interest rate set forth in
Section 2.2, from the date incurred and for each month thereafter, until repaid
in full.
3.0 TERM.
3.1 This Agreement shall remain in full force and effect until May 1,
2000, or until terminated by notice, by Borrower. Notice of such termination
shall be effectuated by mailing of a registered or certified letter not less
than sixty (60) days prior to the effective date of such termination, addressed
to Bank at the address set forth herein and the termination shall be effective
as of the date so fixed in such notice. Notwithstanding the foregoing, should
Borrower be in default of one or more of the provisions of this Agreement, Bank
may terminate this Agreement at any time without notice. Notwithstanding the
foregoing, should either Bank or Borrower become insolvent or unable to meet its
debts as they mature, or fail, suspend, or go out of business, the other party
shall have the right to terminate this Agreement at any time without notice. On
the date of termination all Obligations shall become immediately due and payable
without notice or demand; no notice of termination by Borrower shall be
effective until Borrower shall paid all Obligations to Bank in full.
Notwithstanding termination, until all Obligations have been fully satisfied,
Bank shall retain its security interest in all existing Collateral and
Collateral arising thereafter, and Borrower shall continue to perform all of its
Obligations.
3.2 After termination and when Bank has received payment in full of
Borrower's Obligations to Bank, Bank shall reassign to Borrower all Collateral
held by Bank, and shall execute a termination of all security agreements and
security interests given by Borrower to Bank.
4.0 CREATION OF SECURITY INTEREST.
4.1 Borrower hereby grants to Bank a continuing security interest in
all presently existing and hereafter arising Collateral in order to secure
prompt repayment of any and all Obligations owed by Borrower to Bank and in
order to secure prompt performance by Borrower of each and all of its covenants
and Obligations under this Agreement and otherwise created. Bank's security
interest in the Collateral shall attach to all Collateral without further act on
the part of Bank or Borrower. In the event that any Collateral, including
proceeds, is evidenced by or consists of a letter of credit, advice of credit,
instrument, money, negotiable documents, chattel paper or similar property
(collectively, "Negotiable Collateral"), Borrower shall, promptly upon request
of Bank following the occurrence of an Event of Default hereunder, endorse and
assign such Negotiable Collateral over to Bank and deliver actual physical
possession of the Negotiable Collateral to Bank.
4.2 Bank's security interest in Receivables shall attach to all Receivables
without further act on the part of Bank or Borrower. Upon request from Bank,
Borrower shall provide Bank with schedules describing all Receivables created or
acquired by Borrower (including without limitation agings listing the names and
addresses of, and amounts owing by date by account debtors), and shall execute
and deliver written assignments of all Receivables to Bank all in a form
acceptable to Bank, provided, however, Borrower's failure to execute and deliver
such schedules and/or assignments shall not affect or limit Bank's security
interest and other rights in and to the Receivables. Together with each
schedule, Borrower shall furnish Bank with copies of Borrower's customers'
invoices or the equivalent, and original shipping or delivery receipts for all
merchandise sold, and Borrower warrants the genuineness thereof. Upon the
occurrence and during the continuance of an Event of Default, Bank or Bank's
designee may notify customers or account debtors to pay Bank directly, but,
unless and until Bank does so or gives Borrower other written instructions,
Borrower shall collect all Receivables for Bank and receive in trust all
payments thereon as Bank's trustee, and, if so requested to do so from Bank,
during the continuance of an Event of Default, Borrower shall immediately
deliver said payments to Bank in their original form as received from the
account debtor and all letters of credit, advices of credit, instruments,
documents, chattel paper or any similar property evidencing or constituting
Collateral. Notwithstanding anything to the contrary contained herein, if sales
of inventory are made for cash, Borrower shall, during the continuance of an
Event of Default, upon the request of Bank immediately deliver to Bank, in
identical form, all such cash, checks, or other forms of payment which Borrower
receives. The receipt of any check or other item of payment by Bank shall not be
considered a payment on account until such check or other item of payment is
honored when presented for payment, in which event, said check or other item of
payment shall be deemed to have been paid to Bank two (2) calendar days after
the date Bank actually receives such check or other item of payment.
4.3 Bank's security interest in Inventory shall attach to all Inventory
without further act on the part of Bank or Borrower. Upon Bank's request,
Borrower will from time to time at Borrower's expense pledge, and after the
occurrence and during the continuance of an Event of Default, assemble and
deliver such Inventory to Bank or to a third party as Bank's bailee; or hold the
same in trust for Bank's account or store the same in a warehouse in Bank's
name; or deliver to Bank documents of title representing said Inventory; or
evidence of Bank's security interest in some other manner acceptable to Bank.
Until the occurrence and during the continuance of a default by Borrower under
this Agreement or any other Agreement between Borrower and Bank, and prior to a
demand by Bank hereunder to the contrary, Borrower may, subject to the
provisions hereof and consistent herewith, sell the Inventory, but only in the
ordinary course of Borrower's business. A sale of Inventory in Borrower's
ordinary course of business does not include an exchange or a transfer in
partial or total satisfaction of a debt owing by Borrower.
4.4 Borrower shall execute and deliver to Bank concurrently with Borrower's
execution of this Agreement, and at any time or times hereafter at the request
of Bank, all financing statements, continuation financing statements, security
agreements, mortgages, assignments, certificates of title, affidavits, reports,
notices, schedules of accounts, letters of authority and all other documents
that Bank may reasonably request, in form satisfactory to Bank, to perfect and
maintain perfected Bank's security interest in the Collateral and in order to
fully consummate all of the transactions contemplated under this Agreement.
Borrower hereby irrevocably makes, constitutes and appoints Bank (and any of
Bank's officers, employees or agents designated by Bank) as Borrower's true and
lawful attorney-in-fact with power to sign the name of Borrower on any financing
statements, continuation financing statements, security agreement, mortgage,
assignment, certificate of title, affidavit, letter of authority, notice of
other similar documents which must be executed and/or filed in order to perfect
or continue perfected Bank's security interest in the Collateral. Bank agrees
that it will only exercise its foregoing rights as attorney-in-fact upon the
occurrence and during the continuance of an Event of Default or as necessary to
service Borrower's account in the ordinary course of business.
Borrower shall make appropriate entries in Borrower's Books disclosing
Bank's security interest in the Receivables. Bank (through any of its officers,
employees or agents) shall have the right at any time or times hereafter during
Borrower's usual business hours, or during the usual business hours of any third
party having control over the records of Borrower, to inspect and verify
Borrower's Books in order to verify the amount or condition of, or any other
matter, relating to, said Collateral and Borrower's financial condition.
4.5 Borrower appoints Bank or any other person whom Bank may designate as
Borrower's attorney-in-fact, with power: to endorse Borrower's name on any
checks, notes, acceptances, money orders, drafts or other forms of payment or
security that may come into Bank's possession; to sign Borrower's name on any
invoice or xxxx of lading relating to any Receivables, on drafts against account
debtors, on schedules and assignments of Receivables, on verifications of
Receivables and on notices to account debtors; to establish a lock box
arrangement and/or to notify the post office authorities to change the address
for delivery of Borrower's mail addressed to Borrower to an address designated
by Bank, to receive and open all mail addressed to Borrower, and to retain all
mail relating to the Collateral and forward all other mail to Borrower; to send,
whether in writing or by telephone, requests for verification of Receivables;
and to do all things necessary to carry out this Agreement. Bank agrees that it
will only exercise the foregoing rights upon the occurrence and during the
continuance of an Event of Default. Borrower ratifies and approves all acts of
such attorney-in-fact. Neither Bank nor its attorney-in-fact will be liable for
any acts or omissions or for any error of judgment or mistake of fact or law
except to the extent caused by the gross negligence or willful misconduct of
such attorney-in-fact or Bank. This power being coupled with an interest, is
irrevocable so long as any Receivables in which Bank has a security interest
remain unpaid and until the Obligations have been fully satisfied.
4.6 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, warehousemen,
or any personnel to protect the Collateral, pay any service bureau, or, obtain
any records, and all costs for the same shall be added to the Obligations and
shall be payable on demand.
4.7 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and
service providers.
