Exhibit 10.6
SENIOR LOAN AND SECURITY AGREEMENT NO. 0098
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 0098 (this "Security Agreement") is
dated as of July 15,1997 between WORLDGATE COMMUNICATIONS, INC., a Delaware
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $1,000,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower
(each, a "Loan" and collectively, the "Loans"). Such borrowings shall be
evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other written agreement between Borrower and
Lender, Borrower will grant to Lender hereunder a first perfected security
interest in certain of its equipment, machinery, fixtures, other items and
intangibles whether now owned by Borrower or hereafter acquired, and all
substitutions and replacements of and additions, improvements, accessions and
accumulations to said equipment, machinery and fixtures and other items,
together with all rents, issues, income, profits and proceeds therefrom
(collectively, the "Collateral") which is described on the Note attached hereto
or any subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference. In addition to the foregoing
Collateral, under certain circumstances Borrower's obligations to Lender may
also be secured by certain "Additional Collateral" as provided below, in which
case the term "Collateral" shall include such Additional Collateral.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Base Term and monthly payment amount payable with respect to each
item of Collateral shall be as set forth in and as stated in the respective
Note(s). The terms of each Note hereto are subject to all conditions and
provisions of Us Security Agreement as it may at any time be amended. Each Note
shall constitute a separate and independent Loan and contractual obligation of
Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.
SECTION 2. NON-CANCELLABLE LOAN. This Security Agreement and each Note cannot be
cancelled or terminated except as expressly provided herein. Borrower agrees
that its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such rent and other sums, are absolute and unconditional and are not subject
to any abatement, reduction, setoff, defense, counterclaim or recoupment due or
alleged to be due to, or by reason of, any past, present or future claims which
Borrower may have against Lender, any assignee, the manufacturer or seller of
the Collateral, or against any person for any reason whatsoever.
SECTION 3. LENDER COMMITMENT. (a) GENERAL TERMS. Subject to the terms and
conditions of this Security Agreement and so long as no Event of Default or
event which with the giving of notice or passage of time, or both, could become
an Event of Default has occurred or is continuing, Lender hereby agrees to make
one
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or more senior secured Loans to Borrower, subject to the following conditions:
(i) each Loan shall be evidenced by a Note; (ii) the total principal amount of
the Loans shall not exceed $1,000,000 in the aggregate (the "Commitment"); (iii)
at the time of each Loan, no Event of Default or event which with the giving of
notice or passage of time, or both, could become an Event of Default shall have
occurred and be continuing, as reasonably determined by Lender, and certified by
Borrower; (iv) the amount of each Loan shall be at least $50,000 except for a
final Loan which may be less than $50,000; (v) Lender shall not be obligated to
make any new Loan after December 3 1, 1997 provided that the funding period may
be extended to June 30, 1998 if Lender has received and approved in its sole
discretion Borrower's monthly 1998 business plan; (vi) for each Loan, Borrower
shall present to Lender a list of proposed Collateral for approval by Lender in
its sole discretion; (vii) for each Loan, Borrower shall have provided Lender
with each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance acceptable to Lender); (viii) Borrower
is performing according to its business plan referred to as "WorldGate
Communications, Inc. Confidential 1997 Operating Statements, Balance Sheets and
Cash Flow Statements" (the "Business Plan"), as may be amended from time to time
in form and substance reasonably acceptable to Lender, (ix) there shall be no
material adverse change in Borrower's condition, financial or otherwise, as
reasonably determined by Lender, and Borrower so certifies, from (yy) the date
of the most recent financial statements delivered by Borrower to Lender to (zz)
the date of the proposed Loan; (x) Borrower shall use the proceeds of all Loans
hereunder for working capital; (xi) at the time of each Loan, Borrower has
reimbursed Lender for all UCC filing and search costs and appraisal fees; (xii)
all Collateral has been marked and labeled by Lender or Lender's agent; and
(xiii) Lender has received in form and substance acceptable to Lender: (a)
Borrower's interim financial statements signed by a financial officer of
Borrower, (b) evidence of Borrower's $7,556,000 cash position as of April 30,
1997; and (c) complete copies of the Borrower's audit reports for its most
recent fiscal year, which shall include at least Borrower's balance sheet as of
the close of such year, and Borrower's statement of income and retained earnings
and of changes in financial position for such year, prepared on a consolidated
basis and certified by independent public accountants. Such certificate shall
not be qualified or limited because of restricted or limited examination by such
accountant of any material portion of the company's records. Such reports shall
be prepared in accordance with generally accepted accounting principles and
practices consistently applied.
