EXHIBIT 10.7
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INKTOMI CORPORATION
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
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1. DEFINITIONS AND CONSTRUCTION........................................... 1
1.1 Definitions....................................................... 1
1.2 Accounting Terms.................................................. 9
2. LOAN AND TERMS OF PAYMENT.............................................. 10
2.1 Revolving, Term and Equipment Loan Facilities..................... 10
2.2 Overadvances...................................................... 12
2.3 Interest Rates, Payments, and Calculations........................ 12
2.4 Crediting Payments................................................ 12
2.5 Fees.............................................................. 13
2.6 Additional Costs.................................................. 13
2.7 Term.............................................................. 14
3. CONDITIONS OF LOANS.................................................... 14
3.1 Conditions Precedent to Initial Advance........................... 14
3.2 Conditions Precedent to all Advances.............................. 14
4. CREATION OF SECURITY INTEREST.......................................... 15
4.1 Grant of Security Interest........................................ 15
4.2 Delivery of Additional Documentation Required..................... 15
4.3 Right to Inspect.................................................. 15
5. REPRESENTATIONS AND WARRANTIES......................................... 15
5.1 Due Organization and Qualification............................... 15
5.2 Due Authorization; No Conflict................................... 15
5.3 No Prior Encumbrances............................................ 16
5.4 Bona Fide Eligible Accounts...................................... 16
5.5 Merchantable Inventory........................................... 16
5.6 Intellectual Property............................................ 16
5.7 Name; Location of Chief Executive Office......................... 16
5.8 Litigation....................................................... 16
5.9 No Material Adverse Change in Financial Statements............... 16
5.10 Solvency......................................................... 16
5.11 Regulatory Compliance............................................ 16
5.12 Environmental Condition.......................................... 17
5.13 Taxes............................................................ 17
5.14 Subsidiaries..................................................... 17
5.15 Government Consents.............................................. 17
5.16 Full Disclosure.................................................. 17
6. AFFIRMATIVE COVENANTS.................................................. 17
6.1 Good Standing.................................................... 17
6.2 Government Compliance............................................ 18
6.3 Financial Statements, Reports, Certificates...................... 18
6.4 Inventory; Returns............................................... 18
6.5 Taxes............................................................ 18
6.6 Insurance........................................................ 19
6.7 Principal Depository............................................. 19
6.8 Quick Ratio...................................................... 19
6.9 Liquidity Coverage/Debt Service Coverage......................... 19
6.10 Tangible Net Worth............................................... 19
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6.11 Debt-Net Worth Ratio............................................. 19
6.12 Profitability.................................................... 20
6.13 Registration of Intellectual Property Rights..................... 20
6.14 Further Assurances............................................... 20
7. NEGATIVE COVENANTS..................................................... 20
7.1 Dispositions..................................................... 20
7.2 Change in Business............................................... 21
7.3 Mergers or Acquisitions.......................................... 21
7.4 Indebtedness..................................................... 21
7.5 Encumbrances..................................................... 21
7.6 Distributions.................................................... 21
7.7 Investments...................................................... 21
7.8 Transactions with Affiliates..................................... 21
7.9 Intellectual Property Agreements................................. 21
7.10 Subordinated Debt................................................ 21
7.11 Inventory........................................................ 21
7.12 Compliance....................................................... 22
7.13 Prohibition on Transfer of Assets................................ 22
8. EVENTS OF DEFAULT...................................................... 22
8.1 Payment Default.................................................. 22
8.2 Covenant Default................................................. 22
8.3 Material Adverse Change.......................................... 22
8.4 Attachment....................................................... 22
8.5 Insolvency....................................................... 23
8.6 Other Agreements................................................. 23
8.7 Subordinated Debt................................................ 23
8.8 Judgments........................................................ 23
8.9 Misrepresentations............................................... 23
9. BANK'S RIGHTS AND REMEDIES............................................. 23
9.1 Rights and Remedies.............................................. 23
9.2 Power of Attorney................................................ 24
9.3 Accounts Collection.............................................. 25
9.4 Bank Expenses.................................................... 25
9.5 Bank's Liability for Collateral.................................. 25
9.6 Remedies Cumulative.............................................. 25
9.7 Demand; Protest.................................................. 25
10. NOTICES................................................................ 25
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................. 26
12. GENERAL PROVISIONS..................................................... 26
12.1 Successors and Assigns........................................... 26
12.2 Indemnification.................................................. 27
12.3 Time of Essence.................................................. 27
12.4 Severability of Provisions....................................... 27
12.5 Amendments in Writing, Integration............................... 27
12.6 Counterparts..................................................... 28
12.7 Survival......................................................... 28
12.8 Confidentiality.................................................. 28
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This LOAN AND SECURITY AGREEMENT is entered into as of May 2, 1997, by and
between SILICON VALLEY BANK ("Bank") and INKTOMI CORPORATION("Borrower").
RECITALS
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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
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
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1.1 Definitions. As used in this Agreement, the following terms
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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 Revolving Advance, a Term Advance
or an Equipment Advance.
"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; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), 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" has the meaning set forth in Section 2.1.1
hereof.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
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"Collateral" means the property described on Exhibit A attached
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hereto.
"Committed Line" means Two Million Five Hundred Thousand Dollars
($2,500,000).
"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.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and 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.
"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 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.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Debt Service Coverage" means, as measured quarterly as of the
last day of each fiscal quarter of Borrower, on a consolidated basis determined
in accordance with GAAP, the ratio of (a) an amount equal to the sum of (i)
quarterly net income, plus (ii) quarterly depreciation, amortization of
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intangible assets and other non-cash charges to income plus (iii) quarterly
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interest expense to (b) an amount equal to (i) the sum of all scheduled
repayments for such quarter and mandatory prepayments of principal on account of
long-term Debt, plus (ii) quarterly interest expense.
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"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
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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;
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(b) Accounts with respect to an account debtor, fifty percent
(50%) 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;
(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
against amounts owed to Borrower;
(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 as approved in writing by Bank, except that
with respect to the Eligible Foreign Accounts of NTT and OzEmail the applicable
percentage shall be thirty-five percent (35%);
(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 Equipment" means general purpose scientific,
laboratory, manufacturing and test equipment, computer equipment, office
equipment and furnishings and other machines and office equipment as approved by
Bank in its sole discretion (i) in which the Bank has a valid perfected security
interest, and (ii) delivered to Borrower by the manufacturer or vendor after,
upon or not more than ninety (90) days prior to the date of the Closing Date,
which equipment is new and has not previously been used by any Person.
"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 that are not otherwise excluded under the exceptions to Eligible
Accounts set forth in subsections (a) through (k) of such defined term and are:
(1) covered by credit insurance in form and amount, and by an insurer
satisfactory to Bank less the amount of any deductible(s) which may be or become
owing thereon; or (2) supported by one or more letters of credit in favor of
Bank as beneficiary, in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank; or (3) that Bank approves on a case-by-case
basis including the Accounts of NTT and OzEmail.
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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.
"Equipment Advance" or "Equipment Advances" means a cash advance
or cash advances under the Equipment Facility.
"Equipment Committed Line" means Three Million Dollars
($3,000,000).
"Equipment Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1.3 hereof.
"Equipment Availability Date" means the date nine (9) calendar
months from the date of this Agreement.
"Equipment Maturity Date" means the date thirty-six (36) months
from the Equipment Availability Date.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"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.
"Intellectual Property Collateral" means any and all right, title
and interest of Borrower in the following:
(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;
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(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
(g) 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.
"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 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.
"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 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.
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"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 to trade creditors and with respect to surety
bonds and similar obligations incurred in the ordinary course of business;
(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);
(f) Indebtedness secured by Permitted Liens;
(g) Capital leases or indebtedness incurred solely to purchase
equipment which is secured in accordance with clause (c) of "Permitted Liens"
below and is not in excess of the lesser of the purchase price of such equipment
or the fair market value of such equipment on the date of acquisition;
(h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be; and
(i) other Indebtedness not exceeding Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate.
"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;
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transaction in the ordinary
course of business;
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(d) Investments accepted in connection with Transfers permitted
by Section 7.1;
(e) Investments consisting of (i) compensation of employees,
officers and directors of Borrower or its Subsidiaries so long as the Board of
Directors of Borrower determines that such compensation is in the best interests
of Borrower, (ii) travel advances, employee relocation loans and other employee
loans and advances in the ordinary course of business, and (iii) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries pursuant to employee stock purchase plans or
agreements approved by Borrower's Board of Directors;
(f) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;
(g) Investments pursuant to or arising under currency agreements
or interest rate agreements entered into in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (i)
shall not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions permitted under Section
7.3;
(j) Deposit accounts of Borrower in which Bank has a Lien prior
to any other Lien; and
(k) Deposit accounts of any Subsidiaries maintained in the
ordinary course of business.
