CREDIT AND SECURITY AGREEMENT
Dated as of September 30, 1996
XXXXXX-XXXXX LABORATORIES CORPORATION, a Utah corporation, SENSAR
CORPORATION, a Utah corporation (collectively, the "Borrowers"). and NORWEST
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as
follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles.
"Advance" means an advance to a Borrower by the Lender pursuant to Section
2.1.
"Affiliate" or "Affiliates" means any Person controlled by, controlling or
under common control with a Borrower including (without limitation) any
Subsidiary of either Borrower. For purposes of this definition, "control," when
used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement.
"Banking Day" means a day other than a Saturday on which banks are
generally open for business in Denver. Colorado, Minneapolis, Minnesota and
Provo, Utah.
"Base Rate" means the rate of interest publicly announced from time to time
by the Norwest Bank Minnesota, N.A. as its "base rate" or, if such bank ceases
to announce a rate so designated, any similar successor rate designated by the
Lender.
"Book Net Worth" of LD means the difference between:
(a) the consolidated assets of LD determined in accordance with
generally accepted accounting principles after deducting adequate reserves
in each case where, in accordance with generally accepted accounting
principles, a reserve is proper; and
(b) all Debt of LD and its Subsidiaries, including the Borrowers.
"Borrowers" means LDL and Sensar Corporation, collectively.
"Collateral" means all of the Equipment, General Intangibles, Inventory and
Receivables, together with all substitutions and replacements for and products
of any of the foregoing Collateral and together with proceeds of any and all of
the foregoing Collateral and, in the case of all tangible Collateral, together
with all accessions and together with (i) all accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any such goods and (ii) all warehouse receipts, bills of lading
and other documents of title now or hereafter covering such goods.
"Collateral Account" has the meaning specified in Section 4.l(c) hereof.
"Commitment" means $3,000,000.
"Credit Facility" means the credit facility being made available to the
Borrowers by the Lender pursuant to Article II hereof.
"Debt" of a Person means (i) all items of indebtedness or liability which
in accordance with generally accepted accounting principles would be included in
determining total liabilities as shown on the liabilities side of the balance
sheet of such Person as at the date as of which Debt is to be determined, and
(ii) indebtedness secured by any mortgage, pledge, lien or security interest
existing on property owned by such Person, whether or not the indebtedness
secured thereby shall have been assumed.
"Default" means an event that, with giving of notice or passage of time or
both, would constitute an Event of Default.
"Eligible Accounts" means all unpaid Accounts of a Borrower, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(1) That portion of Accounts which are 90 days past the invoice date
thereof;
(2) That portion of Accounts that are disputed or subject to a claim
of offset or a contra account;
(3) That portion of Accounts not yet earned by the final delivery of
goods or rendition of services, as applicable, by the Borrower to its
customer;
(4) Accounts owed by any unit of government, whether foreign or
domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government with
respect to which the Borrower has provided evidence satisfactory to the
Lender that (A) the Lender has a first priority security interest and (B)
such Account may be enforced by the Lender directly against such unit of
government under all applicable laws);
(5) Accounts owed by an account debtor located outside the United
States or Canada which are not backed by a bank letter of credit assigned
to the Lender, in the possession of the Lender and acceptable to the Lender
in all respects, in its sole discretion, or insured by a policy of foreign
receivables insurance acceptable to the Lender in its sole discretion;
(6) Accounts owed by an account debtor that is the subject of
bankruptcy proceedings or has gone out of business;
(7) Accounts owed by a shareholder, subsidiary, Affiliate, officer or
employee of such Borrower;
(8) Accounts not subject to a duly perfected security interest in
favor of the Lender or which are subject to any lien, security interest or
claim in favor of any Person other than the Lender;
(9) That portion of Accounts that have been restructured, extended,
amended or modified;
(10) That portion of Accounts that constitutes finance charges,
service charges or sales or excise taxes;
(11) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if 10% or more of the total amount due under Accounts
from such debtor is ineligible under clauses or (1), (2) or (9) above;
(12) Accounts or portions thereof, otherwise deemed ineligible by the
Lender in its sole discretion.
"Eligible Inventory" means all inventory of a Borrower consisting of raw
materials or finished goods held for sale, at the lower of cost or market value
as determined in accordance with generally accepted accounting principles;
provided, however, that the following shall not in any event be deemed Eligible
Inventory:
(1) Inventory that is: in-transit; located at any warehouse or other
premises not approved by the Lender in writing; located outside of the
states, or localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security interest in such
inventory; covered by any negotiable or non-negotiable warehouse receipt,
xxxx of lading or other document of title; on consignment to or from any
other person or subject to any bailment;
(2) Supplies or packaging inventory;
(3) Inventory that is damaged, obsolete, or not useable in the normal
course of such Borrower's operations or with respect to such Borrowers
current product lines;
(4) Inventory that such Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the vendor
thereof;
(5) Inventory that is subject to a security interest in favor of any
Person other than the Lender; and
(6) Inventory otherwise deemed ineligible by the Lender in its sole
discretion.
"Environmental Laws" has the meaning specified in Section 5.12 hereof.
"Equipment" means all of the equipment of either Borrower, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by either Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning specified in Section 8.1 hereof.
"General Intangibles" means all of the general intangibles of either
Borrower, as such term is defined in the UCC, whether now owned or hereafter
acquired, including (without limitation) all present and future patents, patent
applications, applications and registrations, copyrights trademarks, trade
names, trade secrets, customer or supplier lists and contracts, manuals,
operating instructions, permits, licenses, franchises, the right to use the name
of either Borrower, and the goodwill of each Borrower's business.
"Guaranty" means any of the guaranty by LD of the Obligations of the
Borrowers and the guaranty by each Borrower of the Obligations of the other
Borrower.
"Inventory" means all of the inventory of either Borrower, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether consisting
of whole goods, spare parts or components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.
"LD" means Xxxxxx-Xxxxx Incorporated, a Nevada corporation.
"LDL" means Xxxxxx-Xxxxx Laboratories Corporation, a Utah corporation.
"LDL Borrowing Base" means at any time and subject to change from time to
time in the Lender's sole discretion, the lesser of:
(a) the Commitment, or
(b) the sum of 80% of the Eligible Accounts of LDL plus the lesser
of:
(A) $600,000 minus the Sensar Inventory Reliance, or
(B) the sum of (x) the lesser of $200,000 or 25 % of the
Eligible Inventory of LDL consisting of raw materials, plus (y) 60% of
the Eligible Inventory of LDL consisting of finished goods.
"LDL Inventory Reliance" means the difference between (i) any outstanding
Advances to LDL and (ii) 80% of the Eligible Accounts of LDL.
"LDL Note" means the promissory note of LDL payable to the order of the
Lender in substantially the form of Exhibit A-1.
"Loan Documents" means this Agreement, the Notes and the Patent Security
Agreements referred to in Section 4.1(e).
"Lockbox" has the meaning specified in Section 6.10.
"Notes" means the LDL Note and the Sensar Corporation Note.
"Obligations" has the meaning specified in Section 3.1 hereof.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of either Borrower and covered by Title IV of ERISA.
"Premises" means all premises where any Borrower conducts its business and
has any rights of possession, including (without limitation) the premises
legally described in Exhibit E attached hereto.
"Receivables" means each and every right of either Borrower to the payment
of money, whether such right to payment now exists or hereafter arises, whether
such right to payment arises out of a sale, lease or other disposition of goods
or other property, out of a rendering of services, out of a loan, out of the
overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by such Borrower or by some other person who subsequently transfers such
person's interest to such Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which such Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in Title IV
of ERISA.
