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EXHIBIT 10.8
SENIOR LOAN AND SECURITY AGREEMENT NO. 0088
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 0088 (this "Security Agreement")
is dated as of June 2, 1997 between ONDISPLAY, INC., A Delaware corporation
("Borrower") and PHOENIX LEASING INCORPORATED, a California corporation
("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $500,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower.
Such borrowings shall be evidenced by one or more Senior Secured Promissory
Notes (each, a "Note" and collectively, the "Notes"), in the form attached
hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first perfected security interest in
certain of its equipment, machinery and fixtures and also certain custom use
equipment, installation and delivery costs, purchase tax, toolings, software
and generally considered fungible or expendable ("Soft Costs"), including but
not limited to personal computers, (including laptops), peripherals,
workstations, office equipment, furniture and other equipment approved by
Lender, whether now owned by Borrower or hereafter acquired, and all
substitutions and replacements of and additions, improvements, accessions and
accumulations to said equipment, machinery and fixtures, together with all
rents, issues, income, profits and proceeds therefrom (collectively, the
"Collateral") which is described on the Note attached hereto or any
subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference. In addition to the foregoing
Collateral, under certain circumstances Borrower's obligations to Lender may
also be secured by certain "Additional Collateral" as provided below, in which
case the term "Collateral" shall include such Additional Collateral.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Base Term and monthly payment amount payable with respect to each
item of Collateral shall be as set forth in and as stated in the respective
Note(s). The terms of each Note hereto are subject to all conditions and
provisions of this Security Agreement as it may at any time be amended. Each
Note shall constitute a separate and independent loan and contractual
obligation of Borrower and shall incorporate the terms and conditions of this
Security Agreement and any additional provisions contained in such Note. In the
event of a conflict between the terms and conditions of this Security Agreement
and any additional provisions of such Note, the additional provisions of such
Note shall prevail with respect to such Note only.
SECTION 2. NON-CANCELLABLE SECURITY AGREEMENT. This Security Agreement and any
Note cannot be cancelled or terminated except as expressly provided herein.
This Security Agreement (including all Notes to this Security Agreement)
constitutes a net loan and Borrower agrees that its obligations to pay all
monthly payment amounts and other sums payable hereunder (and under any Note)
and the rights of Lender and assignee in and to such monthly payments and other
sums, are absolute and unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment due or alleged to be
due to, or by reason of, any past, present or future claims which Borrower may
have against Lender, any assignee, the manufacturer or seller of the
Collateral, or against any person for any reason whatsoever.
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SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
conditions of this Security Agreement and so long as no Event of Default or
event which with the giving of notice or passage of time, or both, could become
an Event of Default has occurred or is continuing, Lender hereby agrees to
make one or more senior secured loans (each, a "Loan" and collectively, the
"Loans") to Borrower, subject to the following conditions: (1) each Loan shall
be evidenced by a Note; (ii) the total principal amount of the Loans shall not
exceed $500,000 in the aggregate (the "Commitment") provided that no more than
10% of the amount of the utilized Commitment may be used to finance Soft Costs;
(iii) at the time of each Loan, no Event of Default or event which with the
giving of notice or passage of time, or both, could become an Event of Default
shall have occurred and be continuing, as reasonably determined by Lender, and
certified by Borrower; (iv) the amount of each Loan shall be at least $25,000
except for a final Loan which may be less than $25,000; (v) Lender shall not be
obligated to make any Loan after March 31, 1998; (vi) for each Loan, Borrower
shall present to Lender a list of proposed Collateral for approval by Lender in
its sole discretion; (vii) for each Loan, Borrower shall have provided Lender
with each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance acceptable to Lender); (viii) for
each Loan, Borrower is performing according to its business plan referred to as
"On Display, Inc. Business Plan, 6 pages," dated April 24, 1997 (the "Business
Plan"), as may be amended from time to time in form and substance acceptable to
Lender; (ix) there shall be no material adverse change in Borrower's condition,
financial or otherwise, as reasonably determined by Lender, and Borrower so
certifies, from (yy) the date of the most recent financial statements delivered
by Borrower to Lender to (zz) the date of the proposed Loan; (x) prior to full