"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
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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 other than Equipment financed hereunder at the time of its
acquisition, provided that the Lien is confined solely to the property so
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acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens on Equipment other than Equipment financed hereunder
leased by Borrower or any Subsidiary pursuant to an operating or capital lease
in the ordinary course of business (including proceeds thereof and accessions
thereto) incurred solely for the purpose of financing the lease of such
Equipment (including Liens pursuant to leases permitted pursuant to Section 7.1
and Liens arising from UCC financing statements regarding leases permitted by
this Agreement);
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(e) Leases or subleases and licenses and sublicenses granted to
others in the ordinary course of Borrower's 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 or under any lease or
license;
(f) Liens on assets (including the proceeds thereof and
accessions thereto) that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation that
existed at the time it became or becomes a Subsidiary); provided such Liens are
not granted in contemplation of or in connection with the acquisition of such
asset by Borrower or a Subsidiary;
(g) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.8;
(h) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not constituting a Material Adverse Effect;
(i) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payments of customs duties in connection with the
importation of goods;
(j) Liens that are not prior to the Lien of Bank which constitute
rights of set-off of a customary nature or banker's Liens with respect to
amounts on deposit, whether arising by operation of law or by contract, in
connection with arrangement entered in to with banks in the ordinary course of
business;
(k) Earn-out and royalty obligations existing on the date hereof
or entered into in connection with an acquisition permitted by Section 7.3;
(l) Liens on insurance proceeds in favor of insurance companies
granted solely as security for financed premiums; and
(m) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) (c), (d), (e), (f) and (k) above, provided that any extension,
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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 unrestricted
cash; unrestricted cash-equivalents; net, billed accounts receivable and
investments with maturities of fewer than one year 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.
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"Revolving Advance" or "Revolving Advances" means a cash advance
or cash advances under the Revolving Facility.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Revolving Advances, as specified in Section 2.1.1 hereof.
"Revolving Maturity Date" means the date immediately preceding
the first anniversary of the date of this Agreement.
"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 consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
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to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
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"Term Advance" means the cash advance under the Term Facility.
"Term Availability Date" means the date one (1) calendar month
from the Closing Date.
"Term Loan Amount" means Two Million Dollars ($2,000,000).
"Term Facility" means the facility under which Borrower may
request Bank to issue the Term Advance, as specified in Section 2.1.2 hereof.
"Term Maturity Date" means the date twenty-four (24) months from
the date of the Term Availability Date.
"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, but specifically excluding Subordinated
Debt.
"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 Assignor connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
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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.
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2. LOAN AND TERMS OF PAYMENT
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2.1 Revolving, Term and Equipment Loan Facilities.
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2.1.1 Revolving Facility.
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(a) Revolving Advances. Subject to and upon the terms and
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conditions of this Agreement, Bank agrees to make Revolving Advances to Borrower
in an aggregate amount not to exceed the lesser of the Committed Line or the
Borrowing Base. For purposes of this Agreement, "Borrowing Base" shall mean an
amount equal to seventy-five percent (75%) of Eligible Accounts. 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.
(b) Procedures. Whenever Borrower desires a Revolving Advance,
----------
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, on the Business Day that the Revolving 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 Revolving Advances under this Agreement, based upon
instructions received from a Responsible Officer, or without instructions if in
Bank's discretion such Revolving 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, 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 Revolving Advances made under this Section 2.1.1 to Borrower's
deposit account.
(c) Interest, Payments. Interest shall accrue from the date of
------------------
each Revolving Advance at the rate specified in Section 2.3(a) and shall be
payable on the first (1st) calendar 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 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) Maturity. The Revolving Facility shall terminate on the
--------
Revolving Maturity Date, at which time all Revolving Advances under this Section
2.1.1 shall be immediately due and payable.
2.1.2 Term Facility.
-------------
(a) Term Advance. Subject to and upon the terms and conditions
------------
of this Agreement, Bank agrees, at any time from the date of this Agreement
through the Term Availability Date, to make the Term Advance to Borrower in a
principal amount of up to the Term Loan Amount. Amounts borrowed pursuant to
this Section 2.1.2 may not be reborrowed once repaid.
(b) Procedures. Whenever Borrower desires the Term Advance,
----------
Borrower shall notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, one (1) Business Day before the day on which the Term
Advance is requested to be made. Such notification shall be promptly confirmed
by a Payment/Advance Form in substantially the form of Exhibit B hereto. Bank is
---------
authorized to make the Term Advance under this Agreement based upon instructions
received from a Responsible Officer. Bank shall be entitled to rely on any
telephonic notice given by a person who Bank reasonably believes to be a
Responsible Officer, 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 the Term Advance made under this Section 2.1.2 to Borrower's
deposit account.
10
(c) Interest and Principal. Interest shall accrue from the date
----------------------
of the Term Advance at the rate specified in Section 2.3(a). 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 Term Facility, 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. On the Term Availability Date,
the Term Advance will be payable in twenty-four (24) equal monthly installments
of principal, plus accrued interest, on the first (1st) calendar day of the
month for each month through the Term Maturity Date.
(d) Maturity. The Term Facility shall terminate on the Term
--------
Maturity Date, at which time all Obligations owing under this Section 2.1.2
shall be immediately due and payable.
2.1.3 Equipment Facility.
------------------
(a) Equipment Advances. Subject to and upon the terms and
------------------
conditions of this Agreement, Bank agrees, at any time from the date of this
Agreement through the Equipment Availability Date, to make Equipment Advances to
Borrower in an aggregate principal amount of up to the Equipment Committed Line.
On the date of each Equipment Advance, Borrower shall provide invoices and other
documents as requested by Bank, in form and content satisfactory to Bank,
demonstrating that the Equipment Advances then outstanding (A) shall be used to
finance or refinance, as the case may be, Eligible Equipment, and (B) shall not
exceed one hundred percent (100%) of the cost of such Eligible Equipment,
excluding any and all installation, freight or warranty expenses or sales taxes,
and (C) that no more than twenty percent (20%) of the aggregate outstanding
Equipment Advances shall finance software licenses, leasehold improvements,
taxes, freight or installation costs, or other soft costs. Amounts borrowed
pursuant to this Section 2.1.3 may not be reborrowed once repaid.
(b) Procedures. Whenever Borrower desires an Equipment Advance,
----------
Borrower shall notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, one (1) Business Day before the day on which the
Equipment Advance is requested to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. The notice shall be signed by a Responsible Officer and
---------
include a copy of the invoice for the Eligible Equipment to be financed. Bank
is authorized to make Equipment Advances under this Agreement, based upon
instructions received from a Responsible Officer, or without instructions if in
Bank's discretion such Equipment 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, 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 Equipment Advances made under this Section 2.1.3 to Borrower's
deposit account.
(c) Interest and Principal. Interest shall accrue from the date
----------------------
of each Equipment Advance at the rate specified in Section 2.3(a), and shall be
payable monthly on the first (1st) calendar day of the month for each month
through the month in which the Equipment Availability Date falls. 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 Equipment Committed
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. All Equipment Advances that are
outstanding on the Equipment Availability Date will be payable in thirty-six
(36) monthly installments of principal, plus accrued interest, on the first
(1st) calendar day of the month for each month through the Equipment Maturity
Date.
11
(d) Maturity. The Equipment Facility shall terminate on the
--------
Equipment Maturity Date, at which time all Obligations owing under this Section
2.1.3 and all other amounts under this Agreement shall be immediately due and
payable.
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess. If,
at any time or for any reason, the amount of Obligations owed by Borrower to
Bank pursuant to Section 2.1.2(a) of this Agreement is greater than the Term
Loan Amount Borrower shall immediately pay to Bank, in cash, the amount of such
excess. If, at any time or for any reason, the amount of Obligations owed by
Borrower to Bank pursuant to Section 2.1.3(b) of this Agreement is greater than
the Equipment Committed Line Borrower shall immediately pay to Bank, in cash,
the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate.
-------------
(i) Revolving Advances. Except as set forth in Section
-------------------
2.3(b), all Revolving Advances shall bear interest, on the average Daily Balance
thereof, at a rate equal to the Prime Rate.
(ii) Term Advance. Except as set forth in Section 2.3(b),
------------
the Term Advance shall bear interest, on the average Daily Balance thereof, at a
rate equal to one half of one percentage point (0.5%) above the Prime Rate;
provided, however, that Borrower shall have a one-time option to elect to have
the Term Advance bear interest, on the average Daily Balance thereof, at a rate
equal to three percentage points (3%) above the yield of the 36 month Treasury
Note as reported in the Western edition of The Wall Street Journal, which rate
-----------------------
shall be fixed at the time of Borrower's election. Borrower shall give written
notice to Bank of its interest rate election on the Term Availability Date. If
Borrower fails to give such notice, then the applicable rate shall be the Prime
Rate described herein.
(iii) Equipment Advance. Except as set forth in Section
-----------------
2.3(b), all Equipment Advances shall bear interest, on the average Daily Balance
thereof, at a rate equal to one half of one percentage point (0.5%) above the
Prime Rate; provided, however, that Borrower shall have a one-time option to
elect to have the Equipment Advances bear interest, on the average Daily Balance
thereof, at a rate equal to three percentage points (3%) above the yield of the
36 month Treasury Note as reported in the Western edition of The Wall Street
---------------
Journal, which rate shall be fixed at the time of Borrower's election. Borrower
-------
shall give written notice to Bank of its interest rate election on the Equipment
Availability Date. If Borrower fails to give such notice, then the applicable
rate shall be the Prime Rate described herein.