"Security Interest" has the meaning specified in Section 3.1 hereof.
"Sensar" means Sensar Corporation, a Utah corporation.
"Sensar Borrowing Base" means at any time and subject to change from time
to time in the Lender's sole discretion, the lesser of:
(a) the Commitment, or
(b) the sum of 80% of the Eligible Accounts of Sensar plus the lesser
of:
(A) $600,000 minus the LDL Inventory Reliance, or
(B) the sum of (x) the lesser of $200,000 or 25 % of the
Eligible Inventory of Sensar consisting of raw materials, plus (y) 60%
of the Eligible Inventory of Sensar consisting of finished goods.
"Sensar Inventory Reliance" means the difference between (i) any
outstanding Advances to Sensar and (ii) 807c of the Eligible Accounts of Sensar.
"Sensar Note" means the promissory note of Sensar payable to the order of
the Lender in substantially the form of Exhibit A-2.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by LD, by LD and one or
more other Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" means September 30, 2000.
"WCC" means the Uniform Commercial Code as in effect from time to time in
the state designated in Section 9.12 hereof as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
ARTICLE II
Amount and Terms of the Credit Facility
Section 2.1 Advances. On the terms and subject to conditions of this
Section, the Lender agrees, on the terms and subject to the conditions herein
set forth, to make Advances to each Borrower from time to time during the period
from the date hereof to and including the Termination Date, or the earlier date
of termination in whole of the Credit Facility pursuant to Sections 2.4(c) or
8.2 hereof, in an aggregate amount at any time outstanding not to exceed such
Borrower's Borrowing Base, which Advances shall be secured by the Collateral as
provided in Article III hereof. The Credit Facility made available to each
Borrower pursuant to this Section 2.1(a) shall be a revolving facility and it is
contemplated that the Borrowers will request Advances, make prepayments and
request additional Advances. The Borrowers agree to comply with the following
procedures in requesting Advances under this Section 2.1:
(a) No Borrower will request any Advance under this Section 2.1 if,
after giving effect to such requested Advance, (i) the outstanding and
unpaid Advances made to such Borrower under this Section 2.1 would exceed
such Borrower's Borrowing Base, or (ii) the aggregate Advances made to both
Borrowers under this Section 2.1 would exceed the Commitment.
(b) Each request for an Advance under this Section 2.1 shall be made
to the Lender prior to 11:00 a.m. (Colorado time) of the day of the
requested Advance. Each request for an Advance may be made in writing or
by telephone, specifying the date of the requested Advance and the amount
thereof, and shall be by (i) any officer of the Borrower requesting the
Advance; or (ii) any person designated as such Borrower's agent by any
officer of such Borrower in a writing delivered to the Lender; or (iii) any
person reasonably believed by the Lender to be an officer of such Borrower
or such a designated agent.
(1) Upon fulfillment of the applicable conditions set forth in
Article IV hereof, the Lender shall promptly disburse loan proceeds by
crediting the same to such Borrower's demand deposit account
maintained with Key Bank of Utah, unless the Lender and such Borrower
shall agree in writing to another manner of disbursement. Upon
request of the Lender, such Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. Such Borrower
shall be obligated to repay all Advances under this Section 2.1
notwithstanding the failure of the Lender to receive such confirmation
and notwithstanding the fact that the person requesting the same was
not in fact authorized to do so. Any request for an Advance under
this Section 2.1, whether written or telephonic, shall be deemed to be
a joint and several representation by the Borrowers that (i) the
condition set forth in Section 2.1(a) hereof has been met, and (ii)
the conditions set forth in Section 4.2 hereof have been met as of the
time of the request.
Section 2.2 Notes. All Advances made by the Lender under Section 2.1
hereof shall be evidenced by and be repayable with interest in accordance with,
in the case of Advances requested by LDL, the LDL Note, and, in the case of
Advances requested by Sensar, the Sensar Note. The principal of the LDL Note
and the Sensar Note shall be payable as provided herein and on the earlier of
the Termination Date or acceleration by the Lender pursuant to Section 8.2
hereof, and shall bear interest as provided herein.
Section 2.3 Interest.
(a) The principal of the Advances outstanding from time to time
during any month shall bear interest (computed on the basis of actual days
elapsed in a 360-day year) as follows:
(1) Advances pursuant to Section 2.1 hereof and evidenced by the
LDL Note or the Sensar Note shall bear interest at an annual rate
equal to the sum of the Base Rate plus 2.5%, which rate shall change
when and as the Base Rate changes.
(2) Notwithstanding anything contained in this Section 2.3 or
the Notes to the contrary (i) from the first day of any month during
which any Default or Event of Default occurs or exists at any time, in
the Lender's discretion and without waiving any of its other rights
and remedies, the rate of interest payable on any and all Advances and
on the Notes shall be the rate otherwise payable with respect to such
Advances and the Notes plus 3.0%, and (ii) in no event shall any rate
change be put into effect which would result in a rate greater than
the highest rate permitted by law.
(3) Notwithstanding the interest payable pursuant to Section
2.3(a)(1) and (2) hereof, if the sum of the interest payable on the
LDL Note and the Sensar Note for any month is not equal to at least
$8,000, the Borrowers shall jointly and severally pay the Lender on
the last day of such month, the difference between $8,000 and the
amount of the interest payable under the LDL Note and the Sensar Note,
but not more than the maximum amount of interest permitted by
applicable law. The minimum interest charge for periods of less than
one month shall be suitably pro rated.
(b) Interest accruing on the principal balance of the Advances
outstanding from time to time shall be payable on the last day of each
month and on the Termination Date or earlier maturity or prepayment in
full.
(c) If any Person shall acquire a participation in Advances under
this Agreement, the Borrower shall be obligated to the Lender to pay the
full amount of all interest calculated under Section 2.3(a) hereof, along
with all other fees, charges and other amounts due under this Agreement,
regardless if such Person elects to accept interest with respect to its
participation at a lower rate, or otherwise elects to accept less than its
pro rata share of such fees, charges and other amounts due under this
Agreement.
Section 2.4 Voluntary Prepayment; Termination of Agreement by Borrower.
(a) Either Borrower may, in its discretion, prepay its Note in whole
or from time to time in part without penalty or premium.
(b) The Borrowers may terminate this Agreement at any time and,
subject to payment and performance of all the Borrowers' obligations to the
Lender, may obtain any release or termination of the Security Interests to
which the Borrower is otherwise entitled by law by (i) giving at least 30
days' prior written notice to the Lender of the Borrowers' intention to
terminate this Agreement; and (ii) paying the Lender a termination fee
equal to 2.0% of the Commitment if such termination occurs prior to October
1, 1997, and 1.5% of the Commitment if such termination occurs after
September 30, 1997, if the Borrowers terminate this Agreement effective as
of any date other than the Termination Date or under circumstances whereby
the Credit Facility is refinanced by a lender other than an affiliate of
Norwest Corporation or if either Borrower enters into a credit facility
with or borrows money from any source other than an affiliate of Norwest
Corporation within 90 days from the date of such termination.
Notwithstanding the foregoing no termination fee shall be payable if this
Agreement is terminated within 60 days of the date on which the Lender
requests reimbursement from the Borrower pursuant to Section 2.11.
