Exhibit 10.16
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of July 28, 1999, by
and between SILICON VALLEY BANK, a California-chartered bank, with its principal
place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a
loan production office located at Wellesley Office Park, 00 Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, doing business under the name
"Silicon Valley East" ("Bank") and JUNO ONLINE SERVICES, INC., a Delaware
corporation with a principal place of business at 0000 Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. 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 loan advance under the Committed
Revolving Line.
"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, partners and, for
any Person that is a limited liability company, such Person's managers and
members.
"Agreement" means this Loan and Security Agreement.
"Bank Expenses" means all reasonable out-of-pocket costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection
with the preparation, negotiation, administration, and enforcement of the
Loan Documents; and Bank's reasonable attorneys' fees and expenses
incurred in amending, enforcing or defending the Loan Documents,
(including fees and expenses of appeal or review, or those incurred in any
Insolvency Proceeding) whether or not suit is brought.
"Billable Service Revenue" in respect of any period, means the
amount specified under the line item "Billable Service Revenue" on
Borrower's consolidated statement of operations for such period.
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"Borrower's Books" means all of Borrower's books and records
including, without limitation: 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.
"Borrower's Investment Policy" means the written investment policy
of Borrower, as amended from time to time, and approved by Bank in
writing, which approval(s) shall not be unreasonably withheld.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of Massachusetts or California are
authorized or required to close.
[****]
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension in an aggregate
principal amount of up to Ten Million Dollars ($10,000,000.00) at any time
outstanding.
"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 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.
"Credit Extension" means each Advance, Letter of Credit, or any
other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"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 of
such date, plus, to the extent not already included therein, all
outstanding Credit Extensions 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
extendable at the option of Borrower or any Subsidiary to a date more than
one year from the date of determination, but excluding Subordinated Debt.
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
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"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
in the United States 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.
"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.
"Investment" means any beneficial 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.
"Letter of Credit" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in Section
2.1.2.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated 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.
"Maturity Date" means one day prior to one year from the Closing
Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, and any notes, drafts,
instruments, securities, documents of title, or chattel paper, owned by or
payable to Borrower.
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"Net Worth" means total assets minus total liabilities (determined
without regard to redeemable preferred stock).
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any
other Loan Documents, 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.
"Payment Date" means the first calendar day of each month commencing
on the first such date after the Closing Date and ending on the Maturity
Date.
"Permitted Indebtedness" means:
(1) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(2) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(3) Subordinated Debt;
(4) Indebtedness to trade creditors incurred in the ordinary
course of business (including, without limitation, accrued unpaid
premiums owed to insurers to the extent the same comprise
Indebtedness);
(5) Indebtedness secured by Permitted Liens;
(6) Contingent Obligations of Borrower to provide credit
support in respect of obligations incurred by any Subsidiary of
Borrower in the ordinary course of business or Contingent
Obligations of any Subsidiary of Borrower to provide credit support
in respect of obligations incurred by Borrower; and
(7) Up to an aggregate of $10,000,000 at any time outstanding
of obligations under capitalized leases (exclusive of any such lease
entered into before the date hereof and any extension or renewal
thereof) entered into to provide financing or refinancing of fixed
assets.
"Permitted Investment" means:
(8) Investments existing on the Closing Date disclosed in the
Schedule; and
(9) Investments pursuant to Borrower's Investment Policy
pertaining to investments of cash and cash equivalents, as in effect
from time to time, as adopted by the Borrower and approved by the
Borrower's Board of Directors;
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(10) Investment in or to Borrower by any Subsidiary of
Borrower and Investments in or to any Subsidiary of Borrower by
Borrower or any Subsidiary of Borrower (up to an aggregate maximum
amount of $5,000,000.00); and
(11) Investments arising from transactions permitted under
Section 7.3.