(b) Default Rate. All Obligations shall bear interest, from and
------------
after the occurrence 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.
(c) 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.
2.4 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
12
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 of payment shall be
immediately applied to conditionally reduce Obligations, but shall not be
considered a payment 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
California 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 Fees. A facility fee equal to Thirty-Seven
-------------
Thousand Five Hundred Dollars ($37,500), which shall be fully earned and
nonrefundable as of such date;
(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; and,
(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 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; provided, however, that Borrower shall
not be liable for any such amount attributable to any period prior to the date
of hundred eight (180) days prior to the date of such certificate.
13
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 Equipment Maturity Date. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Advances 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 (excluding
Obligations under Section 2.6 and 12.2 to the extent they remain inchoate at the
time outstanding payment obligations are paid in full) are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank
---------------------------------------
to make the initial Advance 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) an intellectual property security agreement;
(d) proof that Borrower has received gross proceeds from the
sale of its capital stock or Subordinated Debt in an amount of no less than
Eight Million Dollars ($8,000,000) from Oak Investment Partners;
(e) an audit of Borrower's Accounts (prior to initial Revolving
Advance);
(f) financing statements (Forms UCC-1);
(g) insurance certificate;
(h) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(i) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
------------------------------------
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1;
(b) timely receipt by Bank of the documents, instruments and/or
invoices as provided in Section 2.1.3; and
(c) 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 Advance 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 Advance (except to the extent they relate
specifically to any earlier date, in which case such representations and
warranties shall continue to have been true and accurate as of such date). The
making of each Advance shall be deemed to be a
14
representation and warranty by Borrower on the date of such Advance as to the
accuracy of the facts referred to in this Section 3.2(c).
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, provided, however, that
-------- -------
notwithstanding the foregoing, such grant of a security interest shall not
include, any intellectual property rights which are now or hereafter held by
Borrower as licensee, lessee or otherwise to the extent that such rights are not
assignable or capable of being encumbered as a matter of law or under written
terms of the license, lease or other agreement applicable thereto provided that
Borrower was or is required in its commercially reasonable judgment to enter
into such written terms restricting the grant hereunder. 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, in each case, to the extent that a security interest in such Collateral
can be perfected by the filing of a financing statement or, in the case of
Collateral consisting of instruments, documents, chattel paper or certificated
securities, to the extent that Bank takes possession of such Collateral. Bank
agrees to execute and deliver to Borrower from time to time agreements to
subordinate its Lien as Borrower may request and as are necessary to give to
other lenders which finance new Equipment for Borrower a first priority security
interest in the new Equipment financed so long as the Liens and the Indebtedness
incurred with respect to such Equipment financing are permitted under this
Agreement.
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.
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, except for states as to which any
failure to so qualify would not have a Material Adverse Effect.
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 except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent and
the Loan Documents constitute an assignment. Borrower is not in default
15
under any agreement to which it is a party or by which it is bound, which
default could reasonably be expected to 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 property giving rise to such Eligible Accounts has
been 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 from all material defects.
5.6 Intellectual Property. Borrower is the sole owner of the
---------------------
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
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. Except for and upon the filing with the
United States Patent and Trademark Office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights
necessary to perfect the security interests created hereunder, and except as has
been already made or obtained, no authorization, approval or other action by,
and no notice to or filing with, any United States governmental authority or
United States regulatory body is required either (i) for the grant by Borrower
of the security interest granted hereby or for the execution, delivery or
performance of Loan Documents by Borrower in the United States or (ii) for the
perfection in the United States or the exercise by Bank of its rights and
remedies hereunder.
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 reasonably
be expected to 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.
5.10 Solvency. The fair saleable value of Borrower's assets
--------
(including good will minus disposition costs) exceeds the fair value of its
liabilities; Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is 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
16
result in Borrower's incurring any liability that could reasonably be expected
to 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 except
where the failure to obtain any such consent, approval or authorization, to make
any such declaration or filing, or to be given any such notice could not
reasonably be expected to have a Material Adverse Effect.
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 (it being recognized by Bank that the projections
and forecasts provided by Borrower are not to be viewed as facts and that actual
results during the period or periods covered by any such projections and
forecasts may differ from the projected or forecasted results).
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
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain or cause to be maintained
-------------
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 reasonably be
17
expected to 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 reasonably be expected to 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 reasonably be expected to 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 thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one 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 upon becoming available,
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 and 10-Q 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 One Hundred Thousand
Dollars ($100,000) or more; (e) prompt notice of any material change in the
composition of the Intellectual Property Collateral, including, but not limited
to, any subsequent ownership right of the Borrower in or to any Copyright,
Patent or Trademark not specified in any intellectual property security
agreement between Borrower and Bank or knowledge of an event that materially
adversely effects the value of the Intellectual Property Collateral; and (f)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within twenty (20) 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 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 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
18
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 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. So long as no
Event of Default has occurred and is continuing, Borrower shall have the option
of applying the proceeds of any casualty policy to the replacement or repair of
destroyed or damaged property; provided, that after the occurrence and during
--------
the continuance of an Event of Default, all proceeds payable under any such
policy shall, at the option of Bank, be payable to Bank for application to the
Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities (minus deferred
revenues) of at least 1.25 to 1.00.
6.9 Liquidity Coverage/Debt Service Coverage. Subject to the
----------------------------------------
remainder of this Section, Borrower shall maintain, as of the last day of each
calendar month, the sum of (i) cash and cash equivalents plus (ii) Eligible
----
Accounts minus (iii) the outstanding aggregate amount of Revolving Advances of
-----
at least two (2) times the outstanding amount of Equipment Advances and the Term
Advance. Notwithstanding the foregoing, from and after the time Borrower
achieves for two consecutive fiscal quarters a Debt Service Coverage of at least
1.50 to 1.00, Borrower shall not be subject to the minimum liquidity requirement
set forth above, but instead shall maintain, as of the last day of each fiscal
quarter, a Debt Service Coverage of at least 1.50 to 1.00.
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month, a Tangible Net Worth of not less than Three Million Five
Hundred Thousand Dollars ($3,500,000).
6.11 Debt-Net Worth Ratio. Borrower shall maintain, as of the last
--------------------
day of each calendar month, a ratio of Total Liabilities (minus deferred
revenue) less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of
not more than 1.00 to 1.00.
19
6.12 Profitability. Beginning with the fiscal quarter ending March
-------------
31, 1998, Borrower shall have a minimum net profit, measured as quarterly net
income minus the increase in capitalized software during such quarter plus the
----- ----
amortization expense of capitalized software during such quarter, of One Dollar
($1.00) for each fiscal quarter.
6.13 Registration of Intellectual Property Rights.
--------------------------------------------
(a) Borrower shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, 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. Borrower shall
register or cause to be registered with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those additional
intellectual property rights developed or acquired by Borrower from time to time
in connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or additions to the
intellectual property rights listed on such Exhibits A, B and C.
(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 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, unless Bank determines that reasonable business practices
suggest that abandonment is appropriate.
(d) 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 6.13 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 6.13.
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 Advances, 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 or exclusive licenses for particular geographic regions and similar
arrangements for the use of the property of Borrower or its Subsidiaries; or
(iii) Transfers of worn-out or obsolete Equipment or Equipment financed by other
vendors; (iv) Transfers which constitute liquidation of Investments permitted
under Section 7.7; and (v) other Transfers not otherwise permitted by this
Section 7.1 not exceeding One Hundred Thousand Dollars ($100,000) in the
aggregate in any fiscal year.
20
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 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. 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; provided
--------
that this Section 7.3 shall not apply to (i) the purchase of inventory,
equipment or intellectual property rights in any transaction valued at less than
One Hundred Thousand Dollars ($100,000) in the ordinary course of business or
(ii) transactions among Subsidiaries or among Borrower and its Subsidiaries in
which Borrower is the surviving entity.
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; provided, that (i) Borrower may declare and make any dividend payment or
other distribution payable in its equity securities, (ii) Borrower may convert
any of its convertible securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefor and (iii) for so
long as an Event of Default has not occurred, Borrower may repurchase stock from
former employees of Borrower in accordance with the terms of repurchase or
similar agreements between Borrower and such employees.
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 and
except for transactions with a Subsidiary that are upon fair and reasonable
terms and transactions constituting Permitted Investments.
7.9 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 judgement.
7.10 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.
7.11 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
21
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.
7.12 Compliance. Become an "investment company" or become
----------
"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 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.
7.13 Prohibition on Transfer of Assets. Transfer any of its property
---------------------------------
or assign or otherwise convey any right to receive income, including the sale of
any Accounts, to its Subsidiary, Dot Net, Inc.
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 the principal of, or
---------------
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Sections 6.7, 6.8, 6.9, 6.10, 6.11, 6.12 or 6.13 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 Responsible 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
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 Advances 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 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
22
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 Advances 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 thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a 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 Two Hundred Fifty
Thousand Dollars ($250,000) or that could reasonably be expected to 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 thirty (30) days (provided that no
Advances 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.
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:
(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) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) 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
23
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;
(e) 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;
(f) 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;
(g) 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 any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) 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; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) 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 Exhibit A, Exhibit B and Exhibit 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 any
right, title or interest; (g) 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; and (h)
to transfer the Intellectual Property Collateral into the name of Bank or a
third party to the extent permitted under the California Uniform Commercial Code
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.
