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EXHIBIT 10(r)
IMPERIAL BANK
Member FDIC
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between General Automation, Inc., a Corporation
(herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts
as may be determined by Bank up to, but not exceeding in the aggregate
unpaid principal balance, the following Borrowing Base:
75% of Eligible Accounts
and in no event more than $1,500,000.00
2. The amount of each loan made by Bank to Borrower hereunder shall be
debited to the loan ledger account of Borrower maintained by Bank
(herein called "Loan Account") and Bank shall credit the Loan Account
with all loan repayments made by Borrower. Borrower promises to pay
Bank (a) the unpaid balance of Borrower's Loan Account on demand and
(b) on or before the tenth day of each month, interest on the average
daily unpaid balance of the Loan Account during the immediately
preceding month at the rate of Two percent (2.000%) per annum in excess
of the rate of interest which Bank has announced as its prime lending
rate ("Prime Rate") which shall vary concurrently with any change in
such Prime Rate. Interest shall be computed at the above rate on the
basis of the actual number of days during which the principal balance
of the loan account is outstanding divided by 360, which shall for
interest computation purposes be considered one year. Bank at its
option may demand payment of any or all of the amount due under the
Loan Account including accrued but unpaid interest at any time. Such
notice may be given verbally or in writing and should be effective upon
receipt by Borrower. The amount of interest payable each month by
Borrower shall not be less than a minimum monthly charge of $250.00.
Bank is hereby authorized to charge Borrower's deposit account(s) with
Bank for all sums due Bank under this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by
Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1,
which shall disclose that Borrower is entitled to the amount of loan
being requested.
4. As used in this Agreement, the following terms shall have the
following meanings:
A. "Accounts" means any right to payment for goods sold or
leased, or to be sold or to be leased, or for services
rendered or to be rendered no matter how evidenced, including
accounts receivable, contract rights, chattel paper,
instruments, purchase order, notes, drafts, acceptances,
general intangibles and other forms of obligations and
receivables.
B. "Collateral" means any and all personal property of Borrower
which is assigned or hereafter is assigned to Bank as security
or in which Bank now has or hereafter acquires a security
interest.
C. "Eligible Accounts" means all of Borrower's Accounts
excluding, however, (1) all Accounts under which payment is
not received within 90 days from any invoice date, (2) all
Accounts against which the account debtor or any other person
obligated to make payment thereon asserts any defense, offset,
counterclaim or other right to avoid or reduce the liability
represented by the Account and (3) any Accounts if the account
debtor or any other person liable in connection therewith is
insolvent, subject to bankruptcy of receivership proceedings
or has made an assignment for the benefit of creditors or
whose credit standing is unacceptable to Bank and Bank has so
notified Borrower. Eligible Accounts shall only include such
accounts as Bank in its sole discretion shall determine are
eligible from time to time.
5. Borrower hereby assigns to Bank all Borrower's present and future
Accounts, including all proceeds due thereunder, all guaranties and
security therefor, and hereby grants to Bank a continuing security
interest in all moneys in the Collateral Account referred to in
Section 6 hereof, as security for any and all obligations of Borrower
to Bank, whether now owing or hereafter incurred and whether direct,
indirect, absolute or contingent. So long as Borrower is indebted to
Bank or Bank is committed to extend credit to Borrower, Borrower will
execute and deliver to Bank such assignments, including Bank's
standard forms of Specific or General Assignment covering individual
Accounts, notices, financing statements, and other documents and
papers as Bank may require in order to affirm, effectuate or further
assure the assignment to Bank of the Collateral or to give any third
party, including the account debtors obligated on the Accounts, notice
of Bank's interest in the Collateral.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower will collect with diligence all Borrower's
Accounts, provided that no legal action shall be maintained thereon or
in connection therewith without Bank's prior written consent. Any
collection of Accounts by Borrower, whether in the form of cash,
checks, notes, or other instruments for the payment of money (properly
endorsed or assigned where required to enable Bank to collect same),
shall be in trust for Bank; and Borrower shall keep all such
collections separate and apart from all other funds and property so as
to be capable of identification as the property of Bank and deliver
said collections daily to Bank in the identical form received. The
proceeds of such collections when received by Bank may be applied by
Bank directly to the payment of Borrower's Loan Account or any other
obligation secured hereby. Any credit given by Bank upon receipt of
said proceeds shall be conditional credit subject to collection.
