EXHIBIT 10.3
LOAN AND SECURITY AGREEMENT
This is a Loan and Security Agreement (the "Agreement") entered into as of
the day of October, 1996, by Diamond Tech One, Inc., a Delaware corporation
("Borrower") and ("Lender").
RECITALS
Borrower as requested a loan (the "Loan") from Lender in the principal
amount of Two Hundred Fifty Thousand Dollars ($250,000). The Lender has agreed
to extend such financing to Borrower upon the terms, and subject to the
conditions, of this Agreement.
In consideration of the mutual promises contained herein, the Borrower and
the Lender agree:
1. Agreement to Lend. Upon the terms and subject to the conditions of this
Agreement, the Lender shall make the Loan and shall disburse the Loan proceeds
in the full amount thereof to Borrower pursuant to wire transfer instructions
from Borrower.
2. Promissory Note. The Loan shall be evidenced by a promissory note (the
"Note") of even date herewith, in the principal amount of $250,000 bearing
interest at 15% per annum, maturing June 1, 1997 (the "Maturity Date"). Interest
shall be payable on February 1, 1997 and June 1, 1997.
3. Security. The Loan, in common with any Companion Loans (as hereinafter
defined), shall be secured by a security interest hereby granted to Lender on
the property described on Schedule A hereto (the "Collateral"). If the
Collateral is not encumbered by a security interest granted to a bank or other
financial institution (a "Bank") when this Agreement is executed, the Lender
shall thereafter subordinate the lien of its security interest to security
interests granted to Banks, securing an aggregate principal amount not exceeding
$1,000,000.
4. Guaranty and Warrant. The Loan shall be unconditionally guaranteed by
SI Diamond Technology, Inc. ("SIDT"), a Texas corporation, the parent company of
Borrower (the "Guaranty"). In addition to the Guaranty, SIDT shall grant Lender
a presently exercisable warrant to purchase 50,000 shares of the common stock
(per value $.001 per share) of SIDT (the "Warrant") dated the date of this
Agreement, upon the terms and conditions therein set forth.
5. Representation and Warranties. Borrower represents and warrants:
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, is duly authorized to
do business in the State of Texas and has full power and authority to
conduct its business as presently conducted;
(b) Borrower has full power and authority to perform its obligations
under the Note and this Agreement;
(c) other than a security interest which may be held by a Bank,
Borrower owns the Collateral free and clear of any liens or encumbrances;
and
(d) this Agreement is being executed on behalf of Borrower by its duly
authorized officers and such execution has been approved by all necessary
and proper corporate action.
6. Further Assurances. Whenever required to give effect to the terms of
this Agreement, both parties shall timely execute such financing statements,
subordination agreements or other agreements and documents as may be required.
Borrower will, at any time on Lender's request, make, do, execute and deliver to
Lender or any Bank, and, where appropriate, shall cause to be recorded or filed,
any and all further acts, documents and assurances as may be reasonably
necessary or desirable to effectuate, complete and confirm the transaction
sought to be consummated hereunder.
7. Related Loans. The Loan is identical to other loans, each dated as of
the date hereof for the same amount and upon identical terms and conditions as
the Loan (the "Companion Loans"). The Companion Loans are evidenced by notes
identical to the Note (the "Companion Notes"). The Loan and the Companion Loans
collectively, are sometimes called the "Total Loan". The Total Loan principal
amount shall not, in the aggregate, exceed One Million Dollars ($1,000,000). If
there are less than three Companion Loans to be made to Borrower as of the date
hereof in addition to this Loan, the Borrower shall have the right to refuse to
accept this Loan.
8. Borrower's Total Loan Covenant. The Loan and each loan constituting the
Total Loan shall at all times receive equal payments and benefits from the
Borrower.