24
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. Upon the
occurrence and during the continuation of an Event of Default, 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, 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 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. Bank shall
have a non-exclusive, royalty-free license to use the Intellectual Property
Collateral to the extent reasonably necessary to permit Bank to exercise its
rights and remedies upon the occurrence of an Event of Default.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
its obligations under Section 9207 of the Code, 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. Subject to the foregoing, 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 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, 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:
25
If to Borrower: Inktomi Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxxxx
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Ms. Xxxxxx Xxxx
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
------------------------------------------
The Loan Documents 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.
----------------------
(a) 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
participations in all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder, subject to the provisions of this Section 12.1.
(b) Bank may sell, negotiate or grant participations to other
financial institutions in all or part of the obligations of the Borrower
outstanding under the Loan Documents, without notice to or the approval of
Borrower; provided that any such sale, negotiation or participation shall be in
--------
compliance with the applicable federal and state securities laws and the other
requirements of this Section 12.1. Notwithstanding the sale, negotiation or
grant of participations, Bank shall remain solely responsible for the
performance of its obligations under this Agreement, and Borrower shall continue
to deal solely and directly with Bank in connection with this Agreement and the
other Loan Documents.
(c) The grant of a participation interest shall be on such terms
as Bank determines are appropriate, provided only that (1) the holder of such a
participation interest shall not
26
have any of the rights of Bank under this Agreement except, if the participation
agreement so provides, rights to demand the payment of costs of the type
described in Section 2.6, provided that the aggregate amount that the Borrower
shall be required to pay under Section 2.6 with respect to any ratable share of
the Committed Line or any Advance (including amounts paid to participants) shall
not exceed the amount that Borrower would have had to pay if no participation
agreements had been entered into, and (2) the consent of the holder of such a
participation interest shall not be required for amendments or waivers of
provisions of the Loan Agreement other than those which (i) increase the amount
of the Committed Line, (ii) extend the term of this Agreement, (iii) decrease
the rate of interest or the amount of any fee or any other amount payable to
Bank under this Agreement, (iv) reduce the principal amount payable under this
Agreement, or (v) extend the date fixed for the payment of principal or interest
or any other amount payable under this Agreement.
(d) Bank may assign, from time to time, all or any portion of
the Committed Line to an Affiliate of Bank or to The Federal Reserve Bank or,
subject to the prior written approval of Borrower (which approval will not be
unreasonably withheld), to any other financial institution; provided, that (i)
the amount of the Committed Line being assigned pursuant to each such assignment
shall in no event be less than Five Hundred Thousand Dollars ($500,000) and
shall be an integral multiple of One Hundred Thousand Dollars ($100,000) and
(ii) the parties to each such assignment shall execute and deliver to Borrower
an assignment agreement in a form reasonably acceptable to each. Upon such
execution and delivery, from and after the effective date specified in such
assignment agreement (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such assignment agreement, have the rights and obligations of a Bank
hereunder and (y) Bank shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such assignment agreement,
relinquish its rights and be released from its obligations under this Agreement
(other than pursuant to this Section 12.1(d)), and, in the case of an assignment
agreement covering all or the remaining portion of Bank's rights and obligations
under this Agreement, Bank shall cease to be a party hereto. In the event of an
assignment hereunder, the parties agree to amend this Agreement to the extent
necessary to reflect the mechanical changes which are necessary to document such
assignment. Each party shall bear its own expenses (including without
limitation attorneys' fees and costs) with respect to such an amendment.
12.2 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 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 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.
27
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 (excluding Obligations under Section 2.6 and 12.2 to the extent they
remain inchoate at the time the outstanding payment Obligations are paid in
full) 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 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INKTOMI CORPORATION
By:______________________________
Title:___________________________
SILICON VALLEY BANK
By:_______________________________
Title:____________________________
28
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, 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 the foregoing;
(f) All 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; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
29
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:_________________________
FAX#: (000) 000-0000 TIME:_________________________
FROM: Inktomi Corporation
-----------------------------------------------------------------
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 (REVOLVING ADVANCE) $_______________________________
PRINCIPAL INCREASE (TERM ADVANCE) $_______________________________
PRINCIPAL INCREASE (EQUIPMENT 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 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 #
_______________________________________ ___________________________________
Received By (Bank) Phone #
Authorized Signature (Bank)
_____________________________________
30
EXHIBIT C
BORROWING BASE CERTIFICATE
________________________________________________________________________________
Borrower: Inktomi Corporation Lender: Silicon Valley Bank
Commitment Amount: $2,500,000
________________________________________________________________________________
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 50% 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 (75% of #14) $_________
BALANCES
16. Maximum Loan Amount $_________
17. Total Funds Available [Lesser of #16 or #15] $_________
18. Present balance owing on Line of Credit $_________
19. RESERVE POSITION (#17 minus #18) $_________
* 35% Limit for NTT and OzEmail
**Eligible Foreign Accounts include NTT and OzEmail
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 Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
BANK USE ONLY
---- --- ----
Rec'd By: ___________________
Auth. Signer
Date: _______________________
Verified: ___________________
Auth. Signer
Date: _______________________
_____________________________
Inktomi Corporation
By:___________________________
Authorized Signer
31
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INKTOMI CORPORATION
The undersigned authorized officer of Inktomi Corporation hereby certifies
that in accordance with the terms and conditions of the 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 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial (prior to first draw) and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio/1/ 1.25:1.00 _____:1.0 Yes No
Tangible Net Worth $3,500,000 ________$ Yes No
Debt/TNW 1.00:1.00 _____:1.0 Yes No
Liquidity Coverage/2/ 2.00:1.00 _____:1.0 Yes No
Debt Service Coverage/3/ 1.50:1.00 _____:1.0 Yes No
Profitability: Quarterly/4/ $1.00 $________ $Yes No
/1/Minus deferred revenues.
/2/Converts to Debt Service Coverage upon two consecutive quarters of DSC >
1.50:1.00.
/3/Tested after conversion of Liquidity Coverage.
/4/Begin testing 3/31/98. (Profit measured to exclude capitalized software and
include amortization expenses for the quarter.)
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
______________________________
Signature
Title
______________________________
______________________________
DATE
32
BANK USE ONLY
Received by:__________________
AUTHORIZED SIGNER
Date:_________________________
Verified:_____________________
AUTHORIZED SIGNER
Date:_________________________
Compliance Status: Yes No
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Inktomi Corporation Bank: Silicon Valley Bank
================================================================================
LOAN TYPE. This is a variable rate, revolving line of credit of up to
$2,500,000, a term facility of up to $2,000,000 and an equipment facility of up
to $3,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line Term Line Equipment Line
-------------- --------- --------------
Amount paid to Borrower directly: $___________ $________ $_________
Undisbursed Funds $___________ $________ $_________
Principal $___________ $________ $_________
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $________
$37,500 Loan Fees
________$Accounts Receivables Audit
Other Charges Paid in Cash: $________
$TBD UCC Search Fees
$TBD UCC Filing Fees
$TBD Patent Filing Fees
$TBD Trademark Filing Fees
$TBD Copyright Filing Fees
$TBD Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______________ the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF MAY 2, 1997.
BORROWER: INKTOMI CORPORATION
__________________________________
___________________________________
Authorized Officer
================================================================================
34
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Inktomi Corporation BANK: Silicon Valley Bank
================================================================================
INSURANCE REQUIREMENTS. Inktomi Corporation ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be canceled or diminished without a
minimum of twenty (20) days' prior written notice to
Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of May 2, 1997, or earlier. Grantor acknowledges and agrees that
if Grantor fails to provide any required insurance or fails to continue such
insurance in force, Bank may do so at Grantor's expense as provided in the Loan
and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 2, 1997.
GRANTOR: Inktomi Corporation
x________________________________
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:__________________ PHONE:_____________
AGENT'S NAME:__________________________________________________________________
INSURANCE COMPANY:_____________________________________________________________
POLICY NUMBER:_________________________________________________________________
EFFECTIVE DATES:_______________________________________________________________
COMMENTS:______________________________________________________________________
================================================================================
CORPORATE RESOLUTIONS TO BORROW
================================================================================
BORROWER: INKTOMI CORPORATION
================================================================================
I, the undersigned Secretary or Assistant Secretary of Inktomi Corporation
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Articles of Incorporation and Bylaws of the Corporation,
each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
__________________ ____________________ _____________________________
__________________ ____________________ _____________________________
__________________ ____________________ _____________________________
__________________ ____________________ _____________________________
__________________ ____________________ _____________________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of May 2, 1997 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the
2
Corporation with Bank, or to cause such other disposition of the proceeds
derived therefrom as they may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on May 2, 1997 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X_____________________________________
===============================================================================
Attachment 1 - Articles of Incorporation
Attachment 2 - Bylaws
3
FIRST AMENDMENT
----------------
TO
--
LOAN AND SECURITY AGREEMENT
---------------------------
This First Amendment to Loan and Security Agreement (this "Amendment") is
entered into as of July 11, 1997, by and between Silicon Valley Bank ("Bank")
and Inktomi Corporation ("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of May 2, 1997, as may have been or may be further amended from time to
time (the "Agreement"). Borrower and Bank desire to amend the Agreement in
accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Amendments
----------
(a) Section 1.1 of the Agreement is hereby amended by adding the
following defined terms in appropriate alphabetical order:
"'Cash Management Service' or 'Cash Management Services' has
the meaning set forth in Section 2.1.1.4 herein."
