SECURITIES AND EXCHANGE COMMISSION
Washington, DC 25049
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended December 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from __________ to
___________
Commission File Number 0-21903
ORA ELECTRONICS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4607830
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(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
9410 Owensmouth Avenue, Chatsworth, CA 91311
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(Address of Principal Executive Offices) (Zip Code)
(818) 772-4433
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(Registrant's Telephone Number, Including Area Code)
(No Change)
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
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Exchange Act of 1934 subsequent to the distribution of securities under a plan
to the distribution of securities under a plan confirmed by a
court.
Yes No Not Applicable X
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 13, 1997
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Common Stock, $.001 par value 6,547,254 shares
Exhibit Index on Pages 16 and 17
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ORA ELECTRONICS, INC.
Form 10-Q
December 31, 1996
TABLE OF CONTENTS
Page
----
PART I - Financial Information. 4
Item 1. Financial Statements. 4
Balance Sheets as of March 31, 1996 and
December 31, 1996. 4
Statements of Income for the three month and
nine month periods ended December 31, 1995
and 1996. 6
Statements of Cash Flows for the nine month
periods ended December 31, 1995 and 1996. 7
Notes to Financial Statements. 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation. 9
PART II - Other Information. 13
Item 1. Legal Proceedings. 13
Item 4. Submission of Matters to a Vote of Security Holders. 13
Item 6. Exhibits and Reports on Form 8-K. 13
Signatures 15
Exhibit Index 16-17
Exhibits
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PART I - FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
ORA ELECTRONICS, INC.
Balance Sheets
December 31, March 31,
1996 1996
(Unaudited) (Audited)
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents $ 1,203,330 $ 357,995
Trade accounts receivable, less allowance for
sales returns and doubtful accounts of
$1,914,471 ($2,184,718 at March 31, 1996) 4,369,263 3,333,820
Inventories 6,001,409 5,812,730
Loan receivable, officer 524,836 243,982
Prepaid expenses 368,577 448,115
---------- ----------
Total current assets 12,467,415 10,196,642
Property and equipment, net 6,366,195 6,569,698
Other assets, net 330,338 362,603
---------- ----------
Total assets $19,163,948 $17,128,943
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 61,651 $ 57,267
Bank line of credit 3,500,000 4,000,000
Accounts payable 2,933,532 1,838,641
Accrued interest 91,524 1,674,960
Other accrued expenses 1,624,221 815,956
Notes payable - 275,000
----------- -----------
Total current liabilities 8,210,928 8,661,824
Long-term debt 5,617,900 7,188,902
---------- ----------
Total liabilities 13,828,828 15,850,726
---------- ----------
See accompanying notes to financial statements
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Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000
shares authorized at December 31, 1996;
none outstanding - -
Common stock, $.001 par value; authorized
30,000,000 shares; issued and outstanding,
6,337,691 shares at December 31, 1996;
and $10 par value; authorized 25,000
shares; issued and outstanding 1,000
shares at March 31, 1996 6,338 10,000
Additional paid in capital 5,804,693 -
Retained earnings (deficit) (475,911) 1,268,217
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Total stockholders' equity 5,335,120 1,278,217
--------- ---------
Total liabilities and stockholders' equity $19,163,948 $17,128,943
=========== ===========
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Statements of Income
For the Three Month and Nine Month Periods
Ended December 31, 1996 and 1995
(Unaudited)
Three months Nine months
1996 1995 1996 1995
---- ---- ---- ----
Net sales $6,227,597 $6,958,379 $14,427,805 $18,462,971
Cost of goods sold 3,457,484 3,814,180 9,647,134 11,897,723
---------- ---------- ---------- ----------
Gross profit 2,770,113 3,144,199 4,780,671 6,565,248
---------- ---------- ---------- ----------
Operating expenses:
Selling and shipping expenses 1,035,092 1,301,447 2,563,527 3,062,431
General and administrative
expenses 959,514 1,943,684 3,123,589 4,168,942
---------- --------- ---------- ----------
Total operating expenses 1,994,606 3,245,131 5,687,116 7,231,373
---------- ---------- ---------- ----------
Operating income (loss) 775,507 (100,932) (906,445) (666,125)
Interest expense 362,773 237,276 837,683 525,823
---------- ---------- ---------- ----------
Net income (loss) 412,734 (338,208) (1,744,128) (1,191,948)
Retained earnings (deficit)
beginning of period (888,645) 1,832,332 1,268,217 2,686,072
----------- --------- --------- ---------
Retained earnings (deficit),
end of period $ (475,911) $1,494,124 $ (475,911) $1,494,124
=========== =========== ========== ===========
Per share information:
Net income (loss) $ 412,734 $(338,208) $(1,744,128) $(1,191,948)
=========== ========== ========== ============
Primary:
Earnings (loss)
per share $ 0.07 $ (338.21) $ (0.28) $ (1,191.95)
=========== ========== =========== ===========
Average shares
outstanding $6,337,691 $1,000 $6,337,691 $ 1,000
=========== ========== =========== ===========
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Statements of Cash Flows
For the Nine Month Periods Ended December 31, 1996 and 1995
(Unaudited)
Nine months
1996 1995
---- ----
Cash flows from operating activities:
Net loss $(1,744,128) $(1,191,948)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 269,667 212,747
Provision for losses and sales returns (270,247) 644,574
Changes in assets and liabilities:
Accounts receivable (765,196) (2,403,654)
Inventories (188,679) 2,089,249
Loan receivable, officer (280,854) (787,902)
Prepaid expenses 79,538 219,873
Accounts payable 1,094,891 654,569
Accrued interest 91,524 (40,129)
Other accrued expenses 808,265 (501,054)
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Net cash used in operating activities (905,219) (1,103,675)
----------- -----------
Cash flows from investing activities:
Capital expenditures (33,899) (61,823)
Net cash used in investing activities (33,899) (61,823)
Cash flows from financing activities:
Borrowings from notes 1,000,000 --
Repayment of notes -- (75,000)
Borrowings from line of credit -- 1,000,000
Repayment of line of credit (500,000) --
Additional paid in capital 1,288,115 --
Common stock (3,662) --
----------- ---------
Net cash provided by financing
activities 1,784,453 925,000
Net increase (decrease) in cash and cash
equivalents 845,335 (240,498)
Cash and cash equivalents at beginning of period 357,995 657,803
Cash and cash equivalents at end of period $ 1,203,330 $ 417,305
Supplemental disclosure of cash flow information:
Interest paid $ 837,683 $ 525,823
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
See accompanying notes to financial statements.
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ORA ELECTRONICS, INC.
Notes to Financial Statements
(Unaudited)
1. ORA Electronics, Inc. (the "Company") is a wholesale distributor of
electronic parts and accessories with customers throughout the United
States. In addition, the Company undertakes research in connection with
the development of its own products with customers throughout the United
States. The Company is organized into divisions comprised of cellular
telephone antennas and accessories, computer cables and inter-connect
accessories, stereo and video installation accessories and consumer
electronic original and replacement parts and accessories.
2. Interim financial statements and information are unaudited; however,
in the opinion of management all adjustments necessary for a fair
presentation of the interim results have been made. All such adjustments
were of a normal recurring nature. The results for the three and nine
months ended December 31, 1996 are not necessarily an indication of results
to be expected for the entire fiscal year. The accompanying financial
statements have been prepared in accordance with the instructions to
Form 10-Q and do not include all of the information and the footnotes
required by generally accepted accounting principles for complete
statements. All information reported in this Form 10-Q should be read in
conjunction with the Company's annual financial statements and notes
thereto for the fiscal year ended March 31, 1996 included in the
Company's Current Report dated December 20, 1996 on Form 8-K filed with
the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
COMPARISON OF THIRD QUARTER ENDED DECEMBER 31, 1996 TO THIRD QUARTER ENDED
DECEMBER 31, 1995
Revenues decreased by $730,782, or 10.5%, to $6,227,597 for the
third quarter of fiscal 1997 compared to $6,958,379 for the same period of the
prior year. This decrease primarily reflects lower than expected holiday season
orders by consumer electronics retailers who have reported comparable store
sales decreases as compared with the prior year. The Company allows stock
balancing (return of unsold items for different merchandise) to enable customers
to freshen inventory. Higher than expected returns from customers relating to
such stock balancing also contributed to lower net sales.
Gross profit decreased by $374,086, or 11.9%, to $2,770,113 for the
third quarter of fiscal 1997 compared with $3,144,199 for same period of the
prior year, while the gross profit margin decreased to 44.5% from 45.2%. The
decrease in gross profit is primarily attributable to a decrease in the number
of units sold, combined with an increase in customer returns of unsold
merchandise. The decrease in profit margin is primarily attributable to
competitive pressure among the Company's large retail customers and the
resulting pressure on wholesale prices.
Selling and general and administrative expenses decreased by
$1,250,525, or 38.5%, to $1,994,606 for the third quarter of fiscal 1997
compared with $3,245,131 in the same period of the prior year. The decrease in
general and administrative expenses is primarily attributable to lower bad debt
experience combined with reductions in personnel. The decreases in selling and
shipping expenses are attributable to lower costs of shipping, warehousing,
freight and sales commissions, which primarily resulted from lower sales, and
lower expenditures for media and catalogue advertising.
Operating profit increased by $876,439 to $775,507 for the third
quarter of fiscal 1997 compared with a loss of $100,932 in the same period of
the prior year. The increase in operating profit is a result of reductions in
selling and general and administrative expenses exceeding the decrease in gross
profit.
Interest expense for the third quarter of fiscal 1997 was $362,773
compared with $237,276 in the same period of the prior year. This change is a
result of increases in borrowings under the line of credit from a high of
$3,500,000 during the 1995 period to a high of $4,500,000 during same period of
1996, as well as increased rates under such line of credit from LIBOR plus 2%
in 1995 to prime plus 1.75% in 1996.
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Net income was $412,734 for the third quarter of fiscal 1997 versus
a loss of $338,208 in the same period of the prior year.
COMPARISON OF NINE MONTHS ENDED DECEMBER 31, 1996 TO NINE MONTHS
ENDED DECEMBER 31, 1995
Revenues decreased by $4,035,166, or 21.9%, to $14,427,805 for the
nine months of fiscal 1997 ended December 31, 1996, compared with $18,462,971
for the same period of the prior year. This decrease, in part, reflects results
from ongoing efforts by the Company to reduce business with certain customers
sales to which by the Company have only been marginally profitable. The Company
will continue to evaluate its customer base in order to reduce lower margin
sales and, in light of the financial difficulties reported in the retail
electronics sector, monitor the creditworthiness thereof. Also, the Company
experienced lower than expected holiday season orders by consumer electronics
retailers who have reported comparable store sales decreases compared with the
prior year. The Company allows stock balancing (return of unsold items for
different merchandise) to enable customers to freshen inventory. Higher than
expected returns from customers relating to such stock balancing also
contributed to lower net sales.
Gross profit decreased by $1,784,577, or 27.2%, to $4,780,671 for
the nine months of fiscal 1997 ended December 31, 1996 compared with $6,565,248
for same period of the prior year, while the gross profit margin decreased to
33.1% from 35.6%. The decrease in gross profit is primarily attributable to a
decrease in the number of units sold, combined with an increase in customer
returns of unsold merchandise. The decrease in profit margin is primarily
attributable to competitive pressure among the Company's large retail customers
and the resulting pressure on wholesale prices.
Selling and general and administrative expenses decreased by
$1,544,257, or 21.4%, to $5,687,116 for the nine months of fiscal 1997 ended
December 31, 1996 compared with $7,231,373 in the same period of the prior year.
The decreases in selling and shipping expenses are attributable to lower costs
of shipping, warehousing, freight and sales commissions, which primarily
resulted from lower sales, and lower expenditures for media and catalogue
advertising.
Losses from operations increased by $240,320, or 36.1%, to $906,445
for the nine months of fiscal 1997 ended December 31, 1996 compared with a
$666,125 loss in the same period of the prior year. The impact of lower sales on
gross profits was not made up by the reduction in selling and general and
administrative expenses.
Interest expense for the nine months of fiscal 1997 ended December
31, 1996 was $837,683 compared with $525,823 in the same period of the prior
year. These changes are the result of increases in borrowings under the line of
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credit from a high of $3,500,000 during the 1995 period to a high of $4,500,000
during same period of 1996 and increased rates under such line of credit from
LIBOR plus 2% in 1995 to prime plus 1.75% in 1996.
The net loss increased by $552,180, or 46.3%, to $1,744,128 for the
nine months of fiscal 1997 ended December 31, 1996 compared with $1,191,948 in
the same period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Registrant had $1,203,330 in cash and cash
equivalents with a working capital surplus of $4,256,487, contrasted to $357,995
in cash and cash equivalents with a working capital surplus of $1,534,818 at
March 31, 1996. This change is primarily due to increases in the Company's
receivables and cash and cash equivalents resulting in large part from the
seasonal increase in sales associated with the holidays.
Net cash used in operating activities was $905,219 for the first
nine months of fiscal 1997, compared with net cash used in operating activities
of $1,103,675 for the first nine months of fiscal 1996. This change was
primarily the result of an increased net loss offset by changes in operating
assets and liabilities, particularly an increase in trade accounts receivable
offset partially by an increase in accounts payable and other accrued expenses.
Net cash provided by financing activities increased to $1,784,453 in
the first nine months of fiscal 1997 from $925,000 for the first nine months of
fiscal 1996. This change is primarily a result from selling common stock of the
Company.
The Company's primary cash requirements have been to fund
increased levels of trade accounts receivable and inventories. The Company has
historically satisfied working capital requirements principally through cash
flow from operations and bank borrowings. At December 31, 1996 the Company owed
Sanwa Bank California ("Sanwa") $3,500,000 on its line of credit. Such amount
reflects a payment by the Company of $1,000,000 on the line of credit in
December 1996. The Company borrowed funds from an unaffiliated third party to
make such payment. The interest rate on this new loan is 8%, with all principal
and interest to be paid in full on December 31, 2001. During December, 1996,
Sanwa agreed to extend the Company's line of credit to March 31, 1997 and to
convert such line into a revolving credit facility on a conforming basis
pursuant to which Sanwa will sweep excess funds from the Company's account at
Sanwa on a daily basis and Sanwa will lend against eligible collateral
(receivables and inventory). Under the extended Sanwa facility, the Company was
required to reduce its borrowing availability by $1 million by no later than
January 31, 1997 and is required to reduce such borrowing availability by an
additional $1 million by no later than February 28, 1997. The Company met its
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obligation to pay $1,000,000 on January 31, 1997 through operating cash flow.
The Company is confident that, through cash generated by operations and
additional financings, it will be able to meet its other principal obligations
under the Sanwa facility, although no assurances can be given.
SEASONALITY
The Company's markets are seasonal with sales typically higher in
the Company's third quarter due to increased demand from mass market retailers
during the year-end holiday season.
FORWARD-LOOKING INFORMATION
Certain statements or discussions in Management's Discussion and
Analysis, including, without limitation, with respect to the Company's ongoing
efforts to reduce lower margin sales and its ability to meet its obligations
under the Sanwa credit facility, contain or are based on "forward-looking"
information (as defined in the Private Securities Litigation and Reform Act of
1995) that involve risk and uncertainties inherent in the Company's business.
Actual outcomes are dependent upon the Company's successful performance of
internal plans, its ability to meet financial obligations as such obligations
become due, customer changes in short range and long range plans, competition in
the Company's product areas, continued acceptance of existing products, and the
development and acceptance of new products, ongoing relationships with key
customers and general economic risks and uncertainties.
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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The Company incorporates by reference all disclosures relating to
Legal Proceedings set forth on the Periodic Report on Form 8-K filed by the
Company on December 20, 1996 (the "1996 8-K"). With respect to the suit filed by
the Company in 1994 against Telular Corporation (discussed in greater detail in
the 1996 8- K), argument in front of the United States Court of Appeals for the
Federal Circuit took place on January 28, 1997. However, as of the date of this
filing, such court has not made any ruling with respect to this matter.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The following matters were submitted to a vote of security holders
during the three month period ended December 31, 1996:
By written consent dated December 20, 1996, the holders of the
Company's common stock as of such date (i) approved and adopted the
Company's 1996 Stock Plan and 1996 Non-Employee Directors Stock
Option Plan, (ii) adopted the form of the Company's Indemnification
Agreement, and (iii) approved, ratified and confirmed the Company's
proposed merger with North American Energy of Delaware, Inc.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits.
Exhibit 3.1 - Restated Certificate of Incorporation of the Company
incorporated by reference from Exhibit 3.1 to the 1996 8-K.
Exhibit 3.2 - Bylaws of the Company incorporated by reference from Exhibit 3.2
to the 1996 8-K.
Exhibit 4.1 - Specimen Common Stock Certificate incorporated by reference
from Exhibit 4.1 to the 1996 8-K.
Exhibit 4.2 - Specimen Class A Warrant Certificate incorporated by reference
from Exhibit 4.2 to the 1996 8-K.
Exhibit 4.3 - Specimen Class B Warrant Certificate incorporated by reference
from Exhibit 4.3 to the 1996 8-K.
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Exhibit 4.4 - Specimen Class C Warrant Certificate, incorporated by reference
from Exhibit 4.4 to the 1996 8-K.
Exhibit 4.5 - Specimen Class D Warrant Certificate, incorporated by reference
from Exhibit 4.5 to the 1996 8-K.
Exhibit 4.6 - Warrant Agreement between the Company and Continental Stock
Transfer & Trust Company dated as of December 20, 1996,
incorporated by reference from Exhibit 4.6 to the 1996 8-K.
Exhibit 10.1 - ORA Electronics, Inc. 1996 Stock Plan
Exhibit 10.2 - Form of ORA Electronics, Inc. 1996 Stock Plan Stock Option
Grant Agreement
Exhibit 10.3 - ORA Electronics, Inc. 1996 Non-Employee Directors Stock Option
Plan
Exhibit 10.4 - Form of ORA Electronics, Inc. Non-Employee Directors Stock
Option Agreement
Exhibit 10.5 - Form of Indemnification Agreement
Exhibit 10.6 - Employment Agreement dated as of December 19, 1996 by and
between the Company and Gershon N. Cooper
Exhibit 10.7 - Amended and Restated Promissory Note dated December 17, 1996,
made by Gershon N. Cooper and Ruth Cooper in favor of the
Company.
Exhibit 10.8 - Promissory Note dated December 6, 1996, made by Gershon N.
Cooper and Ruth Cooper in favor of the Company.
Exhibit 10.9 - Amended and Restated Commercial Credit Agreement dated as of
December 31, 1996, by and among Sanwa Bank California, the
Company, Gershon N. Cooper, Ruth Cooper and the Cooper
Living Trust.
Exhibit 10.10 - Amended and Restated Security Agreement dated as of December 31,
1996, by and between the Company and Sanwa Bank California.
Exhibit 10.11 - Secured Promissory Note dated as of February 1, 1989, made by
the Company in favor of the Aid Association for Lutherans.
Exhibit 10.12 - Promissory Note dated as of December 23, 1996, made by the
Company in favor of General Funding Corporation.
Exhibit 11 - Statement re: Computation of Earnings Per Share.
Exhibit 27 - Financial Data Schedule.
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(b) Reports on Form 8-K.
One Report on Form 8-K was filed during the period covered by this
Quarterly Report on Form 10-Q. The Report on Form 8-K was filed on December 20,
1996 in connection with the merger of North American Energy of Delaware, Inc., a
Delaware corporation, into the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ORA ELECTRONICS, INC.
(Registrant)
Dated: February 14, 1997 By:
---------------------------------
John M. Burris, Duly Authorized
Representative and Chief Financial
Officer
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EXHIBIT INDEX
Exhibit No. Description Page No.
- ------------------------------------------------------------------------------
10.1 ORA Electronics, Inc. 1996 Stock
Plan 18
10.2 Form of ORA Electronics, Inc. 1996
Stock Plan Stock Option Grant
Agreement 31
10.3 ORA Electronics, Inc. 1996
Non-Employee Directors Stock Option
Plan 35
10.4 Form of ORA Electronics, Inc.
Non-Employee Directors Stock Option
Agreement 39
10.5 Form of Indemnification Agreement 43
10.6 Employment Agreement dated as of
December 19, 1996 by and between
the Company and Gershon N. Cooper 52
10.7 Amended and Restated Promissory
Note dated December 17, 1996, made
by Gershon N. Cooper and Ruth Cooper
in favor of the Company 64
10.8 Promissory Note dated December 6,
1996, made by Gershon N. Cooper and
Ruth Cooper in favor of the Company 68
10.9 Amended and Restated Commercial
Credit Agreement dated as of
December 31, 1996, by and among
Sanwa Bank California, the Company,
Gershon N. Cooper, Ruth Cooper and
the Cooper Living Trust 69
10.10 Amended and Restated Security
Agreement dated as of December 31,
1996, by and between the Company
and Sanwa Bank California 101
10.11 Secured Promissory Note dated as of
February 1, 1989, made by the Company
in favor of Aid Association for
Lutherans 121
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EXIBIT INDEX (Cont'd)
---------------------
Exhibit No. Description Page No.
- ------------------------------------------------------------------------------
10.12 Promissory Note dated as of
December 23, 1996, made by the Company
in favor of General Funding
Corporation 132
11 Statement re: Computation of
Earnings Per Share 133
27 Financial Data Schedule 134
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EXHIBIT 10.1
ORA ELECTRONICS, INC.
1996 STOCK PLAN
1. PURPOSE. The purposes of the ORA Electronics, Inc. 1996 Stock Plan
("Plan") are to encourage key personnel of ORA Electronics, Inc. (the "Company")
and its subsidiaries to increase their interest in the Company's long-term
success, to enhance the profitability and value of the Company for the benefit
of its shareholders and to assist the Company and its subsidiaries in
attracting, retaining and motivating key personnel by giving suitable
recognition for services which contribute materially to the Company's success.
2. DEFINITIONS. The following definitions shall be applicable throughout
the Plan:
"Act" means the Securities Act of 1933, as amended from time to
time.
"Affiliate" means any parent or subsidiary (as defined in Section
424(e) and (f) of the Code) of the Company.
"Award" means an Option, Stock Appreciation Right or Other Stock
Award.
"Board" means the Board of Directors of the Company.
"Change of Control" means, unless the Board otherwise directs by
resolution adopted prior thereto, (i) the acquisition by any entity,
person or group (other than the Company or its Affiliates or an employee
benefit plan maintained by the Company or one of its Affiliates) of
beneficial ownership of 20% or more of the outstanding voting stock of
the Company; or (ii) the occurrence of a transaction requiring
shareholder approval for the acquisition of the Company by the purchase
of stock or assets, or by merger, or otherwise; or (iii) the election
during any period of 24 months or less of 50% or more of the members of
the Board without the approval of the nomination of such members by a
majority of the Board consisting of members who were serving at the
beginning of such period.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
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"Committee" means the Committee of the Board consisting of two or
more directors, each of whom (i) is a "Non-Employee Director" within the
meaning of Rule 16b-3, and (ii) is an "outside director" within the
meaning of Section 162(m) of the Code, or successor rule or regulation.
"Company" means ORA Electronics, Inc., a Delaware corporation.
"Consultant" means any consultant or advisor engaged by the Company
who renders bona fide services to the Company or an Affiliate in
connection with its business, provided that such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction.
"Disability" means permanent and total disability as defined in
Section 22(e)(3) of the Code.
"Employee" means any person who is employed by the Company or an
Affiliate.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means for any given day (i) the closing sales
price on such date of a share of Stock as reported on the principal
securities exchange on which such shares of Stock are then listed or
admitted to trading, or as reported on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") National Market System,
or (ii) if not so reported, the average of the bid and ask prices on such
date as reported on the Nasdaq System published in THE WALL STREET
JOURNAL, or (iii) if no such quotations are available, as determined by
the Committee in good faith in their absolute discretion.
"Grant Limit" means the total number of shares of Stock that can be
issued to any Participant in any fiscal year pursuant to an Award granted
hereunder.
"Incentive Stock Option" means an Option granted by the Committee to
an Employee Participant under the Plan which is designated by the
Committee as an Incentive Stock Option pursuant to Section 422 of the
Code.
"Non-Qualified Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option.
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"Option" means an Award granted under Section 6 of the Plan.
"Other Stock Awards" means an Award granted under Section 8 of the
Plan.
"Participant" means any individual designated by the Committee to
participate in the Plan.
"Performance-Based Compensation" means (i) an Option granted at less
than 100% of the Fair Market Value of the Stock at the time of grant,
(ii) a Restricted Stock Award or (iii) a Stock Bonus, in each case which
has been granted with the intention that such award will be deductible
under Section 162(m) of the Code, or successor provision.
"Plan" means this ORA Electronics, Inc. 1996 Stock Plan.
"Restricted Stock Award" means an Award granted under Section 8(a)
of the Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
any successor rule or regulation.
"Stock" means the common stock of the Company, $.001 par value.
"Stock Appreciation Right" means an Award granted under Section 7 of
the Plan.
"Stock Bonus" means an Award granted under Section 8(b) of the Plan.
"Termination Date" means the date an optionee ceases to be employed
or engaged by the Company.
3. ADMINISTRATION. The Plan shall be administered by the Committee. The
Committee shall have full power, discretion and authority to interpret, construe
and administer the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to provide for conditions and assurances deemed necessary
or advisable to protect the interests of the Company and to make all other
determinations necessary or advisable for the administration of the Plan, to the
extent not contrary to the explicit provisions of the Plan. Determinations,
interpretations and other actions by the Committee pursuant to the Plan shall be
final, conclusive and binding on all persons for all purposes.
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The Committee shall have full power, discretion and authority to
establish applicable performance measures for Awards intended to be
Performance-Based Compensation, which performance measures shall include one or
more of the following: improvements in revenues, earnings per share, profit
before taxes, net income or operating income; return on shareholder equity;
return on net assets; and stock price performance. Further, the Committee shall
determine the specific targets related to each such performance measure and the
performance period for each such Award. The Committee shall establish in writing
such performance measures, specific targets and performance periods as provided
in Section 162(m) of the Code and the regulations promulgated thereunder, or
successor provision or regulation.
The Committee's decisions and determinations under the Plan need not be
uniform and may be made selectively among Participants whether or not such
Participants are similarly situated. The Committee may, in its discretion,
delegate to others responsibilities to assist in administering the Plan.
In the event that the Board has not designated a Committee, the Plan
shall be administered by the Board, and shall exercise all authority granted to
the Committee pursuant to the terms of this Plan.
