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EXHIBIT 10.8
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of September 29, 2000
between BUSINESS ALLIANCE CAPITAL CORP., a Delaware corporation (BACC), with an
office located at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx
00000 and ICX XXXXXXXXXXX.XXX, a California corporation (Borrower), with its
chief executive office located at 000 Xxxxxx xx Xxxxxxxx, Xxx Xxxxxxxx,
Xxxxxxxxxx 00000.
The parties agree as follows
1. DEFINITIONS AND CONSTRUCTION
1.1 Terms. As used in this Agreement, the following terms shall
have the following meanings:
Accounts means in addition to the definition of accounts in
the Code, all presently existing and hereafter arising accounts receivable,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
whether or not earned by performance, all credit insurance, guaranties, and
other security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing.
Advance Limit has the meaning set forth in Section 2.1.
Advances means all loans, advances and other financial
accommodations by BACC to or on account of the Borrower under Section 2.1.
Agreement means collectively this Loan and Security
Agreement, any concurrent or subsequent rider to this Loan and Security
Agreement, and any extensions, supplements, amendments, addenda or modifications
to or in connection with this Loan and Security Agreement or any such rider.
Authorized Officer means any officer or other
representative of Borrower authorized in a writing delivered to BACC to transact
business with BACC.
BACC means Business Alliance Capital Corp., its successors
and assigns.
BACC Expenses means all of the following: costs and
expenses (whether taxes, assessments, insurance premiums or otherwise) required
to be paid by Borrower under any of the Loan Documents which are paid or
advanced by BACC; filing, recording, publication, appraisal and search fees paid
or incurred by BACC in connection with BACC's transactions with Borrower; costs
and expenses incurred by BACC in the disbursement or collection of funds to or
from Borrower; charges resulting from the dishonor of checks; costs and expenses
incurred by BACC to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; and costs and expenses incurred by BACC in enforcing or defending
the Loan Documents, including, but not limited to, costs and expenses incurred
in connection with any proceeding, suit, enforcement of
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judgment, or appeal; and BACC's reasonable attorneys' fees and expenses incurred
in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing, defending, or otherwise representing BACC concerning the
Loan Documents or the Obligations.
Borrower's Books means all of Borrower's books and records
including all of the following: ledgers; records indicating, summarizing, or
evidencing Borrower's assets or liabilities, or the Collateral; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information, and the facilities containing such information.
Business Day means any day which is not a Saturday, Sunday,
or other day on which banks in the State of New Jersey are authorized or
required to close.
Chattel Paper shall have the same meaning ascribed to such
term in the Code.
Code means the California Uniform Commercial Code, as
amended from time to time.
Collateral means all of the following: the Accounts; the
Equipment; the General Intangibles; the Chattel Paper; the Inventory; the
Negotiable Collateral; the Investment Property; any money, deposit accounts or
assets of Borrower which hereafter come into the possession, custody, or control
of BACC; all proceeds and products, whether tangible or intangible, of any of
the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all tangible or intangible property resulting from the
sale or other disposition of the foregoing, or any portion thereof or interest
therein, and all proceeds thereof, and any other assets of Borrower which may be
subject to a lien in favor of BACC.
Daily Balance means the amount of the Obligations owed at
the end of a given day.
Eligible Accounts means those Accounts created by Borrower
in the ordinary course of business, which are and at all times shall continue to
be acceptable to BACC in all respects; provided, however, that standards of
eligibility may be fixed and revised from time to time by BACC in BACC's
exclusive judgment. In determining such acceptability and standards of
eligibility, BACC may, but need not, rely on agings, reports and schedules of
Accounts furnished by Borrower, but reliance by BACC thereon from time to time
shall not be deemed to limit BACC's right to revise standards of eligibility at
any time as to both Borrower's present and future Accounts. In general, an
Account shall not be deemed eligible unless: (a) the Account debtor on such
Account is and at all times continues to be acceptable to BACC, and (b) such
Account complies in all respects with the representations, covenants and
warranties hereinafter set forth. Except in BACC's sole discretion, Eligible
Accounts shall not include any of the following (a) Accounts which the Account
debtor has failed to pay within ninety (90) days of invoice date, and all
Accounts owed by any Account debtor that has failed to pay twenty-five percent
(25%) or more of its Accounts owed to Borrower within ninety (90) days of
invoice date; (b) Accounts with respect to which goods are placed on consignment
or for a guaranteed sale, or which contain other terms by reason of which
payment by the Account debtor may be conditional; (c) Accounts with respect to
which the Account debtor is not a resident of the United States unless the
Account is supported by foreign credit insurance or a letter of credit, in both
instances satisfactory to and assigned to BACC; (d) Accounts with respect to
which the Account debtor is the United States or any department, agency or
instrumentality of the United
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States, any State of the United States or any city, town, municipality or
division thereof unless all filings have been made under the Federal Assignment
of Claims Act or comparable state or other statute; (e) Accounts with respect to
which the Account debtor is an officer, employee or agent of, or subsidiary of,
related to, affiliated with or has common shareholders, officers or directors
with Borrower; (f) Accounts with respect to which Borrower is or may become
liable to the Account debtor for goods sold or services rendered by the Account
debtor to Borrower; (g) Accounts with respect to an Account debtor whose total
obligations to Borrower exceed fifteen percent (15%) of all Accounts, to the
extent such obligations exceed such percentage, except in the cases of the
Accounts of Account debtors Solectron and Agilent, or with Account debtors with
Dun & Bradstreet ratings of at least 5A, where such percentage shall be thirty
percent (30%); (h) Accounts with respect to which the Account debtor disputes
liability or makes any claim with respect thereto, or is subject to any
insolvency proceeding, or becomes insolvent, fails or goes out of business; (i)
the Account arises out of a contract or purchase order for which a surety bond
was issued on behalf of Borrower; (j) Accounts in which BACC does not have first
priority and exclusive perfected security interest; or (k) Accounts where the
Account Debtor is in a jurisdiction for which Borrower is required to file a
notice of business activities or similar report and Borrower has not filed such
report within the time period required by applicable law.
Eligible Purchase Orders those purchase orders submitted to
Borrower in the ordinary course of business, which are and at all times shall
continue to be acceptable to BACC in all respects; provided, however, that
standards of eligibility may be fixed and revised from time to time by BACC in
BACC's exclusive judgment. In determining such acceptability and standards of
eligibility, BACC may, but need not, rely on agings, reports and schedules of
purchase orders furnished by Borrower, but reliance by BACC thereon from time to
time shall not be deemed to limit BACC's right to revise standards of
eligibility at any time as to both Borrower's present and future purchase
orders. In general, a purchase order shall not be deemed eligible unless: (a)
Borrower's customer on such purchase order is and at all times continues to be
acceptable to BACC, and (b) such purchase order complies in all respects with
the representations, covenants and warranties hereinafter set forth. Eligible
Purchase Orders shall not include purchase orders that have not been converted
to Accounts within ten business days of Borrowers s receipt of such purchase
orders.