5.0 CONDITIONS PRECEDENT.
5.1 As conditions precedent to the making of the loans and the
extension of the financial accommodations hereunder, all of the conditions
precedent set forth below shall have occurred to the satisfaction of Bank and
its counsel:
a.receipt by Bank of this Agreement and other documents requested by Bank;
b.receipt by Bank of financing statements (Form UCC-1) in form satisfactory to
Bank for filing and recording with the appropriate governmental authorities;
c.receipt by Bank of certified extracts from the minutes of the meeting or
written consent of its board of directors, authorizing the borrowings and the
granting of the security interest provided for herein and authorizing specific
officers to execute and deliver the agreements provided for herein;
d. receiptby Bank of (i) a certificate of good standing showing that Borrower is
in good standing under the laws of the state of its incorporation and
California; and (ii) certificates indicating that Borrower is qualified to
transact business and is in good standing in any other state in which it
conducts business except where failure to so qualify or be in good standing
would not have a material adverse effect on Borrower (a "Material Adverse
Effect");
e. receipt by Bank of UCC searches, tax lien and litigation searches, business
statement filings, insurance certificates, notices or other similar documents
which Bank may require and in such form as Bank may require, in order to
reflect, perfect or protect Bank's first priority security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
by this Agreement;
f.receipt by Bank of evidence that Borrower has obtained insurance and
acceptable endorsements;
g.receipt by Bank of waivers executed by landlords and mortgagees of any real
property on which any Collateral is located;
h.receipt by Bank of the Borrower's Authorization;
i.receipt by Bank of the Corporate Resolution and Incumbency Certification -
Authority to Procure Loans;
j.receipt by Bank of the Equipment Rider;
k.receipt by Bank of the Environmental Rider;
l.receipt by Bank of the Agreement to Furnish Insurance;
m.payment by Borrower of all attorneys' fees and expenses incurred by Bank (not
to exceed Seven Thousand Five Hundred and 00/100 Dollars ($7,500) in the
aggregate) in preparing and negotiating this Agreement, or any portion hereof,
and preparing and/or reviewing any documents to be executed in connection
herewith;
n.payment by Borrower of its commitment fee in the amount of Fifty Thousand and
00/100 Dollars ($50,000) for the line of credit associated with this Agreement;
and
o.such other and further items and Bank may reasonably require to carry out the
terms hereof.
6.0 WARRANTIES, REPRESENTATIONS AND COVENANTS.
6.1 If so requested by Bank, Borrower shall, within twenty (20) days of
the last day of each month, during the term hereof execute and deliver a Report
of Accounts Receivable or similar report, in form customarily used by Bank.
Borrower's Borrowing Base at all times pertinent hereto shall not be less than
the advances made hereunder. Bank shall have the right to recompute Borrower's
Borrowing Base in conformity with this Agreement.
6.2 Except as permitted in Section 1.12 hereof, if any warranty is
breached as to any account, or any account is not paid in full by an account
debtor within ninety (90) days from the date of invoice, or an account debtor
disputes liability or makes any claim with respect thereto, or a petition in
bankruptcy or other application for relief under the Bankruptcy Code or any
other insolvency law is filed by or against an account debtor, or an account
debtor makes an assignment for the benefit of creditors, becomes insolvent,
fails or goes out of business, then Bank may deem ineligible any and all
accounts owing by that account debtor, and reduce Borrower's Borrowing Base by
the amount thereof. Bank shall retain its security interest in all Receivables
and accounts, whether eligible or ineligible, until all Obligations have been
fully paid and satisfied. Returns and allowances, if any, as between Borrower
and its customers, will be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at this time. Borrower shall
promptly notify Bank of all disputes and claims and settle or adjust them on
terms approved by Bank. After the occurrence and during the continuance of a
default by Borrower hereunder, no material discount, credit or allowance shall
be granted to any account debtor by Borrower and no return of merchandise
outside of the ordinary course of business shall be accepted by Borrower without
Bank's consent, which shall not be unreasonably withheld. Bank may, after the
occurrence and during the continuance of a default by Borrower, settle or adjust
disputes and claims directly with account debtors for amounts and upon terms
which Bank considers advisable, and in such cases Bank will credit Borrower's
account with only the net amounts received by Bank in payment of the accounts,
after deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
(a) Borrower has good and marketable title to the Collateral.
Bank has and shall continue to have a first priority perfected security interest
in and to the Collateral except with respect to Permitted Liens. The Collateral
shall at all times remain free and clear of all liens, encumbrances and security
interests except Permitted Liens.
(b) All accounts are and will, at all times pertinent hereto,
be bona fide existing Obligations created by the sale and delivery of
merchandise or the rendition of services to account debtors in the ordinary
course of business, free of liens, claims, encumbrances and security interests
(except as held by Bank and except as may be consented to, in writing, by Bank)
and are unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, rights of return or cancellation in excess of an aggregate value
of Fifty Thousand and 00/100 Dollars ($50,000) except in the ordinary course of
business as Borrower's business is currently operated, and Borrower shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time an account due from such account debtor is assigned to Bank.
(c) At the time each account is assigned to Bank, all property
giving rise to such account shall have been delivered to the account debtor or
to the agent for the account debtor for immediate shipment to, and unconditional
acceptance by, the account debtor. Borrower shall deliver to Bank, as Bank may
from time to time require, delivery receipts, customer's purchaser orders,
shipping instructions, bills of lading and any other evidence of shipping
arrangements. Absent such a request by Bank, copies of all such documentation
shall be held by Borrower as custodian for Bank.
6.4 At the time each Eligible Account is included in the Borrowing
Base, each such Eligible Account will be due and payable on terms set forth in
Section 1.12 hereof or on such other terms approved in writing by Bank in
advance of the creation of such accounts and which are expressly set forth on
the face of all invoices, copies of which shall be held by Borrower as custodian
for Bank, and no such eligible account will then be past due.
6.5 Borrower shall keep the Inventory only at the following locations:
See Schedule B and the owner or mortgagees of the respective locations are:
See Schedule B
(a) Borrower, immediately upon demand by Bank, shall now and
from time to time hereafter, at such intervals as are requested by Bank, deliver
to Bank therefor, designations of Inventory specifying Borrower's cost of
Inventory, the wholesale market value thereof and such other matters and
information relating to the Inventory as Bank may request;
(b) Borrower's Inventory, valued at the lower of Borrower's
cost or the wholesale market value thereof, at all times pertinent hereto shall
not be less than N/A Dollars ($ N/A ) of which no less than N/A Dollars ($ N/A )
shall be in raw materials and finished goods;
(c) All of the Inventory is and shall remain free from all
purchase money or other security interests, liens or encumbrances except
Permitted Liens;
(d) Borrower does now keep and hereafter at all times shall
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of the Inventory, its cost therefor and selling price
thereof, and the daily withdrawals therefrom and additions thereto, all of which
records shall be available upon demand to any of Bank's officers, agents and
employees for inspection and copying;
(e) All Inventory, now and hereafter at all times, shall be
new (except for reconditioned units used to fulfill warranty claims) Inventory
of good and merchantable quality free from defects;
(f) Except for component parts, work in progress and finished
goods stored by foreign third party manufacturers, Inventory is not now and
shall not at all times hereafter be located or stored with a bailee,
warehouseman or other third party without Bank's prior written consent, and, in
such event, Borrower will concurrently therewith cause any such bailee,
warehouseman or other third party to issue and deliver to Bank, in a form
acceptable to Bank, warehouse receipts in Bank's name evidencing the storage of
Inventory or other evidence of Bank's prior rights in the Inventory. In any
event, Borrower shall instruct any third party to hold all such Inventory for
Bank's account subject to Bank's security interests and its instructions; and
(g) Bank shall have the right upon demand now and/or at all
times hereafter, during Borrower's usual business hours, upon reasonable prior
notice, to inspect and examine the Inventory and to check and test the same as
to quality, quantity, value and condition and Borrower agrees to reimburse Bank
for Bank's reasonable costs and expenses in so doing.