4. ELIGIBILITY. Any Employee selected by the Committee, except a member
of the Committee or a director whose principal employment is not with the
Company or an Affiliate, and any Consultant selected by the Committee shall be
eligible for Awards contemplated under the Plan except that Consultants shall
not be eligible for Incentive Stock Option grants.
5. STOCK SUBJECT TO PLAN AND GRANT LIMITS. The total number of shares of
Stock subject to issuance under the Plan may not exceed 2,000,000, subject to
adjustments as provided in the Plan. Shares to be delivered under the Plan may
consist, in whole or in part, of authorized but unissued shares or shares
purchased by the Company on the open market or by private purchase. The Grant
Limit shall equal 150,000 shares, subject to adjustment as provided in Section
10 hereof.
Except as otherwise provided in the Plan, shares of Stock that are
subject to an Option or Stock Appreciation Right which, for any reason, expires
or is terminated unexercised as to such shares, and shares of Stock subject to a
Restricted Stock Award made under the Plan which are reacquired by the Company
pursuant to the Plan, shall again become available for issuance under the Plan.
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6. STOCK OPTIONS. The Committee may grant stock Options alone or in
addition to any other Awards granted under the Plan. Options granted under the
Plan may be of two types: (i) Incentive Stock Options; and (ii) Non-Qualified
Stock Options. Subject to the limitations contained herein with respect to
Incentive Stock Options, the Committee may grant Incentive Stock Options,
Non-Qualified Stock Options, or both types of Options to a Participant and the
Committee shall have complete discretion in determining the number of Options
granted to each Participant, subject to the Grant Limit. To the extent that any
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option. The provisions of Options need not be the
same with respect to each Participant granted an Option.
Each Option shall be set forth in a written agreement, shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions not inconsistent with the terms of the Plan as the Committee
deems appropriate:
(a) The exercise price of shares subject to any Incentive Stock
Option shall not be less than the Fair Market Value of the Stock at the
time the Incentive Stock Option is granted; the exercise price of shares
subject to any Non-Qualified Stock Option shall be such price as the
Committee shall determine on the date on which such Non-Qualified Stock
Option is granted, provided that such exercise price may not be less than
85% of the Fair Market Value of the Stock at the time the Non-Qualified
Stock Option is granted;
(b) If the exercise price of a Non-Qualified Stock Option is less
than 100% of the Fair Market Value of the Stock at the time the
Non-Qualified Stock Option is granted, the Committee may designate such
award as Performance-Based Compensation in which event the Committee shall
establish performance measures for such award, the specific targets
applicable to such measures and the performance period for such award;
(c) The exercise price of any shares exercised under any Option must
be paid in full upon such exercise in cash or stock, or such other form as
the Committee may determine;
(d) The term of each Option shall be fixed by the Committee but no
Option may be exercised after the expiration of 10 years from the date
such Option is granted;
(e) In the event that an optionee shall cease to be employed or
engaged by the Company or an Affiliate, the vesting of such optionee's
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Options shall immediately and automatically terminate on the Termination
Date and if the cessation of employment or engagement is:
(1) due to any reason other than due to retirement, Disability
or death, such optionee's Options exercisable on the Termination
Date shall remain exercisable for 30 days after the Termination
Date;
(2) due to retirement, such optionee's Options exercisable on
the Termination Date shall remain exercisable for three months after
the Termination Date;
(3) due to a Disability, such optionee's Options exercisable
on the Termination Date shall remain exercisable for one year after
the Termination Date, or;
(4) due to death while employed or engaged by the Company or
its Affiliate, or during the three month period following retirement
or during the one year period following cessation of employment due
to a Disability, the optionee's Options exercisable at the time of
death shall remain exercisable for one year after the date of the
optionee's death;
provided, however, that notwithstanding anything herein to the contrary,
if any Option would otherwise expire on an earlier date than described
above, such Option shall remain exercisable only until the earlier
expiration date;
(f) Options shall become exercisable at such time or times and
subject to such terms and conditions (including, without limitation,
installment exercise provisions) as shall be determined by the Committee
and if the Committee provides that any Option is exercisable only in
installments, the Committee may waive such installment exercise provisions
at any time in whole or in part based on any factors as the Committee may
determine;
(g) Incentive Stock Options may be granted only to Employees;
(h) In the case of an Incentive Stock Option, the aggregate Fair
Market Value (determined as of the time the Option is granted) of the
Stock with respect to which Options are exercisable for the first time by
any Employee during any calendar year (under all such plans of the Company
and its Affiliates) shall not exceed $100,000;
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(i) No Incentive Stock Option shall be granted to a Participant who,
at the time the Incentive Stock Option is granted, owns (within the
meaning of Section 422 of the Code) Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any
Affiliate unless the exercise price per share of Stock is at least 110% of
the Fair Market Value of the Stock at the time the Incentive Stock Option
is granted and the Incentive Stock Option by its terms is not exercisable
after the expiration of five years from the date of grant;
(j) No Option shall be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated otherwise than by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code; and
(k) All Options shall be exercisable during the optionee's lifetime
only by the optionee or by a transferee permitted pursuant to Section 6(j)
above.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participants affected, to disqualify any Incentive
Stock Option under Section 422.
7. STOCK APPRECIATION RIGHTS. The Committee may grant Stock Appreciation
Rights alone or in conjunction with all or part of any Option granted under the
Plan, subject to the Grant Limit. In the case of a Non-Qualified Stock Option,
such Stock Appreciation Rights may be granted either at or after the time of the
grant of such NonQualified Stock Option. In the case of an Incentive Stock
Option, such Stock Appreciation Rights may be granted only at the time of the
grant of the Incentive Stock Option.
Each Stock Appreciation Right shall be set forth in a written agreement,
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions not inconsistent with the terms of the Plan as
the Committee deems appropriate:
(a) Subject to subparagraphs (b) and (c) below, a Stock Appreciation
Right granted in connection with an Option shall become exercisable and
shall lapse according to the same vesting schedule and lapse rules that
are established for the Option; a Stock Appreciation Right granted
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independently of an Option shall become exercisable and shall lapse in
accordance with the vesting schedule and lapse rules established by the
Committee;
(b) A Stock Appreciation Right and any related Option shall not be
exercisable during the first six months of their terms by any Participant;
(c) A Stock Appreciation Right shall be exercisable only when the
Fair Market Value of the Stock relating to the Stock Appreciation Right
exceeds the exercise price thereof;
(d) If the exercise price of a Stock Appreciation Right is less than
100% of the Fair Market Value of the Stock at the time the Stock
Appreciation Right is granted, such award may be designated by the
Committee to be PerformanceBased Compensation in which event the Committee
shall establish performance measures for such award, the specific targets
applicable to such measures and the performance period for such award;
(e) Upon the exercise of a Stock Appreciation Right with respect to
any number of shares of Stock, the holder shall be entitled to receive
payment of an amount (subject to subparagraph (f), below) determined by
multiplying (i) the difference between the Fair Market Value per share of
Stock on the date of exercise and the exercise price of the related Option
(or in the case of an Stock Appreciation Right granted independent of an
Option, the exercise price of the Stock Appreciation Right as established
by the Committee) by (ii) the number of shares in respect of which the
Stock Appreciation Right is exercised. At the discretion of the Committee,
payment for Stock Appreciation Rights may be made in cash or stock, or in
a combination thereof. If payment is made in Stock, the value of such
Stock shall be the Fair Market Value determined as of the date of
exercise;
(f) At the time of grant, the Committee may establish, in its sole
discretion, a maximum amount per share which will be payable upon exercise
of a Stock Appreciation Right;
(g) Notwithstanding any other provisions of the Plan, the Committee
may impose such conditions on exercise of a Stock Appreciation Right
(including, without limitation, the right of the Committee to limit the
time of exercise to speci fied periods) as may be required to satisfy the
requirements of Rule 16b-3;
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(h) The Committee may provide that upon exercise of a Stock
Appreciation Right granted in conjunction with an Option, the number of
shares of Stock for which the related Option shall be exercisable shall
reduce by the number of shares of Stock for which the Stock Appreciation
Right shall have been exercised and the number of shares of Stock for
which a Stock Appreciation Right shall be exercisable shall be reduced
upon any exercise of a related Option by the number of shares of Stock for
which such Option shall have been exercised;
(i) The term of a Stock Appreciation Right granted under the Plan
shall not exceed ten years;
(j) No Stock Appreciation Right granted under the Plan may be sold,
transferred, pledged, signed or otherwise alienated or hypothecated
otherwise than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Code,
and all Stock Appreciation Rights shall be exercisable during the
Participant's lifetime only by the Participant or by a transferee
permitted pursuant to Section 7(j) above;
(k) The Committee may provide, at the time of grant, that such Stock
Appreciation Right can be exercised only in the event of a Change of
Control, subject to terms and conditions as the Committee may specify at
grant.
8. OTHER STOCK AWARDS. In addition to Options and Stock Appreciation
Rights, the Committee may grant Other Stock Awards payable in Stock upon such
terms and conditions as the Committee may determine, subject to the provisions
of the Plan. Other Stock Awards may include, but are not limited to, the
following types of Awards:
(a) RESTRICTED STOCK AWARDS. The Committee may grant Restricted
Stock Awards, each of which consists of a grant of shares of Stock subject
to restrictions, terms and conditions not inconsistent with the terms of
the Plan, including the Grant Limit, as the Committee deems appropriate,
which such restrictions, terms and conditions shall be set forth in
written agreements. The Committee may designate a Restricted Stock Award
as Performance-Based Compensation in which event the Committee shall
establish performance measures for such award, the specific targets
applicable to such measures and the performance period for such award.
Stock certificates evidencing a Restricted Stock Award shall be issued by
the Company in the name of the Participant, and such Participant shall be
entitled to all voting rights, rights to dividends and other rights of
holders of Stock, subject to the provisions of the Plan. The certificates
representing a Restricted Stock Award issued under the Plan and any
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dividends paid thereon, shall remain in the physical custody of the
Company or an escrow holder or be placed in trust until the restrictions
imposed under the Plan have lapsed. The Committee may also require that
a legend or legends be placed on any certificates representing a
Restricted Stock Award to reference the various restric tions imposed on
such Stock. If a Restricted Stock Award is granted which requires the
payment of an exercise price by the Participant, then such Award must be
accepted within a period of 60 days (or such shorter periods as the
Committee may specify at grant) after the date of grant. The shares of
Stock granted under a Restricted Stock Award may not be sold, transferred,
assigned, or otherwise alienated or hypothecated until the lapse or
release of restrictions in accordance with the terms of the Restricted
Stock Award agreement and the Plan. Prior to the lapse or release of
restrictions, all shares of Stock are subject to forfeiture in accordance
with conditions as may be determined by the Committee. The provisions of
a Restricted Stock Award need not be the same with respect to each
recipient.
(b) STOCK BONUSES. The Committee may grant Stock Bonuses in such
amounts as it shall determine from time to time, subject to the Grant
Limit. A Stock Bonus shall be paid at such time and be subject to such
conditions as the Committee shall determine at the time of the grant of
such Stock Bonus. The Committee may designate a Stock Bonus as
Performance-Based Compensation in which event the Committee shall
establish performance measures for such award, the specific targets
applicable to such measures and the performance period for such award.
Certificates for shares of Stock granted as a Stock Bonus shall be issued
in the name of the Participant to whom such grant was made and delivered
to such Participant as soon as practicable after the date on which such
Stock Bonus is required to be paid.
9. GENERAL PROVISIONS. The grant of any Award under the Plan may also be
subject to such other provisions (whether or not applicable to any Award granted
to any other Participant) as the Committee determines appropriate including,
without limitation, provisions to assist the Participant in financing the
purchase of Stock through the exercise of Options, provisions for restrictions
on resale or other disposition of shares acquired under any Award, provisions
giving the Company the right to repurchase Stock acquired under any Award in the
event the Participant elects to dispose of such Stock, provisions to comply with
compensation expense deductibility under the Code and provisions to comply with
federal and state securities laws and federal and state income tax withholding
requirements.
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The obligation of the Company to make payment of Awards in Stock or
otherwise shall be subject to applicable laws, rules and regulations, and to
such approvals by governmental agencies as may be required. The Company shall be
under no obligation to register under the Act any of the shares of Stock
delivered under the Plan. All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed and any
applicable federal or state securities laws, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. The Committee may require each Participant
acquiring shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the Participant is acquiring the Stock without
a view to distribution thereof.
The Company shall have the right to deduct from all Awards, to the extent
paid in cash, all federal state or local taxes as required by law to be withheld
with respect to such Awards and, in the case of Awards paid in Stock, the
Participant or other person receiving such Stock may be required to pay to the
Company prior to delivery of such Stock, the amount of any such tax which the
Company is required to withhold, if any, with respect to such Stock. At the
discretion of the Committee, the Company may accept shares of Stock, or withhold
shares of Stock otherwise issuable upon exercise of an Award, of equivalent Fair
Market Value in payment of such withholding tax obligations or provide
alternative methods of complying with such withholding tax obligations.
No Employee or other person shall have any claim or right to be granted
an Award under the Plan nor, having been selected for the grant of an Award, to
be selected for a grant of any other Award. Neither this Plan nor any action
taken hereunder shall be construed as giving any Participant any right to be
retained in the employ of the Company or its Affiliates.
Each Participant may file with the Committee a written designation of one
or more persons as the beneficiary who shall be entitled to receive the amounts
payable with respect to the benefits of an Award, if any, due under the Plan
upon such Participant's death. A Participant may, from time to time, revoke or
change the beneficiary designation without the consent of any prior beneficiary
by filing a new designation with the Committee. The last designation received by
the Committee shall be controlling; provided, however, that no designation, or
change or revocation therein shall be effective unless received by the Committee
prior to the Participant's death, and in no event shall it be effective as of a
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date prior to such receipt. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the Participant's
estate.
Except as otherwise specifically provided in the Plan, no Participant
shall be entitled to the privileges of stock ownership in respect of Stock which
is subject to an Option, Stock Appreciation Right or Other Stock Award until
such Stock has been issued to that Participant upon exercise of an Option or
Stock Appreciation Right according to its terms or upon sale or grant of Stock
in accordance with an Other Stock Award.
No Participant or other person shall have any right with respect to this
Plan, shares reserved under this Plan, or in any Award, contingent or otherwise,
until written evidence of the Award shall have been delivered to the Participant
and all the terms, conditions and provisions of the Plan applicable to such
Participant have been met.
10. CHANGES IN CAPITAL STRUCTURE. In the event of changes in the
outstanding Stock or in the capital structure of the Company by reason of any
stock dividend, stock split, exchange of shares, recapitalization,
reorganization, subdivision or consolidation of shares, or other similar
transaction, the aggregate number of shares available under the Plan, the number
of shares subject to each outstanding Award and the price per share of any
Award, shall all be proportionately adjusted. In the event the Company shall be
a party to a transaction involving a sale of substantially all of its assets, a
merger or a consolidation, the Board shall make such adjustment as shall be
necessary or appropriate which may include assumption of Awards by the surviving
Company, for their continuation, for the acceleration of vesting and expiration,
or for settlement in cash. In the case of dissolution of the Company (other than
a dissolution following the sale of substantially all of the Company's assets),
the Awards outstanding hereunder shall terminate; provided, however, that each
Participant shall have 30 days' prior written notice of such event, during which
time the Participant shall have the right to exercise in full any partly or
wholly unexercised Award, including the portion not yet exercisable pursuant to
the vesting schedule set forth in any Award agreement. In the event of any
change in applicable laws or any change in circumstances which results in or
would result in any substantial dilution or enlargement of the rights granted to
or available for Participants in the Plan, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of the Plan, the
Committee may make such adjustments or substitutions to Awards or agreements
evidencing Awards as the Committee determines appropriate in its sole
discretion. Any adjustment in Incentive Stock Options under this Section 10
shall be made only to the extent not constituting a "modification" within the
meaning of Section 424(h)(3) of the Code. The Company shall give each
Participant notice of an adjustment hereunder and, upon notice, such adjustments
shall be conclusive and binding for all purposes.
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11. CHANGE OF CONTROL. Upon the occurrence of an event constituting a
Change of Control, the following transactions, in the sole discretion of the
Committee, may be triggered: (i) all Options and Stock Appreciation Rights shall
become immediately exercisable in full for the remainder of their terms; and
(ii) restrictions on alienation or hypothecation of Stock granted pursuant to a
Restricted Stock Award shall lapse and in such case the Participant shall be
issued Stock certificates free of any such restrictions.
12. AMENDMENTS AND TERMINATION. The Board may, from time to time, amend,
suspend or terminate the Plan in whole or in part and, if terminated, may
reinstate any or all of the provisions of the Plan, except that no amendment,
suspension or termination shall be made which would impair the rights of a
Participant under an Award theretofore granted, without such Participant's
consent. The Board shall obtain stockholder approval of any amendment to this
Plan which would be necessary to allow this Plan to continue to meet the
conditions of Rule 16b-3 or Sections 162(m) or 422 of the Code.
13. EFFECTIVE DATE AND TERM. The Plan shall become effective as of
December 20, 1996, the date of its adoption by the Board, subject to
ratification by the stockholders of the Company within twelve months of the
adoption date. Unless sooner terminated by the Committee, the Plan shall
continue until December 20, 2006, the tenth anniversary of the Plan's effective
date, when it shall terminate and no Award shall be granted under the Plan
thereafter. The Plan shall continue in effect, however, insofar as is necessary
to complete all the Company's obligations under outstanding Awards and to
conclude the administration of the Plan.
14. GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and be governed by the laws of the State of
Delaware.
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EXHIBIT 10.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES OR BLUE SKY LAWS OF CALIFORNIA OR ANY OTHER STATE AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED PURSUANT TO THE RELEVANT PROVISIONS OF
FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS APPLICABLE.
ORA ELECTRONICS, INC.
1996 STOCK PLAN
STOCK OPTION GRANT AGREEMENT
Optionee: ________________
Number of Option Shares: _______
Exercise Price Per Share: $ ______
Date of Grant: _______________
Expiration Date: _______________
Type of Stock Option (check one):
_____ Incentive _____ Non-Qualified
1. GRANT OF OPTION. ORA Electronics, Inc., a Delaware corporation
(the "Company"), hereby grants to the optionee named above ("Optionee") an
option ("Option") to purchase the total number of shares of Common Stock of the
Company set forth above (the "Shares") at the exercise price per share set forth
above (the "Exercise Price"), subject to all of the terms and conditions of this
Stock Option Grant Agreement ("Agreement") and the Company's 1996 Stock Plan as
it may be amended from time to time (the "Plan"). The Plan is incorporated
herein by this reference. Terms defined in the Plan have the same meaning in
this Agreement. If designated as an Incentive Stock Option above, this Option is
intended to qualify as an "incentive stock option" ("ISO") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
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2. EXERCISE PERIOD OF OPTION. Subject to the terms
and conditions of the Plan and this grant, this Option shall
become exercisable as to portions of the Shares as follows:
Percentage
From To Exercisable
---- -- -----------
Date of Grant Date Prior to First 0%
Anniversary of Date of
Grant
First Anniversary Date Prior to Second 25%
of Date of Grant Anniversary of Date of
Grant
Second Date Prior to Third 50%
Anniversary of Anniversary of Date of
Date of Grant Grant
Third Anniversary Date Prior to Fourth 75%
of Date of Grant Anniversary of Date of
Grant
Fourth Expiration 100%
Anniversary of
Date of Grant
3. METHOD OF EXERCISE. The Option shall be exercised by the Optionee
(a) by giving written notice to the Secretary of the Company stating the number
of shares of Common Stock with respect to which the Option is being exercised
and (b) tendering payment of the option price for each share of Common Stock to
be purchased. The exercise price of any shares of Common Stock exercised under
this Option must be paid in full upon such exercise. Payment shall be made in
cash, previously owned shares of Common Stock or such other form of
consideration as the Committee may permit. The Optionee's exercise notice
provided for in this Section above shall be accompanied by (i) this Agreement
(for appropriate endorsement by the Company to reflect such exercise), (ii) an
investment letter pursuant to Section 9 below, if then required by the
Committee, and (iii) such other agreements and documents as may be reasonably
requested by the Company. The certificate(s) evidencing shares of Common Stock
purchased pursuant to the terms of this Option shall bear applicable securities
laws legends as may be required by the Company and its counsel.
4. TERMINATION. In the event that the Optionee shall cease to be
employed or engaged by the Company or an Affiliate, the vesting hereof shall
immediately and automatically terminate on the Termination Date, the unvested
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portion hereof shall terminate and, if the cessation of employment or engagement
is:
(a) due to any reason other than as set forth under (b) through
(d) below, such portion hereof as is vested on the Termination
Date shall remain exercisable for 30 days after the
Termination Date;
(b) due to retirement, such portion hereof as is vested on the
Termination Date shall remain exercisable for 3 months after
the Termination Date;
(c) due to a Disability, such portion hereof as is vested on the
Termination Date shall remain exercisable for 1 year after the
Termination Date; or
(d) due to death while employed or engaged by the Company or its
Affiliate, or during the 3 month period following retirement
or during the one year period following cessation of
employment due to a Disability, such portion hereof as is
vested at the time of death shall remain exercisable for 1
year after the date of the Optionee's death.
5. NON-TRANSFERABILITY OF OPTION. This Option may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code.
6. "AT WILL" STATUS UNCHANGED. If Optionee is an "at will"
employee at the time this Option is granted, that status shall remain unchanged
after the grant of this Option and the grant of this Option shall not create
any obligation on the part of the Company to continue Optionee's employment.
7. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to shares of the Company's Common Stock covered by
this Option until the date of the issuance of a stock certificate or stock
certificates.
8. MODIFICATION, TERMINATION AND ADJUSTMENT. The rights of the
Optionee are subject to modification, termination and adjustment in certain
events as provided in the Plan.
9. INVESTMENT COVENANT. The Optionee represents and agrees that as a
condition to exercise of this Option, the shares of Common Stock of the Company
that the Optionee acquires under this Option will be acquired by the Optionee
for investment and not with a view to distribution or resale, unless counsel
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for the Company is then of the opinion that such a representation is not
required under the Securities Act of 1933, as amended, or any other applicable
law, regulation or rule of any governmental agency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ORA Electronics, Inc.
By ___________________________________
Its ______________________________
ACCEPTANCE BY OPTIONEE:
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is annexed hereto, and represents that the Optionee is familiar with the
terms and provisions thereof. The Optionee hereby accepts this Option subject to
all the terms and provisions of the Plan and this Stock Option Grant Agreement.
The Optionee hereby agrees to accept as binding, conclusive, and final all
decisions and interpretations of the Board and where applicable, the Committee,
upon any questions arising under the Plan and this Stock Option Grant Agreement.
OPTIONEE:
--------------------------------------
--------------------------------------
(Printed Name)
Optionee Address:
--------------------------------------
--------------------------------------
--------------------------------------
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EXHIBIT 10.3
ORA ELECTRONICS, INC.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
---------------------------------------------
1. PURPOSE. ORA Electronics, Inc., a Delaware corporation (the
"Company"), hereby establishes its 1996 Non-Employee Directors Stock Option Plan
(the "Plan"). The purpose of the Plan is to provide non-employee directors with
an opportunity to participate in the growth of the Company through stock
ownership.
2. ELIGIBILITY. Only non-employee directors of the Company shall be
eligible to participate in the Plan.
3. STOCK AVAILABLE FOR OPTIONS UNDER THE PLAN. Subject to adjustment as
provided in Section 5 hereof, the aggregate number of shares of the common stock
of the Company ("Common Stock") as to which options may be granted under the
Plan shall not exceed 100,000 shares. Any of such shares which may remain unsold
and which are not subject to out standing options at the termination of the Plan
shall cease to be reserved for the purpose of the Plan, but until termination of
the Plan, the Company shall at all times reserve a sufficient number of shares
to meet the requirements of the Plan.
In the event that any option granted under the Plan shall expire or
terminate for any reason, including termination by the voluntary surrender
thereof for cancellation, without having been exercised in whole or in part, the
unpurchased shares subject thereto shall again be available for options to be
granted under the Plan.
4. STOCK OPTION. The options granted under the Plan shall be evidenced by
a written option agreement which shall contain the following terms and
conditions:
a. OPTION PRICE. The option price of shares of Common Stock covered
by each option shall be 100% of the fair market value of the Common Stock
on the date such option is granted. The fair market value shall be equal to
(i) the closing sales price on such date of a share of Common Stock as
reported on the principal securities exchange on which such shares of
Common Stock are then listed or admitted to trading, or as reported on the
National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market System, or (ii) if not so reported, the average of the
closing bid and ask prices on such date as reported on the Nasdaq System
published in THE WALL STREET JOURNAL. In the event that, at the time
options are granted pursuant to the terms of this Plan, neither Section
4(a)(i) nor Section 4(a)(ii) apply to the Company's Common Stock, the fair
market value of the Company's Common Stock shall be as determined in the
reasonable judgment of the Company's Board of Directors.
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b. NUMBER OF SHARES.
(i) Each non-employee director shall automatically receive an
option to purchase 5,000 shares of Common Stock on the date of his or her
first election as a director (the "Initial Grant").
(ii) Each year, as of the date of the Annual Meeting of
Stockholders of the Company, each non-employee director who has been
elected or re-elected or who is continuing as a member of the Board of
Directors as of the adjournment of the Annual Meeting (other than any
non-employee director eligible for an initial grant pursuant to Section
4(b)(i) hereof by reason of first election at such meeting) shall
automatically receive an option to purchase 500 shares of Common Stock (the
"Annual Grant").
c. EXPIRATION AND TERMINATION OF OPTIONS.
(i) EXPIRATION. Each option and all rights and obligations
thereunder shall, subject to the provisions of Section 4(c)(ii) hereof,
expire ten (10) years from the date of grant.
(ii) TERMINATION. In the event that an optionee shall cease to
be a director of the Company for any reason other than a disability (as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended from time to time, herein "Disability") or death, the vesting of
his or her options shall immediately and automatically terminate and the
vested portion of the option at the time the optionee ceases to be a
director shall be exercisable for one year subsequent to the date the
optionee ceased to be a director unless such option would expire pursuant
to Section 4(c)(i) hereof at an earlier date, in which case such option
shall remain exercisable only until the earlier expiration date. In the
event that the optionee shall cease to be a director of the Company due to
Disability, the portion of his or her options vested at the date the
optionee ceased to be a director shall remain exercisable for five years
after such cessation unless such options would expire pursuant to Section
4(c)(i) at an earlier date, in which case such options shall remain
exercisable only until the earlier expiration date. In the event that the
optionee should die while a director of the Company or during the one year
period following resig nation as a director due to Disability, the portion
of his or her options vested at the date the optionee ceased to be a
director shall remain exercisable for five years after the date of the
optionee's death, unless such options would expire pursuant to Section
4(c)(i) at an earlier date, in which case the options shall remain
exercisable only until the earlier expiration date.
d. NON-TRANSFERABILITY OF THE OPTIONS. An option granted under the
Plan may not be transferred otherwise than by will or the laws of descent
and distribution or as permitted by Rule 16b-3 of the Securities Exchange
Act of 1934, as amended, or successor rule or regulation ("Rule 16b-3"). An
option granted under the Plan may, during the lifetime of the optionee to
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whom granted, be exercised only by such optionee, his or her
guardian or legal representative, or by a transferee permitted by Rule
16b-3.
e. EXERCISE OF OPTIONS.
