1
EXHIBIT 10.13
GREYROCK CAPITAL, A BANK OF AMERICA COMPANY
LOAN AND SECURITY AGREEMENT
BORROWER: WITNESS SYSTEMS, INC.
ADDRESS: 0000 XXXXXXXXX XXXXXXX
XXXXX 000
XXXXXXXXXX, XXXXXXX 00000
DATE: JUNE 24, 1999
This Loan and Security Agreement is entered into on the above date
between GREYROCK CAPITAL, a Division of NationsCredit Commercial Corporation
('GC"), whose address is 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") being signed concurrently is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. GC will make loans to Borrower (the "Loans"), in amounts
determined by GC in its sole discretion, up to the amounts (the "Credit Limit")
shown on the Schedule, provided no Default or Event of Default has occurred and
is continuing. If at any time or for any reason the total of all outstanding
Loans and all other Obligations exceeds the Credit Limit, Borrower shall
immediately pay the amount of the excess to GC, without notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement or in another written agreement signed by GC and
Borrower. Interest shall be payable monthly, on the last day of the month.
Interest may, in GC's discretion, be charged to Borrower's loan account, and the
same shall thereafter bear interest at the same rate as the other Loans.
1.3 FEES. Borrower shall pay GC the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to GC and are not
refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to GC a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, Investment Property and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, all money, all
collateral in which GC is granted a security interest pursuant to any other
present or future agreement, all property now or at any time in the future in
GC's possession, and all proceeds (including proceeds of any insurance policies,
proceeds of letters of credit, proceeds of proceeds and claims against third
parties), all products of the foregoing, and all books and records related to
any of the foregoing.
-1-
2
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GC as follows, and Borrower covenants that
the following representations will continue to be true, and that Borrower will
at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is
and will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation, or Borrower's bylaws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give GC 30 days prior written notice before changing its name or
doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give GC at least 30 days' prior written
notice before opening any additional place of business, changing its chief
executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GC and the Collateral against all claims of
others. So long as any Loan is outstanding which is a term loan, none of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises. Whenever any Collateral is located upon
premises in which any third .party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by GC, use its best efforts to cause such third party to execute and
deliver to GC, in form acceptable to GC, such waivers and subordinations as GC
shall specify, so as to ensure that GC's rights in the Collateral are, and will
continue to be, superior to the rights
-2-
3
of any such third party. Borrower will keep in full force and effect, and will
comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, ordinary wear and tear excepted, and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise GC
in writing of any material loss or damage to the Collateral. Borrower will
maintain the validity of, and otherwise maintain, preserve and protect, its
patents, trademarks, copyrights and other intellectual property in accordance
with prudent business practices.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GC have been, and will be, prepared
in conformity with generally accepted accounting principles and now and in the
future will completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date covered
by any such statement provided to GC and the date hereof, there has been no
material adverse change in the financial condition or business of Borrower.
Borrower is now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
applicable law, and Borrower has timely paid, and will timely pay, all
applicable taxes, assessments, deposits and contributions now or in the future
owed by Borrower. Borrower may, however, defer payment of any contested taxes,
provided that Borrower (i) in good faith contests Borrower's obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies GC in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower which could not reasonably be expected to have a
material adverse effect on the financial condition or business of Borrower.
Borrower has paid, and shall continue to pay all amounts necessary to fund all
present and future pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not and will not withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted. Borrower will
promptly inform GC in writing
-3-
4
of any claim, proceeding, litigation or investigation in the future threatened
by written communication to Borrower or instituted by or against Borrower
involving any single claim of $100,000 or more, or involving $200,000 or more in
the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
3.12 YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its subsidiaries (or its suppliers
and vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have material adverse effect. The
Borrower will promptly notify GC in the event the Borrower discovers or
determines that any computer application (including those of its suppliers and
vendors) that is material to its or any of its subsidiaries' business and
operations will not be Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a material
adverse effect.
