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EXHIBIT 10.5(a)
BSQUARE CORPORATION
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as
of July 1, 1999, by and between IMPERIAL BANK ("Bank") and BSQUARE CORPORATION
("Borrower"").
RECITALS
A. Bank and Borrower are parties to that certain Loan and Security
Agreement dated as of February 11, 1998, as amended (the "Original Agreement").
B. Borrower and Bank wish to amend and restate the terms of the Original
Agreement. This Agreement sets forth the terms on which Bank will advance
credit to Borrower, and Borrower will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of
the foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of
such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty percent (80%)
of Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California or the State of Washington
are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to
Five Million Dollars ($5,000,000).
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"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or other deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and the like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Letter of Credit,
Equipment Advance, Leasehold Advance or any other extension of credit by Bank
for the benefit of Borrower hereunder.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination
thereof unless such Indebtedness is renewable or extendible at the option of
Borrower or any Subsidiary to a date more than one year from the date of
determination.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Debt Service Coverage" means, as of any date of determination,
a ratio of (a) the sum of (i) earnings after tax annualized for the preceding
three (3) months plus interest and non-cash (i.e., depreciation and
amortization) expenses, annualized for the preceding (3) months to (b) the sum
of (i) current portion of long term debt and capitalized leases plus (ii)
interest expense, annualized for the preceding three months.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, twenty-five
percent (25%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower,
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(f) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the United
States or any department, agency, or instrumentality of the United States;
(h) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage; except that the concentration limit for Accounts
on which Microsoft Corporation is the account debtor shall be fifty percent
(50%); and except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines to be
doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and (1) that have sales in excess of Five Hundred Million Dollars
($500,000,000) per year; or (2) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1.5.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"Facility A Equipment Line" means a credit extension of up to Five
Hundred Thousand Dollars ($500,000).
"Facility A Equipment Maturity Date" means October 30, 2001.
"Facility B Equipment Line" means a credit extension of up to One
Million Dollars ($1,000,000).
"Facility B Equipment Maturity Date" means June 30, 2003.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
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"Intellectual Property Collateral" means:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to xxx for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing. Notwithstanding any of the foregoing,
"Intellectual Property Collateral" shall not include any property which is owned
by a client of Borrower pursuant to a consulting contract between Borrower and
such client.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products intended
for sale or lease or to be furnished under a contract of service, of every kind
and description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any benefit ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Leasehold Advance" or "Leasehold Advances" means a cash advance
under the Leasehold Facility.
"Leasehold Committed Line" means a credit extension of up to Four
Million Dollars ($4,000,000).
"Leasehold Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1.3 hereof.
"Leasehold Improvements" means leasehold improvements, equipment
specifically designed or manufactured for Borrower, office furnishings, limited
use property and other similar property.
"Leasehold Maturity Date" means June 30, 2005.
"Lien" means any mortgage lien, deed of trust, charge, pledge,
security interest or other encumbrance.
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"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Indebtedness secured by a lien described in clause (c) of the
defined term "Permitted Liens," provided such Indebtedness does not exceed the
lesser of the cost or fair market value of the equipment financed with such
Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course
of business; and
(f) Other Indebtedness in an outstanding principal amount not to
exceed $200,000.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
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"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule
or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank's security
interests;
(c) Liens (i) upon or in any equipment (other than equipment financed
hereunder) acquired or held by Borrower or any of its Subsidiaries to secure the
purchase price of such equipment or indebtedness incurred solely for the purpose
of financing the acquisition of such equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of
such equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank, as its "prime rate," whether or not such announced rate is
the lowest rate available from Bank.
"Quick Assets" means, at any date, as of which the amount thereof shall be
determined, the unrestricted cash and cash-equivalents, accounts receivable and
investments, with maturities not to exceed 90 days, of Borrower determined in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the Chief
Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means June 30, 2000.
"Revolving Facility" means the facility under which Borrower may request
Bank to issue Advances, as specified in Section 2.1.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any general
partnership interest or (ii) more than 50% of the stock of which by the terms
thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof shall
be determined, the sum of the capital stock and additional paid-in capital plus
retained earnings (or minus accumulated deficit) of Borrower and its
Subsidiaries minus intangible assets, plus Subordinated Debt, on a consolidated
basis determined in accordance with GAAP.