(i) Subject to the provisions of the Plan, an Initial Grant
pursuant to Section 4(b)(i) shall be exercisable as follows:
Percentage
From To Exercisable
- ---- -- -----------
Date of Grant Day prior to 1st 0%
Anniversary
1st Anniversary Day prior to 2nd 50%
Anniversary
2nd Anniversary Expiration Date 100%
(ii) Subject to the provisions of the Plan, an Annual Grant pursuant
to Section 4(b)(ii) shall be exercisable in full beginning on the first
anniversary date of the date of grant.
(iii) Options may be exercised by giving written notice to the
Secretary of the Company stating the number of shares of Common Stock with
respect to which the option is being exercised and tendering payment
therefor. Payment for shares of Common Stock shall be made in full at the
time that an option or any part thereof is exercised. Payment may be made
(i) in cash, or (ii) by delivery of shares of stock of the Company held by
optionee, which shares shall be valued, for purposes of payment, at their
fair market value on the date of payment, determined in accordance with
procedures established in Subsection 4(a).
5. CAPITAL ADJUSTMENTS AND CHANGES IN THE COMPANY. In the event of any
stock dividend, stock split, exchange of shares, recapitalization, subdivision
or consolidation of shares, or other similar transaction, the aggregate number
of shares available under the Plan, the number of shares subject to each
outstanding option and the option price per share, shall all be proportionately
adjusted.
In the event the Company shall be a party to a transaction involving a
sale of substantially all its assets, a merger or a consolidation, all then
outstanding options under the Plan may be cancelled by the Company as of the
effective date of any such transaction by giving notice to each optionee of its
intention to do so and by permitting the exercise, during the 30-day period
preceding the effective date of such transaction, of all partly or wholly
unexercised options in full, including the portion not yet exercisable pursuant
to the vesting schedule set forth in Subsection 4(e) above.
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In the case of dissolution of the Company (other than a dissolution
following a sale of substantially all of the Company's assets), every option
outstanding hereunder shall terminate; provided, however, that each optionee
shall have 30 days' prior written notice of such event, during which time the
optionee shall have a right to exercise any partly or wholly unexercised option
in full, including the portion not yet exercisable pursuant to the vesting
schedule set forth in Subsection 4(e) above.
6. NO OBLIGATION. The granting of an option shall impose no obligation on
the Company to continue optionee's service as a director for any period.
7. LEGAL AND OTHER REQUIREMENTS. The obligation of the Company to issue
or transfer shares of Common Stock under options granted under the Plan shall be
subject to all applicable laws, regulations, rules and approvals including, but
not by way of limitation, the effec tiveness of a registration statement under
the Securities Act of 1933, as amended, the qualification of the options and the
shares of Common Stock reserved for issuance upon exercise of options under
applicable state securities laws, the satisfaction of applicable listing
requirements of the principal securities exchange on which the Company's Common
Stock is listed or admitted to trading, if deemed necessary or appropriate by
the Company, and the payment by the optionee to the Company, upon its demand, of
such amount or, in lieu thereof, such number of shares of Common Stock of the
Company, as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state or local income or other taxes incurred by
reason of the exercise of such options or the delivery of shares of Common Stock
incident thereto.
8. TERMINATION AND AMENDMENT OF PLAN. The Board of Directors, without
further action on the part of the stockholders, may suspend, terminate or amend
the Plan except that no such action may materially and adversely affect any
outstanding option without the consent of the optionee. This Plan may not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act or the
rules thereunder.
9. EFFECTIVE DATE AND DURATION OF PLAN. This Plan shall become effective
as of December 20, 1996, the date of its adoption by the Board of Directors
("Effective Date"). No options may be granted under this Plan subsequent to the
date which is 10 years from the Effective Date. The Plan shall continue in
effect, however, insofar as is necessary to complete all the Company's
obligations under outstanding options and to conclude the administration of the
Plan.
10. GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and be governed by the laws of the State of
Delaware.
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EXHIBIT 10.4
ORA ELECTRONICS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION AGREEMENT
---------------------------------------------
This Non-Employee Director Stock Option Agreement (the "Agreement")
is made and entered into as of _____________ by and between ORA Electronics,
Inc. (the "Company") and ____________ (the "Optionee").
RECITALS
The Company has adopted its 1996 Non-Employee Directors Stock Option
Plan (the "Plan") and, pursuant to such, desires to grant Optionee an option to
purchase _________ shares of the common stock, $.001 par value ("Common Stock"),
of the Company upon the terms and conditions hereinafter set forth. Capitalized
terms used and not defined herein shall have the meanings set forth in the Plan.
AGREEMENT
In consideration of the promises and of the undertakings of the
parties hereto hereinafter set forth, it is hereby agreed:
1. GRANT OF OPTION.
The Company hereby grants Optionee the option to purchase, upon and
subject to the terms and conditions of the Plan, all or part of __________
shares of Common Stock of the Company at the price equal to $____ per share.
2. TERM OF OPTION.
This option, subject to the provisions of Section 3 hereof, shall
expire on the tenth anniversary of the date on which this option is granted
("Expiration Date").
3. TERMINATION.
In the event that Optionee shall cease to be a director of the
Company for any reason, the vesting of this option shall immediately and
automatically terminate. In the event that Optionee shall cease to be a director
of the Company for any reason other than a disability (as defined in Internal
Revenue Code ss. 22(e)(3), herein "Disability") or death, the vested portion of
the option at the time Optionee ceases to be a director shall be exercisable for
one (1) year subsequent to the date Optionee ceased to be a director unless such
option would expire pursuant to Section 2 hereof at an earlier date in which
case such option shall remain exercisable only until the earlier expiration
date. In the event that Optionee shall cease to be a director of the Company due
to Disability, the portion of this option vested at the date Optionee ceased to
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be a director shall remain exercisable for five (5) years after such cessation
unless such option would expire pursuant to Section 2 hereof at an earlier date
in which case such option shall remain exercisable only until the earlier
expiration date. In the event that Optionee should die while a director of the
Company or during the one year period following resignation as a director due to
Disability, the portion of this option vested at the date Optionee ceased to be
a director shall remain exercisable for five (5) years after the date of
Optionee's death, unless this option would expire pursuant to Section 2 hereof
at an earlier date, in which case this option shall remain exercisable only
until the earlier expiration date.
4. NON-TRANSFERABILITY OF OPTION.
This option may not be transferred otherwise than by will or the
laws of descent and distribution or as permitted by Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, or successor rule or regulation ("Rule
16b-3"). During the lifetime of Optionee, this option may be exercised only by
Optionee, or Optionee's guardian or legal representative or by a transferee
permitted by Rule 16b-3.
5. EXERCISE OF OPTION.
(i) Subject to the provisions of the Plan, an Initial Grant pursuant
to Section 4(b)(i) of the Plan shall be exercisable as follows:
Percentage
From To Exercisable
---- -- -----------
Date of Grant Day prior to 0%
1st Anniversary
1st Anniversary Day prior to 50%
2nd Anniversary
2nd Anniversary Expiration Date 100%
(ii) Subject to the provisions of the Plan, an Annual Grant pursuant
to Section 4(b)(ii) of the Plan shall be exercisable in full beginning on the
first anniversary of the date of grant.
(iii) This option may be exercised by giving written notice to the
Secretary of the Company stating the number of shares of Common Stock with
respect to which the option is being exercised and tendering payment therefor.
Payment for shares of Common Stock shall be made in full at the time that the
option, or any part thereof, is exercised. Payment may be made (a) in cash, or
(b) by delivery of shares of stock of the Company held by Optionee, which shares
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shall be valued, for purposes of payment, at their fair market value on the date
of payment, determined in accordance with procedures established in the Plan.
6. NO RIGHTS AS SHAREHOLDER.
Optionee shall have no rights as a shareholder with respect to
shares of the Company's Common Stock covered by this option until the date of
the issuance of a stock certificate or stock certificates.
7. NO OBLIGATION.
Optionee agrees that the granting of this option shall impose no
obligation on the Company to continue Optionee's service as a director for any
period.
8. MODIFICATION, TERMINATION AND ADJUSTMENT.
The rights of Optionee are subject to modification, termination and
adjustment in certain events as provided in the Plan.
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9. INCORPORATION BY REFERENCE.
This Agreement is subject to the terms and provisions of the Plan
which is incorporated herein by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
"COMPANY"
ORA ELECTRONICS, INC.
By ___________________________________
Its _______________________________
"OPTIONEE":
___________________________________
___________________________________
[Printed Name]
Optionee Address:
___________________________________
___________________________________
___________________________________
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<PAGE>
EXHIBIT 10.5
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("Agreement") is made as of
____________, 1996, by and between ORA ELECTRONICS, INC., a Delaware corporation
(the "Company"), and _____________________ ("Indemnitee"), with reference to the
following facts:
A. Indemnitee is currently serving as a director or officer of
the Company.
B. The Company and Indemnitee recognize the substantial increase in
corporate litigation in general, subjecting officers and directors to expensive
litigation risks at the same time as the availability and coverage of liability
insurance has been severely limited.
C. Indemnitee does not regard the current protection available to be
adequate under the present circumstances to protect him or her against the risks
associated with his or her service to the Company and the Company recognizes
that Indemnitee and other officers and directors of the Company may not be
willing to continue to serve as officers or directors without additional
protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, including Indemnitee, to serve as officers and directors
of the Company and thus desires to indemnify its officers and directors to
provide them with the maximum protection permitted by law.
THEREFORE, IN CONSIDERATION OF the foregoing premises, the Company
and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
1.1 THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Company to procure a
judgment in its favor) by reason of the fact that Indemnitee is or was a
director, officer, employee or other agent of the Company, or any subsidiary of
the Company, and such proceeding relates to any action or inaction on the part
of Indemnitee while an officer, director, employee or agent or by reason of the
fact that Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including, subject to
Section 13 hereof, attorneys' fees and any expenses of establishing a right to
indemnification pursuant to this Agreement or under Delaware law), judgments,
fines, settlements (if such settlement is approved in advance by the Company,
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which approval shall not be unreasonably withheld) and other amounts actually
and reasonably incurred by Indemnitee in connection with such proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company and, in the case of a
criminal proceeding, if Indemnitee had no reasonable cause to believe
Indemnitee's conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company, or with respect to any
criminal proceedings, would not create a presumption that Indemnitee had
reasonable cause to believe that Indemnitee's conduct was unlawful.
1.2 PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action by or in the right of the
Company or any subsidiary of the Company to procure a judgment in its favor by
reason of the fact that Indemnitee is or was a director, officer, employee or
other agent of the Company, or any subsidiary of the Company, and such action
relates to any action or inaction on the part of Indemnitee while an officer,
director or agent, or by reason of the fact that Indemnitee is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including, subject to Section 13 hereof, attorneys' fees and any
expenses of establishing a right to indemnification pursuant to this Agreement
or under Delaware law) and amounts paid in settlement, in each case to the
extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of the proceeding if Indemnitee acted in good faith and in
a manner Indemnitee believed to be in or not opposed to the best interests of
the Company, except that no indemnification shall be made with respect to any
claim, issue or matter to which Indemnitee shall have been adjudged to have been
liable to the Company in the performance of Indemnitee's duty to the Company,
unless and only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to indemnity for
expenses and then only to the extent that the court shall determine is proper.
1.3 SUCCESSFUL DEFENSE ON MERITS. To the extent that Indemnitee has
been successful on the merits in defense of any proceeding referred to in
Section 1.1 or 1.2 above, or in defense of any claim, issue or matter therein,
the Company shall indemnify Indemnitee against expenses (including attorneys'
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fees) actually and reasonably incurred by Indemnitee in connection
therewith.
1.4 CERTAIN TERMS DEFINED. For purposes of this Agreement,
references to "other enterprises" shall include employee benefit plans,
references to "fines" shall include any excise taxes assessed on Indemnitee with
respect to an employee benefit plan and references to "proceeding" shall include
any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative. For purposes of this Agreement,
references to the "Company" shall include all constituent corporations absorbed
in a consolidation or merger as well as the resulting or surviving corporation,
so that an Indemnitee who is or was a director, officer, employee or other agent
of such a constituent corporation, or who, being or having been such a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as an Indemnitee would if he or she had served the resulting or
surviving corporation in the same capacity.
2. AGREEMENT TO SERVE. Indemnitee agrees to serve or continue to serve as
a director and/or officer of the Company for so long as he or she is duly
elected or appointed or until such time as he or she voluntarily resigns.
Indemnitee agrees to tender written notice to the Company at least 30 days prior
to voluntarily resigning. The terms of any existing employment agreement between
Indemnitee and the Company shall continue in effect but shall be modified or
supplemented by the terms of this Agreement. Nothing contained in this Agreement
is intended to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
3.1 ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
(excluding amounts actually paid in settlement of any action, suit or
proceeding) or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1.1 or 1.2 hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall be determined
ultimately that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee within twenty (20) days following delivery of a written
request therefor by Indemnitee to the Company.
3.2 NOTICE OF CLAIM. Indemnitee shall, as a condition precedent to
his or her right to be indemnified under this Agreement, give the Company notice
in writing as soon as practicable of any claim made against Indemnitee for which
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indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Secretary of the Company at the address shown
on the signature page of this Agreement (or such other address as the Company
shall designate in writing to Indemnitee). In addition, Indemnitee shall give
the Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
3.3 ENFORCEMENT RIGHTS. Any indemnification provided for in Section
1 shall be made no later than sixty (60) days after receipt of the written
request of Indemnitee. If a claim or request under this Agreement, under any
statute, or under any provision of the Company's Bylaws providing for
indemnification, is not paid by the Company, or on its behalf, within sixty (60)
days after written request for payment thereof has been received by the Company,
Indemnitee may, but need not, at any time thereafter bring suit against the
Company to recover the unpaid amount of the claim or request, and subject to
Section 13, Indemnitee shall also be entitled to be paid for the expenses
(including attorneys' fees) of bringing such action. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in connection with any action, suit or proceeding in advance of its
final disposition) that Indemnitee has not met the standards of conduct which
make it permissible under applicable law for the Company to indemnify Indemnitee
for the amount claimed but the burden of proving such defense shall be on the
Company and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Section 3.1 unless and until such defense may be finally adjudicated
by court order or judgment for which no further right of appeal exists. The
parties hereto intend that, if the Company contests Indemnitee's right to
indemnification, the question of Indemnitee's right to indemnification shall be
a decision for the court and no presumption regarding whether the applicable
standard has been met will arise based on any determination or lack of
determination of such by the Company (including its Board of Directors or any
committee thereof, independent legal counsel or its stockholders).
3.4 ASSUMPTION OF DEFENSE. In the event the Company shall be
obligated to pay the expenses of any proceeding against Indemnitee, the Company,
if appropriate, shall be entitled to assume the defense of such proceeding with
counsel approved by Indemnitee, which approval shall not be unreasonably
withheld, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, unless (i) the employment of
counsel by Indemnitee is authorized by the Company, (ii) Indemnitee shall have
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reasonably concluded that there may be a conflict of interest of such counsel
retained by the Company between the Company and Indemnitee in the conduct of
such defense, or (iii) the Company ceases or terminates the employment of such
counsel with respect to the defense of such proceeding, in any of which events
then the fees and expenses of Indemnitee's counsel shall be at the expense of
the Company. At all times Indemnitee shall have the right to employ other
counsel in any such proceeding at Indemnitee's expense.
3.5 NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 3.2 hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
3.6 SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall do all things that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
4. EXCEPTIONS. Notwithstanding any other provision herein
to the contrary, the Company shall not be obligated pursuant to
the terms of this Agreement:
4.1 CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or as otherwise required under the
Delaware General Corporation Law, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of
Directors has approved the initiation or bringing of such suit; or
4.2 LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that such proceeding was not made in good faith or was frivolous; or
4.3 INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) that
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have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company; or
4.4 CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by
Indemnitee in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
6.1 SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify Indemnitee to the fullest extent
permitted by law, including those circumstances in which indemnification would
otherwise be discretionary and notwithstanding that such indemnification is not
specifically authorized by this Agreement. In the event of any change in any
applicable law, statute or rule which narrows the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement shall have no effect on this Agreement or the parties'
rights and obligations hereunder.
6.2 NON-EXCLUSIVITY. Nothing herein shall be deemed to diminish or
otherwise restrict any rights to which Indemnitee may be entitled under the
Company's Bylaws, any agreement, any vote of stockholders or disinterested
directors, or under the laws of the State of Delaware.
7. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
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8. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from time
to time, make the good faith determination whether or not it is practicable for
the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. Notwithstanding the
foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
subsidiary or parent of the Company.
9. SEVERABILITY. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. If this Agreement or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the fullest extent permitted by any
applicable portion of this Agreement that shall not have been invalidated and
the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
10. EFFECTIVE DATES. This Agreement shall be effective as of the date set
forth on the first page and may apply to acts or omissions of Indemnitee which
occurred prior to such date if Indemnitee was an officer, director, employee or
other agent of the Company, or any predecessor corporation or constituent
corporation in a merger involving the Company, or was serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, at the time such act or
omission occurred.
11. COVERAGE. The provisions of this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though Indemnitee may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to the
benefit of Indemnitee and Indemnitee's estate, heirs, legal representatives and
assigns.
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12. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement or
as subsequently modified by written notice.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that the action was not instituted in good faith or was frivolous. In the event
of an action instituted by or in the name of the Company under this Agreement,
or to enforce or interpret any of the terms of this Agreement, Indemnitee shall
be entitled to be paid all court costs and expenses, including attorneys' fees,
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that Indemnitee's defenses to such
action were not made in good faith or were frivolous.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts in the State of Delaware.
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16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
ORA ELECTRONICS, INC. Address:
9410 Owensmouth Avenue
Chatsworth, California 91313
By: ________________________
Title: _____________________
INDEMNITEE Address:
--------------------------
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), effective as of
December 19, 1996 ("Effective Date"), is entered into by and between
Gershon N. Cooper ("Executive") and ORA Electronics, Inc., a Delaware
corporation (the "Company").
WHEREAS, Executive serves as Chief Executive Officer, President and
Chairman of the Board of the Company; and
WHEREAS, the Company desires to establish its right to the continued
services of Executive, in the capacities described below, on the terms and
conditions hereinafter set forth, and Executive is willing to accept such
employment on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, Executive and the Company agree as follows:
1. EMPLOYMENT AS PRESIDENT AND CHIEF EXECUTIVE
OFFICER OF THE COMPANY.
1.1 DUTIES. The Company does hereby employ Executive as
President and Chief Executive Officer of the Company and Executive does hereby
accept and agree to such employment. Subject to the supervision and control of
the Board of Directors of the Company, Executive shall do and perform all
services and acts necessary or advisable to fulfill the duties and
responsibilities of President and Chief Executive Officer and shall render such
services on the terms set forth herein. In addition, Executive shall have such
other executive and managerial powers and duties with respect to the Company and
its subsidiaries as may reasonably be assigned to him by the Board, to the
extent consistent with his position and status as President and Chief Executive
Officer of the Company. Executive agrees to devote substantially all of his
working time and efforts exclusively to the business of the Company.
1.2 PLACE OF PERFORMANCE. In connection with Executive's
employment by the Company, Executive shall be based at the principal executive
offices of the Company in Chatsworth, California.
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2. TERM OF AGREEMENT. The term ("Term") of this Agreement shall
commence on the Effective Date and shall continue for a period of three (3)
years. The Term may be extended by mutual agreement of the parties for
successive one year periods on such terms as may be agreed.
3. COMPENSATION.
3.1 BASE SALARY. The Company shall pay Executive an annual
base salary at the rate of $330,000 per year, or such higher amount as the
Company may from time to time determine ("Base Salary"), payable in equal
biweekly installments or at such other time or times as Executive and the
Company shall agree. Except as otherwise provided herein, the Company's
obligation to pay Executive's Base Salary under this Agreement shall cease as of
the date of termination of Executive's employment.
3.2 BONUS. Executive shall be entitled to participate in such
bonus plans as the Board of Directors may from time to time adopt.
3.3 FRINGE BENEFITS. Executive shall be entitled to
participate in any fringe and other benefit programs adopted from time to time
by the Company for the benefit of its executive employees, including but not
limited to vacation, reimbursement of business expenses, medical and similar
plans. Additionally, Executive shall be entitled to an annual automobile
allowance of $12,000, payable in equal monthly installments of $1,000 per month.
3.4 CONSULTING AGREEMENT. Commencing on the expiration of the
Term of this Agreement or any extension thereof, or, if earlier, the date of
termination of Executive's employment hereunder for any reason other than death,
Executive hereby agrees to render consulting services to the Company and the
Company agrees to accept such services and to pay Executive a consulting fee at
the rate of $250,000 per year, payable in equal biweekly installments, such
services to be provided at such time or times and in such manner as Executive
and the Company shall agree. It is expressly understood that the
non-competition, confidentiality and non-solicitation provisions hereof shall be
applicable during the three year term of the consulting services. During such
term, Executive's reporting obligations pursuant to the consulting agreement
shall be limited to the Chairman of the Board of Directors of the Company or the
Company's President, as determined by the Board of Directors, or such other
person as Executive and the Company shall agree.
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4. TERMINATION OF EXECUTIVE'S EMPLOYMENT.
4.1 DEATH. In the event Executive's employment hereunder is
terminated by reason of Executive's death, the Company shall pay to Executive's
estate any amounts accrued hereunder to the date of death.
4.2 DISABILITY. If, as a result of Executive's incapacity due
to physical or mental illness ("Disability"), Executive shall have been absent
from the full-time performance of his duties with the Company for a period of
six (6) consecutive months and, within thirty (30) days after written notice is
provided to him by the Company, he shall not have returned to the full-time
performance of his duties, Executive's employment under this Agreement may be
terminated by the Company for Disability. During any period prior to such
termination during which Executive is absent from the full-time performance of
his duties with the Company due to Disability, the Company shall continue to pay
Executive his Base Salary at the rate in effect at the commencement of such
period of Disability.
4.3 TERMINATION FOR CAUSE. The Company may terminate
Executive's employment under this Agreement for "Cause," at any time prior to
expiration of the Term of this Agreement. For this purpose, "Cause" shall mean
willful breach of this Agreement, fraud, misappropriation or embezzlement, or
other criminal conduct, or habitual neglect to perform Executive's duties. In
the event of termination for Cause, Executive's employment may be terminated by
the Board of Directors immediately without advance written notice, whereupon
this Agreement shall terminate without further obligation by the Company, except
for payment of amounts of Base Salary accrued through the date of termination.
4.4 TERMINATION BY THE COMPANY OTHER THAN FOR DEATH,
DISABILITY OR CAUSE. If Executive's employment is terminated by the Company for
any reason other than Executive's death or Disability or for Cause, the Company
shall continue to pay Executive upon such termination an amount equal to his
Base Salary (less amounts paid under Section 3.4) in effect on the date of
termination for the remaining Term of this Agreement as if Executive had
remained in the Company's employment during such period at a rate equal to his
then Base Salary.
4.5 NO MITIGATION REQUIRED. Executive shall not be required in
any way to mitigate the amount of any payment or benefit provided for under
Subsection 3.4 or in this Section 4, including, but not limited to, by seeking
other employment, nor shall the amount of any payment or benefit provided for
under Subsection 3.4 or in this Section 4 be reduced by any compensation earned
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by Executive as the result of employment with or services provided to another
employer after the date of Executive's termination, or otherwise.
5. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS.
5.1 DEFINITION OF "INVENTIONS". As used herein, the term
"Inventions" shall mean all inventions, discoveries, improvements, trade
secrets, formulas, techniques, data, programs, systems, specifications,
documentation, algorithms, flow charts, logic diagrams, source codes, processes,
and other information, including worksin-progress, whether or not subject to
patent, trademark, copyright, trade secret, or mask work protection, and whether
or not reduced to practice, which are made, created, authored, conceived, or
reduced to practice by Executive, either alone or jointly with others, during
the period of employment with the Company (including, without limitation, all
periods of employment with the Company prior to the Effective Date) which (A)
relate to the actual or anticipated business, activities, research, or
investigations of the Company or (B) result from or is suggested by work
performed by Executive for the Company (whether or not made or conceived during
normal working hours or on the premises of the Company), or (C) which result, to
any extent, from use of the Company's premises or property.
5.2 WORK FOR HIRE. Executive expressly acknowledges that all
copyrightable aspects of the Inventions (as defined above) are to be considered
"works made for hire" within the meaning of the Copyright Act of 1976, as
amended (the "Act"), and that the Company is to be the "author" within the
meaning of such Act for all purposes. All such copyrightable works, as well as
all copies of such works in whatever medium, fixed or embodied, shall be owned
exclusively by the Company as of the date of creation, and Executive hereby
expressly disclaims any and all interest in any of such copyrightable works and
waives any right of DROIT MORALE or similar rights.
5.3 ASSIGNMENT. Executive acknowledges and agrees that all
Inventions constitute trade secrets of the Company and shall be the sole
property of the Company or any other entity designated by the Company. In the
event that title to any or all of the Inventions, or any part or element
thereof, may not, by operation of law, vest in the Company, or such Inventions
may be found as a matter of law not to be "works made for hire" within the
meaning of the Act, Executive hereby conveys and irrevocably assigns to the
Company, without further consideration, all his right, title and interest,
throughout the universe and in perpetuity, in all Inventions and all copies of
them, in whatever medium, fixed or embodied, and in all written records,
graphics, diagrams, notes, or reports relating thereto in Executive's possession
or under his control, including, with respect to any of the foregoing, all
rights of copyright, patent, trademark, trade secret, mask work, and any and all
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other proprietary rights therein, the right to modify and create derivative
works, the right to invoke the benefit of any priority under any international
convention, and all rights to register and renew same.
5.4 PROPRIETARY NOTICES, NO FILINGS, WAIVER OF MORAL RIGHTS.
Executive acknowledges that all Inventions shall, at the sole option of the
Company, bear the Company's patent, copyright, trademark, trade secret, and mask
work notices.