"Permitted Liens" means the following:
(12) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan
Documents;
(13) Liens for taxes, fees, assessments or other governmental
charges or levies, or for obligations to materialmen, mechanics,
warehouseman, carriers or employees or other like Liens arising in
the ordinary course of business, in each case, either not delinquent
or being contested in good faith by appropriate proceedings and as
to which adequate reserves are maintained on Borrower's Books or the
books of the Borrower's affected Subsidiary, as the case may be, in
accordance with GAAP;
(14) Liens (i) upon or in any Equipment 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 or refinancing 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;
(15) Leases or subleases and licenses or sublicenses granted
to others in the ordinary course of Borrower's or any of its
Subsidiaries' business not interfering in any material respect with
the business of Borrower and its Subsidiaries taken as a whole, and
any interest or title of a lessor, licensor, sublicensor or under
any lease or license or sublicense provided that such leases,
subleases, licenses and sublicenses do not prohibit the grant of the
security interest granted hereunder; and
(16) 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, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 365 days of Borrower determined in accordance
with GAAP.
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"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"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 reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business
entity of which more than fifty percent (50%) of the voting stock or other
equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
1.2 Accounting and Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including" or "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
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 in accordance
with the terms hereof. 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 (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 the Committed Revolving Line, minus the
face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit, and any Letter of Credit Reserve). Subject
to the terms and conditions of this Agreement, amounts borrowed pursuant
to this Section 2.1 may be repaid and reborrowed at any time during the
term of this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify Bank
by facsimile transmission or telephone no later than 3:00 p.m. Eastern
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 written 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 will
credit the amount of Advances made under this Section 2.1 to Borrower's
deposit account.
(c) The Committed Revolving Line shall terminate on the Maturity
Date, at which time all Advances under this Section 2.1 and other amounts
due under this Agreement (except as otherwise expressly specified herein)
shall be immediately due and payable.
2.2 Letters of Credit.
(1) 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
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not to exceed (i) the Committed Revolving Line minus (ii) the then
outstanding principal balance of the Advances; provided that the 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 Ten Million Dollars ($10,000,000.00). Each Letter of Credit shall
have an expiry date no later than three hundred sixty (360) days after the
Maturity Date provided that Borrower's Letter of Credit reimbursement
obligation shall be secured by cash collateral on terms acceptable to Bank
at any time after the Maturity Date if the term of this Agreement is not
extended by Bank. 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. Unless otherwise agreed in writing by the Borrower and
Bank, the issuance fees shall be as follows:
(1) Standby Letters of Credit in individual amounts of less
than $1,000,000.00 ...... [****] of the face amount.
(2) Standby Letters of Credit in individual amounts of at
least $1,000,000.00, but less than $2,000,000.00 ...... [****] of
the face amount.
(3) Standby Letters of Credit in individual amounts of
$2,000,000.00 and greater ...... [****] of the face amount.
(2) 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 except to the extent that any such loss, cost,
expense or liability arises from Bank's own gross negligence or wilful
misconduct.
(3) 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.
(4) Upon the issuance of any Letter of Credit payable in a currency
other than United States Dollars, Bank shall create a reserve (the "Letter
of Credit Reserve") under the Committed Revolving Line for letters of
credit against fluctuations in currency exchange rates, in an amount in
Dollars (determined at applicable exchange rates prevailing in New York on
the date of establishment of such reserve) 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.
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
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2.3 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1, and 2.1.2 of
this Agreement is greater than the Committed Revolving Line, Borrower shall
immediately pay to Bank, in cash, the amount of such excess.
2.4 Interest Rates, Payments, and Calculations.
(1) Interest Rate. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average daily balance thereof, at a
fluctuating per annum rate equal to the Prime Rate as in effect from time
to time pursuant to Section 2.3(d).
(2) Default Rate. All Obligations shall bear interest, from and
after the occurrence of an Event of Default and only during the pendency
thereof, at a rate equal to three (3) percentage points above the interest
rate applicable in the absence of any continuing Event of Default.
(3) Payments. Interest hereunder shall be due and payable on each
Payment Date. 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.
(4) Computation. In the event the Prime Rate is changed 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.
2.5 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit as specified by Borrower any wire transfer of funds, check or
other item of payment designated by Borrower for application against the
Obligations. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment designated by Borrower for application against the
Obligations received by Bank after 3:00 P.M. Eastern 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.