"Total Liabilities" means at any date as of which the amount thereof shall
be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
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"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in lawful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.
2.1.1 Revolving Advances
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate outstanding
amount not to exceed (i) the lesser of the Committed Revolving Line or the
Borrowing Base, minus (ii) the aggregate face amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit). Subject to the
terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1.1 may be repaid and reborrowed at any time prior to the Revolving
Maturity Date, at which time all Advances under this Section 2.1.1 shall be
immediately due and payable. Notwithstanding the foregoing, the aggregate
Advances outstanding under this Section 2.1.1 shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000) unless Bank has performed an audit of the
Collateral, the results of which are satisfactory to Bank.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1.1 to Borrower's deposit account.
2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued Letters of Credit for the account of
Borrower in an aggregate outstanding face amount not to exceed (i) the lesser of
the Committed Revolving Line or the Borrowing Base, minus (ii) the then
outstanding principal balance of the Advances, provided that the aggregate face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) shall not in any case exceed
One Million Dollars ($1,000,000). Each Letter of Credit shall have an expiry
date no later than the Revolving Maturity Date. All Letters of Credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of standard Application and
Letter of Credit Agreement.
(b) The obligation of Borrower to immediately reimburse Bank
for drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.
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(c) Borrower may request that Bank issue a Letter of Credit
payable in a currency other than United States Dollars. If a demand for payment
is made under any such Letter of Credit, Bank shall treat such demand as an
Advance to Borrower of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of exchange in San
Francisco, California, for sales of that other currency for cable transfer to
the country of which it is the currency.
(d) Upon the issuance of any Letter of Credit payable in a
currency other than United States Dollars, Bank shall create a reserve under
the Committed Revolving Line for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Revolving Line shall be reduced by
the amount of such reserve for so long as such Letter of Credit remains
outstanding.
2.1.3 Leasehold Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees, at any time from the date hereof through June 30, 2000,
to make advances (each a "Leasehold Advance" and, collectively, the "Leasehold
Advances") to Borrower in an aggregate outstanding principal amount not to
exceed the Leasehold Committed Line. Each Leasehold Advance (i) shall be used
to finance Leasehold Improvements, and (ii) shall not exceed one hundred
percent (100%) of the cost of such Leasehold Improvements, excluding taxes,
shipping, warranty charges, freight discounts and installation expense.
(b) Interest shall accrue from the date of each Leasehold
Advance at the rate specified in Section 2.3(a), and shall be payable monthly on
the last day of each month through June 30, 2000. Any Leasehold Advances that
are outstanding on June 30, 2000 shall be payable in sixty (60) equal monthly
installments of principal, plus all accrued interest, beginning on July 31,
2000, and continuing on the last day of each month thereafter through the
Leasehold Maturity Date, at which time all amounts due under this Section 2.1.3
and any other amounts due under this Agreement shall be immediately due and
payable. Leasehold Advances, once repaid, may not be reborrowed. Borrower may
prepay any Leasehold Advances without penalty or premium.
(b) When Borrower desires to obtain a Leasehold Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Leasehold Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice for any Leasehold Improvements to be financed.
2.1.4 Facility A Equipment Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date of the Original Agreement through October
30, 1998, Bank agrees to make advances (each a "Facility A Equipment Advance"
and, collectively, the "Facility A Equipment Advances") to Borrower in an
aggregate outstanding amount not to exceed the Facility A Equipment Line. The
Facility A Equipment Advances shall be used only to purchase Equipment and
software approved from time to time by Bank purchased on or after ninety (90)
days prior to the date hereof, and shall not exceed eighty percent (80%) of the
invoice amount of such equipment, excluding taxes, shipping, warranty charges,
freight discounts and installation expense. Not more than twenty-five percent
(25%) of the aggregate outstanding Facility A Equipment Advances shall be used
to finance the acquisition or licensing of software.
(b) Interest shall accrue from the date of each Facility A
Equipment Advance at the rate specified in Section 2.3(a), and shall be payable
monthly for each month through October 1998. Any Facility A Equipment Advances
that are outstanding on October 30, 1998 shall be payable in thirty-six (36)
equal monthly installments of principal, plus all accrued interest, beginning
on November 30, 1998, and continuing on the last day of each month thereafter
through the Facility A Equipment Maturity Date, at which time all amounts due
under this Section 2.1.4 shall be immediately due and payable. Facility A
Equipment Advances, once repaid, may not be reborrowed.