(b) THE NOTES. Each Loan shall be evidenced by a Note. Each Note shall
bear interest and be payable and prepayable at the times and in the manner
provided therein. Following payment of the Indebtedness related to each Note,
Lender shall promptly return such Note, marked "canceled," to Borrower.
(c) SPECIFIC TERMS - TRADE SHOW BOOTH. Borrower and Lender agree that
if, upon the expiration of the Commitment Period, the amount funded allocable to
Borrower's trade show booth exceeds thirty-five percent (35%) of the Commitment
utilized as of such expiration date, then, at Lender's option, Borrower shall
pay to Lender an amount equal to such excess ("Excess Payment"). Borrower agrees
to pay the Excess Payment to Lender within thirty (30) days of Lender's invoice
The Excess Payment shall be applied in pro rata shares to each Note as advance
payments under each such Note of (i) first, Borrower's additional interest
compensation election (which for purposes of this Excess Payment shall be
assumed to be the final payment election) and (ii) next, to Borrower's last
monthly payment obligations. Such Excess Payment shall not constitute a
prepayment of interest or principal.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i) the
payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender (the "Obligations").
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SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note except where the failure
to so qualify or remain qualified would not have a material adverse effect upon
Borrower; (b) it has full authority to execute and deliver this Security
Agreement and the Notes and perform the terms hereof and thereof, and this
Security Agreement and the Notes have been duly authorized, executed and
delivered and constitute valid and binding obligations of Borrower enforceable
in accordance with their terms except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditor's rights generally, and general principles of equity; (c) the execution
and delivery of this Security Agreement and the Notes will not contravene any
law, regulation or judgment affecting Borrower or result in any breach of any
agreement or other instrument binding on Borrower; (d) no consent of Borrower's
shareholders or holder of any indebtedness, or filing with, or approval of, any
governmental agency or commission, which has not already been obtained or
performed, as appropriate, is a condition to the performance of the terms of
this Security Agreement or the Notes; (e) there is no action or proceeding
pending or threatened against Borrower before any court or administrative agency
which might have a materially adverse effect on the business, financial
condition or operations of Borrower; (f) Borrower owns and will keep all of the
Collateral free and clear of all liens, claims and encumbrances, and, except for
this Security Agreement, there is no deed of bust, mortgage, security agreement
or other third party interest against any of the Collateral; (g) Borrower has
good and marketable title to the Collateral; (h) all Collateral has been
received, installed and is ready for use and is satisfactory in all respects for
the purposes of this Security Agreement; (i) the Collateral is, and will remain
at all times under applicable law, removable personal property, which is free
and clear of any lien or encumbrance except in favor of Lender, notwithstanding
the manner in which the Collateral may be attached to any real property; (j) all
credit and financial information submitted to Lender herewith or at any other
time is and will at the time given be true and correct; and (k) the security
interest granted to Lender hereunder is a perfected first priority security
interest.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be located
at the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent which location shall
in all events be within the United States. All of the records regarding the
Collateral shall be located at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX
00000. Lender shall have the right to inspect Collateral, including records
relating thereto, and Borrower's books and records with respect to the same at
any time (upon reasonable notification) during regular business hours, such
books and records to be maintained in accordance with generally accepted
accounting principles. Borrower shall be responsible for all labor, material and
freight charges incurred in connection with any removal or relocation of
Collateral which is requested by Borrower and consented to by Lender, as well as
for any charges due to the installation or moving of the Collateral. Payments
under the Notes and under this Security Agreement shall continue during any
period in which the Collateral is in transit during a relocation. Lender or its
agent shall xxxx and label Collateral, which labels (to be provided by Lender)
shall state that such Collateral is subject to a security interest of Lender,