utilization of the Commitment amount, Borrower shall not offer any loan secured
by capital equipment to any other person or entity other than Lender, unless
Lender declines to finance such transaction or Borrower and Lender are unable
to agree on the terms of such financing; (xi) Borrower shall use the proceeds
of all Loans hereunder for working capital; (xii) at the time of each Loan,
Borrower has reimbursed Lender for all UCC filing and search costs and
appraisal fees; (xiii) all Collateral has been marked and labeled by Lender or
Lender's agent; and (xiv) Lender has received in form and substance acceptable
to Lender: (a) Borrower's interim financial statements signed by a financial
officer of Borrower, (b) evidence of Borrower's $1,660,000 cash position as of
March 31, 1997; and (c) complete copies of the Borrower's audit reports for its
most recent fiscal year, which shall include at least Borrower's balance sheet
as of the close of such year, and Borrower's statement of income and retained
earnings and of changes in financial position for such year, prepared on a
consolidated basis and certified by independent public accountants. Such
certificate shall not be qualified or limited because of restricted or limited
examination by such accountant of any material portion of the company's
records. Such reports shall be prepared in accordance with generally accepted
accounting principles and practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
bear interest and be payable and prepayable at the times and in the manner
provided therein. Following a payment of the indebtedness related to each Note,
Lender shall return such Note, marked "canceled," to Borrower.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i)
the payment of the principal of and interest on the Notes and all other sums
due thereunder and under this Security Agreement (the "Indebtedness") and (ii)
the performance by Borrower of all of its other covenants now or hereafter
existing under the Notes, this Security Agreement and any other obligation owed
by Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, and duly qualified to do business and will remain duly qualified
during the term of this Security Agreement in each state where necessary to
carry on its present business and operations, including the jurisdiction(s)
where the Collateral will be located as specified on each Note; (b) it has full
authority to execute and deliver this Security Agreement and the Notes
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and perform the terms hereof and thereof, and this Security Agreement and the
Notes have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any agreement or other instrument binding on Borrower, (d) no consent
of Borrower's shareholders or holder of any indebtedness, or filing with, or
approval of, any governmental agency or commission, which has not already been
obtained or performed, as appropriate, is a condition to the performance of the
terms of this Security Agreement or the Notes; (e) there is no action or
proceeding pending or threatened against Borrower before any court or
administrative agency which might have a materially adverse effect on the
business, financial condition or operations of Borrower; (f) Borrower owns and
will keep all of the Collateral free and clear of all liens, claims and
encumbrances (excluding taxes, fees, assessments or other government charges
which exist in the ordinary course of business from time to time, but which
Borrower agrees to pay when due), and, except for this Security Agreement, there
is no deed of trust, mortgage, security agreement or other third party interest
against any of the Collateral; (g) Borrower has good and marketable title to the
Collateral; (h) all Collateral has been received, installed and is ready for use
and is satisfactory in all material respects for the purposes of this Security
Agreement; (i) the Collateral is, and will remain at all times under applicable
law, removable personal property, which is free and clear of any lien or
encumbrance except in favor of the Lender, notwithstanding the manner in which
the Collateral may be attached to any real property; (j) all credit and
financial information submitted to Lender herewith or at any other time is and
will at the time given be true and correct; and (k) the security interest
granted to Lender hereunder is a perfected first priority security interest.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at its
office at the address specified in the Notes, or such other address as Lender
specifies in writing, all amounts payable to it in respect of the principal of
or interest on the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral, with the
exception of portable laptop computers used by employees, shall be located at
the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent which location shall
in all events be within the United States. All of the records regarding the
Collateral shall be located at 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx 00000. Lender shall have the right to inspect Collateral, including
records relating thereto, and Borrower's books and records at any time (upon
reasonable notification) during regular business hours, such books and records
to be maintained in accordance with generally accepted accounting principles.