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(c) When Borrower desires to obtain a Facility A Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Facility A Equipment Advance is to
be made. Such notice shall be substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer or its designee and include a copy of
the invoice for any Equipment to be financed.
2.1.5 Facility B Equipment Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through June 30, 2000, Bank agrees
to make advances (each a "Facility B Equipment Advance", collectively, the
"Facility B Equipment Advances", and, collectively with the Facility A Equipment
Advances, the "Equipment Advances") to Borrower in an aggregate outstanding
amount not to exceed the Facility B Equipment Line. The Facility B Equipment
Advances shall be used only to purchase Equipment, software, and furniture
approved from time to time by Bank purchased on or after ninety (90) days prior
to the date hereof, and shall not exceed one hundred percent (100%) of the
invoice amount of such equipment, excluding taxes, shipping, warranty charges,
freight discounts and installation expense.
(b) Interest shall accrue from the date of each Facility B
Equipment Advance at the rate specified in Section 2.3(a), and shall be payable
monthly through June 30, 2000. Any Facility B Equipment Advances that are
outstanding on June 30, 2000 shall be payable in thirty-six (36) equal monthly
installments of principal, plus all accrued interest, beginning on July 31,
2000, and continuing on the last day of each month thereafter through the
Facility B Equipment Maturity Date, at which time all amounts due under this
Section 2.1.5 shall be immediately due and payable. Facility B Equipment
Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain a Facility B Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Facility B Equipment Advance is to
be made. Such notice shall be substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer or its designee and include a copy of
the invoice for any Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Sections 2.1.1 and 2.1.2 of
this Agreement is greater than the lesser of (i) the Committed Revolving Line or
(ii) the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Advances. Except as set forth in Section 2.3(b), the
Advances shall bear interest, on the average daily balance thereof, at a rate
equal to the Prime Rate.
(ii) Equipment Advances. Except as set forth in Section
2.3(b), the Equipment Advances shall bear interest, on the average daily balance
thereof, at a rate equal to the Prime Rate plus one-quarter percent (0.25%).
(iii) Leasehold Advances. Except as set forth in Section
2.3(b), the Leasehold Advances shall bear interest, on the average daily balance
thereof, at a rate equal to the Prime Rate plus one-half percent (0.50%).
(b) Late Fee; Default Rate. If any payment is not made within
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
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(c) Payments. Interest hereunder shall be due and payable on the last
day of each month during the term hereof. Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of Borrower's
deposit accounts or against the Committed Revolving Line, in which case those
amounts shall thereafter accrue interest at the rate then applicable hereunder.
Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event the Prime Rate is change from time to
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item on account unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a Facility Fee equal to
Twenty-Five Thousand Dollars ($25,000), which shall be fully earned and
nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses incurred
through the Closing Date, including reasonable attorneys' fees and expenses,
and, after the date hereof, all Bank Expenses, including reasonable attorneys'
fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation, treaty
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any Obligations, Bank shall notify Borrower thereof. Borrower agrees to pay to
Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or
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expense is incurred or determined, upon presentation by Bank of a statement of
the amount and setting forth Bank's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for a
term ending on the Leasehold Maturity Date. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions
under this Agreement immediately and without notice upon the occurrence and
during the continuance of an Event of Default. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) agreement to provide insurance;
(d) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(e) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1;
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of
such Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. Without
limiting the generality of the foregoing, Bank shall not be obligated to make
any Credit Extension if, at and as of the date immediately following such
Credit Extension, Borrower would not be in compliance with any of the covenants
or restrictions set forth in Sections 6.8, 6.9, 6.10, or 6.11. The making of
each Credit Extension shall be deemed to be a representation and warranty by
Borrower on the date of such Credit Extension as to the accuracy of the facts
referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's
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security interests in the Collateral and in order to fully consummate all of
the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization: No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The services or property giving rise to such Eligible
Accounts have been rendered or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor that is included in any Borrowing
Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
of good and marketable quality, free form all material defects.