Returned items at Bank's option may be charged to Borrower's general
account. All collections of the Accounts shall be set forth on an
itemized schedule, showing the name of the account debtor, the amount
of each payment and such other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect
to returned merchandise and adjustments. However, Borrower shall
immediately notify Bank of all cases involving returns, repossessions,
and loss or damage of or to merchandise represented by the Accounts
and of any credits, adjustments or disputes arising in connection with
the goods or services represented by the Accounts and, in any of such
events, Borrower will immediately pay to Bank from its own funds (and
not from the proceeds of Accounts or Inventory) for application to
Borrower's Loan Account or any other obligation secured hereby the
amount of any credit for such returned or repossessed merchandise and
adjustments made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a
corporation, that Borrower is duly organized and existing in the State
of its incorporation and the execution, delivery and performance
hereof are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any
charter, by-law or other incorporation papers, or of any indenture,
agreement or undertaking to which Borrower is a party or by which
Borrower is found or affected; (ii) Borrower is, or at the time the
collateral becomes subject to Bank's security interest will be, the
true and lawful owner of and has, or at the time the Collateral
becomes subject to Bank's security interest will have, good and clear
title to the Collateral, subject only to Bank's rights therein; (iii)
Each Account is, or at the time the Account comes into existence will
be, a true and correct statement of a bona fide indebtedness incurred
by the debtor named therein in the amount of the Account for either
merchandise sold or delivered (or being held subject to Borrower's
delivery instructions) to, or services rendered, performed and
accepted by, the account debtor; (iv) That there are or will be no
defenses, counterclaims, or setoffs which may be asserted against the
Accounts; and (v) any and all financial information, including
information relating to the Collateral, submitted by Borrower to Bank,
whether previously or in the future, is or will be true and correct.
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9. Borrower will: (i) Furnish Bank from time to time such financial
statements and Information as Bank may reasonably request and inform
Bank immediately upon the occurrence of a material adverse change
therein; (ii) Furnish Bank periodically, in such form and detail and at
such times as Bank may require, statements showing aging and
reconciliation of the Accounts and collections thereon; (iii) Permit
representatives of Bank to inspect the Borrower's books and records
relating to the Collateral and make extracts therefrom at any
reasonable time and to arrange for verification of the Accounts, under
reasonable procedures, acceptable to Bank, directly with the account
debtors or otherwise at Borrower's expense; (iv) Promptly notify Bank
of any attachment or other legal process levied against any of the
Collateral and any information received by Borrower relative to the
Collateral, including the Accounts, the account debtors or other
persons obligated in connection therewith, which may in any way affect
the value of the Collateral or the rights and remedies of Bank in
respect thereto; (v) Reimburse Bank upon demand for any and all legal
costs, including reasonable attorneys' fees, and other expense incurred
in collecting any sums payable by Borrower under Borrower's Loan
Account or any other obligation secured hereby, enforcing any term or
provision of this Security Agreement or otherwise or in the checking,
handling and collection of the Collateral and the preparation and
enforcement of any agreement relating thereto; (vi) Notify Bank of each
location and of each office of Borrower at which records of Borrower
relating to the Accounts are kept; (vii) Provide, maintain and deliver
to Bank policies insuring the Collateral against loss or damage by such
risks and in such amounts, forms and companies as Bank may require and
with loss payable solely to Bank, and, in the event Bank takes
possession of the Collateral, the insurance policy or policies and any
unearned or returned premium thereon shall at the option of Bank become
the sole property of Bank, such policies and the proceeds of any other
insurance covering or in any way relating to the Collateral, whether
now in existence or hereafter obtained, being hereby assigned to Bank;
and (viii) in the event the unpaid balance of Borrower's Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower
is entitled under Section 1 hereof, Borrower shall immediately pay to
Bank, from its own funds and not from the proceeds of Collateral, for
credit to Borrower's Loan Account the amount of such excess.
10. Bank may at any time, without prior notice to Borrower, collect the
Accounts and may give notice of assignment to any and all account
debtors, and Borrower does hereby make, constitute and appoint Bank its
irrevocable, true and lawful attorney with power to receive, open and
dispose of all mail addressed to Borrower, to endorse the name of
Borrower upon any checks or other evidences of payment that may come
into the possession of Bank upon the Accounts to endorse the name of
the undersigned upon any document or instrument relating to the
Collateral; in its name or otherwise, to demand, xxx for, collect and
give acquittances for any and all moneys due or to become due upon the
Accounts; to compromise, prosecute or defend any action, claim or
proceeding with respect thereto; and to do any and all things necessary
and proper to carry out the purpose herein contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or
grant a security interest in any of the Collateral other than to Bank,
or execute any financing statements covering the Collateral in favor of
any secured party or person other than Bank.