Borrower shall be responsible for all labor, material and freight charges
incurred in connection with any removal or relocation of Collateral which is
requested by Borrower and consented to by Lender, as well as for any charges due
to the installation or moving of the Collateral. Payments under the Notes and
under this Security Agreement shall continue during any period in which the
Collateral is in transit during a relocation. Lender or its agent shall xxxx and
label Collateral, which labels (to be provided by Lender) shall state that such
Collateral is subject to a security interest of Lender, and Borrower shall keep
such labels on the Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Borrower will at its sole
expense comply with all applicable laws, rules, regulations, requirements and
orders with respect to the use, maintenance, repair, condition, storage and
operation of each item of Collateral. Except as required herein, Borrower will
not make any addition or improvement to any item of Collateral that is not
readily removable without causing material damage to any item or impairing its
original value or utility. An addition or improvement that is so required or
cannot be so removed will immediately become Collateral of Lender. (b) Service
and Repair. Borrower will at its sole expense maintain and service and repair
any damage to each item of Collateral in a manner consistent with prudent
industry practice and Borrower's own practice so that such item of Collateral is
at all times (i) in the same
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condition as when delivered to Borrower, except for ordinary wear and tear, and
(ii) in good operating order for the function intended by its manufacturer's
warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." On the first day payment is due on each Note following
the Casualty Occurrence or, if there is no such payment date, thirty (30) days
after such Casualty Occurrence Borrower shall pay to Lender an amount equal to
the Balance Due (as defined below) for each lost or damaged item of Collateral.
The Balance Due for each item such is the sum of: (i) all amounts for each item
which may be then due or accrued to the payment date, plus (ii) as of such
payment date, an amount equal to the product of the fraction specified below
times the sum of all remaining payments under the respective Note, including the
amount of any mandatory or optional payment required or permitted to be paid by
Borrower to Lender at the maturity of the Note. The numerator of the fraction
shall be the Collateral Value (as set forth on the applicable Note) of the item
and the denominator shall be the aggregate Collateral Value of all items under
the Note. Upon the making of such payments, Lender shall release such item of
Collateral from its lien hereunder.
Notwithstanding the above, within thirty (30) days following a Casualty
Occurrence, Borrower may replace any item of Collateral which has suffered a
Casualty Occurrence with Collateral of equivalent value in good condition and
repair and, in such event, the provisions of the previous paragraph shall not
apply. Borrower's tender of such Collateral shall constitute a representation
and warranty that it is free of all liens, claims and encumbrances (excluding
taxes, fees, assessments, or other government charges not yet due which exist
in the ordinary course of business from time to time, but which Borrower agrees
to pay when due), and otherwise qualifies as Collateral under this Security
Agreement. Following such tender, Lender shall have a first security interest
in such Collateral.
All insurance proceeds from policies required to be maintained hereunder
received by or payable to Lender on account of a Casualty Occurrence, shall be
released to the vendor of the replacement item of Collateral upon Borrower's
request if (i) no Event of Default has occurred and is continuing hereunder, and
(ii) Lender has received an invoice from Vendor describing the replacement item
of Collateral.
If Lender has received from Borrower the Balance Due and all other payments due
with respect to the item of Collateral which has suffered a Casualty
Occurrence, all insurance proceeds received by Lender thereafter or payable on
account of the Casualty Occurrence shall be paid over to Borrower as it may
direct.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value
of the Collateral and in no event for less than the amount payable following a
Casualty Occurrence (as provided in Section 9). Such insurance shall provide
for a loss payable endorsement to Lender and/or any assignee of Lender.
Borrower shall maintain commercial general liability insurance with respect to
loss or damage for personal injury, death or property damage in an amount not
less than $2,000,000 in the aggregate, naming Lender and/or Lender's assignee
as additional insured. Such insurance shall contain insurer's agreement to give
thirty (30) days' advance written notice to Lender before cancellation or
material change of any policy of insurance. Borrower will provide Lender and
any assignee of Lender with a certificate of insurance from the insurer
evidencing Lender's or such assignee's interest in the policy of insurance.
Such insurance shall cover any Casualty Occurrence to any unit of Collateral.
Notwithstanding anything in Section 9 or this Section 10 to the contrary, this
Security Agreement and Borrower's obligations hereunder shall remain in full
force and effect with respect to any unit of Collateral which is not subject to
a Casualty Occurrence. If Borrower fails to provide or maintain insurance as
required herein, Lender shall have the right, but shall not
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be obligated to obtain such insurance. In that event, Borrower shall pay to
Lender the cost thereof.