6.6 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:
(a) Grant a security interest in or permit a lien, claim or
encumbrance except Permitted Liens upon any of the Collateral to any person,
association, firm, corporation, entity or governmental agency or
instrumentality;
(b) Permit any levy, attachment or restraint to be made
affecting any of Borrower's assets;
(c) Permit any judicial officer or assignee to be appointed or
to take possession of any or all of Borrower's assets;
(d) Change its name, business structure, corporate identity or
structure; add any new fictitious names, liquidate, merge or consolidate with or
into any other business organization other than with Borrower's stock;
(e) Move or relocate any Collateral except in accordance with
Subsection (n) hereof or otherwise in the normal course of business ;
(f) Acquire any other business organization or organizations
where the acquisition amount exceeds an aggregate of Two Million and 00/100
Dollars ($2,000,000) other than with Borrower's stock without Bank's prior
written consent, which shall not be unreasonably withheld;
(g) Enter into any transaction or transactions not in the
usual course of Borrower's business in excess of an aggregate of Five Million
and 00/100 Dollars ($5,000,000), without Bank's prior written consent, which
shall not be unreasonably withheld;
(h) Make any change in Borrower's financial structure or in
any of its business objectives, purposes or operations which would adversely
affect the ability of Borrower to repay Borrower's Obligations;
(i) Incur any debts outside the ordinary course of Borrower's
business except renewals or extensions of existing debts and interest thereon;
(j) Make any advance or loan except in the ordinary course of
Borrower's business as currently conducted;
(k) Make loans, advances or extensions of credit to any
Person, except for sales on open account and otherwise in the ordinary course of
business;
(l) Guarantee or otherwise, directly or indirectly, in any way
be or become responsible for obligations of any other person, whether by
agreement to purchase the Indebtedness of any other Person, agreement for
furnishing of funds to any other Person through the furnishing of goods,
supplies or services, by way of stock purchase, capital contribution, advance or
loan, for the purpose of paying or discharging (or causing the payment or
discharge of) the Indebtedness of any other person, or otherwise, except for the
endorsement of negotiable instruments by Borrower in the ordinary course of
business for deposit or collection;
(m)(a) Other than sales of Inventory in the ordinary course of
Borrower's business, to sell, lease, or otherwise dispose of, move, or transfer,
whether by sale or otherwise, any of Borrower's properties or assets having an
aggregate book value of more than Five Million and 00/100 Dollars ($5,000,000)
(whether in one transaction or in a series of transactions) without Bank's prior
written consent, which shall not be unreasonably withheld; (b) change its name,
consolidate with or merge into any other corporation, permit another corporation
to merge into it, acquire all or substantially all the properties or assets of
any other Person, enter into any reorganization or recapitalization or
reclassify its capital stock, or (c) enter into any sale-leaseback transaction;
(n) Purchase or hold beneficially any stock or other
securities of, or make any investment, except for commercial paper rated A-1 or
P-1 by Moody's Ratings, or acquire any interest whatsoever in, any other Person,
except for the common stock of the Subsidiaries owned by Borrower on the date of
this Agreement, the shares of stock in Infogear and CIDCO Europe currently owned
by Borrower, investments or transactions consistent with Borrower's investment
policy or as otherwise authorized by Borrower's Board of Directors, and as
further consented to by Bank, which consent shall not be unreasonably withheld,
and except for certificates of deposit with maturities of one year or less of
United States commercial banks with capital, surplus and undivided profits in
excess of One Hundred Million Dollars ($100,000,000) and direct obligations of
the United States Government maturing within one year from the date of
acquisition thereof;
(o) Allow any fact, condition or event to occur or exist with
respect to any employee pension or profit sharing plans established or
maintained by it which might constitute grounds for termination of any such plan
or for the court appointment of a trustee to administer any such plan; or
(p) Make capital expenditures or lease equipment in an
aggregate amount that exceeds Five Million and 00/100 Dollars ($5,000,000) in
any fiscal year.
6.7 Borrower is not a merchant who resells goods for personal, family
or household purposes.
6.8 Borrower's sole place of business or chief executive office or
residence is located at the address indicated above and Borrower covenants and
agrees that it will not, during the term of this Agreement, without prior
written notification to Bank, relocate said sole place of business or chief
executive office or residence.
6.9 Borrower further represents, warrants and covenants as set forth
below.
(a) Borrower will not make any distribution or declare or pay
any cash dividend to any shareholder or on any of its capital stock, of any
class, whether now or hereafter outstanding, or purchase, acquire, repurchase,
or redeem or retire any such capital stock other than the repurchase of stock in
an aggregate amount not to exceed Five Million and 00/100 Dollars ($5,000,000)
during Borrower's fiscal year ending 1999, to be increased to an aggregate
amount not to exceed Ten Million and 00/100 Dollars ($10,000,000) if Borrower
has net profits of not less than One Million and 00/100 Dollars ($1,000,000) as
of Borrower's fiscal quarter ending March 31, 1999;
(b) Borrower is and shall at all times hereafter be a
corporation duly organized and existing in good standing under the laws of the
state of its incorporation and qualified and licensed to do business in
California. Borrower is also and shall at all times hereafter be qualified and
licensed to do business in any other state in which it conducts its business,
except where failure to so qualify would not have a Material Adverse Effect;
(c) Borrower has the right and power and is duly authorized to
enter into this Agreement; and
(d) The execution by Borrower of this Agreement shall not
constitute a breach of any provision contained in Borrower's articles of
incorporation or by-laws.
6.10 The execution of and performance by Borrower of all of the terms
and provisions contained in this Agreement shall not result in a breach of or
constitute an event of default under any Agreement to which Borrower is now or
hereafter becomes a party.
6.11 Borrower shall promptly notify Bank in writing of its acquisition
by purchase, lease or otherwise of any after acquired property of the type
included in the Collateral, with the exception of purchases of Inventory in the
ordinary course of business.
6.12 Except to the extent (a) being contested in good faith; and (b)
adequate reserves are being held by Borrower in connection with any disputed
assessments or taxes, all assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against, Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency. Except to the extent (a) being contested in good faith; and
(b) adequate reserves are being held by Borrower in connection with any disputed
assessments or taxes, Borrower shall make due and timely payment or deposit of
all federal, state and local taxes, assessments or contribution required of it
by law, and will execute and deliver to Bank, on demand, appropriate
certificates attesting to the payment or deposit thereof. Borrower will make
timely payment or deposit of all F.I.C.A. payments and withholding taxes
required of it by applicable laws, and will upon request furnish Bank with proof
satisfactory to it that Borrower has made such payments or deposit. If Borrower
fails to pay any such assessment, tax, contribution, or make such deposit, or
furnish the required proof, Bank may, in its sole and absolute discretion and
without notice to Borrower, (i) make payment of the same or any part hereof, or
(ii) set up such reserves in Borrower's account as Bank deems necessary to
satisfy the liability therefor, or both. Bank may conclusively rely on the usual
statements of the amount owing or other official statements issued by the
appropriate governmental agency. Each amount so paid or deposited by Bank shall
constitute a Bank Expense and an additional advance to Borrower.
6.13 There are no actions or proceedings pending by or against Borrower
or any guarantor of Borrower before any court or administrative agency which
Borrower believes will have a material impact upon its operations and Borrower
has no knowledge of any such pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except as heretofore
specifically disclosed in writing to Bank. If any of the foregoing arise during
the term of the Agreement, Borrower shall immediately notify Bank in writing.
6.14 (a) Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use such
properties in similar businesses for the full insurable value thereof. Borrower
shall also keep and maintain business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of the Collateral and its other assets. All such policies of insurance relating
to Borrower's ownership and use of the Collateral and its other assets shall be
in such form, with such companies, and in such amounts as may be reasonably
satisfactory to Bank. Borrower shall deliver to Bank certified copies of such
policies of insurance and evidence of the payments of all premiums therefor. All
such policies of insurance (except those of public liability and property
damage) shall contain an endorsement in a form satisfactory to Bank showing Bank
as a loss payee thereof, with a waiver of warranties (Form 438-BFU), and all
proceeds payable thereunder shall be payable to Bank and, upon receipt by Bank,
shall be applied on account of the Obligations owing to Bank; however, Bank
agrees that it will only exercise its foregoing rights as loss payee under
Borrower's insurance policies upon the occurrence and during the continuance of
an Event of Default. To secure the payment of the Obligations, Borrower grants
Bank a security interest in and to all such policies of insurance (except those
of public liability and property damage) and the proceeds thereof, and Borrower
shall direct all insurers under such policies of insurance to pay all proceeds
thereof directly to Bank unless Bank consents otherwise, which consent shall not
be unreasonably withheld; however, Bank agrees that it will only exercise its
foregoing rights as secured creditor with respect to the proceeds of Borrower's
insurance policies upon the occurrence and during the continuance of an Event of
Default.
(b) During the continuance of any Event of Default, Borrower
hereby irrevocably appoints Bank (and any of Bank's officers, employees or
agents designated by Bank) as Borrower's attorney for the purpose of making,
selling and adjusting claims under such policies of insurance, endorsing the
name of Borrower on any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. Borrower may replace but
will not cancel any of such policies without Bank's prior written consent, which
consent shall not be unreasonably withheld. Each such insurer shall agree by
endorsement upon the policy or policies of insurance required above or to pay
any premium in whole or in part relating thereto. Bank, without waiving or
releasing any Obligations or any Event of Default, may, but shall have no
obligation to do so, obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect to such policies which Bank
deems advisable. All sums so disbursed by Bank, as well as reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall constitute
Bank Expenses and are payable on demand.
6.15 All financial statements and information relating to Borrower
which have been or may hereafter be delivered by Borrower to Bank are true and
correct to the best of Borrower's knowledge and have been prepared in accordance
with GAAP constituently applied and there has been no material adverse change in
the financial condition of Borrower since the submission of such financial
information to Bank.