Executive agrees not to file any patent, copyright, or
trademark applications relating to any Invention, except with prior written
consent of an authorized representative of the Company (other than Executive).
Executive hereby expressly disclaims any and all interest in
any Inventions and waives any right of DROIT MORALE or similar rights, such as
rights of integrity or the right to be attributed as the creator of the
Invention.
5.5 FURTHER ASSURANCES. Executive agrees to assist the
Company, or any party designated by the Company, promptly on the Company's
request, whether before or after the termination of employment, however such
termination may occur, in perfecting, registering, maintaining, and enforcing,
in all jurisdictions, the Company's rights in the Inventions by performing all
acts and executing all documents and instruments deemed necessary or convenient
by the Company, including, by way of illustration and not limitation:
5.5.1 Executing assignments, applications, and other
documents and instruments in connection with (A) obtaining patents, copyrights,
trademarks, mask works, or other proprietary protections for the Inventions and
(B) confirming the assignment to the Company of all right, title and interest in
the Inventions or otherwise establishing the Company's exclusive ownership
rights therein.
5.5.2 Cooperating in the prosecution of patent,
copyright, trademark and mask work applications, as well as in the enforcement
of the Company's rights in the Inventions, including, but not limited to,
testifying in court or before any patent, copyright, trademark or mask work
registry office or any other administrative body.
Executive will be reimbursed for all out-of-pocket costs
reasonably incurred in connection with the foregoing, if such assistance is
requested by the Company after the termination of Executive's employment. In
addition, to the extent that, after the termination of employment for whatever
reason, Executive's technical expertise shall be required in connection with
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the fulfillment of the aforementioned obligations, the Company will compensate
Executive at a reasonable rate for the time actually spent by Executive at the
Company's request rendering such assistance.
5.6 POWER OF ATTORNEY. Executive hereby irrevocably appoints
the Company to be his Attorney-In-Fact to execute any document and to take any
action in his name and on his behalf and to generally use his name for the
purpose of giving to the Company the full benefit of the assignment provisions
set forth above.
5.7 DISCLOSURE OF INVENTIONS. Executive will make full and
prompt disclosure to the Company of all Inventions subject to assignment to the
Company, and all information relating thereto in Executive's possession or under
his control as to possible applications and use thereof.
6. ASSIGNMENT OF TRADEMARKS
6.1 DEFINITION OF "MARKS" AND PRODUCTS. As used herein, the
term "Marks" shall mean the name "ORA Electronics, Inc." and all variations
thereof, and signatures, designs, and logos incorporating any of the foregoing.
As used herein, the term "Products" shall mean all consumer communication and
related products and all services related thereto, and any other products or
services that the Company may decide to sell or provide at any time or from time
to time.
6.2 ASSIGNMENT. Executive hereby conveys and irrevocably
assigns to the Company all of Executive's right, title and interest in and to
the Marks, and any and all variations thereof, throughout the world, including
all applications, registrations, and common law rights therein, together with
all goodwill symbolized or associated with the aforementioned, and all income,
royalties, damages, and payments now or hereafter due or payable in respect
thereto, and in and to all causes of action (either in law or in equity) and the
right to sue, counterclaim, and recover for past, present, or future
infringement of the Marks.
6.3 USE OF NAME. Executive hereby agrees that the Company
shall have the exclusive right to use or to allow others to use the Marks and
any and all variations thereof in connection with the Products or any product,
business, service or any other activity similar to or related to the Products.
Executive hereby agrees that he will not, and he will not authorize or license
others to, use the Marks or any variations of the Marks, in connection with the
Products or any product, business, service, or any other activity similar to or
related to the Products without the prior written approval of the Company (which
must be approved by a majority of the independent board members). Executive
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further agrees that he will never assert any claims, including but not limited
to a claim of infringement, against the Company relating to the use of the Marks
or any variations of the Marks.
6.4 FURTHER ASSURANCES. Executive agrees to assist the
Company, or any party designated by the Company, promptly on the Company's
request, whether before or after the termination of employment, however such
termination may occur, in perfecting, registering, maintaining, and enforcing,
in all jurisdictions, the Company's rights in the Marks by performing all acts
and executing all documents and instruments deemed necessary or convenient by
the Company, including, by way of illustration and not limitation:
6.4.1 Executing assignments, applications and other
documents and instruments in connection with (A) obtaining trademark
registrations for the Marks or other proprietary protections for the Marks and
(B) confirming the assignment to the Company of all right, title and interest in
the Marks or otherwise establishing the Company's exclusive ownership rights
therein.
6.4.2 Cooperating in the prosecution of trademark
applications for the Marks, as well as in the enforcement of the Company's
rights in the Marks, including, but not limited to, testifying in court or
before any trademark registry office or any other administrative body.
Executive will be reimbursed for all out-of-pocket costs
reasonably incurred in connection with the foregoing, if such assistance is
requested by the Company after the termination of Executive's employment. In
addition, to the extent that, after the termination of employment for whatever
reason, Executive's technical expertise shall be required in connection with the
fulfillment of the aforementioned obligations, the Company will compensate
Executive at a reasonable rate for the time actually spent by Executive at the
Company's request rendering such assistance. Nothing in this Section 6 shall be
construed in any manner to limit in any way the rights granted to the Company in
Section 5.
7. NO VIOLATION OF THIRD-PARTY RIGHTS. Executive represents,
warrants, and covenants that he:
7.1 Is not a party to any conflicting agreements with third
parties which will prevent him from fulfilling the terms of employment and the
obligations of this Agreement;
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7.2 Does not have in his possession any confidential or
proprietary information or documents belonging to others and will not disclose
to the Company, use, or induce the Company to use, any confidential or
proprietary information or documents of others; and
7.3 Agrees to respect any and all valid obligations which he
may now have to prior employers or to others relating to confidential
information, inventions, or discoveries which are the property of those prior
employers or others, as the case may be.
Executive has supplied or shall promptly supply to the Company
a copy of each written agreement to which Executive is subject (other than any
agreement to which the Company is a party) which includes any obligation of
confidentiality, assignment of Inventions, or non-competition.
Executive agrees to indemnify and save harmless the Company
from any loss, claim, damage, cost or expense of any kind (including without
limitation, reasonable attorney fees) to which the Company may be subjected by
virtue of a breach by Executive of the foregoing representations, warranties and
covenants.
8. CONFIDENTIAL INFORMATION AND NON-COMPETITION.
8.1 CONFIDENTIALITY. Executive acknowledges that in his
employment hereunder and thereafter as a consultant, and during prior periods of
employment with the Company, he has occupied and will continue to occupy a
position of trust and confidence. Executive shall not, except as may be required
to perform his duties hereunder or as required by applicable law, without
limitation in time, or until such information shall have become public other
than by Executive's unauthorized disclosure, disclose to others or use, whether
directly or indirectly, any Confidential Information regarding the Company.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates and their respective clients and customers that is
not disclosed by the Company for financial reporting purposes and that was
learned by Executive in the course of his employment by the Company, including
(without limitation) any proprietary knowledge, trade secrets, data, formulae,
information and client and customer lists and all papers, resumes, and records
(including computer records) of the documents containing such confidential
Information. Executive acknowledges that such Confidential Information is
specialized, unique in nature and of great value to the Company, and that such
information gives the Company a competitive advantage. Executive agrees to (i)
deliver or return to the Company, at the Company's request at any time or upon
termination or expiration of his employment or as soon thereafter as possible,
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(A) all documents, computer tapes and disks, records, lists, data, drawings,
prints, notes and written information (and all copies thereof) furnished by the
Company or prepared by Executive during the term of his employment by the
Company and (B) all notebooks and other data relating to research or experiments
or other work conducted by Executive in the scope of employment or any
Inventions made, created, authored, conceived, or reduced to practice by
Executive, either alone or jointly with others, and (iii) make full disclosure
relating to any Inventions.
8.2 NON-COMPETITION. During the Term of this Agreement and for
the three (3) year consulting period commencing at the expiration of the Term
hereof or the earlier termination of Executive's employment for any reason other
than death, Executive shall not, directly or indirectly, without the prior
written consent of the Company, provide consultative services or otherwise
provide services to (whether as an employee or a consultant, with or without
pay), own, manage, operate, join, control, participate in, or be connected with
(as a stockholder, partner, or otherwise), any business, individual, partner,
firm, corporation, or other entity that is then a competitor of the Company
(each such competitor a "Competitor of the Company"); provided, however, that
the "beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
not more than one percent (1%) of the voting stock of any publicly held
corporation shall not alone constitute a violation of this Agreement. It is
further expressly agreed that the Company will or would suffer irreparable
injury if Executive were to compete with the Company or any subsidiary or
affiliate of the Company in violation of this Agreement and that the Company
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction and Executive further consents and stipulates to the
entry of such injunctive relief in such a court prohibiting Executive from
competing with the Company or any subsidiary or affiliate of the Company in
violation of this Agreement. Executive and the Company acknowledge and agree
that the business of the Company is global in nature, and that the terms of the
non-competition agreement set forth herein shall apply on a worldwide basis, and
shall specifically apply to each city and county in the State of California and
each other state in the United States.
8.3 NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
Term of this Agreement and for the three (3) year consulting period commencing
at the expiration of the Term hereof or the earlier termination of Executive's
employment for any reason other than death, Executive shall not, directly or
indirectly, influence or attempt to influence customers or suppliers of the
Company or any of its subsidiaries or affiliates, to divert their business to
any Competitor of the Company.
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8.4 NON-SOLICITATION OF EMPLOYEES. Executive recognizes that
he possesses and will possess confidential information about other employees of
the Company relating to their education, experience, skills, abilities,
compensation and benefits, and inter-personal relationships with customers of
the Company. Executive recognizes that the information he possesses and will
possess about these other employees is not generally known, is of substantial
value to the Company in developing its business and in securing and retaining
customers, and has been and will be acquired by him because of his business
position with the Company. Executive agrees that, during the Term of this
Agreement and for a period of three (3) years thereafter, he will not, directly
or indirectly, solicit or recruit any employee of the Company for the purpose of
being employed by him or by any Competitor of the Company on whose behalf he is
acting as an agent, representative or employee and that he will not convey any
such confidential information or trade secrets about other employees of the
Company to any other person.
9. SURVIVAL OF PROVISIONS. The obligations contained in
Subsections 3.4 and 4.4 and Sections 5, 6 and 8 shall survive the termination
or expiration of Executive's employment with the Company and shall be fully
enforceable thereafter.
10. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax or first class mail,
certified or registered with return receipt requested, and shall be deemed to
have been duly given three (3) days after mailing, twenty-four (24) hours after
transmission of a fax (at the individual's then current fax number) or upon
personal delivery to the respective persons named below:
If to Company: ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, CA 91313
Attn: Corporate Secretary
If to Executive: Mr. Gershon N. Cooper
c/o ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, CA 91313
Either party may change such party's address for notices by notice duly given
pursuant hereto.
11. DISPUTE RESOLUTION; ATTORNEYS' FEES. The Company and
Executive agree that any dispute arising as to the parties' rights and
obligations hereunder, other than with respect to Section 8, shall be
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resolved by binding arbitration before a private judge to be determined by
mutually agreeable means. Each party shall have the right, in addition to any
other relief granted by such arbitrator (or by any court with respect to relief
granted with respect to Section 8), to attorneys' fees based on a determination
by the arbitrator (or, with respect to Section 8, the court) of the extent to
which each party has prevailed as to the material issues raised in determination
of the dispute.
12. TERMINATION OF PRIOR AGREEMENTS. This Agreement
terminates and supersedes any and all prior agreements and understandings
between the parties with respect to Executive's employment and compensation by
the Company, but only with respect to the matters expressly addressed herein.
13. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided that, in the event of the merger, consolidation, transfer, or sale of
all or substantially all of the assets of the Company with or to any other
individual or entity, this Agreement shall, subject to the provisions hereof, be
binding upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties and obligations of the
Company hereunder.
14. GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under and
in accordance with the internal laws of the State of California.
15. WITHHOLDING. The Company shall make such deductions and
withhold such amounts from each payment made to Executive hereunder as may be
required from time to time by law, governmental regulation or order.
16. HEADINGS. 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.
17. WAIVER; MODIFICATION. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
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of such right or power at any other time or times. This Agreement shall not
be modified in any respect except by a writing executed by each party hereto.
18. SEVERABILITY. In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statue or public policy, only the portions of this Agreement that violate
such statute or public policy shall be stricken. All portions of this Agreement
that do not violate any statute or public policy shall continue in full force
and effect. Further, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much effect
as possible to the intentions of the parties under this Agreement.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Executive has hereunto signed this
Agreement, as of the date first above written.
Company:
ORA ELECTRONICS, INC.
By: /s/ John M. Burris
----------------------------
Its: Chief Financial Officer
Executive:
/s/ Gershon N. Cooper
---------------------------------
Gershon N. Cooper
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EXHIBIT 10.7
AMENDED AND RESTATED PROMISSORY NOTE
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
GERSHON N. COOPER and RUTH COOPER, husband and wife, of 4561 Tara Drive, Encino,
California 91436, each promise, both jointly and severally, to pay to the order
of ALLIANCE RESEARCH CORPORATION, a California corporation, or any subsequent
holder of this Note, TWO HUNDRED FORTY-THREE THOUSAND NINE HUNDRED EIGHTY-TWO
DOLLARS ($243,982.00) together with interest thereon, such interest being
calculated at the rate of FIVE AND FIVE HUNDREDTHS PERCENT (5.05%) PER ANNUM,
calculated annually, for a term of THREE (3) YEARS commencing March 31, 1996.
This Amended and Restated Promissory Note (the "Note") amends and restates,
in its entirety, that certain Promissory Note, dated March 31, 1996, by
Gershon N. Cooper and Ruth Cooper in favor of Alliance Research Corporation.
Gershon N. Cooper and Ruth Cooper each have the right, at any time
and from time to time, to prepay, without premiums or penalty, principal or
interest due under this Note. Any prepayment shall be deemed to be a prepayment
of interest until all interest due at the time of such payment has been paid, at
which point any additional prepayment shall be deemed to be a prepayment of
principal.
In the event of default on this Note, Gershon N. Cooper and Ruth
Cooper both individually and jointly, waive demand, presentment of payment,
protest, notice of protest, dishonor and any defense by reason of any extension
of time or other indulgence granted by the holder of this Note, and agree that,
if payment on this Note is not made when due or demanded, the holder shall have
the right to accelerate and make the entire unpaid balance of principal and
interest immediately due and payable. Default is defined as: (a) The violation
of any other term, condition or promise of this Note; or (b) A filing by or
against Gershon N. Cooper or Ruth Cooper of any bankruptcy proceeding, or any
filing of relief of debtors in any court or under any statute.
If the holder of this Note incurs any costs in the collection or
enforcement of this Note, including, without limitation, costs of filing suit
and reasonable attorneys' fees, Gershon N. Cooper and Ruth Cooper, both
individually and jointly, agree to pay such costs.
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This Note shall be deemed to have been made under, and shall in all
respects be governed by, the internal laws of the State of California, and any
legal action or proceeding shall be filed within the judicial confines of Los
Angeles County, California.
Date: December 17, 1996 /s/ Gershon N. Cooper
_____________________________________
Gershon N. Cooper
Date: December 17, 1996 /s/ Ruth Cooper
_____________________________________
Ruth Cooper
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EXHIBIT 10.8
PROMISSORY NOTE
---------------
FOR VALUABLE CONSIDERATION, receipt of which is acknowledged, the
undersigned GERSHON N. COOPER and RUTH COOPER, husband and wife, of 4561 Tara
Drive, Encino, California 91436 each promise both jointly and severally, to pay
to the order of ALLIANCE RESEARCH CORPORATION, a California corporation, or any
subsequent holder of this Note, the total sum of TWO HUNDRED EIGHTY THOUSAND
EIGHT HUNDRED AND FIFTY-FIVE DOLLARS ($280,855.00) which shall be due on
December 1, 1999 and interest on such principal being calculated at the rate of
FIVE AND FIVE HUNDREDTHS PERCENT (5.05%) PER ANNUM. The principal and interest
are to be paid in full on the due date of this Note or, if this Note is prepaid
early, on the date this Note is prepaid in full.
The entire principal and balance of this Note and accrued and unpaid
interest, if any, can be prepaid at any time without penalty.
In the event of default on this Note, Gershon N. Cooper and Ruth Cooper
both individually and jointly, waive demand, presentment of payment, protest,
notice of protest, dishonor and any defense by reason of any extension of time
or other indulgence granted by the holder of this Note, and agree that, if
payment on this Note is not made when due or demanded, the holder shall have the
right to accelerate and make the entire unpaid balance of principal and interest
immediately due and payable. Default is defined as: (a) Failure to make any
payment of principal or interest when due under the terms of this Note; (b) The
violation of any other term, condition or promise of this Note; or, (c) A filing
by or against Gershon N. Cooper or Ruth Cooper of any bankruptcy proceeding, or
any filing of relief of debtors in any court or under any statute.
If the holder of this Note incurs any costs in the collection or
enforcement of this Note, including costs of filing suit and reasonable attorney
fees, Gershon N. Cooper and Ruth Cooper, both individually and jointly, agree to
pay such costs.
This Note shall be deemed to have been made under and shall in all
respects be governed by, the law of the State of California in force from time
to time, and any legal action or proceeding shall be filed within the judicial
confines of Los Angeles County, California.
Date: December 6, 1996 /s/ Gershon N. Cooper
-----------------------------------------
Gershon N. Cooper
Date: December 6, 1996 /s/ Ruth Cooper
-----------------------------------------
Ruth Cooper
Page 68 of 134
<PAGE>
EXHIBIT 10.9
AMENDED AND RESTATED COMMERCIAL CREDIT AGREEMENT
------------------------------------------------
THIS AMENDED AND RESTATED COMMERCIAL CREDIT AGREEMENT ("Agreement")
is made as of December 31, 1996 by and between Sanwa Bank California, a
California corporation ("Sanwa"), on the one hand, and ORA Electronics, Inc. a
Delaware corporation ("Borrower"), successor-in-interest to Alliance Research
Corporation, a California corporation ("Alliance"); Gershon N. Cooper, an
individual ("G. Cooper"); Ruth Cooper, an individual ("R. Cooper"); and The
Cooper Living Trust Dated April 19, 1990 and amended on December 13, 1994, a
revocable trust ("Cooper Trust"), on the other hand. [G. Cooper, R. Cooper and
Cooper Trust are sometimes referred to herein collectively as the "Guarantors."
Borrower and the Guarantors are sometimes referred to herein collectively as the
"Obligors" or singularly as an "Obligor"].
RECITALS
A. Pursuant to that certain "Line of Credit Agreement" dated as of
October 17, 1994, as amended by those certain "Amendment Of Commercial Credit
Agreement(s)" dated as of December 19, 1994; March 30, 1995; October 6, 1995;
October 31, 1995; December 11, 1995, and October 1, 1996 (collectively, the
"Credit Agreement"), Sanwa agreed, inter alia, to make available to Alliance a
line of credit (the "Alliance Line"), including a letter of credit sub-facility
(the "L/C Facility"), up to the aggregate sum of $5,000,000.00 for Alliance's
ongoing working capital needs. [The Credit Agreement together with all of the
agreements, instruments and other documents executed in connection therewith
shall hereinafter be referred to collectively as the "Alliance Loan Documents"].
B. The obligations of Alliance under the Alliance Loan Documents,
including without limitation, all amounts owed by Alliance to Sanwa under the
Alliance Line and the L/C Facility ("Alliance Obligations"), mature on December
31, 1996.
C. The outstanding balance of the Alliance Obligations as of December 31,
1996 is $3,543,306.60, consisting of principal in the amount of $3,500,000.00;
together with interest thereon through December 31, 1996 in the amount of
$30,020.84; together with other fees and costs chargeable under the Alliance
Loan Documents in the amount of $13,285.83.
D. The Alliance obligations are guaranteed, jointly and severally, by
each of the Guarantors.
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E. Effective as of December 20, 1996, Alliance merged
with and into Borrower (the "Merger"), and Borrower has assumed
all liabilities and obligations of Alliance to Sanwa, including
the Alliance Obligations.
F. Obligors and Alliance have requested that Sanwa
amend and restate the Alliance Loan Documents, including
granting Borrower a revolving credit facility and extending the
maturity thereof to March 31, 1997, on the terms and conditions
set forth below.
G. Sanwa is willing to amend and restate the Alliance
Loan Documents only in accordance with all terms and conditions
of this Agreement and all documents, instruments and agreements
executed in connection herewith (collectively, the "Loan
Documents").
G. Except as otherwise provided herein, this Agreement
shall amend, restate and replace in its entirety the Credit
Agreement, and all other Loan Documents shall amend, restate
and replace in their entirety all of the Alliance Loan
Documents; provided however, that Sanwa, Guarantors, and
Borrower, for itself and as successor-in-interest to Alliance,
each desire and agree that in the event that the Merger is in
any way (either voluntarily or otherwise) set aside, dissolved,
terminated, deferred, reversed, rejected, undone or otherwise
unwound at any time during the term of this Agreement, the
Alliance Loan Documents shall be revived, reinstated and in
full force and effect as though they had never been amended,
restated or replaced by this Agreement and the Loan Documents,
and shall thereafter remain in full force and effect in
accordance with their original terms.
NOW, THEREFORE, in consideration of: (i) the above
recitals and the mutual promises contained in this Agreement;
(ii) the execution of this Agreement and all Loan Documents
required to be executed in accordance with this Agreement;
(iii) the satisfaction of all Conditions Precedent set forth in
Article 4 below; and for other and further valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, it is hereby agreed as follows:
ARTICLE 1 - DEFINITIONS
The following definitions shall be applicable to both the
singular and plural forms of the defined terms:
1.1 "Account Debtor" means the Person obligated upon an
Account.
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<PAGE>
1.2 "Accounts" means all rights to the payment of money now
owned or hereafter acquired by Borrower, whether due or to
become due and whether or not earned by performance, including
but not limited to, accounts and chattel paper, and instruments
and general intangibles relating to Accounts.
1.3 "Accounts Payable" means accounts due to creditors,
including trade creditors, as shown by the books of a business,
but not evidenced by notes, drafts or acceptances (open book
accounts).
1.4 "Advance" means an extension of credit made under the
provisions of Section 2.1 of this Agreement.
1.5 "Affiliate" means any Person which directly or
indirectly controls, is controlled by, or is under common
control with, another Person. "Control," "controlled by" and
"under common control with" mean direct or indirect possession
of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by
contract or otherwise); provided that control shall be
conclusively presumed when any Person or affiliated group
directly or indirectly owns five percent or more of the
securities having ordinary voting power for the election of
directors of a corporation.
1.6 "Agreement" means this Amended And Restated Commercial
Credit Agreement as it may be amended from time to time.
1.7 "Application" means any of Sanwa's standard form
applications executed in connection herewith.
1.8 "Borrowing Base" means the sum of the following amounts
and inventory:
(a) Sixty percent (60%) of Borrower's Eligible Company
Accounts; and
(b) Thirty-five percent (35%) of Borrower's Eligible
Inventory.
For purposes of calculating the Borrowing Base, the value of
Eligible Company Accounts and Eligible Inventory shall be
computed as of the date of the most recently received Borrowing
Base Certificate; and the value of Eligible Inventory shall be
based upon the lesser of the value stated in the Inventory
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Status Certificate Report most recently received by Sanwa or
Sanwa's independent determination of the resale value of the
Eligible Inventory in such quantities and on such terms as
Sanwa may deem appropriate.
1.9 "Borrowing Base Certificate" means the certificate in
form and substance satisfactory to Sanwa, substantially in the
form of Exhibit "B" hereto, executed by Borrower to evidence
the Borrowing Base.
1.10 "Borrowing Notice" has the meaning assigned to such term
in Section 2.5 hereof.
1.11 "Business Day" means a day, other than a Saturday or
Sunday, on which Sanwa is open for business to the general
public.
1.12 "Closinq Date" means the effective date of this
Agreement, i.e., December 31, 1996.
1.13 "Credit" means the Line of Credit provided Borrower as
more fully described in Section 2.1 of this Agreement.
1.14 "Credit Limit" means the limitation on all Credit
extensions defined in Section 2.1 of this Agreement.
1.15 "Draft" means a negotiable draft as described in the
Uniform Commercial Code.
1.16 "Eligible Company Account" means a Company Account:
(a) Arising from the sale or lease of goods or the
performance of services by Borrower in the ordinary
course of Borrower's business;
(b) Upon which Borrower's right to receive payment is
absolute and not contingent upon the fulfillment of any
condition whatever;
(c) Against which is asserted no defense, counterclaim,
discount, or setoff;
(d) That is an accurate statement of the indebtedness
incurred by the Account Debtor;
(e) Owned by Borrower free and clear of all Liens,
rights, claims, and interests of others except security
interests in favor of Sanwa;
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(f) That does not arise from a sale or lease to or
performance of services for a Related Person;
(g) That has selling terms not longer than ninety (90)
days;
(h) That is not in default. A Company Account shall be
deemed in default upon the occurrence of any of the
following:
(i) The Company Account is not paid within ninety
(90) days after the original invoice due date.
(ii) The Account Debtor suspends business, becomes
insolvent, or fails to pay its debts generally as
they come due;
(iii) Any petition is filed by or against the
Account Debtor under the Bankruptcy Reform Act,
Title 11 of the United States Code or under any
other law relating to bankruptcy, insolvency,
reorganization or other relief for debtors; or
(iv) More than twenty percent (20%) of the total
balance due of the Accounts of the Account Debtor
are not paid within ninety (90) days after the
original invoice due date;
(i) That is not the obligation of an Account Debtor
that is the federal government, any state or any
political subdivision thereof, unless Borrower has
complied in form and substance satisfactory to Sanwa
with the Assignment of Claims Act or any successor
thereof in effect from time to time, and other
applicable laws or regulations;
(j) That is not the obligation of an Account Debtor
located in a foreign country, unless Sanwa consents in
writing and the Account is insured by the Foreign Credit
Insurance Association or covered by a letter of credit
issued or confirmed by a bank located in the United
States of America acceptable to Sanwa, each such
insurance policy or letter of credit being in form and
substance satisfactory to Sanwa;
(k) That does not at any time, when added to all other
Company Accounts that are obligations of the same
Account Debtor, result in a total sum that exceeds
forty-five percent (45%) of the total balance then due
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on all Borrower's Accounts, unless approved in writing
by Sanwa; and
(l) That is otherwise acceptable to Sanwa.