12. Should: (i) Default be made in the payment of any obligation, or breach
be made in any warranty, statement, promise, term or condition,
contained herein or hereby secured; (ii) Any statement or
representation made for the purpose of obtaining credit hereunder prove
false; (iii) Bank deem the Collateral inadequate or unsafe or in danger
of misuse; (iv) Borrower become insolvent or make an assignment for the
benefit of creditors; or (v) Any proceeding be commended by or against
Borrower under any bankruptcy, reorganization, arrangement,
readjustment of debt or moratorium law or statute; then in any such
event, Bank may, at its option and without demand first made and
without notice to Borrower, do any one or more of the following: (a)
Terminate its obligation to make loans to Borrower as provided in
Section 1 thereof; (b) Declare all sums secured hereby immediately due
and payable; (c) immediately take possession of the Collateral wherever
it may be found, using all necessary force so to do, or require
Borrower to assemble the Collateral and make it available to Bank at a
place designated by Bank which is reasonably convenient to Borrower and
Bank, and Borrower waives all claims for damages due to or arising from
or connected with any such taking; (d) Proceed in the foreclosure of
Bank's security interest and sale of the Collateral in any manner
permitted by law, or provided for herein; (e) Sell, lease or otherwise
dispose of the Collateral at public or private sale, with or without
having the Collateral at the place of sale, and upon terms and in such
manner as Bank may determine, and Bank may purchase same at any such
sale; (f) Retain the Collateral in full satisfaction of the obligations
secured thereby; (g) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at
its option, cause any of the Collateral to be repaired or reconditioned
in such manner and to such extent as Bank may deem advisable, and any
sums expanded therefor by Bank shall be repaid by Borrower and secured
hereby. Bank shall have the right to enforce one or more remedies
hereunder successively or concurrently, and any such action shall not
estop or prevent Bank from pursuing any further remedy which it may
have hereunder or by law. If a sufficient sum is not realized from any
such disposition of Collateral to pay all obligations secured by this
Security Agreement, Borrower hereby promises and agrees to pay Bank any
deficiency.
13. If any writ of attachment, garnishment, execution or other legal
process be issued against any property of Borrower, or if any
assessment for taxes against Borrower, other than real property, is
made by the Federal or State government or any department thereof, the
obligation of Bank to make loans to Borrower as provided in Section 1
hereof shall immediately terminate and the unpaid balance of the Loan
Account, all other obligations secured hereby and all other sums due
hereunder shall immediately become due and payable without demand,
presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in
connection with the transactions contemplated herein at any time
subsequent to four months from the time such items are delivered to
Bank.
15. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Borrower,
but each and every condition hereof shall be in addition thereto.
*16. Additional Provisions:
See "EXHIBIT A" attached
Executed this 30th day of OCTOBER, 1996
General Automation, Inc.
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(Name of Borrower)
BY: /s/ XXXX X. XXXXXXXX, PRES. & CEO
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(Authorized Signature and Title)
IMPERIAL BANK
BY: /s/ XXXXX XXXX BY:
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Xxxxx Xxxx, Vice President (Authorized Signature and Title)
*If none, insert "None"
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[LOGO]
IMPERIAL BANK
Member FDIC
GENERAL SECURITY AGREEMENT
(Tangible and Intangible Personal Property)
This Agreement is executed on October 30, 1996, by GENERAL AUTOMATION, INC.
(hereinafter called "Obligor"). In consideration of financial accommodations
given, to be given or continued, the Obligor grants to IMPERIAL BANK
(hereinafter called "Bank") a security interest in (a) all property (i)
delivered to Bank by Obligor, (ii) which shall be in Bank's possession or
control in any matter or for any purpose, (iii) described below, (iv) now owned
or hereafter acquired by Obligor of the type or class described below and/or in
any supplementary schedule hereto, or in any financing statement filed by Bank
and executed by or on behalf of Obligor; (b) the proceeds, increase and
products of such property, all accessions thereto, and all property which
Obligor may receive on account of such collateral which Obligor will
immediately deliver to Bank (collectively referred to as "Collateral") to
secure payment and performance of all of Obligor's present or future debts or
obligations to Bank, whether absolute or contingent (hereafter referred to as
"Debt"). Unless otherwise defined, words used herein have the meanings given
them in the California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
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Identification License or
Year Make/Manufacturer Model and Serial No. Registration No. New or Used
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Engine or other equipment:
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(For aircraft - original ink signature on copy to FAA)
B. DEPOSIT ACCOUNTS:
Type Account Number Amount $
----------------------------- ------------------- ------------------------------------------------
In name of Depository
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AND ALL EXTENSIONS OR RENEWALS THEREOF.
