1
EXHIBIT 10.7
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(ACCOUNTS AND INVENTORY)
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OBLIGOR # NOTE # AGREEMENT DATE
3954357024 December 20, 1999
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CREDIT LIMIT INTEREST RATE OFFICER NO./INITIALS
$5,000,000.00 Base Rate+ 0.000% 48234, Xxxxx Xxxxxxx
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THIS AGREEMENT is entered into on December 20, 1999, between Comerica
Bank-California ("Bank") as secured party, whose Headquarter Office is 000
Xxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, XX and JMAR Technologies, Inc. ("Borrower"),
a Corporation whose sole place of business (if it has only one), chief
executive office (If it has more than one place of business) or residence (if
an individual) is located at 0000 Xxxxxxxx Xxxxxx Xxxx., Xxx Xxxxx, XX. The
parties agree as follows:
1. DEFINITIONS
1.1 "Agreement" as used in this Agreement means and includes this
Revolving Credit Loan & Security Agreement (Accounts and Inventory), any
concurrent or subsequent rider to this Revolving Credit Loan & Security
Agreement (Accounts and Inventory) and any extensions, supplements,
amendments or modifications to this Revolving Credit Loan & Security
Agreement (Accounts and Inventory) and to any such rider.
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
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 or defending 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
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.
1.3 "Base Rate" as used in this Agreement means that variable rate
of interest so announced by Bank at its headquarters office in San Jose,
California as its "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. See Addendum B attached.
1.4 "Borrower's Books" as used in this Agreement means and includes
all of the 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 (80.000%) of the net amount of Eligible Accounts after
deducting therefrom all payments, adjustments and credits 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. See Addendum A attached.
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 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 N/A, beginning with the period from _____________
__________ to __________________________.
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 specified interest rate and term.
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
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 the 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 by 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,
guaranteed sale or other terms by reason of which the payment by the account
debtor may be conditional; (c) accounts with respect to which the account debtor
is not a resident of the United States; (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 the 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 account
debtor becomes insolvent, fails or goes out of business; and (k) accounts owed
by any single account debtor which exceed twenty percent (20%) of all of the
Eligible Accounts; and (l) accounts with a particular account debtor on which
over twenty-five percent (25%) of the aggregate amount owing is greater than
ninety (90) days from the date of the invoice. See Addendum A attached.
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 includes, 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, use 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 ____________________ to
___________________.
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 the 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 disks, 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,
2.
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LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
replacement, return, repossession or otherwise, and all additions and
accessions thereto, and the resulting product or mass, and any documents of
title respecting any of the above.
1.19 "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
1.20 "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.
1.21 "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 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 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.
1.22 "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.
1.23 "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 the Borrower's books (except minute
books) relating to any of the foregoing.
1.24 "Subordinated Debt" as used in this Agreement means indebtedness of
the Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content satisfactory to the
Bank.
1.25 "Subordination Agreement" as used in this Agreement means a
subordination agreement in form satisfactory to Bank making all present and
future indebtedness of the Borrower to N/A subordinate to the Obligations.
1.26 "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, money due from affiliates (including officers, directors,
subsidiaries and commonly held companies).
1.27 "Tangible Net Worth" as used in this Agreement means, as of any
applicable date of determination, the excess of
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), over
b. all Debt of such person.
1.28 "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 the 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 the indebtedness of others, whether or not reflected on the balance
sheets of the Borrower, including 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.
1.29 "Working Capital" as used in this Agreement means, as of any
applicable date of determination, Current Assets less Current Liabilities.
3.
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
1.30 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. 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, 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 Borrowing Base or the sum of Five Million and no/100 ($5,000,000.00), such
amount being 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 (0.000) percentage points per annum
above the Base Rate (the "Rate"). The Credit shall bear interest, from and after
the occurrence 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 Rent as of the date of this Agreement is Eight and 5/10 (8.500%)
per annum. In the event that the Base Rent 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 the 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 day of each calendar month during the term of this
Agreement. A late payment charge equal to 5% of each late payment may be
charged on any payment not received by the Bank within 10 calendar days after
the payment due date, but acceptance of payment of this charge shall not waive
any Default under this 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 N/A (N/A%)
percentage points per month in excess of the interest rate set forth in Section
2.2, from the date incurred and for each month thereafter, until repaid in full.