5.6 Intellectual Property Collateral. Borrower is the sole owner of
the Intellectual Property Collateral, except for exclusive and non-exclusive
licenses granted by Borrower to its customers in the ordinary course of business
or where Borrower is a joint owner. Each of the issued Patents is valid and
enforceable, and no part of the Intellectual Property Collateral has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property Collateral violates the rights of any
third party.
5.7 Name: Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.9 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
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5.10 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940. Borrower is
not engaged principally, or as one of the important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T and U of the Board of Governors of the
Federal Reserve System). Borrower has complied with all the provisions of the
Federal Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to
the best of Borrower's knowledge, by previous owners or operators, in the
disposal of, or to produce, store, handle, treat, release, or transport, any
hazardous waste or hazardous substance other than in accordance with applicable
law; to the best of Borrower's knowledge, none of Borrower's properties or
assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute; no lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by
Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by Borrower or any Subsidiary resulting in
the releasing, or otherwise disposing of hazardous waste or hazardous
substances into the environment.
5.13 Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 Government Consents. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.16 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates
or statements not misleading.
5.17 Year 2000. Borrower and its Subsidiaries have reviewed the
areas within their operations and business which could be adversely affected
by, and have developed or are developing a program to address on a timely
basis, the Year 2000 Problem and have made related appropriate inquiry of
material suppliers and vendors, and based on such review and program, the Year
2000 Problem will not have a Material Adverse Effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower
may be unable to recognize and properly perform date sensitive functions
involving certain dates prior to and any dates on or after December 31, 1999.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each
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of its Subsidiaries to maintain, to the extent consistent with prudent
management of Borrower's business, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within twenty-five
(25) days after the end of each month, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, in a form acceptable to Bank and certified by a Responsible
Officer; (b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (c)
within five (5) days of filing, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders or to any
holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (d) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of Fifty Thousand Dollars ($50,000) or more; (e) such budgets,
sales projections, operating plans or other financial information as Bank may
reasonably request from time to time; and (f) within twenty-five (25) days of
the last day of each fiscal quarter, a report signed by Borrower, in form
reasonably acceptable to Bank, listing any applications or registrations that
Borrower has made or filed in respect of any Patents, Copyrights or Trademarks
and the status of any outstanding applications or registrations, as well as any
material change in Borrower's intellectual property, including but not limited
to any subsequent ownership right of Borrower in or to any Trademark, Patent or
Copyright not specified in Exhibits A, B, and C of the Intellectual Property
Security Agreement delivered to Bank by each Borrower in connection with this
Agreement.
Within fifteen (15) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts and appraise Collateral at Borrower's expense, provided that such
audits will be conducted no more often than every twelve (12) months unless an
Event of Default has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement.
Borrower shall promptly notify Bank of all returns and recoveries and of all
disputes and claims, where the return, recovery, dispute or claim involves more
than Fifty Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with
proof satisfactory to Bank indicating that Borrower or a Subsidiary has made
such payments or deposits; provided that Borrower or a Subsidiary need not make
any payment if the amount or validity of such
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payment is contested in good faith by appropriate proceedings and is reserved
against (to the extent required by GAAP) by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least
twenty (20) days notice to Bank before canceling its policy for any reason.
Upon Bank's request, Borrower shall deliver to Bank certified copies of such
policies of insurance and evidence of the payments of all premiums therefor.
All proceeds payable under any such policy shall, at the option of Bank, be
payable to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
depository, investment, and operating accounts with Bank.
6.8 Adjusted Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to Current Liabilities,
less deferred revenue, of at least 1.50 to 1.00.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month, a Tangible Net Worth plus Subordinated Debt of not less
than Twelve Million Five Hundred Thousand Dollars ($12,500,000).
6.10 Liquidity; Debt Service Coverage. Borrower shall maintain, as of
the last calendar day of each month, a balance of unrestricted cash plus eighty
percent (80%) of Eligible Accounts minus the outstanding Advances that is two
(2) times the outstanding balance of (i) the Equipment Advances plus (ii) the
Leasehold Advances. In the alternative, Borrower may maintain a Debt Service
Coverage of at least 2.00 to 1.00 as of the last calendar day of each month.
6.11 Adjusted Total Liabilities-Tangible Net Worth. Borrower shall
maintain, as of the last day of each calendar month, a ratio of Total
Liabilities less deferred revenue to Tangible Net Worth of not more than 1.00
to 1.00.