C. ACCOUNTS, INTANGIBLES AND OTHER: (Describe)
All personal property, whether presently existing or hereafter
created or acquired, including but not limited to: All
accounts, chattel paper, documents, instruments, money,
deposit accounts and general intangibles including returns,
repossessions, books and records relating thereto, and
equipment containing said books and records. All goods
including equipment and inventory. All proceeds including,
without limitation, insurance proceeds. All guarantees and
other security therefor.
The collateral not in Bank's possession will be located at:
00000 Xxxxxxxx Xxxxx, Xxxxxx, XX 00000
000 Xxxxxx Xxxx., Xxxxxxxxx, XX 00000
000 Xxxxxxxxx Xx., Xxxxxxxxxxx, XX 00000
[ ] If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
("Borrower").
All the terms and provisions on the reverse side hereof are incorporated herein
as though set forth in full, and constitute a part of this Agreement.
Signature
Name (indicate title, if applicable) Address
GENERAL AUTOMATION, INC. BY /s/ XXXX X. XXXXXXXX 17731 Xxxxxxxx North
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Pres. & CEO Xxxxxx, XX 00000
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SECURITY AGREEMENT (CONTINUED)
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs
of collecting the Debt, of protecting, insuring of realizing on Collateral, and
any expenditure of Bank pursuant hereto, including attorneys' fees and
expenses, with interest at the rate of 24% per year, or the rate applicable to
the Debt, whichever is less, from the date of expenditure, and (c) any
deficiency after realization of Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefore, and will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor's possession (unless specifically
otherwise agreed to by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location
disclosed to Bank and will not remove the Collateral from the
location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair
it if necessary, clean, feed, shelter, water, medicate, fertilize,
cultivate, irrigate, prune and otherwise deal with the Collateral in
all such ways as are considered good practice by owners of like
property, use it lawfully and only as permitted by insurance policies,
and permit Bank to inspect the Collateral at any reasonable time.
(d) Not sell, contract to sell, lease, encumber or transfer the
Collateral (other than inventory Collateral) until the Debt has been
paid, even though Bank has a security interest in proceeds of such
Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose
of inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as
received in a demand deposit account with Bank, containing only such
proceeds and deliver statements identifying units of inventory
disposed of, accounts which gave rise to proceeds, and all
acquisitions and returns of inventory as required by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the
Bank and deliver to Bank all non-cash proceeds other than
inventory received in trade.
(d) If not in default, may obtain release of Bank's interest in
individual units of inventory upon request, therefore, payment to
Bank of the release price of such units shown on any Collateral
schedule supplementary hereto, and compliance herewith as to proceeds
thereof.
5. As to Collateral which are accounts, chattel paper, general
intangibles and proceeds described in 4(c) above, Obligor warrants, represents
and agrees:
(a) All such Collateral is genuine, enforceable in accordance with
its terms, free from default, prepayment, defense and conditions
precedent (except as disclosed to and accepted by Bank in writing),
and is supported by consecutively numbered invoices to, or rights
against, the debtors thereon. Obligor will supply Bank with duplicate
invoices or other evidence of Obligor's rights on Bank's request;
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form,
content and manner of preparation and execution and has been properly
registered, recorded, and/or filed to protect Obligor's interest
thereunder;
(d) If an account debtor shall also be indebted to Obligor on
another obligation, any payment made by him not specifically
designated to be applied on any particular obligation shall be
considered to be a payment on the account in which Bank has a security
interest. Should any remittance include a payment not on an account,
it shall be delivered to Bank and, if no event of default has
occurred, Bank shall pay Obligor the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account
or renew or extend the time of payment thereof without Bank's prior
written consent.