and Borrower shall keep such labels on the Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. For so long as an item of Collateral remains
subject to a security interest hereunder, then, with respect to such item of
Collateral: (a) GENERAL. Borrower will reasonably permit Lender to inspect each
item of Collateral and its maintenance records. Borrower will at its sole
expense comply with all applicable laws, rules, regulations, requirements and
orders with respect to the use, maintenance,
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repair, condition, storage and operation of each item of Collateral. Except as
required herein, Borrower will not make any addition or improvement to any item
of Collateral that is not readily removable without causing material damage to
any item or impairing its original value or utility. Any addition or improvement
that is so required or cannot be so removed will immediately become Collateral
of Lender. (b) SERVICE AND Repair. Borrower will at its sole expense maintain
and service and repair any damage to each item of Collateral in a manner
consistent with prudent industry practice and Borrower's own practice so that
such item of Collateral is at all times (i) in the same condition as when
delivered to Borrower, except for ordinary wear and tear, and (ii) in good
operating order for the function intended by its manufacturer's warranties and
recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." On the first day payment is due on each Note describing
Collateral materially affected by such Casualty Occurrence, following the
Casualty Occurrence or, if there is no such payment date, thirty (30) days after
such Casualty Occurrence Borrower shall: (a) repair the Collateral, (b) replace
the Collateral with comparable Collateral in good condition and repair taking
all steps required by Lender to perfect Lender's first priority security
interest therein and (which replacement Collateral shall be subject to the terms
of this Security Agreement), or (c) pay to Lender an amount equal to the Balance
Due (as defined below) for each lost or damaged item of Collateral. The Balance
Due for each such item is the sum of. (i) all amounts for each item which may be
then due or accrued to the payment date, plus (ii) as of such payment date, an
amount equal to the product of the fraction specified below times the sum of all
remaining payments under the respective Note, including the amount of any
mandatory or optional payment required or permitted to be paid by Borrower to
Lender at the maturity of the Note. The numerator of the fraction shall be the
Collateral Value (as set forth on the applicable Note) of the item and the
denominator shall be the aggregate Collateral Value of all items under the Note.
Upon the making of such payments, Lender shall release such item of Collateral
from its lien hereunder.
Notwithstanding the above, within thirty (30) days following a Casualty
Occurrence, Borrower may replace any item of Collateral which has suffered a
Casualty Occurrence with Collateral acceptable to Lender in its complete
discretion and, in such event the provisions of the previous paragraph shall not
apply. Borrower's tender of such Collateral shall constitute a representation
and warranty that it is free of all liens, claims and encumbrances and otherwise
qualifies as Collateral under this Security Agreement. Following such tender,
Lender shall have a first security interest in such Collateral.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured
against all risks of physical loss for at least the replacement value of the
Collateral and in no event for less than the amount payable following a Casualty
Occurrence (as provided in Section 9). Such insurance shall provide for a loss
payable endorsement to Lender and/or any assignee of Lender. Borrower shall
maintain commercial general liability insurance with respect to loss or damage
for personal injury, death or property damage in an amount not less than
$2,000,000 in the aggregate, naming Lender and/or Lender's assignee as
additional insured. Such insurance shall contain insurer's agreement to give
thirty (30) days' advance written notice to Lender before cancellation or
material change of any policy of insurance. Borrower will provide Lender and any
assignee of Lender with a certificate of insurance from the insurer evidencing
Lender's or such assignee's interest in the policy of insurance. Such insurance
shall cover any Casualty Occurrence to any unit of Collateral. Notwithstanding
anything in Section 9 or this Section 10 to the contrary, this Security
Agreement and Borrower's obligations hereunder shall remain in full force and
effect with respect to any unit of Collateral which is not subject to a Casualty
Occurrence. If Borrower fails to provide or maintain insurance as required
herein, Lender shall have the right, but shall not be obligated, to obtain such
insurance. In that event, Borrower shall pay to Lender the cost thereof.