Equipment means all of Borrower's present and hereafter
acquired equipment, machinery, machine tools, motors, furniture, furnishings,
fixtures, motor vehicles, rolling stock, processors, tools, pans, dies, jigs,
goods (other than consumer goods or farm products) and any interest in any of
the foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
ERISA Affiliate means each trade or business (whether or
not incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(I), or IRC Section 414.
Event of Default means the events specified in Section 8.
General Intangibles means all of Borrower's present and
future general intangibles and other personal property (including choses or
things in action, goodwill, patents, trade
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names; trademarks, service marks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, infringement claims, computer programs, computer discs, computer tapes,
Borrower's Books, literature, reports, catalogs, deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims) other than goods and
Accounts.
Guarantor means each person or entity, which guarantees the
Obligations.
Initial Term has the meaning set forth in the definition of
Termination Date.
Insolvency Proceeding means any proceeding commenced by or
against any person or entity under any provision of the federal Bankruptcy Code,
as amended, or under any other state or federal insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, or extensions generally with its creditors.
Inventory means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service, Borrower's present and future raw
materials, work in process, finished goods, tangible property, stock in trade,
wares, and materials used in or consumed in Borrower's business, goods which
have been returned to, repossessed by, or stopped in transit by Borrower,
packing and shipping materials, wherever located, any documents of title
representing any of the above, and Borrower's Books relating to any of the
foregoing.
Investment Property has the meaning set forth in Section
9115 of the Code.
IRC means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
Loan Documents means, collectively, this Agreement, any
Note or Notes, any security agreements, pledge agreements, mortgages, deeds of
trust or other encumbrances or agreements which secure the Obligations, and any
other agreement entered into between Borrower and BACC or by Borrower or a
Guarantor in favor of BACC relating to or in connection with this Agreement or
the Obligations.
Multiemployer Plan means a multiemployer plan as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f).
Negotiable Collateral means all of Borrower's present and
future letters of credit, notes, drafts, instruments, documents, leases, and
Chattel Paper.
Note means any promissory note made by Borrower to the
order of BACC concurrently herewith or at any time hereafter.
Obligations means all loans, advances, debts, liabilities
(including all interest and amounts charged to the Obligations pursuant to any
agreement authorizing BACC to charge the Obligations), obligations, lease
payments, guaranties, covenants, and duties owing by Borrower to BACC of any
kind and description (whether pursuant to or evidenced by the Loan Documents or
by any other agreement between BACC and Borrower, and irrespective of whether
for the payment of money), whether made or incurred prior to, on, or after the
Termination Date, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including any debt,
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liability or obligation owing from Borrower to others which BACC may obtain by
assignment or otherwise, and all interest thereon and all BACC Expenses.
Overadvance has the meaning set forth in Section 2.2.
Plan means any plan described in ERISA Section 3(2)
maintained for employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
Prime Rate means the variable rate of interest, per annum,
published by The Wall Street Journal as the Prime Rate and based on the base
rate on corporate loans posted by at least 75% of the nation's 30 largest banks.
The Prime Rate is nothing more nor less than an index for determining the
interest rate payable under the terms of this Agreement. The Prime Rate is not
necessarily the best rate, or any other definition of rates, offered by the
banks that establish the rate or by BACC. In the event The Wall Street Journal
ceases to publish the Prime Rate, BACC, in its reasonable judgment, may
substitute any similar index for the Prime Rate.
Renewal Term has the meaning set forth in Section 3.1.
Term means the period from the date of the execution and
delivery by BACC of this Agreement through and including the later of(a) the
Termination Date and (b) the payment and performance in full of the Obligations.
Termination Date means (a) October 15, 2001 (the period
through such date the "Initial Term"), unless such date is extended pursuant to
Section 3.1, and if so extended on one or more occasions the last date of the
last such extension, or (b) if earlier terminated by BACC pursuant to Section
9.1, the date of such termination.
1.2 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural. The words hereof, herein, hereby, hereunder, and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, subsection, clause, exhibit
and schedule references are to this Agreement unless otherwise specified. Words
importing a particular gender mean and include every other gender.
1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles (GAAP) as in effect from time to time. When used herein,
the term financial statements shall include the notes and schedules thereto.
1.4 Exhibits and Schedules. All of the exhibits, schedules,
addenda or riders attached to this Agreement shall be deemed incorporated herein
by reference.
1.5 Code. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the Code, unless
otherwise defined herein.
2. ADVANCES AND TERMS OF PAYMENT
2.1 Revolving Advances; Advance Limit. Upon the request of
Borrower, made at any time or from time to time during the Term and so long as
no Event of Default has occurred and is continuing, BACC may, in its sole and
absolute discretion, make Advances in an amount up to the
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sum of (a) eighty-five percent (85%) of the aggregate outstanding amount of
Eligible Accounts, plus (b) the lesser of (1) seventy-five percent (75%) of the
aggregate value of Eligible Purchase Orders or (2) Five Hundred Thousand Dollars
($500,000) or (3) an amount not to exceed one hundred percent (100%) of the cost
of inventory for such Eligible Purchase Orders or (4) an amount equal to twenty
percent (20%) of the outstanding Advances against Eligible Accounts; provided,
however, that in no event shall the aggregate amount of the outstanding Advances
be greater than, at any time, the amount of Two Million Five Hundred Thousand
Dollars ($2,500,000) (said dollar limit the Advance Limit). Notwithstanding the
foregoing, no Advances will be made against Eligible Purchase Orders until such
time as Borrower has received $1,000,000 in the form of a cash capital infusion
or subordinated debt and, provided further, that: (i) in the event of a cash
capital infusion, BACC shall have received evidence satisfactory to it, in its
sole and absolute discretion, that such cash capital infusion has been made, or
(ii) in the event of subordinated debt, BACC shall have received a subordination
agreement from the subordinated debt holder, with the form and content of such
subordination agreement to be acceptable to BACC in its sole and absolute
discretion.
2.2 Overadvances. All Advances shall be added to and be deemed
part of the Obligations when made. If, at any time and for any reason, the
aggregate amount of the outstanding Advances exceeds the dollar or percentage
limitations contained in Section 2.1 (an Overadvance) then Borrower shall, upon
demand by BACC, immediately pay to BACC, in cash, the amount of such
Overadvance. Without affecting Borrower's obligation to immediately repay to
BACC the amount of each Overadvance, Borrower shall pay BACC a fee (the
Overadvance Fee) in an amount equal to two percent (2.0%) per month on the
Overadvance amount for each day any Overadvance exists, but not less than Five
Hundred Dollars ($500) for each Overadvance. All such fees shall be computed on
the basis of a three hundred and sixty (360) day year for the actual number of
days elapsed.