SECTION. 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will (a) duly pay all governmental taxes and assessments at the time
they become due and payable; (b) comply with all applicable governmental laws,
rules and regulations; (c) maintain Lender's security interest in the
Collateral as a first and prior perfected security interest; (d) furnish Lender
with its annual audited financial statements within ninety (90) days following
the end of Borrower's fiscal year, unaudited quarterly financial statements
within twenty (20) days after the end of each fiscal quarter, and within twenty
(20) days of the end of each month a financial statement for that month prepared
by Borrower, including all financial information given to Borrower's Board of
Directors, and including an income statement and balance sheet, all of which
shall be certified by an officer of Borrower as true and correct and shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and such other information as Lender may reasonably
request; (e) promptly (but in no event more than five (5) days after the
occurrence of such event) notify Lender of any material adverse change in
Borrower's condition during the commitment period and of the occurrence of any
Event of Default; and (f) take all steps deemed by Lender reasonable or
advisable to validate or perfect the security interest of Lender in the
Collateral.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees on an after-tax basis from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including reasonable attorneys' fees and expenses), imposed upon
or incurred by or asserted against Lender or any assignee of Lender by Borrower
or any third party by reason of the occurrence or existence (or alleged
occurrence or existence) of any act or event relating to or caused by any
portion of the Collateral, or its purchase, acceptance, possession use,
maintenance or transportation, including without limitation, consequential or
special damages of any kind, any failure on the part of Borrower to perform or
comply with any of the terms of this Security Agreement or the Notes, claims
for latent or other defects, claims for patent, trademark or copyright
infringement and claims for personal injury, death or property damage,
including those based on Lender's negligence or strict liability in tort and
excluding only those based on Lender's gross negligence or willful misconduct.
In the event that any action, suit or proceeding is brought against Lender by
reason of any such occurrence, Borrower, upon Lender's request, will, at
Borrower's expense, resist and defend such action, suit or proceeding or cause
the same to be resisted and defended by counsel designated and approved by
Lender. Borrower's obligations under this Section 11 shall survive the payment
in full of all the Indebtedness and the performance of all Obligations with
respect to acts or events occurring or alleged to have occurred prior to the
payment in full of all the Indebtedness and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for and to indemnify and hold
Lender and any assignee harmless from, all fees (including but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupation, value added or other taxes,
levies, imposts, duties assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except some as may be
attributable to Lender's income, arising at any time prior to or during the
term of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b)the exportation, importation,
registration, purchase, ownership, delivery, leasing, possession, use,
operation, storage, maintenance, repair, return, sale, transfer of title, or
other disposition thereof, (c) the rentals, receipts, or earnings arising from
the Collateral, or any disposition of the rights to such rentals, receipts, or
earnings, (d) any payment pursuant to this Security Agreement or the Notes, or
(e) this Security Agreement, the Notes or any transaction or any part hereof or
thereof.
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SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD, BORROWER SHALL NOT (a) ASSIGN, TRANSFER,
PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT, ANY
COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL OR PERMIT IT
TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES OR (c) MERGE
INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER ITS PROPERTIES SUBSTANTIALLY AS AN
ENTIRETY TO ANY OTHER PERSON OR ENTITY. LENDER MAY ASSIGN ANY OF THE NOTES,
THIS SECURITY AGREEMENT OR ITS SECURITY INTEREST IN ANY OR ALL COLLATERAL, OR
ANY OR ALL OF THE ABOVE, IN WHOLE OR IN PART TO ONE OR MORE ASSIGNEES OR
SECURED PARTIES WITHOUT NOTICE TO BORROWER. If Borrower is given notice of such
assignment it agrees to acknowledge receipt thereof in writing and Borrower
shall execute such additional documentation as Lender's assignee and/or secured
party shall reasonably require. Each such assignee and/or secured party shall
have all of the rights, but (except as provided in this Section 15) none of the
obligations, of Lender under this Security Agreement, unless such assignee or
secured party expressly agrees to assume such obligations in writing. Borrower
shall not assert against any assignee and/or secured party any defense,
counterclaim or offset that Borrower may have against Lender. Notwithstanding
any such assignment, and providing no Event of Default has occurred and is
continuing, Lender, to is assignees, secured parties, or their agents or
assigns, shall not interfere with Borrower's right to quietly enjoy use of
Collateral subject to the terms and conditions of this Security Agreement.