Section 2.5 Mandatory Prepayment. Without notice or demand, if the sum of
the outstanding principal balance of the Advances made to a Borrower pursuant to
Section 2.1 shall at any time exceed the Borrowing Base of such Borrower, such
Borrower shall immediately prepay the Advances made to it to the extent
necessary to reduce the sum of the outstanding principal balance of the Advances
made to it pursuant to Section 2.1 to the Borrowing Base of such Borrower. Any
payment received by the Lender under this Section 2.5 or under Section 2.4 may
be applied to the Advances to such Borrower, including interest thereon and any
fees, commissions, costs and expenses hereunder and under the other Loan
Documents, in such order and in such amounts as the Lender, in its discretion,
may from time to time determine.
Section 2.6 Payment. All payments of principal of and interest on the
Advances shall be made to the Lender in immediately available funds. Each
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time and without request by the Borrower, to make an Advance to such
Borrower in the amount of any interest due and payable by such Borrower
hereunder or the amount of any fees, costs or expenses due and payable hereunder
or under any other Loan Documents by such Borrower.
Section 2.7 Payment on Non-Banking Days. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Banking Day, such
payment may be made on the next succeeding Banking Day, and such extension of
time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
Section 2.8 Liability Records. The Lender may maintain from time to time,
at its discretion, liability records as to any and all advances made or repaid
and interest accrued or paid under this Agreement. All entries made on any such
record shall be presumed correct until the Borrowers establish the contrary. On
demand by the Lender, the Borrowers will admit and certify in writing the exact
principal balance that the Borrowers then assert to be outstanding to the Lender
under this Agreement. In the absence of manifest error, any billing statement
or accounting rendered by the Lender shall be conclusive and fully binding on
the Borrowers unless specific written notice of exception is given to the Lender
by the Borrowers within 30 days after its receipt by the Borrowers.
Section 2.9 Setoff. The Borrowers agree that the Lender may at any time
or from time to time, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrowers by the Lender,
whether or not due, against any indebtedness owed to the Lender by the Borrowers
(for Advances or for any other transaction or event), then due and payable. In
addition, each other Person holding a participating interest in the Note shall
have the right to appropriate or setoff any deposit or other liability then owed
by such Person to the Borrowers, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to the Borrowers the amount of such participating interest.
Section 2.10 Fees. (a) The Borrowers hereby jointly and severally agree
to pay the Lender a fully earned and non-refundable origination fee of $30,00O,
due and payable upon the execution of this Agreement.
(b) The Borrowers jointly and severally agree to pay the Lender a
commitment fee at the rate of one-half of one percent (0.50%) per annum on
the daily unused amount of the Commitment (determined by taking into
account the aggregate outstanding Advances to both Borrowers) from the date
hereof to and including the date on which the Credit Facility is
terminated, due and payable in arrears commencing October 1, 1996, and
continuing on the first day of each month thereafter, provided that any
commitment fee remaining unpaid upon termination of the Credit Facility or
acceleration of the Notes by the Lender pursuant to Section 8.2 hereof
shall be due and payable on the date of such termination or acceleration.
Such fee shall be calculated on the basis of the actual number of days
elapsed in a 360-day year.
(c) The Borrowers hereby jointly and severally agree to pay the
Lender, on demand, audit fees of $50.00 per auditor (or if different, the
Lender's then current hourly auditor charge) in connection with any audits
or inspections by the Lender of any collateral or the operations or
business of either Borrower, together with all reasonable out-of-pocket
costs and expenses incurred in conducting any such audit or inspection.
Section 2.11 Capital Adequacy. If the Lender shall determine that the
adoption after the date hereof of any applicable law, rule or regulation
regarding capital adequacy, or any change therein after the date hereof, any
change after the date hereof in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender or its
parent corporation with any guideline or request issued after the date hereof
regarding capital adequacy (whether nor not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's or the Lender's parent corporation's
capital as a consequence of the Lender's obligations hereunder to a level below
that which the Lender or its parent corporation could have achieved but for such
adoption, change or compliance (taking into consideration the Lender's policies
with respect to capital adequacy and those of the Lender's parent corporation)
by an amount deemed to the Lender or its parent corporation to be material, then
from time to time on demand by the Lender, the Borrowers shall jointly and
severally pay to the Lender such additional amount or amounts as will compensate
the Lender or its parent corporation for such reduction. Certificates of the
Lender sent to the Borrowers from time to time claiming compensation under this
Section, stating the reason therefor and setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to the Lender
hereunder shall be conclusive absent manifest error. In determining such
amounts, the Lender or its parent corporation may use any reasonable averaging
and attribution methods. Notwithstanding the foregoing, no amounts shall be
payable pursuant to this Section 2.11 if the Borrower terminates this Agreement
and pays all of the outstanding obligations within 60 days from the date of a
demand by the Lender for reimbursement hereunder.
ARTICLE III
Security Interest
Section 3.1 Grant of Security Interest. Each Borrower hereby assigns and
grants to the Lender a security interest (collectively referred to as the
"Security Interests") in the Collateral, as security for the payment and
performance of each and every debt, liability and obligation of every type and
description which such Borrower may now or at any time hereafter owe to the
Lender (whether such debt liability or obligation now exists or is hereafter
created or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of such Borrower, and
whether it is direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or sole, joint, several or
joint and several, and including specifically, but not limited to, all
indebtedness of such Borrower arising under this Agreement or any other loan or
credit agreement or guaranty between such Borrower and the Lender, whether now
in effect or hereafter entered into; all such debts, liabilities and obligations
are herein collectively referred to as the "Obligations" of such Borrower).
Section 3.2 Notification of Account Debtors and Other Obligors. In
addition to the rights of the Lender under Section 6.10 hereof, with respect to
any and all rights to payment constituting Collateral the Lender may, at any
time before the occurrence of an Event of Default, notify any account debtor or
other person obligated to pay the amount due that payment shall be made directly
to a Lockbox, and may at any time after the occurrence of an Event of Default
which is continuing, notify such Person that the right to such payment has been
assigned to the Lender for security and shall be paid directly to the Lender.
The Borrowers will join in giving such notice if the Lender so requests. At any
time after the occurrence of an Event of Default which is continuing, the Lender
may, but need not, in the Lender's name or in such Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as agent and
attorney in fact of such Borrower, notify the United States Postal Service to
change the address for delivery of such Borrower's mail to any address
designated by the Lender, otherwise intercept such Borrower's mail, and receive,
open and dispose of such Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for such Borrower's account or
forwarding such mail to such Borrower's last known address.
Section 3.3 Assignment of Insurance. As additional security for the
payment and performance of the Obligations, each Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of such Borrower with respect to, any and all policies of insurance now
or at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and such Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether before or after the occurrence of any Event of
Default, the Lender may (but need not), in the Lender's name or in such
Borrower's name execute and deliver proof of claim, receive all such monies,
endorse checks and other instruments representing payment of such monies, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.
Section 3.4 Occupancy. (a) Each Borrower hereby irrevocably grants to the
Lender the right to take possession of the Premises of such Borrower at any time
after the occurrence and during the continuance of an Event of Default.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose
of goods that are Collateral and for other purposes that the Lender may in
good xxxxx xxxx to be related or incidental purposes.
(c) The right of the Lender to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations, and (ii) final sale or disposition of all goods constituting
Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, in the event that the Lender does pay or
account for any rent or other compensation for the possession, occupancy or
use of any of the Premises, the Borrowers shall jointly and severally
reimburse the Lender promptly for the full amount thereof. In addition,
the Borrowers will jointly and severally pay, or reimburse the Lender for,
all taxes, fees, duties, imposts, charges and expenses at any time incurred
by or imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or the
provisions of this Section 3.4.