3. TERM.
3.1 This Agreement shall remain in full force and effect until June 1,
2000, or until terminated by notice by Borrower. Notice of such termination by
Borrower shall be effectuated by mailing of a registered or certified letter not
less than thirty (30) days prior to the effective date of such termination,
addressed to the 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 have 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, upon the execution and delivery
of mutual general releases.
4. 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, immediately upon
receipt thereof, 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,
4.
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REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
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. Bank or
Bank's designee may notify customers or account debtors of collection costs
and expenses to Borrower's account but, unless and until Bank does so or
gives Borrower other written instructions, Borrower shall collect all
Receivables for Bank, receive in trust all payments thereon as Bank's
trustee, and, if so requested to do so from Bank, 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 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,
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 a default by Borrower under
this Agreement or any other Agreement between Borrower and Bank, 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 or 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 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.
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 order, 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.
Borrower ratifies and approves all acts of the attorney-in-fact. Neither
Bank nor its attorney-in-fact will be liable for any act or omissions or
for any error of judgement or mistake of fact or law. 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. CONDITIONS PRECEDENT
5.1 Conditions precedent to the making of the loans and the
extension of the financial accommodations hereunder, Borrower shall
execute, or cause to be executed, and deliver to Bank, in form and
substance satisfactory to Bank and its counsel, the following:
a. This Agreement and other documents required by Bank;
b. Financing statements (Form UCC-1) in form satisfactory to
Bank for filing and recording with the appropriate governmental
authorities;
5.
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LOAN & SECURITY AGREEMENT
(ACCOUNTS & INVENTORY)
c. If Borrower is a corporation, then certified extracts from the
minutes of the meeting 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. If Borrower is a corporation, then a certificate of good
standing showing that Borrower is in good standing under the
laws of the state of its incorporation and certificates that
Borrower is qualified to transact business and is in good
standing in any other state in which it conducts business;
e. If Borrower is a partnership, then a copy of Borrower's
partnership agreement certified by each general partner of
Borrower;
f. UCC searches, tax lien and litigation searches, fictitious
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
under this Agreement;
g. Evidence that Borrower has obtained insurance and acceptable
endorsements;
h. Waivers executed by landlords and mortgagees of any real
property on which any Collateral is located; and
i. Warranties and representations of officers.
6. WARRANTIES REPRESENTATIONS AND COVENANTS.
6.1 If so requested by Bank, Borrower shall, at such intervals
designated by Bank, 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 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 the Borrower, as they exist at
this time. Any merchandise which is returned by an account debtor or otherwise
recovered shall be set aside, marked with Bank's name, and Bank shall retain a
security interest therein. Borrower shall promptly notify Bank of all disputes
and claims and settle or adjust them on terms approved by Bank. After default
by Borrower hereunder, no discount, credit or allowance shall be granted to any
account debtor by Borrower and no return of merchandise shall be accepted by
Borrower without Bank's consent. Bank may, after 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. The Collateral shall
at all times remain free and clear of all liens, encumbrances
and security interests (except those in favor of Bank).
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, 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 purchase
orders, shipping instruction, 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 assigned to Bank, all such
Eligible Accounts will be due and payable on terms set forth in Section 1.12,
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.
7
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(ACCOUNTING & INVENTORY)
6.5 Borrower shall keep the inventory only at the following locations,
while allowing demo. inventory to be at different locations: 0000 Xxxxxxxx
Xxxxxx Xxxx., Xxx Xxxxx, XX; 00000-X Xxxxx Xxxx, Xxxxxx, XX; 0000 Xxxx Xxx.,
Xxxxxxxxxx, XX.
a. Borrower, immediately upon demand by Bank therefor, shall now
and from time to time hereafter, at such intervals as are
requested by Bank, deliver to Bank, 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 as held by Bank;
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 the Bank's officers, agents and employees
for inspection and copying;
e. All inventory, now and hereafter at all times, shall be new
inventory of good and merchantable quality free from defects;
f. Inventory is not now and shall not at any time or 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, 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:
x. Xxxxx a security interest in or permit a lien, claim or
encumbrance 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. 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 assets;
e. 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;
f. Move or relocate any Collateral;
g. Acquire any other business organization;
h. Enter into any transaction not in the usual course of
Borrower's business;
i. Make any investment in securities of any person, association,
firm, entity, or corporation other than the securities of the
United States of America;
j. Make any change in Borrower's financial structure or in any
of its business objectives, purposes or operations which would
adversely effect the ability of Borrower to repay Borrower's
Obligations;
k. Incur any debts outside the ordinary course of Borrower's
business except renewals or extensions of existing debts and
interest thereon;
l. Make any advance or loan except in the ordinary course of
Borrower's business as currently conducted;
7.