6.16 (a) Borrower at all times hereafter shall maintain a standard and
modern system of accounting in accordance with GAAP consistently applied with
ledger and account cards and/or computer tapes and computer disks, computer
printouts and computer records pertaining to the Collateral which contain
information as may from time to time be reasonably requested by Bank, not modify
or change its method of accounting or enter into, modify or terminate any
agreement presently existing, or at any time hereafter entered into with any
third party accounting firm and/or service bureau for the preparation and/or
storage of Borrower's accounting records without the written consent of Bank
first obtained and without said accounting firm and/or service bureau agreeing
to provide information regarding the Receivables and Inventory and Borrower's
financial condition to Bank; permit Bank and any of its employees, officers or
agents, upon reasonable prior notice, during Borrower's usual business hours, or
the usual business hour of third persons having control thereof, to have access
to and examine all of Borrower's Books relating to the Collateral, Borrower's
Obligations to Bank, Borrower's financial condition and the results of
Borrower's operations and in connection therewith, permit Bank or any of its
agents, employees or officers to copy and make extracts therefrom.
(b) Borrower shall deliver to Bank within fifteen days (15)
days after becoming available a CPA-audited statement of the financial condition
of Borrower for each such fiscal year, with the CPA's audit to be unqualified.
Such annual financial statements shall include, without limitation, a balance
sheet and profit and loss statement and any other report requested by Bank
relating to the Collateral and the financial condition of Borrower, and a
certificate signed by an authorized employee of Borrower to the effect that all
reports, statements, computer disk or tape files, computer printouts, computer
runs, or other computer prepared information of any kind or nature relating to
the foregoing or documents delivered or caused to be delivered to Bank under
this subparagraph are complete, correct and thoroughly present the financial
condition of Borrower and that there exists on the date of delivery to Bank no
condition or event which constitutes a breach or Event of Default under this
Agreement.
(c) Borrower shall deliver to Bank within fifteen (15) days of
becoming available: (i) the annual report and 10K filed by Borrower with the
Securities and Exchange Commission; and (ii) the quarterly 10-Q report filed by
Borrower with the Securities and Exchange Commission each quarter of each fiscal
year of Borrower.
(d) Borrower shall deliver to Bank copies of all reports filed
with the Securities and Exchange Commission promptly upon the filing thereof,
but in any event within fifteen (15) days thereof.
(e) In addition to the financial statements requested above,
Borrower agrees to provide Bank with the following schedules:
X Accounts Receivable Agings on a monthly basis within 20 days of the
end of each month;
X Accounts Payable Agings on a monthly basis within 20 days of the
end of each month;
N/A Job Progress Reports on a N/A basis; and
X Borrowing Base Certificate on a monthly basis within 20 days of the
end of each month.
6.17 Borrower agrees that Bank may perform annual accounts receivable
audits, at the expense of Borrower.
6.18 Borrower shall maintain the following financial ratios and
covenants to be tested quarterly, except as set forth specifically below:
(a) Working Capital in an amount not less than N/A .
(b) Tangible Effective Net Worth in an amount not less than
Seventy-five Million and 00/100 Dollars ($75,000,000) (to be decreased to
Seventy Million and 00/100 Dollars ($70,000,000) if Borrower has net profits of
not less than One Million and 00/100 Dollars ($1,000,000) as of Borrower's
fiscal quarter ending March 31, 1999); to increase by fifty percent (50%) of any
quarterly profit and fifty percent (50%) of any new equity or subordinated debt;
(c) A ratio of Current Assets to Current Liabilities of not
less than N/A.
(d) A quick ratio of Current Assets (less inventories) to
Current Liabilities greater than 1.50:1.00, increasing to 1.75:1.00 by June 30,
1999;
(e) A ratio of Total Liabilities (less debt subordinated to
Bank) to Tangible Effective Net Worth of less than 0.75:1.00;
(f) A ratio of Cash Flow to Fixed Charges of not less than N/A.
(g) Net profit after taxes both quarterly and annually, except
that a loss in an aggregate amount not to exceed Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000) shall be permitted in any one quarter
during Borrower's fiscal year ending 1999; and
(h) Borrower shall not without Bank's prior written consent
make capital expenditures or lease equipment in an aggregate amount that exceeds
Five Million and 00/100 Dollars ($5,000,000) in any fiscal year.
All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.
6.19 Borrower shall promptly supply Bank (and cause any guarantor to
supply Bank) with such other information (including tax returns) concerning its
financial affairs (or that of any guarantor), including, but not limited to,
budgets, sales projections and/or other financial exhibits as Bank may
reasonably request from time to time hereafter, and shall promptly notify Bank
of any material adverse change in Borrower's financial condition and of any
condition or event known to Borrower which constitutes a breach of or an event
which constitutes an Event of Default under this Agreement.
6.20 Borrower is now and shall be at all times hereafter solvent and
able to pay its debts (including trade debts) as they mature.
6.21 Borrower shall immediately and without demand reimburse Bank for
all sums expended by Bank in connection with any action brought by Bank to
correct any default or enforce any provision of this Agreement, including all
Bank Expenses; Borrower authorizes and approves all advances and payments by
Bank for items described in this Agreement as Bank Expenses.
6.22 Each warranty, representation and agreement made not as of a date
certain contained in this Agreement shall be automatically deemed repeated with
each advance and shall be conclusively presumed to have been relied on by Bank
regardless of any investigation made or information possessed by Bank. The
warranties, representations and agreements set forth herein shall be cumulative
and in addition to any and all other warranties, representations and agreements
which Borrower shall give, or cause to give, to Bank, either now or hereafter.
6.23 Borrower shall keep all of its principal operating accounts with
Bank and shall notify the Bank immediately in writing of the existence of any
other bank account, deposit account, or any other account into which money can
be deposited.
6.24 Borrower shall furnish to Bank: (a) as soon as possible, but in no
event later than thirty (30) days after Borrower knows or has reason to know
that any reportable event with respect to any deferred compensation plan has
occurred, a statement of the chief financial officer of Borrower setting forth
the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower; (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information from time
to time disseminated to the participants by the administrator of the deferred
compensation plan.
6.25 Borrower is now and shall at all times hereafter remain in
compliance with all federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic substances,
wastes and hazardous material and shall maintain all necessary authorizations
and permits except where failure to do so would not have a Material Adverse
Effect.
6.26 Borrower shall maintain insurance on the life of N/A in an amount
not to be less than N/A Dollars ($ N/A ) under one or more policies issued by
insurance companies satisfactory to Bank, which policies shall be assigned to
Bank as security for the Indebtedness and on which Bank shall be named as sole
beneficiary.
6.27 Borrower shall limit direct and indirect compensation paid to the
following employees:
, N/A , to an aggregate of N/A
Dollars ($ N/A ) per N/A .
6.28 Borrower shall pay an annual commitment fee in the amount of Fifty
Thousand and 00/100 Dollars ($50,000) payable upon closing and on each
anniversary of the closing during which this Agreement is in effect.
6.29 Borrower shall pay commitment fees ("Commitment Fee" or
"Commitment Fees") of (i) 1.00% of the face amount of the letters of credit
being issued under the Letter of Credit Subfeature if the aggregate face amounts
of the issued and outstanding letters of credit total Ten Million and 00/100
Dollars ($10,000,000) or less as of the date of the issuance of such letter of
credit; and (ii) .85% of the face amount of the letters of credit being issued
under the Letter of Credit Subfeature if the aggregate face amounts of the
issued and outstanding letters of credit total in excess of Ten Million and
00/100 Dollars ($10,000,000) as of the date of the issuance of such letter of
credit.
6.30 Borrower shall perform all acts reasonable necessary to ensure
that: Borrower and any business in which Borrower holds a substantial interest;
and (ii) all customers, suppliers and vendors that are material to Borrower's
business, become Year 2000 Compliant in a timely manner. Such acts shall
include, without limitation, performing a comprehensive review and assessment of
all of Borrower's systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems. As used in this
paragraph, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date-sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with the terms of this
section as Bank may from time to time require.
