EXHIBIT 10.25
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, dated as of June, 15 1999 is entered by
and between:
(1) XXXXXXXX.XXX, a Delaware corporation ("Borrower"); and
(2) DOMINION VENTURE FINANCE L.L.C. ("Lender").
RECITALS
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A. Borrower desires to obtain a loan upon the security of certain
equipment owned or to be acquired by Borrower.
B. Lender is willing to make a loan upon the terms and subject to
the conditions set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing and of the covenants,
conditions and agreements set forth herein, the parties agree as follows:
ARTICLE 1. DEFINITIONS.
For purposes of this Loan Agreement the following capitalized terms shall
have the meanings set forth below:
1.1 "Business Day" shall mean any day on which commercial banks are not
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authorized or required to close in San Francisco, California.
1.2 "Closing" shall mean the date, time and place as the parties may agree
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for the consummation of the loan contemplated hereby.
1.3 "Collateral" shall have the meaning set forth in Section 3.1 of this
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Loan Agreement.
1.4 "Commitment" shall have the meaning set forth in Section 2.1 of this
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Loan Agreement.
1.5 "Commitment Termination Date" shall have the meaning set forth in
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Section 2.1 of this Loan Agreement.
1.6 "Contractual Obligation" of any Person shall mean, any indenture,
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note, security, deed of trust, mortgage, security agreement, lease, guaranty,
instrument, contract, agreement or other form of obligation or undertaking to
which such Person is a party or by which such Person or any of its property is
bound.
1.7 "Default" shall mean any event or circumstance not yet constituting an
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Event of Default but which, with the giving of any notice or the lapse of any
period of time or both, would become an Event of Default.
1.8 "Default Rate" shall mean, as of any date of determination, an
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interest rate per annum equal to five percent (5%) in excess of the rate per
annum otherwise applicable on such date.
1.9 "Disclosure Schedule" shall have the meaning set forth in Article 5 of
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this Loan Agreement.
1.10 "Eligible Equipment" shall mean computers, furniture, software and
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office equipment, to the extent acceptable to Lender; provided that the
aggregate value of all software may not exceed ten percent (10%) of the
Commitment. The Aggregate value of Softcosts, defined as software and leasehold
improvements shall not exceed twenty percent (20%) of the total equipment loan.
All New Equipment to be purchased by Borrower and intended to constitute
Collateral must be approved by Lender and shall be valued at cost (net of
freight, taxes, installation and similar costs). All Used Equipment owned by
Borrower as of the date of this Loan Agreement, or acquired by Borrower after
the date of this Loan Agreement in one or more transactions, and which Borrower
intends to constitute Collateral must be approved by Lender and shall be valued
using straight line depreciation from the original cost (net of freight, taxes,
installation and similar costs) over thirty-six (36) months. All appraisal
costs shall be borne by Borrower.
1.11 "Environmental Laws" means all Requirements of Law relating to the
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protection of human health or the environment, including, without limitation,
(a) all Requirements of Law, pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or wastes, whether
solid, liquid, or gaseous in nature; and (b) all Requirements of Law pertaining
to the protection of the health and safety of employees or the public.
1.12 "Equipment" shall have the meaning set forth in Section 3.1 of this
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Loan Agreement.
1.13 "Event of Default" shall have the meaning set forth in Section 10.1
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of this Loan Agreement.
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1.14 "Financial Statements" shall mean, with respect to any accounting
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period for any Person, statements of operations, retained earnings and cash flow
of such Person for such period, and balance sheets of such Person as of the end
of such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding fiscal year, all prepared in reasonable detail and in
accordance with generally accepted accounting principles. Unless otherwise
indicated, each reference to Financial Statements of any Person shall be deemed
to refer to Financial Statements prepared on a consolidated basis.
1.15 "Governmental Authority" shall mean any domestic or foreign national,
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state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.16 "Governmental Rule" shall mean any law, rule, regulation, ordinance,
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order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
1.17 "Indebtedness" of any Person shall mean and include the aggregate
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amount of, without duplication (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (other than accounts payable
incurred in the ordinary course of business determined in accordance with
generally accepted accounting principles), (d) all obligations under capital
leases of such Person, (e) all obligations or liabilities of others secured by a
lien on any asset of such Person, whether or not such obligation or liability is
assumed, (f) all guaranties of such Person of the obligations of another Person;
(g) all obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement upon an
event of default are limited to repossession or sale of such property), (h) net
exposure under any interest rate swap, currency swap, forward, cap, floor or
other similar contract that is not entered to in connection with a bona fide
hedging operation that provides offsetting benefits to such Person, which
agreements shall be marked to market on a current basis, (i) all reimbursement
and other payment obligations, contingent or otherwise, in respect of letters of
credit.
1.18 "Lien" shall mean, with respect to any property, any security
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interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation, the
interest of a vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar instrument under
the Uniform Commercial Code or comparable law of any jurisdiction.
1.19 "Loan" shall have the meaning set forth in Section 2.1 of this Loan
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Agreement.
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1.20 "Loan Agreement" shall mean this Loan and Security Agreement.
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1.21 [Intentionally Deleted]
1.22 "Material Adverse Effect" shall mean a material adverse effect on (a)
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the business, assets, operations, prospects or financial or other condition of
Borrower and its Subsidiaries, taken as a whole; (b) the ability of Borrower and
its Subsidiaries to pay or perform the Obligations in accordance with the terms
of this Loan Agreement and the other Operative Documents and to avoid an Event
of Default under any Operative Document; or (c) the rights and remedies of
Lender under this Loan Agreement, the other Operative Documents or any related
document, instrument or agreement.
1.23 "New Equipment" shall mean Eligible Equipment purchased with the
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proceeds of a Loan or placed in service not more than ninety (90) days prior to
the date of funding of the applicable Loan.
1.24 "Note" shall mean a promissory note or notes of Borrower
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substantially in the form attached as Exhibit A hereto.
1.25 "Obligations" shall mean and include all loans, advances, debts,
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liabilities, and obligations, including, without limitation, the noncancelable
obligation to make each payment scheduled to be made under Sections 2.2.2, 2.2.3
and 2.2.4, howsoever arising, owed by Borrower to Lender of every kind and
description (whether or not evidenced by any note or instrument and whether or
not for the payment of money), now existing or hereafter arising under or
pursuant to the terms of this Loan Agreement or the other Operative Documents,
including, without limitation, all interest, , fees, charges, expenses,
attorneys' fees and costs and accountants' fees and costs chargeable to and
payable by Debtor hereunder and thereunder, in each case, whether direct or
indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding.