2.3 Authorization to Make Advances. BACC is hereby authorized to
make the Advances based upon telephonic or other instructions received from
anyone purporting to be an Authorized Officer, or, at the discretion of BACC, if
such Advances are necessary to satisfy any Obligations. All requests for
Advances shall specify the date on which such Advance is to be made (which day
shall be a Business Day) and the amount of such Advance. Requests received after
10:30 a.m. Pacific time on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day. All Advances made
under this Agreement shall be conclusively presumed to have been made to, at the
request of, and for the benefit of Borrower when deposited to the credit of
Borrower or otherwise disbursed in accordance with the instructions of Borrower
or in accordance with the terms and conditions of this Agreement. Unless
otherwise requested by Borrower, all Advances shall be made by a wire transfer
to the deposit account of Borrower designated on Schedule 2.3, or such other
account as Borrower shall notify BACC in writing. Borrower shall pay to BACC a
funds transfer fee of $25.00 for each Advance. Said fees shall be payable on the
first day of each month of the Term for all Advances made during the preceding
month.
2.4 Interest.
(a) Except where specified to the contrary in the Loan
Documents, the aggregate outstanding balances of the Obligations shall accrue
interest at the per annum rate of three percentage points (3.0%) above the Prime
Rate. The Obligations shall bear interest from and after written notice by BACC
to Borrower of the occurrence of an Event of Default, and without constituting a
waiver of any such Event of Default, at the per annum rate of eight percentage
points
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(8.0%) above the Prime Rate. All interest payable under the Loan Documents shall
be computed on the basis of a three hundred sixty (360) day year for the actual
number of days elapsed on the Daily Balance. Interest as provided for herein
shall continue to accrue until the Obligations are paid in full.
(b) The interest rate payable by Borrower under the terms
of this Agreement shall be adjusted in accordance with any change in the Prime
Rate from time to time on the date of any such change. All interest payable by
Borrower shall be due and payable on the first day of each calendar month during
the Term. BACC may, at its option, add such interest and all BACC Expenses to
the Obligations, and such amount shall thereafter accrue interest at the rate
then applicable under this Agreement. Notwithstanding anything to the contrary
contained in the Loan Documents, the minimum interest payable by Borrower on the
Obligations shall be Three Thousand Dollars ($3,000) per month.
(c) In no event shall interest on the Obligations exceed
the highest lawful rate in effect from time to time. It is not the intention of
the parties hereto to make an agreement which violates any applicable state or
federal usury laws. In no event shall Borrower pay or BACC accept or charge any
interest which, together with any other charges upon the principal or any
portion thereof, exceeds the maximum lawful rate of interest allowable under any
applicable state or federal usury laws. Should any provision of this Agreement
or any existing or future Notes or Loan Documents between the parties be
construed to require the payment of interest or any other fees or charges which
could be construed as interest which, together with any other charges upon the
principal or any portion thereof and any other fees or charges which could be
construed as interest, exceeds the maximum lawful rate of interest, then any
such excess shall be applied to the remaining principal balance of the
Obligations, if any, and the remainder refunded to Borrower.
(d) Notwithstanding the foregoing, for purposes of this
Agreement, it is the intention of Borrower and BACC that interest shall mean,
and be limited to, any payment to BACC which compensates it for extending credit
to Borrower, for making available to Borrower a credit facility during the term
of this Agreement and for any default or breach by Borrower of a condition upon
which credit was extended. Borrower and BACC agree that, for the sole purpose of
calculating the interest paid by Borrower to BACC, it is the intention of
Borrower and BACC that interest shall mean and include, and be expressly limited
to, any interest accrued on the aggregate outstanding balance of the Obligations
during the term hereof pursuant to Sections 2.4(a) and 2.4(b); and any
Overadvance Fee, Origination Fee, and late fees charged to Borrower during the
term hereof. Borrower and BACC further agree that it is their intention that the
following fees shall not constitute interest: any Collateral Monitoring Fee, any
attorney fees incurred by BACC, any premiums or commissions attributable to
insurance guaranteeing repayment, finders' fees, report fees, appraisal fees or
fees for document preparation or notarization. To the extent, however, that
California law excludes from the calculation of interest any fees defined herein
as interest, or includes as interest any fees or other sums which are intended
not to constitute interest California law shall supersede and prevail and all
such interest shall be subject to Section 2.5(c).
2.5 Collection of Accounts. BACC or a BACC designee may, at any
time, with or without notice to Borrower, notify customers or Account debtors
that the Accounts have been assigned to BACC, and that BACC has a security
interest in them and collect the Accounts directly, and add the collection costs
and expenses to the Obligations, but, unless and until BACC does so or gives
Borrower other written instructions, Borrower shall receive all payments on
Accounts and other proceeds, including cash, of Collateral in trust for BACC and
immediately deliver said payments to BACC's bank account at Xxxxx Fargo Bank or
such bank account designated from time
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to time, in their original form as received from the Account debtor, together
with any necessary endorsements.
2.6 Crediting Payments. The receipt of any item of payment by BACC
shall, subject to final payment of such item, be provisionally applied to reduce
Obligations on the date of receipt of such item by BACC, but the receipt of such
an item of payment shall for the purpose of calculation of interest on the
Obligations not be deemed to have been paid to BACC until four (4) Business Days
after the date of BACC's actual receipt of such item of payment. Notwithstanding
anything to the contrary contained herein, payments received by BACC after 11:00
a.m. Pacific time shall be deemed to have been received by BACC as of the
opening of business on the immediately following Business Day.
2.7 Origination and Annual Fee. In consideration of BACC entering
into this Agreement, Borrower shall pay BACC an origination fee of Twenty-Five
Thousand Dollars ($25,000), which shall be paid simultaneously with the
execution hereof, and thereafter an annual fee in an amount equal to one percent
(1.0%) of the Advance Limit, on each and every anniversary of the initial
Advance of funds hereunder, for so long as the Obligations are outstanding.
2.8 Intentionally Omitted.
2.9 Field Examination Fee. Borrower shall pay BACC a fee in an
amount equal to Seven Hundred Dollars ($700) per day per examiner, plus
out-of-pocket expenses for each field examination of Borrower's Books or the
other Collateral performed by BACC or its designee.
2.10 Late Reporting Fee. Borrower shall pay to BACC a fee in an
amount equal to Fifty Dollars ($50.00) per document per day for each Business
Day any report, financial statement or schedule required by this Agreement to be
delivered to BACC is past due.
2.11 Monthly Statements. BACC shall render monthly statements to
Borrower of all Obligations, including statements of all principal, interest and
BACC Expenses, and Borrower shall have fully and irrevocably waived all
objections to such statements and the contents thereof unless, within thirty
(30) days after receipt, Borrower shall deliver to BACC, by registered,
certified or overnight mail as set forth in Section 12, written objection to
such statement specifying the error or errors, if any, contained therein.