2.6 Fees. Borrower shall pay to Bank the following:
(1) Committed Revolving Line Facility Fee. As compensation for the
Bank's maintenance of sufficient funds available for such purpose, the
Bank shall have earned a Committed Revolving Line Facility Fee (so
referred to herein), which fee shall be paid quarterly in arrears on the
last day of each calendar quarter (but pro rated in the case of any
partial such quarter), accruing at a per annum rate equal to [****] on the
average unused portion of the Committed Revolving Line during any such
calendar quarter, as determined by the Bank. The Borrower shall not be
entitled to any credit, rebate or repayment of any Committed Revolving
Line Facility Fee previously earned by the Bank pursuant to this Section
notwithstanding any termination of the within Agreement, or suspension or
termination of the Bank's obligation to make loans and advances hereunder.
Bank acknowledges that Borrower has paid as of the date of this Agreement
$5,000.00, to be credited against fees otherwise payable under this
Section 2.5;
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[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
8
(2) Financial Examination and Appraisal Fees. Bank's customary fees
and out-of-pocket expenses for Bank's audits of Borrower's Accounts
pursuant to Section 6.3, and for each appraisal of Collateral and
financial analysis and examination of Borrower performed from time to time
by Bank or its agents;
(3) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, 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.
2.7 Additional Costs. In case any law, regulation, treaty or official
directive or in the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any change after the Closing Date in any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law):
(1) 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);
(2) 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
(3) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any such change is to increase the cost to Bank, reduce the
income receivable by Bank or impose any expense upon Bank with respect to any
loans, 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 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.
2.8 Term. Except as otherwise set forth herein, 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 Maturity Date or such
earlier date on which both the Obligations shall have been paid in full and the
Committed Revolving Line shall have been terminated as provided herein.
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. The Borrower may also terminate this Agreement by written notice to the
Bank. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
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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:
(1) this Agreement;
(2) a Negative Pledge Agreement;
(3) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(4) an opinion of Borrower's counsel;
(5) financing statements (Forms UCC-1);
(6) insurance certificate;
(7) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(8) Certificate of Good Standing and Foreign Qualification (if
applicable); and
(9) 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:
(1) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1; and
(2) 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. 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).
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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 payment 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. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
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 security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents;
provided, however, that prior to occurrence of any continuing Event of Default,
nothing contained in the Loan Documents shall obligate Borrower or any
Subsidiary of Borrower to make any registration, recordation or filing in
respect of intellectual property rights determined by Borrower to not be
material to the business of the Borrower and its Subsidiaries taken as a whole
or to the extent that any such registration, recordation or filing is determined
by Borrower to be inconsistent with the objectives or policies of Borrower or
any of its Subsidiaries concerning protection of trade secrets of Borrower or
any of its Subsidiaries.
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, provided that right will be exercised no
more often than every six (6) months unless an Event of Default has occurred and
is continuing
4.4 Bank agrees to execute and deliver such documents as may reasonably be
requested by Borrower to confirm the security interest granted herein shall not
apply to any Equipment to be purchased by Borrower with financing from a lender
other than the Bank.
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/Certificate 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.
11
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 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do 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.
5.5 Litigation. There are no actions or proceedings pending, or, to
Borrower's knowledge, threatened 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.
5.6 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
on or about the Closing Date or, if later, pursuant to Section 6.3.
5.7 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 its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations 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.
5.8 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 release, or other
disposition of hazardous waste or hazardous substances into the environment.
5.9 Taxes. Borrower and each Subsidiary has filed or caused to be filed
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all
12
taxes reflected therein, except those being contested in good faith by proper
proceedings with adequate reserves under GAAP.
5.10 Subsidiaries. Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.11 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.
5.12 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.
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 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 forty five (45) days
after the end of each quarter, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
and a report of the amount of subscribers, certified by an officer of Borrower
and in a form reasonably acceptable to Bank; (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 written notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that, if determined
adversely to Borrower or such Subsidiary, would result in damages or costs to
Borrower or any Subsidiary of Borrower comprising a Material Adverse Effect; and
(e) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time.