8
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
m. Make loans, advances or extensions of credit to any Person, except for
sales on open account and otherwise in the ordinary course of business;
n. 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 the 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 the Borrower in the ordinary course of business for
deposit or collection.
o. (a) Sell, lease, transfer or otherwise dispose of properties and assets
having an aggregate book value of more than One Hundred Thousand and 00/100
Dollars ($100,000.00) (whether in one transaction or in a series of
transactions) except as to the sale of inventory in the ordinary course of
business; (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;
p. Subordinate any indebtedness due to it from a person to indebtedness of
other creditors of such person;
q. Purchase or hold beneficially any stock or other securities of, or make
any investment or acquire any interest whatsoever in, any other Person, except
for the common stock of the Subsidiaries owned by the Borrower on the date of
this Agreement 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 $100,000,000 and direct obligations of the
United States Government maturing within one year from the date of acquisition
thereof; or
r. 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.
6.7 Borrower is not a merchant whose sales for resale of goods for personal,
family or household purposes exceeded seventy-five percent (75%) in dollar
volume of its total sales of all goods during the 12 months preceding the filing
by Bank of a financing statement describing the Collateral. At no time hereafter
shall Borrower's sales for resale of goods for personal, family or household
purposes exceed seventy-five percent (75%) in dollar volume of its total sales.
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 If Borrower is a corporation, Borrower represents, warrants and covenants
as follows:
a. Borrower will not make any distribution or declare or pay any dividend
(in stock or in cash) to any shareholder or on any of its capital stock, of
any class, whether now or hereafter outstanding, or purchase, acquire,
repurchase, redeem or retire any such capital stock;
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 or
any other state in which it conducts its business;
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, and with the exception of acquired property under
a cost of $100,000.
6.12 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. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, and will execute and deliver to 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,
8.
9
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
(i) make payment of the same or any part thereof; 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 of administrative agency and
Borrower has no knowledge of any 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
shall be in such form, with such companies, and in such amounts as may be
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. 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.
b. 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 will not cancel any of such policies without Bank's prior written
consent. Each such insurer shall agree by endorsement upon the policy or
policies of insurance issued by it to Borrower as required above, or by
independent instruments furnished to Bank, that it will give Bank at least ten
(10) days written notice before any such policy or policies of insurance shall
be altered or cancelled, and that no act or default of 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 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 reasonably 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 and have been prepared in accordance with GAAP consistently 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 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 demand, during Borrower's usual business hours, or the usual business hour
of third xxxxxxx having control thereof, to have access to and examine all of
the 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 forty-five (45) days after the end of
each Quarter, a COMPANY PREPARED balance sheet and profit and loss statement
covering Borrower's operations and deliver to Bank within ninety (90) days
after the end of each of Borrower's fiscal years a(n) AUDITED statement of the
financial condition of the Borrower for each such fiscal year, including but
not limited to, 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. See Addendum A attached.
9.
10
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
C. In addition to the financial statements requested above, the Borrower
agrees to provide Bank with the following schedules:
XX Accounts Receivable Agings on a Monthly basis;
---------------- ----------------
XX Accounts Payable Agings on a Monthly basis;
---------------- ----------------
Job Progress Reports on a basis; and
---------------- ----------------
XX Borrowing Base Certificates on a Monthly basis
---------------- ----------------
See Addendum "A" attached for additional controls for subsidiaries
6.17 Borrower shall maintain the following financial ratios and covenants on
a consolidated and non-consolidated basis:
a. Working Capital in an amount not less than N/A
--------------------------------
-----------------------------------------------------------------------------
b. Tangible Effective Net Worth in an amount not less than $9,000,000,
------------------
increasing to $9,500,000 at 3/31/00.