3. TERM
3.1 Term and Renewal Date. This Agreement shall become effective
upon execution by BACC and shall continue in full force through the Initial Term
and from year to year thereafter (a "Renewal Term") if BACC, at its option, in
writing agrees to extend the Term for one (1) year from the then Termination
Date, provided that Borrower has not exercised its termination right in
accordance with this Section 3.1. Borrower may terminate the Term on the then
Termination Date by giving BACC at least sixty (60) days prior written notice by
registered or certified mail, return receipt requested. In addition, BACC shall
have the right to terminate this Agreement immediately at any time upon the
occurrence of an Event of Default. No such termination shall relieve or
discharge Borrower of its duties, Obligations and covenants hereunder until all
Obligations have been paid and performed in full, and BACC's continuing security
interest in the Collateral shall remain in effect until the Obligations have
been fully and irrevocably paid and satisfied in cash or cash equivalent. On the
Termination Date of this Agreement, the Obligations shall be immediately
due and payable in full.
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3.2 Early Termination Fee. If the Term is terminated by BACC upon
the occurrence of an Event of Default, or is terminated by Borrower except as
provided in Section 3.1, in view of the impracticability and extreme difficulty
of ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of BACC's lost profits as a result thereof, Borrower
shall pay BACC upon the effective date of such termination a fee in an amount
equal to three percent (3.0%) of the Advance Limit if such termination occurs at
any time including during any Renewal Term. Such fee shall be presumed to be the
amount of damages sustained by BACC as the result of an early termination and
Borrower acknowledges that it is reasonable under the circumstances currently
existing. The fee provided for in this Section 3.2 shall be deemed included in
the Obligations.
4. CREATION OF CONTINUING SECURITY INTEREST
4.1 Grant of Continuing Security Interest. Borrower hereby grants
to BACC a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of the
Obligations and in order to secure prompt performance by Borrower of each and
all of its covenants and Obligations under the Loan Documents and otherwise.
BACC's continuing security interest in the Collateral shall attach to all
Collateral without further act on the part of BACC or Borrower.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall notify BACC and upon the request of BACC, immediately endorse and
assign such Negotiable Collateral to BACC and deliver physical possession of
such Negotiable Collateral to BACC.
4.3 Delivery of Additional Documentation Required. Borrower shall
execute and deliver to BACC concurrently with Borrower's execution and delivery
of this Agreement and at any time thereafter at the request of BACC, all
financing statements, continuation financing statements, fixture filings,
security agreements. chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that BACC
may request, in form satisfactory to BACC, to perfect and maintain perfected
BACC's continuing security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.4 Power of Attorney. Borrower hereby irrevocably makes,
constitutes and appoints BACC (and any person designated by BACC) as Borrower's
true and lawful attorney-in-fact with power to sign the name of Borrower on any
of the above described documents or on any other similar documents to be
executed, recorded or filed in order to perfect or continue perfected BACC's
continuing security interest in the Collateral. In addition, Borrower hereby
appoints BACC (and any person designated by BACC) as Borrower's attorney-in-fact
with power to: (a) sign Borrower's name on verifications of Accounts, and on
notices to Account debtors; (b) send requests for verification of Accounts; (c)
endorse Borrower's name on any checks, notes, acceptances, money orders, drafts
or other forms of payment or security that may come into BACC's possession; (d)
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by BACC, to receive and open all mail
addressed to Borrower, and to retain all mail relating to the Collateral and
forward all other mail to Borrower; (e) make, settle and adjust all claims under
Borrower's policies of insurance, endorse the name of Borrower on any check,
draft,
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instrument or other item of payment for the proceeds of such policies of
insurance and make all determinations and decisions with respect to such
policies of insurance. The appointment of BACC as Borrower's attorney-in-fact
and each and every one of BACC's rights and powers, being coupled with an
interest, is irrevocable so long as any Accounts in which BACC has a continuing
security interest remain unpaid and until all of the Obligations have been fully
repaid and performed. BACC shall have no obligation to protect any rights of
Borrower against any person obligated on any Collateral.
4.5 Right To Inspect. BACC shall have the right at any time or
times hereafter during Borrower's usual business hours, or during the usual
business hours of any third party having control over Borrower's Books to
inspect Borrower's Books in order to verify the amount or condition of, or any
other matter relating to, the Collateral or Borrower's financial condition. BACC
also shall have the right at any time or times hereafter during Borrower's usual
business hours to inspect and examine the Inventory and the Equipment and to
check and test the same as to quality, quantity, value and condition.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to BACC the following and
acknowledges:
5.1 No Prior Encumbrances; Security Interests. Borrower has good
and marketable title to the Collateral, free and clear of liens, claims,
security interests or encumbrances, except for the security interests to be
satisfied from the proceeds of the first Advances hereunder, the continuing
security interests granted to BACC by Borrower, and those disclosed on Schedule
5.1. Other than those expressly permitted by this Agreement, Borrower will not
create or permit to be created any security interest, lien, pledge, mortgage or
encumbrance on any Collateral or any of its other assets.
5.2 Bona Fide Accounts. All Accounts represent bona fide sales or
leases of goods and/or services for which Borrower has an unconditional right to
payment. None of the Accounts are subject to any rights of offset, counterclaim,
cancellation or contractual rights of return.
5.3 Merchantable Inventory. All Inventory is now and at all times
hereafter shall be of good and merchantable quality, free from defects.
5.4 Location of Inventory and Equipment. The Inventory and
Equipment is not now and shall not at any time or times hereafter be stored with
a bailee, warehouseman, processor, or similar party. Borrower shall keep the
Inventory and Equipment only at the following locations:
000 Xxxxxx xx Xxxxxxxx
Xxx Xxxxxxxx, Xxxxxxxxxx 00000
00000 Xxxxx, Xxxxx X
Xxxx Xxxxxx, XX 00000
5.5 Inventory Records. Borrower now keeps and hereafter at all
times shall keep correct and accurate records itemizing and describing the kind,
type, quality and quantity of the Inventory and Borrower's cost of said items,
and none of Borrower's Inventory contains any labels, trademarks, trade-names or
other identifying characteristics which are the properties of third parties.
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5.6 Retail Accounts. No Accounts arise from the sale of goods for
personal, family or household purposes.
5.7 Relocation of Chief Executive Office. The chief executive
office of Borrower and the location of all books and records of Borrower
relating to the Collateral is at the address indicated on the first page of this
Agreement and Borrower will not, without thirty (30) days' prior written notice
to BACC, relocate such office.
5.8 Due Incorporation and Qualification. Borrower is and shall at
all times hereafter be a corporation duly organized and existing under the laws
of the state of its incorporation and is qualified and licensed to do business
and is in good standing in any state in which the conduct of its business or its
ownership of assets requires that it be so qualified.
5.9 Fictitious Name. Borrower is conducting its business under the
following trade or fictitious name(s) and no others: [none]. Borrower has
complied with the fictitious name laws of all jurisdictions in which compliance
is required in connection with its use of such name(s).
5.10 Permits and Licenses. Borrower holds all licenses, permits,
franchises, approvals and consents required for the conduct of its business and
the ownership and operation of its assets.