1.26 "Operative Documents" shall mean, collectively, the Loan Agreement,
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the Notes and the other documents executed in connection herewith.
1.27 "Permitted Liens" shall mean and include: (a) Liens for taxes or
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other Governmental Charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided provision is made to
the reasonable satisfaction of Lender for the eventual payment thereof if
subsequently found payable; (b) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of business
for sums not overdue or being contested in good faith, provided provision is
made to the reasonable satisfaction of Lender for the eventual payment thereof
if subsequently found payable; and (c) Liens in favor of Lender.
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1.28 "Person" shall mean and include an individual, a partnership, a
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corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a Governmental Authority.
1.29 "Requirement of Law" applicable to any Person shall mean (a) the
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articles or certificate of incorporation, bylaws or other governing documents of
such Person, (b) any Governmental Rule applicable to such Person, (c) any
license, permit, approval or other authorization granted by any Governmental
Authority to or for the benefit of such Person and (d) any judgment, decision or
determination of any Governmental Authority or arbitrator, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
1.30 "Subsidiary" of any Person shall mean (a) any corporation of which
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more than fifty percent (50%) of the issued and outstanding equity securities
having ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any
partnership, joint venture, or other association of which more than fifty
percent (50%) of the equity interest having the power to vote, direct or control
the management of such partnership, joint venture or other association is at the
time owned and controlled by such Person, by such Person and one or more of the
other Subsidiaries or by one or more of such Person's other subsidiaries and (c)
any other Person included in the financial statements of such Person on a
consolidated basis. Any reference to a Subsidiary without designation of the
ownership of such Subsidiary shall be deemed to refer to a Subsidiary of
Borrower.
1.31 "Used Equipment" shall mean Eligible Equipment which is not New
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Equipment.
ARTICLE 2. THE LOANS.
2.1 Commitment. Subject to the terms and conditions of this Loan
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Agreement, from time to time on or prior to June 15, 2000 (the "Commitment
Termination Date), Lender agrees to advance to Borrower term loans (the "Loans")
in an aggregate principal amount of up to Two Million, Six Hundred Thousand
Dollars ($2,600,000) (the "Commitment"). Loans shall be made not more often
than monthly. Borrower may not prepay any amount due with respect to the Loans
2.2 Loan Payments.
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2.2.1 Loan Interest. Borrower shall pay interest in advance on the
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unpaid principal amount of each Loan from the date of such Loan until such Loan
is paid in full, at a rate of interest equal to eight percent (8%) per annum,
based upon a year of 360 days and actual days elapsed. If Borrower pays
interest on such Loan which is determined to be in excess of the then legal
maximum
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rate, then that portion of each interest payment representing an amount in
excess of the then legal maximum rate shall be deemed a payment of principal and
applied against the principal of the Loan.
2.2.2 Payments of Principal and Interest. Borrower shall make
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thirty-six (36) equal payments of principal and interest (payable in advance),
which payments shall fully amortize the principal and interest due on the Loan
over such thirty-six (36) month period, on the first Business Day of each month
until the Loan is paid in full.
2.2.3 Interim Interest Payment. Concurrently, with the funding of
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each Loan, Borrower shall make an advance payment of interest for the period
from the date of funding to the first Business Day of the month after the
funding of such Loan.
2.2.4 Final Payment. On the date on which the last payment is due
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under Section 2.2.2 with respect to each Loan, Borrower shall pay to Lender, in
addition to any remaining unpaid principal and accrued interest and all other
amounts previously due with respect to such Loan, an amount equal to fifteen
percent (15 %) of the original principal amount of such Loan.
2.2.5 [Intentionally Deleted.]
2.3 Use of Proceeds; the Loan and the Note; Disbursement.
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2.3.1 Use of Proceeds. The proceeds of the Loan shall be used solely
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for purchasing Eligible Equipment.
2.3.2 The Loan and the Notes. The obligation of Borrower to repay
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the aggregate unpaid principal amount of and interest on each Loan shall be
evidenced by a Note setting forth the principal amount of such Loan and the
payments due with respect thereto. Any failure by Lender to obtain or retain
such a Note shall not limit or otherwise affect the obligations of Borrower to
pay amounts due hereunder with respect to a Loan.
2.3.3 Disbursement. Subject to the satisfaction of the conditions
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set forth in this Agreement, Lender shall disburse each Loan to Borrower as
directed in writing by Borrower.
2.4 Other Payment Terms.
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2.4.1 Place and Manner. Borrower shall make all payments due to
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Lender in lawful money of the United States, in immediately available funds, at
the address for payments specified in Section 11.5.
2.4.2 Date. Whenever any payment due hereunder shall fall due on a
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day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
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2.4.3 Default Rate. If any amounts required to be paid by Borrower
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under this Agreement or the other Operative Documents (including principal or
interest payable on the Loan, any fees or other amounts) remain unpaid after
such amounts are due, Borrower shall pay interest on the aggregate, outstanding
principal balance hereunder from the date due until such past due amounts are
paid in full, at a per annum rate equal to the Default Rate. All computations
of such interest shall be based on a year of 360 days and actual days elapsed.
2.4.4 Commitment Fee. Lender has received a commitment fee from
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Borrower in the amount of $4,000 (the "Commitment Fee"). The Commitment Fee
shall be applied towards last month's rent under this Agreement.
ARTICLE 3. CREATION OF SECURITY INTEREST.
3.1 Grant of Security Interest. As collateral security for the
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Obligations, Borrower hereby grants to Lender a continuing security interest in
and to the following property and interests in property of Borrower (the
"Collateral"):
All right, title, interest, claims and demands of Borrower in and to
each and every item of equipment, fixtures or personal property now or
hereafter listed on Schedule I hereto, whether now owned or hereafter
acquired, together with all substitutions, renewals or replacements of and
additions, improvements, accessions, replacement parts and accumulations to
any and all of such equipment, fixtures or personal property (collectively,
the "Equipment"), together with all proceeds thereof, including, without
limitation, insurance, condemnation, requisition or similar payments, and
all proceeds from sales, renewals, releases or other dispositions thereof,
and together with all money delivered to Lender as additional security or
collateral.