6.12 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable: (i) those intellectual property rights listed on Exhibits A, B and
C to the Intellectual Property Security Agreement delivered to Bank by Borrower
in connection with this Agreement, within thirty (30) days of the date of this
Agreement, (ii) all registerable intellectual property rights in Intellectual
Property Collateral which constitute or give rise to more than five percent
(5%) of Borrower's revenue in any given month which Borrower has developed as
of the date of this Agreement but heretofore failed to register, within thirty
(30) days of the date of this Agreement, and (iii) those additional
intellectual property rights in Intellectual Property Collateral which
constitute or give rise to more than five percent (5%) of Borrower's revenue in
any given month which are developed or acquired by Borrower from time to time
in connection with any Borrower's product, within thirty days of the sale or
licensing of such product to any third party and within thirty days of
Borrower's use of such product (including without limitation major revisions or
additions to the intellectual property rights listed on such Exhibits A, B and
C). Borrower shall give Bank notice of all such applications or registrations.
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(b) Borrower shall execute and deliver such additional instruments
and documents from time to time as Bank shall reasonably request to perfect
Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Bank in writing of material infringements detected and (iii) not
allow any material Trademarks, Patents or Copyrights to be abandoned, forfeited
or dedicated to the public without the written consent of Bank, which shall not
be unreasonably withheld.
(d) Bank may audit Borrower's Intellectual Property Collateral to
confirm compliance with this Section 6.12, provided such audit may not occur
more often than once per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.12 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.12.
6.13 Year 2000 Compliance. Borrower shall perform all acts reasonably
necessary to ensure that Borrower and any business in which Borrower holds a
substantial interest become Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems.
Borrower shall also take reasonably necessary steps to ensure that it will not
be materially adversely affected as a result of any customer, supplier or
vendor's failure to become Year 2000 compliant. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to the
business operations or financial condition of such entity, will properly perform
date sensitive functions before, during and after the year 2000. Borrower shall
immediately upon request, provide to Bank such certifications or other
evidence of Borrower's compliance with the terms of this paragraph as Bank may
from time to time require.
6.14 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as
may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of surplus, worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change of no more than fifty
percent (50%) in Borrower's ownership. Borrower will not, without thirty (30)
days prior written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merger or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
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7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any
capital stock, except that Borrower may pay dividends to its shareholders in
such amounts as are necessary to cover personal tax liabilities of such
shareholders.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than
would be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
7.12 Intellectual Property Agreements. Borrower shall not permit the
inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts, except to the extent that such provisions are necessary in
Borrower's exercise of its reasonable business judgment.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event
of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof
or any officer of Borrower becomes aware thereof; provided, however, that if
the default cannot by its nature be cured within the ten (10) day period or
cannot after diligent
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attempts by Borrower be cured within such ten (10) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall
have an additional reasonable period (which shall not in any case exceed thirty
(30) days) to attempt to cure such default, and within such reasonable time
period the failure to have cured such default shall not be deemed an Event of
Default (provided that no Credit Extensions will be required to be made during
such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other Agreements. If there is an uncured default in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
8.10 Guaranty. Any guaranty of all or a portion of the Obligations
ceases for any reason to be in full force and effect, or any guarantor fails to
perform any obligation under any guaranty of all or a portion of the
Obligations, or any guarantor revokes or purports to revoke any guaranty of the
Obligations, or any material misrepresentation or material misstatement exists
now or hereafter in any warranty or representation set forth in any guaranty of
all or a portion of the Obligations or in any certificate delivered to Bank in
connection with such guaranty.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
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(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable (provided that upon the occurrence of an Event of Default described
in Section 8.5 all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior
to its security interest and to pay all expenses incurred in connection
therewith. With respect to any of Borrower's owned premises, Borrower hereby
grants Bank a license to enter into possession of such premises and to occupy
the same, without charge, in order to exercise any of Bank's rights or remedies
provided herein, at law, in equity, or otherwise;
(f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure
to Bank's benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts of transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as is