-----------------------------------------------------------------------------
c. a ratio of Current Assets to Current Liabilities of not less than
1.75:1.00
-----------------------------------------------------------------------------
d. a quick ratio of cash plus securities plus Receivables to Current
Liabilities of not less than N/A
-------------------------------------------------
-----------------------------------------------------------------------------
e. a ratio of Total Liabilities (less debt subordinated to Bank) to Tangible
Effective Net Worth of less than 1.25:1.00
---------------------------------------------
-----------------------------------------------------------------------------
f. a ratio of Cash Flow to Fixed Charges of not less than N/A
--------------------
-----------------------------------------------------------------------------
g. Net Income after taxes of Net loss before one-time writeoffs for FYE
------------------------------------------------
12/31/99 of no greater than ($1,600,000). Minimum net income after taxes of
-----------------------------------------------------------------------------
$500,000 annually beginning 12/31/00. Quarterly net loss of no greater than
-----------------------------------------------------------------------------
($450,000) for the quarter ending 3/31/00, ($50,000) quarterly thereafter.
-----------------------------------------------------------------------------
h. Borrower shall not without Bank's prior written consent acquire or expend
for or commit itself to acquire or expend for fixed assets by lease, purchase
or otherwise in an aggregate amount that exceeds N/A
-----------------------------
Dollars ($ ) in any fiscal year; and
------------------------ ------------
i. Monthly report of costs completed on the IBM Laser Station Contract.
-----------------------------------------------------------------------------
j. Semi-annual Accounts Receivable and Inventory Audit.k. Quarterly backlog
-----------------------------------------------------------------------------
report.
-------
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.
6.18 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) as Bank may 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 which
constitutes a breach of or an event which constitutes an Event of Default under
this Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent and able to
pay its debts (including trade debts) as they mature.
6.20 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.
6.21 Each warranty, representation and agreement 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 be given, to Bank, either now or hereafter.
6.22 Borrower shall keep all of its principal bank 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.
6.23 Borrower shall furnish to the 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
10.
11
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
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.
6.24 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.
6.25 Borrower shall maintain insurance on the life of N/A
-------------------
in an amount not to be less than Dollars
----------------------- ---------------
($ ) under one or more policies issued by insurance
---------------------
companies satisfactory to Bank, which policies shall be assigned to Bank as
security for the Obligations and on which Bank shall be named as sole
beneficiary.
6.26 Borrower shall limit direct and indirect compensation paid to the
following employees: , ,
------------------------------- -------------------------
to an aggregate of Dollars ($ N/A ) per
--------------------------- ------------------
N/A .
-----------------------------------------------
6.27 Borrower shall perform all acts reasonably necessary to ensure
that: (i) 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 function 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 terms of
this paragraph as Bank may from time to time require.
7. EVENTS OF DEFAULT
Any one or more of the following events shall constitute a default by
Borrower under this Agreement:
a. If Borrower fails or neglects to perform, keep or observe any term,
provision, condition, covenant, agreement, warranty or representation contained
in this Agreement, or any other present or future agreement between Borrower and
Bank;
b. 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;
c. If Borrower fails to pay when due and payable or declared due and payable,
all or any portion of the Borrower's Obligations (whether of principal,
interest, taxes, reimbursement of Bank Expenses, or otherwise);
d. 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;
e. 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 ten (10) days thereafter;
f. If any Insolvency Proceeding is filed or commenced by or against Borrower
without being dismissed within ten (10) days thereafter;
g. If any proceeding is filed or commenced by or against Borrower for its
dissolution or liquidation;
h. 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;
i. If a notice of lien, levy or assessment is filed of record with respect to
any or all of Borrower's assets by the United States Government, or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether xxxxxx or
otherwise, upon any or all of the Borrower's assets and the same is not paid on
the payment date thereof;
j. 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 ten (10) days thereafter;
k. 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;
11.