Schedule I and Schedule III shall be deemed amended upon the execution of each
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Note to identify (i) the items of Equipment financed with the Loan evidenced by
such Note and in which a security interest is granted hereunder and (ii) the
locations of such items of Equipment, and such amendment shall be effective
whether or not a listing of such items or locations is actually appended
thereto.
3.2 Security Deposit. As additional security for the Obligations, Borrower
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shall deposit with Lender upon the Closing an amount equal to the last month's
payment on the amount of the Commitment (the "Security Deposit") which shall be
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held by Lender (without payment of interest thereon). A pro rata portion of the
Security Deposit shall be deemed to prepay as of the date of this Loan Agreement
the last payment due on each Loan. If the Commitment is not fully utilized by
the Commitment Termination Date, Lender shall retain the unutilized portion of
the Security Deposit as compensation for expenses. Borrower hereby grants to
Lender a security interest in such Security Deposit. Lender shall be under no
obligation to segregate the Security Deposit from its other funds.
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3.3 Liabilities Unconditional. Borrower is and shall remain absolutely
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and unconditionally liable for the performance of its obligations under the
Operative Documents, including without limitation any deficiency by reason of
the failure of the Collateral to satisfy all amounts due Lender under the Note
or pursuant to any other Operative Document.
ARTICLE 4. CLOSING.
4.1 Conditions to Closing. The obligation of Lender to fund a Loan shall
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be subject to the following conditions precedent:
4.1.1 Conditions to Closing. Lender shall have received in
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connection with the Closing in form and substance satisfactory to Lender:
(a) This Loan Agreement, duly executed by Borrower;
(b) Copies, certified by the Secretary or Assistant Secretary
of Borrower, of: (A) the Certificate of Incorporation and
Bylaws of Borrower (as amended to the date of this Loan
Agreement), (B) the resolutions adopted by Borrower's
board of directors authorizing the transaction and the
documents being executed in connection therewith, and (C)
the incumbency of the officers executing this Loan
Agreement and the other Operative Documents on behalf of
Borrower.
(c) Subject to the restrictions set forth in the definition of
Eligible Equipment, if a Loan includes software which is
intended to become Collateral under such Loan and the
aggregate cost of such software exceeds Thirty Thousand
Dollars ($30,000), then Lender may request that assignment
or sublicensing documentation in form and substance
satisfactory to Lender be executed prior to the inclusion
of the software as Collateral under such Loan and Borrower
shall use its reasonable best efforts to accommodate said
request with the vendor of such software.
(d) Good Standing Certificate(s) (including tax status if
available) with respect to Borrower from Borrower's state
of incorporation and principal place of business, if
different, (each) dated a date reasonably close to the
date of this Loan Agreement.
(e) Evidence of the insurance coverage required by Section 6.6
of this Loan Agreement.
(f) All necessary consents of shareholders and other third
parties with respect to the subject matter of the Loan
Agreement and the other documents being executed in
connection therewith.
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(h) All other documents as Lender shall have reasonably
requested.
4.1.2 Conditions to Funding of Each Loan. Prior to the funding of
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each Loan, the following conditions with respect to such Loan shall have been
satisfied or waived by Lender:
(a) Borrower shall have executed and delivered a Note prepared
by Lender setting forth the terms of the Loan.
(b) Borrower shall have provided to Lender, with respect to
the Equipment constituting Collateral, such invoices,
bills of sale, receipts, agreements, canceled checks, and
other documents as Lender shall reasonably request to
evidence the ownership by Borrower of, and the payment in
full of the purchase price of such Equipment, each in form
and substance reasonably satisfactory to Lender; and,
except with the prior written consent of Lender which
shall not be unreasonably withheld, all such Equipment
shall be Eligible Equipment and acceptable to Lender as to
value and type.
(c) Borrower shall have taken such actions, if any, as Lender
shall reasonably determine are necessary or desirable to
perfect and protect its security interest in the
Collateral and the priority thereof.
(d) No Event of Default or Default shall have occurred and be
continuing.
(e) In Lender's sole discretion, there shall not have occurred
any Material Adverse Effect.
(f) The representations and warranties contained in this
Agreement and the other Operative Documents to which
Borrower is a party, as modified by any Disclosure
Schedule, shall be true and correct in all material
respects as if made on the date of funding of the Loan and
the items listed on such Disclosure Schedule shall be
reasonably acceptable to Lender.
(g) Each of the Operative Documents remains in full force and
effect.
(h) The requested date of funding the Loan shall not be later
than June 15, 2000.
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(i) Borrower shall have provided to Lender a Landlord Waiver
in the form of Exhibit B hereto or otherwise in form and
substance satisfactory to Lender, from each owner of
record of real property at which items of Collateral will
be located, setting forth the rights of Lender with
respect to such items of Collateral.
(j) Borrower shall have provided to Lender a UCC-1 financing
statement duly executed by Borrower for each state (and
county, if applicable) in which Equipment financed by the
Loan is or will be located.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Except as set forth on Schedule II hereto (the "Disclosure Schedule"),
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Borrower represents and warrants to Lender:
5.1 Due Incorporation, Qualification, etc. Each of Borrower and its
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Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation; (ii) has the power and
authority to own, lease and operate its properties and carry on its business as
now conducted; and (iii) is duly qualified, licensed to do business and in good
standing as a foreign corporation in each jurisdiction where the failure to be
so qualified or licensed could reasonably be expected to have a Material Adverse
Effect.
5.2 Authority. The execution, delivery and performance by Borrower of
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each Operative Document to be executed by Borrower and the consummation of the
transactions contemplated thereby (i) are within the power of Borrower and (ii)
have been duly authorized by all necessary actions on the part of Borrower.
5.3 Enforceability. Each Operative Document executed, or to be executed,
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by Borrower has been, or will be, duly executed and delivered by Borrower and
constitutes, or will constitute, a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except as
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights generally and
general principles of equity.
5.4 Non-Contravention. The execution and delivery by Borrower of the
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Operative Documents executed by Borrower and the performance and consummation of
the transactions contemplated thereby do not and will not (i) violate any
Requirement of Law applicable to Borrower; (ii) violate any provision of, or
result in the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of notice or lapse of time or both), any
Contractual Obligation of Borrower; or (iii) result in the creation or
imposition of any Lien upon any property, asset or revenue of Borrower (except
such Liens as may be created in favor of Lender pursuant to this Loan Agreement
or the other Operative Documents).