Section 3.5 License. Each Borrower hereby grants to the Lender a non-
exclusive, worldwide and royalty-free license, to the full extent of such
Borrower s rights as they may exist from time to time, to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of such
Borrower for the purpose of selling, leasing or otherwise disposing of any or
all Collateral following an Event of Default.
ARTICLE IV
Conditions of Lending
Section 4.1 Conditions Precedent to the Initial Advance. The obligation
of the Lender to make the initial Advance under the Credit Facility shall be
subject to the condition precedent that the Lender shall have received all of
the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed on behalf of the Borrowers.
(b) The LDL Note, properly executed on behalf of LDL, and the Sensar
Note properly executed on behalf of Sensar.
(c) Separate Collateral Account Agreements, duly executed by each
Borrower and Key Bank of Utah, pursuant to which such Borrower and such
bank establish a depository account (the "Collateral Account") in the name
of and under the sole and exclusive control of the Lender, from which such
institution agrees to transfer finally collected funds to the Lender for
application to such Borrower's Obligations.
(d) The Guaranties, properly executed by each party thereto.
(e) A Patent Security Agreement properly executed by each Borrower.
(f) A true and correct copy of any and all leases, pursuant to which
either Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(g) Current searches of appropriate filing offices showing that (i)
no state or federal tax liens have been filed and remain in effect against
either Borrower, (ii) no financing statements have been filed and remain in
effect against either Borrower, except those financing statements relating
to liens permitted pursuant to Section 7.1 hereof and those financing
statements filed by the Lender, and (iii) the Lender has duly filed all
financing statements necessary to perfect the Security Interests granted
hereunder, to the extent the Security Interests are capable of being
perfected by filing.
(h) A certificate of the Secretary or an Assistant Secretary of each
Borrower, certifying as to (i) the resolutions of the directors and, if
required, the shareholders of such Borrower, authorizing the execution,
delivery and performance of this Agreement and the Security Documents, (ii)
the articles of incorporation and bylaws of such Borrower, and (iii) the
signatures of the officers or agents of such Borrower authorized to execute
and deliver this Agreement, the Security Documents and other instruments,
agreements and certificates, including Advance requests, on behalf of such
Borrower.
(i) A current certificate issued by the Secretary of State of the
state of each Borrower's incorporation, certifying that such Borrower is in
compliance with all corporate organizational requirements of such state.
(j) Evidence that the each Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary.
(k) An opinion of counsel to each Borrower and to LD, addressed to
the Lender.
(l) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in favor of the
Lender and with all liability insurance naming the Lender as an additional
insured.
(m) Payment of the fees due through the date of the initial Advance
under Section 2.10 hereof and expenses incurred by the Lender through such
date and required to be paid by the Borrowers under Section 9.7 hereof.
(n) Such other documents as the Lender in its sole discretion may
require.
(o) Evidence satisfactory to the Lender that immediately after the
payment of all fees payable under this Agreement, all amounts owed to Key
Bank of Utah and all past due accounts payable, the sum of the LDL
Borrowing Base and the Sensar Borrowing Base exceeds the aggregate
principal balances of the LDL Note and the Sensar Note by at least
$100,000.
Section 4.2 Conditions Precedent to All Advances. The obligation of the
Lender to make each Advances shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V hereof
are correct on and as of the date of the Advance as though made on and as
of such date, except to the extent that such representations and warranties
relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from the
Advance which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
The Borrowers jointly and severally represent and warrant to the Lender as
follows:
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations. LDL is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Utah and
Sensar is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Utah, and each Borrower is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. Each Borrower has all requisite
power and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its corporate existence, each Borrower has
done business solely under the names set forth in Exhibit B hereto. The chief
executive office and principal place of business of each Borrower is located at
the address set forth in Exhibit B hereto, and all of such Borrower's records
relating to its business or the Collateral are kept at that location. All
Inventory and Equipment is located at that location or at one of the other
locations set forth in Exhibit B hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by each Borrower of the
Loan Documents and such Borrower's Guaranty and the borrowings from time to time
hereunder have been duly authorized by all necessary corporate action and do not
and will not (a) require any consent or approval of the stockholders of either
Borrower, (b) require any authorization, consent or approval by, or
registration, declaration or filing with, or notice to, any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof, (c) violate any provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to either Borrower or of the
Articles of Incorporation or Bylaws of either Borrower, (d) result in a breach
of or constitute a default under any indenture or loan or credit agreement or
any other material agreement, lease or instrument to which either Borrower is a
party or by which it or its properties may be bound or affected, or (e) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature
(other than the Security Interests) upon or with respect to any of the
properties now owned or hereafter acquired by either Borrower.
Section 5.3 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower executing the same, the other Loan Documents and such
Borrower's Guaranty will constitute, the legal, valid and binding obligations of
the Borrower executing the same, enforceable against such Borrower in accordance
with their respective terms.
Section 5.4 Subsidiaries. Except as set forth in Exhibit B attached
hereto the Borrowers have no Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change. LD has heretofore
furnished to the Lender audited financial statements of LD for its fiscal year
ended June 30 1996, and those statements fairly present the financial condition
of LD and its Subsidiaries on the dates thereof and the results of their
operations and cash flows for the periods then ended, and were prepared in
accordance with generally accepted accounting principles. Since the date of the
most recent financial statements, there has been no material adverse change in
the business, properties or condition (financial or otherwise) of LD or the
Borrowers.
Section 5.6 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of either Borrower, threatened against or affecting
either Borrower or any of its Affiliates or the properties of either Borrower or
any of its Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to such Borrower or any of its Affiliates, would have a
material adverse effect on the financial condition, properties or operations of
such Borrower or any of its Affiliates.
Section 5.7 Regulation U. Neither Borrower is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
Section 5.8 Taxes. Each Borrower and each of its Affiliates have paid or
caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. Each Borrower and each of
its Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of such Borrower or any such Affiliate, as the case
may be, are required to be filed, and such Borrower and its Affiliates have paid
or caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 Titles and Liens. Each Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest balance
sheet referred to in Section 5.5 hereof and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances, except for
mortgages, security interests and liens permitted by Section 7.1 hereof. No
financing statement naming either Borrower as debtor is on file in any office
except to perfect only security interests permitted by Section 7.1 hereof.
Section 5.10 Plans. Except as disclosed to the Lender in writing prior to
the date hereof, neither Borrower nor any of its Affiliates maintains or has
maintained any Plan. Neither Borrower nor any Affiliate of either Borrower has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither Borrower nor any
Affiliate of either Borrower has:
(a) Any accumulated funding deficiency within the meaning of ERISA;
or
(b) Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which or which may
become payable to participants or beneficiaries of any such Plan).
Section 5.11 Default. Each Borrower is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a material adverse effect on the financial condition, properties or
operations of such Borrower.
Section 5.12 Environmental Protection. Each Borrower has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws and regulations relating to emissions, discharges, releases
of pollutants, contaminants, hazardous or toxic materials, or wastes into
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes ("Environmental Laws") at such Borrower s facilities or in
connection with the operation of its facilities. Except as previously disclosed
to the Lender in writing, each Borrower and all activities of such Borrower at
its facilities comply with all Environmental Laws and with all terms and
conditions of any required permits, licenses and authorizations applicable to
such Borrower with respect thereto. Except as previously disclosed to the
Lender in writing, each Borrower is also in compliance with all limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations
schedules and timetables contained in Environmental Laws or contained in any
plan order decree judgment or notice of which such Borrower is aware. Except as
previously disclosed to the Lender in writing, neither Borrower is aware of, nor
has either Borrower received notice of any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent continued compliance with, or which may give rise to any liability
under, any Environmental Laws.