1.17 "Eligible Inventory" means Inventory which is:
(a) Owned by Borrower free and clear of all Liens,
rights, claims, and interests of others, except security
interests in favor of Sanwa;
(b) Located only in the places identified in the
Security Agreement;
(c) In Sanwa's judgment, not obsolete, unsalable,
damaged, or unfit for further processing;
(d) Covered by insurance acceptable to Sanwa which
names Sanwa as loss payee thereunder; and
(e) Otherwise acceptable to Sanwa.
1.18 "ERISA" means the Employees' Retirement Income Security
Act of 1974, or any successor thereof, in effect from time to
time.
1.19 "Expiration Date" means the earlier of: (a) March 31,
1997 and (b) the date Sanwa terminates any obligation to extend
credit pursuant to Article 7 of this Agreement. On the
Expiration Date, all principal, interest, fees and costs owing
under the Agreement and the Loan Documents shall become
immediately due and payable in full without further notice.
1.20 "Event of Default" means any event described in Article
7 of this Agreement.
1.21 "GAAP" means generally accepted accounting principles
and practices consistently applied.
1.22 "Guaranty" or "Guaranties" means the guaranty or
guaranties in form and substance satisfactory to Sanwa executed
by Guarantors in favor of Sanwa.
1.23 "Guarantors" means, collectively; (i) G. Cooper,
(ii) R. Cooper and (iii) Cooper Trust.
1.24 "Inventory" has the meaning assigned to such term in the
Security Agreement.
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1.25 "Inventory Status Certificate Report" means the report
to be furnished by Borrower to Sanwa as required under Section
5.4(d) of this Agreement, in form and substance satisfactory to
Sanwa, substantially in the form of Exhibit "C" attached
hereto.
1.26 "Lien" means any voluntary or involuntary security
interest, mortgage, pledge, claim, charge, encumbrance, title
retention agreement, or third party interest, covering all or
any part of the property of Borrower or any other Person.
1.27 "Loan Documents" means, individually and collectively,
this Agreement, the Guaranties, the Security Agreement, any
Application, any other guaranty, security or pledge agreement,
any deed of trust, and any other contracts, instruments,
addenda and other documents executed in connection with the
extensions of Credit which are the subject of this Agreement.
1.28 "Paydowns" means and includes collectively the First
Paydown, the Second Paydown and the Third Paydown described and
defined below:
(a) "First Paydown" means the $1,000,000.00 reduction
of the Alliance Line due from Borrower to Sanwa. The
First Paydown shall be made by December 31, 1996. As
set forth in Section 4.1(k) below, timely payment of the
First Paydown is a condition precedent to the
effectiveness of this Agreement.
(b) "Second Paydown" means the reduction by Borrower of
the Periodic Maximum Credit Availability under the
Alliance Loan to not greater than $2,500,000.00. The
Second Paydown shall be made by January 31, 1997.
(c) "Third Paydown" means the reduction by Borrower of
the Periodic Maximum Credit Availability under the
Alliance Loan to not greater than $1,500,000.00. The
Third Paydown shall be made by February 28, 1997.
1.29 "PBGC" means the Pension Benefit Guaranty Corporation or
any successor thereto established under ERISA.
1.30 "Periodic Maximum Credit Availability" means:
(i) $3,500,000.00 during the period from the Closing Date
through the earlier of the Termination Date or January 30,
1997; (ii) $2,500,000.00 during the period from January 31,
1997 through the earlier of the Termination Date or
February 27, 1997; and (iii) $1,500,000.00 during the period
from February 28, 1997 through the Termination Date.
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1.31 "Person" means any individual or entity.
1.32 "Plan" means any employee benefit plan of Borrower
subject to ERISA.
1.33 "Reference Rate" means the base rate of interest
internally or publicly announced or otherwise established by
Sanwa from time to time as its "Reference Rate", which serves
as a basis or reference point for determining the effective
interest rate on certain types of loans making reference
thereto. The Reference Rate of Sanwa is only an index used by
Sanwa, and Sanwa may make loans to other borrowers bearing
interest at, above or below the Reference Rate. Interest shall
be calculated daily based on a year of three hundred sixty
(360) days and actual days elapsed based on the Reference Rate
in force from time to time. The interest rate on the Advances
and other obligations owed under this Agreement shall change
automatically when the Reference Rate changes, effective on and
as of the date of each such change in the Reference Rate,
without notice.
1.34 "Related Person" means any Affiliate of Borrower, or any
officer, employee, director or shareholder of Borrower or any
Affiliate, or a relative of any of them.
1.35 "Related Person Debt" means all debt owed by Borrower to
any Related Person.
1.36 "Security Agreement" means the security agreement
executed concurrently or substantially concurrently herewith by
Borrower in favor of Sanwa, in form and substance satisfactory
to Sanwa.
1.37 "Sublimit" or "Sublimits" means, individually and
collectively, the separate limitations on Credit extensions
defined in Section 2.1 of this Agreement.
ARTICLE 2 - CREDIT FACILITY
2.1 Line of Credit; Advances. Subject to the terms and
conditions of this Agreement and the Loan Documents, from time
to time prior to the Expiration Date, upon request by Borrower,
Sanwa will provide extensions of credit (the "Line of Credit")
to Borrower in the form of advances ("Advances"); provided that
at no time shall the aggregate principal amount of outstanding
Advances exceed the lesser of: (A) the Periodic Maximum Credit
Availability, and (B) the Borrowing Base (the "Advance Limit").
In that regard, Sanwa shall, upon the written request of
Borrower therefor pursuant to Section 2.5 hereof and subject to
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the Advance Limit, make Advances to Borrower. Each Advance
shall be payable no later than the Expiration Date. Advances
shall be used first to pay off the Alliance Obligations in full
and, thereafter, for Borrower's normal, customary and
reasonable working capital purposes only.
2.2 Credit Limits. If at any time the Advance Limit has
been exceeded, Borrower shall immediately, without the
necessity of demand by Sanwa, repay such excess or, as Sanwa
might specify, cash secure such excess.
2.3 Extension Fees. As further consideration for Sanwa's
agreement to enter into this Agreement, unless the Alliance
Obligations have been paid in full, Borrower shall pay to Sanwa
the following extension fees: (a) On or before December 31,
1996, Borrower shall have paid to Sanwa an extension fee in the
amount of $20,000.00, with such payment constituting a
condition precedent to the effectiveness of this Agreement as
set forth in Article 4 hereof; (b) On or before February 1,
1997, Borrower shall pay to Sanwa a second extension fee in the
amount of $5,000.00; and (c) On or before March 1, 1997,
Borrower shall pay to Sanwa a final extension fee in the amount
of $5,000.00.
2.4 Interest; Fees; Calculations.
(a) Interest. Interest on the outstanding principal
balance of each Advance shall accrue daily from and
including the date such Advance is made to but excluding
the Expiration Date at a fluctuating rate per annum at
all times equal to the Reference Rate plus one-and-
three-quarters percent (1.75%). Such interest shall be
payable on the first day of each consecutive month,
beginning on the first such date after the first Advance
and continuing through the Expiration Date and on the
Expiration Date, in each case for the period from and
including the first day of the immediately preceding
calendar month to and including the last day of such
month.
(b) Default Interest. If any amount is not paid when
due under this Agreement or any of the Loan Documents,
interest shall accrue on such amount from the date it is
first due and payable until the date of its payment in
full, whether before or after judgment, at a rate per
annum equal to the Reference Rate plus four-and-three-
quarters percent (4.75%). Borrower shall pay such
interest on demand.
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(c) Interest and Fee Computations. Interest, charges,
and fees under this Agreement and the other Loan
Documents shall be calculated for actual days elapsed on
the basis of a 360-day year (which results in higher
interest, charge, or fee payments than if a 365-day year
were used) based on the Reference Rate in force from
time to time. The interest rate on the Advances and
other obligations owed under this Agreement shall change
automatically when the Reference Rate changes, effective
on and as of the date of each such change in the
Reference Rate, without notice.
(d) Collateral Monitoring Fees. Immediately upon
demand by Sanwa, Borrower shall pay to Sanwa all
collateral monitoring, auditing, investigating and other
charges actually incurred by Sanwa and Sanwa's
representatives and agents while any of the Alliance
obligations remain outstanding. Borrower also
authorizes Sanwa to sweep Borrower's accounts to pay all
fees, interest and other charges due to Sanwa in
accordance with Section 2.6 below.
2.5 Method and Notice of Borrowing.
(a) With respect to each Advance made pursuant to
Section 2.1 above, Borrower shall give to Sanwa at the
address specified in Section 9.1 hereof, at least one
(1) Business Day prior to the date such Advance is
requested to be made, a notice of borrowing (a
"Borrowing Notice") substantially in the form of Exhibit
"A" hereto. Any Notice of Borrowing received by Sanwa
after 11:00 a.m. (Los Angeles time) shall be deemed
received on the next Business Day. Each Borrowing
Notice delivered by Borrower to Sanwa shall be
irrevocable.
(b) Not later than 12:00 noon (Los Angeles time) on the
date of each requested Advance and upon satisfaction of
all conditions precedent set forth in this Agreement,
Sanwa shall make the proceeds thereof available to
Borrower in accordance with disbursement instructions
received by Sanwa from Borrower.
2.6 Cash Sweep, Account Monitoring and General Provisions as
to Payments. Subject to the cash sweep provisions set forth
below, all payments hereunder shall be made to Sanwa's office
set forth in Section 9.1 hereof, or such other location as
Sanwa may hereafter designate. Whenever any payment hereunder
shall be due on a day which is not a Business Day, such payment
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shall be made on the first Business Day following such due date
and such extension of time shall be taken into account in the
computation of any interest, fee or other amounts due
hereunder. If the date for any payment or reimbursement
hereunder is extended by operation of law or otherwise,
interest shall be payable for such extended time. Unless
provided otherwise herein or in any of the Loan Documents, all
payments shall be made on or before 4:00 p.m. (Los Angeles
time) on the date due and if payment is not received by such
time such payment will be deemed received on the next
succeeding Business Day. Notwithstanding the foregoing,
Borrower agrees: (i) to maintain all of its existing bank
accounts at Sanwa and to use Sanwa for all of its banking
services; (ii) that Sanwa will continue to sweep all funds in
Borrower's accounts at Sanwa on a daily basis to reduce the
Alliance obligations and all amounts owing under this
Agreement; (iii) to comply with all of the cash reporting,
monitoring and accounting procedures set forth herein and
contained in the Loan Documents; and (iv) to provide Sanwa with
reasonable access to Borrower's and Alliance's books and
records, and to cooperate with Sanwa, Sanwa's agents and
Sanwa's professionals to facilitate the monitoring of Sanwa's
collateral.
2.7 Collateral; Guaranties.
(a) Borrower's obligations hereunder shall be secured
by the Security Agreement.
(b) Borrower's obligations hereunder shall be
guaranteed by the Guaranty.
2.8 Taxes. All payments to be made by Borrower hereunder
shall be made without set-off or counterclaim and free and
clear of and without deduction for or on account of any present
or future taxes, levies, imposts, duties, deductions,
withholdings or other charges of whatever nature imposed by any
governmental authority (foreign or domestic), other than any
tax on or measured by the overall net income of Sanwa
(collectively, "Taxes"). All Taxes shall be paid by Borrower
for its own account prior to the date on which penalties attach
thereto, and Borrower shall and does hereby indemnify Sanwa in
respect of all Taxes. Should any payment be subject to any Tax
and the above provisions either cannot be effected or do not
result in Sanwa actually receiving an amount equal to the full
amount provided for hereunder, Borrower shall pay to Sanwa such
additional amounts as may be necessary to ensure that Sanwa
receives a net amount equal to the full amount which it would
have received had payment not been made subject to such Tax.
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Borrower shall deliver to Sanwa evidence satisfactory to Sanwa
(including all relevant tax receipts) that any such Tax has
been duly remitted to the appropriate authority.
2.9 Increased Costs. If any law, rule or regulation of any
governmental authority (domestic or foreign), any change
therein, or the interpretation or application thereof by any
court or by any governmental authority charged with the
interpretation or administration thereof (whether or not having
the force of law):
(i) imposes, modifies or deems applicable any tax,
duty, reserve, special deposit or similar requirement
against assets held by, or deposits in or for the
account of, or loans by, Sanwa, including any increase
in capital required or expected to be maintained by
Sanwa or any entity controlling Sanwa, with respect to
the Credit, or
(ii) imposes upon Sanwa any other condition with respect
to this Agreement and/or any of the Loan Documents,
and the result of any of the foregoing is to increase the cost
to Sanwa, reduce the income receivable by Sanwa or impose any
expense upon Sanwa with respect to the Credit, interest thereon
or any other amount payable hereunder by an amount which Sanwa
deems to be material, Sanwa shall from time to time notify
Borrower of the amount determined in good faith by Sanwa (which
determination shall be presumed to be correct) to be necessary
to compensate Sanwa for such increase in cost, reduction in
income or additional expense. Borrower shall pay such amount
to Sanwa within ten (10) Business Days of Borrower's receipt of
such notice, and Sanwa shall have the right, without notice and
without a ten (10) day waiting period, to sweep said amounts
from Borrower's accounts at Sanwa pursuant to Section 2.6
herein.
2.10 Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation or any
change therein, or any change in the interpretation or
administration thereof by any governmental authority charged
with the interpretation or administration thereof, or
compliance by Sanwa with any request or directive (whether or
not having the force of law) of any such governmental authority
shall make it unlawful or impossible for Sanwa to make
Advances, Sanwa shall forthwith so notify Borrower. Upon
receipt of such notice, Sanwa's obligation to make Advances
shall be suspended and Borrower shall within thirty (30) days
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<PAGE>
of the date of such notice repay in full the then outstanding
principal amount of all Advances.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower (and Guarantors where specified) represents and
warrants that as of the Closing Date and the date of each
extension of credit under the Credit:
3.1 Due Organization; Successor to Alliance. Borrower is
duly organized and validly existing in good standing under the
laws of the jurisdiction of its organization, is duly qualified
to conduct business in each jurisdiction where failure to so
qualify would have a material adverse effect on its business,
is the successor-in-interest to Alliance, and has assumed all
liabilities and obligations of Alliance including, but not
limited to, the Alliance obligations.
3.2 Validity this Agreement and Enforceability. The
execution, delivery and performance of this Agreement and all
Loan Documents executed by Borrower and Guarantors are within
Borrower's and Guarantors' powers, have been duly authorized,
and are not in conflict with Borrower's articles of
incorporation or by-laws, or the terms of any charter or other
organizational document of Borrower; and this Agreement and all
such Loan Documents constitute valid and binding obligations of
Borrower and Guarantors, enforceable in accordance with their
terms.
3.3 Compliance With Applicable Laws. Borrower has complied
with all licensing, permit and fictitious name requirements
necessary to lawfully conduct the business in which it is
engaged and with all laws and regulations applicable to any
sales, leases or the furnishing of services by Borrower
including without limitation those requiring consumer or other
disclosures.
3.4 Governmental Approvals; Licenses, Trademarks. The
execution, delivery and performance by Borrower of this
Agreement and the Loan Documents do not and will not require
any registration with, consent or approval from, or notice to,
any foreign, federal, state or local authority, except for the
filing of the UCC Financing Statements referred to herein.
Borrower has all patents, licenses, trademarks, trademark
rights, trade names, trade name rights, copyrights, permits and
franchises required in order for Borrower to conduct its
business and operate without conflict with the rights of
others.
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<PAGE>
3.5 Import, Export, Other Licenses and Insurance. Borrower
will promptly procure all import, export and other licenses
essential to the import, export, shipping or warehousing of all
goods covered by any documents at any time held by or for
Sanwa, will comply with all foreign and domestic governmental
regulations pertaining thereto, will keep said goods covered by
insurance satisfactory to Sanwa issued by insurers acceptable
to Sanwa and naming Sanwa as an additional insured and/or loss
payee as Sanwa may require, and will pay all taxes and other
charges or expenses upon or with regard to said property.
3.6 No Conflict. The execution, delivery, and performance
by Borrower and Guarantors of this Agreement and all Loan
Documents to which Borrower and Guarantors are parties are not
in conflict with any law, rule, regulation, order or directive,
or any indenture, agreement, or undertaking to which Borrower
or any Guarantor is a party or by which Borrower or any
Guarantor may be bound or affected.
3.7 No Litigation, Claims, or Proceedings. Except as
previously disclosed to Sanwa in writing there is no
litigation, tax claim, proceeding or dispute pending or, to the
knowledge of any Obligor, threatened against or affecting any
Obligor or its property.
3.8 Correctness of Financial Statements. Obligors'
financial statements dated September 30, 1996, which have been
delivered to Sanwa, fairly and accurately reflect each such
Obligor's financial condition as of such date, and since such
date there has been no material adverse change in such
Obligor's financial condition or business.
3.9 No Subsidiaries. Borrower is not a majority owner of or
in a control relationship with any other business entity.
3.10 Retail Merchant. If any of Borrower's Inventory is
situated in California, Borrower's ability to grant Sanwa a
security interest of first priority in Inventory is not
restricted by the California Commercial Code.
3.11 Title to Assets. Borrower has good and clear title to
its assets, which are not subject to any Liens other than those
permitted by the terms of Section 6.2.
3.12 Tax Status. Borrower has filed all tax returns and
reports required to be filed and has paid all applicable
federal, state and local franchise and income taxes which are
due and payable.
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<PAGE>
3.13 ERISA. Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA, and
has not incurred any material liability to the PBGC in
connection with any Plan or other class of benefit which PBGC
has elected to insure.
3.14 Environmental Quality. Borrower has complied with all
applicable state, federal and local laws and regulations
relating to environmental quality; Borrower is not aware that
it is under investigation by any state, federal or local agency
designed to enforce such laws and regulations.
3.15 Other Laws/Regulations. Borrower is not subject to the
Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Interstate Commerce Act, or any
successor thereof, as any are in effect from time to time, or
any other statute or regulation restricting the execution or
performance of this Agreement or any of the Loan Documents by
Borrowers.
3.16 Labor, Salaries and Wages. All Inventory has been and
will be produced in compliance with all applicable state and
federal laws and regulations, including but not limited to the
Fair Labor Standards Act (including the minimum wage and
overtime pay provisions contained therein), or any successor
thereof, in effect from time to time. All salaries and wages
due in connection therewith have been paid, and no wage claims
have been filed by any employee or former employee.
3.17 Indebtedness. Borrower has no indebtedness other than
(i) normal trade credit for the acquisition of supplies or
Inventory, and (ii) the indebtedness evidenced by this
Agreement, (iii) any other indebtedness which is disclosed to
Sanwa in writing.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Extension of Credit.
The obligation of Sanwa to be bound by this Agreement is
subject to the condition that there shall have been delivered
to Sanwa, in form and substance satisfactory to Sanwa, and duly
executed as required by Sanwa:
(a) This Agreement;
(b) The Security Agreement and any Application(s)
required by Sanwa in connection with such initial
extension of Credit;
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<PAGE>
(c) Financing statement(s) and other security interest
perfection documentation in form and substance
satisfactory to Sanwa, duly filed under the Uniform
Commercial Code in all jurisdictions as may be
necessary, or in Sanwa's judgment, desirable to perfect
Sanwa's Liens created under any Loan Document; and all
filings, recordings, and other actions that are
necessary or advisable, in Sanwa's judgment, in order to
establish, perfect, preserve and protect Sanwa's Liens
as legal, valid and enforceable Liens having the
priority set forth in the Security Agreement; and all
property, including without limitation documents of
title and certificates of ownership in cases in which
possession is required for the perfection of Sanwa's
Lien;
(d) Executed copies of that certain "Agreement and Plan
of Merger" or such other agreement by and between
Alliance and Borrower evidencing and setting forth the
terms and conditions of the merger of Alliance with and
into Borrower ("Merger Agreement"), and any other
information and/or documentation required by Sanwa to
confirm the validity and effectiveness of the merger and
Borrower's assumption of Alliance's liabilities to
Sanwa;
(e) Evidence that the Liens in favor of Sanwa are
perfected, valid, enforceable, and prior to the rights
and interests of others;
(f) [Intentionally Omitted];
(g) The Guaranty;
(h) Copies of Borrower's articles of incorporation,
by-laws, and resolutions authorizing the execution,
delivery and performance by Borrower of this Agreement
and the Loan Documents, and recent certificates of good
standing from the office of the California Secretary of
State, all as certified by Borrower's Secretary and, in
the case of the articles of incorporation and the
certificate of good standing, by the Secretary of State
of the State of California;
(i) A certificate of Borrower's Secretary as to the
incumbency, and setting forth a specimen signature, of
each of the persons: (i) who will sign the Loan
Documents to which it is party, including any
Applications executed from time to time; and (ii) who
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<PAGE>
will, until replaced by other persons duly authorized
for that purpose, act as the representative of Borrower
for the purpose of signing documents in connection
therewith;
(j) Execution of appropriate documentation evidencing
Alliance's assignment to Borrower and Borrower's
assumption of all of the Alliance Obligations;
(k) Evidence that the First Paydown has been made in a
manner acceptable to Sanwa;
(l) Evidence that Borrower has paid to Sanwa on or
before December 31, 1996, an extension fee in the amount
of $20,000.00;
(m) Evidence that any insurance required by this
Agreement is in effect;
(n) Payment in full of any fees or other charges due by
the Closing Date under the terms of this Agreement or
any of the Loan Documents; and
(o) Such other documents, instruments or agreements as
Sanwa may require.
4.2 Conditions Precedent to Each Extension of Credit. The
obligation of Sanwa to make any extension of Credit hereunder
shall be subject to the following additional conditions
precedent:
(a) Sanwa shall have received any required Application;
(b) On the date of such extension of Credit, the
representations and warranties of Borrower set forth in
Article 3 hereof shall be true and correct in all
material respects, after giving effect to such extension
of Credit, with the same effect as though such
representations and warranties had been made on and as
of such date, and Borrower shall be deemed to have
certified to such effect to Sanwa immediately prior to
such extension of Credit with the same effect as if it
had delivered to Sanwa at such time a certificate
affirming such representations and warranties; and
(c) on the date of such extension of Credit and after
giving effect thereto, no Event of Default or event
which would, with the giving of notice or lapse of time
constitute an Event of Default shall have occurred and
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<PAGE>
be continuing or would result from such extension of
Credit, and Borrower shall be deemed to have certified
to such effect to Sanwa immediately prior to such
extension of Credit with the same effect as if it had
delivered to Sanwa at such time a certificate affirming
such matters.
ARTICLE 5 - AFFIRMATIVE AND FINANCIAL COVENANTS
During the term of this Agreement and until its performance of
all obligations to Sanwa, Borrower will, unless Sanwa otherwise
consents in writing:
5.1 Use of Proceeds. Use the proceeds of the Credit only
for purposes set forth in Article 2 of this Agreement, and not
directly or indirectly to purchase or carry any margin stock,
as defined from time to time by the Board of Governors of the
Federal Reserve System in Federal Regulation U.
5.2 [Intentionally Omitted]
5.3 Notice to Sanwa. Promptly give written notice to Sanwa
of:
(a) Any litigation or administrative or regulatory
proceeding affecting Borrower where the amount claimed
against Borrower is $25,000.00 or more, or where the
granting of the relief requested would have a material
adverse effect on Borrower's financial condition or
business;
(b) Any material dispute which may exist between
Borrower and any governmental or regulatory authority,
foreign or domestic;
(c) Any Event of Default;
(d) Any change in the location of any of Borrower's
inventory, property, or places of business or of the
establishment of any new, or the discontinuance of any
existing, place of business;
(e) Any other matter which has resulted or might result
in a material adverse change in Borrower's financial
condition or business.
5.4 Financial Statements and Other Information. Deliver to
Sanwa in form and detail satisfactory to Sanwa the following
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<PAGE>
financial information, which Borrower warrants shall be
accurate and complete in all material respects:
(a) Accounts. As soon as available but no later than
the second Business Day following the last Friday of
each week, in form and substance satisfactory to Sanwa,
a report showing the aging and reconciliation of
Accounts and collections as of the end of the period
extending from the last Friday of the preceding week
through the last Friday of such week, which report shall
be attached to the Borrowing Base Certificate delivered
for such period; and if requested by Sanwa, whenever
collections on Accounts are delivered to Sanwa, a
schedule of the amounts so collected and delivered as of
the last day of such period.
(b) Accounts Payable. As soon as available but no
later than fifteen (15) days after the end of each
month, in form and substance satisfactory to Sanwa, a
statement showing aging of Borrower's accounts payable
as of the last day of such period.
(c) Borrowing Base Certificate. No later than the
second Business Day following the last Friday of each
week, a Borrowing Base Certificate executed by an
authorized officer of Borrower setting forth the amount
of Eligible Accounts and Eligible Inventory as of the
end of the period extending from the last Friday of the
preceding week through the last Friday of such week.
(d) Inventory Status Certificate Report. As soon as
available but no later than the second Business Day
following the last Friday of each week (or more
frequently if requested by Sanwa), an Inventory Status
Certificate Report as of the end of the period extending
from the last Friday of the preceding week through the
last Friday of such week.
(e) Inventory Report. No later than two (2) Business
Days after the end of each week, if required by Sanwa,
statements of Inventory composition and reports of
Inventory sales as of the last day of such period.
(f) Government Required Reports. Promptly after
sending, making available, or filing, copies of all
reports, proxy statements, and financial statements that
Borrower sends or makes available to its stockholders
and all registration statements and reports that
Borrower files with the Securities and Exchange
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<PAGE>
Commission, or any other governmental or regulatory
authority.
(g) Other Information. Such other statements, lists of
property and accounts, budgets, forecasts, reports, or
other financial information as Sanwa may from time to
time reasonably request.
5.5 Existence. Maintain and preserve Borrower's existence,
present form of business, and all rights, privileges and
franchises necessary or desirable in the normal course of its
business; and keep all Borrower's property in good working
order and condition, ordinary wear and tear excepted.
5.6 Insurance. Maintain and keep in force insurance with
companies acceptable to Sanwa and in such amounts and types as
is usual in the business carried on by Borrower, or as Sanwa
may reasonably request. Such insurance policies must be in
form and substance satisfactory to Sanwa.
5.7 Accounting Records. Maintain adequate books, accounts
and records, and prepare all financial statements in accordance
with GAAP, and in compliance with the regulations of any
governmental or regulatory authority having jurisdiction over
Borrower or Borrower's business; and permit employees or agents
of Sanwa at such reasonable times as Sanwa may request to
inspect Borrower's properties including, without limitation,
collateral audits performed by an auditing firm acceptable to
Sanwa and at Borrower's expense, and to examine, audit, and
make copies and memoranda of Borrower's books, accounts and
records.