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SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; (b) comply with all applicable governmental laws,
rules and regulations relating to its business and the Collateral; (c) maintain
Lender's security interest in the corresponding Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual financial
statements within ninety (90) days following the end of Borrower's fiscal year,
quarterly financial statements within forty-five (45) days after the end of each
fiscal quarter, and within thirty (30) days of the end of each month a financial
statement for that month prepared by Borrower, and including an income statement
and balance sheet, all of which shall be certified by an officer of Borrower as
true and correct and shall be prepared in accordance with generally accepted
accounting principles consistently applied, and such other information as Lender
may reasonably request; and (e) promptly (but in no event more than five (5)
business days after the occurrence of such event) notify Lender of any material
adverse change in Borrower's condition during the commitment period and of the
occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees on an after-tax basis from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses), imposed upon or incurred by
or asserted against Lender or any assignee of Lender by any third party by
reason of the occurrence or existence (or alleged occurrence or existence) of
any act or event relating to or caused by any portion of the Collateral, or its
purchase, acceptance, possession, use, maintenance or transportation, including
without limitation, consequential or special damages of any kind, any failure on
the part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct, provided, however, did in the event that any action, suit or
proceeding is brought against Lender by reason of any such occurrence, Borrower
will, at Borrower's expense, resist and defend such action, suit or proceeding
or cause the same to be resisted and defended by counsel designated by Borrower
and reasonably approved by Lender. Borrower's obligations under this Section 12
shall survive the payment in full of all the Indebtedness and the performance of
all Obligations with respect to acts or events occurring or alleged to have
occurred prior to the payment in full of all the Indebtedness and the
performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to Lender's income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement, the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall promptly execute UCC
termination statements and such other documents as Borrower shall reasonably
request to evidence the release of Lender's lien relating to the Collateral.
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SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD, BORROWER SHALL NOT (a) ASSIGN, TRANSFER,
PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT, ANY NOTE,
ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL OR PERMIT
IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES AND
CONTRACTORS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER ITS
PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY EXCEPT TO
A SUCCESSOR IN INTEREST TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS OF BORROWER;
PROVIDED, HOWEVER, THAT, THE FINANCIAL CONDITION OF SUCH SUCCESSOR IS GREATER
THAN OR EQUAL TO BORROWER AS DETERMINED IN GOOD FAITH BY LENDER. LENDER MAY
ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY INTEREST IN ANY
OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN PART TO ONE OR
MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. In the event
Lender declines to consent to an assignment pursuant to Section 15(c) above,
Borrower shall have the option to early terminate all Notes upon payment to
Lender of (i) all amounts under the Notes which may be then due or accrued, (ii)
the aggregate sum of all remaining payments under the Notes, including the
amount of any mandatory or optional payment required or permitted to be paid by
Borrower to Lender at the maturity of the Notes discounted to present value at a
rate of 6% per annum, and (iii) all other amounts due under this Security
Agreement and under the Notes. If Borrower is given notice of such assignment it
agrees to acknowledge receipt thereof in writing and Borrower shall execute such
additional documentation as Lender's assignee and/or secured party shall
reasonably require. Each such assignee and/or secured party shall have all of
the rights, but (except as provided in this Section 15) none of the obligations,
of Lender under this Security Agreement, which obligations will be retained by
Lender unless such assignee or secured party expressly agrees to assume such
obligations in writing. Borrower shall not assert against any assignee and/or
secured party any defense, counterclaim or offset that Borrower may have against
Lender. Notwithstanding any such assignment, and providing no Event of Default
has occurred and is continuing, Lender, or its assignees, secured parties, or
their agents or assigns, shall not interfere with Borrower's right to quietly
enjoy use of Collateral subject to the terms and conditions of this Security
Agreement. Subject to the foregoing, the Notes and this Security Agreement shall
inure to the benefit of, and are binding upon, the successors and assignees of
the parties hereto. Borrower acknowledges that any such assignment by Lender
will not change Borrower's duties or obligations under this Security Agreement
and the Notes or increase any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder. (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15 if not cured within thirty (30)
days of such failure in instances when a cure can be effected; (iii) any
representation or warranty of Borrower made in this Security Agreement or the
Notes or in any other agreement, statement or certificate furnished to Lender in
connection with this Security Agreement or the Notes shall prove to have been
incorrect in any material respect when made or given; (iv) Borrower's failure to
comply with or perform any term, covenant or condition of this Security
Agreement or any Note or under any other agreement between Borrower and Lender
or under any lease or mortgage of real property covering the location of the
Equipment if such failure to comply or perform is not cured by Borrower within
thirty (30) days after Borrower knows of the noncompliance or nonperformance or
notice from Lender; (v) seizure of any of the Collateral under legal process;
(vi) the filing by or against Borrower or any guarantor under any guaranty
executed in connection with this Security Agreement ("Guarantor") of a petition
for reorganization or liquidation under the Bankruptcy Code or any amendment
thereto or under any other insolvency law providing for the relief
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of debtors; (vii) the voluntary or involuntary making of an assignment of a
substantial portion of its assets by Borrower or by any Guarantor for the
benefit of its creditors, the appointment of a receiver or trustee for Borrower
or any Guarantor or for any of Borrower's or Guarantor's assets, the institution
by or against Borrower or any Guarantor of any formal or informal proceeding for
dissolution, liquidation, settlement of claims against or winding up of the
affairs of Borrower or any Guarantor provided that in the case of all such
involuntary proceedings, same are not dismissed within sixty (60) days after
commencement; or (viii) except as permitted under Section 15, the making by
Borrower or by any Guarantor of a transfer of all or a material portion of
Borrower's or Guarantor's assets or inventory not in the ordinary course of
business.