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5.5 Approvals. No consent, approval, order or authorization of, or
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registration, declaration or filing with, any Governmental Authority or other
Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Operative
Documents executed by Borrower and the performance and consummation of the
transactions contemplated thereby.
5.6 No Violation or Default. None of Borrower or Borrower's Subsidiaries
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is in violation of or in default with respect to (i) any Requirement of Law;
(ii) any Contractual Obligation (nor is there any waiver in effect which, if not
in effect, would result in such a violation or default), where, in each case,
such violation or default, individually, or together with all such violations or
defaults, could reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, none of Borrower or Borrower's
Subsidiaries (A) has violated any Environmental Laws, (B) has any liability
under any Environmental Laws or (C) has received notice or other communication
of an investigation or is under investigation by any Governmental Authority
having authority to enforce Environmental Laws, where such violation, liability
or investigation could reasonably be expected to have a Material Adverse Effect.
No Event of Default or Default has occurred and is continuing.
5.7 Litigation. No actions (including, without limitation, derivative
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actions), suits, proceedings or investigations are pending or, to the knowledge
of Borrower, threatened against Borrower or Borrower's Subsidiaries at law or in
equity in any court or before any other Governmental Authority which if
adversely determined (i) could reasonably be expected (alone or in the
aggregate) to have a Material Adverse Effect or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance by Borrower of
the Operative Documents or the transactions contemplated thereby.
5.8 Title. Borrower has good and marketable title to all Collateral, free
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and clear of all Liens, other than Permitted Liens. Each item of Collateral
constitutes personal property.
5.9 Financial Statements. The Financial Statements of Borrower which have
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been delivered to Lender (i) are in accordance with the books and records of
Borrower and its Subsidiaries, which have been maintained in accordance with
good business practice; (ii) have been prepared in conformity with generally
accepted accounting principles; and (iii) fairly present the consolidated
financial position of Borrower as of the dates presented therein and the results
of operations, changes in financial positions or cash flows, as the case may be,
for the periods presented therein. As of the date hereof, none of Borrower or
any of Borrower's Subsidiaries has any contingent obligations, liability for
taxes or other outstanding obligations which are material in the aggregate,
except as disclosed in the most recent audited Financial Statements furnished by
Borrower to Lender prior to the date hereof.
5.10 Governmental Charges. Each of Borrower and its Subsidiaries has filed
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or caused to be filed all tax returns which are required to be filed by it.
Borrower and Borrower's Subsidiaries have paid, or made provision for the
payment of, all taxes and other Governmental Charges which
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have or may have become due pursuant to said returns or otherwise, except such
Governmental Charges, if any, which are being contested in good faith and as to
which adequate reserves (determined in accordance with generally accepted
accounting principals) have been provided or which could not reasonably be
expected to have a Material Adverse Effect if unpaid.
5.11 Catastrophic Events; Labor Disputes. None of Borrower or Borrower's
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Subsidiaries and none of their properties is or has been affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or other casualty that could reasonably be
expected to have a Material Adverse Effect. There are no disputes presently
subject to grievance procedure, arbitration or litigation under any of the
collective bargaining agreements, employment contracts or employee welfare or
incentive plans to which Borrower or Borrower's Subsidiaries is a party, and
there are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Borrower, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a Material Adverse
Effect.
5.12 No Material Adverse Effect. No event has occurred and no condition
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exists which could reasonably be expected to have a Material Adverse Effect.
5.13 Accuracy of Information Furnished. None of the Operative Documents
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and none of the other certificates, statements or information furnished to
Lender by or on behalf of Borrower or Borrower's Subsidiaries in connection with
the Operative Documents or the transactions contemplated thereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.14 First Priority. Assuming the timely filing of financing statements
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covering the Collateral, the security interest granted hereby constitutes a
first priority security interest in and Lien on all of the Collateral, subject
only to Permitted Liens.
5.15 Principal Place of Business. The principal place of business and
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chief executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral is set forth in Section 11.5.
ARTICLE 6. COVENANTS OF BORROWER.
While any Obligations remain outstanding:
6.1 Financial Statements; Other Information. Borrower shall provide to
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Lender the financial statements specified in this Section 6.1, prepared in
accordance with generally accepted accounting principles, consistently applied
(except, in the case of unaudited financial statements, for the absence of
footnotes and normal year-end adjustments); provided, however, that after the
effective date of the initial registration statement covering a public offering
of Borrower's securities, Borrower shall only be required to deliver those
financial statements required to be filed by the
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Securities and Exchange Commission, to be provided as soon as practicable and no
less frequently than quarterly.
6.1.1 As soon as practicable (and in any event within thirty (30)
days after the end of each month), a reasonably detailed balance sheet as of the
end of such month and the related statements of income or loss, cash flow and
capital structure of the Borrower during such month (including notification of
the commencement of any material litigation by or against Borrower), certified
by Borrower's Chief Executive Officer or Chief Financial Officer fairly to
present the data reflected therein.
6.1.2 As soon as practicable (and in any event within ninety (90)
days after the end of each fiscal year), audited balance sheets as of the end of
such year (consolidated if applicable), and related statements of income or
loss, retained earnings or deficit, cash flows and capital structure of Borrower
for such year, setting forth in comparative form the corresponding figures for
the preceding fiscal year, and accompanied by an audit report and opinion of the
independent certified public accountants of recognized national standing
selected by Borrower.
6.2 Other Information. Borrower shall promptly furnish to Lender any
-----------------
additional information (including but not limited to annual and/or quarterly
reports to shareholders, tax returns, income statements, balance sheets, and
names of principal creditors) as Lender shall reasonably request which is
necessary to evaluate Borrower's continuing financial obligations.
6.3 Suits. Borrower shall deliver to Lender, promptly after the
-----
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which suits or proceedings if decided
adversely to Borrower could reasonably be expected to have a Material Adverse
Effect.
6.4 Financing Statements and Other Actions Regarding Collateral. At the
-----------------------------------------------------------
request of Lender, Borrower shall join Lender in executing and delivering one or
more financing statements or other documents or instruments in form and
substance satisfactory to Lender for filing or recording in any state, county or
other jurisdiction Lender or its legal counsel reasonably deems advisable to
perfect the security interests granted hereunder. Borrower agrees that Lender
may file this Loan Agreement as a Financing Statement in any such jurisdiction.