5.8 Compliance with Laws. Comply with all laws, rules,
regulations, orders and directives of any governmental or
regulatory authority having jurisdiction over Borrower or
Borrower's business, and with all material agreements to which
Borrower is a party.
5.9 Taxes and Other Liabilities. Pay all Borrower's
obligations when due; pay all taxes and other governmental or
regulatory assessments before delinquency or before any penalty
attaches thereto, except as may be contested in good faith by
the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax
returns.
5.10 ERISA Compliance. Comply with the minimum funding
requirements of ERISA with respect to any Plan.
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<PAGE>
5.11 Environmental Quality. Comply with all applicable laws,
rules regulations, orders and directives relating to
environmental quality.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until Borrower's
performance of all obligations to Sanwa, Borrower will not,
unless Sanwa otherwise consents in writing:
6.1 Indebtedness. Be indebted for borrowed money, the
deferred purchase price of property, or leases which would be
capitalized in accordance with GAAP; or become liable as a
surety, guarantor, accommodation party or otherwise for or upon
the obligation of any other Person, except:
(a) Indebtedness for the acquisition of supplies or
Inventory on normal trade credit;
(b) Indebtedness for the endorsement of negotiable
instruments for deposit or collection in the ordinary
course of Borrower's business; and
(c) The indebtedness of Borrower under this Agreement.
6.2 Liens. Create, incur, assume or permit to exist any
Lien, or grant any other Person a negative pledge, on any of
Borrower's property in the aggregate, except:
(a) Involuntary Liens which, in the aggregate, would
not have a material adverse effect on Borrower's
financial condition or business;
(b) Liens for current taxes or other governmental or
regulatory assessments which are not delinquent, or
which are contested in good faith by the appropriate
procedures and for which appropriate reserves are
maintained; and
(c) Liens in favor of Sanwa.
6.3 Dividends. Pay any dividends, except those payable
solely in Borrower's capital stock; or purchase, redeem or
otherwise acquire for value or make any other distribution with
respect to any of Borrower's capital stock.
6.4 Changes/Mergers. Change its name; liquidate or
dissolve, or enter into any consolidation, merger, de-merger,
partnership, joint venture or other combination; issue, redeem,
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<PAGE>
purchase, retire or otherwise acquire any shares of any class
of capital stock of Borrower or grant or issue any warrant,
right or option pertaining thereto or other security
convertible into any of the foregoing; reorganize, reclassify
or recapitalize its capital stock; prepay any subordinated
debt, debt for borrowed money, or debt secured by any permitted
Lien, or enter into or modify any agreement as a result of
which the terms of payment of any such debt are waived or
modified.
6.5 Sale of Assets. Sell, transfer, 1ease or otherwise
dispose of any of Borrower's assets except for fair
consideration and in the ordinary course of its business; or
enter into any sale and leaseback agreement covering any of
Borrower's fixed or capital assets.
6.6 Acquisitions. Acquire or purchase all or substantially
all the assets or business of any other Person; or acquire or
purchase securities, except those permitted under Section 6.7.
6.7 Loan/Investments. Make or suffer to exist any loans,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of
Borrower's business;
(b) Temporary advances to cover incidental expenses to
be incurred in the ordinary course of business.
6.8 Transactions with Related Persons. Directly or
indirectly enter into any transaction with or for the benefit
of a Related Person on terms more favorable to the Related
Person than would have been obtainable in an "arm's length"
dealing.
6.9 Other Business. Conduct any business other than the
business Borrower conducts as of the Closing Date.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of any of the
following shall (1) terminate any obligation of Sanwa to make
or continue the Credit; and (2) at Sanwa's option, make all
sums of interest, principal and any other amounts owing under
this Agreement and any Loan Document immediately due and
payable without notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor or any
other notices or demands; and (3) give Sanwa the right to
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<PAGE>
exercise any other right or remedy provided by contract or
applicable law:
(a) Borrower shall fail to make any payment of
principal or interest or to pay any fees or other
charges when due under this Agreement or any of the Loan
Documents, or Borrower or any other Person shall fail to
perform any other covenant or obligation under this
Agreement or any of the Loan Documents;
(b) Any representation or warranty made, or financial
statement, certificate or other document provided, by
Borrower or any Guarantor shall prove to have been false
or misleading;
(c) Borrower or any Guarantor shall fail to pay its
debts generally as they become due or shall file any
petition or action for relief under any bankruptcy,
insolvency, reorganization, moratorium, creditor
composition law, or any other law for the relief of or
relating to debtors; an involuntary petition shall be
filed under any bankruptcy law against Borrower or any
Guarantor, or a custodian, receiver, trustee, assignee
for the benefit of creditors, or other similar official,
shall be appointed to take possession, custody or
control of the properties of Borrower or any Guarantor;
or the dissolution or termination of the business of
Borrower or any Guarantor shall be commenced;
(d) Borrower or any Guarantor shall fail to perform
under any other agreement involving the borrowing of
money, the purchase of property, the advance of credit
or any other monetary liability of any kind to any
Person and such failure shall continue for five (5) days
after Sanwa has sent notice thereof to Borrower, or any
guaranty of Borrower's obligations to Sanwa shall be
revoked or terminated;
(e) Any governmental or regulatory authority shall take
any action, any defined benefit pension plan maintained
by Borrower or any Guarantor shall have any unfunded
liabilities, or any other event shall occur, any of
which, in the judgment of Sanwa, might have a material
adverse effect on the financial condition or business of
Borrower or any Guarantor;
(f) Any sale, transfer or other disposition of all or a
material part of the assets of Borrower or any
Guarantor, including without limitation to any trust or
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similar entity, shall occur without Sanwa having given
its prior written consent thereto, which consent shall
not be unreasonably withheld;
(g) Any Person shall fail to perform its obligations
under the terms of any promissory note, contract or
other obligation that is held by Sanwa as collateral for
the obligations evidenced by the Loan Documents except
an Account (as defined in Section 1.2); or Sanwa shall
not have a perfected security interest of the priority
set forth in the Security Agreement in, or shall deem
itself insecure (such insecurity to be based on a
commercially reasonable determination by Sanwa) with
respect to the value of, any collateral being held for
the obligations evidenced by the Loan Documents;
(h) Any judgment(s) shall be entered against Borrower
or any Guarantor, or any involuntary lien(s) of any kind
or character shall attach to any assets or property of
Borrower or any Guarantor, any of which, in the judgment
of Sanwa, might have a material adverse effect on the
financial condition or business of Borrower or any
Guarantor;
(i) Without Sanwa's prior written consent, Borrower's
shareholders of record as of the Closing Date shall
cease to own a majority of the voting interest in
Borrower; or any change shall occur in the executive
management of Borrower; or any change shall occur in the
corporate or legal structure of Borrower;
(j) Any Guarantor which is a natural person shall die
or become incapacitated and Sanwa shall reasonably
determine that such death or incapacity has or will
result in a material detriment to Borrower's business;
or
(k) Any default under, or violation or breach of the
Merger Agreement.
In addition to any other rights or remedies Sanwa may have, and
without waiving any of them, if employee wages or payroll taxes
have not been paid, Sanwa may, in its sole discretion,
establish a reserve in the Borrowing Base in such amount as
Sanwa deems necessary to satisfy Borrower's liability therefor.
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ARTICLE 8 - RELEASE OF CLAIMS
8.1 Release of Claims Against Sanwa. As additional
consideration for Sanwa's agreement to enter into this
Agreement, Obligors, and each of them, and on behalf of
Alliance, for themselves, their heirs, their executors,
administrators, employees, representatives, shareholders,
predecessors, subsidiaries and/or affiliates, parents,
successors-in-interest, transferees, assigns, officers,
directors, managers, servants, employees, insurers,
underwriters, attorneys, partners and agents, now and in the
future, and all persons acting by, through, under or in concert
with them, and each of them, hereby release and discharge Sanwa
and its respective past, present and future administrators,
affiliates, agents, assigns, attorneys, directors, employees,
executors, heirs, officers, parents, partners, predecessors,
representatives, parents, shareholders, subsidiaries and
successors, and each of them; and all persons acting by,
through, under or in concert with one or more of them, from any
liabilities, claims, obligations, counterclaims, security
arrangements, controversies, damages, judgments, awards and
actions or causes of action whatsoever, whether known or
unknown, liquidated or unliquidated, fixed, contingent, direct
or indirect which Obligors ever had, now have or claim or could
claim to have upon or against Sanwa arising out of, related to
or in any way connected with: (a) the Alliance Obligations, (b)
the Alliance Credit Agreement; (c) the Alliance Loan Documents;
and (d) Obligors, banking relationship with Sanwa from the
beginning of-time through and including the date of execution
of this Agreement (the "Released Matters").
8.2 Waiver of the Civil Code Section 1542. Obligors
understand and have been advised by their legal counsel of the
provisions of Section 1542 of the California Civil Code, which
provides as follows:
"A general release does not extend to claims
which the creditor does not know or suspect to
exist in his favor at the time of executing the
release, which if known by him must have
materially affected his settlement with the
debtor."
Obligors, and each of them, understand and hereby waive
the provisions of Civil Code Section 1542 and declare that they
realize they may have damages they presently know nothing about
and that, as to them, they have been released pursuant to this
release. The undersigned, and each of them, also declare they
understand that Sanwa would not have agreed to enter into this
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Agreement if the release provisions contained in this Article 8
did not cover damages and their results which may not yet have
manifested themselves or may be unknown to or not anticipated
at the present time.
ARTICLE 9 - GENERAL PROVISIONS
9.1 Notices. Any notice given by any party under this
Agreement or any Loan Document shall be in writing and
personally delivered, sent by United States mail, postage
prepaid, or sent by telex or other authenticated message,
charges prepaid and addressed as follows:
Notices to Sanwa: Mr. Jerry Wich
Vice President
Sanwa Bank of California
601 South Figueroa Street
Ninth Floor
Los Angeles, California 90017
Fax No. (213) 896-7387
With Copies to: Eugene B. Stern, Esq.
Senior Counsel
Sanwa Bank of California
601 South Figueroa Street
Legal Department
Los Angeles, California 90017
Fax No. (213) 896-7924
-AND-
Pillsbury Madison & Sutro, LLP
725 So. Figueroa Street, Suite 1200
Los Angeles, California 90017
Fax No.: (213) 629-1033
Attn: William B. Freeman, Esq.
Notices to Borrower: Matthew F. Jodziewicz, Esq.
Secretary
ORA Electronics, Inc.
9410 Owensmouth Avenue
P.O. Box 4029
Chatsworth, California 91313
Fax No. (818) 718-8626
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With a Copy to: Tabach-Bank & Levenstein
1453 Third Street, Suite 250
Santa Monica, CA 90401
Fax No. (310) 458-2978
Attn: Alan M. Levenstein, Esq.
Guarantor Notices: Gershon N. Cooper
Ruth Cooper
c/o ORA Electronics, Inc.
9410 Owensmouth Avenue
P.O. Box 4029
Chatsworth, California 91313
Fax No. (818) 718-1306
With a Copy to: Tabach-Bank & Levenstein
1453 Third Street, Suite 250
Santa Monica, CA 90401
Fax No. (310) 458-2978
Attn: Alan M. Levenstein, Esq.
Each party may change the address to which notices, requests
and other communications are to be sent by giving written
notice of such change to each other party in accordance
herewith.
9.2 JURY WAIVER. TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, BORROWER, GUARANTORS AND SANWA, EACH FOR ITSELF, ITS
OFFICERS, SHAREHOLDERS, PARTNERS, EMPLOYEES, DIRECTORS, AGENTS,
AFFILIATES AND SUBSIDIARIES, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT OR ANY OF ITS RELATED PARTIES
IDENTIFIED ABOVE MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION, DIRECTLY OR INDIRECTLY, AND AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE LOAN
DOCUMENTS OR ANY OTHER INSTRUMENT EXECUTED OR DELIVERED IN
CONNECTION WITH, PURSUANT TO OR IN FURTHERANCE OF THE
FOREGOING, OR ANY TRANSACTION CONTEMPLATED THEREBY OR HEREBY.
9.3 Binding Effect. The Loan Documents shall be binding
upon and inure to the benefit of Borrower, Guarantors and Sanwa
and their successors and assigns; provided, however, that no
Obligor may assign or transfer the rights or obligations of
such Obligor under this Agreement or any Loan Document without
Sanwa's prior written consent. Sanwa reserves the right to
sell, assign, transfer, negotiate or grant participations in
all or any part of, or any interest in, Sanwa's rights and
obligations under this Agreement and/or the Loan Documents. In
that connection, Sanwa may disclose all documents and
information which Sanwa now or hereafter may have relating to
the Credit, Borrower or any Guarantor or their business.
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<PAGE>
9.4 No Waiver. Any waiver, consent or approval by Sanwa of
any Event of Default or breach of any provision, condition or
covenant of this Agreement or any Loan Document must be in
writing and shall be effective only to the extent set forth in
such writing. No waiver of any breach or default shall be
deemed a waiver of any later breach or default of the same or
any other provision of this Agreement or any Loan Document. No
failure or delay on the part of Sanwa in exercising any power,
right or privilege under this Agreement or any Loan Document
shall operate as a waiver thereof, and no single or partial
exercise of any such power, right, or privilege shall preclude
any further exercise thereof or the exercise of any other
power, right or privilege.
9.5 Rights Cumulative. All rights and remedies existing
under this Agreement and the Loan Documents are cumulative
with, and not exclusive of, any other rights or remedies
available under contract or applicable law.
9.6 Unenforceable Provision. Any provision of this
Agreement or any Loan Document executed by Borrower or
Guarantors which is prohibited or unenforceable in any
jurisdiction, shall be so only as to such jurisdiction and only
to the extent of such prohibition or unenforceability, but all
the remaining provisions of this Agreement and any such Loan
Document shall remain valid and enforceable.
9.7 Governing Law. This Agreement and the Loan Documents
shall be governed by and construed in accordance with the laws
of the State of California.
9.8 Accounting Terms. All accounting terms and financial
covenants and information referenced to or provided herewith
shall be determined and prepared in accordance with GAAP as in
effect on the date of this Agreement.
9.9 Indemnification. Borrower and Guarantors shall pay and
protect, defend and indemnify Sanwa and Sanwa's employees,
officers, directors, shareholders, affiliates, correspondents,
agents and representatives against, and hold Sanwa and each
such other Person harmless from, all claims, actions,
proceedings, liabilities, damages, losses, expenses (including,
without limitation, attorneys' fees and costs) and other
amounts incurred by Sanwa and each such other Person, arising
from: (i) the matters contemplated by this Agreement, or any of
the Loan Documents; or (ii) any contention that Borrower has
failed to comply with any law, rule, regulation, order or
directive applicable to Borrower's sales, leases or performance
of services to Borrower's customers, including without
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<PAGE>
limitation those sales, leases and services requiring consumer
or other disclosures; provided, however, that this
indemnification shall not apply to any of the foregoing
incurred solely as the result of Sanwa's gross negligence or
willful misconduct. This indemnification shall survive the
payment and satisfaction of all of Borrower's and Guarantors'
obligations and liabilities to Sanwa.
9.10 Reimbursement for Costs and Expenses. Obligors shall
reimburse Sanwa for all of its actual attorneys' fees and other
actual costs and expenses in connection with: (a) the
negotiation, preparation and documentation of this Agreement,
the Loan Documents and all other documents executed and/or
entered into in connection herewith; (b) the recording of any
instrument or document required hereunder to maintain and/or
perfect Sanwa's security interests in its collateral; and (c)
monitoring its collateral until such time as all of the
obligations hereunder have been repaid in full. By executing
this Agreement below, Borrower authorizes Sanwa to debit
Borrower's account at Sanwa for all of said fees, costs and
expenses without further notice.
In addition, Obligors shall reimburse Sanwa for all
costs and expenses, including without limitation reasonable
attorneys' fees, expended or incurred by Sanwa in connection
with: (a) the amendment and enforcement of this Agreement and
the Loan Documents, including without limitation during any
workout, attempted workout, and/or in connection with the
rendering of legal advice as to Sanwa's rights, remedies and
obligations under this Agreement or the Loan Documents, (b)
collecting any sum which becomes due Sanwa under this Agreement
or any Loan Document, (c) any proceeding for declaratory
relief, any counterclaim to any proceeding, any appeal or any
arbitration, judicial reference or legal action, or (d) the
protection, preservation or enforcement of any rights or
remedies of Sanwa.
9.11 Execution in Counterparts. This Agreement may be
executed in any number of counterparts which, when taken
together, shall constitute but one agreement.
9.12 Entire Agreement; Conflict; Amendments. This Agreement
and the Loan Documents are intended by the parties as the final
expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior
understandings or agreements concerning the subject matter
hereof. If there shall exist any conflict between the terms of
this Agreement and any Loan Document, unless herein
specifically provided to the contrary, the terms of this
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<PAGE>
Agreement shall control. This Agreement may be amended only in
a writing signed by Borrower, Guarantors and Sanwa.
9.13 Setoff. Sanwa shall have a right of setoff against, and
Obligors hereby grant a security interest in, all moneys,
securities and other property of Obligors now or hereafter in
the possession of, or on deposit with Sanwa, whether held in a
general or special account or deposit, or for safekeeping or
otherwise. Such right is in addition to any right of setoff
Sanwa may have by law. All rights of setoff may be exercised
without notice or demand to Obligors or any of them. No right
of setoff shall be deemed to have been waived by any act or
conduct on the part of Sanwa, or by any neglect to exercise
such right of setoff, or by any delay in doing so. Every right
of setoff shall continue in full force and effect until
specifically waived or released by an instrument in writing
executed by Sanwa.
9.14 Further Assurances. At any time or from time to time
upon the request of Sanwa, Obligors will execute and deliver
such further documents and do such other acts as Sanwa may
reasonably request in order to effect fully the purposes of the
Loan Documents and provide for the payment of Obligors'
obligations thereunder and interest thereon in accordance with
the terms of the Loan Documents.
9.15 Revival of Alliance Loan Documents. Sanwa, Guarantors,
and Borrower, for itself and as successor-in-interest to
Alliance, each agree that in the event that the Merger is in
any way (either voluntarily or otherwise) set aside, dissolved,
terminated, deferred, reversed, rejected, undone or otherwise
unwound at any time during the term of this Agreement, the
Alliance Loan Documents shall be revived, reinstated and in
full force and effect as though they had never been amended,
restated or replaced by this Agreement and the Loan Documents,
and shall thereafter remain in full force and effect in
accordance with their original terms.
9.16 Survival. Notwithstanding any provision herein to the
contrary and notwithstanding the occurrence of the Expiration
Date, all the agreements, covenants, promises, indemnities and
other obligations of Obligors hereunder shall remain in full
force and effect so long as any Advance shall remain unpaid.
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<PAGE>
IN WITNESS WHEREOF, Borrower, Guarantors and Sanwa have
executed this Agreement as of the date set forth in the
preamble.
SANWA BANK OF CALIFORNIA
By: /s/ Jerry Wich
-----------------------------
Jerry Wich
Its: Vice President
ORA ELECTRONICS, INC.
By: /s/ Gershon N. Cooper
-----------------------------
Gershon N. Cooper
Its: President
By: /s/ Matthew F. Jodziewicz
-----------------------------
Matthew F. Jodziewicz
Its: Secretary
By: /s/ John M. Burris
-----------------------------
John M. Burris
Its: Chief Financial Officer
GERSHON N. COOPER
/s/ Gershon N. Cooper
-----------------------------
Gershon N. Cooper
RUTH COOPER
/s/ Ruth Cooper
-----------------------------
Ruth Cooper
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<PAGE>
THE COOPER LIVING TRUST DATED APRIL 19, 1990
By: /s/ Gershon N. Cooper
-----------------------------
Gershon N. Cooper
Its: Trustee
By: /s/ Ruth Cooper
-----------------------------
Ruth Cooper
Its: Trustee
APPROVED AS TO FORM AND CONTENT:
PILLSBURY MADISON & SUTRO LLP
WILLIAM B. FREEMAN
DAVID S. RAUCH
By: /s/ William Freeman
-----------------------------
William B. Freeman
Attorneys for Sanwa Bank
California
MATTHEW F. JODZIEWICZ
/s/ Matthew F. Jodziewicz
-----------------------------
Matthew F. Jodziewicz
Attorney for
ORA Electronics, Inc.
Gershon N. Cooper, Ruth Cooper
and The Cooper Living Trust Dated
April 19, 1990
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<PAGE>
EXHIBIT 10.10
AMENDED AND RESTATED SECURITY AGREEMENT
---------------------------------------
THIS AMENDED AND RESTATED SECURITY AGREEMENT ("Agreement"), is
dated as of December 31, 1996, and is made by ORA ELECTRONICS, INC. ("Grantor"),
a Delaware corporation with an office at 9410 Owensmouth Avenue, Chatsworth,
California 91311, the successor-in-interest to Alliance Research Corporation, a
California corporation ("Alliance"), in favor of SANWA BANK CALIFORNIA, a
California corporation (the "Sanwa"). This Agreement is made with reference to
the following facts:
RECITALS
--------
A. As set forth below, Sanwa and the Grantor are concurrently
herewith entering into that certain "Amended And Restated Commercial Credit
Agreement" of even date herewith (said agreement, as it may hereafter be amended
or otherwise modified from time to time, being called the "Credit Agreement"),
together with all other documents, instruments and agreements executed in
connection with the Credit Agreement (collectively with the Credit Agreement,
the "Loan Documents"). All capitalized terms not otherwise defined herein shall
have the meanings given for said terms in the Credit Agreement.
B. It is a condition precedent to the extension of credit by
Sanwa under the Credit Agreement that the Grantor shall have granted the
security interest contemplated by this Agreement.
C. Pursuant to that certain "Line of Credit Agreement" dated as
of October 17, 1994, as amended by those certain "Amendment Of Commercial Credit
Agreement(s)" dated as of December 19, 1994; March 30, 1995; October 6, 1995;
October 31, 1995; December 11, 1995, and October 1, 1996 (collectively, the
"Alliance Credit Agreement"), Sanwa agreed, inter alia, to make available to
Alliance a-line of credit (the "Alliance Line"), including a letter of credit
sub-facility (the "L/C Facility"), up to the aggregate sum of $5,000,000.00 for
Alliance's ongoing working capital needs. [The Alliance Credit Agreement
together with all of the agreements, instruments and other documents executed in
connection therewith shall hereinafter be referred to collectively as the
"Alliance Loan Documents"].
D. The obligations of Alliance under the Alliance Loan Documents,
including without limitation all amounts owed by Alliance to Sanwa under the
Alliance Line and the L/C Facility (the "Alliance Obligations"), mature on
December 31, 1996.
E. Effective as of December 20, 1996, Alliance merged with and
into Grantor (the "Merger"), and Grantor taken possession of all assets of
Alliance, and Grantor has assumed all liabilities and obligations of Alliance to
Sanwa, including the Alliance Obligations.
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<PAGE>
F. Except as otherwise provided herein, this
Agreement shall amend, restate and replace in their entirety
any and all of the Alliance Loan Documents which constitute
security agreements, including without limitation: (i) the
security agreement contained in the Alliance Credit Agreement,
(ii) that "Security Agreement (Equipment, Inventory And
Accounts Receivable -- Blanket Lien)" dated as of February 6,
1989; (iii) that "Security Agreement -- Blanket Lien" dated as
of September 20, 1989; (iv) that "Security Agreement-Blanket
Lien" dated as of October 2, 1990; M that "Security Agreement
Addendum -- Blanket Lien" dated as of September 20, 1991; and
(vi) that "Security Agreement Addendum-- Blanket Lien" dated as
of September 30, 1992 (collectively, the "Alliance Security
Agreements"); provided however, that Sanwa and Grantor, for
itself and as successor-in-interest to Alliance, each desire
and agree that in the event that the merger is in any way
(either voluntarily or otherwise) set aside, dissolved,
terminated, deferred, reversed, rejected, undone or otherwise
unwound at any time during the term of this Agreement, the
Alliance Loan Documents, including without limitation the
Alliance Security Agreements, shall be revived, reinstated and
in full force and effect as though they had never been amended,
restated or replaced by this Agreement and the Loan Documents,
and shall thereafter remain in full force and effect in
accordance with their original terms.
SECTION 1. Grant of Security. The Grantor hereby
assigns and pledges to Sanwa, and hereby grants to Sanwa a
security interest in, all of the Grantor's right, title and
interest in and to the following, whether now owned or
hereafter acquired (the "Collateral"):
(a) all equipment in all of its forms, wherever
located, now or hereafter existing and including all
fixtures, and all parts thereof and accessions thereto
(any and all such equipment, fixtures, parts and
accessions being called the "Equipment")
(b) all inventory in all of its,.forms,
wherever located, now or hereafter existing (including
(i) all fabric, textiles and related products and raw
materials and work in process therefor, finished goods
thereof, materials used or consumed in the manufacture or
production thereof and all boxes, bolts and other
containers in which or on which such inventory is stored,
(ii) goods in which the Grantor has an interest in mass or
a joint or other interest or right of any kind (including
goods in which the Grantor has an interest or right as
consignee) and (iii) goods that are returned to or
repossessed by the Grantor), and all accessions to the
foregoing, products thereof and documents therefor,
including all warehouse receipts (any and all such
inventory, accessions, products and documents being called
the "Inventory");
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<PAGE>
(c) all accounts and all instruments, chattel
paper, documents, contract rights, notes, bills and
general intangibles relating thereto, and all other forms
of obligations of customers of Grantor now or hereafter
existing and arising out of the sale of goods or the
rendition of services by the Grantor, and all rights now
or hereafter. existing in and to all security agreements
and other contracts securing such accounts, instruments
and chattel paper and all products and proceeds of any of
the foregoing and all books and records relating to the
foregoing (any and all such accounts and related
instruments, chattel paper, documents, contract rights,
notes, bills, general intangibles, obligations, security
agreements, products, proceeds and books and records being
called the "Accounts Receivable");
(d) all patents and patent applications and all
rights corresponding thereto throughout the world, and all
unpatented or unpatentable developments and inventions,
including, but not limited to, such patents and patent
applications set forth in Schedule 1 appended hereto (any
and all such patents, applications, rights, developments
and inventions being called the "Patents");
(e) All trademarks, service marks, logos, and
all United States, state and/or foreign applications for
registration and registrations thereof, all trade names,
trade styles, designs, and the like, all elements of
package or trade dress of goods, the goodwill of the
Grantor's business connected with the use of, and
symbolized by any of the above, and all property of
Grantor necessary to produce any products sold under any
of the above, including, but not limited to, such
trademarks and tradenames set forth in Schedule 1 appended
hereto (any and all such trademarks, marks,
logos,,applications, registrations, trade names, trade
styles, designs, elements, and goodwill being called the
"Trademarks");
(f) All copyrights and copyrighted works, all
derivative works thereof, all mask works of semiconductor
chip products, and United States and/or foreign
applications for registration and registrations thereof,
including, but not limited to, such copyrights and
copyrighted works set forth in Schedule 1 appended hereto
(any and all such copyrights, works, applications and
registrations being called the "Copyrights");
(g) all computer software programs developed or
to be developed by Grantor or in which Grantor asserts or
could assert a proprietary interest; all personal
property, including but not limited to source codes,
object codes or similar information, which is necessary to
the practical utilization of such programs; all tangible
property of Grantor embodying or incorporating any such
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<PAGE>
programs (any and all such software, property and tangible
property being called the "Software");
(h) All trade secrets, proprietary information,
customer lists, instructional materials, working drawings,
manufacturing techniques, process technology
documentation, and product formulations (any and all such
secrets, information, lists, materials, drawings,
techniques, documentation and formulations being called
the "Trade Secrets");
(i) all (i) accounts, instruments and chattel
paper (to the extent not covered in clause [(c) of this
Section 11) and (ii) all contract rights, general
intangibles, leases and other obligations of any kind, now
or hereafter existing, whether or not arising out of or in
connection with the sale or lease of goods or the
rendering of services (any and all such accounts,
instruments, chattel paper, contract rights, general
intangibles, leases and other obligations being called the
"Other Intangibles");
(j) all other personal property of the Grantor;
(k) All rights to damages or profits due or
accrued arising out of past, present or future
infringement of any of the foregoing Collateral or injury
to Grantor's good will connected with the use of any of
the foregoing Collateral and the right to sue therefor;
(l) All renewals, modifications, amendments,
re-issues, divisions, continuations in whole or part, and
extensions of any of the foregoing Collateral;
(m) all proceeds of any and all of the
foregoing Collateral (including proceeds that constitute
property of the types described in clauses [(a), (b), (c),
(d), (e) (f), (g), (h), (i), (j), (k) and (1) of this
Section 11) and, to the extent not otherwise included, all
payments under any insurance (whether or not Sanwa is the
loss payee thereof), indemnity, warranty or guaranty
payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral.