(b) REMEDIES. If any Event of Default has occurred, Lender may in its
sole discretion exercise one or more of the following remedies with respect to
any or all of the Collateral: (i) declare due any or all of the aggregate sum of
all remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all direct damages and expenses reasonably incurred by Lender by reason
of an Event of Default; (iii) without court order or prior demand, enter upon
the premises where the Collateral is located and take immediate possession of
and remove it without liability of Lender to Borrower or any other person or
entity; (iv) terminate this Security Agreement and sell the Collateral at public
or private sale, or otherwise dispose of, hold, use or lease any or all of the
Collateral adhering to standards of commercial reasonableness; or (v) exercise
any other right or remedy available to it under applicable law. If Lender has
declared due any or all of the Remaining Payments, Borrower will pay immediately
to Lender (A) the Remaining Payments, (B) all amounts which may be then due or
accrued, and (C) all other amounts due under this Security Agreement and under
the Notes (Lender's Return, as referred to below, means the amounts described in
clauses (A), (B) and (C) above). The net proceeds of any sale or lease of such
Collateral will be credited against Lender's Return. The net proceeds of a sale
of the Collateral pursuant to this Section 15(b) is defined as the sales price
of the Collateral less reasonable selling expenses, including, without
limitation, costs of remarketing the Collateral and all refurbishing costs and
commissions paid with respect to such remarketing. The net proceeds of a lease
of the Collateral pursuant to this Section 15 (b) is defined as the amount equal
to the monthly payments due under such lease (discounted at a rate per annum
equal to the 3-year Treasury Xxxx yield as of the date on which Lender notifies
Borrower that this Security Agreement is terminated (the "Termination Date") (as
such yield is reported in the most recent Federal Reserve Statistical Release H.
15 (519) ("Statistical Release") (the "Discount Rate")) plus the residual value
of the Collateral at the end of the basic term of such lease, as reasonably
determined by Lender, and discounted at the Discount Rate.
Borrower agrees to pay all reasonable internal and out-of-pocket costs
of Lender incurred in enforcement of this Security Agreement, the Notes or any
instrument or agreement required under this Security Agreement, including, but
not limited to attorneys' fees and litigation expenses and fees of collection
agencies ("Remedy Expenses"). At Lender's request, Borrower shall assemble the
Collateral and make it available to Lender at such time and location as Lender
may designate.
Declaration that any or all amounts under this Security Agreement
and/or the Notes are immediately due and payable and Lender's taking possession
of any or all Equipment shall not terminate this Security Agreement or any of
the Notes unless Lender so notifies Borrower in writing. None of the above
remedies is intended to be exclusive but each is cumulative and may be enforced
separately or concurrently.
(c) APPLICATION of PROCEEDS. The proceeds of any sale of all or any
part of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
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FIRST, to the payment of reasonable costs and expenses of suit
or foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all reasonable expenses, liabilities and advances incurred
or made pursuant to this Security Agreement or any Note by Lender in connection
with foreclosure, suit, sale or enforcement of this Security Agreement or the
Notes, and taxes, assessments or liens superior to Lender's security interest
granted by this Security Agreement;
SECOND, to the payment of all other amounts not described in
item Third below due under this Security Agreement and all Notes;
THIRD ,to pay Lender an amount equal to Lender's Return, to
the extent not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to
whomever may lawfully be entitled to receive it.