6. Obligor owns all Collateral absolutely, and no other person has or
claims any interest in any Collateral, except as disclosed to and accepted by
Bank in writing. Obligor will defend any proceeding which may affect title to
or Bank's security interest in any Collateral, and will indemnify and hold Bank
free and harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession, the
realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request and authorizes Bank to make any claim thereunder, to cancel the
insurance on Obligor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail to
deliver the required policy or policies to the Bank, Bank may, at Obligor's
cost and expense, without any duty to do so, get and pay for insurance naming
as the insured, at Bank's option, either both Obligor and Bank, or only Bank,
and the cost thereof shall be secured by this Security Agreement, and shall be
repayable as provided in Paragraph 1 above.
9. Obligor will give Bank any information it requires. All information
at any time supplied to Bank by Obligor (including, but not limited to, the
value and condition of Collateral, financial statements, financing statements,
and statements made in documentary Collateral) is correct and complete, and
Obligor will notify Bank of any adverse change in such information. Obligor
will promptly notify Bank of any change of Obligor's residence, chief executive
office or mailing address.
10. Bank is irrevocably appointed Obligor's attorney-in-fact to do any act
which Obligor is obligated hereby to do, to exercise such rights as Obligor may
exercise, to use such equipment as Obligor might use, to enter Obligor's
premises to give notice of Bank's security interest, and to collect Collateral
and proceeds and to execute and file in Obligor's name any financing statements
and amendments thereto required to perfect Bank's security interest hereunder,
all lo protect and preserve the Collateral and Bank's rights hereunder. Bank
may:
(a) Endorse, collect and receive delivery or payment of
instruments and documents constituting Collateral;
(b) Make extension agreements with respect to or affecting
Collateral, exchange it for other Collateral, release persons liable
thereon or take security for the payment thereof, and compromise
disputes in connection therewith;
(c) Use or operate Collateral for the purpose of preserving
Collateral or its value and for preserving or liquidating Collateral.
11. If more than one Obligor signs this Agreement, their liability is
joint and several. Any Obligor who is married agrees that recourse may be had
against separate property for the Debt. Discharge of any Obligor except for
full payment, or any extension, forbearance, change of rate of interest, or
acceptance, release or substitution of Collateral or any impairment or
suspension of Bank's rights against an Obligor, or any transfer of an Obligor's
interest to another shall not affect the liability of any other Obligor. Until
the Debt shall have been paid of performed in full, Bank's rights shall
continue even it the Debt is outlawed. All Obligors waive: (a) any right to
require Bank to proceed against any Obligor before any other, or to pursue any
other remedy; (b) presentment, protest and notice of protest, demand and notice
of nonpayment, demand or performance, notice of sale, and advertisement of
sale; (c) any right to the benefit of or to direct the application of any
Collateral until the Debt shall have been paid; (d) and any right of
subrogation to Bank until Debt shall have been paid or performed in full.
12. Upon default, at Bank's option, without demand or notice, all or any
part of the Debt shall immediately become due. Bank shall have all rights
given by law, and may sell, in one or more sales, Collateral in any county
where Bank has an office. Bank may purchase at such sale. Sales for cash or
on credit to a wholesaler, retailer or user of the Collateral, or at public or
private auction, are all to be considered commercially reasonable. Bank may
require Obligor to assemble the Collateral and make it available to Bank at the
entrance to the location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with
Bank or breach of any warranty herein, or Borrower's failure to pay or
perform any agreement with Bank.
(b) Any change in Obligor's or Borrower's financial condition which
in Bank's judgment impairs the prospect of Borrower's payment or
performance.
(c) Any actual or reasonably anticipated deterioration of the
Collateral or in the market price thereof which causes it, in Bank's
judgment, to become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors,
insolvency, appointment of receiver, or the filing of any petition
under bankruptcy or debtor's relief laws of, by or against Obligor or
Borrower or any guarantor of the Debt.
(f) Any warranty or representation which is false or is believed
in good faith by Bank to be false.
13. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of Obligor
or Borrower or right of Bank to modify this Agreement, or waive any other
similar default.
14. On transfer of all or any part of the Debt, Bank may transfer all or
any part of the Collateral. Bank may deliver all or any part of the Collateral
to any Obligor at any time. Any such transfer or delivery shall discharge Bank
from all liability and responsibility with respect to such Collateral
transferred or delivered. This Agreement benefits Bank's successors and
assigns and binds Obligor's heirs, legatees, personal representatives,
successors and assigns. Obligor agrees not to assert against any assignee of
Bank any claim or defense that may exist against Bank. Time is of the essence.