4. RECEIVABLES AND INVESTMENT PROPERTY.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to GC that each Receivable with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, represent an
undisputed, bona fide, existing, unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services, in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to GC as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall comply
with all applicable laws and governmental rules and regulations. All signatures
and endorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES AND INVESTMENT
PROPERTY. Borrower shall deliver to GC transaction reports and loan requests,
schedules and assignments of all Receivables, and schedules of collections, all
on GC's standard forms; provided, however, that Borrower's failure to execute
and deliver the same shall not affect or limit GC's security interest and other
rights in all of Borrower's Receivables, nor shall GC's failure to advance or
lend against a specific Receivable affect or limit GC's security interest and
other rights therein. Together with each such schedule and assignment, or later
if requested by GC, Borrower shall famish GC with copies (or, at GC's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such
-4-
5
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also famish to GC an aged accounts receivable trial balance in
such form and at such intervals as GC shall request. In addition, Borrower shall
deliver to GC the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, immediately upon receipt thereof and in the same form as
received, with all necessary endorsements, and, upon the request of GC, Borrower
shall deliver to GC all letters of credit and also all certificated securities
with respect to any Investment Property, with all necessary endorsements, and
obtain such account control agreements with securities intermediaries and take
such other action with respect to any Investment Property, as GC shall request,
in form and substance satisfactory to GC. Upon request of GC Borrower
additionally shall obtain consents from any letter of credit issuers with
respect to the assignment to GC of any letter of credit proceeds.
4.4 COLLECTION OF RECEIVABLES AND INVESTMENT PROPERTY INCOME. Borrower
shall have the right to collect all Receivables and retain all Investment
Property payments and distributions, unless and until a Default or an Event of
Default has occurred. Borrower shall hold all payments on, and proceeds of, and
distributions with respect to, Receivables and Investment Property in trust for
GC, and Borrower shall deliver all such payments, proceeds and distributions to
GC, within one business day after receipt of the same, in their original form,
duly endorsed, to be applied to the Obligations in such order as GC shall
determine. Upon the request of GC, any such distributions and payments with
respect to any Investment Property held in any securities account shall be held
and retained in such securities account as part of the Collateral.
4.5 DISPUTES. Borrower shall notify GC promptly of all disputes or
claims relating to Receivables on the regular reports to GC. Borrower shall not
forgive, or settle any Receivable for less than payment in full, or agree to do
any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GC on the regular reports provided to GC; (ii) no Default or Event
of Default has occurred and is continuing; and (iii) taking into account all
such settlements and forgiveness, the total outstanding Loans and other
Obligations will not exceed the Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to GC, as and when requested by GC). In
the event any attempted return occurs after the occurrence of any Event of
Default Borrower shall (i) not accept any return without GC's prior written
consent, (ii) hold the returned Inventory in trust for GC, (iii) segregate all
returned Inventory from all of Borrower's other property, (iv) conspicuously
label the returned Inventory as GC's property, and (v) immediately notify GC of
the return of any Inventory, specifying the reason for such return, the location
and condition of the returned Inventory, and on GC's request deliver such
returned Inventory to GC.
4.7 VERIFICATION. GC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or GC or such other name as GC may choose, and GC or its designee may,
at any time, notify Account Debtors that it has a security interest in the
Receivables.
4.8 NO LIABILITY. GC shall not under any circumstances be responsible
or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement
-5-
6
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall GC be deemed to be responsible for any of Borrower's obligations under any
contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve GC from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to GC, in such form and amounts as GC may
reasonably require, and Borrower shall provide evidence of such insurance to GC,
so that GC is satisfied that such insurance is, at all times, in full force and
effect. All such insurance policies shall name GC as an additional loss payee,
and shall contain a lenders loss payee endorsement in form reasonably acceptable
to GC. Upon receipt of the proceeds of any such insurance, GC shall apply such
proceeds in reduction of the Obligations as GC shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, GC shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid. GC may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay for
any insurance, GC may, but is not obligated to, obtain the same at Borrower's
expense. Borrower shall promptly deliver to GC copies of all reports made to
insurance companies.