"'Foreign Exchange Reserve' has the meaning set forth in
Section 2.1.1.3 herein."
"'Letter of Credit' or 'Letters of Credit' has the meaning
set forth in Section 2.1.1.1 herein."
(b) Section 2.1.1(a) of the Agreement is hereby amended by replacing
it in its entirety with the following:
"(a) Advances. Subject to and upon the terms and conditions
--------
of this Agreement Bank agrees to make Revolving Advances to Borrower in an
aggregate amount not to exceed (i) the lesser of the Committed Line or the
Borrowing Base minus (ii) the sum of (A) the face amount of all outstanding
-----
Letters of Credit (including drawn but unreimbursed Letters of Credit), (B)
the Foreign Exchange Reserve, and (C) the aggregate amount outstanding for
Cash Management Services. For purposes of this Agreement, "Borrowing Base"
shall mean an amount equal to seventy-five percent (75%) of Eligible
Accounts. 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."
(c) The Agreement is hereby amended by adding the following Sections
2.1.1.1, 2.1.1.2, 2.1.1.3 and 2.1.1.4 in appropriate numerical order:
"2.1.1.1 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
(each a "Letter of Credit," collectively, the "Letters of Credit") for the
account of Borrower in an aggregate face amount not to exceed (i) the
lesser of the Committed Line or the Borrowing Base minus (ii) the sum of
-----
(A) the then outstanding principal balance of the Revolving Advances, (B)
the Foreign Exchange Reserve and (C) amounts outstanding
1
for Cash Management Services. Each such Letter of Credit shall have an
expiry date no later than the Revolving Maturity Date. All such 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 application and letter of credit agreement. All amounts actually paid
by Bank in respect of a Letter of Credit shall, when paid, constitute a
Revolving Advance under this 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 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.
2.1.1.2 Letter of Credit Reimbursement; Reserve.
---------------------------------------
(a) 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.
(b) 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 Line for letters of credit against fluctuations
in currency exchange rates, in an amount equal to twenty percent (20%) 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 Line shall be
reduced by the amount of such reserve for so long as such Letter of Credit
remains outstanding.
2.1.1.3 Foreign Exchange Contract; Foreign Exchange
-------------------------------------------
Settlements.
-----------
(a) Subject to the terms of this Agreement,
Borrower may enter into foreign exchange contracts (the "Exchange
Contracts") not to exceed (i) the lesser of the Committed Line or the
Borrowing Base minus (ii) the sum of (A) the then outstanding principal
-----
balance of the Revolving Advances, (B) the Foreign Exchange Reserve and (C)
amounts outstanding for Cash Management Services (the "Contract Limit"),
pursuant to which Bank shall sell to or purchase from Borrower foreign
currency on a spot or future basis. Borrower shall not request any Exchange
Contracts at any time it is out of compliance with any of the provisions of
this Agreement. All Exchange Contracts must provide for delivery of
settlement on or before the Revolving Maturity Date. The amount available
under the Committed Line at any time shall be reduced by the following
amounts (the "Foreign Exchange Reserve") on any given day (the
"Determination Date"): (i) on all outstanding Exchange Contracts on which
delivery is to be effected or settlement allowed more than two business
days after the Determination Date, ten percent (10%) of the gross amount of
the Exchange Contracts; plus (ii) on all outstanding Exchange Contracts on
which delivery is to be effected or settlement allowed within two (2)
business days after the Determination Date, one hundred percent (100%) of
the gross amount of the Exchange Contracts.
2
(b) Bank may, in its discretion, terminate the
Exchange Contracts at any time (a) that an Event of Default occurs or (b)
that there is no sufficient availability under the Committed Line and
Borrower does not have available funds in its bank account to satisfy the
Foreign Exchange Reserve. If Bank terminates the Exchange Contracts, and
without limitation of any applicable indemnities, Borrower agrees to
reimburse Bank for any and all fees, costs and expenses relating thereto or
arising in connection therewith.
(c) Borrower shall not permit the total gross
amount of all Exchange Contracts on which delivery is to be effected and
settlement allowed in any two business day period to be more than Two
Million Five Hundred Thousand Dollars ($2,500,000) (the "Settlement
Limit"), nor shall Borrower permit the total gross amount of all Exchange
Contracts to which Borrower is a party, outstanding at any one time, to
exceed the Contract Limit. Notwithstanding the above, however, the amount
which may be settled in any two (2) business day period may be increased
above the Settlement Limit up to, but in no event to exceed, the amount of
the Contract Limit under either of the following circumstances:
(i) if there is sufficient availability
under the Committed Line in the amount of the Foreign Exchange Reserve as
of each Determination Date, provided that Bank in advance shall reserve the
full amount of the Foreign Exchange Reserve against the Committed Line; or
(ii) if there is insufficient availability
under the Committed Line, as to settlements within any two (2) business day
period, provided that Bank, in its sole discretion, may: (A) verify good
funds overseas prior to crediting Borrower's deposit account with Bank (in
the case of Borrower's sale of foreign currency); or (B) debit Borrower's
deposit account with Bank prior to delivering foreign currency overseas (in
the case of Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as a Revolving Advance under the Committed
Line, or to debit Borrower's account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange
Contracts and, without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges of Bank in
connection with the Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank and hold it harmless from and against any
and all claims, debts, liabilities, demands, obligations, actions, costs
and expenses (including, without limitation, attorneys' fees of counsel of
Bank's choice), of every nature and description which it may sustain or
incur, based upon, arising out of, or in any way relating to any of the
Exchange Contracts or any transactions relating thereto or contemplated
thereby.
2.1.1.4 Cash Management Sublimit. Subject to the
------------------------
terms and conditions of this Agreement, Borrower may utilize up to an
aggregate amount not to exceed Two Million Five Hundred Thousand Dollars
($2,500,000) (the "Cash Management Sublimit") for cash management services
provided by Bank, which
3
services may include merchant services, PC-ACH, direct deposit of payroll,
business credit card, Firstax, and other related check cashing services as
defined in that certain Cash Management Services Agreement provided to
Borrower in connection herewith (a "Cash Management Service", or the "Cash
Management Services"). Any amounts actually paid by Bank in respect of a
Cash Management Service or Cash Management Services shall, when paid,
constitute a Revolving Advance under this Agreement."
(d) Section 6.3 of the Agreement is hereby amended by replacing the second
paragraph contained therein in its entirety with the following:
"Within twenty (20) days after the last day of each month in which
either (i) Revolving Advances are outstanding or (ii) the aggregate amount
outstanding under Sections 2.1.1.1, 2.1.1.2, 2.1.1.3 or 2.1.1.4 is equal to
or greater than One Million Dollars ($1,000,000), 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."
(e) Section 6.9 of the Agreement is hereby amended in its entirety by
replacing it with the following:
"6.9 Liquidity Coverage/Debt Service Coverage.
----------------------------------------
(a) Subject to the remainder of this Section, Borrower
shall maintain:
(i) as of the last day of each calendar month in
which there are no outstanding Revolving Advances and the aggregate amount
outstanding under Sections 2.1.1.1, 2.1.1.2, 2.1.1.3 and 2.1.1.4 herein is
less than One Million Dollars ($1,000,000), the sum of (A) cash and cash
equivalents plus (B) fifty percent (50%) of Eligible Accounts of at least
----
two (2) times the sum of the outstanding aggregate amount of Equipment
Advances and the Term Advance;
(ii) as of the last day of each calendar month in
which either there are Revolving Advances outstanding hereunder or the
aggregate amount of outstandings under Sections 2.1.1.1, 2.1.1.2, 2.1.1.3
and 2.1.1.4 are greater than or equal to One Million Dollars ($1,000,000),
the sum of (A) cash and cash equivalents plus (B) Eligible Accounts minus
-----
(c) the outstanding aggregate amount of Revolving Advances of at least two
(2) times the sum of the outstanding aggregate amount of Equipment Advances
and the Term Advance.
(b) Notwithstanding the foregoing, from and after the time
Borrower achieves for two consecutive fiscal quarters a Debt Service
Coverage of at least 1.50 to 1.00, Borrower shall not be subject to the
minimum liquidity requirement set forth above, but instead shall maintain,
as of the last day of each fiscal quarter, a Debt Service Coverage of at
least 1.50 to 1.00."
(f) Exhibit D to the Agreement is hereby amended and replaced in its
---------
entirety with the Exhibit D attached hereto.
---------
4
2. Conditions Precedent to Effectiveness. The effectiveness of this
-------------------------------------
Amendment is subject to the further conditions precedent that Bank shall have
received, in form and substance satisfactory to Bank:
(a) a certificate of the secretary of Borrower with respect to incumbency
and resolutions authorizing the execution, delivery and performance of this
Amendment, and confirming that the copies of the Articles of Incorporation
and By Laws previously delivered to Bank have not been amended and remain
in full force and effect;
(b) an audit of Borrower's Accounts; and
(c) a copy of this Amendment duly executed by Borrower.