commercially reasonable, and apply any proceeds to the Obligations in whatever
manner or order Bank deems appropriate;
(i) Bank may credit bid and purchase at any public sale; and
(j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral in connection with the exercise of
Bank's remedies under Article 8 of the California Uniform Commercial Code; (e)
make, settle, and adjust all claims under and decisions with respect to
Borrower's policies of insurance; (f) settle and adjust disputes and claims
respecting the accounts
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directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; (g) to modify, in its sole discretion, any intellectual
property security agreement entered into between Borrower and Bank without
first obtaining Borrower's approval of or signature to such modification by
amending Exhibits A, B, and C, thereof, as appropriate, to include reference to
any right, title or interest in any Copyrights, Patents or Trademarks acquired
by Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower no
longer has or claims to have any right, title or interest; and (h) to file, in
its sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature of
Borrower where permitted by law; provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for Bank, receive in trust all
payments as Bank's trustee, and immediately deliver such payments to Bank in
their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities within ten (10)
days of when such payment is due, to the extent required under the terms of
this Agreement, then Bank may do any or all of the following: (a) make payment
of the same or any part thereof; (b) set up such reserves under the Revolving
Facility as Bank deems necessary to protect Bank from the exposure created by
such failure; or (c) obtain and maintain insurance policies of the type
discussed in Section 6.6 of this Agreement, and take any action with respect to
such policies as Bank deems prudent. Any amounts so paid or deposited by Bank
shall constitute Bank Expenses, shall be immediately due and payable, and shall
bear interest at the then applicable rate hereinabove provided, and shall be
secured by the Collateral. Any payments made by Bank shall not constitute an
agreement by Bank to make similar payments in the future or a waiver by Bank of
any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank or any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
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If to Borrower: bsquare corporation
0000 000xx Xxxxx XX, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
FAX: (000) 000-0000
If to Bank: Imperial Bank
000 Xxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Corporate Banking Center
FAX: (000) 000-0000
with a copy to: Imperial Bank
000 000xx Xxxxxx XX, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Mr. Xxx Xxxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.1 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
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12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
12.9 Effect of Amendment and Restatement. This Agreement is intended
to and does completely amend and restate, without novation, the Original
Agreement. All security interests granted under the Original Agreement are
hereby confirmed and ratified and shall continue to secure all Obligations under
this Agreement.
13. JUDICIAL REFERENCE
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this document, which controversy, dispute or claim is not settled in
writing within thirty (30) days after the "Claim Date" (defined as the date on
which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 et seq. of the California Code of Civil Procedure, or their successor
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of the Court (or any subsequently enacted
Rule). Each party shall have one
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peremptory challenge pursuant to CCP Section 170.6. The referee shall (a) be
requested to set the matter for hearing within sixty (60) days after the date
of selection of the referee and (b) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final, binding
and conclusive and judgment shall be entered pursuant to CCP Section 644 in any
court in the State of California having jurisdiction. Any party may apply for a
reference proceeding at any time after thirty (30) days following notice to any
other party of the nature of the controversy, dispute or claim, by filing a
petition for a hearing and/or trial. All discovery permitted by this Agreement
shall be completed no later than fifteen (15) days before the first hearing
date established by the referee. The referee may extend such period in the event
of a party's refusal to provide requested discovery or unavailability of a
witness due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Depositions may be taken by either party upon seven (7)
days written notice, and request for production or inspection of documents which
cannot be resolved by the parties shall be submitted to the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisions
remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the obligation
to arrange for and pay for the court reporter. The costs of the court reporter
at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of California. The
rules of evidence applicable to proceedings at law in the State of California
will be applicable to the reference proceeding. The referee shall be empowered
to enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that will be binding upon the
parties. The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BSQUARE CORPORATION
By: /s/ XXXXX X. XXXXXX
--------------------------------
Title: Chief Financial Officer
-----------------------------
IMPERIAL BANK
By: /s/ [ILLEGIBLE]
--------------------------------
Title: SVP
-----------------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
(e) All documents, cash, deposit accounts, securities, financial assets,
investment property, securities accounts, securities entitlements, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to any of the foregoing.