5.2 REPORTS. Borrower, at its expense, shall provide GC with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as GC shall from time to time reasonably
specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and
on one business day's notice, GC, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records. GC
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but GC shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Borrower's expense and the charge therefor shall be $600 per person per
day (or such higher amount as shall represent GC's then current standard charge
for the same), plus reasonable out-of-pockets expenses. Borrower shall not be
charged more than $3,000 per audit (plus reasonable out-of-pockets expenses) or
for more than two audits per calendar year, nor shall audits be done more
frequently than four times per calendar year, provided that the foregoing limits
shall not apply after the occurrence of a Default or Event of Default, nor shall
they restrict GC's right to conduct audits at its own expense (whether or not a
Default or Event of Default has occurred). Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first obtaining GC's written consent, which may be conditioned upon such
accounting firm, service bureau or other third party agreeing to give GC the
same rights with respect to access to books and records and related rights as GC
has under this Agreement.
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to GC in
the original form in which received by Borrower not later than the following
business day after receipt by Borrower, to be applied to the Obligations in such
order as GC shall determine; provided that, if no Default or Event of Default
has occurred and is continuing, and if no term loan is outstanding hereunder,
then Borrower shall not be obligated to remit to GC the proceeds of the sale of
Equipment which is sold in the ordinary course of business, in a good-faith
arm's length transaction. Except for the proceeds of the sale of Equipment as
set
-6-
7
forth above, Borrower shall not commingle proceeds of Collateral with any of
Borrower's other funds or property, and shall hold such proceeds separate and
apart from such other funds and property and in an express trust for GC. Nothing
in this Section limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without GC's prior written consent, do any of the following:
(i) merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
material transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except that, provided no Default or Event of Default
has occurred and is continuing, Borrower may (a) sell finished Inventory in the
ordinary course of Borrower's business, (b) if no term loan is outstanding
hereunder, sell Equipment in the ordinary course of business, in good faith
arm's length transactions, and (c) license or sublicense on a non-exclusive
basis intellectual property in the ordinary course of Borrower's business; (v)
store any Inventory or other Collateral with any warehouseman or other third
party; (vi) sell any Inventory on a sale-or return, guaranteed sale,
consignment, or other contingent basis; (vii) make any loans of any money or
other assets; (viii) incur any debts, outside the ordinary course of business,
which would have a material, adverse effect on Borrower or on the prospect of
repayment of the Obligations; (ix) guarantee or otherwise become liable with
respect to the obligations of another party or entity; (x) pay or declare any
dividends on Borrower's stock (except for dividends payable solely in stock of
Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock except out of the net proceeds of any equity
issuance; (xii) make any change in Borrower's capital structure which would have
a material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do any
of the foregoing.
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against GC with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to GC, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that GC may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower will promptly notify GC in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, the opening of any new securities account, and
any material adverse change in the business or financial affairs of Borrower.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
GC, to execute all documents and take all actions, as GC may deem reasonably
necessary or useful in order to perfect and maintain GC's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GC and hold GC
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
attorneys' fees), of every nature, character and description, which GC may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Borrower or its employees, any relationship or agreement between GC and
Borrower, any actual or alleged failure of GC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or
-7-
8
representing GC). Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to GC; or (ii) by GC at any time after
the occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by GC under this Section 6.2,
Borrower shall pay to GC a termination fee (the "Termination Fee") in the amount
shown on the Schedule. The Termination Fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate equal
to the highest rate applicable to any of the Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding letters of
credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GC, then on such date Borrower shall provide to GC cash
collateral in an amount equal to 110% of the face amount of all such letters of
credit plus all interest, fees and costs due or (in GC's estimation) likely to
become due in connection therewith, to secure all of the Obligations relating to
said letters of credit, pursuant to GC's then standard form cash pledge
agreement. Notwithstanding any termination of this Agreement, all of GC's
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that, without limiting the fact
that Loans are subject to the discretion of GC, GC may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of GC, nor shall any such termination
relieve Borrower of any Obligation to GC, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement GC shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be reasonably required to terminate GC's security interests.