3. No Defenses of Borrower. Borrower agrees, as of this date, that it
-----------------------
has no defenses against the obligations to pay any amounts under the
Indebtedness.
4. Interpretation. Unless otherwise defined, all capitalized terms in
--------------
this Amendment shall be as defined in the Agreement.
5. Representations. Borrower represents and warrants that the
---------------
Representations and Warranties contained in the Agreement are true and correct
as of the date of this Amendment, and that no Event of Default has occurred and
is continuing.
6. MISCELLANEOUS.
-------------
a. Successors and Assigns. This Amendment shall be binding upon and
----------------------
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
b. Entire Agreement. This Amendment and the Loan Documents contain
----------------
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings.
c. Course of Dealing; Waivers. No course of dealing on the part of
--------------------------
Bank or its officers, nor any failure or delay in the exercise of any right by
Bank, shall operate as a waiver thereof, and any single or partial exercise of
any such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by
an officer of Bank.
d. Legal Effect. Except as amended by this Amendment, the Loan
------------
Documents remain in full force and effect. If any provision of this Amendment
conflicts with applicable law, such provision shall be deemed severed from this
Amendment, and the balance of this Amendment shall remain in full force and
effect.
[Remainder of Page Intentionally Left Blank]
5
e. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
INKTOMI CORPORATION
By _____________________________
Title __________________________
SILICON VALLEY BANK
By _____________________________
Title __________________________
6
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INKTOMI CORPORATION
The undersigned authorized officer of Inktomi Corporation hereby certifies
that in accordance with the terms and conditions of the 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 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days/1/ Yes No
A/R Audit Initial and Semi-Annual Yes No
/1/ Due when Revolving Advances outstanding or outstandings under subfacilities less than or equal
to $1,000,000
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio/1/ 1.25:1.00 _____:1.0 Yes No
Tangible Net Worth $3,500,000 $________ Yes No
Debt/TNW 1.00:1.00 _____:1.0 Yes No
Liquidity Coverage/2, 3/ 2.00:1.00 _____:1.0 Yes No
Debt Service Coverage/4/ 1.50:1.00 _____:1.0 Yes No
Profitability: Quarterly/5/ $ 1.00 $________ Yes No
/1/Minus deferred revenues.
/2/Liquidity ratio calculations includes 50% Accounts if no Revolving Advances
outstanding and outstanding amounts under subfacilities less than $1,000,000
/3/Converts to Debt Service Coverage upon two consecutive quarters of DSC
greater than 1.50:1.00.
/4/Tested after conversion of Liquidity Coverage.
/5/Begin testing 3/31/98. (Profit measured to exclude capitalized software and
include amortization expenses for the quarter.)
COMMENTS REGARDING EXCEPTIONS: See Attached.
-----------------------------------
Sincerely, BANK USE ONLY
______________________________ Received by: ______________________
Signature AUTHORIZED SIGNER
Date: _____________________________
______________________________
Title Verified: _________________________
AUTHORIZED SIGNER
______________________________
Date Date: _____________________________
Compliance Status: Yes No
-----------------------------------
7
CORPORATE RESOLUTIONS TO BORROW
______________________________________________________________________________
BORROWER: INKTOMI CORPORATION
______________________________________________________________________________
I, the undersigned Secretary or Assistant Secretary of Inktomi Corporation
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the state of California.
I FURTHER CERTIFY that the Articles of Incorporation and By Laws previously
delivered to Silicon Valley Bank (the "Bank") remain in full force and effect
and have not been amended, restated or modified.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
____________________ ______________________ __________________________
____________________ ______________________ __________________________
____________________ ______________________ __________________________
____________________ ______________________ __________________________
____________________ ______________________ __________________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Bank, on such terms as may
be agreed upon between the officers, employees, or agents and Bank, such sum or
sums of money as in their judgment should be borrowed, without limitation,
including such sums as are specified in that certain First Amendment to Loan and
Security Agreement dated as of July 11, 1997 (the "Amendment").
EXECUTE NOTES. To execute and deliver to Bank the Amendment and also to
execute and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, or
any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
1
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
CASH MANAGEMENT SERVICES. To enter into that certain Cash Management
Services Agreement and any other related documents pertaining to cash management
services.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on July 11, 1997 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X ______________________________
-------------------------------------------------------------------------------
2
SECOND AMENDMENT
-----------------
TO
--
LOAN AND SECURITY AGREEMENT
---------------------------
This Second Amendment to Loan and Security Agreement (this "Amendment") is
entered into as of July 17, 1997, by and between Silicon Valley Bank ("Bank")
and Inktomi Corporation ("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of May 2, 1997, as amended by that First Amendment to Loan and Security
Agreement dated as of July 11, 1997, and as may have been or may be further
amended from time to time (the "Agreement"). Borrower and Bank desire to amend
the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Amendments
----------
(a) Section 1.1 of the Agreement is hereby amended by adding the
following defined terms in appropriate alphabetical order:
"'Microsoft Accounts' means Accounts owed to Borrower by
Microsoft Corporation pursuant to the Microsoft Hosting Agreement."
'Microsoft Debt' means all amounts owed by Borrower to
Microsoft Corporation pursuant to the terms of the Microsoft Loan
Agreement.
'Microsoft Hosting Agreement' means that certain Software Hosting
Agreement dated as of ______________, 1997 by and between Borrower and
Microsoft Corporation.
'Microsoft Loan Agreement' means that certain Loan Agreement by
and between Borrower and Microsoft Corporation dated as of
______________, 1997 and all promissory notes executed thereunder, and
that certain Security Agreement dated as of ______________, 1997 by
and between Borrower and Microsoft Corporation related thereto and any
other documents executed in connection with any of them, pursuant to
which Borrower may borrow amounts for the acquisition of certain
Equipment as described therein."
(b) Section 1.1 of the Agreement is hereby amended by adding the
following subsection to the exclusions set forth in the definition of "Eligible
Accounts":
"(l) Microsoft Accounts."
(c) Section 1.1 of the Agreement is hereby amended by replacing
subsection (c) of the defined term "Permitted Liens" in its entirety with the
following:
"(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, (ii) Liens on any deposit account into
which funds borrowed pursuant to the Microsoft Loan Agreement are
deposited prior to the purchase of such Equipment, or (iii) Liens
existing on such Equipment other than Equipment financed hereunder 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) Section 4.1 of the Agreement is hereby amended by adding the
following sentence to the end of the Section:
"Bank agrees to execute and deliver to Borrower from time to time such
Lien releases as Borrower may request and as are necessary to give
Microsoft Corporation a first priority security interest in the (i)
Equipment financed under the Microsoft Loan Agreement; proceeds
thereof; increases, accessions, substitutions, additions thereto and
replacements therefor; and (ii) any deposit account into which amounts
borrowed under the Microsoft Loan Agreement are deposited prior to the
purchase of such Equipment."
(e) Section 6.8 is hereby amended by replacing it in its entirety
with the following:
"6.8 Quick Ratio. Borrower shall maintain, as of the last day
-----------
of each calendar month, a ratio of Quick Assets to Current Liabilities
(minus deferred revenues and Microsoft Debt) of at least 1.25 to 1.00.
For purposes of this Section 'Quick Assets' shall not include
Microsoft Accounts."
(f) Section 6.11 is hereby amended by replacing it in its entirety
with the following:
"6.11 Debt-Net Worth Ratio. Borrower shall maintain, as of the
--------------------
last day of each calendar month, a ratio of Total Liabilities (minus
deferred revenue and Microsoft Debt) less Subordinated Debt to
Tangible Net Worth (minus Microsoft Accounts) plus Subordinated Debt
of not more than 1.00 to 1.00."
2. Conditions Precedent to Effectiveness. The effectiveness of this
-------------------------------------
Amendment is subject to the further conditions precedent that Bank shall have
received, in form and substance satisfactory to Bank:
(a) a certificate of the secretary of Borrower with respect to incumbency
and resolutions authorizing the execution, delivery and performance of this
Amendment, and confirming that the copies of the Articles of Incorporation
and By Laws previously delivered to Bank have not been amended and remain
in full force and effect; and
(b) a copy of this Amendment duly executed by Borrower.
3. No Defenses of Borrower. Borrower agrees, as of this date, that it
-----------------------
has no defenses against the obligations to pay any amounts under the
Indebtedness.
4. Interpretation. Unless otherwise defined, all capitalized terms in
--------------
this Amendment shall have the meaning set forth in the Agreement.
5. Representations. Borrower represents and warrants that the
---------------
Representations and Warranties contained in the Agreement are true and correct
as of the date of this Amendment, and that no Event of Default has occurred and
is continuing.