5.11 Due Authorization. Borrower has the right and power and is
duly authorized to enter into the Loan Documents to which it is a party.
5.12 Compliance with Articles; Bylaws. The execution by Borrower
of the Loan Documents to which it is a party does not constitute a breach of any
provision contained in Borrower's Certificate or Articles of Incorporation or
its Bylaws, nor does it constitute an event of default under any material
agreement to which Borrower is now or may hereafter become a party.
5.13 Litigation. There are no actions, proceedings or claims
pending by or against Borrower before any court or administrative agency and
Borrower has no knowledge or notice of any pending, threatened or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower, except for ongoing collection matters in which
Borrower is the plaintiff. If any such actions, proceedings or claims arise
during the Term, Borrower shall promptly notify BACC in writing.
5.14 No Material Adverse Change in Financial Statements. All
financial statements relating to Borrower which have been or may hereafter be
delivered to BACC (i) have been prepared in accordance with GAAP; (ii) fairly
present Borrower's financial condition as of the date thereof and Borrower's
results of operations for the period then ended; and (iii) disclose all
contingent obligations of Borrower. In addition no material adverse change in
the financial condition of Borrower has occurred since the date of the most
recent of such financial statements.
5.15 Solvency. Borrower is now, and shall be at all times through
the Term, solvent and able to pay its debts (including trade debts) as they
mature.
5.16 ERISA. Neither Borrower or any ERISA Affiliate, nor any Plan
is or has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a), or any of the published
interpretations thereof. No lien upon the assets of Borrower has arisen
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with respect to any Plan. No prohibited transaction within the meaning of ERISA
Section 406 or IRC Section 4975(c) has occurred with respect to any Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal liability
with respect to any Multiemployer Plan. Borrower and each ERISA Affiliate have
made all contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan, whether
or not waived.
5.17 Environmental Laws and Hazardous Materials. Borrower has
complied, and at all times through the Term will comply, with all Environmental
Laws. Borrower has not and will not cause or permit any Hazardous Materials to
be located, incorporated, generated, stored, manufactured, transported to or
from, released, disposed of, or used at, upon, under, or within any premises at
which Borrower conducts its business, or in connection with Borrower's business.
To the best of Borrower's knowledge, no prior owner or operator of any premises
at which Borrower conducts its business has caused or permitted any of the above
to occur at, upon, under, or within any of the premises. Borrower will not
permit any lien to be filed against the Collateral or any part thereof under any
Environmental Law, and will promptly notify BACC of any proceeding, inquiry or
claim relating to any alleged violation of any Environmental Law, or any alleged
loss, damage or injury resulting from any Hazardous Material. BACC shall have
the right to join and participate in, as a party if it so elects, any legal or
administrative proceeding initiated with respect to any Hazardous Material or in
connection with any Environmental Law. "Hazardous Material" includes without
limitation any substance, material, emission, or waste which is or hereafter
becomes regulated or classified as a hazardous substance, hazardous material,
toxic substance or solid waste under any Environmental Law, asbestos, petroleum
products, urea formaldehyde, polychlorinated biphenyls (PCBs), radon, and any
other hazardous or toxic substance, material, emission or waste. Environmental
Law means the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
regulations pertaining to such statutes, and any other safety, health or
environmental statutes, laws, regulations or ordinances of the United States or
of any state, county or municipality in which Borrower conducts its business or
the Collateral is located.
5.18 Tax Compliance. Borrower has filed all tax returns required
to be filed by it and has paid all taxes due and payable on said returns and on
any assessment made against it or its assets.
5.19 Reliance by BACC; Cumulative. Each warranty, representation
and agreement contained in this Agreement shall be automatically deemed repeated
by Borrower with each request for an Advance and shall be conclusively presumed
to have been relied on by BACC regardless of any investigation made or
information possessed by BACC. The warranties, representations and agreements
set forth herein shall be cumulative and in addition to any and all other
warranties, representations and agreements which Borrower shall now or hereafter
give, or cause to be given, to BACC.
5.20 Year 2000 Compatibility. As a result of a comprehensive
assessment undertaken by Borrower of Borrower's computer based hardware and
software and after due inquiry made to Borrower's material suppliers, vendors
and customers, Borrower knows of no facts that would cause Borrower to believe
that its computer based hardware and software and that of its material
suppliers, vendors and customers are unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and acknowledges that during the Term Borrower
shall comply with all of the following:
6.1 Collateral and Other Reports. Borrower shall on each Business
Day report to BACC all Accounts arising since its most recent report to BACC and
shall provide BACC with copies of all invoices over Ten Thousand Dollars
($10,000) together with their supporting documentation. Borrower shall execute
and deliver to BACC, no later than the fifteenth (15th) day of each month during
the Term, a detailed aging of the Accounts, a reconciliation statement and a
summary aging, by vendor, of all accounts payable of Borrower and any book
overdraft. Borrower shall deliver to BACC, as BACC may from time to time
require, collection reports, sales journals, invoices, original delivery
receipts, customers' purchase orders, shipping instructions, bills of lading and
other documentation respecting shipment arrangements. Absent such a request by
BACC, copies of all such documentation shall be held by Borrower as custodian
for BACC.
6.2 Returns. Returns and allowances, if any, as between Borrower
and any Account debtors, shall be permitted on the same basis and in accordance
with the usual customary practices of Borrower as they exist at the date of the
execution and delivery of this Agreement. If at any time prior to the occurrence
of an Event of Default any Account debtor returns any Inventory to Borrower,
Borrower shall promptly determine the reason for such return and, if Borrower
accepts such return, issue a credit memorandum (with a copy to be sent to BACC)
in the appropriate amount to such Account debtor. Borrower shall promptly notify
BACC of all returns and recoveries and of all disputes and claims.
6.3 Designation of Inventory. At BACC's request, Borrower shall
execute and deliver to BACC a designation of Inventory specifying the cost and
the wholesale market value of Borrower's raw materials, work in process and
finished goods, and further specifying such other information as BACC may
reasonably request.
6.4 Financial Statements, Reports, Certificates. Borrower shall
deliver to BACC: (a) as soon as available, but in any event within thirty (30)
days after the end of each month during the Term, a balance sheet and profit and
loss statement prepared by Borrower covering Borrower's operations during such
period; and (b) as soon as available, but in any event within ninety (90) days
after the end of each of Borrower's fiscal years, financial statements of
Borrower for each such fiscal period, reviewed by independent certified public
accountants acceptable to BACC. Such financial statements shall include a
balance sheet and profit and loss statement, and the accountants' management
letter. Together with the above, Borrower shall also deliver Borrower's Form
10-Qs, 10-Ks or 8-Ks, if any, as soon as the same become available, and any
other report reasonably requested by BACC relating to the Collateral and the
financial condition of Borrower and a certificate signed by its chief financial
officer to the effect that all reports, statements or computer prepared
information of any kind or nature delivered or caused to be delivered to BACC
under this Section 6.4 fairly present its financial condition and that there
exists on the date of delivery of such certificate to BACC no condition or event
which constitutes an Event of Default.