-8-
9
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give GC immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to GC by Borrower or any
Guarantor or any of Borrower's or any Guarantor's officers, employees or agents,
now or in the future, shall be untrue or misleading in a material respect; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to perform any non-monetary Obligation which by its nature cannot be cured;
or (e) Borrower shall fail to perform any other nonmonetary Obligation, which
failure is not cured within 5 business days after the date performance is due;
or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other
than a Permitted Lien) is made on all or any part of the Collateral which is not
cured within 10 days after the occurrence of the same; or (g) any default or
event of default occurs under any obligation secured by a Permitted Lien, which
is not cured within any applicable cure period or waived in writing by the
holder of the Permitted Lien; or (h) Borrower or any Guarantor breaches any
material contract or obligation, which has or may reasonably be expected to have
a material adverse effect on Borrower's or such Guarantor's business or
financial condition; or (i) dissolution, termination of existence, insolvency or
business failure of Borrower or any Guarantor; or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower or
any Guarantor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against Borrower or any Guarantor under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 45 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit securities or other
property or asset pledged by any other Person to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such Person under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, or (m) Borrower or
any Guarantor makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits or terminates its
subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than 20% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of GC; or (o) Borrower or any Guarantor shall
generally not pay its debts as they become due, or Borrower or any Guarantor
shall conceal, remove or transfer any part of its property, with intent to
hinder, delay or defraud its creditors, or make or suffer any transfer of any of
its property which may be fraudulent under any bankruptcy, fraudulent conveyance
or similar law; or (p) there shall be a material adverse change in Borrower's or
any Guarantor's business or financial condition. GC may cease making any Loans
hereunder during any of the above cure periods, and thereafter if an Event of
Default has occurred.
7.2 REMEDIES. Upon the occurrence and during the continuance of any
Event of Default, GC, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any
-9-
10
part of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of
the Collateral wherever it may be found, and for that purpose Borrower hereby
authorizes GC without judicial process to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof, without charge for so long as XX
xxxxx it reasonably necessary in order to complete the enforcement of its rights
under this Agreement or any other agreement; provided, however, that should GC
seek to take possession of any of the Collateral by Court process, Borrower
hereby irrevocably waives: (i) any bond and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that GC
retain possession of, and not dispose of, any such Collateral until after trial
or final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to GC at places designated by GC which are reasonably
convenient to GC and Borrower, and to remove the Collateral to such locations as
GC may deem advisable; (e) Complete the processing, manufacturing or repair of
any Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, GC shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time GC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GC shall have the right to conduct
such disposition on Borrower's premises without charge, for such time or times
as XX xxxxx reasonable, or on GC's premises, or elsewhere and the Collateral
need not be located at the place of disposition. GC may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes GC to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in GC's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables, General Intangibles and the like for
less than face value; (h) Collect, receive, dispose of and realize upon any
Investment Property, including withdrawal of any and all funds from any
securities accounts; and (i) Demand and receive possession of any of Borrower's
federal and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by GC with respect to the
foregoing shall be added to and become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
GC agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by GC,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, GC may
-10-
11
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same. GC shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable. Without limiting the generality of the
foregoing, Borrower recognizes that GC may be unable to make a public sale of
any or all of the Investment Property, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance
of any Event of Default, without limiting GC's other rights and remedies,
Borrower grants to GC an irrevocable power of attorney coupled with an interest,
authorizing and permitting GC (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but GC agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that GC may, in its sole discretion, deem advisable in