7.0 EVENTS OF DEFAULT
Any one or more of the following events shall constitute a default and an Event
of Default by Borrower under this Agreement:
p. If Borrower fails or neglects to perform, keep or observe any
material term, provision, condition, covenant, agreement, warranty or
representation, other than a payment default under Subsection (c) hereof,
contained in this Agreement, or any other present or future agreement between
Borrower and Bank;
q. If any representation, statement, report or certificate made or
delivered by Borrower, or any of its officers, employees or agents to Bank is
not true and correct in all material respects;
r. If Borrower fails to pay when due and payable or declared due and
payable, all or any portion of Borrower's Obligations (whether of principal,
interest, taxes (except to the extent (a) being contested in good faith; and (b)
adequate reserves are being held by Borrower in connection with such disputed
taxes), reimbursement of Bank Expenses, or otherwise);
s. If there is a material impairment of the prospect of repayment of
all or any portion of Borrower's Obligations or a material impairment of the
value or priority of Bank's security interest in the Collateral;
t. If all or any of Borrower's assets are attached, seized, subject to
a writ or distress warrant, or are levied upon, or come into the possession of
any Judicial Officer or Assignee and the same are not released, discharged or
bonded against within fifteen (15) days thereafter;
u. If any Insolvency Proceeding is filed or commenced by or against
Borrower without being dismissed within fifteen (15) days thereafter;
v. If any proceeding is filed or commenced by or against Borrower for
its dissolution or liquidation;
w. If Borrower is enjoined, restrained or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs;
x. If a notice of lien (except for a Permitted Lien), levy or
assessment in an amount equal to or in excess of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000) is filed of record with respect to any
or all of Borrower's assets by any (1) state, county, municipal or other
governmental agency and Borrower (a) is not contesting such lien, levy or
assessment in good faith; or (b) Borrower fails to record on its books adequate
reserves by the end of Borrower's then-current quarter, or if any taxes or debts
owing at any time hereafter in excess of such amount to any one or more of such
entities becomes a lien, whether xxxxxx or otherwise, upon any or all of
Borrower's assets and the same is not paid on the payment date thereof unless it
is adequately reserved by Borrower by the end of Borrower's then-current
quarter; or (2) the United States government, or any department, agency or
instrumentality thereof, and Borrower (a) is not contesting such lien, levy or
assessment in good faith; or (b) Borrower fails to advise Bank within five (5)
Business Days thereof that Borrower has either (i) paid the amount of such lien,
levy or assessment; or (ii) recorded adequate reserves therefor;
y. If a judgment or other claim becomes a lien or encumbrance upon any
or all of Borrower's assets and the same is not satisfied, dismissed or bonded
against within fifteen (15) days thereafter;
z. If Borrower's records are prepared and kept by an outside computer
service bureau at the time this Agreement is entered into or during the term of
this Agreement such an agreement with an outside service bureau is entered into,
and at any time thereafter, without first obtaining the written consent of Bank,
Borrower terminates, modifies, amends or changes its contractual relationship
with said computer service bureau or said computer service bureau fails to
provide Bank with any requested information or financial data pertaining to
Bank's Collateral, Borrower's financial condition or the results of Borrower's
operations;
aa. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result in an acceleration of the
maturity of Borrower's Indebtedness to others, whether under any indenture,
agreement or otherwise;
bb. If Borrower makes any payment on account of Indebtedness which has
been subordinated to Borrower's Obligations to Bank;
cc. If any misrepresentation exists now or thereafter in any warranty
or representation made to Bank by any officer or director of
Borrower, or if any such warranty or representation is withdrawn
by any officer or director;
dd. If any party subordinating its claims to that of Bank's or any
guarantor of Borrower's Obligations dies or terminates its subordination or
guaranty, becomes insolvent or an Insolvency Proceeding is commenced by or
against any such subordinating party or guarantor;
ee. If Borrower is an individual and Borrower dies;
ff. If any reportable event, which Bank determines constitutes grounds
for the termination of any deferred compensation plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any such plan, shall have occurred and
be continuing thirty (30) days after written notice of such determination shall
have been given to Borrower by Bank, or any such Plan shall be terminated within
the meaning of Title IV of the Employment Retirement Income Security Act
("ERISA"), or a trustee shall be appointed by the appropriate United States
District Court to administer any such plan, or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any plan and in case of any
event described in this Section 7.0, the aggregate amount of Borrower's
liability to the Pension Benefit Guaranty Corporation under Sections 4062, 4063
or 4064 of ERISA shall exceed five percent (5%) of Borrower's Tangible Effective
Net Worth.
Notwithstanding anything contained in Section 7 to the contrary, Bank
shall refrain from exercising its rights and remedies and Event of Default shall
thereafter not be deemed to have occurred by reason of the occurrence of any of
the events set forth in Sections 7.e, 7.f or 7.j of this Agreement if, within
fifteen (15) days from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; provided, however, if the event is the
institution of Insolvency Proceedings against Borrower, Bank shall not be
obligated to make advances to Borrower during such cure period.
8.0 BANK'S RIGHTS AND REMEDIES
7.1 Upon the occurrence and during the continuance of an Event of
Default by Borrower under this agreement, Bank may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare Borrower's Obligations, whether evidenced by this
Agreement, installment notes, demand notes or otherwise, immediately due and
payable to Bank;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this agreement, or any other agreement between
Borrower and Bank;
(c) Terminate this Agreement as to any future liability or
obligation of Bank, but without affecting Bank's rights and security interests
in the Collateral, and the Obligations of Borrower to Bank;
(d) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral available to Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the Collateral
is located, take and maintain possession of the Collateral and the premises (at
no charge to Bank), or any part thereof, and to pay, purchase, contest or
compromise any encumbrance, charge or lien which in the opinion of Bank appears
to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith;
(e) Without limiting Bank's rights under any security interest,
Bank is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any property of a
similar nature as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit, and Bank
shall have the right and power to enter into sublicense agreements with respect
to all such rights with third parties on terms acceptable to Bank;
(fShip, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sales and sell (in the manner provided for
herein) the Inventory;
(xXxxx or dispose of the Collateral in a commercially
reasonable manner at either a public or private sale, or both, by way of one or
more contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as is commercially reasonable in the
opinion of Bank. It is not necessary that the Collateral be present at any such
sale;
(h)Bank shall give notice of the disposition of the Collateral
as follows:
1. Bank shall give Borrower and each holder of a
security interest in the Collateral who has filed with Bank a written request
for notice,
a notice in writing of the time and place of public sale, or, if the sale is a
private sale or some disposition other than a public sale is to be made of the
Collateral, the time on or after which the private sale or other disposition is
to be made;
2. The notice shall be personally delivered or
mailed, postage prepaid, to Borrower's address appearing in this Agreement, at
least five (5)
calendar days before the date fixed for the sale, or at least five (5) calendar
days before the date on or after which the private sale or other disposition is
to be made, unless the Collateral is perishable or threatens to decline speedily
in value. Notice to persons other than Borrower claiming an interest in the
Collateral shall be sent to such addresses as have been furnished to Bank;
3. If the sale is to be a public sale, Bank shall
also give notice of the time and place by publishing a notice one time at least
five (5) calendar days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held; and
4. Bank may credit bid and purchase at any public
sale.
(i)Borrower shall pay all Bank Expenses incurred in connection
with Bank's enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Bank;
(j)Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third parties,
to Borrower by Bank, or, in Bank's discretion, to any party who Bank believes,
in good faith, is entitled to the excess; and
(k)Without constituting a retention of Collateral in
satisfaction of an obligation within the meaning of 9505 of the Uniform
Commercial Code or an action under California Code of Civil Procedure 726, apply
any and all amounts maintained by Borrower as deposit accounts (as that term is
defined under 9105 of the Uniform Commercial Code) or other accounts that
Borrower maintains with Bank against the Obligations.
7.2 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided by law or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election or acquiescence by Bank.
8.0 TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY
If Borrower fails to pay promptly when due to another person or entity,
monies which Borrower is required to pay by reason of any provision in this
Agreement, Bank may, but need not, pay the same and charge Borrower's account
therefor, and Borrower shall promptly reimburse Bank. All such sums shall become
additional Indebtedness owing to Bank, shall bear interest at the rate
hereinabove provided, and shall be secured by all Collateral. Any payments made
by Bank shall not constitute (i) an agreement by it to make similar payments in
the future, or (ii) a waiver by Bank of any default under this Agreement, Bank
need not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance of lien and the receipt of the usual official
notice of the payment thereof shall be conclusive evidence that the same was
validly due and owing. Such payments shall constitute Bank Expenses and
additional advances to Borrower.
9.0 WAIVERS
9.1 Borrower agrees that checks and other instruments received by Bank
in payment or on account of Borrower's Obligations constitute only conditional
payment until such items are actually paid to Bank and Borrower waives the right
to direct the application of any and all payments at any time or times hereafter
received by Bank on account of Borrower's Obligations and Borrower agrees that
Bank shall have the continuing exclusive right to apply and reapply such
payments in any manner as Bank may deem advisable, notwithstanding any entry by
Bank upon its books.
9.2 Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, documents, instruments, chattel paper,
and guarantees at any time held by Bank on which Borrower may in any way be
liable.
9.3 Bank shall not in any way or manner be liable or responsible for
(a) the safekeeping of the Inventory; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever. All risk of loss, damage or
destruction of Inventory shall be borne by Borrower.