Subject to the foregoing, the Notes and this Security Agreement shall inure to
the benefit of and are binding upon, the successors and assignees of the
parties hereto. Borrower acknowledges that any such assignment by Lender will
not materially change Borrower's duties or obligations under the Security
Agreement or increase any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder, (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
fifth (5th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection
with this Security Agreement or the Notes shall prove to have been incorrect in
any material respect when made or given; (iv) Borrower's failure to comply with
or perform any term, covenant or condition of this Security Agreement or any
Note or under any other agreement between Borrower and Lender or under any
lease of real property covering the location of the Equipment if such failure
to comply or perform is not cured by Borrower within ten (10) days after
Borrower knows of the noncompliance or nonperformance or notice from Lender;
(v) seizure of any of the Collateral under legal process; (vi) the filing by or
against Borrower or any guarantor under any guaranty executed in connection
with this Security Agreement ("Guarantor") of a petition for reorganization or
liquidation under the Bankruptcy Code or any amendment thereto or under any
other insolvency law providing for the relief of debtors; (vii) the voluntary
or involuntary making of an assignment of a substantial portion of its assets
by Borrower or by any Guarantor for the benefit of its creditors, the
appointment of a receiver or trustee for Borrower or any Guarantor or for any
of Borrower's or Guarantor's assets, the institution by or against Borrower or
any Guarantor of any formal or informal proceeding for dissolution,
liquidation, settlement of claims against or winding up of the affairs of
Borrower or any Guarantor provided that in the case of all such involuntary
proceedings, same are not dismissed within sixty (60) days after commencement;
or (vii) the making by Borrower or by any Guarantor of a transfer of all or a
material portion of Borrower's or Guarantor's assets or inventory not in the
ordinary course of business.
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(b) Remedies. If any Event of Default has occurred, Lender may in its sole
discretion exercise one or more of the following remedies with respect to any or
all of the Collateral: (i) declare due any or all of the aggregate sum of all
remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all damages and expenses incurred by Lender by reason of an Event of
Default; (iii) without court order or prior demand, enter upon the premises
where the Collateral is located and take immediate possession of and remove it
without liability of Lender to Borrower or any other person or entity; (iv)
terminate this Security Agreement and sell the Collateral at public or private
sale, or otherwise dispose of, hold, use or lease any or all of the Collateral;
or (v) exercise any other right or remedy available to it under applicable law.
If Lender has declared due any or all of the Remaining Payments, Borrower will
pay immediately to Lender (A) the Remaining Payments, (B) all amounts which may
be then due or occurred, and (C) all other amounts due under this Security
Agreement and under the Notes (Lender's Return, as referred to below, means the
amounts described in Clauses (A), (B) and (C) above). The net proceeds of any
sale or lease of such Collateral will be credited against Lender's Return. The
net proceeds of a sale of the Collateral pursuant to this Section 15(b) is
defined as the sales price of the Collateral less selling expenses, including,
without limitation, costs of remarketing the Collateral and all refurbishing
costs and commissions paid with respect to such remarketing. The net proceeds of
a lease of the Collateral pursuant to this Section 15(b) is defined as the
amount equal to the monthly payments due under such lease (discounted at a rate
per annum equal to the 3-year Treasury Xxxx yield as of the date on which Lender
notifies Borrower that this Security Agreement is terminated (the "Termination
Date") (as such yield is reported in the most recent Federal Reserve Statistical
Release H.15 (519) ("Statistical Release") (the "Discount Rate")) plus the
residual value of the Collateral at the end of the basic term of such lease, as
reasonably determined by Lender, and discounted at the Discount Rate.