Section 5.13 Submissions to Lender. All financial and other information
provided to the Lender by or on behalf of a Borrower in connection with such
Borrower's request for the credit facilities contemplated hereby is true and
correct in all material respects and, as to projections, valuations or pro forma
financial statements, present a good faith opinion as to such projections,
valuations and pro forma condition and results.
Section 5.14 Financing Statements. Each Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the Security
Interests and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the Security Documents which is capable of
being perfected by filing financing statements. None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.15 Rights to Payment. Each right to payment and each instrument
document, chattel paper and other agreement constituting or evidencing
Collateral or other collateral covered by the Security Documents is (or, in the
case of all future Collateral or such other collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim, of the account debtor or other obligor
obligated to pay such obligation.
ARTICLE VI
Affirmative Covenants of the Borrowers
So long as the Note shall remain unpaid or any Credit Facility shall be
outstanding, the Borrowers jointly and severally agree that they will comply
with the following requirements, unless the Lender shall otherwise consent in
writing:
Section 6.1 Reporting Requirements. The Borrowers will deliver, or cause
to be delivered, to the Lender each of the following which shall be in form and
detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrowers, audited financial statements of
LD with the unqualified opinion of independent certified public accountants
selected by LD and acceptable to the Lender, which annual financial
statements shall include the consolidated and consolidating balance sheets
of LD and its Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating statements of income, retained
earnings and cash flows of LD and its Subsidiaries for the fiscal year then
ended, all in reasonable detail and prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the
accounting practices applied in the preparation of the financial statements
referred to in Section 5.5 hereof, together with (i) a report signed by
such accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge except as specifically stated, of
any Default or Event of Default hereunder and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
the Borrowers are in compliance with the requirements set forth in Sections
6.12 through 6.14 and Section 7.10 hereof; and (ii) a certificate of the
chief financial officer of LD stating that such financial statements have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices reflected in
the annual financial statements referred to in Section 5.5 hereof and
whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
(b) as soon as available and in any event within 20 days after the
end of each month, an unaudited/internal balance sheet and statements of
income and retained earnings of LD and each Borrower as at the end of and
for such month and for the year to date period then ended in each case,
prepared in reasonable detail and stating in comparative form the figures
for the corresponding date and periods in the previous year in accordance
with generally accepted accounting principles applied on a basis consistent
with the accounting practices reflected in the pro forma financial
statements referred to in Section 5.5 hereof, but subject to year-end audit
adjustments; and accompanied by a certificate of the chief financial
officer of LD, substantially in the form of Exhibit D hereto stating (i)
that such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
the accounting practices reflected in the pro forma financial statements
referred to in Section 5.5 hereof, subject to year-end audit adjustments,
(ii) whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore reported and remedied
and, if so, stating in reasonable detail the facts with respect thereto,
and (iii) all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrowers are in compliance with the
requirements set forth in Sections 6.12 through 6.14 and Section 7.10
hereof;
(c) within 15 days after the end of each month, separate agings of
each Borrower's accounts receivable and its accounts payable and a
collateral certification report for such Borrower as at the end of such
month;
(d) weekly, or more frequently if requested by the Lender, an
assignment and collection report for each Borrower certified by the chief
financial officer of such Borrower;
(e) at least 30 days before the beginning of each fiscal year of the
Borrowers, the projected balance sheets and income statements for each
month of such year for each of the Borrowers individually and for LD on a
consolidated basis, each in reasonable detail, representing the good faith
projections of the Borrowers and certified by LD's chief financial officer
as being the most accurate projections available and identical to the
projections used by the Borrowers for internal planning purposes, together
with such supporting schedules and information as the Lender may in its
discretion require;
(f) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting either Borrower of the type described in Section 5.6
hereof or which seek a monetary recovery against such Borrower in excess of
$25,000;
(g) as promptly as practicable (but in any event not later than five
business days) after an officer of either Borrower obtains knowledge of the
occurrence of any breach, default or event of default under any Loan
Document or any event which constitutes a Default or Event of Default
hereunder, notice of such occurrence, together with a detailed statement by
a responsible officer of such Borrower of the steps being taken by the
Borrowers to cure the effect of such breach, default or event;
(h) as soon as possible and in any event within 30 days after either
Borrower knows or has reason to know that any Reportable Event with respect
to any Plan has occurred, the statement of the chief financial officer of
such Borrower setting forth details as to such Reportable Event and the
action which the Borrowers propose to take with respect thereto, together
with a copy of the notice of such Reportable Event to the Pension Benefit
Guaranty Corporation;
(i) as soon as possible, and in any event within 10 days after either
Borrower fails to make any quarterly contribution required with respect to
any Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, the statement of the chief financial officer of such Borrower
setting forth details as to such failure and the action which the Borrowers
propose to take with respect thereto, together with a copy of any notice of
such failure required to be provided to the Pension Benefit Guaranty
Corporation;
(j) promptly upon knowledge thereof, notice of (i) any disputes or
claims by customers of either Borrower involving amounts which, in the
aggregate, exceed $10,000; (ii) any goods returned to or recovered by
either Borrower involving amounts which, in the aggregate, exceed $10 000;
and (iii) any change in the persons constituting the officers and directors
of either Borrower;
(k) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any Collateral
or such other collateral or the prospect of payment thereof;
(l) promptly after the sending or filing thereof, copies of all
regular and periodic financial reports which LD shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) promptly upon knowledge thereof, notice of the violation by
either Borrower of any law, rule or regulation, the non-compliance with
which could materially and adversely affect its business or its financial
condition; and
(n) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports, records
or information as the Lender may request.
Section 6.2 Books and Records; Inspection and Examination. Each Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to such Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with generally accepted
accounting principles consistently applied and, upon request of the Lender, will
permit any officer, employee, attorney or accountant for the Lender (upon
reasonable notice unless the Lender in good faith believes that the accuracy of
the audit may be effected by notice) to audit, review, make extracts from or
copy any and all corporate and financial books and records of such Borrower at
all times during ordinary business hours, to send and discuss with account
debtors and other obligors requests for verification of amounts owed to such
Borrower, and to discuss the affairs of such Borrower with any of its directors.
Officers, employees or agents. Each Borrower will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any
Collateral, other collateral covered by the Security Documents or any other
property of such Borrower at any time during ordinary business hours.
Section 6.3 Account Verification. Each Borrower will at any time and from
time to time upon request of the Lender send requests for verification of
accounts or notices of assignment to account debtors and other obligors.
Section 6.4 Compliance with Laws: Environmental Indemnity. Each Borrower
will (a) comply with the requirements of applicable laws and regulations, the
non-compliance with which would materially and adversely affect its business or
its financial condition, (b) comply with all applicable Environmental Laws and
obtain any permits, licenses or similar approvals required by any such
Environmental Laws, and (c) use and keep the Collateral, and will require that
others use and keep the Collateral, only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance. Each Borrower will
indemnify, defend and hold the Lender harmless from and against any claims, loss
or damage to which the Lender may be subjected as a result of any past, present
or future existence, use, handling, storage, transportation or disposal of any
hazardous waste or substance or toxic substance by the Borrower or on property
owned, leased or controlled by such Borrower. This indemnification agreement
shall survive the termination of this Agreement and payment of the indebtedness
hereunder.