6.5 Corporate Identity. Borrower shall notify Lender in writing prior to
------------------
any change in Borrower's principal place of business or chief executive office
and any proposed or actual change of Borrower's name, identity or corporate
structure.
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6.6 Insurance. Borrower shall, at its own expense, maintain the following
---------
types of insurance, with companies with an A-5 Best rating or better, acceptable
to Lender:
6.6.1 Personal property insurance on all property owned by Borrower
(including without limitation all of the Equipment) in an agreed amount based
upon the following:
(a) Standard "all risk" property insurance, including boiler
and machinery insurance, earthquake insurance, if
applicable, and flood insurance if any Equipment is
located in an identified "flood hazard area," in which
flood insurance has been made available pursuant to the
National Flood Insurance Act of 1968;
(b) The amount of such insurance covering the Equipment shall
be not less than the greater of the fair market value or
the full undepreciated replacement value of the Equipment.
The amount of such insurance allocable to loss or damage
or personal property shall not have a deductible in excess
of One Thousand Dollars ($1,000) per occurrence.
(c) Such insurance shall contain an endorsement issued by the
insurer (as opposed to a certificate issued by an agent of
the insurer) in which Lender is named as loss payee with
respect to the Equipment, and shall set aside the amount
stated in Section 6.6.1(b) for the sole benefit of, and
payable directly to, Lender.
6.6.2 Employee dishonesty insurance payable to Lender with respect to
the theft of the Equipment.
6.6.3 Business interruption insurance in an amount at all times equal
to the total payments of principal and interest to become due during the six (6)
months following the date of calculation. In the event of any interruption of
Borrower's business, the amount payable to Lender shall be equal to the actual
loss of payments of principal and interest suffered by Lender as the result of
such interruption, and shall be payable to Lender within thirty (30) days from
the date of loss, and on a month-to-month basis thereafter, until Borrower's
business is returned to a fully operational state, plus ninety (90) days.
6.6.4 Commercial general liability insurance covering bodily injury
(including death) and property damage, naming Lender, its directors, officers,
agents and employees as an Additional Insureds on all policies (evidenced by an
endorsement issued by the insurer (as opposed to a certificate issued by an
agent of the insurer)), and providing total limits in amounts as are at the time
carried by entities engaged in the same or similar business and which are
similarly situated, but in no event less than Two Million Dollars ($2,000,000)
for combined single limit occurrence. All such policies shall cover any injury
or damage occasioned by, or occurring upon, Borrower's premises, products,
operations and, at Lender's option, explosion, collapse and underground hazards.
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All such policies shall contain contractual liability coverage including all
liability assumed under this agreement, and a cross liability clause providing
that such insurance shall, except with respect to the limits of liability, apply
separately to each insured.
6.6.5 Workers compensation insurance.
6.6.6 All insurance specified in this Section 6.6 shall be primary
over, and in no event shall, any insurance carried by Lender be called upon to
contribute to any loss relating to or arising out of this Loan Agreement. All
insurance shall be in effect, and shall be evidenced by policies and/or
endorsements delivered to Lender no later than twenty (20) days after the date
upon which Borrower executes this Loan Agreement. Notwithstanding anything to
the contrary contained in this Loan Agreement, Lender shall have no obligation
to purchase any Equipment until all policies are in place. All such policies
shall provide for at least thirty (30) days' prior written notice to Lender in
the event of any cancellation, non-renewal or material change in coverage, and
Lender shall receive a copy of any and all endorsements or other documentation
relating to such policies.
6.7 Title. Borrower shall promptly notify Lender in writing of any event
-----
which materially affects the value of the Collateral, the ability of Borrower or
Lender to dispose of the Collateral, or the rights or remedies of Lender in
relation thereto, including, but not limited to, the levy of any legal process
against the Collateral. Borrower shall deliver to Lender any and all evidence of
ownership of, and certificates of title to, any and all of the Equipment.
Borrower shall not grant to any Person (other than Lender or the holder of a
Permitted Lien) a Lien in the Collateral.
6.8 Further Identification of Collateral. Borrower shall furnish to Lender
------------------------------------
from time to time such statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Lender may reasonably request, all in reasonable detail.
6.9 Good Repair. Borrower shall keep and maintain all Collateral in good
-----------
operating condition and repair, subject to ordinary wear and tear, make all
necessary repairs thereto and replacement of parts thereof so that the value and
operating efficiency thereof shall at all times be maintained and preserved; and
Borrower shall keep complete and accurate books and records with respect to the
Collateral, including maintenance records.
6.10 Loss; Damage; Destruction and Seizure.
-------------------------------------
6.10.1 If while payment Obligations are outstanding any item of
Equipment is lost, stolen, destroyed, damaged or seized by a Governmental
Authority (an "Event of Loss"), then, at Borrower's option, either (i) Lender
shall receive from the proceeds of insurance maintained pursuant to Section 6.6,
from any award paid by the seizing Governmental Authority or, to the extent not
received from the proceeds of insurance or award or both, from Borrower, on or
before the next scheduled payment date succeeding such Event of Loss, an amount
equal to the replacement value of the item of Equipment subject to the Event of
Loss which shall be held as additional Collateral for the Loan, or (ii) if no
Event of Default has occurred and is continuing, Borrower may use any such
-15-
proceeds to purchase an item of Equipment to replace the item of Equipment which
was subject to the Event of Loss and such replacement Equipment shall become
part of the Collateral. On the date of receipt by Lender of the amount specified
hereinabove with respect to each such item of Collateral subject to an Event of
Loss, the provisions of this Agreement shall terminate as to such Collateral.
Any proceeds of insurance maintained by Borrower with respect to the Collateral
pursuant to Section 6.6 and received by Borrower shall be paid to Lender
promptly upon their receipt by Borrower. If any proceeds of insurance or awards
received from Governmental Authorities are in excess of the amount owed under
this Section 6.10.1, Lender shall promptly remit to Borrower the amount in
excess of the amount to be held by Lender.