order to perfect and maintain GC's security interest in the Collateral, or in
order to exercise a right of Borrower or GC, or in order to fully consummate all
the transactions contemplated under this Agreement, and all other present and
future agreements; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
GC's Collateral or in which GC has an interest; (c) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any Notice of Lien, claim of mechanic's, materialman's or other lien, or
assignment or satisfaction of mechanic's, materialman's or other lien; (d) Take
control in any manner of any cash or non-cash items of payment or proceeds of
Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into GC's possession; (e)
Endorse all checks and other forms of remittances received by GC; (f) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (g) Grant
extensions of time to pay, compromise claims and settle Receivables and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give GC the same rights of access and other rights with respect
thereto as GC has under this Agreement; (k) Execute and deliver to any
securities intermediary or other Person any entitlement order, account control
agreement or other notice, document or instrument with respect to any Investment
Property; and (l) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other present or future agreements. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and reasonable attorneys' fees incurred by GC with respect to the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall GC's rights under the
foregoing power of attorney or any of GC's other rights under this Agreement be
deemed to indicate that GC is in control of the business, management or
properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by GC first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GC in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GC shall
-11-
12
determine in its sole discretion. Any surplus shall be paid to Borrower or other
persons legally entitled thereto; Borrower shall remain liable to GC for any
deficiency. If, GC, in its sole discretion, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale of
Collateral, GC shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by GC of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, GC shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between GC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GC of one or more of its rights or remedies shall not be deemed an election, nor
bar GC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this agreement the following terms have the following
meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" and "this Agreement" means this Loan and Security Agreement
and all modifications and amendments thereto, extensions thereof, and
replacements therefor.
"Business Day" means a day on which GC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Eligible Receivables" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
will be deemed eligible for borrowing based on the following considerations (the
"Eligibility Requirements"): (i) the Receivable must not be outstanding for more
than 120 days from its invoice date, (ii) the Receivable must not be subject to
any contingencies (including Receivables arising from sales on consignment,
guaranteed sale or other terms pursuant to which payment by the Account Debtor
may be conditional), (iii) the Receivable must not be subject to any dispute
between Borrower and the Account Debtor, (iv) the Receivable must not be owing
from an Affiliate of Borrower, (v) the Receivable must not be owing from an
Account Debtor which is subject to any insolvency or bankruptcy proceeding, or
which fails or goes out of a material portion of its business, (vi)
-12-
13
the Receivable must not be owing from an Account Debtor to whom Borrower is or
may be liable for goods purchased from such Account Debtor or otherwise, (vii)
the Receivable must not violate any representation or warranty set forth in this
Agreement, (viii) the Receivable must not be one in which GC does not have a
first-priority, valid, perfected security interest, unless approved by GC, and
(ix) the Receivable must not be one which GC, in its sole judgment exercised in
good faith discretion, believes the collection of which is insecure or may not
be paid by reason of the Account Debtor's financial inability to pay, or deems
ineligible on such other credit and/or collateral considerations as GC in its
good faith discretion deems appropriate. If more than 50% of the Receivables
owing from an Account Debtor are outstanding more than 120 days from their
invoice date (without regard to unapplied credits) or are otherwise not Eligible
Receivables, then all Receivables owing from that Account Debtor will be deemed
ineligible for borrowing.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names; trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against GC, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims including life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including all raw
materials, work in process, finished goods and goods in transit), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"Investment Property" means any and all investment property of
Borrower, including all securities, whether certificated or uncertificated
security entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or otherwise,
wherever located, and whether now existing or hereafter acquired or arising.