In addition to the foregoing remedies, Lender may apply the security
deposit pledged to Lender pursuant to Section 26, including all interest paid
thereon, (A) to compensate Lender for losses or damages sustained as a result of
such Event of Default, and/or (B) to reimburse Lender for costs and expenses,
including reasonable attorney's fees, incurred by Lender in connection with such
failure to perform, whether or not litigation or other judicial proceedings are
commenced. Any surplus remaining thereafter shall be retained by Lender as
security hereunder.
Borrower agrees to pay all reasonable internal and out-of-pocket costs of
Lender incurred in enforcement of this Security Agreement, the Notes or any
instrument or agreement required under this Security Agreement, including, but
not limited to direct overhead costs of Lender allocated to the estimated time
spent by its employees (and the employees of its affiliates, including counsel
who are employees of Lender or its affiliates) and outside counsel legal fees
and litigation expenses and fees of collection agencies ("Remedy Expenses"). At
Lender's request, Borrower shall assemble the Collateral and make it available
to Lender at such time and location as Lender may designate. Borrower waives any
right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or
the Notes are immediately due and payable and/or Lender's taking possession of
any or all Equipment shall not terminate this Security Agreement or any of the
Notes unless Lender so notifies Borrower in writing. None of the above remedies
is intended to be exclusive but each is cumulative and may be enforced
separately or concurrently.
In addition to the foregoing remedies, if an Event of Default hereunder
shall have occurred and be continuing, Lender shall have the right to cause its
representative or representatives to attend any meeting of Borrower's Board of
Directors or any committee thereof. In such case, Borrower shall provide Lender
with the
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same notice of any such Board or Committee meeting that is given to the members
of Borrower's Board or committee thereof.
(c) Application of Proceeds. The proceeds of any sale of all or any part
of the Collateral and the proceeds of any remedy afforded to lender by this
Security Agreement shall be paid to and applied as follows:
First to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
Second, to the payment of all other amounts not described in item
Third below due under this Security Agreement and all Notes;
Third, to pay Lender an amount equal to Lender's Return, to the extent
not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever may
lawfully be entitled to receive it.
(d) Effect of Delay; Waiver, foreclosure on Collateral. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, or to impair the rights of
lender in respect of any damages suffered as a result of the Event of Default.
The giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment or discharge of the Indebtedness and
performance of the Obligations shall in no way operate to prejudice, waive or
affect the security interest created by this security Agreement or any rights,
powers or remedies exercised hereunder or thereunder. Lender shall not be
required first to foreclose on the Collateral prior to bringing an action
against Borrower for sums owed to Lender under this security Agreement or under
any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge in an amount
equal to 10% of each monthly payment owed Lender by Borrower which is not paid
when due, for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law. If such
amounts have not been received by Lender at Lender's place of business or by
Lender's designated agent by the date such amounts are due under this Security
Agreement or the Notes, Lender shall xxxx borrower for such charges. Borrower
acknowledges that invoices for amounts due hereunder or under the Notes are sent
by Lender for Borrower's convenience only. Borrower's non-receipt of an invoice
will not relieve Borrower of its obligation to make payments hereunder or under
the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10, then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all costs and expenses incurred in connection with the
performance of any such act.
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SECTION 19. FINANCING STATEMENTS. Borrower will execute all financing
statements pursuant to the Uniform Commercial Code and all such other documents
reasonably requested by Lender to perfect Lender's security interests
hereunder. Borrower authorizes Lender to file financing statements signed only
by Lender (where such authorization is permitted by law) at all places where
Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs
and expenses including reasonable attorney's fees and the fees of collection
agencies, incurred by Lender (a) in enforcing any of the terms, conditions or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
os filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent, which shall not
be given for changes that will affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or
which in any way affect the value of the Collateral for purposes of resale or
lease. All attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lessor.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original
of each Note and it shall be marked "Original," and all other counterparts will
be duplicates. To the extent, if any, that any Note(s) to this Security
Agreement constitutes chattel paper (or as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction) no security
interest in any Note(s) may be created in any documents other than the
"Original."