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: EMERGING GROWTH INDUSTRIES DATE:
----------------
FAX#: (000) 000-0000 TIME:
----------------
FROM:
----------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
--------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
-------------------- -------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $
--------------------------
PRINCIPAL PAYMENT (ONLY) $
--------------------------
INTEREST PAYMENT (ONLY) $
--------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
--------------------------
OTHER INSTRUCTIONS:
--------------------------------------------------------
---------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Amended and
Restated Loan Agreement are true, correct and complete in all material respects
as of the date of the telephone request for and Advance confirmed by this
Borrowing Certificate; provided, however, that those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
--------------------------------- ------------------------------------
Authorized Requester Phone #
--------------------------------- ------------------------------------
Authorized Requester Phone #
------------------------------
Authorized Signature (Bank)
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: BSQUARE CORPORATION Lender: Imperial Bank
Commitment Amount: $5,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
--------- ----------
2. Additions (please explain on reverse) $
----------
3. TOTAL ACCOUNTS RECEIVABLE $
----------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) $
----------
4. Amounts over 90 days due $
----------
5. Balance of 25% over 90 day accounts $
----------
6. Concentration Limits $
----------
7. Foreign Accounts $
----------
8. Governmental Accounts $
----------
9. Contra Accounts $
----------
10. Promotion or Demo Accounts $
----------
11. Intercompany/Employee Accounts $
----------
12. Other (please explain on reverse) $
----------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------
14. Eligible Accounts (#3 minus #13) $
----------
15. LOAN VALUE OF ACCOUNTS (80% OF #14) $
----------
BALANCES
16. Maximum Loan Amount $5,000,000
17. Total Funds Available [Lesser of #16 or #15] $
----------
18. Present balance owing on Line of Credit $
----------
19. Outstanding under Sublimits (Letter of Credit) $
----------
20. RESERVE POSITION (#17 minus #18 and #19) $
----------
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Amended and
Restated Loan and Security Agreement between the undersigned and Imperial Bank.
COMMENTS: BANK USE ONLY
Rcv'd by:
-----------------------
BSQUARE CORPORATION Auth. Signer
Date:
---------------------------
By:
------------------------
Authorized Signer Verified:
-----------------------
Auth. Signer
Date:
---------------------------
--------------------------------
26
28
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: IMPERIAL BANK
FROM: BSQUARE CORPORATION
The undersigned authorized officer of bsquare corporation hereby certifies
that in accordance with the terms and conditions of the Amended and Restated
Loan and Security Agreement between Borrower and Bank (the "Agreement"),
(i) Borrower is in complete compliance for the period ending __________ with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistently applied from one period to the next except as
explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings, Borrowing Base Cert. Monthly within 15 days Yes No
A/R Audit Initial and Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis: 2.0:1.0 ____:1.0 Yes No
Minimum Liquidity* 2.0:1.0 ____:1.0 Yes No
Minimum Debt Service Coverage* 1.5:1.0 ____:1.0 Yes No
Minimum Adjusted Quick Ratio $12,500,000 $_______ Yes No
Minimum Tangible Net Worth
Maximum Adjusted Total Liabilities to
Tangible Net Worth 1.0:1.0 ____:1.0 Yes No
*Borrower shall maintain either a Minimum Liquidity or a Minimum Debt Service
Coverage.
COMMENTS REGARDING EXCEPTIONS: SEE ATTACHED. BANK USE ONLY
Sincerely, Received by:
-------------------
AUTHORIZED SIGNER
Date:
-------------------------------------------- --------------------------
SIGNATURE
Verified:
-------------------------------------------- ----------------------
TITLE AUTHORIZED SIGNER
Date:
-------------------------------------------- --------------------------
DATE
Compliance Status: Yes No
27
29
AGREEMENT TO PROVIDE INSURANCE
TO: IMPERIAL BANK Date: July 1, 1999
0000 X. Xx Xxxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000 Borrower: BSQUARE CORPORATION
In consideration of a loan in the amount of $10,000,000, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force during
the term of the loan.