13
Borrower shall deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit C hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) 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 in any single case involves
more than [****].
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
(i) the amount or validity of such payment is contested in good faith by
appropriate proceedings, (ii) Borrower or Subsidiary, as the case may be, has
established proper reserves (to the extent required by GAAP) and (iii) no lien
other than a Permitted Lien results.
6.6 Insurance.
(1) 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.
(2) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are 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. At 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.
----------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
14
6.7 Principal Depository. Borrower shall maintain an operating account
with Bank, and shall maintain, at all times, a balance of [****] in a depositary
account at the Bank
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
quarter, a ratio of Quick Assets to Current Liabilities less the current portion
of deferred revenue of at least [****].
6.9 Billable Service Revenue. Borrower shall satisfy, as of the last day
of each quarter, [****]
6.10 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 Extension
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 Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer") all or any part of its business or property, other
than Transfers: (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business; (iii) that
constitute payment of normal and usual operating expenses in the ordinary course
of business; (iv) of worn-out or obsolete Equipment, or (v) of property to a
Subsidiary, up to the amount of $5,000,000.00, inclusive of any Permitted
Investments pursuant to clause (c) of the definition of Permitted Investments.
7.2 Changes in Business, Ownership, or Management, Business Locations.
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).
Borrower will not, without at least thirty (30) days prior written notification
to Bank, relocate its chief executive office or, without at least five (5) days
prior written notification, add any new offices or business locations.
7.3 Mergers or Acquisitions. Merge 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 ( without
the prior written consent of the Bank, which will not be unreasonably withheld
or delayed) unless: (i) there is no Event of Default hereunder, and (ii) that
such merger, consolidation or acquisition will not result, on a prospective
basis, in the breach of any of the covenants, terms and conditions hereunder,
and (iii) that such merger, consolidation or acquisition does not result in the
reduction of the Net Worth of the Borrower and its Subsidiaries on a
consolidated basis, of more than twenty-five percent (25.0%), and (iv) the cash
expenditures by the Borrower and its Subsidiaries for all such transactions will
be a maximum aggregate amount of [****] (inclusive of any indebtedness of the
acquired company assumed by the Borrower in connection with the transaction),
and (v) the Borrower (or Subsidiary as applicable in the event the Borrower is
not a party to such merger, consolidation, or acquisition) is the surviving
legal entity, and (vi) the Borrower's management does not change in any material
way.
----------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
15
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.
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.
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 Compliance. Become an "investment company" or a 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 Advance 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 other 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.
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, within three (3) days of
when due, any of the Obligations. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extensions will be
made during the cure period).
8.2 Covenant Default. If Borrower does not perform any obligation in
Section 6 or violates any covenant in Article 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents and as to any default under a term, condition or covenant that can be
cured, has not cured the default within 10 days after it occurs, or if the
default cannot be cured within 10
16
days or cannot be cured after Borrower's attempts in the 10 day period, and the
default may be cured within a reasonable time, then Borrower has an additional
time, (of not more than 30 days) to attempt to cure the default. During the
additional period the failure to cure the default is not an Event of Default
(but no Credit Extensions will be made during the cure period).
8.3 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 forty-five (45) 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 forty-five
(45) 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);
8.4 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 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.5 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in acceleration of
the maturity of any Indebtedness in an amount in excess of Two Million Dollars
($2,000,000);
8.6 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;
8.7 Judgments. If a judgment or judgments, not covered by insurance, for
the payment of money in an amount, individually or in the aggregate, of at least
Two Million Dollars ($2,000,000) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of ninety (90) days (provided that
no Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.8 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
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:
17
(1) Declare all Obligations 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);
(2) 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;
(3) 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;
(4) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(5) 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 premises, Borrower hereby grants Bank a license to enter 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;
(6) 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;
(7) 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 non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section
9.1, to use, without charge, Borrower's labels, patents, copyrights, mask
works, 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;
(8) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in whatever manner or order it deems appropriate; and
18
(9) Bank may credit bid and purchase any Collateral at any public
sale, or at any private sale as permitted by law.