SECTION 2. Security for Obligations. This
Agreement secures the payment of all obligations of the Grantor
now or hereafter existing under the Credit Agreement and the
other Loan Documents, whether for principal, interest, fees,
expenses or otherwise, and all obligations of the Grantor now
or hereafter existing under this Agreement (all such
obligations of the Grantor being called the "Obligations").
SECTION 3. Grantor Remains Liable. Anything herein
to the contrary notwithstanding, (a) the Grantor shall remain
liable under the contracts and agreements included in the
Collateral to the extent set forth therein to perform all of
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<PAGE>
its duties and obligations-thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Sanwa
of any of its rights hereunder shall not release the Grantor
from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) Sanwa shall not
have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this
Agreement, and Sanwa shall not be obligated to perform any of
the obligations or duties of the Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. Representations and Warranties. The
Grantor's representations and warranties for the benefit of
Sanwa are as set forth below.
(a) Schedule 1 is a complete list of all
patents, trademark and service mark registrations,
copyright registrations, mask work registrations, and all
applications therefor, in which Grantor or Alliance have
any right, title, or interest, throughout the world.
(b) Grantor has full power and authority to
execute this Agreement and perform its obligations
hereunder, and to subject the Collateral to the security
interest transferred hereby, and Grantor has entered and
will enter into written agreements with each of its
present and future employees, agents and consultants which
will enable it to comply with the covenants herein
contained.
(c) All of the Equipment and Inventory are
located at the places specified in the first paragraph of
this Agreement or in Schedule 2 appended hereto. The
chief place of business and chief executive office of the
Grantor and the office where the Grantor keeps its records
concerning the Accounts Receivable and Other Intangibles
are located at the address first specified above for the
Grantor. All originals of all chattel paper that evidence
Accounts Receivable and Other Intangibles are located at
the address first specified above for the Grantor. None
of the Accounts Receivable or Other Intangibles is
evidenced by a promissory note or other instrument.
(d) The Grantor is the legal and beneficial
owner of the entire right, title and interest in and to
all the Collateral free and clear of any Lien other than
the security interest created and/or continued by this
Agreement and any of the other Loan Documents. No
effective financing statement or other instrument similar
in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been
filed in favor of Sanwa relating either to this Agreement
or the other Loan Documents, or to the Alliance Security
Agreements.
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<PAGE>
(e) The Grantor has exclusive possession and
control of the Equipment and Inventory. None of the
Inventory is evidenced by a warehouse receipt.
(f) This Agreement creates a valid and
perfected first-priority security interest in the
Collateral securing the payment of the Obligations, and
all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly
taken.
(g) No consent, approval, authorization, permit
or license from, or registration or filing with, any
United States, state, foreign or other regulatory
authority (such consents, approvals, authorizations,
permits, licenses, registrations and filings,
"Governmental Action"), other than Governmental Action
referred to in (d) above that has already been taken, is
required either (i) for the grant by the Grantor of the
security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Grantor
or (ii) for the perfection of or the exercise by Sanwa of
its rights and remedies hereunder.
(h) Grantor's primary deposit account (except
for a payroll account at another institution) is located
at Sanwa's Los Angeles office and bears account
no. _______ and Grantor shall not establish any other such
account at any' other financial institution during the
term of the Credit Agreement.
SECTION 5. Further Assurances.
(a) The Grantor agrees that, from time to time
at the expense of the Grantor, the Grantor will promptly
execute and deliver all further instruments and documents,
and take all further action, that may be necessary or
desirable, or that Sanwa may request, in order to perfect
and protect any security interest granted or purported to
be granted hereby or to enable Sanwa to exercise and
enforce its rights and remedies hereunder with respect to
any Collateral, including without limitation giving notice
to any warehouse holding Collateral of Sanwa's security
interest therein. Without limiting the generality of the
foregoing, the Grantor will (i) mark conspicuously each
document included in the Inventory, each chattel paper
included in the Accounts Receivable and Other Intangibles,
each contract pledged hereunder and, at the request of
Sanwa, each of its records pertaining to the Collateral
with a legend, in form and substance satisfactory to
Sanwa, indicating that such document, chattel paper,
contract or Collateral is subject to the security interest
granted hereby; (ii) if any Accounts Receivable or Other
Intangibles shall be evidenced by a promissory note or
other instrument, deliver and pledge to Sanwa hereunder
such note or instrument duly endorsed and accompanied by
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<PAGE>
duly executed instruments of transfer or assignment, all
in form and substance satisfactory to Sanwa; and
(iii) execute and file such financing or continuation
statements, such amendments thereto and such other
instruments and notices as may be necessary or desirable,
or as Sanwa may request, in order to perfect and preserve
the security interests granted or purported to be granted
hereby.
(b) The Grantor hereby authorizes Sanwa to file
one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the
Collateral without the signature of the Grantor where
permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by
law.
(c) The Grantor will furnish to Sanwa from time
to time statements and schedules further identifying and
describing the Collateral and such other reports in
connection with the Collateral as Sanwa may reasonably
request, all in reasonable detail.
SECTION 6. As to Equipment and Inventory.
(a) The Grantor shall keep the Equipment and
Inventory (other than Inventory sold in the ordinary
course of business) at the places therefor specified in
Section [4(c)], and the Grantor shall not move the
Equipment or Inventory to any other place without the
prior written consent of Sanwa.
(b) The Grantor shall cause the Equipment to be
maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's
manual, and shall forthwith, or in the case of any loss or
damage to any of the Equipment as quickly as practicable
after the occurrence thereof, make or cause to be made all
repairs, replacements .and other improvements in
connection therewith that are necessary or desirable to
such end. The Grantor shall promptly furnish to Sanwa a
statement respecting any loss or damage to any of the
Equipment.
(c) The Grantor shall pay promptly when due all
property and other taxes, assessments and governmental
charges and levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the
Equipment and Inventory; provided, however, that the
Grantor shall not be required to pay or discharge any tax,
assessment, charge, levy or claim that is being contested
in good faith, by proper proceedings and as to which
appropriate reserves are being maintained. The Grantor
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<PAGE>
shall obtain and maintain all Governmental Action
necessary for the purchase, use and operation of the
Equipment and for the purchase, use, manufacture and sale
of the Inventory.
(d) In the event that any Inventory is
evidenced by a warehouse receipt, the Grantor shall
promptly deliver the original of such warehouse receipt to
Sanwa.
SECTION 7. Insurance.
(a) The Grantor shall, at its own expense,
maintain insurance with respect to the Equipment and
Inventory in such amounts, against such risks, in such
form and with such insurers as shall be satisfactory to
Sanwa from time to time. Each policy for liability
insurance shall provide for all losses to be paid on
behalf of Sanwa and the Grantor as their respective
interests may appear, and each policy for property damage
insurance shall provide for all losses (other than losses
of less than $5,000 per occurrence) to be paid directly to
Sanwa. Each such policy shall in addition (i) name the
Grantor and Sanwa as insured parties thereunder (without
any representation or warranty by or obliga-tion upon
Sanwa) as their interests may appear, (ii) contain the
agreement by the insurer that any loss thereunder shall be
payable to Sanwa notwithstanding any action, inaction or
breach of representation or warranty by the Grantor,
(iii) provide that there shall be no recourse against
Sanwa for payment of premiums or other amounts with
respect thereto and (iv) provide that at least 30 days'
prior written notice of cancellation or lapse shall be
given to Sanwa by the insurer. The Grantor shall, if so
requested by Sanwa, deliver to Sanwa original or duplicate
policies of such insurance and, as often as Sanwa may
reasonably request, a report of a reputable insurance
broker with respect to such insurance. Further, the
Grantor shall, at the request of Sanwa, duly exercise and
deliver instruments of assignment of such insurance
policies to comply with the requirements of Section [5]
and cause the respective insurers to acknowledge notice of
such assignment.
(b) Reimbursement under any liability insurance
maintained by the Grantor pursuant to this Section [7] may
be paid directly to the Person that shall have incurred
liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection
[(c)] of this Section [7] is not applicable, the Grantor
shall make or cause to be made the necessary repairs to or
replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Grantor pursuant
to this Section [7] shall be paid to the Grantor as
reimbursement for the costs of such repairs or
replacements.
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<PAGE>
(c) Upon (i) the occurrence and during the
continuance of any Event of Default or (ii) the actual or
constructive total loss (in excess of $5,000 per
occurrence) of any Equipment or Inventory, all insurance
payments in respect of such Equipment or Inventory shall
be paid to and applied by Sanwa as specified in Section
[15(b)].
SECTION 8. As to Accounts Receivable and Other
Intangibles.
(a) The Grantor shall keep its chief place of
business and chief executive office and the office where
it keeps its records concerning the Accounts Receivable
and Other Intangibles, and all originals of all chattel
paper that evidence Accounts Receivable or Other
Intangibles, at the location therefor specified in Section
[4(c)), and the Grantor shall not move any of the same to
any other location without the prior written consent of
Sanwa. The Grantor will hold and preserve such records
and chattel paper and will permit representatives of Sanwa
at any time during normal business hours to inspect and
make abstracts from such records and chattel paper.
(b) Except as otherwise provided in this
subsection [(b)], the Grantor shall continue to collect,
at its own expense, all amounts due or to become due to
the Grantor under (i) the Other Intangibles and (ii) the
Accounts Receivable. In connection with such collections,
the Grantor may take (and, at Sanwa's direction, shall
take) such action as the Grantor or Sanwa may deem
necessary or advisable to enforce collection of such
receivables; provided, however, that, upon the occurrence
and during the continuance of an Event of Default, Sanwa
shall have the right at any time, upon written notice to
the Grantor of its intention to do so, (i) to notify the
account debtors or obligers under any such receivables of
the assignment of such receivables to Sanwa, (ii) to
direct such account debtors or obligers to make payment of
all amounts due or to become due to the Grantor thereunder
directly to Sanwa, (iii) upon such notification and at the
expense of the Grantor, to enforce collection of any such
receivables and (iv) to adjust, settle or compromise the
amount or payment thereof, all in the same manner and to
the same extent as the Grantor might have done. After
receipt by the Grantor of the notice from Sanwa referred
to in the proviso to the preceding sentence, (i) all
amounts and proceeds (including instruments) received by
the Grantor in respect to such receivables shall be
received in trust for the benefit of Sanwa hereunder shall
be segregated from other funds of the Grantor and shall be
forthwith paid over to Sanwa in the same form as so
received (with any necessary endorsement) to be held as
cash collateral and either (A) released to the Grantor so
long as no Event of Default shall have occurred and be
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<PAGE>
continuing or (B) if any Event of Default shall have
occurred and be continuing, applied as provided by Section
[15(b)], and (ii) the Grantor shall not adjust, settle or
compromise the amount or payment of any such receivables
release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon.
SECTION 9. As to Patents, Trademarks, Copyrights,
Software and Trade Secrets.
A. Grantor will at its reasonable expense properly
maintain the Patents, Trademarks, Copyrights, Software and
Trade Secrets (hereinafter "Intellectual Property Collateral")
and shall not fail to renew and shall not otherwise abandon any
material Intellectual Property Collateral. Grantor will, at
its reasonable expense, diligently prosecute all patent,
trademark or service mark or copyright applications pending on
or after the date hereof, will maintain in effect all issued
patents and will renew all trademark and service mark
registrations, including payment of any and all maintenance and
renewal fees relating thereto; Grantor also will promptly make
application on any patentable but unpatented inventions,
registerable but unregistered trademarks and service marks, and
copyrightable-but uncopyrighted works.
B. Grantor will at its reasonable expense protect
and defend all rights in the Intellectual Property Collateral
against any claims and demands of all persons other than Sanwa
and will, at its expense, enforce all rights in the
Intellectual Property Collateral against any and all infringers
of the Intellectual Property Collateral. Grantor will not
license or transfer any of the Intellectual Property Collateral
except with Sanwa's prior written consent.
C. Grantor will notify Sanwa in writing prior to
any change in Grantor's place of business or, if Grantor has'
or acquires more than one place of business, prior to any
change in Grantor's chief executive office or headquarters.
D. Grantor will promptly notify Sanwa of any
acquisition (by adoption and use, purchase, license or
otherwise) of any patent, trademark or service mark
registration, copyright registration, mask work registration,
and applications therefor, and unregistered trademarks and
service marks and copyrights, throughout the world, which are
granted or filed or acquired after the date hereof or which are
not listed on Schedule 1 hereto. Grantor authorizes Sanwa,
without notice to Grantor, to modify this Agreement by amending
Schedule 1 to include any such Intellectual Property
Collateral.
E. Grantor will promptly notify Sanwa of any legal
process which is levied against the Intellectual Property
Collateral and any other event which may have a material
adverse effect on the value of the Intellectual Property
Collateral (including, but not limited to, conduct which might
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<PAGE>
infringe on any Intellectual Property Collateral) or the rights
and remedies of Sanwa in relation thereto, and Grantor will
enforce all rights in the Intellectual Property Collateral
against any and all infringers thereof.
F. Grantor will, at the request of Sanwa, execute
such other agreements, documents or instruments in connection
with this Agreement as Sanwa may reasonably deem necessary,
including, but not limited to, those documents prepared by
Sanwa which, at Sanwa's option, Sanwa chooses to record with
any governmental entity, in any State or at the Federal level
or in any foreign country, relating to the security interest
Sanwa holds in the Intellectual Property Collateral.
G. Grantor will pay to Sanwa, on demand, the
amounts of any fees required to be paid in connection with
recordation of this Agreement or any other agreement, document,
or instrument evidencing Sanwa's security interest and any
other rights in or to the Intellectual Property Collateral.
SECTION 10. Transfers and Other Liens. The Grantor
shall not (a) sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to,
any of the Collateral, except Inventory in the ordinary course
of business; or (b) create or suffer to exist any Lien upon or
with respect to any of the Collateral other than the security
interests) created and/or continued by this Agreement and the
other Loan Documents.
SECTION 11. Sanwa Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints Sanwa the Grantor's
attorney-in-fact, with full authority in the place and stead of
the Grantor and in the name of the Grantor or otherwise, from
time to time in Sanwa's discretion upon the occurrence and
during the continuance of an Event of Default, to take any
action and to execute any instrument that Sanwa may deem
necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of the Grantor under Section
[81), including the following:
(a) to obtain and adjust insurance required to
be paid to Sanwa pursuant to Section [7];
(b) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any of
the Collateral;
(c) to receive, endorse and collect any drafts
and any other instruments, documents or chattel paper in
connection with clause [(a) or (b)] above; and
(d) to file any claims, take any action or
institute any proceedings that Sanwa may deem necessary or
desirable for the collection of any of the Collateral or
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<PAGE>
otherwise to enforce the rights of Sanwa with respect to
any of the Collateral.
SECTION 12. Sanwa May Perform. If the Grantor
fails to perform any agreement contained herein, Sanwa may
itself perform, or cause performance of, such agreement, and
the expenses of Sanwa incurred in connection therewith shall be
payable by the Grantor under Section [16(b)]. Sanwa shall
endeavor to provide notice to the Grantor before taking action
pursuant to the preceding sentence; provided that Sanwa's
failure to provide such notice shall not subject Sanwa to any
liability or limit its rights hereunder.
SECTION 13. Sanwa's Duties. The powers conferred
on Sanwa hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral
in its possession and the accounting for moneys actually
received by it hereunder, Sanwa shall have no duty as to any
Collateral or as to the taking of any necessary steps to
preserve rights against other parties or any other rights
pertaining to any Collateral. Sanwa shall be deemed to have
exercised reasonable care in the custody and preservation of
any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that accorded by Sanwa to its
own property.
SECTION 14. Events of Default. Any one or more of
the following shall constitute an "Event of Default" hereunder:
(a) Grantor shall fail to pay any Obligations
to Sanwa when due;
(b) Grantor shall breach any term, provision,
warranty or representation under this Agreement, under any
other security agreement, under any of the other Loan
Documents, or under any other obligation or agreement
between Grantor to Sanwa;
(c) Any receiver or trustee shall be appointed
with regard to all or a substantial portion of the assets
of Grantor;
(d) Grantor shall become insolvent or unable to
pay debts as they mature, shall make a general assignment
for the benefit of creditors or shall voluntarily file
under any bankruptcy or similar law;
(e) Any involuntary petition in bankruptcy
shall be filed against Grantor, and shall not be dismissed
within sixty (60) days;
(f) Any levies of attachment, executions, tax
assessments or similar processes shall be issued against
the Collateral and shall not be released within ten days
thereof;
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<PAGE>
(g) Any financial statements, profit and loss
statements, borrowing certificates or schedules, or other
statements furnished by Grantor to Sanwa prove false or
.incorrect in any material respect; or
(h) Any other event, the occurrence of which
would constitute an Event of Default (as that term is
defined in the Credit Agreement) under the Credit
Agreement;
SECTION 15. Remedies. If any Event of Default
shall have occurred and be continuing, then the following
provisions shall apply, in addition to any other rights and
remedies Sanwa may be entitled to under the Credit Agreement,
the Loan Documents and applicable law.
(a) Sanwa may exercise in respect of the
Collateral, in addition to other rights and remedies
provided for herein, or in the Credit Agreement, or
otherwise available to it, all the rights and remedies of
a secured party on default under the Uniform Commercial
Code in effect in the State of California at such time
(the "Code") (whether or not the Code applies to the
affected Collateral) and may also (i) require the Grantor
to, and the Grantor hereby agrees that it will at its
expense and upon request of Sanwa forthwith, assemble all
or part of the Collateral as directed by Sanwa and make it
available to Sanwa at a place to be designated by Sanwa
that is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at
public or private sale, at any of Sanwa's offices or
elsewhere, for cash, on credit or for future delivery and
upon such other terms as Sanwa may deem commercially
reasonable. The Grantor agrees that, to the extent notice
of sale shall be required by law, at least 10 days' notice
to the Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall
constitute reasonable notification. Sanwa shall not be
obligated to make any sale of Collateral regardless of
notice of sale having been given. Sanwa may adjourn any
public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to
which it was so adjourned.
(b) All cash proceeds received by Sanwa in
respect of any sale of, collection from or other
realization upon all or any part of the Collateral may, in
the discretion of Sanwa, be held by Sanwa as collateral
for, and/or then or at any time thereafter applied (after
payment of any amounts payable to Sanwa pursuant to
Section [161) in whole or in part by Sanwa against, all or
any part of the Obligations in such order as Sanwa shall
elect. Any surplus of such cash or cash proceeds held by
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<PAGE>
Sanwa and remaining after payment in full of the
Obligations shall be paid over to the Grantor or to
whoever may be lawfully entitled to receive such surplus.
SECTION 16. Indemnity and Expenses.
(a) The Grantor agrees to indemnify Sanwa from
and against any and all claims, losses and liabilities
growing out of or resulting from this Agreement (including
enforcement of this Agreement), except claims, losses or
liabilities resulting from Sanwa's gross negligence or
willful misconduct.
(b) The Grantor will upon demand pay to Sanwa
the amount of any and all expenses, including the fees and
disbursements of its counsel and of any experts and
agents, that Sanwa may incur in connection with (i) the
admin-istration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of
the rights of Sanwa hereunder or (iv) the failure by the
Grantor to perform or observe any of the provisions
hereof.
SECTION 17. Amendments, Etc. No amendment or
waiver of any provision of this Agreement or consent to any
departure by the Grantor therefrom shall in any event be
effective unless the same shall be in writing and signed by
Sanwa, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which
given.
SECTION 18. Notices. All notices and other
communications provided for hereunder shall be given in
accordance with Section [9.11 of the Credit Agreement.
SECTION 19. Continuing Security Interest. This
Agreement shall continue and/or create a continuing security
interest in the Collateral and shall (a) remain in full force
and effect until payment in full of the obligations and
termination of the Credit Agreement, (b) be binding upon the
Grantor and its successors and assigns and (c) inure, together
with the rights and remedies of Sanwa hereunder, to the benefit
of Sanwa and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause [(c)], Sanwa
may assign or otherwise transfer any of its rights and
obligations under the Loan Documents to any other Person, and
such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Sanwa herein or
otherwise. Upon the payment in full of the Obligations and
termination of the Credit Agreement, the security interest
granted hereby shall terminate, and all rights to the
Collateral shall revert to the Grantor. Upon any such
termination, Sanwa will, at the Grantor's expense, execute and
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<PAGE>
deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
SECTION 20. Governing Law; Terms. This Agreement
shall be governed by and construed in accordance with the laws
of the State of California without reference to its choice of
law principles. Unless otherwise defined herein or in the
Credit Agreement, terms used in Article 9 of the Code are used
herein as therein defined.
ORA ELECTRONICS, INC.
By: /s/ Gershon N. Cooper
-------------------------
Name:_________________________
Title:________________________
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<PAGE>
SCHEDULE 1
TO
SECURITY AGREEMENT
PATENTS
Number Description
------ -----------
5,386,455 SYSTEM AND METHOD FOR AUTOMATIC
ACTIVATION OF CELLULAR TELEPHONES
5,298,907 BALANCED POLARIZATION DIVERSIFIED
CELLULAR ANTENNA
5,181,043 PASSIVE REPEATER FOR CELLULAR
TELEPHONES
5,122,063 ADJUSTABLE ELECTRICAL CONNECTOR
4,873,712 TELEPHONE CONTROLLED INTERRUPTER
CIRCUIT
4,872,630 UNIVERSALLY ADJUSTABLE MOUNTING DEVICE
4,857,939 MOBILE COMMUNICATIONS ANTENNA
4,847,629 RETRACTABLE CELLULAR ANTENNA
4,836,485 UNIVERSALLY ADJUSTABLE MOUNTING DEVICE
4,794,319 GLASS MOUNTED ANTENNA
4,721,862 AUXILIARY FUSE BLOCK
4,692,770 VEHICLE WINDOW MOUNT FOR PORTABLE
ANTENNA
D 351,586 BATTERY CHARGER FOR CELLULAR TELEPHONE
BATTERIES
D 350,726 BATTERY CHARGER FOR CELLULAR TELEPHONE
BATTERIES
D 344,709 ALTERNATE POWER SUPPLY ADAPTER FOR A
BATTERY OPERATED RADIO TELEPHONE
D 332,609 CELLULAR ANTENNA
D 329,240 COMMUNICATIONS ANTENNA
D 325,385 CELLULAR ANTENNA
D 325,384 CELLULAR ANTENNA
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<PAGE>
D 324,865 ADJUSTABLE SUPPORT FOR A CELLULAR
TELEPHONE OR THE LIKE
D 320,396 CELLULAR ANTENNA
D 320,395 CELLULAR ANTENNA
D 320,394 CELLULAR ANTENNA
D 320,393 CELLULAR ANTENNA
D 310,224 HINGED COMMUNICATIONS ANTENNA
D 310,084 COUPLING BLOCK FOR A GLASS MOUNTED
ANTENNA
D 309,141 COMMUNICATIONS ANTENNA
D 298,431 INDOOR ANTENNA
D 298,430 INTERIOR GLASS MOUNTED ANTENNA
D 298,037 THROUGH GLASS ANTENNA
D 297,841 GLASS MOUNTED ANTENNA
D 297,530 ELECTRICAL CONNECTOR PLUG
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<PAGE>
TRADEMARKS
REGISTRATIONS
Number Description
------ -----------
2,002,746 CHARGE & TALK
2,001,061 TRAVEL TALK
1,998,817 SIGNAL PLUS
1,987,151 REDGUARD
1,875,143 C-TAC
1,845,988 CELLULAR FULFILLMENT CENTER
1,811,890 POWER UP
1,719,953 WE KEEP THE WORLD TALKING
11692,541 WE KEEP AMERICA TALKING
1,667,396 CAR-KIT and design
1,664,775 CAR-KIT
1,631,282 ORA
1,594,984 TOTAL COVERAGE
1,577,580 PARA-LINK
1,548,256 THE CELLULAR SPECTRUM
1,534,089 MODUNET
1,476,384 THRU-GLASS
1,366,382 STUDIO SPEC
1,359,789 OUR SERVICE MAKES THE DIFFERENCE
1,352,513 TERMIGHT
1,350,398 DATA SPEC
1,343,956 ORA and design
1,320,451 TELE SPEC
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<PAGE>
TRADEMARKS
APPLICATIONS
Number Description
------ -----------
75/108,413 WE KEEP THE WORLD CONNECTED
75/080,526 CELLUDEX
75/070,595 TOP-OFF
75/069,750 SNAP
75/066,370 EXERCISER
74/686,796 TELECAR
74/663,884 VIBARING
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<PAGE>
SCHEDULE 2
TO
SECURITY AGREEMENT
Locations of Equipment
None
Locations of Inventory
None
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<PAGE>
EXHIBIT 10.11
SECURED PROMISSORY NOTE
$5,000,000 Los Angeles, California February 1, 1989
(Place of Execution)
FOR VALUE RECEIVED, the undersigned, Alliance Research Corporation,
a California corporation (the "Borrower"), hereby promises to pay, in coin or
currency that at the time or times of payment is legal tender for public and
private debts in the United States, in installments as herein stated, to the
order of Aid Association for Lutherans, a Wisconsin corporation (the "Holder"),
the principal sum of FIVE MILLION DOLLARS ($5,000,000) together with interest on
the unpaid principal balance hereof from the Interest Accrual Date 1/ (as
hereinafter defined) at the rate of nine and seven- eighths percent (9-7/8%) per
annum in like coin or currency until paid in full.