Section 6.5 Payment of Taxes and Other Claims. Each Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including, without limitation, the Collateral) or upon or against the
creation, perfection or continuance of the Security Interests, prior to the date
on which penalties attach thereto, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon any
properties of such Borrower; provided, that no Borrower shall be required to pay
any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings.
Section 6.6 Maintenance of Properties.
(a) Each Borrower will keep and maintain the Collateral, the other
collateral covered by the Loan Documents and all of its other properties
necessary or useful in its business in good condition, repair and working
order (normal wear and tear excepted) and will from time to time replace or
repair any worn, defective or broken parts: provided, however, that nothing
in this Section 6.6 shall prevent any Borrower from discontinuing the
operation and maintenance of any of its properties if such discontinuance
is, in the judgment of the Lender, desirable in the conduct of the
Borrower's business and not disadvantageous in any material respect to the
Lender.
(b) Each Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender) claiming the Collateral or
any interest therein.
(c) Each Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security interests,
liens and encumbrances except the Security Interests and other security
interests permitted by Section 7.1 hereof.
Section 6.7 Insurance. Each Borrower will obtain and at all times
maintain insurance with insurers believed by such Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which such Borrower operates.
Without limiting the generality of the foregoing, each Borrower will at all
times keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (for Collateral consisting of
motor vehicles) and such other risks and in such amounts as the Lender may
reasonably request with any loss payable to the Lender to the extent of its
interest, and all policies of such insurance shall contain a lender's loss
payable endorsement for the benefit of the Lender. All policies of liability
insurance required hereunder shall name the Lender as an additional insured.
Section 6.8 Preservation of Corporate Existence. Each Borrower will
preserve and maintain its corporate existence and all of its rights, privileges
and franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments etc. Upon request by the Lender, each
Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by such Borrower.
Section 6.10 Lockbox; Collateral Account. (a) Until the Lender directs a
Borrower to establish a lockbox pursuant hereto, each Borrower will irrevocably
direct all present and future Account debtors and other Persons obligated to
make payments constituting Collateral to make such payments by wire transfer
directly to the Collateral Account established for such Borrower. Following the
establishment of a Lockbox for a Borrower, each Borrower will irrevocably direct
all present and future Account debtors and other persons obligated to make
payments constituting Collateral to make such payments by wire transfer directly
to the Collateral Account established for such Borrower or to such Borrower's
Lockbox. All of such Borrower's invoices, account statements and other written
or oral communications directing, instructing, demanding or requesting payment
of any Account or any other amount constituting Collateral shall conspicuously
direct that all payments be made in accordance with the requirements of this
Section 6.10 and shall include wire transfer instructions and, if established,
the Lockbox address. All payments received in a Borrower's Lockbox shall be
processed to the Collateral Account established for such Borrower.
(b) Each Borrower agrees to deposit in the Collateral Account or, at
the Lender's option, to deliver to the Lender all collections on Accounts,
contract rights, chattel paper and other rights to payment constituting
Collateral, and all other cash proceeds of Collateral, which such Borrower
may receive directly, immediately upon receipt thereof, in the form
received, except for such Borrower's endorsement when deemed necessary.
Until delivered to the Lender or deposited in the Collateral Account, all
proceeds or collections of Collateral shall be held in trust by such
Borrower for and as the property of the Lender and shall not be commingled
with any funds or property of such Borrower. Amounts deposited in the
Collateral Account of a Borrower shall not bear interest and shall not be
subject to withdrawal by such Borrower, except after full payment and
discharge of all Obligations of such Borrower. All such collections shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation of such Borrower. Collected funds from the Collateral Account
of a Borrower shall be transferred to the Lender's general account, and the
Lender may deposit in its general account or in such Collateral Account any
and all collections received by it directly from such Borrower. The Lender
may commingle such funds with other property of the Lender or any other
person. The Lender from time to time shall, upon initiation by such
Borrower, after allowing one Banking Day, apply such funds to the payment
of any and all Obligations of such Borrower, in any order or manner of
application satisfactory to the Lender. All items delivered to the Lender
or deposited in the Collateral Account of a Borrower shall be subject to
final payment. If any such item is returned uncollected, such Borrower
will immediately pay the Lender, or, for items deposited in the Collateral
Account of a Borrower, the bank maintaining such account, the amount of
that item, or such bank at its discretion may charge any uncollected item
to such Borrower's commercial account or other account. Such Borrower
shall be liable as an endorser on all items deposited in the Collateral
Account, whether or not in fact endorsed by such Borrower.
Section 6.11 Performance by the Lender. If either Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives such Borrower written notice thereof
(or in the case of the agreements contained in Sections 6.5, 6.7 and 6.10
hereof, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of the Borrowers (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrowers shall
thereupon jointly and severally pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable attorneys' fees
and legal expenses) incurred by the Lender in connection with or as a result of
the performance or observance of such agreements or the taking of such action by
the Lender together with interest thereon from the date expended or incurred at
the default rate of interest payable on the Term Note. To facilitate the
performance or observance by the Lender of such covenants of the Borrowers, each
Borrower hereby irrevocably appoints the Lender, or the delegate of the Lender,
acting alone, as the attorney in fact of such Borrower (which appointment is
coupled with an interest) with the right (but not the duty) from time to time to
create, prepare, complete, execute, deliver, endorse or file in the name and on
behalf of such Borrower any and all instruments, documents, assignments,
security agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by such Borrower under this Section 6.11.
Section 6.12 Book Net Worth. LD shall, on the last day of each month in
each of the periods set forth below, maintain its consolidated Book Net Worth at
an amount which is greater than or equal to the amount set forth opposite such
period plus the amount of the net proceeds to LD from the sale of equity
securities received after the date of this Agreement:
Period Book Net Worth
Date hereof to and including $15,316,000
September 30 1996
October 1, 1996 to and including $14,895,000
December 31, 1996
January 1, 1997 to and including $15,744,000
March 31, 1997
April 1, 1997 to and including $17,758,000
June 30 1997
Prior to June 30, 1997, the Borrowers and the Lender shall negotiate in good
faith as to the Book Net Worth that LD shall be required to maintain for periods
after such date, but if the Borrowers and the Lender do not agree, the Lender
may designate the required amounts in its sole discretion, and the failure by LD
to maintain the designated amounts shall be a default hereunder.
Section 6.13 After-tax Income (or Loss). LD shall, on the last day of
each of the periods set forth below, have after tax income or loss, determined
in accordance with generally accepted accounting principles but excluding
extraordinary gains, which is at least as great as (in the case of income) or
does not exceed (in the case of losses) the amount set forth opposite such
period:
Minimum Income or
Period (Maximum Loss)
Three months ending September 30, 1996 <$1,133,000>
Six months ending December 31, 1996 <$1,554,000>
Nine months ending March 31, 1997 <$708,000>
Twelve months ending June 30, 1997 $500,000
Prior to June 30, 1997, the Borrowers and the Lender shall negotiate in good
faith as to the income that LD shall be required to maintain for periods after
such date, but if the Borrowers and the Lender do not agree the Lender may
designate the required income in its sole discretion, and the failure by LD to
maintain the designated income shall be a default hereunder.