6. MISCELLANEOUS.
-------------
a. Successors and Assigns. This Amendment shall be binding upon and
----------------------
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
b. Entire Agreement. This Amendment and the Loan Documents contain
----------------
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings.
c. Course of Dealing; Waivers. No course of dealing on the part of
--------------------------
Bank or its officers, nor any failure or delay in the exercise of any right by
Bank, shall operate as a waiver thereof, and any single or partial exercise of
any such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by
an officer of Bank.
d. Legal Effect. Except as amended by this Amendment, the Loan
------------
Documents remain in full force and effect. If any provision of this Amendment
conflicts with applicable law, such provision shall be deemed severed from this
Amendment, and the balance of this Amendment shall remain in full force and
effect.
e. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
INKTOMI CORPORATION
By________________________________________
Title_____________________________________
SILICON VALLEY BANK
By________________________________________
Title_____________________________________
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
BORROWER: INKTOMI CORPORATION
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of Inktomi Corporation
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the state of California.
I FURTHER CERTIFY that the Articles of Incorporation and By Laws previously
delivered to Silicon Valley Bank (the "Bank") remain in full force and effect
and have not been amended, restated or modified.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
---------------- --------------------- -------------------------------
---------------- --------------------- -------------------------------
---------------- --------------------- -------------------------------
---------------- --------------------- -------------------------------
---------------- --------------------- -------------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Bank, on such terms as may
be agreed upon between the officers, employees, or agents and Bank, such sum or
sums of money as in their judgment should be borrowed, without limitation,
including such sums as are specified in that certain Second Amendment to Loan
and Security Agreement dated as of July 17, 1997 (the "Amendment").
EXECUTE NOTES. To execute and deliver to Bank the Amendment and also to
execute and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, or
any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
CASH MANAGEMENT SERVICES. To enter into that certain Cash Management
Services Agreement and any other related documents pertaining to cash management
services.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on July 17, 1997 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X______________________________________
THIRD AMENDMENT
----------------
TO
--
LOAN AND SECURITY AGREEMENT
---------------------------
This Third Amendment to Loan and Security Agreement (this "Amendment") is
entered into as of November 6, 1997, by and between Silicon Valley Bank ("Bank")
and Inktomi Corporation ("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of May 2, 1997, as amended by that First Amendment to Loan and Security
Agreement dated as of July 11, 1997, and by that Second Amendment to Loan and
Security Agreement dated as of July 17, 1997, and as may have been or may be
further amended from time to time (the "Agreement"). Borrower and Bank desire
to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Waiver. Bank waives Borrower's obligations to comply with section 6.9
------
for the periods ended June 30, 1997 and July 31, 1997, and with section 6.11 for
the period ended July 31, 1997. Such waiver does not constitute a waiver (i) of
compliance with those sections as of any other date, (ii) of any other failure
by Borrower to comply with the Agreement or any other Events of Default, now
existing or hereafter arising, or (iii) Bank's right to require compliance at
all times with the terms and conditions of the Agreement. Bank reserves all
rights under the Agreement and under applicable law. Borrower agrees, as of
this date, that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
2. Equity Financing. Borrower may not request any Advances under the
----------------
Agreement until the receipt by Borrower of at least Four Million Dollars
($4,000,000) in additional equity financing.
3. Amendments
----------
(a) Section 1.1 of the Agreement is hereby amended by replacing
subsection (l) to the exclusions set forth in the definition of "Eligible
Accounts" in its entirety as follows:
"(l) The Microsoft Accounts, to the extent they exceed forty
percent (40%) of all Accounts."
(b) Section 6.8, 6.9, 6.10, 6.11 and 6.12 are amended to read as
follows:
"6.8 Quick Ratio. Beginning August 31, 1997, Borrower shall
-----------
maintain (i) as of the last day of each calendar month, a
ratio of Quick Assets to Current Liabilities (minus
deferred revenues and Microsoft Debt) of at least 1.25 to
1.00 and (ii) as of the last day of each fiscal quarter, a
ratio of Quick Assets to Current Liabilities (minus
deferred revenues and Microsoft Debt) of at least 1.75 to
1.00. Beginning March 31, 1998, Borrower shall maintain (i)
as of the last day of each calendar month, a ratio of Quick
Assets to Current Liabilities (minus deferred revenues and
Microsoft Debt) of at least 1.50 to 1.00 and (ii) as of the
last day of each fiscal quarter, a ratio of Quick Assets to
Current Liabilities (minus deferred revenues and Microsoft
Debt) of at least 2.00 to 1.00. For purposes of this
Section 'Quick Assets' shall not include Microsoft Accounts
to the extent the proceeds of such Accounts service the
Microsoft Debt."
1
"6.9 Liquidity Coverage. Beginning August 31, 1997, Borrower
------------------
shall maintain, as of the last day of each calendar month,
the sum of (i) cash and cash equivalents plus (ii) Eligible
----
Accounts minus (iii) the outstanding aggregate amount of
-----
Revolving Advances of at least one (1) times the
outstanding amount of Equipment Advances and the Term
Advance ("Liquidity Coverage Ratio"); provided that if
--------
Borrower has not provided agings of its accounts receivable
pursuant to or voluntarily in accordance with Section 6.3
of the Agreement, then Liquidity Coverage Ratio shall mean
the sum of (i) cash and cash equivalents plus (ii) fifty
----
percent (50%) of net accounts receivable of at least one
(1) times the outstanding amount of Equipment Advances and
the Term Advance. Beginning as of March 31, 1998, Borrower
shall maintain, as of the last day of each fiscal quarter,
a Liquidity Coverage Ratio of at least 2.00 to 1.00.
"6.10 Tangible Net Worth. Beginning as of August 31, 1997,
------------------
Borrower shall maintain, as of the last day of each fiscal
quarter, a Tangible Net Worth of not less than One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000)
increasing to a Tangible Net Worth of not less than Three
Million Dollars ($3,000,000) beginning as of the quarter
ending March 31, 1998 and thereafter.
"6.11 [Intentionally Omitted.]"
-----
"6.12 Profitability. For the quarter ending March 31, 1998,
-------------
Borrower's loss shall not exceed Two Million Five Hundred
Thousand Dollars ($2,500,000). For the quarter ending June
30, 1998, Borrower's loss shall not exceed One Million
Dollars ($1,000,000). Thereafter, Borrower shall have a
minimum net profit, measured as quarterly net income minus
-----
the increase in capitalized software during such quarter
plus the amortization expense of capitalized software
----
during such quarter, of One Dollar ($1.00) as of the last
day of each fiscal quarter."
(c) Exhibit D to the Agreement is hereby amended and replaced in its
---------
entirety with the Exhibit D attached hereto.
---------
4. Conditions Precedent to Effectiveness. The effectiveness of this
-------------------------------------
Amendment is subject to the further conditions precedent that Bank shall have
received, in form and substance satisfactory to Bank:
(a) a certificate of the secretary of Borrower with respect to
incumbency and resolutions authorizing the execution, delivery and performance
of this Amendment, and confirming that the copies of the Articles of
Incorporation and By Laws previously delivered to Bank have not been amended and
remain in full force and effect; and
(b) a copy of this Amendment duly executed by Borrower.
5. Bank Balances. In connection with this amendment, beginning December
-------------
31, 1997, Borrower shall hold the lesser of (i) Fifty-One Percent (51%) of all
cash and cash equivalents, or (ii) Four Million Dollars ($4,000,000) at the Bank
in either a Certificate of Deposit, Money Market Account, and/or Checking
Account through the later of the Equipment Maturity Date, the Revolving Maturity
Date, or the Term Maturity Date. For each month that Borrower's average monthly
book balance falls below the deposit requirement described in the preceding
sentence, Bank shall charge Borrower a fee in the amount of Two Thousand Dollars
($2,000).
6. Reincorporation. Bank consents to Borrower's reincorporation as a
---------------
Delaware corporation, provided the successor to Borrower assumes all of the
obligations of Borrower on terms
2
reasonably acceptable to Bank and executes a financing statement for the benefit
of Bank in a form reasonably acceptable to Bank.
7. Representation and Warranties. Borrower represents and warrants that
-----------------------------
the Representations and Warranties contained in the Agreement are true and
correct as of the date of this Amendment, and that no Event of Default has
occurred and is continuing.
8. MISCELLANEOUS.
-------------
(a) Successors and Assigns. This Amendment shall be binding upon and
----------------------
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
(b) Entire Agreement. This Amendment and the Loan Documents contain
----------------
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings.
(c) Course of Dealing; Waivers. No course of dealing on the part of
--------------------------
Bank or its officers, nor any failure or delay in the exercise of any right by
Bank, shall operate as a waiver thereof, and any single or partial exercise of
any such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by
an officer of Bank.
(d) Legal Effect. Except as amended by this Amendment, the Loan
------------
Documents remain in full force and effect. If any provision of this Amendment
conflicts with applicable law, such provision shall be deemed severed from this
Amendment, and the balance of this Amendment shall remain in full force and
effect. Unless otherwise defined, all capitalized terms in this Amendment shall
have the meaning set forth in the Agreement.
(e) Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
INKTOMI CORPORATION
By ______________________________________
Title ___________________________________
SILICON VALLEY BANK
By ______________________________________
Title ___________________________________
3
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INKTOMI CORPORATION
The undersigned authorized officer of Inktomi Corporation hereby certifies
that in accordance with the terms and conditions of the 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 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days* Yes No
A/R Audit Initial and Semi-Annual Yes No
* Due when Revolving Advances outstanding or outstandings under subfacilities
greater than or equal to $1,000,000
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
----------------- -------- ------ --------
Maintain on the Following Basis:
Minimum Quick Ratio /1/ _____:1.0 Yes No
Tangible Net Worth /2/ $________ Yes No
Liquidity Coverage Ratio /3/ _____:1.0 Yes No
Profitability /4/ $________ Yes No
/1/Minus deferred revenues and Microsoft Debt. Monthly 1.25:1.00 and quarterly
1.75:1.00, increasing to monthly 1.50:1.00 and quarterly 2.00:1.00 at
3/31/98.