The Interest Accrual Date shall be the date hereafter endorsed on
the first page of this Note. Until otherwise directed by the Holder in writing,
the installments as herein stated shall be paid by wire transfer of immediately
available federal funds to Harris Trust and Savings Bank, 111 West Monroe
Street, Chicago, Illinois 60690, Account No. 164-096-0 (Aid Association for
Lutherans) or, so long as Borrower shall not be in default hereunder, by check
drawn on good and sufficient funds delivered on or before when due to Aid
Association for Lutherans, P.O. Box 95373, Chicago, Illinois 60694.
This Note is secured by a Deed of Trust, Financing Statement and
Security Agreement (With Assignment of Rents) (the "Deed of Trust") of even date
herewith executed by Borrower as Trustor to Continental Land Title Company as
Trustee for Aid Association for Lutherans as Beneficiary, which is a lien on
property (the "Property") (and the rents therefrom) located in Chatsworth, City
of Los Angeles, County of Los Angeles, State of California, all as more
particularly described in said Deed of Trust. This Note is also secured by a
separate Assignment of Rents and Leases (the "Assignment") of even date herewith
executed by Borrower as Assignor in favor of Aid Association for Lutherans as
Assignee, which is a lien on the rents, additional rents, profits, royalties and
payments of the Property. Reference is hereby made to the Deed of Trust and to
the Assignment for a description of the nature and extent of such security and
the rights of Holder with respect thereto. This Note is also made and entered
into pursuant to that certain Loan Agreement (the "Loan Agreement") of even date
herewith by and between Borrower and Holder.
- --------
1/ Interest on the within Note to accrue from and after ____________, 1989
("Interest Accrual Date").
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<PAGE>
If the Interest Accrual Date is on any day other than
the fifteenth day of a calendar month, Borrower shall pay, on
the next fifteenth day of a calendar month (such payment date
called the "Adjustment Date"), interest accrued on the
principal amount from the Interest Accrual Date to the
Adjustment Date. If the interest Accrual Date is the fifteenth
day of a calendar month, such date shall be deemed to be the
Adjustment Date, and no interest payment shall be made on that
date. From and after the Adjustment Date, except as otherwise
provided herein, principal and interest on this Note shall be
payable in installments of Forty-three Thousand Four Hundred
Eighteen Dollars ($43,418) per month (aggregating Five Hundred
Twenty-one Thousand Sixteen Dollars ($521,016) per year), to be
applied first to accrued interest and then to the reduction of
principal, commencing on the next fifteenth day of a calendar
month following the Adjustment Date and continuing on the
fifteenth day of each calendar month thereafter for three
hundred fifty-nine months. The remaining principal balance
hereof, together with all accrued interest thereon, shall be
due and payable on the fifteenth day of the three hundredth
sixtieth (360th) month after the Adjustment Date.
Holder shall have the right, at any time after the
expiration of the first five (5) years following the Adjustment
Date, upon six (6) months advance notice to Borrower, of
requiring Borrower to repay all (but not less than all) of the
then outstanding principal balance and accrued interest to the
date of repayment. It is understood and agreed that the
earliest that Holder may give such advance notice is four
(4) years and six (6) months after the Adjustment Date so as to
require repayment any time after the expiration of the first
five (5) years after the Adjustment Date. It is also
understood and agreed that Holder may exercise this option in
its sole absolute discretion for any reason that Holder may
have, including but not limited to any change in general market
interest rates, and it is understood and agreed that Borrower
has no right to challenge a decision by Holder to exercise this
option.
Borrower has no right, and no privilege is reserved,
to prepay principal during the first two (2) years following
the Adjustment Date.
Borrower shall have the privilege, after the
expiration of the first two (2) years following the Adjustment
Date, upon sixty (60) days' advance written notice to Holder,
of prepaying all (but not less than all) of the then
outstanding principal balance hereof upon payment by the
Borrower of a prepayment privilege fee (the "Prepayment
Privilege Fee"). The Prepayment Privilege Fee shall be equal
to the higher of (a) one percent (1%) of the amount prepaid or
(b) the amount prepaid times the privilege rate (the "Privilege
Rate"), said product to be reduced to its present value on a
per period basis utilizing a discount factor equal to the
Treasury Note Yield (as hereinafter defined). The Privilege
Rate shall be equal to the product of (a) the difference, if
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<PAGE>
any, between (i) the Interest Rate and (ii) the highest current
yield (if less than the Interest Rate) on the date of
prepayment of the United States Treasury Note (the "Treasury
Note Yield"), as quoted in the Wall Street Journal, closest in
maturity to the date that is four (4) years and nine (9) months
after the Adjustment Date, times (b) the term remaining from
the date of prepayment (the remaining term to be expressed as a
fraction the numerator of which is equal to the number of days
remaining from the date of prepayment to the date that is four
(4) years and nine (9) months after the Adjustment Date and the
denominator of which is three hundred sixty-five (365)). After
the date that is four (4) years and nine (9) months after the
Adjustment Date, there will be no Prepayment Privilege Fee.
Any prepayment of the entire outstanding principal balance of
this Note as permitted herein shall also include accrued
interest to the date of prepayment.
If Holder should determine, in its sole option and
absolute discretion, to accept, after the expiration of the
first two (2) years following Adjustment Date, a prepayment of
less than all of the outstanding principal balance together
with accrued but unpaid interest thereon, all such prepayments
accepted in Holder's sole option and absolute discretion shall,
except for any prepayment privilege fee assessed by Holder,
first be applied against accrued interest then due and owing
and thereafter against the principal due hereunder in the
inverse order of principal payments as they mature. Such
partial prepayments, if permitted at the Holder's sole option
and absolute discretion, shall not relieve the obligation of
the Borrower to pay installments of principal and interest when
due hereunder and any such partial prepayments shall be subject
to a prepayment privilege fee as determined by Holder in its
sole and absolute discretion. The Holder's consent to any such
partial prepayment will not be a consent to any other or
subsequent partial prepayment or a waiver of the need for such
consent in any future or other instance.
Notwithstanding the foregoing, the total loan amount
disbursed to Borrower shall not exceed seventy-five percent
(75%) of the certified purchase price and the certified
interior improvement costs for the Property paid by Borrower,
all as more particularly set forth in the Loan Agreement of
even date herewith. Any loan amounts not disbursed to Borrower
as a result of the above shall be applied as a mandatory
prepayment of principal due under this Note, with no prepayment
fee. Any such principal reduction shall occur as of the
fifteenth day of the next calendar month following Lender's
receipt of the Escrow Funds (as defined in the Loan Agreement)
not disbursed to Borrower (the "Principal Reduction Date"), On
the fifteenth day of the month following the Principal
Reduction Date, and on the fifteenth day of each month
thereafter until maturity of this Note (whether by acceleration
or otherwise), the monthly principal and interest installment
payment paid by Borrower shall be an amount sufficient to
amortize the principal amount remaining on this Note after such
mandatory principal repayment, at the Interest Rate, in equal
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<PAGE>
monthly installments over the term of the loan remaining under
this Note.
Notwithstanding anything to the contrary contained in
this Note, if the Deed of Trust specifically and expressly
permits prepayment without prepayment privilege fee in any
instance, no prepayment privilege fee shall be assessed under
this Note.
Notwithstanding the foregoing, in the event of the
occurrence of an Event of Default (as hereinafter defined)
hereunder followed by acceleration of the maturity of this Note
in Holder's sole and absolute discretion, any payment of the
amount necessary to satisfy this Note shall be deemed to be a
voluntary prepayment of this Note and shall be accompanied by
and subject to a prepayment privilege fee equal to the
following: (a) if such Event of Default should occur on or
before the expiration of the first two (2) years following the
Adjustment Date, of the greater of (i) eight percent (8%) of
the then outstanding principal balance and (ii) the then
outstanding principal balance times the Privilege Rate, said
product to be reduced to its present value on a per period
basis utilizing a discount factor equal to the Treasury Note
Yield; or (b) if such Event of Default should occur after the
expiration of the first two (2) years following the Adjustment
Date, the then outstanding principal balance times the
Privilege Rate, said product to be reduced to its present value
on a per period basis utilizing a discount factor equal to the
Treasury Note Yield.
In the event that without the prior written consent
of Holder, which consent or the denial thereof shall be in
Holder's sole and absolute discretion, (a) Borrower sells,
assigns, contracts to sell, leases or otherwise transfers all
or any portion of the Trust Property (as defined in the Deed of
Trust) or any interest or estate therein (whether possessory or
nonpossessory), whether voluntarily or by operation of law;
(b) any sale, pledge, hypothecation, encumbrance, grant of a
security interest or option to acquire, contract to sell,
assignment or other transfer of any stock of Borrower or in the
funds, capital and profits of Borrower or any legal or
beneficial ownership of any stock of Borrower is or may be
changed, including, without limitation, the sale of additional
stock, the liquidation or dissolution of Borrower, or the
merger or consolidation of Borrower with any other corporation,
shall occur and result in someone other than Gershon Cooper,
Ruth Cooper, or a living trust for the benefit of the Cooper
family, in which Gershon Cooper and/or Ruth Cooper are the sole
trustees, acquiring a controlling interest in the Borrower; or
(c) the Bylaws or Articles of Incorporation of Borrower are
modified, terminated or amended, or Borrower is dissolved,
liquidated or terminated, whether by operation of law or,
otherwise (an "Unconsented Transfer"), then, at Holder's
election in its sole and absolute discretion, upon notice to
Borrower, Holder may declare the whole of the principal balance
of this Note and all accrued but unpaid interest thereon
-4-
Page 124 of 134
<PAGE>
immediately due and payable, together with a transfer privilege
fee of (a) four percent (4%) of said principal balance if such
Unconsented Transfer occurs on or before the expiration of the
first two (2) years following the Adjustment Date, or (b) the
greater of (1) one-half (1/2) of the then applicable Prepayment
Privilege Fee and (ii) one percent (1%) of said principal
balance if such Unconsented Transfer occurs after the
expiration of the first two (2) years following the Adjustment
Date and before the date that is four (4) years and nine (9)
months after the Adjustment Date. After the date that is four
(4) years and nine (9) months following the Adjustment Date,
there will be no transfer privilege fee.
This transfer privilege fee shall apply only in the
case of a bona fide Unconsented Transfer to a person or entity
entirely unrelated to Borrower. Without limitation, it shall
not be a bona fide Unconsented Transfer if Borrower retains any
interest in the property so transferred, if Borrower retains
any agreement or understanding with the transferee of such
property with respect to the re-transfer of such property or if
Borrower has any interest in the transferee of such property.
If any Unconsented Transfer is not bona fide, in the reasonable
discretion of Holder, then such transfer shall be deemed an
Event of Default (as hereinafter defined), and Holder shall
have all of its rights and remedies in such event, including,
without limitation, the right to declare the entire unpaid
principal balance of this Note and all accrued but unpaid
interest thereon immediately due and payable, together with the
prepayment privilege fee due pursuant to the terms hereof upon
the occurrence of an Event of Default followed by acceleration
of the maturity of this Note, and to charge the Default
Interest Rate (as hereinafter defined) on the unpaid amount of
such principal and accrued interest as of the date of
acceleration, until all such sums are paid.
Upon the occurrence of any of the following events,
which events shall constitute events of default hereunder
("Events of Default"), Holder hereof may, at its sole option
and in its absolute discretion, to be exercised at anytime
thereafter, on notice to Borrower, declare the entire unpaid
principal balance hereof and accrued but unpaid interest
thereon immediately due and payable:
(a) Failure of Borrower to make any payment of
principal and/or interest on this Note within ten (10)
days when due;
(b) Failure of Borrower to comply with any
other provision contained in this Note or to perform any
other obligation of Borrower hereunder pursuant to the
terms hereof, and such failure continues for ten (10) days
after notice from Holder;
(c) Borrower, without the written consent of
Holder, voluntarily or by operation of law encumbers any
interest in the Trust Property or any part thereof or any
-5-
Page 125 of 134
<PAGE>
of the rents or profits therefrom derived as security for
any debt or obligation;
(d) Failure of Borrower to comply with any
provision of or to perform any obligations contained in
the Deed of Trust, or the Assignment or the Loan
Agreement, or the breach of any representations,
warranties, agreements or covenants contained in the Deed
of Trust or the Assignment or the Loan Agreement, which
failure to comply or perform, or breach, shall constitute
an Event of Default as defined in the Deed of Trust, or
the occurrence of an Event of Default as defined in the
Deed of Trust;
(e) Failure of Borrower to comply with any
provision of or to perform any obligations contained in
any other agreement affecting the Trust Property
(including leases thereof), or the breach of any
representations, warranties, agreements or covenants
contained in any other agreement affecting the Trust
Property (including leases thereof), and such failure or
breach continues for ten (10) days after notice from
Holder; or
(f) Any act by Borrower that would permit any
of the existing tenants or any future tenants of the
Property to terminate their respective leases, or any
termination, surrender, merger, amendment or other change
of any such leases, whether voluntarily or by operation of
law, without Holder's prior written consent, such consent
not to be unreasonably withheld.
Notwithstanding anything to the contrary contained
herein, upon the maturity of this Note, whether by acceleration
or otherwise, the unpaid principal balance together with
interest accrued to such maturity shall thereafter bear
interest at an annual rate of interest equal to the higher of
(a) the Interest Rate plus five percent (5%) or (b) the
interest rate from time to time then or thereafter charged by
the Federal Reserve Bank of San Francisco on advances to member
banks under Sections 13 and 13a of the Federal Reserve Act plus
five percent (5%) (the "Default Interest Rate").
All notices, requests, demands and other
communications hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, or,
if mailed, on the date two (2) business days after mailing by
United States certified or registered mail, prepaid, return
receipt requested, to the parties at the following addresses
(until such addresses are changed by notice pursuant to these
notice provisions):
-6-
Page 126 of 134
<PAGE>
Borrower:
Alliance Research Corporation
9410 Owensmouth Avenue
Chatsworth, California 91311
Attn: John Burris, Vice President
with a copy to:
Arant, Kleinberg & Lerner
2049 Century Park East, Suite 1080
Los Angeles, California 90067
Attn: Marvin H. Kleinberg, Esq.
Holder:
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919
Attn: Director of Investments
with a copy to:
Legal Department
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919
and
Irell & Manella
840 Newport Center Drive, Suite #500
Newport Beach, California 92660
Attn: Anthony Sclafani, Esq.
All persons, entities or corporations now or at any
time liable, whether primarily or secondarily, for payment of
the indebtedness hereby evidenced for themselves, their heirs,
legatees, devisees, legal representatives, executors,
administrators, conservators, successors and assigns,
respectively, expressly waive presentment for payment, notice
of dishonor, protest, notice of protest and diligence in
collection, and consent that the time of said payments or any
part thereof may be extended by Holder and further consent that
the real or collateral security or any part thereof may be
released by Holder without in any way modifying, altering,
releasing, affecting, or limiting the respective liability.
The parties hereto intend and believe that each
provision in this Note comports with all applicable local,
state and federal laws and judicial decisions. However, if any
provision or provisions, or if any portion of any provision or
provisions, in this Note is found by a court of law to be in
violation of any applicable local, state or federal ordinance,
statute, law, administrative or judicial decision, or public
policy, and if such court should declare such portion,
-7-
Page 127 of 134
<PAGE>
provision or provisions of this Note to be illegal, invalid,
unlawful, void or unenforceable as written, then it is the
intent of all parties hereto that such portion, provision or
provisions shall be given force to the fullest possible extent
that they are legal, valid and enforceable, that the remainder
of this Note shall be construed as if such illegal, invalid,
unlawful, void or unenforceable portion, provision or
provisions were not contained therein, and that the rights,
obligations and interest of Borrower and Holder under the
remainder of this Note shall continue in full force and effect.
All agreements herein are expressly limited so that
in no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof, acceleration of maturity of
the unpaid principal balance hereof, or otherwise, shall the
amount paid or agreed to be paid to Holder for the use,
forbearance or detention of the money to be advanced hereunder
exceed the highest lawful rate permissible under applicable
usury laws. If from any circumstances whatsoever, fulfillment
of any provision hereof, at the time performance of such
provision shall be due, shall involve transcending the limit of
validity prescribed by law that a court of competent
jurisdiction may deem applicable hereto, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of
such validity and if from any circumstance the Holder shall
ever receive as interest an amount that would exceed the
highest lawful rate, such amount that would be excessive
interest shall be applied to the reduction of the unpaid
principal balance due hereunder in the inverse order of
maturity and not to the payment of interest.
This Note shall be governed by and construed in
accordance with the laws of the State of California.
If, by the laws of the United States of America, or
of any state or local jurisdiction having jurisdiction over
Borrower, any tax is due or becomes due in respect of the
issuance of this Note, Borrower covenants and agrees to pay
such tax in the manner required by any such law. Borrower
further covenants to hold harmless and agrees to indemnify
Holder against any liability incurred by reason of the
imposition of any tax on the issuance of this Note.
Time is of the essence with respect to each and every
obligation of Borrower set forth in this Note. In the event
that any monthly installment of this Note is not received by
Holder when due, but within ten (10) days when due, then
Borrower shall be liable to Holder for a late payment privilege
fee equal to the greater of three percent (3%) of the overdue
payment or five hundred dollars ($500), which fee at Holder's
option may be either required in addition to the monthly
installment or added to principal. In the event that any
monthly installment of this Note is not received by Holder
within ten (10) days when due, Holder may, in its sole and
absolute discretion, waive the Event of Default then occurring
upon payment by the Borrower of the monthly installment then
-8-
Page 128 of 134
<PAGE>
overdue together with a late payment privilege fee equal to the
greater of three percent (3%) of the overdue payment or five
hundred dollars ($500), which fee at Holder's option may be
either required in addition to the monthly installment or added
to principal. Borrower acknowledges this fee is reasonable in
either case under the circumstances existing at the time this
Note is made to compensate Holder for its additional costs and
expenses incident to the handling of such delinquent
installment, including, without limitation, disruption of
Holder's accounting and bookkeeping operations caused by
Borrower's failure to make payment when due, and the loss of
Holder's ability to promptly reinvest the payments.
No delay or omission on the part of Holder or other
holder hereof under this Note or under any security agreement
given to secure this Note (including the Deed of Trust and
Assignment) shall operate as a waiver of such right or of any
other right hereunder or under said Deed of Trust or
Assignment, or under the Loan Agreement.
If either Borrower or Holder fail to perform any of their
respective covenants or agreements contained in this Note or in
the Deed of Trust, Assignment or Loan Agreement, then the
nonperforming party shall pay all out-of-pocket expenses of the
other party (including but not limited to fees and
disbursements of counsel) incurred by reason of or in response
to such nonperformance, together with interest thereon at the
Default Interest Rate from the date such expenses are incurred
until paid.
Notwithstanding anything to the contrary contained herein,
except as otherwise provided in this paragraph, Borrower shall
not have any personal liability on this Note, and in the event
of a foreclosure of the security interest in the property
encumbered by the Deed of Trust, no deficiency judgment may be
obtained against Borrower. It is expressly understood and
agreed, however, that nothing contained in this paragraph shall
impair in any manner any rights, remedies or recourse Holder
may have against any person or entity other than Borrower or in
any manner or way constitute or be deemed a release of the debt
evidenced by this Note or otherwise affect or impair the
enforceability of the liens, deed of trust, assignments, rights
and security interests created by the Deed of Trust or any
other instrument or agreement evidencing, securing, or relating
to the indebtedness evidenced by this Note. Nothing in this
paragraph shall preclude Holder from foreclosing the Deed of
Trust or from enforcing any of its rights and remedies at law
or in equity against Borrower except as stated in this
paragraph. Further, nothing in this paragraph shall be
construed as restricting, limiting or waiving the personal
liability of Borrower arising under this Note or otherwise, and
whether or not a foreclosure of the security in the property
encumbered by the Deed of Trust has occurred, for:
(a) any tort giving rise to a claim by Holder
against Borrower;
-9-
Page 129 of 134
<PAGE>
(b) any fraud or material misrepresentation
contained in the Loan Agreement or in any certificate,
document or instrument delivered pursuant to the
provisions of the Loan Agreement;
(c) any action by Holder against Borrower
arising from or in connection with any toxic materials or
hazardous waste stored or used on the Property, whether
prior to or after Borrower became owner of the Property;
and
(d) any action that Borrower may take or permit
that has the effect of diminishing the value of the Trust
Property or any other security under the Deed of Trust,
the Assignment, or any other document relating to the Loan
Agreement (to the extent of such diminution in value),
including but not limited to (i) waste, (ii) failure to
maintain or voiding of insurance coverage required by the
provisions of paragraph 4 of the Deed of Trust;
(iii) misappropriation or misuse of any income or revenues
from the Trust Property or any other security, including
without limitation the use of such income or revenues for
any purpose other than normal and necessary operating
expenses for the Trust Property and the servicing of the
loan evidenced by this Note, (iv) collection of any rents
for more than one (1) month in advance of their due date
or after the occurrence of any Event of Default under this
Note or the Deed of Trust and any interest on such amount,
(v) nonpayment of any real estate taxes, assessments,
ground rents or insurance premiums when due, (vi) without
the prior written consent of Holder, the application or
use of any insurance proceeds on the Trust Property which
is inconsistent with the provisions of paragraph 4 of the
Deed of Trust and (vii) without the prior written consent
of Holder, the application or use of any Proceeds (as
defined in the Deed of Trust) on the Trust Property which
is inconsistent with the provisions of paragraph 14 of the
Deed of Trust. Any and all amounts due and payable to
Holder pursuant to this subparagraph (d) and not received
by Holder at the earlier of (A) ten (10) days after demand
and (B) the date of recordation of a foreclosure deed or
deed-in-lieu of foreclosure shall (x) bear interest at the
Default Interest Rate from the applicable due date until
and including the date of payment, and (y) be accompanied
by a late payment privilege fee equal to the greater of
three percent (3%) of the overdue payment or five hundred
dollars ($500), which fee at Holder's option may be either
required in addition to the monthly installments of this
Note or added to the principal.
-10-
Page 130 of 134
<PAGE>
In the event of any inconsistency between provisions
of this Note and those of the Deed of Trust, Assignment or Loan
Agreement, the provisions of this Note shall control.
IN WITNESS WHEREOF, this Note is executed as of the
date set forth above.
Alliance Research Corporation,
a California corporation
By: /s/ Gershon N. Cooper
----------------------------
Its: President
By: /s/ Ruth Cooper
----------------------------
Its: Secretary
-11-
Page 131 of 134
<PAGE>
EXHIBIT 10.12
PROMISSORY NOTE
FOR VALUABLE CONSIDERATION, receipt of which is acknowledged, the
undersigned ALLIANCE RESEARCH CORPORATION, a California corporation having a
principal place of business at 9410 Owensmouth Avenue, Chatsworth, California
91311 promises to pay to the order of GENERAL FUNDING CORPORATION, having a
principal place of business at Mutschellen Strasse No. 6, 8002 Zurich,
Switzerland, or any subsequent holder of this Note, the total sum of ONE MILLION
DOLLARS ($US 1,000,000.00) with interest from the date shown, at the rate of
EIGHT PERCENT (8.00%) SIMPLE INTEREST PER ANNUM, calculated annually, and due on
December 31, 2001. The principal and interest are to be paid in full on the due
date of this Note.
The principal balance of this Note and accrued and unpaid interest,
if any, can be prepaid, either partially or in full, at any time without
penalty.
This Note shall be deemed to have been made under, and shall in all
respects be governed by, the law of the State of California in force from time
to time, and any legal action or proceeding shall be filed within the judicial
confines of Los Angeles County, California.
ALLIANCE RESEARCH CORPORATION
Date: December 23, 1996 /s/ Gershon N. Cooper
----------------------------------------
Gershon N. Cooper
President, Alliance Research Corporation
-1-
Page 132 of 134
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended December 31,
1996 1995
-------------- -------------
Primary average shares outstanding 6,337,691 1,000
========= ===========
Net income (loss) 412,734 (338,208)
========= ============
Primary earnings (loss) per share 0.07 (338.21)
========= ============
Nine Months Ended December 31,
1996 1995
-------------- -------------
Primary average shares outstanding 6,337,691 1,000
========= ===========
Net income (loss) (1,744,128) (1.191.948)
========= ===========
Primary earnings (loss) per share (0.28) (1.191.95)
========= ===========
Page 133 of 134
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1997
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 1,203,330 1,203,330
<SECURITIES> 0 0
<RECEIVABLES> 6,283,734 6,283,734
<ALLOWANCES> 1,914,471 1,914,471
<INVENTORY> 6,001,409 6,001,409
<CURRENT-ASSETS> 12,467,415 12,467,415
<PP&E> 8,976,490 8,976,490
<DEPRECIATION> 2,610,295 2,610,295
<TOTAL-ASSETS> 19,163,948 19,163,948
<CURRENT-LIABILITIES> 8,210,928 8,210,928
<BONDS> 0 0
0 0
0 0
<COMMON> 6,338 6,338
<OTHER-SE> 5,328,782 5,328,782
<TOTAL-LIABILITY-AND-EQUITY> 19,163,948 19,163,948
<SALES> 6,227,597 14,427,805
<TOTAL-REVENUES> 6,227,597 14,427,805
<CGS> 3,457,484 9,647,134
<TOTAL-COSTS> 1,994,606 5,687,116
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 362,773 837,683
<INCOME-PRETAX> 412,734 (1,744,128)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 412,734 (1,744,128)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 412,734 (1,744,128)
<EPS-PRIMARY> 0.07 (0.28)
<EPS-DILUTED> 0.07 (0.28)
</TABLE>