6.5 Tax Returns, Receipts. Borrower shall deliver to BACC copies
of each of its future federal income tax returns, and any amendments thereto,
within thirty (30) days of the filing thereof. Borrower further shall promptly
deliver to BACC, upon request, satisfactory evidence of Borrower's payment of
all withholding and other taxes required to be paid by it.
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6.6 Guarantor Reports. Borrower agrees to cause each Guarantor to
deliver its annual financial statements and copies of all federal income tax
returns as soon as the same are available and in any event no later than thirty
(30) days after the same are required to be filed by law.
6.7 Title to Equipment. Upon BACC's request, Borrower shall
immediately deliver to BACC, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
6.8 Maintenance of Equipment. Borrower shall keep and maintain the
Equipment in good operating condition and repair, and shall make all necessary
replacements thereto so that its value and operating efficiency shall at all
times be maintained and preserved. Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and the Equipment is now and shall at all times remain Borrower's personal
property.
6.9 Taxes. All Federal, state and local assessments and taxes,
whether real, personal. or otherwise, due or payable by, or imposed, levied or
assessed against Borrower or any of its assets or in connection with Borrower's
business shall hereafter be paid in full, before they become delinquent or
before the expiration of any extension period. Borrower shall make due and
timely payment or deposit of all federal, state and local taxes, assessments or
contributions required of it by law, and will execute and deliver to BACC, on
demand, appropriate certificates attesting to the payment or deposit thereof.
6.10 Insurance. Borrower, at its expense, shall keep and maintain
the Collateral insured against all risk of loss or damage from fire, theft,
vandalism, malicious mischief, explosion, sprinklers, and all other hazards and
risks of physical damage included within the meaning of the term "extended
coverage" in such amounts as are ordinarily insured against by similar
businesses. Borrower shall also keep and maintain comprehensive general public
liability insurance and property damage insurance, and insurance against loss
from business interruption, insuring against all risks relating to or arising
from Borrower's ownership and use of the Collateral and its other assets and the
operation of its business. All such policies shall be in such form, with such
companies and in such amounts as may be satisfactory to BACC. Borrower shall
deliver to BACC certified copies of such policies and evidence of the payments
of all premiums therefor. All such policies (except those of public liability
and liability property damage) shall contain a Lender's Loss Payable endorsement
in a form satisfactory to BACC, naming BACC as sole loss payee thereof, and
containing a waiver of warranties. All proceeds payable under such policies
shall be payable to BACC and applied to the Obligations.
6.11 BACC Expenses. Borrower shall immediately and without demand
reimburse BACC for all BACC Expenses and Borrower hereby authorizes the payment
of such BACC Expenses.
6.12 Compliance With Law. Borrower shall comply, in all material
respects, with the requirements of all applicable laws, rules, regulations and
orders of governmental authorities relating to Borrower and the conduct of its
business.
6.13 Accounting System. Borrower at all times hereafter shall
maintain a standard and modern system of accounting in accordance with GAAP with
ledger and account cards or computer tapes, disks, printouts and records
pertaining to the Collateral containing such information as may from time to
time be requested by BACC.
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6.14 Intentionally Omitted.
7. NEGATIVE COVENANTS
Borrower covenants and acknowledges that during the Term Borrower
shall not undertake any of the following:
7.1 Extraordinary Transactions and Disposal of Assets. Enter into
any transaction not in the ordinary and usual course of its business as
conducted on the date hereof, including but not limited to the sale, lease,
disposal, movement, relocation or transfer, whether by sale or otherwise, of any
its assets other than sales of Inventory in the ordinary and usual course of its
business as presently conducted; incur any indebtedness for borrowed money or
other indebtedness outside the ordinary and usual course of its business as
conducted on the date hereof except for renewals or extensions of existing debts
permitted by BACC; or make any advance or loan.
7.2 Change Name. Change its name, business structure or identify
or add any new fictitious name.
7.3 Merge, Acquire. Merge, acquire, or consolidate with or into
any other business organization.
7.4 Guaranty. Guaranty or otherwise become in any way liable with
respect to the obligations of any third party, except by endorsement of
instruments or items of payment for deposit to the account of Borrower for
negotiation and delivery to BACC.
7.5 Restructure. Make any change in its financial structure or
business operations.
7.6 Prepayments. Prepay any existing indebtedness owing to any
third party other than trade payables.
7.7 Change of Ownership. Cause, permit or suffer any change,
direct or indirect, in the ownership of the capital stock of Borrower without
first giving BACC sixty (60) days prior written notice of such change, or enter
into any agreement with any person or entity which provides for a payment to
such person or entity based upon the income of Borrower.
7.8 Compensation. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts, management fees or
other payments, whether direct or indirect, in money or otherwise, during any
fiscal year to its executives, officers, shareholders, affiliates, and directors
(or any relatives of the foregoing) in an aggregate amount in excess of one
hundred and fifteen percent (115%) of the total compensation paid in the prior
fiscal year.
7.9 Loans and Advances. Make any loans, advances or extensions of
credit to any officer, director, executive employee or shareholder of Borrower
(or any relative of any of the foregoing), or to any entity which is a
subsidiary of, related to, affiliated with or has common shareholders, officers
or directors with Borrower.
7.10 Capital Expenditures. Make any plant or fixed capital
expenditure, or any commitment therefor, or purchase or lease any real or
personal assets or replacement Equipment in excess of, Fifty Thousand Dollars
($50,000) for any individual transaction or where the aggregate amount of such
transactions in any fiscal year exceeds One Hundred Thousand Dollars ($100,000).
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7.11 Consignments of Inventory. Consign any Inventory.
7.12 Distributions. Make any distribution or declare or pay any
dividends (in cash or in stock) on, or purchase, acquire, redeem or retire any
of its capital stock, of any class, whether now or hereafter outstanding.
7.13 Accounting Methods. Modify or change its method of accounting
or enter into, modify or terminate any agreement presently existing or at any
time hereafter entered into with any third party for the preparation or storage
of Borrower's records of Accounts and financial condition without said party
agreeing to provide BACC with information regarding the Collateral or Borrower's
financial condition. Borrower waives the right to assert a confidential
relationship, if any, it may have with any such third party in connection with
any information requested by BACC hereunder, and agrees that BACC may contact
any such party directly in order to obtain such information.