6.10.2 So long as no Event of Default has occurred and is
continuing, any proceeds of insurance maintained pursuant to Section 6.6
received by Lender or Borrower with respect to an item of Collateral the repair
of which is practicable shall, at the election of Borrower, be applied either to
the repair or replacement of such Collateral or, upon Lender's receipt of
evidence of the repair or replacement of the Collateral reasonably satisfactory
to Lender, to the reimbursement of Borrower for the cost of such repair or
replacement. All replacement parts and equipment acquired by Borrower in
replacement of Collateral pursuant to this Section 6.10 shall immediately become
part of the Collateral upon acquisition by Borrower. Borrower shall take such
actions and provide such documentation as may be reasonably requested by Lender
to protect and preserve Lender's first priority security interest and otherwise
to avoid any impairment of Lender's rights under the Operative Documents, in
connection with such repair or replacement.
ARTICLE 7. CONFIDENTIALITY.
Lender agrees to hold non-public information received by it in confidence
and shall not disclose or use such information to third parties except to its
partners or the partners of its affiliated investment funds and as Lender may
deem necessary in its reasonable judgment to satisfy its legal obligations or to
enforce Lender's rights under any Operative Document.
ARTICLE 8. PRESERVATION OF COLLATERAL BY LENDER.
Should Borrower fail or refuse to make any payment, perform or observe any
other covenant, condition or obligation, or take any other action which Borrower
is obligated under any Operative Document to make, perform, observe, take or do
at the time or in the manner provided in any Operative Document, then at
Lender's sole and absolute discretion, without notice to or demand upon Borrower
and without releasing Borrower from any obligation, covenant or condition in any
Operative Document, Lender may make, perform, observe, take or do the same in
such manner and to such extent as Lender may deem necessary to protect its
security interest in or the value of the Collateral, and Borrower shall be
liable to Lender for all costs and expenses incurred by Lender in connection
therewith.
ARTICLE 9. INSPECTION RIGHTS; LOCATION.
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9.1 Inspection. Borrower hereby grants Lender or its agents, from time
----------
to time upon not less than forty-eight (48) hours' notice to Borrower during
Borrower's normal business hours, the right to enter Borrower's premises for the
purposes of inspecting all items of Collateral and ascertaining their location
and condition. Borrower shall make available to Lender or its representative its
personnel knowledgeable in the location, function and condition of such
Collateral and shall reasonably assist Lender and its representatives in their
inspection of such Collateral.
9.2 Location. Borrower shall keep the Collateral at the location
--------
specified in Section 11.5, the locations specified in Schedule III hereto as it
may be amended from time to time and such other locations as Lender shall
consent to in writing, all of which locations shall be in the state of
Washington. Borrower shall not permit any Collateral to be moved to a new
location without the prior written consent of Lender.
ARTICLE 10. EVENTS OF DEFAULT.
10.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" under this Loan Agreement and the Notes:
10.1.1 Failure to Pay. Borrower shall fail to pay when due any
--------------
principal, interest or other payment required under the terms of this Loan
Agreement or any other Operative Document on the date due and such payment shall
not have been made within five (5) Business Days of the due date; or
10.1.2 Insurance. Borrower or any of its Subsidiaries shall
---------
fail to observe or perform any covenant set forth in Section 6.6 and such
failure shall continue for a period of five (5) Business Days after notice
thereof is given to Borrower by Lender; or
10.1.3 Breaches of Other Covenants. Borrower or any of its
-----------------------------
Subsidiaries shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in this Loan Agreement or the other Operative
Documents (other than those specified in Sections 10.1.1 and 10.1.2) and such
failure shall continue for ten (10) Business Days; or
10.1.4 Representations and Warranties. Any representation,
------------------------------
warranty, certificate, or other statement (financial or otherwise) made or
furnished by or on behalf of Borrower to Lender in writing in connection with
this Loan Agreement or any of the other Operative Documents, or as an inducement
to Lender to enter into this Loan Agreement, shall be false, incorrect,
incomplete or misleading in any material respect when made or furnished; or
10.1.5 Other Payment Obligations. Borrower or any of its Subsidiaries
-------------------------
shall fail to make any payment when due under the terms of any Indebtedness to
be paid by such Person (excluding this Loan Agreement and the other Operative
Documents but including any other Indebtedness of Borrower or any of its
Subsidiaries to Lender) and such failure shall continue beyond any period of
grace provided with respect thereto, or shall default in the observance or
-17-
performance of any other agreement, term or condition contained in any such
Indebtedness, and the effect of such failure or default is to cause, or permit
the holder or holders thereof to cause Indebtedness in an aggregate amount of
Fifty Thousand Dollars ($50,000) or more to become due prior to its stated date
of maturity; or
10.1.6 Voluntary Bankruptcy or Insolvency Proceedings. Borrower
----------------------------------------------
or any of its Subsidiaries shall (i) apply for or consent to the appointment of
a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated in full or in part, (v) become insolvent (as such term may be defined
or interpreted under any applicable statute), (vi) commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of affecting any of the foregoing; or
10.1.7 Involuntary Bankruptcy or Insolvency Proceedings.
------------------------------------------------
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Borrower or any of its Subsidiaries or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Borrower or any of
its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement; or
10.1.8 Judgments. A final judgment or order for the payment of
---------
money in excess of Fifty Thousand Dollars ($50,000) shall be rendered against
Borrower or any of its Subsidiaries and the same shall remain undischarged for a
period of thirty (30) days during which execution shall not be effectively
stayed, or any judgment, writ, assessment, warrant of attachment, or execution
or similar process shall be issued or levied against a substantial part of the
property of Borrower or any of its Subsidiaries and such judgment, writ, or
similar process shall not be released, stayed, vacated or otherwise dismissed
within thirty (30) days after issue or levy; or
10.1.9 Operative Documents. Any Operative Document or any material
-------------------
term thereof shall cease to be, or be asserted by Borrower not to be, a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms or if the Liens of Lender in the Collateral shall cease to be or shall not
be valid, first priority perfected Liens or Borrower shall assert that such
Liens are not valid, first priority and perfected Liens; or
10.1.10 Material Adverse Effect. One or more conditions exist or
-----------------------
events have occurred which could reasonably be expected to result in a Material
Adverse Effect.
-18-
10.2 Rights of Lender upon Default. Upon the occurrence or existence
-----------------------------
of any Event of Default (other than an Event of Default referred to in Sections
10.1.6 and 10.1.7) and at any time thereafter during the continuance of such
Event of Default, Lender may, by written notice to Borrower, declare all
outstanding Obligations payable by Borrower hereunder to be immediately due and
payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the
Notes to the contrary notwithstanding. Upon the occurrence or existence of any
Event of Default described in Sections 10.1.6 and 10.1.7, immediately and
without notice, all outstanding Obligations payable by Borrower hereunder shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Notes to the contrary
notwithstanding .