SECTION 25. ADDITIONAL SECURITY (CASH). For each Note executed by Borrower
hereunder, before Lender's funding of the Note, Borrower shall provide to
Lender, as security for the timely performance and payment by Borrower of its
obligations hereunder, cash in a dollar amount equal to 10% of the Collateral
value ("Additional Security"). The Additional Security shall accrue interest at
6% per annum compounded monthly. If any Event of Default has occurred or is
continuing, the amount of any such interest shall be retained by Lender as
Additional Security.
Provided (a) no Event of Default hereunder has occurred or is continuing, (b)
Lender is satisfied that Borrower has theretofore continuously performed
according to its Business Plan and (c) Lender has timely received from Borrower
all monthly note payments, then Lender shall apply the Additional Security to
Borrower's Additional
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Interest Compensation requirement described in Section 31 hereof and the Note
provided, that if Borrower elects the 12 month extension period provided under
Section 31(b), Election No. 2, the Additional Security shall be applied in
prorata increments to the extended monthly note payments, with the balance of
the Additional Security continuing to earn interest as stated herein.
If an Event of Default by Borrower occurs hereunder, the amount of the
Additional Security for all Notes then retained by Lender, together with any
interest thereon, shall be applied against the amount of Borrower's default
obligation. In such event, Lender may apply all or part of the Additional
Security for the following purposes:
(a) to compensate Lender for losses or damages sustained as a result of
such Event of Default; and/or
(b) to reimburse Lender for costs and expenses, including reasonable
attorney's fees, incurred by Lender in connection with such failure to perform,
whether or not litigation or other judicial proceedings are commenced. Any
surplus remaining thereafter shall be retained by Lender as security hereunder.
Provided no Event of Default has occurred and is continuing under this Security
Agreement, upon payment by Borrower of all obligations under the Note, any
Additional Security, if any, held by Lender for such Note shall be returned to
Borrower.
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee
("Fee") of $10,000. The Fee shall be applied by Lender first to reimburse
Lender for all out-of-pocket UCC and other search costs, inspections and
labeling costs and appraisal fees, if any, incurred by Lender, and then
proportionally to the first monthly payment for each Note hereunder in the
proportion that the Collateral Value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligations pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service and shall be directed, as the
case may be, to Lender at 0000 Xxxxxx Xxxxxxxxx, Xxx Xxxxxx, Xxxxxxxxxx 00000,
Attention: Asset Management and to Borrower at 0000 Xxxxxx Xxxxx, Xxxxx 000,
Xxx Xxxxx, XX 00000, Attention: Xx. Xxxxx Xxxxxxxx.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) Borrower represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with respect to
this Security Agreement. (d) Borrower acknowledges that Borrower has read this
Security Agreement and the Notes, understands them and agrees to be bound by
their terms and further agrees that this Security Agreement and the Notes
constitute the entire agreement between Lender and Borrower with respect to the
subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement and the Notes may not be changed,
altered or modified except by an instrument signed by an officer or authorized
representative of Lender and Borrower. (f) Any failure of Lender to require
strict performance by Borrower or any waiver by Lender of any provision herein
or in a Note shall not be construed as a consent or waiver of any other breach
of the same or any other provision. (g) If any provision of this Security
Agreement or a Note is held invalid, such invalidity shall not affect any other
provisions hereof or thereof. (h) The obligations of Borrower to pay the
Indebtedness and perform the Obligations shall survive the expiration or earlier
termination of this Security Agreement or the Notes until all Obligations of
Borrower to Lender have been met and all liabilities of Borrower to Lender and
any assignee have been paid in full. (i) Borrower will notify Lender at least 30
days before changing its name, principal place of business or chief executive
office. (j) Borrower will, at its expense, promptly execute and deliver to
Lender such documents and assurances (including financing statements) and take
such further action as Lender may reasonably request in order to carry out the
intent of this Security Agreement and Lender's rights and remedies. (k) Borrower
hereby appoints Lender (and each of Lender's officers, employees
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or agents designated by Lender), with full power of substitution by Lender, as
Borrower's attorney, with power to execute and deliver on Borrower's behalf
financing statements and other documents necessary to perfect and/or give
notice of Lender's security interest in any of the Collateral. (l) Borrower
shall keep its books and records in accordance with generally accepted
accounting principles and practices consistently applied and shall deliver to
Lender its annual audited financial statements, unaudited monthly financial
statements to include any financial information given to Borrower's Board of
Directors, and signed by an officer of Borrower and such other unaudited
financial statements as may be reasonably requested by Lender.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed
in the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of relating to this Security Agreement or a Note shall be in the
Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for
the Northern District of California situated in San Francisco. B0RROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 30. ADDITIONAL INTEREST COMPENSATION: (a) General. If and as the Note
provides, Borrower is required to choose a final payment or Note extension
election ("Additional Interest Compensation") at the expiration of the first
Note's base term, that choice shall be an election of Borrower's Additional
Interest Compensation election for all, but not less than all, of the
Collateral under all Notes under the Security Agreement.