9. Events of Default. The happening of any one or more of the following
events shall constitute an Event of Default under this Agreement and the Note:
a. Failure of Borrower to make any required payment of interest or
other charges or fees under the Loan or any Companion Loan;
b. Failure of Borrower to pay all accrued interest and outstanding
principal on the Maturity Date (whether by acceleration or otherwise) or of
any note representing a Companion Loan;
c. Breach of any of the terms and conditions of the Agreement or
any Companion Loan agreement;
d. Failure of SIDT to comply with any of the terms and
conditions of the Guaranty and/or the Warrant.
10. Remedies. Upon the occurrence of any Event of Default, the Lender
may declare the Loan in default and shall have the right at its option to:
a. Accelerate the maturity of the Note and demand payment of
the principal sums due thereunder, with interest, reasonable costs and legal
fees (whether or not suit is brought, incurred in connection with collection,
trail or appeal) and enforce collection of such payment in any court of
competent jurisdiction; or
b. Exercise any other right, privilege or remedy available to
Lender as may be provided by applicable law.
11. Lender's Covenants. If any lender of a Companion Loan declares
a Companion Loan to be in Default, the Lender hereunder and all Companion Loan
lenders shall join in the action taken to obtain the remedy elected by the
lender initiating such action. Each lender shall pay a prorata portion of the
expenses of enforcing the Total Loan obligation. Once any action for collection
against the Borrower, the Guarantor or the Collateral has been commenced, the
lenders of the Total Loan shall take action as determined by majority vote of
all lenders of the Total Loan.
12. Exclusivity of Agreement. This Agreement and the Note are made
for the sole benefit and protection of Borrower, Lender, the Companion Loan
lenders and their assigns and no other person shall have any right of action
hereunder.
13. Notices to All Lenders. When the Loan and the Companion Loans
are disbursed, Borrower shall promptly give notice to each lender of the name,
address, telephone and fax numbers of each other lender. Borrower shall
promptly notify all lenders of the occurrence of any Event of Default.
14. Notices. All notices or other communications between Borrower
and Lender shall also be given to each Companion Loan lender and may be given by
hand (or courier) delivery, or by certified or registered return receipt
requested mail, addressed to the appropriate party (including Companion Loan
lenders) at the address designated by such party who is to receive such notice.
Notices shall be deemed complete upon actual delivery.
15. Governing Law. This Agreement and the Note shall be governed by
the laws of the State of Texas, without application of conflicts of law
principles.
16. No Oral Modification. No provision of this Agreement, or any
Companion Loan agreement, shall be amended, waived or modified except by an
instrument in writing signed by the parties hereto and agreed to by the
Companion Loan lenders. Waiver by Lender of any breach or default by Borrower
under any of the terms of the Note or this Agreement shall not be deemed to be,
not shall the same constitute a waiver of any subsequent breach or default.
17. Severability. Inapplicability or unenforceability of any provision
of this Agreement shall not limit or impair the operation or validity of any
other provision of this Agreement.
18. Funding Conditions. Lender shall not be obligated to disburse the
Loan funds unless Lender shall have received the following:
a. Certificate of Borrower's corporate resolutions authorizing
the consummation of the transactions contemplated herein.
b. This Agreement and the Note duly executed by Borrower.
c. A UCC-1 Financing Statement executed by Borrower.
d. Any other documents or instruments reasonably required by
Lender to evidence the transactions contemplated hereby.
19. Payment of Brokers. The Lender shall not be obligated to pay any
fees, charges, costs or commissions in connection with the Loan, and the
Borrower agrees to indemnify the Lender against and to hold the Lender harmless
from any and all such fees, charges, costs, expenses or commissions.
20. Headings. The descriptive section headings herein have been inserted
for convenience of reference only and shall not be deemed to limit or otherwise
affect the construction or interpretation of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one Agreement.
Executed as of the date and year first above written.
DIAMOND TECH ONE, INC.
00000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 00000
By:
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XXX XXXXX
Attest:
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Secretary
(SEAL)
LENDER
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Name:
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Title:
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Address:
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