12
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
l. If Borrower permits a default in any material agreement to which
Borrower is a party with third parties so as to result an acceleration of
the maturity of Borrower's indebtedness to others, whether under any
indenture, agreement or otherwise;
m. If Borrower makes any payment on account of indebtedness which has been
subordinated to Borrower's Obligations to Bank;
n. 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;
o. 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;
p. If Borrower is an individual and Borrower dies;
q. If there is a change of ownership or control of N/A percent (N/A%) or
more of the issued and outstanding stock of Borrower; or
r. If any reportable event, which the 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 the 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 Events 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 ten (10) 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. BANK'S RIGHTS AND REMEDIES
8.1 Upon the occurrence 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 the 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.
Borrower agrees to assemble the Collateral if Bank so requires and to
make 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 licensees and all
franchise agreement 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;
f. Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sales and sell (in the manner provided for
herein) the inventory;
g. Sell or dispose the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or
on terms, in such manner and at such places (including Borrower's
premises) as 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:
12.
13
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
(1) Bank shall give the 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 they have
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.
8.2 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.
9. 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 or 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.
10. WAIVERS.
10.1 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 thereafter 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.
10.2 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 or 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.
10.3 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.
10.4 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 a Bank may contact directly any such accountants, accounting
firm and/or service bureau or consultant in order to obtain such
information.
10.5 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.
13.
14
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
10.6 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 terms, 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.
11. 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 a consumer loan, 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 the
Borrower (or any of them) has (have) given or give(s) Bank a deed of trust or
mortgage covering real property, that deed of trust or mortgage shall not
secure the loan and any other Obligation of the Borrower (or any of them),
unless expressly provided to the contrary in another place.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices 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.
Requests to Borrower by Bank hereunder may be made orally.
13. 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.
14. 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.
15. 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 County of Santa
Xxxxx.
16. GENERAL PROVISIONS.
16.1 This Agreement shall be binding and deemed effective when
executed by the Borrower and accepted and executed by Bank at its
Headquarter Office.
16.2 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.
16.3 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.
16.4 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.
14.
15
REVOLVING CREDIT
LOAN & SECURITY AGREEMENT
(Accounts & Inventory)
16.5 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.
16.6 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.
16.7 The parties intend 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.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit
Loan & Security Agreement (Accounts and Inventory) to be executed as of the
date first hereinabove written.
ATTEST: BORROWER: JMAR Technologies, Inc.
------------------------------- By: /s/ Xxxxxx X. Xxxxxxxxx
Title --------------------------------
Signature of Xxxxxx X. Xxxxxxxxx
Accepted and effective as of
December 20, 1999 Title: Chief Financial Officer
------------------------------- -----------------------------
at Bank's Headquarter Office
(Bank) Comerica Bank-California
By: By: /s/ Xxxxx Xxxxxxx
---------------------------- -------------------------------
Signature of Xxxxx Xxxxxxx
Title: Vice President Title:
-------------------------- -----------------------------
By:
--------------------------------
Signature of
Title:
------------------------------
15.
16
Addendum "A" to Revolving Credit Loan & Security Agreement
Dated December 20, 1999
Section 1.5 is amended by adding the following:
...Plus (3) 50% of unbilled revenue on IBM Laser Station contract up to a
maximum advance of $750,000, plus (4) $750,000 overformula to be reduced to $0
for 30 consecutive days annually.
Section 1.12 is amended by substituting the following underlined passage for
"Borrower":
1.12 "Eligible Accounts" as used in this Agreement means and includes
those accounts of JMAR Precision Systems which ...
Section 1.12(c) is hereby deleted in its entirety and replaced with the
following:
(c) accounts with respect to which the account debtor is not a resident
of the United States, except that account debtors that are foreign subsidiaries
of IBM shall be eligible up to an aggregate of $500,000.00.
Section 1.12(k) is hereby deleted in its entirety and replaced with the
following:
(k) accounts owed by any single account debtor which exceed twenty
percent (20% of all of the Eligible Accounts, except that with respect to
account debtor Affymetrix, Inc. the accounts owed by them shall not exceed
sixty percent (60%) and account debtor IBM (combined foreign and domestic) the
accounts owed by them shall not exceed fifty percent (50%).
Section 6.16(b) is hereby deleted in its entirety and replaced with the
following:
b. Borrower shall deliver to Bank within Forty-five (45) days after the
end of each Quarter, a consolidated and consolidating company-prepared balance
sheet and profit and loss statement covering Borrower's and JMAR Precision
Systems' operations and deliver to Bank within ninety (90) days after the end
of each of Borrower's fiscal years a consolidated and consolidating audited
statement of the financial condition of the Borrower for each such fiscal year,
including but not limited to, 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.