This Agreement and supplementary schedules hereto contain the entire security
agreement between Bank and Obligor. Obligor will execute any additional
agreements, assignments or documents reasonably required by Bank to carry this
Agreement into effect.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, to the jurisdiction of whose courts the
Obligor hereby agrees to submit. Obligor agrees that service of process may be
accomplished by any means authorized by California law. All words used herein
in the singular shall be considered to have been used in the plural where the
context and construction so require.
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EXHIBIT "A"
ADDENDUM TO SECURITY AND LOAN AGREEMENT ("SECURITY AND LOAN AGREEMENT") BETWEEN
GENERAL AUTOMATION, INC. AND IMPERIAL BANK.
Dated: October 30, 1996
This Addendum is made and entered into October 30, 1996 between
GENERAL AUTOMATION, INC. ("Borrower") and IMPERIAL BANK ("Bank"). This
Addendum amends and supplements the Security and Loan Agreement. In the event
of any inconsistency between the terms herein and the terms of the Security and
Loan Agreement, the terms herein shall in all cases govern and control. All
capitalized terms herein, unless otherwise defined herein, shall have the
meaning set forth in the Security and Loan Agreement.
1. Any commitment of Bank, pursuant to the terms of the Security and Loan
Agreement, to make advances against Eligible Accounts shall expire on November
4, 1997, subject to Bank's right to renew said commitment at its sole
discretion. Any renewal of the commitment shall not be binding upon the Bank
unless it is in writing and signed by an officer of the Bank.
2. Borrower represents and warrants that:
a. LITIGATION. There is no litigation or other proceeding
pending or threatened against or affecting Borrower, and Borrower is not in
default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority.
b. FINANCIAL CONDITION. The balance sheet of Borrower as of June
30, 1996, and the related profit and loss statement on that date, a copy of
which has heretofore been delivered to Bank by Borrower, and all other
statements and data submitted in writing by Borrower to Bank in connection with
this request for credit are true and correct, and said balance sheet and profit
and loss statement truly present the financial condition of Borrower as of the
date thereof and the results of the operations of Borrower for the period
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date,
there have been no materially adverse changes. Borrower has no knowledge of
any liabilities, contingent or otherwise, at such date not reflected in said
balance sheet, and Borrower has not entered into any special commitments or
substantial contracts which are not reflected in said balance sheet, other than
in the ordinary and normal course of its business, which may have a materially
adverse effect upon its financial condition, operations or business as now
conducted.
1
6
EXHIBIT A
Page 2
c. TRADEMARKS, PATENTS. Borrower, as of the date hereof,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights, and licenses to conduct its business as now operated, without any known
conflict with valid trademarks, trade names, copyrights patents and license
rights of others.
d. TAX STATUS. Borrower has no liability for any delinquent
state, local or federal taxes, and, if Borrower has contracted with any
government agency, Borrower has no liability for renegotiation of profits.
3. Borrower agrees that so long as it is indebted to Bank, it WILL NOT,
without Bank's WRITTEN CONSENT.
a. TYPE OF BUSINESS; MANAGEMENT Make any substantial change in
the character of its business; or make any change in its executive management.
b. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness for borrowed moneys other than loans from Bank except
obligations now existing as shown in financial statement dated September 30,
1996, and any debt associated with the Asset Purchase Agreement between General
Automation and Sequoia Systems, Inc. dated October 3, 1996, excluding those
being refinanced by Bank; or sell or transfer, either with or without recourse,
any accounts or notes receivable or any moneys due to become due.
c. LIENS AND ENCUMBRANCES. Create, incur, assume any mortgage,
pledge, encumbrance, lien or charge of any kind (including the charge upon
property at any time purchased or acquired under conditional sale or other
title retention agreement) upon any asset now owned or hereafter acquired by
it, other than liens for taxes not delinquent and liens in Bank's favor.
d. LOANS, INVESTMENTS, SECONDARY LIABILITIES, Make any loans or
advances to any person or other entity other than in the normal and ordinary
course of its business as now conducted or make any investment in the
securities of any person or other entity other than the United States
Government; or guarantee or otherwise become liable upon the obligation of any
person or other entity, except by endorsement of negotiable instruments for
deposit or collection in the ordinary and normal course of its business.
e. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION.