10.3 Rights Regarding Collateral. Borrower agrees that when any Event
---------------------------
of Default has occurred and is continuing, Lender shall have the rights,
options, duties and remedies of a secured party as permitted by law and, in
addition to and without limiting the foregoing, Lender may exercise any one or
more or all, and in any order, of the remedies herein set forth, including the
following: (a) Lender, personally or by agents or attorneys, shall have the
right (subject to compliance with any applicable mandatory legal requirements)
to require Borrower to assemble the Collateral and make it available to Lender
at a place to be designated by Lender located within the State of Washington ,or
to take immediate possession of the Collateral, or any portion thereof, and for
that purpose may pursue the same wherever it may be found, and may enter any
premises of Borrower, with or without notice, demand, process of law or legal
procedure, to the extent permitted by applicable law, and search for, take
possession of, remove, keep and store the same, or use and operate or lease the
same until sold; (b) Lender may, if at the time such action may be lawful and
always subject to compliance with any mandatory legal requirements, either with
or without taking possession and either before or after taking possession,
without instituting any legal proceedings whatsoever, having first given notice
of such sale by registered or certified mail to Borrower once at least ten (10)
days prior to the date of such sale, and having first given any other notice
which may be required by law, sell and dispose of the Collateral, or any part
thereof, at a private sale or at public auction, to the highest bidder, in one
lot as an entirety or in separate lots, and either for cash or on credit and on
such terms as Lender may determine, and at any place (whether or not it be the
location of the Collateral or any part thereof) designated in the notice
referred to above. To the extent permitted by applicable law, any such sale or
sales may be adjourned from time to time by announcement at the time and place
appointed for such sale or sales, or for any such adjourned sale or sales,
without further published notice, and Borrower, Lender or the holder or holders
of the Note, or of any interest therein, may bid and become the purchaser at any
such sale; and (c) Lender may proceed to protect and enforce this Agreement and
the other Operative Documents by suit or suits or proceedings in equity, at law
or in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
-19-
10.4 Waiver by Borrower. Upon the occurrence of an Event of Default, to
------------------
the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower, acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of this
Agreement, all benefit and advantage of any such law or laws, and covenants that
it will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to Lender, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted.
10.5 Effect of Sale. Any sale, whether under any power of sale available
--------------
to Lender or by virtue of judicial proceedings, shall operate to divest all
right, title, interest, claim and demand whatsoever, either at law or in equity,
of Borrower in and to the property sold, and shall be a perpetual bar, both at
law and in equity, against Borrower, its successors and assigns, and against any
and all persons claiming the property sold or any part thereof under, by or
through Borrower, its successors or assigns.
10.6 Application of Collateral Proceeds. The proceeds and/or avails of the
----------------------------------
Collateral, or any part thereof, and the proceeds and the avails of any remedy
hereunder (as well as any other amounts of any kind held by Lender at the time
of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows: (a) First, to the payment of
reasonable costs and expenses, including all amounts expended to preserve the
value of the Collateral, of foreclosure or suit, if any, and of such sale and
the exercise of any other rights or remedies, and of all proper fees, expenses,
liability and advances, including reasonable legal expenses and attorneys' fees,
incurred or made hereunder by Lender; (b) Second, to the payment to Lender of
the amount then owing or unpaid on the Note, and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid upon the
Note, then first, to the unpaid interest thereon, and second, to unpaid
principal thereof; such application to be made upon presentation of the Note,
and the notation thereon of the payment, if partially paid, or the surrender and
cancellation thereof, if fully paid; (c) Third, to the payment of other amounts
then payable to Lender under any of the Operative Documents; and (d) Fourth, to
the payment of the surplus, if any, to Borrower, it successors and assigns, or
to whomsoever may be lawfully entitled to receive the same.
10.7 Reinstatement of Rights. If Lender shall have proceeded to enforce
-----------------------
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such
-20-
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely, then and in every such case (unless otherwise
ordered by a court of competent jurisdiction), Lender shall be restored to its
former position and rights hereunder with respect to the property subject to the
security interest created under this Agreement.
ARTICLE 11. MISCELLANEOUS.
11.1 Modifications, Amendments or Waivers. The provisions of any
-------------------------------------
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required. No delay
---------------------------------------------------------
or failure of Lender in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder of Lender are cumulative and
not exclusive of any rights or remedies which it would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of
Lender of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
11.3 Expenses; Indemnification. Borrower agrees upon demand to pay or
-------------------------
reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents. Borrower shall indemnify, reimburse and hold Lender and its
permitted assigns, each of Lender's or its permitted assigns' partners, and each
of their respective successors, assigns, agents, officers, directors,
shareholders, servants, agents and employees harmless from and against all
liabilities, losses, damages, actions, suits, demands, claims of any kind and
nature (including claims relating to environmental discharge, cleanup or
compliance), all costs and expenses whatsoever to the extent they may be
incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), licensing fees relating to any
item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "Claim"), directly or indirectly relating to or
arising out of the use of the proceeds of the Loan, including acquisition, use,
ownership, operation, possession, control, storage, return or condition of any
item of Equipment constituting Collateral (regardless of whether such item of
Equipment is at the time in the possession of Borrower), the falsity of any
representation or warranty of Borrower or Borrower's failure to comply with the
terms of this Agreement or any other Operative Document during the Term. The
foregoing indemnity shall cover, without limitation, (i) any Claim in connection
with a design or other defect (latent or patent) in any item of Equipment
constituting Collateral, (ii) any Claim for infringement of any patent,
copyright, trademark or other intellectual property right, (iii) any Claim
-21-
resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials from any
item of Equipment financed by a Loan or constituting Collateral, including any
Claims asserted or arising under any Environmental Law, or (iv) any Claim for
negligence or strict or absolute liability in tort; provided, however, that
Borrower shall not indemnify Lender for any liability incurred by Lender as a
direct and sole result of Lender's gross negligence or willful misconduct. Such
indemnities shall continue in full force and effect, notwithstanding the
expiration or termination of this Agreement. Upon Lender's written demand,
Borrower shall assume and diligently conduct, at its sole cost and expense, the
entire defense of Lender and its permitted assigns, each of Lender's or its
permitted assigns' partners, and each of their respective successors, assigns,
agents, officers, directors, shareholders, servants, agents and employees
against any indemnified Claim described in this Section 11.3. Borrower shall not
settle or compromise any Claim against or involving Lender without first
obtaining Lender's written consent thereto, which consent shall not be
unreasonably withheld.