Until Borrower fulfills an End of Loan election, all Borrower's Obligations,
including payment of the Monthly Payment Amount, shall continue in full force
and effect, on a month-to-month basis.
(b) End of Loan Position Elections
Election No. 1
Make a final payment equal to 15% of the Collateral's original purchase price.
Election No. 2
Extended the Note's Base Term for an additional 12 months ("Extended Term") for
a monthly rate of 1.5% of the Collateral's original purchase price.
In the event Borrower does not provide 90 days' prior written notice of its
election, Borrower shall be deemed to have elected No. 1 above.
SECTION 31. ADJUST-A-LOAN OPTION: (a) General: After the first 12 months of the
term of any Note, Borrower shall have the option to remove such Note's
Collateral ("Removed Collateral") and finance new Collateral ("New Collateral")
under a new Note ("New Note"). (b) New Note Amount: The principal amount of the
New Note shall be an amount equal to the purchase price for the New Collateral
plus a prepayment figure for the Removed Collateral. The prepayment figure
shall be the original principal amount of the original Note ("Old Note") less:
(i) any trade-in value or resale proceeds received by Lender for the Removed
Collateral and (ii) a
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credit for Note payments already made (the total Old Note payments attributable
to the removed Collateral multiplied by the "Allowance Factor" indicated in the
table below). In no event shall the principal amount of the New Note be less
than original principal amount of the Old Note.
REMOVAL DATE ALLOWANCE FACTOR
------------ ----------------
After 12 Months of Old Note 55%
After 24 Months of Old Note 60%
After 36 Months of Old Note 65%
(c) Old Note: If any Collateral remains on the Old Note, the monthly payment
amount for the Old Note will be reduced in proportion to the Removed
Collateral's value. (d) Option Preconditions: Borrower's right to exercise this
Adjust-A-Loan Option ("Option") is conditioned upon the following: (i) no Event
of Default under the Security Agreement has theretofore occurred or is
continuing; (ii) the New Collateral and prepayment of the Removed Collateral
are financed by Lender under a New Note, subject to Lender's current loan rates
and documentation acceptable to Lender; (iii) Lender is satisfied with
Borrower's creditworthiness; (iv) the New Collateral is acceptable to Lender;
and (v) Borrower has given Lender at least 90 days' prior written notice of its
desire to exercise the Option.
SECTION 32. PREPAYMENT. If, and as each Note provides, after the 24th month of
the term of the last Note funded pursuant to this Security Agreement, and
provided Borrower is not in default under this Security Agreement, Borrower
shall have the right to elect to prepay all amounts then owing under all Notes,
for the Prepayment Amount, as defined below. The Prepayment Amount shall be an
amount equal to the difference between (a) the sum of (i) all past due payments
and interest, costs, expenses or other amounts due Lender pursuant to this
Security Agreement and Notes, and (ii) the present value of the remaining
payments and Additional Interest due under the Security Agreement and Notes
discounted at 6% per annum compounded monthly, and (b) the then current balance
of Additional Security remaining.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED ONDISPLAY, INC.
By: [SIGNATURE ILLEGIBLE] By: /s/ XXXX XXXX
----------------------------- -----------------------------
Title: V.P. Title: Illegible
-------------------------- --------------------------
HEADQUARTERS LOCATION:
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
County of Contra Costa
EXHIBITS AND SCHEDULES:
Exhibit A -- Closing Memorandum
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