9.4 Borrower waives the right and the right to assert a confidential
relationship, if any, it may have with any accountant, accounting firm and/or
service bureau or consultant in connection with any information requested by
Bank pursuant to or in accordance with this Agreement, and agrees that Bank may
contact directly any such accountants, accounting firm and/or service bureau or
consultant in order to obtain such information.
9.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER, OR
CONTEMPLATED HEREUNDER, OR ANY OTHER CLAIM (INCLUDING TORT OR BREACH OF DUTY
CLAIMS) OR DISPUTE HOWSOEVER ARISING BETWEEN BANK AND BORROWER.
9.6 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails to
pursue or enforce any term, such waiver, delay or failure to pursue or enforce
shall only be effective with respect to that single act and shall not be
construed to affect any subsequent transactions or Bank's right to later pursue
such rights and remedies.
10.0 ONE CONTINUING LOAN TRANSACTION. All loans and advances heretofore, now or
at any time or times hereafter made by Bank to Borrower under this agreement or
any other agreement between Bank and Borrower, shall constitute one loan secured
by Bank's security interests in the Collateral and by all other security
interests, liens, encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Bank.
Notwithstanding the above, (i) to the extent that any portion of the Obligations
are consumer loans, that portion shall not be secured by any deed of trust or
mortgage on or other security interest in Borrower's principal dwelling which is
not a purchase money security interest as to that portion, unless expressly
provided to the contrary in another place, or (ii) if Borrower (or any of them)
has (have) given or give(s) Bank a deed of trust or mortgage covering real
property, or mortgage shall not secure the loan and any other Obligation of
Borrower (or any of them), unless expressly provided to the contrary in another
place.
11.0 NOTICES. Unless otherwise provided in this Agreement, all notices, requests
or demands by either party on the other relating to this Agreement shall be in
writing and sent by regular United States mail, postage prepaid, properly
addressed to Borrower or to Bank at the addresses stated in this Agreement, or
to such other addresses as Borrower or Bank may from time to time specify to the
other in writing.
12.0 AUTHORIZATION TO DISBURSE. Bank is hereby authorized to make loans and
advances hereunder upon telephonic or other instructions received from anyone
purporting to be an officer, employee, or representative of Borrower, or at the
discretion of Bank if said loans and advances are necessary to meet any
Obligations of Borrower to Bank. Bank shall have no duty to make inquiry or
verify the authority of any such party, and Borrower shall hold Bank harmless
from any damage, claims or liability by reason of Bank's honor of, or failure to
honor, any such instructions except to the extent caused by the gross negligence
or willful misconduct of Bank.
13.0 DESTRUCTION OF BORROWER'S DOCUMENTS. Any documents, schedules, invoices or
other papers delivered to Bank, may be destroyed or otherwise disposed of by
Bank six (6) months after they are delivered to or received by Bank, unless
Borrower requests, in writing, the return of the said documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.
14.0 CHOICE OF LAW. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined according to the laws of the
State of California. The parties agree that all actions or proceedings arising
in connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or the County of Santa
Xxxxx.
15.0 GENERAL PROVISIONS.
15.1 This Agreement shall be binding and deemed effective when executed
by Borrower and accepted and executed by Bank at its headquarter office.
15.2 This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights hereunder without
Bank's prior written consent and any prohibited assignment shall be absolutely
void. No consent to an assignment by Bank shall release Borrower or any
guarantor from their Obligations to Bank. Bank may assign this Agreement and its
rights and duties hereunder. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in
Bank's rights and benefits hereunder. In connection therewith, Bank may disclose
all documents and information which Bank now or hereafter may have relating to
Borrower or Borrower's business.
15.3 Paragraph headings and paragraph numbers have been set forth
herein for convenience only; unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
15.4 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Bank or Borrower, whether under any rule
of construction or otherwise; on the contrary, this Agreement has been reviewed
by all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto. When permitted by the context, the singular includes the
plural and vice versa.
15.5 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
15.6 This Agreement cannot be changed or terminated orally. Except as
to currently existing Obligations owing by Borrower to Bank, all prior
agreements, understandings, representations, warranties, and negotiations, if
any, with respect to the subject matter hereof, are merged into this Agreement.
15.7 The parties intend to and agree that their respective rights,
duties, powers, liabilities, obligations and discretions shall be performed,
carried out, discharged and exercised reasonably and in good faith.
15.8 In addition, if this Agreement is secured by a deed of trust or
mortgage covering real property, then the trustor or mortgagor shall not
mortgage or pledge the mortgaged premises as security for any other Indebtedness
or obligations. This Agreement, together with all other Indebtedness secured by
said deed of trust or mortgage, shall become due and payable immediately,
without notice, at the option of Bank, (a) if said trustor or mortgagor shall
mortgage or pledge the mortgaged premises for any other Indebtedness or
obligations or shall convey, assign or transfer the mortgaged premises by deed,
installment sale contract or other instrument; (b) if the title to the mortgaged
premises shall become vested in any other person or party in any manner
whatsoever; or (c) if there is any disposition (through one or more
transactions) of legal or beneficial title to a controlling interest of said
trustor or mortgagor.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Loan & Security Agreement (Accounts and Inventory) to be executed as of
the date first hereinabove written.
CIDCO, INCORPORATED
By:/s/ Xxxxxxx X. Xxxx
Title: Chief Financial & Operating Officer
Accepted and effective as of March 29, 1999 at Bank's Headquarters Office
COMERICA BANK-CALIFORNIA
By:/s/Xxxxxxxx X. Xxxxx
Title: Vice President
SCHEDULE A
Permitted Liens
(This space left blank in document.)
SCHEDULE B
CIDCO Incorporated locations and Landlords/Mortgagors
1. CIDCO Incorporated
180 and 000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
2. GSS Array Technology
00 XXX 0. Xx-Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Bang PA-In
Ayudhaya 00000
Xxxxxxxx
3. In-Tec Global / Professional Conglomerate SDN. BHD
NO 10, Jalan Hasil
Kawasan Perindustrian Jalan Hasil
00000 Xxxxxx, Xxxxx Xxxxx, Xxxxx, Xxxxxxxx
4. CGE Ltd.
NO. 8 Industrial Zone
Xxx Xxxx Xxxx
Xxx Xxxx Hsien
Canton, China
5. Shenzhen Taifeng Electronics - (formally known as Xxxxxxx Investment)
Taifeng Xxxxxxxx 0xx Xxxxxxxxxx Xxxx
Xxxxxx Xxxxxxxx Xxxxx
Third Party Warehouses
6. Salinas Valley Public Warehouse
Fireston Business Park
000 Xx Xxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
[GRAPHIC OMITTED]
EQUIPMENT RIDER
Borrower(s): CIDCO, INCORPORATED
Borrower and Comerica Bank-California ("Bank") are entering into that
certain Amended and Restated Loan & Security Agreement (Accounts and Inventory)
of even date herewith (the "Agreement"). This EQUIPMENT RIDER (this "Rider")
dated March 29, 1999 is hereby made a part of and incorporated into the
Agreement.
1. Borrower grants to Bank a security interest in the following
(hereinafter referred to as "Equipment"):
(a) All of Borrower's present machinery, equipment, fixtures,
vehicles, office equipment, furniture, furnishings, tools,
dies, jigs and attachments, wherever located, (including but
not limited to, the items listed and described on the Schedule
of Equipment attached hereto and marked Exhibit "A" and by
this reference made a part hereof as though fully set forth
hereat);
(b) all of Borrower's additional equipment, wherever located, of
like or unlike nature, to be acquired hereafter, and all
replacements, substitutes, accessions, additions and
improvements to any of the foregoing; and
(c) all of Borrower's general intangibles, including without
limitation, computer programs and computer disks. 2. Bank's security
interest in the Equipment as set forth above shall secure each, any and all
of Borrower's Obligations to
Bank, as the term "Obligations" is defined in the Agreement; and, the payment of
Borrower's indebtedness in the principal amount not to exceed Fifteen Million
and 00/100 Dollars ($15,000,000) and interest evidenced by the Agreement.
3. Bank may, in its sole discretion, from time to time hereafter, make
loans to Borrower. Loans made by Bank to Borrower pursuant to this Rider shall
be included as part of the Obligations of Borrower to Bank and at Bank's option,
may be evidenced by promissory note(s), in form satisfactory to Bank. Such loans
shall bear interest at the rate and be payable in the manner specified in said
promissory note(s) in the event Bank exercises the aforementioned option, and in
the event Bank does not, such loans shall bear interest at the rate and be
payable in the manner specified in the Agreement.