7.14 Business Suspension. Suspend or go out of business.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an Event of Default by Borrower hereunder:
8.1 Failure to Pay. Borrower's failure to pay when due and
payable, or when declared due and payable, any portion of the Obligations
(whether principal, interest, taxes, BACC Expenses, or otherwise);
8.2 Failure to Perform. Borrower's or a Guarantor's failure to
perform, keep or observe any term, provision, condition, representation,
warranty, covenant or agreement contained in this Agreement, in any of the Loan
Documents or in any other present or future agreement between Borrower and/or a
Guarantor and BACC;
8.3 Misrepresentation. Any misstatement or misrepresentation now
or hereafter exists in any warranty, representation, statement, aging or report
made to BACC by, Borrower and/or a Guarantor or any officer, employee, agent or
director thereof, or if any such warranty, representation, statement, aging or
report is withdrawn by such person;
8.4 Material Adverse Change. There is a material adverse change in
Borrower's, or a Guarantor's, business or financial condition;
8.5 Material Impairment. There is a material impairment of the
prospect of repayment of the Obligations or a material impairment of BACC's
continuing security interests in the Collateral;
8.6 Levy or Attachment. Any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant or is levied upon,
or comes into the possession of any judicial officer or assignee;
8.7 Insolvency by Borrower or Guarantor. An Insolvency Proceeding
is commenced by Borrower or a Guarantor;
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8.8 Insolvency Against Borrower. An Insolvency Proceeding is
commenced against Borrower or a Guarantor;
8.9 Injunction Against Borrower. Borrower is enjoined, restrained
or in any way prevented by court order from continuing to conduct all or any
material part of its business;
8.10 Government Lien. A notice of lien, levy or assessment is
filed of record with respect to any of Borrower's or a Guarantor's assets by the
United States Government, or any department, agency or instrumentality thereof,
or by any state, county, municipal or other governmental agency, or any taxes or
debts owing at any time hereafter to any one or more of such entities becomes a
lien, whether xxxxxx or otherwise, upon any of Borrower's or a Guarantor's
assets and the same is not paid on the payment date thereof;
8.11 Judgment. A judgment is entered against Borrower or a
Guarantor;
8.12 Default to Third Party. There is a default in any material
agreement to which Borrower or a Guarantor is a party or by which Borrower or a
Guarantor or any of their assets are bound;
8.13 Subordinated Debt Payments. Borrower makes any payment on
account of indebtedness which has now or hereafter been subordinated to the
Obligations, except to the extent such payment is allowed under any
subordination agreement entered into with BACC;
8.14 Termination of Guarantor. A Guarantor dies or terminates its
guaranty; or
8.15 Change in Management. If Xxxx X. Xxxxxx ceases to be actively
engaged in the management of Borrower.
8.16 ERISA Violation. A prohibited transaction within the meaning
of ERISA Section 406 or IRC Section 1975(c) shall occur with respect to a Plan
which could have a material adverse effect on the financial condition of
Borrower; any lien upon the assets of Borrower in connection with any Plan shall
arise; Borrower or any ERISA Affiliate shall completely or partially withdraw
from a Multiemployer Plan and such withdrawal could, in the opinion of BACC,
have a material adverse effect on the financial condition of Borrower. Borrower
or any of its ERISA Affiliates shall fail to make full payment when due of all
amounts which Borrower or any of its ERISA Affiliates may be required to pay to
any Plan or any Multiemployer Plan as one or more contributions thereto;
Borrower or any of its ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency, whether or not waived; the voluntary or
involuntary termination of any Plan which termination could, in the opinion of
BACC, have a material adverse effect on the financial condition of Borrower or
Borrower shall fail to notify BACC promptly and in any event within ten (10)
days of the occurrence of an event which constitutes an Event of Default under
this clause or would constitute an Event of Default upon the exercise of BACC's
judgment.
8.17 Loss of License, etc. If any license, permit, distributor,
franchise or similar agreement, necessary for the continue operation of
Borrower's ordinary course of business is revoked, suspended, or terminated.
Notwithstanding anything contained in this Section 8 to the
contrary, BACC shall refrain from exercising its rights and remedies and an
Event of Default shall not be deemed to have
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occurred by reason of the occurrence of any of the events set forth in Sections
8.6, 8.8, 8.10 or 8.11 if; within ten (10) days from the date thereof; the same
is released, discharged, dismissed, bonded against or satisfied; provided,
however, BACC shall not be obligated to make Advances to Borrower during such
period.
9. BACC'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of
Default, BACC may, at its election, without notice of such election and without
demand, do any one or more of the following:
(a) Declare all Obligations, whether evidenced by the Loan
Documents or otherwise, immediately due and payable in full;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under the Loan Documents or under any other agreement
between Borrower and BACC;
(c) Terminate this Agreement as to any future liability or
obligation of BACC, but without affecting BACC's rights and security interest in
the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account debtors for amounts and upon terms which BACC considers advisable and,
in such cases, BACC will credit the Obligations with the net amounts received by
BACC in payment of such disputed Accounts, after deducting all BACC Expenses;
(e) Cause Borrower to hold all returned Inventory in trust
for BACC, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of BACC;
(f) Without notice to or demand upon Borrower or any
Guarantor, make such payments and do such acts as BACC considers necessary or
reasonable to protect its security interest in the Collateral. Borrower shall
assemble the Collateral if BACC so requires and deliver or make the Collateral
available to BACC at a place designated by BACC. Borrower authorizes BACC to
enter any premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest
or compromise any encumbrance, charge or lien which in BACC's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell (in the manner provided
for herein) the Collateral. BACC is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any asset of a similar nature, pertaining to the Collateral, in
completing the production of; advertising for sale and sale of the Collateral.
Borrower's rights under all licenses and all franchise agreements shall inure to
BACC's benefit;
(h) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places
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(including Borrower's premises) as BACC determines is commercially reasonable.
It is not necessary that the Collateral be present at any such sale;
BACC shall give notice of the disposition of the
Collateral as follows:
(1) To the Borrower and each holder of a security
interest in the Collateral who has filed with BACC a written
request for notice, a notice in writing of the time and place of
public sale or, if the sale is a private sale or some other
disposition other than a public sale is to be made, then the time
on or after which the private sale or other disposition is to be
made;
(2) The notice hereunder shall be personally
delivered or mailed, postage prepaid, to Borrower as provided in
Section 12, at least five (5) calendar days before the date fixed
for the sale, or at least five (5) calendar days before the date
on or after which the private sale or other disposition is to be
made, unless the Collateral is perishable or threatens to decline
speedily in value. Notice to persons other than Borrower claiming
an interest in the Collateral shall be sent to such addresses as
they have furnished to BACC;
(i) BACC may credit bid and purchase at any public sale;
(j) Any deficiency which exists after disposition of the
Collateral as provided herein shall be immediately paid by Borrower. Any excess
will be remitted without interest by BACC to the party or parties legally
entitled to such excess; and
(k) In addition to the foregoing, BACC shall have all
rights and remedies provided by law (including those set forth in the Code) and
any rights and remedies contained in any Loan Documents and all such rights and
remedies shall be cumulative.