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) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (e) to file, one or more financing
statements relative to the Collateral without the signature of Borrower; and (f)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; 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. Upon the occurrence and during the continuance of
an Event of Default, 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 if requested or required by Bank,
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, as 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
Committed Revolving Line as Bank reasonably 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 reasonably 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, (i) 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, and (ii)
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
19
expressly set forth herein 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 of 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, by 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:
If to Borrower Juno Online Services, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxxx Xxxxx, Chief Financial Officer
FAX: (000) 000-0000
with a copy to: Juno Online Services, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx, General Counsel
FAX: (000) 000-0000
If to Bank Silicon Valley Bank
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxx, Vice President
FAX: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
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.
20
11. CHOICE OF LAW AND VENUE; JURY WAIVER
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT;
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.
21
12.2 Indemnification. Borrower shall, indemnify, defend, protect 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 the Loan Documents;
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 the Loan Documents, 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.
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 except by a writing signed by Borrower and Bank. 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; provided that so
long as the obligations referred to in the first sentence of this Section 12.7
have been satisfied, and Bank has no commitment to make any Credit Extensions or
to make any other loans to Borrower, Bank shall release all security interests
granted hereunder and redeliver all Collateral held by it in accordance with
applicable law.
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 deem
appropriate in connection with the exercise 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 when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault 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.
22
12.9 Countersignature. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
JUNO ONLINE SERVICES, INC.
By: /s/ Xxxxxxx Xxxxx
-----------------
Title: President and Chief Executive Officer
By: /s/ Xxxxxxx Xxxxxxxx
--------------------
Title: Senior Vice President
SILICON VALLEY BANK, d/b/a SILICON VALLEY EAST
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
SILICON VALLEY BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: Assistant Vice President
(Signed in Santa Xxxxx County, California)
23
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(1) 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;
(2) 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;
(3) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, leases,
license agreements, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, claims, literature, reports,
catalogs, income tax refunds, payments of insurance and rights to payment
of any kind, provided however that the Collateral shall not include,
except to the extent provided for in Section 9-318(4) of the Code, any
right arising under any contract or agreement but only to the extent that
such inclusion would violate such contract or agreement;
(4) 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;
(5) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned
or hereafter acquired and Borrower's Books relating to the foregoing; and
(6) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to include any
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing.
24
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ______________________________
FAX#: (000) 000-0000 TIME: ______________________________
FROM: JUNO ONLINE SERVICES, INC.
--------------------------
BORROWER'S NAME
FROM:___________________________________________________________________________
AUTHORIZED SIGNER'S NAME
___________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE:__________________________________________________________________________
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 Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; 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
___________________________________
Authorized Signature (Bank)
Phone #____________________________
--------------------------------------------------------------------------------
25
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: JUNO ONLINE SERVICES, INC.
The undersigned authorized officer of JUNO ONLINE SERVICES, INC. certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the "Agreement"; terms defined therein
being used herein as therein defined), in each case on behalf of the Borrower in
his or her capacity as an officer of the Borrower and not in his or her capacity
as an individual, as follows: (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. The Officer
expressly acknowledges that no borrowings may be requested by the Borrower at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that such compliance is determined not just at
the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
------------------ -------- --------
Quarterly financial statements Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10Q and 10K Within 5 days after filing
with the SEC Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Deposits at Bank [****] $ Yes No
Minimum Quick Ratio [****] _____:1.0 Yes No
[****]
[****]
* See Loan and Security Agreement
Comments Regarding Exceptions:
=================================
BANK USE ONLY
=================================
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status: Yes / No
=================================
Sincerely,
JUNO ONLINE SERVICES, INC.
_______________________ Date:_______________
SIGNATURE
_______________________
TITLE
----------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
26
EXHIBIT E
BORROWER'S FORECAST
[****]
----------
[****] Confidential treatment has been requested for this portion pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
27