Section 6.14 Debt to Net Worth. LD shall, on the last day of each of the
periods set forth below, maintain the ratio of (i) total liabilities to Book Net
Worth, at a ratio which is greater than or equal to the ratio set forth opposite
such period:
Period Ratio
Three months ending September 30, 1996 0.18 to 1
Six months ending December 31, 1996 0.24 to 1
Nine months ending March 31, 1997 0.32 to 1
Twelve months ending June 30, 1997 0.25 to 1
Prior to June 30, 1997, the Borrowers and the Lender shall negotiate in good
faith as to the ratios that LD shall be required to maintain for periods after
such date, but if the Borrowers and the Lender do not agree, the Lender may
designate the required ratios in its sole discretion, and the failure by LD to
maintain the designated ratios shall be a default hereunder.
ARTICLE VII
Negative Covenants
So long as any Note shall remain unpaid or any Credit Facility shall remain
outstanding, the Borrowers jointly and severally agree that, without the prior
written consent of the Lender:
Section 7.1 Liens. Neither Borrower will create, incur or suffer to exist
any mortgage, deed of trust, pledge lien security interest, assignment or
transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; excluding, however, from the operation of the
foregoing:
(a) mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in Exhibit C hereto,
securing indebtedness for borrowed money permitted under Section 7.2
hereof;
(b) the Security Interests; and
(c) purchase money security interests relating to the acquisition of
machinery and equipment of the Borrower so long as the Borrower is in, and
maintains, compliance with every other provision of this Agreement.
Section 7.2 Indebtedness. Neither Borrower will incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of such Borrower in existence on the date hereof and
listed in Exhibit C hereto; and
(c) indebtedness relating to liens permitted in accordance with
Section 7.l(c) hereof.
Section 7.3 Guaranties. Neither Borrower will assume, guarantee, endorse
or otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(a) the endorsement of negotiable instruments by such Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Exhibit C hereto and the
guaranties by each Borrower of the other Borrower's Obligations to the
Lender.
Section 7.4 Investments and Subsidiaries. (a) Neither Borrower will
purchase or hold beneficially any stock or other securities or evidences of
indebtedness of, make or permit to exist any loans or advances to, or make any
investment or acquire any interest whatsoever in, any other Person, including
specifically, but without limitation, any partnership or joint venture, except:
(1) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued
by U. S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System
having deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the Federal
Deposit Insurance Corporation);
(2) travel advances or loans to officers and employees of such
Borrower not exceeding at any one time an aggregate of $120,000; and
(3) advances in the form of progress payments, prepaid rent or
security deposits.
(b) Neither Borrower will create or permit to exist any Subsidiary
other than any Subsidiary in existence on the date hereof and listed in
Exhibit B hereto.
Section 7.5 Dividends. Neither Borrower will not declare or pay any
dividends (other than dividends payable solely in stock of such Borrower) on any
class of its stock or make any payment on account of the purchase, redemption or
other retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly; if a Default or Event of Default exists
immediately before, or would exist immediately after, such dividend is paid.
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations.
Neither Borrower will sell, lease, assign, transfer or otherwise dispose of (i)
the stock of any Subsidiary, (ii) all or a substantial part of its assets, or
(iii) any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than the sale of Inventory in
the ordinary course of business and will not liquidate, dissolve or suspend
business operations. Neither Borrower will in any manner transfer any property
without prior or present receipt of full and adequate consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions. Neither
Borrower will consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 7.8 Sale and Leaseback. Neither Borrower will enter into any
arrangement, directly or indirectly, with any other Person whereby such Borrower
shall sell or transfer any real or personal property whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which such Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 Restrictions on Nature of Business. Neither Borrower will
engage in any line of business materially different from that presently engaged
in by such Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 7.10 Capital Expenditures. The Borrowers' aggregate expenditures
required to be capitalized in accordance with generally accepted accounting
principles shall not exceed $700,000 in the aggregate for both Borrowers during
the Borrowers' fiscal year ended June 30, 1997, except to the extent that such
expenditures are for the acquisition of capital assets which are financed by
third parties, and except to the extent that such expenditures are for research
and development and do not exceed (i) the net proceeds to the Borrowers from the
sale of equity securities to LD during such fiscal year, or (ii) the amount of
any capital contributions from LD to the Borrowers during such fiscal year.
Prior to June 30, 1997, the Borrowers and the Lender shall negotiate in good
faith as to the limitations on capital expenditures for periods after such date,
but if the Borrowers and the Lender do not agree, the Lender may designate
capital expenditures limitations in its sole discretion, and the failure of the
Borrowers to maintain their capital expenditures within such limitations shall
be a default hereunder.
Section 7.11 Accounting. Neither Borrower will adopt any material change
in accounting principles other than as required by generally accepted accounting
principles. Neither Borrower will adopt, permit or consent to any change in its
fiscal year.
Section 7.12 Discounts, etc. Neither Borrower will, after notice from the
Lender, grant any discount, credit or allowance to any customer of such Borrower
or accept any return of goods sold, or at any time (whether before after notice
from the Lender) modify, amend, subordinate, cancel or terminate the obligation
of any account debtor or other obligor of such Borrower.
Section 7.13 Defined Benefit Pension Plans. Neither Borrower will adopt,
create, assume or become a party to any defined benefit pension plan, unless
disclosed to the Lender pursuant to Section 5.10 hereof.
Section 7.14 Other Defaults. Neither Borrower will permit any breach,
default or event of default to occur under any note loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other contractual
obligation binding upon such Borrower.
Section 7.15 Place of Business; Name. Neither Borrower will transfer its
chief executive office or principal place of business or move, relocate, close
or sell any business location. Neither Borrower will permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interests. Neither Borrower will change
its name.
Section 7.16 Organizational Documents. Neither Borrower will amend its
certificate of incorporation, articles of incorporation or bylaws.
Section 7.17 Salaries. Neither Borrower will pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families by more than 10% in any one year.
ARTICLE VIII
Events of Default, Rights and Remedies
Section 8.1 Events of Default. "Event of Default", wherever used herein,
means any one of the following events:
(a) Default in the payment of any interest on or principal of any
Note when it becomes due and payable; or
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by either Borrower under this Agreement; or
(c) Default in the performance, or breach, of any covenant or
agreement of either Borrower contained in this Agreement and the
continuance thereof for a period of 15 days after receipt of notice of such
default from the Lender; or
(d) Either Borrower or LD shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or either Borrower or LD shall
apply for or consent to the appointment of any receiver, trustee, or
similar officer for it for all or any substantial part of its property; or
such receiver, trustee or similar officer shall be appointed without the
application or consent of either Borrower or LD; or either Borrower or LD
shall institute (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under
the laws of any jurisdiction; or any such proceeding shall be instituted
(by petition, application or otherwise) against either Borrower or LD; or
any judgment, writ, warrant of attachment, garnishment or execution or
similar process shall be issued or levied against a substantial part of the
property of either Borrower or LD; or
(e) A petition shall be filed by or against either Borrower or LD
under the United States Bankruptcy Code naming such Borrower as debtor; or
(f) Any representation or warranty made by either Borrower in this
Agreement, or by either (or any of its officers) in any agreement,
certificate, instrument or financial statement or other statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement shall prove to have been incorrect in any material respect when
deemed to be effective; or
(g) The rendering against either Borrower of a final judgment, decree
or order for the payment of money in excess of $25,000 and the continuance
of such judgment, decree or order unsatisfied and in effect for any period
of 30 consecutive days without a stay of execution; or
(h) A default under any bond, debenture, note or other evidence of
indebtedness of either Borrower or LD owed to any Person other than the
Lender, or under any indenture or other instrument under which any such
evidence of indebtedness has been issued or by which it is governed, or
under any lease of any of the Premises, and the expiration of the
applicable period of grace, if any, specified in such evidence of
indebtedness, indenture, other instrument or lease; or
(i) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after
written notice to such effect shall have been given to either Borrower by
the Lender; or a trustee shall have been appointed by an appropriate United
States District Court to administer any Plan; or the Pension Benefit
Guaranty Corporation shall have instituted proceedings to terminate any
Plan or to appoint a trustee to administer any Plan; or either Borrower
shall have filed for a distress termination of any Plan under Title IV of
ERISA; or either Borrower shall have failed to make any quarterly
contribution required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, which the Lender determines in
good faith may by itself, or in combination with any such failures that the
Lender may determine are likely to occur in the future, result in the
imposition of a lien on the assets of either Borrower in favor of the Plan;
or
(j) An event of default shall occur under any Loan Document or under
any other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any obligations of either Borrower
hereunder or under any note; or
(k) Either Borrower or LD shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its business
in the ordinary course, or sell all or substantially all of its assets.