4. Borrower represents and warrants to Bank that:
(a) it has good and indefeasible title to the Equipment;
(b) the Equipment is and will be free and clear of all liens,
security interests, encumbrances and claims, except Permitted
Liens as defined in the Agreement;
(c) the Equipment shall be kept only at the following locations:
180 and 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxxxx
00000 and See Schedule B of the Agreement
(d) the owners or mortgagees of the respective locations are:
See Schedule B of the Agreement; and
(e) Bank shall have the right to demand now and/or at all times
hereafter, during Borrower's usual business hours to inspect
and examine the Equipment and Borrower agreed to reimburse
Bank for its reasonable costs and expenses in so doing.
5. Borrower shall keep and maintain the Equipment in good operating
condition and repair, make all necessary replacements thereto so that the value
and operating efficiency thereof shall at all times be maintained and preserved.
Borrower shall not permit any items of Equipment to become a fixture to real
estate or accession to other property, and the Equipment is now and shall at all
times remain and be personal property.
6. Borrower, at its expense, shall keep and maintain the Equipment insured
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners who use such
properties and interest in properties in similar businesses for the full
insurable value thereof; and business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of its assets. All such policies of insurance shall be in such form, with such
companies and in such amounts as may be reasonably satisfactory to Bank.
Borrower shall deliver to Bank certified copies of such policies of insurance
and evidence of the payment of all premiums thereof. All such policies of
insurance (except those of public liability and property damage) shall contain
an endorsement in a form satisfactory to Bank showing loss payable to Bank and
all proceeds payable thereunder shall be payable to Bank and upon receipt by
Bank shall be applied on the account of Borrower's Obligations. To secure the
payment of Borrower's Obligations, Borrower grants Bank's security interest in
and to all such policies of insurance (except those of public liability and
property damage) and the proceeds thereof and directs all insurers under such
policies of insurance to pay all proceeds thereof directly to Bank). Upon the
occurrence and during the continuance of an Event of Default, Borrower hereby
irrevocably appoints Bank (and any of Bank's officers, employees or agents
designated by Bank) as Borrower's attorney-in-fact for the purpose of making,
settling and adjusting claims under such policies of insurance. Each such
insurer shall agree by endorsement upon the policy or policies of insurance
issued by it to Borrower, or any other person, shall affect the right of Bank to
recover under such policy or policies of insurance required above or to pay any
premium in whole or in part relating thereto. Bank, without waiving or releasing
any obligations or defaults by Borrower hereunder, may at any time or times
hereafter, but shall have no obligations to do so, obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect to such policies which Bank deems advisable. All sums so disbursed by
Bank, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be a part of Borrower's Obligations and payable
on demand.
7. Until the occurrence and during the continuance of a default by Borrower
under the Agreement or this Rider, Borrower may, subject to the provisions of
the Agreement and this Rider and consistent therewith, remain in possession
thereof and use the Equipment referred to herein in the ordinary course of
business at the location or locations hereinabove designated.
8. All of the terms, conditions, warranties, covenants, agreements and
representations of the Agreement are incorporated herein and reaffirmed.
9. Upon a default by Borrower under the Agreement or this Rider, Borrower
upon request of Bank to do so, agrees to assemble and make the Equipment or any
part thereof available to Bank at a place designated by Bank.
10. Borrower shall upon demand by Bank immediately deliver to Bank and
properly endorse, any and all evidences of ownership, certificates of title or
applications for titles to any of the aforesaid items of Equipment.
11. Bank shall not in any way or manner be liable or responsible for (a)
the safekeeping of the Equipment; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof or (d) any act or default by any person whomsoever. All risk of Loss,
damage or destruction of the Equipment shall be borne by Borrower.
Borrower: CIDCO, INCORPORATED
By:/s/Xxxxxxx X. Xxxx
Its:CFO & COO
Accepted this 29th day of March, 1999 at Bank's place of business in San Jose,
California.
Comerica Bank-California
By: /s/Xxxxxxxx X. Xxxxx
Its: Vice President
[GRAPHIC OMITTED]
ENVIRONMENTAL RIDER
This ENVIRONMENTAL RIDER (this "Rider") dated this 29th day of March,
1999 is hereby made a part of and incorporated into that certain Amended and
Restated Loan & Security Agreement (Accounts and Inventory) (the "Agreement")
dated March 29, 1999 between Comerica Bank-California, a California corporation
("Lender") and CIDCO, INCORPORATED, a California corporation ("Borrower").
1. Borrower hereby represents, warrants and covenants that none of the
collateral or real property occupied and/or owned by Borrower has ever been used
by Borrower or to the knowledge of Borrower any other previous owner and/or
operator in connection with the disposal of or to refine, generate, manufacture,
produce, store, handle, treat, transfer, release, process or transport any
hazardous waste, as defined in 42 U.S.C. 9601 (14) ("Hazardous Substance"), and
Borrower will not at any time use the collateral or such real property for the
disposal of, refining of, generating, manufacturing, producing, storing,
handling, treating, transferring, releasing, processing, or transporting any
such Hazardous Waste and/or Hazardous Substances.
2. None of the collateral or real property used and/or occupied by
Borrower has been designated, listed or identified in any manner by the United
States Environmental Protection Agency (the "EPA") or under and pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, set forth at 42 U.S.C. 9601 et seq. ("CERCLA") or the Resource
Conservation and Recovery Act of 1986, as amended, set forth at 42 U.S.C. 9601
et seq. ("RCRA") or any other environmental protection statute as a Hazardous
Waste or Hazardous Substance disposal or removal site, superfund or cleanup site
or candidate for removal of closure pursuant to RCRA, CERCLA or any other
environmental protection statute.
3. Borrower has not received a material summons, citation, notice,
directive, letter or other communication, written or oral, from the EPA or any
other federal or state governmental agency or instrumentality, authorized
pursuant to an environmental protection statute, concerning any intentional or
unintentional action or omission by Borrower resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise
disposing of Hazardous Waste or Hazardous Substance into the environmental
resulting in damage thereto or to the fish, shellfish, wildlife, biota or other
natural resources.
4. Borrower shall not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part, or on the part of
any third party, on property owned and/or occupied by Borrower, any disposal,
releasing, spilling, leaking, pumping, omitting, pouring, emptying or dumping of
a Hazardous Waste or Hazardous Substance into the environment where damage may
result to the environment, fish, shellfish, wildlife, biota or other natural
resources unless such disposal, release, spill, leak, pumping, emission,
pouring, emptying or dumping is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal or state governmental
authority.
5. Borrower shall furnish to Lender:
(a) Promptly and in any event within thirty (30) days after receipt
thereof, a copy of any material notice, summons, citation, directive, letter or
other communications from the EPA or any other governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with the handling, transporting, transferring,
disposal or in the releasing, spilling, leaking, pumping, pouring, omitting,
emptying or dumping of Hazardous Waste or Hazardous Substances into the
environment resulting in damage to the environment, fish, shellfish, wildlife,
biota and any other natural resource;
(b) Promptly and in any event within thirty (30) days after the
receipt thereof, a copy of any notice of or other communication concerning the
filing of a lien upon, against or in connection with Borrower, the collateral or
Borrower's real property by the EPA or any other governmental agency or
instrumentality authorized to file such a lien pursuant to an environmental
protection statute in connection with a fund to pay for damages and/or cleanup
and/or removal costs arising from the intentional or unintentional action or
omission of Borrower resulting from the disposal or in the releasing, spilling,
leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Waste or
Hazardous Substances into the environment;
(c) Promptly and in any event within thirty (30) days after the
receipt thereof, a copy of any notice, directive, letter or other communication
from the EPA or any other governmental agency or instrumentality acting under
the authority of an environmental protection statute indicating that all or any
portion of the Borrower's property or assets have been listed and/or borrowers
deemed by such agency to be the owner and operator of the facility that has
failed to furnish to the EPA or other authorized governmental agency or
instrumentality, all the information required by the RCRA, CERCLA or other
applicable environmental protection statutes;
(d) Promptly and in no event more than thirty (30) days after the
filing thereof with the EPA or other governmental agency or instrumentality
authorized as such pursuant to an environmental protection statute, copies of
any and all information reports filed with such agency or instrumentality in
connection with Borrower's compliance with RCRA, CERCLA or other applicable
environmental protection statutes.