Purchase or otherwise acquire the assets or business of any person or other
entity with the exception of the Asset Purchase Agreement between General
Automation and Sequoia Systems, Inc. dated October 3, 1996; or liquidate,
dissolve, merge or consolidate, or commence any proceedings therefore; or sell
any assets except in the ordinary and normal course of
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EXHIBIT A
Page 3
its business as now conducted; or sell, lease, assign, or transfer any
substantial part of its business or fixed assets, or any property or other
assets necessary for the continuance of its business as now conducted,
including without limitation the selling of any property or other asset
accompanied by leasing back of same.
f. DIVIDENDS, STOCK PAYMENTS, OTHER WITHDRAWALS FROM RETAINED
EARNINGS. Declare or pay any dividend (other than dividends payable in common
stock of Borrower) or make any other distribution of any of its capital stock
now outstanding or hereafter issued or purchase, redeem or retire any of such
stock or make withdrawals from retained earnings for any reason not mentioned
above.
4. Should there be a default under the Security and Loan Agreement, the
General Security Agreement executed by Borrower or any note executed by
Borrower in favor of Bank, all obligations, loans and liabilities of Borrower
to Bank, due or to become due, whether now existing or hereafter arising, shall
at the option of the Bank, become immediately due and payable without notice or
demand, and Bank shall thereupon have the right to exercise all of its default
rights and remedies.
5. Bank will advance up to 75% of Eligible Accounts Receivables up to
maximum of $1,500,000. Eligible Accounts shall only include such accounts as
Bank in its sole discretion shall determine are eligible from time to time. In
addition to the provisions in the Security and Loan Agreement, "Eligible
Accounts" shall also NOT include any of the following:
a. Accounts balances over sixty (60) days past due.
b. Credit balances greater than sixty (60) days past due.
c. Accounts with respect to which 25% or more of the account
debtor's total accounts or obligations outstanding to Borrower are more than 60
days past due.
d. Accounts representing more than 15% of total accounts
receivable, the balance in excess of the 15%. However, the Bank may deem, at
its sole discretion, the entire amount, or any portion thereof, eligible.
Special concentration limits may be established on a case by case basis.
e. Accounts with respect to international transactions (with
exception of Canada) unless insured by an insurance company acceptable to the
Bank or covered by letters of credit issued or confirmed by a bank acceptable
to the Bank.
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EXHIBIT A
Page 4
f. Accounts with respect to which the account debtor is an
officer, director, shareholder, employee, subsidiary or affiliate of Borrower.
g. All accounts for sales to and purchases from a company of
common name/ownership, thereby a potential offset exists.
h. Consignment or guaranteed sales.
i. Accounts with creditors (contra accounts) to the extent of
offsetting accounts payable
j. Xxxx and hold accounts.
k. Sales representative accounts.
l. Federal Government accounts, unless assigned to the Bank in
form and substance satisfactory to the Bank with acknowledgement under the
Assignment of Claims Act.
m. Pre-xxxxxxxx under service maintenance contracts except for
the 1-30 days past due and 31-60 days past due monthly xxxxxxxx under
Borrower's GA Service Aging.
n. Evaluation units.
7. All financial covenants and financial information referenced herein
shall be interpreted and prepared in accordance with generally accepted
accounting principles applied on basis consistent with previous years.
Compliance with financial covenants shall be calculated and monitored on a
quarterly basis.
8. Borrower affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank, it will:
a. Maintain a minimum BOOK NET WORTH of $5,000,000 as of 9/30/96,
and thereafter. Book Net Worth is defined as stockholders' equity plus
subordinated debt.
b. Maintain a maximum ratio of TOTAL DEBT TO BOOK NET WORTH of
4.00 to 1.00 as of 9/30/96, and thereafter.
c. Maintain a CURRENT RATIO of at least 1.20 to 1.00 as of
9/30/96, and thereafter.