I/We also agree to advise the below named agent to add Imperial Bank as
lender's loss payable on the new or existing insurance policy, and to furnish
Bank at above address with a copy of said policy/endorsements and any subsequent
renewal policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the real
property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Imperial
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent Telephone No.:
Agent's Address:
Signature of Obligor: /s/ [ILLEGIBLE]
-----------------------------
Signature of Obligor:
-----------------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date:
-----------------------
Person Spoken to:
-----------------------------------
Policy Number:
--------------------------------------
Effective Form: To:
--------- ------------------------
Verified By:
----------------------------------------
30
IMPERIAL BANK
CALIFORNIA'S BUSINESS BANKS AUTOMATIC DEBIT AUTHORIZATION
MEMBER FDIC (EQUIPMENT LOAN)
To: IMPERIAL BANK
Re: LOAN #
-----------------------------------------
You are hereby authorized and instructed to charge account No. 00000000 in the
name of BSQUARE CORPORATION for principal and interest payments due on the
above referenced loan as set forth below and credit the loan referenced above.
[X] 6 Debit each interest payment as it becomes due according to the
terms of the note and any renewals or amendments thereof.
[X] 7 Debit each principal payment as it becomes due according to
the terms of the note and any renewals or amendments thereof.
This authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
/s/ [ILLEGIBLE] 7/1/99
--------------------- -------------------------
31
IMPERIAL BANK
CALIFORNIA'S BUSINESS BANKS AUTOMATIC DEBIT AUTHORIZATION
MEMBER FDIC (REVOLVER)
To: IMPERIAL BANK
Re: LOAN #
-----------------------------------------
You are hereby authorized and instructed to charge account No. 00000000 in the
name of BSQUARE CORPORATION for principal and interest payments due on the
above referenced loan as set forth below and credit the loan referenced above.
[X] 4 Debit each interest payment as it becomes due according to the
terms of the note and any renewals or amendments thereof.
[ ] 5 Debit each principal payment as it becomes due according to
the terms of the note and any renewals or amendments thereof.
This authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
/s/ [ILLEGIBLE] 7/1/99
------------------------------ -------------------
32
IMPERIAL BANK
CALIFORNIA'S BUSINESS BANKS AUTOMATIC DEBIT AUTHORIZATION
MEMBER FDIC (LEASEHOLD FACILITY)
To: IMPERIAL BANK
Re: LOAN #
-----------------------------------------
You are hereby authorized and instructed to charge account No. 00000000 in the
name of BSQUARE CORPORATION for principal and interest payments due on the
above referenced loan as set forth below and credit the loan referenced above.
[X] 8 Debit each interest payment as it becomes due according to the
terms of the note and any renewals or amendments thereof.
[X] 9 Debit each principal payment as it becomes due according to
the terms of the note and any renewals or amendments thereof.
This authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
/s/ [ILLEGIBLE] 7/1/99
----------------------- -----------------------
33
IMPERIAL BANK
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(REVOLVER)
Name(s): BSQUARE CORPORATION Date: July 1, 1999
$ paid to you directly by Cashiers Check No.
$ 5,000,000.00 credited to deposit account No. 00000000 when Advances are requested or by
wire transfer or cashiers check
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$ to Imperial Bank for Loan Fee
$ to Imperial Bank for Document Fee
$ to Imperial Bank for accounts receivable audit
(estimate)
$ to Bank counsel fees and expenses
$ to
$ to
$ 5,000,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
/s/ [ILLEGIBLE]
-------------------------------- --------------------------------
Signature Signature
34
IMPERIAL BANK
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(LEASEHOLD FACILITY)
Name(s): BSQUARE CORPORATION Date: July 1, 1999
$ paid to you directly by Cashiers Check No.
$ 4,000,000.00 credited to deposit account No. 00000000 when Advances are requested or by
wire transfer or cashiers check
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$ to Imperial Bank for Loan Fee
$ to Imperial Bank for Document Fee
$ to Bank counsel fees and expenses
$ to
$ to
$ 4,000,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
/s/ [ILLEGIBLE]
-------------------------------- --------------------------------
Signature Signature
35
IMPERIAL BANK
MEMBER FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(EQUIPMENT LOAN)
Name(s): BSQUARE CORPORATION Date: July 1, 1999
$ paid to you directly by Cashiers Check No.
$ 1,000,000.00 credited to deposit account No. 00000000 when Advances are requested or by
-------- wire transfer or cashiers check
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$ to Imperial Bank for Loan Fee
$ to Imperial Bank for Document Fee
$ to Bank counsel fees and expenses
$ to
$ to
$ 1,000,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
/s/ [ILLEGIBLE]
-------------------------------- --------------------------------
Signature Signature