11.4 Waivers; Limitation on Damages. (a) Borrower or Lender shall give the
------------------------------
other party written notice within three hundred sixty-five (365) days of
obtaining knowledge of the occurrence of any claim or cause of action it
believes it has, or may seek to assert to allege against the other party,
whether such claim is based in law or equity, arising under or related to this
Agreement or any of the other Operative Documents or to the transactions
contemplated hereby or thereby, or any act or omission to act with respect
hereto or thereto, and that if it shall fail to give such notice with regard to
any such claim or cause of action, the party asserting the claim or cause of
action shall be deemed to have waived, and shall be forever barred from bringing
or asserting such claim or cause of action in any suit, action or proceeding in
any court or before any governmental agency or authority or any arbitrator. (b)
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR ANYWHERE
ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER UNDER ANY THEORY OF
LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES.
11.5 Notices; Payments. All notices and other communications given to or
-----------------
made upon any party hereto in connection with this Agreement shall be in writing
(including telexed, telecopied or telegraphic communication) and mailed (by
certified or registered mail), telexed, telegraphed, telecopied or delivered to
the respective parties, as follows:
Borrower: XXXXXXXX.XXX
0000 Xxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxx CFO
Lender: DOMINION VENTURE FINANCE L.L.C.
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
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Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
11.6 Severability. If any provision of any Operative Document is held
------------
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
11.7 Survival. All representations, warranties, covenants and
--------
agreements of Borrower contained herein or made in writing in connection
herewith shall survive the execution and delivery of the Operative Documents,
the making of Loan hereunder, the granting of security and the issuance of the
Note.
11.8 Governing Law. This Agreement, the other Operative Documents and
-------------
the rights and obligations of the parties hereto and thereto together with
matters arising in connection therewith, shall be governed by and construed and
enforced in accordance with the laws of the State of California. Any action to
enforce this Agreement against Borrower may be brought in California or, with
regard to Collateral, may also be brought wherever such Collateral is located.
11.9 Successors and Assigns. This Agreement and the other Operative
----------------------
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
thereunder or any interest herein or therein without the prior written consent
of Lender. Lender may assign all or any portion of its rights hereunder and
under one or more Notes to any of its affiliated investment funds or to any one
or more banks or an agent or trustee for such bank(s) (an "Assignee") and may
sell such rights to any other financial entity (a "Participant") participation
interests in Lender's rights under this Agreement and the other Operative
Documents. Lender may disclose the Operative Documents and any other financial
or other information relating to Borrower or any Subsidiary to any potential
Assignee or Participant, provided that such Participant agrees to protect the
confidentiality of such documents and information using the same measures that
it uses to protect its own confidential information. Notwithstanding anything
contained in this Paragraph 11.9, a Transfer shall not include a merger or
consolidation where (i) Borrower is the surviving entity, (ii) such merger or
consolidation will not result in an Event of Default and (iii) the Borrower will
have a net worth after giving effect to the merger or consolidation at least as
great as the net worth of the Borrower prior to such merger or consolidation.
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11.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
11.11 Further Assurances. Borrower will, at its own expense, from time to
------------------
time do, execute, acknowledge and deliver all and every further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
11.12 Right of First Offer. So long as any Obligations are outstanding
--------------------
hereunder, Borrower shall provide Lender with all requests for additional debt
or lease financing prior to the time that such requests are provided to other
financing sources. Should Borrower and Lender fail to agree on the terms and
conditions of such financing within ten (3) Business Days of receipt of a
request from Borrower, then Borrower may accept a funding source other than
Lender.
11.13 Power of Attorney in Respect of the Collateral. Borrower does hereby
----------------------------------------------
irrevocably appoint Lender (which appointment is coupled with an interest), the
true and lawful attorney-in-fact of Borrower with full power of substitution,
for it and in its name (a) to perform (but Lender shall not be obligated to and
shall incur no liability to Borrower or any third party for failure to perform)
any act which Borrower is obligated by this Agreement to perform, (b) to ask,
demand, collect, receive, receipt for, xxx for, compound and give acquittance
for any and all rents, issues, profits, avails, distributions, income, payment
draws and other sums in which a security interest is granted under Section 3.1
with full power to settle, adjust or compromise any claim thereunder as fully as
if Lender were Borrower itself, (c) to receive payment of and to endorse the
name of Borrower to any items of Collateral (including checks, drafts and other
orders for the payment of money) that come into Lender's possession or under
Lender's control, (d) to make all demands, consents and waivers, or take any
other action with respect to, the Collateral, (e) in Lender's discretion, to
file any claim or take any other action or institute proceedings, either in its
own name or in the name of Borrower or otherwise, which Lender may reasonably
deem necessary or appropriate to protect and preserve the right, title and
interest of Lender in and to the Collateral, and (f) to otherwise act with
respect thereto as though Lender were the outright owner of the Collateral;
provided, however, that the power of attorney herein granted shall be
exercisable only upon the occurrence and during the continuation of an Event of
Default unless in Lender's reasonable opinion immediate action is necessary to
preserve or protect the Collateral. Borrower agrees to reimburse Lender upon
demand for all reasonable costs and expenses, including attorneys' fees and
expenses, which Lender may incur while acting as Borrower's attorney in fact
hereunder, all of which costs and expenses are included within the Obligations.
11.14 Entire Agreement. This Loan Agreement and each of the other
----------------
Operative Documents, taken together, constitute and contain the entire agreement
of Borrower and Lender and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the date first written above.
LENDER: BORROWER:
DOMINION VENTURE FINANCE L.L.C., XXXXXXXX.XXX,
a Delaware limited liability company a Delaware
corporation
By: DOMINION MANAGEMENT, L.L.C.
a Delaware limited liability By: /s/ Xxxxxx Xxxxxx
company, its General Partner _______________________________
Name: Xxxxxx Xxxxxx
_____________________________
By: /s/ Xxxxx X. Xxxxx Title: CEO
__________________________________ ____________________________
Name: Xxxxx X. Xxxxx
________________________________
Title: VP
_______________________________
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