/2/Quarterly at $1,750,000, increasing to $3,000,000 at 3/31/98.
/3/Monthly at 1.00:1.00 increasing to 2.00:1.00 at 3/31/98.
/4/Quarterly loss not to exceed $2,500,000 for 3/31/98 or $1,000,000 for
6/30/98. Profitable thereafter.
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
------------------------------
BANK USE ONLY
____________________________________________ Received by:__________________
SIGNATURE AUTHORIZED SIGNER
____________________________________________ Date:_________________________
TITLE
Verified:_____________________
____________________________________________ AUTHORIZED SIGNER
DATE
DATE:_________________________
Compliance Status: Yes No
------------------------------
4
CORPORATE RESOLUTIONS TO BORROW
________________________________________________________________________________
BORROWER: INKTOMI CORPORATION
________________________________________________________________________________
I, the undersigned Secretary or Assistant Secretary of Inktomi Corporation
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the state of California.
I FURTHER CERTIFY that the Articles of Incorporation and By Laws previously
delivered to Silicon Valley Bank (the "Bank") remain in full force and effect
and have not been amended, restated or modified.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
___________________ _____________________ _______________________________
___________________ _____________________ _______________________________
___________________ _____________________ _______________________________
___________________ _____________________ _______________________________
___________________ _____________________ _______________________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Bank, on such terms as may
be agreed upon between the officers, employees, or agents and Bank, such sum or
sums of money as in their judgment should be borrowed, without limitation,
including such sums as are specified in that certain Third Amendment to Loan and
Security Agreement dated as of November 6, 1997 (the "Amendment").
EXECUTE NOTES. To execute and deliver to Bank the Amendment and also to
execute and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, or
any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the
1
Corporation with Bank, or to cause such other disposition of the proceeds
derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
CASH MANAGEMENT SERVICES. To enter into that certain Cash Management
Services Agreement and any other related documents pertaining to cash management
services.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on November __, 1997 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X _____________________________________
________________________________________________________________________________
2
FOURTH AMENDMENT
-----------------
TO
--
LOAN AND SECURITY AGREEMENT
---------------------------
This Fourth Amendment to Loan and Security Agreement (this "Amendment") is
entered into as of February 2, 1998, by and between Silicon Valley Bank ("Bank")
and Inktomi Corporation ("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of May 2, 1997, as amended from time to time (the "Agreement").
Borrower and Bank desire to amend the Agreement in accordance with the terms of
this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Equity Financing; Subsequent Advances. Borrower shall receive gross
-------------------------------------
proceeds from the sale or issuance of its capital stock in an amount not less
than Ten Million Dollars ($10,000,000) not later than March 1, 1998. Borrower
may not request any Advances or other extensions of credit under the Agreement
until Borrower complies with the provisions of Sections 6.8, 6.9, 6.10 and 6.12.
2. Amendments
----------
(a) Sections 6.8, 6.9, 6.10, and 6.12 are amended to read as follows:
"6.8 Quick Ratio. Beginning March 31, 1998, Borrower shall
-----------
maintain (i) as of the last day of each calendar month, a
ratio of Quick Assets to Current Liabilities (minus deferred
revenues and Microsoft Debt) of at least 1.50 to 1.00 and
(ii) as of the last day of each fiscal quarter, a ratio of
Quick Assets to Current Liabilities (minus deferred revenues
and Microsoft Debt) of at least 2.00 to 1.00. For purposes
of this Section, 'Quick Assets' shall not include Microsoft
Accounts to the extent the proceeds of such Accounts service
the Microsoft Debt."
"6.9 Liquidity Coverage. Beginning March 31, 1998, Borrower
------------------
shall maintain, as of the last day of each calendar month,
the sum of (i) cash and cash equivalents plus (ii) Eligible
----
Accounts minus (iii) the outstanding aggregate amount of
-----
Revolving Advances of at least two (2) times the outstanding
amount of Equipment Advances and the Term Advance
("Liquidity Coverage Ratio"); provided that if Borrower has
--------
not provided agings of its accounts receivable pursuant to
or voluntarily in accordance with Section 6.3 of the
Agreement, then Liquidity Coverage Ratio shall mean the sum
of (i) cash and cash equivalents plus (ii) fifty percent
----
(50%) of net accounts receivable of at least two (2) times
the outstanding amount of Equipment Advances and the Term
Advance.
"6.10 Tangible Net Worth. Beginning as of March 31, 1998,
------------------
Borrower shall maintain, as of the last day of each fiscal
quarter, a Tangible Net Worth of not less than Three Million
Dollars ($3,000,000).
"6.12 Profitability. For the quarter ending March 31, 1998,
-------------
Borrower's loss shall not exceed Four Million Six Hundred
Fifty Thousand Dollars ($4,650,000)."
1
(c) Exhibit D to the Agreement is hereby amended and replaced in its
---------
entirety with the Exhibit D attached hereto.
---------
3. Condition Precedent to Effectiveness. The effectiveness of this
------------------------------------
Amendment is subject to the further condition precedent that Bank shall have
received an amount equal to the Bank Expenses incurred in connection with this
Amendment.
4. Representation and Warranties. Borrower represents and warrants that
-----------------------------
the Representations and Warranties contained in the Agreement are true and
correct as of the date of this Amendment, and that no Event of Default has
occurred and is continuing.
5. MISCELLANEOUS.
-------------
(a) Successors and Assigns. This Amendment shall be binding upon and
----------------------
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.
(b) Entire Agreement. This Amendment and the Loan Documents contain
----------------
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings.
(c) Course of Dealing; Waivers. No course of dealing on the part of
--------------------------
Bank or its officers, nor any failure or delay in the exercise of any right by
Bank, shall operate as a waiver thereof, and any single or partial exercise of
any such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision
shall not affect any right of Bank thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by
an officer of Bank.
(d) Legal Effect. Except as amended by this Amendment, the Loan
------------
Documents remain in full force and effect. If any provision of this Amendment
conflicts with applicable law, such provision shall be deemed severed from this
Amendment, and the balance of this Amendment shall remain in full force and
effect. Unless otherwise defined, all capitalized terms in this Amendment shall
have the meaning set forth in the Agreement.
(e) Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
INKTOMI CORPORATION
By ________________________________________
Title _____________________________________
SILICON VALLEY BANK
By ________________________________________
Title _____________________________________
2
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INKTOMI CORPORATION
The undersigned authorized officer of Inktomi Corporation hereby certifies
that in accordance with the terms and conditions of the 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 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days* Yes No
A/R Audit Initial and Semi-Annual Yes No
* Due when Revolving Advances outstanding or outstandings under subfacilities
greater than or equal to $1,000,000
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on the Following Basis:
Minimum Quick Ratio /1/ _____:1.0 Yes No
Tangible Net Worth /2/ $ _______ Yes No
Liquidity Coverage Ratio /3/ _____:1.0 Yes No
Profitability /4/ $ _______ Yes No
/1/Minus deferred revenues and Microsoft Debt. Monthly 1.50:1.00 and quarterly
2.00:1.00.
/2/Quarterly at $3,000,000 at 3/31/98.
/3/Monthly at 2.00:1.00 at 3/31/98.
/4/Quarterly loss not to exceed $4,650,000 for 3/31/98.
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
------------------------------
BANK USE ONLY
____________________________________________ Received by:__________________
SIGNATURE AUTHORIZED SIGNER
____________________________________________ Date:_________________________
TITLE
____________________________________________ Verified:_____________________
DATE AUTHORIZED SIGNER
Date:_________________________
Compliance Status: Yes No
------------------------------
3
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
BORROWER: INKTOMI CORPORATION
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of Inktomi Corporation
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the state of California.
I FURTHER CERTIFY that the Articles of Incorporation and By Laws previously
delivered to Silicon Valley Bank (the "Bank") remain in full force and effect
and have not been amended, restated or modified.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
_____________________ _______________________ _____________________________
_____________________ _______________________ _____________________________
_____________________ _______________________ _____________________________
_____________________ _______________________ _____________________________
_____________________ _______________________ _____________________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Bank, on such terms as may
be agreed upon between the officers, employees, or agents and Bank, such sum or
sums of money as in their judgment should be borrowed, without limitation,
including such sums as are specified in that certain Third Amendment to Loan and
Security Agreement dated as of February 2, 1998 (the "Amendment").
EXECUTE NOTES. To execute and deliver to Bank the Amendment and also to
execute and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes, or
any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the
1
Corporation with Bank, or to cause such other disposition of the proceeds
derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
CASH MANAGEMENT SERVICES. To enter into that certain Cash Management
Services Agreement and any other related documents pertaining to cash management
services.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on February __, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X______________________________________
--------------------------------------------------------------------------------
2