6. Any one or more of the following events which occur with respect to
Borrower shall constitute an event of default;
(a) The breach by Borrower of any covenant or condition,
representation or warranty contained in this Rider;
(b) The failure by Borrower to comply with each, every and all of
the requirements of RCRA, CERCLA or any other applicable environmental on
Borrower's other property;
(c) The receipt by Borrower of a notice from the EPA or any other
governmental agency or instrumentality acting under the authority of any
environmental protection statute, indicating that a lien has been filed against
any of the collateral, or any of Borrower's other property by the EPA or any
other governmental agency or instrumentality in connection with a fund as a
result of damage arising from an intentional or unintentional action or omission
by Borrower resulting from the disposal, releasing, spilling, leaking, pumping,
pouring, emitting, emptying or dumping of Hazardous Substances or Hazardous
Waste into the environment; and
(d) Any other event or condition exists which might, in the opinion
of Lender, under applicable environmental protection statutes, have a material
adverse effect on the financial or operational condition of Borrower or the
value of all or any material part of the collateral or other property of
Borrower.
IN WITNESS WHEREOF, Borrower has agreed as of the date first set forth
above.
CIDCO, INCORPORATED
(borrower/pledgor)
By: /s/Xxxxxxx X. Xxxx
Its: CFO & COO
[GRAPHIC OMITTED]
CORPORATE RESOLUTIONS AND INCUMBENCY
CERTIFICATION - AUTHORITY TO PROCURE LOANS
I certify that I am the duly elected and qualified Secretary of CIDCO,
INCORPORATED, a California corporation (the "Corporation") and the keeper of the
records of the Corporation; that the following is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Corporation in
accordance with its bylaws and applicable statutes on or as of the 29th day of
March, 1999.
Copy of Resolutions:
Be it Resolved, That:
1. Any (insert number required to sign) ( 1 ) one of the officers set forth
below of the Corporation are/is authorized, for, on behalf of, and in the
name of the Corporation to:
(a) Negotiate and procure letters of credit and other credit or
financial accommodations from Comerica Bank-California (the
"Bank") up to an amount not exceeding Twenty-Five Million and
00/100 Dollars ($25,000,000) (if left blank, unlimited);
(b) Discount with Bank commercial or other business paper belonging to
the Corporation made or drawn by or upon third parties, without
limit as to amount;
(c) Purchase, sell, exchange, assign, endorse for transfer and/or
deliver certificates and/or instruments representing stocks,
bonds, evidence of indebtedness or other securities owned by the
Corporation, whether or not registered in the name of the
Corporation;
(d) Give security for any liabilities of the Corporation to Bank by
grant, security interest, assignment, lien, deed of trust or
mortgage upon any real or personal property, tangible or
intangible of the Corporation; and
(e) Execute and deliver in form and content as may be required by Bank
any and all notes, evidences of indebtedness, applications for
letters of credit, guaranties, subordination agreements, loan and
security agreements, financing statements, assignments, liens,
deeds of trust, mortgages, trust receipts and other agreements,
instruments or documents to carry out the purposes of these
Resolutions, any or all of which may relate to all or to
substantially all of the Corporation's property and assets.
2. Said Bank be and it is authorized and directed to pay the proceeds of any
such loans or discounts as directed by the persons so authorized to sign,
whether so payable to the order of any of said persons in their individual
capacities or not, and whether such proceeds are deposited to the
individual credit of any of said persons or not;
3. Any and all agreements, instruments and document previously executed and
acts and things previously done to carry out the purposes of these
Resolutions are ratified, confirmed and approved as the act or acts of the
Corporation.
4. These Resolutions shall continue in force, and Bank may consider the
holders of said offices and their signatures to be and continue to be as
set forth in a certified copy of these Resolutions delivered to Bank, until
notice to the contrary in writing is duly served on Bank (such notice to
have no effect on any action previously taken by Bank in reliance on these
Resolutions).
5. Any person, corporation or other legal entity dealing with Bank may rely
upon a certificate signed by an officer of Bank to effect that these
Resolutions and any agreement, instrument or document executed pursuant to
them are still in full force and effect and binding upon the Corporation.
6. Bank may consider the holders of the offices of the Corporation and their
signatures, respectively, to be and continue to be as set forth in the
Certificate of the Secretary of Corporation until notice to the contrary in
writing is duly served on Bank.
I further certify that the above Resolutions are in full force and effect as of
the date of this Certificate; that these Resolutions and any borrowings or
financial accommodations under these Resolutions have been properly noted in the
corporate books and records, and have not been rescinded, annulled, revoked or
modified; that neither the foregoing Resolutions nor any actions to be taken
pursuant to them are or will be in contravention of any provision of the
articles of incorporation or bylaws of the Corporation or of any agreement,
indenture or other instrument to which the Corporation is a party or by which it
is bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent of
shareholders of the Corporation to authorize any act, matter or thing described
in the foregoing Resolutions.
I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:
NAME (Type or Print) TITLE SIGNATURE
Xxxx X. Xxxxxxx President/CEO /s/ Xxxx X. Xxxxxxx
Xxxxxxx X. Xxxx CFO/COO /s/ Xxxxxxx X. Xxxx
IN WITNESS WHEREOF, I have affixed my name as Secretary and have caused the
corporate seal of said Corporation to be affixed this 29th day of March, 1999.
/s/ Xxxxxxx X. Xxxx
Secretary
The Above Statements are Correct. /s/ Xxxx X. Xxxxxxx
SIGNATURE OF OFFICER OR DIRECTOR OF, IF NONE,
A SHAREHOLDER OTHER THAN SECRETARY WHEN
SECRETARY IS AUTHORIZED TO SIGN ALONE
Failure to complete the above when the Secretary is authorized to sign alone
shall constitute a certification by the Secretary that he/she is the sole
Shareholder, Director and Officer of the Corporation.
[GRAPHIC OMITTED]
BORROWER'S AUTHORIZATION
Date: March 29, 1999
I (we) hereby authorize and direct Comerica Bank-California ("Bank") to
pay
to be forwarded on demand
of the proceeds of my (our) loan from the Bank evidenced by an Amended and
Restated Loan & Security Agreement dated March 29, 1999 in the original
principal amount of Fifteen Million and 00/100 Dollars ($15,000,000).
Borrower(s): CIDCO, INCORPORATED
By:/s/ Xxxx X. Xxxxxxx Its: President/CEO
SIGNATURE OF Xxxx X. Xxxxxxx TITLE (if applicable)
By:/s/ Xxxxxxx X. Xxxx Its: CFO & COO
SIGNATURE OF Xxxxxxx X. Xxxx TITLE (if applicable)
Attachment A to UCC-1 Financing Statement
between Comerica Bank-California and CIDCO, Incorporated dated March 29, 1999
The attached Financing Statement covers the following types or
items of property:
ACCOUNTS, INVENTORY AND EQUIPMENT
All present and future accounts, contract rights, chattel paper,
security agreements and debts secured thereby, documents, notes, drafts,
instruments, general intangibles (including, without limitation, all present and
future choses and things in action, goodwill, patents, trademarks, trade names,
customer lists, purchase orders, deposit accounts and tax refunds) , and
returned goods. All present and hereafter acquired inventory wherever located,
including but not limited to all present and future goods held for sale or lease
or to be furnished under a contract of service and all raw materials, work in
process and finished goods but excluding inventory, goods or equipment and
accessories associated therewith which is held by Borrower in consignment or
bailment, subject to the last sentence hereof. All present and hereafter
acquired equipment wherever located, including but not limited to machinery,
machine tools, motors, equipment, controls, attachments, parts, tools,
furniture, furnishings, fixtures and motor vehicles and all attachments,
accessories, accessions, replacements, substitutions, additions and improvements
to any of the foregoing but excluding inventory, goods or equipment and
accessories associated therewith which is held by Borrower in consignment or
bailment, subject to the last sentence hereof. All present and future dies,
drawings, blueprints, catalogs and computer programs. All proceeds and products
of the foregoing, including but not limited to accounts, contract rights,
general intangibles, equipment, inventory, money, deposit accounts, foods,
chattel paper, documents, notes, drafts, instruments, insurance proceeds, and
any other tangible or intangible property received upon the sale or other
disposition of any of the foregoing but excluding the proceeds and products from
the sale of consigned or bailed inventory, goods or equipment and accessories
associated therewith which was held and/or disposed of by Borrower, subject to
the last sentence hereof. All present and future books and records pertaining to
any of the foregoing and the equipment containing said books and records.
Notwithstanding any provision to the contrary in this Attachment A, nothing in
this Attachment A shall be deemed to preclude Bank from having a security
interest in any Receivables, as defined in that certain Amended and Restated
Loan & Security Agreement of even date herewith (the "Loan Agreement"), for the
services provided by Borrower to Third Party Consignors or Bailors, as defined
in the Loan Agreement, in connection with any third party inventory, goods,
products, equipment and accessories held by Borrower in connection with
consignment or bailment.
Except as to inventory held for sale, the debtor has no right to sell
or otherwise dispose of any of the collateral.
/s/ RDK
Debtor's Initials