17
Section 6.16(c) is amended by adding the following schedules:
Monthly Accounts Receivable and Accounts Payable agings of JMAR
Precision systems on a monthly basis.
Quarterly Accounts Receivable and Accounts Payable agings of JMAR
Semiconductor and JMAR Research.
/s/ XXXXXX X. XXXXXXXXX
--------------------------------------
JMAR Technologies
18
[COMERICA LOGO]
INVENTORY RIDER
(REVOLVING ADVANCE)
BORROWER(S): JMAR Technologies, Inc.
Borrower has entered into a certain Revolving Credit and Security
Agreement (Accounts and Inventory) or a certain Loan and Security Agreement
(Accounts and Inventory) (either hereinafter referred to as "Agreement") dated
December 20, 1999 with Bank (Secured Party). This INVENTORY RIDER (hereinafter
referred to as this Rider) dated December 20, 1999 is hereby made a part of and
incorporated into that agreement.
1. At the request of Borrower, made at any time and from time to time
during the term of the Agreement, and so long as no event of default under the
Agreement has occurred and Borrower is in full, faithful and timely compliance
with each and all of the covenants, conditions, warranties and representations
contained in the Agreement, this Rider and/or any other agreement between Bank
and Borrower, Bank agrees to lend Borrower Thirty Five Percent (35.000%) of the
lower of cost or market value of Borrower's raw materials and finished goods
Inventory, and as may be adjusted by Bank, in Bank's discretion, for age and
seasonality or other factors affecting the value of the Inventory, up to a
maximum advance outstanding at any one time of Two Million Five Hundred
Thousand and no/100 Dollars ($2,500,000.00) upon Borrower's concurrent
execution and delivery to Bank of a Designation of Inventory, or Certification
of Borrowing Base, in form customarily used by Bank. All advances made and to
be made pursuant to this Rider are solely and exclusively to enable Borrower to
acquire rights in and purchase new Inventory, and Borrower represents and
warrants that all advances by Bank pursuant to this Rider will be used solely
and exclusively for such purpose; and since such advances will be used for the
foregoing purposes, Bank's security interest in Borrower's Inventory is and
shall be at all times a purchase money security interest as that term is
described in Section 9107 of the California Uniform Commercial Code.
2. Advances made by Bank to Borrower pursuant to this Rider shall be
included as part of the Obligations of Borrower to Bank as the term
"Obligations" is defined in the Agreement; and at Bank's option, advances
pursuant to this Rider may be evidenced by promissory note(s), in form and on
terms satisfactory to Bank. All such advances 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
advances shall bear interest at the rate and be payable in the manner specified
in the Agreement.
3. All of the terms, covenants, warranties, conditions, agreements and
representations of the Agreement are incorporated herein as though set forth in
their entirety and are hereby reaffirmed by Borrower and Bank as though fully
set forth herein.
BORROWER(S): JMAR Technologies, Inc.
/s/ XXXXXX X. XXXXXXXXX
-------------------------------- -----------------------------------
By: By:
-------------------------------- -----------------------------------
By: By:
Accepted this 20th day of December, 1999 at Bank's place of business in Xxx
Xxxx, XX 00000.
/s/ XXXXX XXXXXXX
-----------------------------------
By: Xxxxx Xxxxxxx, Vice President
19
Addendum to Inventory Rider (Revolving Advance)
Dated December 30, 1999
Section 1 is hereby amended as follows:
1. At the request of Borrower, made at any time and from time to time
during the term of the Agreement, and so long as no event of default under the
Agreement has occurred and Borrower is in full, faithful and timely compliance
with each and all of the covenants, conditions, warranties and representations
contained in the Agreement, this Rider and/or any other agreement between Bank
and Borrower, Bank agrees to lend Borrower Thirty Five Percent (35.00%) of the
lower of cost or market value of JMAR Precision Systems' total inventory, and as
may be . . .
/s/ XXXXXX X. XXXXXXXXX
-------------------------------
JMAR Technologies