-13-
14
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GC, whether evidenced by this Agreement or any note or
other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by GC in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, loan fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and GC.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens which are subordinate to the security interest in favor of
GC and are consented to in writing by GC (which consent shall not be
unreasonably withheld); (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. GC will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on GC's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of GC, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an. Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Prime Rate" means the actual "Reference Rate" or the substitute
therefor of Bank of America NT & SA ("B of A") whether or not that rate is the
lowest interest rate charged by B of A. If the Prime Rate, as so defined, is
unavailable on any date of determination, "Prime Rate" shall mean the highest of
the prime rates published in the Wall Street Journal, on such date of
determination, as the base rate on corporate loans at large United States money
center commercial banks, as determined in good faith by GC, which determination
shall be conclusive absent manifest error.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, documents and all other forms of obligations
at any time owing to Borrower, all guaranties and other security therefor, all
merchandise returned to or repossessed by Borrower, and all rights of stoppage
in transit and all other rights or remedies of an unpaid vendor, lienor or
secured party.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently
-14-
15
applied. All other terms contained in this Agreement; unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by GC (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by GC on account of the Obligations three Business Days after receipt by
GC of immediately available funds. GC shall not, however, be required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to GC in its discretion, and GC may charge Borrower's Loan account for the
amount of any item of payment which is returned to GC unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in GC's sole discretion reversed and reapplied,
to the Obligations, in such order and manner as GC shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNT. GC may, in its discretion, require that
Borrower pay monetary Obligations in cash to GC, or charge them to Borrower's
Loan account in which event they will bear interest at the same rate applicable
to the Loans.
9.4 MONTHLY ACCOUNTINGS. GC shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by GC) unless Borrower
notifies GC in writing to the contrary within sixty days after each account is
rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service, or by facsimile, or by regular first-class mail, or certified mail
return receipt requested, addressed to GC or Borrower at the addresses shown in
the heading to this Agreement or at any other address designated in writing by
one party to the other party. All notices shall be deemed to have been given
upon delivery in the case of notices personally delivered, or at the expiration
of one business day following delivery to the private delivery service, or one
day after the date sent by facsimile, or two business days following the deposit
thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings. representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8 WAIVERS. The failure of GC at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and
-15-
16
GC shall not waive or diminish any right of GC later to demand and receive
strict compliance therewith. Any waiver of any default shall not waive or affect
any other default, whether prior or subsequent, and whether or not similar. None
of the provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to GC shall be deemed to have been waived by
any act or knowledge of GC or its agents or employees, but only by a specific
written waiver signed by an authorized officer of GC and delivered to Borrower.
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement
extension or renewal of any commercial paper, instrument account, General
Intangible, document or guaranty at any time held by GC on which Borrower is or
may in any way be liable, and notice of any action taken by GC, unless expressly
required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GC.
9.10 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse GC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit and other reasonable costs incurred by GC, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GC incurs in order to do the following: prepare and negotiate this Agreement and
the documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek. to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim third-party claim, or other claim; examine, audit, copy,
and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GC's
security interest in, the Collateral; and otherwise represent GC in any
litigation relating to Borrower. If either GC or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which GC may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GC; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GC, and any prohibited assignment shall be
void. No consent by GC to any assignment shall release Borrower from its
liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against GC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Agreement, or any other
present or future document or agreement, or any other transaction contemplated
-16-
17
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by GC, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of GC, or on any other person authorized to
accept service on behalf of GC, within thirty (30) days thereafter. Borrower
agrees that such one-year period is a reasonable and sufficient time for
Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of GC in its sole discretion. This provision shall
survive any termination of this Agreement or any other present or future
agreement.
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and GC acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. The term "including,"
whenever used in this Agreement, shall mean "including (but not limited to)."
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against GC or Borrower under any rule of construction or
otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of GC and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to GC to enter into this Agreement, Borrower (i) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at GC's option, be litigated in courts located within California, and
that the exclusive venue therefor shall be Los Angeles County; (ii) consents to
the jurisdiction and venue of any such court and consents to service of process
in any such action or proceeding by personal delivery or any other method
permitted by law; and (iii) waives any and all rights Borrower may have to
object to the jurisdiction of any such court, or to transfer or change the venue
of any such action or proceeding.
-17-
18
9.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GC OR BORROWER, IN ALL OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
WITNESS SYSTEMS, INC.
BY: /s/ Xxxx Xxxxx
---------------------------------------
President or Vice President
By: /s/ Xxx Xxxxxx
---------------------------------------
Secretary or Ass't Secretary
GREYROCK CAPITAL,
a Division of NationsCredit Commercial
Corporation
By: /s/ Xxxx Xxxxxx
---------------------------------------
Title: SVP
------------------------------------
-18-