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EXHIBIT A
Page 5
Bank will have the right to change and/or add financial covenants upon
review of both Company's CPA-audited financial statements at FYE 9/30/96 and
CPA-audited financial statements of Sequoia Enterprise Systems ("SES") at
acquisition date.
d. Maintain all significant bank accounts and banking
relationship with Bank.
e. By the 15th of following month, deliver to Bank a month-end
detailed accounts receivable aging reconciled to the general ledger of
Borrower, a month-end detailed accounts payable aging reconciled to the
Borrower's general ledger and setting forth the amount of any book overdraft or
the amount of checks issued but not sent. All the foregoing will be in form
satisfactory to the Bank. Also, deliver to Bank on a quarterly basis, or more
frequently if demanded by Bank, a complete address listing of all active
customers.
f. Within 30 days after the end of each month, deliver to Bank a
profit and loss statement, a balance sheet, and reconciliation of Borrower's
capital accounts as of the close of such period and covering operations for the
portion of Borrower's fiscal year ending on the last day of such period,
prepared in accordance with generally accepted accounting principles on a
consistent basis, all in reasonable detail and comparative form satisfactory to
Bank, certified by an officer of Borrower.
g. Within 45 days after the end of each quarter, deliver to Bank
Borrower's Form 10-Q, including a profit and loss statement and a balance sheet
in form satisfactory to Bank all certified by an officer of Borrower.
h. Within 120 days after end of Borrower's fiscal year, deliver
to Bank the CPA-audited financial statements, as of the close of and for such
fiscal year, in reasonable detail and stating in comparative form the figures
as of the close of and for the previous fiscal year, of an independent public
accounting firm selected by Borrower but acceptable to Bank, together with
federal income tax returns and financial projections for the upcoming fiscal
year.
i. RIGHTS AND FACILITIES. Maintain and preserve all rights,
franchises and other authority adequate for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair;
conduct its business in an orderly manner without voluntary interruption and,
if a corporation or partnership, maintain and preserve its existence.
i. INSURANCE. Maintain public liability, property damage and
workers' compensation insurance and insurance on all its insurable property
against fire and other hazards with responsible insurance carriers to the
extent usually maintained by similar
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EXHIBIT A
Page 6
businesses. Borrower shall provide evidence of property insurance in amounts
and types acceptable to the Bank. Bank to be named as loss payee.
j. TAXES AND OTHER LIABILITIES. Pay and discharge, before the
same become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental changes upon or against it or any of its
properties, and any of its liabilities at any time existing, except to the
extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially
adverse effect upon its financial condition or the loss of any
right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves segregated to
the extent required by generally accepted accounting practice)
deemed adequate with respect thereto.
9. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at reasonable times, at least
two times a year at a fee to the Borrower of $2,500 per audit.
10. INTEREST RATE. The rate of interest applicable to the Loan Account
shall be 2.00% per year in excess of the rate of interest which Bank has
announced as its prime lending rate ("Prime Rate") which shall vary
concurrently with any change in such Prime Rate. Interest shall be computed at
the above rate on the basis of the actual number of days during which the
principal balance of the loan account is outstanding divided by 360, which
shall, for interest computation purposes, be considered one year. Bank at its
option may demand payment of any or all of the amount due under the Loan
Account including accrued but unpaid interest, at any time. Such notice may be
given verbally or in writing and shall be effective upon receipt by Borrower.
The default rate of interest shall be five percent (5%) per year in excess of
the rate otherwise applicable.
11. COMMITMENT FEE. A commitment fee of $15,000 will be payable upon
signing of the loan documents. This fee will be prorated if the term is more
or less than twelve months.
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EXHIBIT A
Page 7
12. LATE CHARGES. If any installment payment, interest payment, principal
payment or principal balance payment due hereunder is delinquent ten or more
days, Borrower agrees to pay Bank a late charge in the amount of 5% of the
payment so due and unpaid, in addition to the payment; but nothing in this
paragraph is to be construed as any obligation on the part of the Bank to
accept payment of any payment past due or less than the total unpaid principal
balance after maturity.
All payments shall be applied first to any late charges owing, then to interest
and the remainder, if any, to principal.
13. MISCELLANEOUS PROVISIONS. Failure or Indulgence Not Waiver. No
failure or delay on the part of your Bank or any holder of Notes Issued
hereunder, in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
or of any other right, power or privilege. All rights and remedies existing
under this agreement or any not issued in connection with a loan that your Bank
may make hereunder, are cumulative to, not exclusive of, any rights or remedies
otherwise available.
This Addendum is executed by and on behalf of the parties as of the date first
above written.
GENERAL AUTOMATION, INC. IMPERIAL BANK
"BORROWER" "BANK"
BY: /s/ XXXX X. XXXXXXXX BY:
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TITLE: PRES. & CEO TITLE: VICE PRESIDENT
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BY: BY:
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TITLE: TITLE: REGIONAL VICE PRESIDENT
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