without the prior written consent of the Lender; or
(l) Either Borrower or LD shall fail to pay, withhold, collect or
remit any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper proceedings
and for which it shall have set aside on its books adequate reserves
therefor) or notice of any state or federal tax liens shall be filed or
issued; or
(m) Default in the payment of any amount owed by either Borrower to
the Lender other than any indebtedness arising hereunder and the expiration
of the applicable grace period, if any, with respect thereto; or
(n) Any breach, default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender and the
expiration of the applicable grace period, if any, with respect thereto.
Section 8.2 Rights and Remedies. Upon the occurrence of an Event of
Default or at any time thereafter, the Lender may exercise any or all of the
following rights and remedies:
(a) The Lender may, by notice to the Borrowers, declare the Credit
Facility to be terminated, whereupon the same shall forthwith terminate.
(b) The Lender may, by notice to the Borrowers, declare to be
forthwith due and payable the entire unpaid principal amount of the Notes
then outstanding, all interest accrued and unpaid thereon, all amounts
payable under this Agreement and any other Obligations, whereupon such
Notes, all such accrued interest and all such amounts and Obligations shall
become and be forthwith due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrowers;
(c) The Lender may, without notice to the Borrowers and without
further action, apply any and all money owing by the Lender to either
Borrower to the payment of the Advances, including interest accrued
thereon, and of all other sums then owing by the Borrowers hereunder;
(d) The Lender may, exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of Collateral,
or any evidence thereof, proceeding without judicial process or by judicial
process (without a prior hearing or notice thereof, which the Borrowers
hereby expressly waive) and the right to sell, lease or otherwise dispose
of any or all of the Collateral, and, in connection therewith, the
Borrowers will on demand assemble the Collateral and make it available to
the Lender at a place to be designated by the Lender which is reasonably
convenient to both parties;
(e) the Lender may exercise and enforce its rights and remedies under
the Loan Documents; and
(f) the Lender may exercise any other rights and remedies available
to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 8.1(e) hereof, the entire unpaid principal amount of the
Note, all interest accrued and unpaid thereon, all other amounts payable under
this Agreement and any other Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.
Section 8.3 Certain Notices. If notice to either Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten calendar days prior
to the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1 No Waiver; Cumulative Remedies. No failure or delay on the
part of the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.2 Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrowers therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on a Borrowers in any
case shall entitle either Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.3 Addresses for Notices, Etc. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed to the party to whom notice is being given at its address as
set forth below and, if telecopied, transmitted to that party at its telecopier
number set forth below:
If to the Borrowers:
c/o Xxxxxx-Xxxxx Laboratories Corporation
0000 Xxxx 000 Xxxxx
Xxxxx, Xxxx 00000
Telecopier:
Attention:
If to the Lender:
Norwest Business Credit, Inc.
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxx Xxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, or (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy.
Section 9.4 Financing Statement. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrowers is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtors:
Xxxxxx-Xxxxx Laboratories Corporation
0000 Xxxx 000 Xxxxx
Xxxxx, Xxxx 00000
Federal Tax Identification No.
Sensar Corporation
0000 X. Xxxxxxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Federal Tax Identification No.
Name and address of Secured Party:
Norwest Business Credit, Inc.
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Section 9.5 Further Documents. The Borrowers will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interests or the rights of the Lender under this
Agreement (but any failure to request or assure that any Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of this Agreement and the Security Interests,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
Section 9.6 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrowers are entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral. The Lender shall not be obligated to preserve any rights the
Borrowers may have against prior parties, to realize on the Collateral at all or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Section 9.7 Costs and Expenses. The Borrowers jointly and severally agree
to pay on demand all costs and expenses, including (without limitation)
attorneys' fees incurred by the Lender in connection with the Obligations, this
Agreement, the Loan Documents and any other document or agreement related hereto
or thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interests.
Section 9.8 Indemnity. In addition to the payment of expenses pursuant to
Section 9.7 hereof and the environmental indemnity pursuant to Section 6.4
hereof, the Borrowers jointly and severally agree to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees and agents of the
foregoing (the "Indemnitees"), from and against (i) any and all transfer taxes
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement and the other Loan
Documents or the making of the Advance, and (ii) any and all liabilities,
losses, damages, penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of counsel) in connection with any investigative,
administrative or judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by or asserted
against such Indemnitee, in any manner relating to or arising out of or in
connection with the making of the Advance, this Agreement and all other Loan
Documents or the use or intended use of the proceeds of the Advance (the
"Indemnified Liabilities"). If any investigative, judicial or administrative
proceeding arising from any of the foregoing is brought against any Indemnitee,
upon request of such Indemnitee, the Borrowers, or counsel designated by the
Borrowers and satisfactory to the Indemnitee, will resist and defend such
action, suit or proceeding to the extent and in the manner directed by the
Indemnitee, at the Borrowers' sole cost and expense. Each Indemnitee will use
its best efforts to cooperate in the defense of any such action, suit or
proceeding. If the foregoing undertaking to indemnify, defend and hold harmless
may be held to be unenforceable because it violates any law or public policy,
the Borrowers shall nevertheless make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. The obligation of the Borrowers under this Section 9.8
shall survive the termination of this Agreement and the discharge of the
Borrowers' other Obligations.
Section 9.9 Participants. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the participants, successors or assigns of the Lender.
Section 9.10 Execution in Counterparts. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
Section 9.11 Binding Effect; Assignment; Complete Agreement. The Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lender and their respective successors and assigns, except that neither
Borrower shall have the right to assign its rights thereunder or any interest
therein without the prior written consent of the Lender. This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof.
Section 9.12 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Colorado. Each
party consents to the personal jurisdiction of the state and federal courts
located in the State of Colorado in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in connection
with this Agreement shall be venued in either the District Court of the City and
County of Denver, Colorado, or the United States District Court, District of
Colorado. The parties waive any right to trial by jury in any action or
proceeding based on or pertaining to this Agreement.
Section 9.13 Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
Section 9.14 Headings. Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers "hereunto duly authorized as of the date
first above written.
XXXXXX-XXXXX LABORATORIES
CORPORATION
By /s/ Xxx X. Xxxxxxx
Its Vice-President
SENSAR CORPORATION
By /s/ Xxx X. Xxxxxxx
Its Vice-President
NORWEST BUSINESS CREDIT, INC.
By Xxxxxx X.
Its Vice-President