9.2 No Waiver. No delay on the part of BACC in exercising any
right, power or privilege under any Loan Document shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege under such
Loan Documents or otherwise, preclude other or further exercise of any such
right, power or privilege.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums or otherwise) due to third persons or entities, or fails to
make any deposits or furnish any required proof of payment or deposit, or fails
to perform any of Borrower's other covenants under any of the Loan Documents,
then in its discretion and without prior notice to Borrower, BACC may do any or
all of the following: (a) make any payment which Borrower has failed to pay or
any part thereof; (b) set up such reserves in Borrower's loan account as BACC
deems necessary to protect BACC from the exposure created by such failure; (c)
obtain and maintain insurance policies of the type described in Section 6.10 and
take any action with respect to such policies as BACC deems prudent; or (d) take
any other action deemed necessary to preserve and protect its interests and
rights under the Loan Documents. Any payments made by BACC shall not constitute:
(a) an agreement by BACC to make similar payments in the future or (b) a waiver
by BACC of any Event of Default. BACC need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance or lien
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and the receipt of notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing.
11. WAIVERS.
11.1 Demand, Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, and notice of nonpayment at maturity and acknowledges that BACC
may compromise, settle or release, without notice to Borrower, any Collateral
and/or guaranties at any time held by BACC. Borrower hereby consents to any
extensions of time of payment or partial payment at, before or after the
Termination Date.
11.2 No Marshaling. Borrower, on its own behalf and on behalf of
its successors and assigns hereby expressly waives all rights, if any, to
require a marshaling of assets by BACC or to require that BACC first resort to
some portion(s) of the Collateral before foreclosing upon, selling or otherwise
realizing on any other portion thereof.
11.3 BACC's Non-Liability for Inventory or Equipment. So long as
BACC complies with its obligations, if any, under Section 9207 of the Code, BACC
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Inventory or Equipment; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever. All risk of loss, damage or
destruction of the Inventory or Equipment shall be borne by Borrower.
12. NOTICES
Unless otherwise provided herein, all consents, waivers, notices
or demands by any party relating to the Loan Documents shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be telecopied (followed up by a
mailing), personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by receipted overnight delivery service to
Borrower or to BACC, as the case may be, at their addresses set forth below:
If to Borrower: ICX Xxxxxxxxxxx.xxx
000 Xxxxxx xx Xxxxxxxx
Xxx Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, President/Chief Executive
Officer
Fax # (000) 000-0000
If to BACC: Business Alliance Capital Corp.
000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxx, Senior Vice President
Fax # (000) 000-0000
Any party may change the address at it is to receive notices
hereunder by notice in writing in the foregoing manner given to the other. All
notices or demands sent in accordance with
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this Section 12 shall be deemed received on the earlier of the date of actual
receipt or five (5) calendar days after the deposit thereof in the mail or on
the date telecommunicated if telecopied.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings or other papers
delivered to BACC may be destroyed or otherwise disposed of by BACC four (4)
months after they are delivered to or received by BACC, unless Borrower
requests, in writing, the return of the said documents, schedules. invoices or
other papers and makes arrangements, at Borrower's expense, for their return.
14. GENERAL PROVISIONS
14.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and executed and delivered by BACC.
14.2 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights
hereunder and any prohibited assignment shall be absolutely void. No consent to
an assignment by BACC shall release Borrower from its Obligations. Without
notice to or the consent of Borrower, BACC may assign this Agreement and its
rights and duties hereunder and BACC reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in BACC's rights and benefits hereunder. In connection therewith, BACC
may disclose all documents and information which BACC now or hereafter may have
relating to Borrower or Borrower's business. Borrower and BACC do not intend any
of the benefits of the Loan Documents to inure to any third party, and no third
party shall be a third party beneficiary hereof or thereof.
14.3 Section Headings. Headings and numbers have been set forth
herein for convenience only.
14.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against BACC or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by each party and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of the parties hereto.
14.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of such provision.
14.6 Amendments in Writing. This Agreement cannot be changed or
terminated orally. This Agreement is the entire agreement between the parties
with respect to the matters contained herein. This Agreement supersedes all
prior agreements, understandings and negotiations, if any, all of which are
merged into this Agreement.
14.7 Counterparts. This Agreement may be executed in any number of
counterparts each of which, when executed and delivered, shall be deemed to be
an original and all of which, when taken together, shall constitute but one and
the same Agreement.
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14.8 Indemnification. Borrower hereby indemnifies, protects,
defends and saves harmless BACC and any member, officer, director, official,
agent, employee and attorney of BACC, and their respective heirs, successors and
assigns (collectively, the "Identified Parties"), from and against any and all
losses, damages, expenses or liabilities of any kind or nature and from any
suits, claims or demands, including reasonable counsel fees incurred in
investigating or defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with the
Loan Documents and the transactions contemplated therein or the Collateral
(unless caused by the gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (a) losses, damages, expenses or
liabilities sustained by BACC in connection with any environmental cleanup or
other remedy required or mandated by any Environmental Law; (b) any untrue
statement of a material fact contained in information submitted to BACC by
Borrower or a Guarantor or the omission of any material fact necessary to be
stated therein in order to make such statement not misleading or incomplete; (c)
the failure of Borrower or a Guarantor to perform any obligations required to be
performed by Borrower or a Guarantor under the Loan Documents; and (d) the
ownership, construction, occupancy, operations, use and maintenance of any of
Borrower's or a Guarantor's assets. The provisions of this Section 14.8 shall
survive termination of this Agreement and the other Loan Documents.
15. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE
LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN
THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, THE FEDERAL COURTS WHOSE VENUE
INCLUDES THE CENTRAL DISTRICT OF THE STATE OF CALIFORNIA, OR AT THE SOLE OPTION
OF BACC, IN ANY OTHER COURT IN WHICH BACC SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER AND BACC EACH WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING UNDER THE LOAN
DOCUMENTS OR RELATING TO THE DEALINGS OF BORROWER ANT) BACC AND ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO VENUE
TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 15.
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Borrower and BACC have executed this Agreement as of the date
first above written.
ICX XXXXXXXXXXX.XXX,
a California corporation
Signed by: /s/ XXXX X. XXXXXX
-----------------------------------
Print Name: Xxxx X. Xxxxxx
----------------------------------
Title/Capacity: Pres/CEO
------------------------------
BUSINESS ALLIANCE CAPITAL CORP.,
a Delaware corporation
Signed by: /s/ XXXXXXX XXXXX
-----------------------------------
Print Name: Xxxxxxx Xxxxx
Title/Capacity: Senior Vice President
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SCHEDULE 2.3
Deposit Account of Borrower for Advances
Farmers & Merchants Bank
00000 Xxxxxxxxx Xxxxxxxxx
Xxxx Xxxxxx, XX 00000
Account #: 00-00000-0
ABA#: 000000000
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SCHEDULE 5.1
EXISTING LIENS WHICH ARE TO CONTINUE
Creditor Date UCC# Collateral
-------- ---- ---- ----------
Transaction Funding, Inc. 6/21/99 9917760213 Blanket Filing -- Intercreditor
Agreement
KTS Services, Inc. 12/16/99 993620503 Specific Toshiba equipment