(d) EFFECT OF DELAY; WAIVER; FORECLOSURE ON COLLATERAL. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies exercised hereunder or thereunder.
Lender shall not be required first to foreclose on the Collateral prior to
bringing an action against Borrower for sums owed to Lender under this Security
Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge in an amount
equal to 10% of each monthly payment and other payments, if any, owed Lender by
Borrower which are not paid when due, for every month such payment is not paid
when due, but in no event an amount greater than the highest rate permitted by
applicable law. If such amounts have not been received by Lender at Lender's
place of business or by Lender's designated agent by the date such amounts are
due under this Security Agreement or the Notes, Lender shall xxxx Borrower for
such charges. Borrower acknowledges that invoices for amounts due hereunder or
under the Notes are sent by Lender for Borrower's convenience only. Borrower's
non-receipt of an invoice will not relieve Borrower of its obligation to make
payments hereunder or under the Notes.
SECTION 18. PAYMENTS BY LENDER If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10, then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums reasonably paid and all costs and expenses reasonably incurred in
connection with the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower Will execute all financing statements
pursuant to the Uniform Commercial Code and all such other documents reasonably
requested by Lender to perfect Lender's security interests hereunder. Borrower
authorizes Lender to file financing statements signed only by Lender (where such
authorization is permitted by law) at all places where Lender deems necessary.
8
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall -pay Lender all costs and expenses
including reasonable attorneys' fees and the fees of collection agencies,
reasonably incurred by Lender (a) in enforcing any of the terms, conditions or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
is filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent, which shall not
be given for changes that will affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or which
in any way affect the value of the Collateral for purposes of resale or lease.
All attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lessor.
SECTION 24. CHATTEL PAPER (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes(s) to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
SECTION 25. COMMITMENT FEE. Borrower has paid to Lender a commitment fee ("Fee")
of $5,000. The Fee shall be applied by Lender first to reimburse Lender for all
out-of-pocket UCC and other search costs, inspections and labeling costs and
appraisal fees, if any, incurred by Lender, and then proportionally to the first
monthly payment for each Note hereunder in the proportion that the Collateral
Value for such Note bears to Lender's entire commitment. However, the portion of
the Fee which is not applied to such monthly payments shall be non-refundable
except if Lender defaults in its obligation to fund Loans pursuant to Section 3.
SECTION 26. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service and shall be directed, as the
case may be, to Lender at 0000 Xxxxxx Xxxxxxxxx, Xxx Xxxxxx, Xxxxxxxxxx 00000,
Attention: Asset Management and to Borrower at 0000 Xxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxx, XX 00000, Attention: Xxxx Xxxxxxx, Xx.
SECTION 27. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) Borrower represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with
9
respect to this Security Agreement. (d) Borrower acknowledges that Borrower has
read this Security Agreement and the Notes, understands them and agrees to be
bound by their terms and further agrees that this Security Agreement and the
Notes constitute the entire agreement between Lender and Borrower with respect
to the subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement and the Notes may not be changed,
altered or modified except by an instrument signed by an officer or authorized
representative of Lender and Borrower. (f) Any failure of either party to
require strict performance by the other or any waiver of any provision herein or
in a Note shall not be construed as a consent or waiver of any other breach of
the same or any other provision. (g) If any provision of this Security Agreement
or any Note is held invalid, such invalidity shall not affect any other
provisions hereof or thereof. (h) The obligations of Borrower to pay the
Indebtedness and perform the Obligations shall survive the expiration or earlier
termination of this Security Agreement and each Note until all Obligations of
Borrower to Lender have been met and all liabilities of Borrower to Lender and
any assignee have been paid in full. (i) Borrower will, at its expense, promptly
execute and deliver to Lender such documents and assurances (including financing
statements) and take such further action as Lender may reasonably request in
order to carry out the intent of this Security Agreement and Lender's rights and
remedies. (j) During the continuance of an Event of default hereunder, Borrower
hereby appoints Lender (and each of Lender's officers, employees or agents
designated by Lender), with full power of substitution by Lender, as Borrower's
attorney, with power to execute and deliver on Borrower's behalf financing
statements and other documents necessary to perfect and/or give notice of
Lender's security interest in any of the Collateral. (k) Any consents required
hereunder shall not be unreasonably withheld or delayed.
SECTION 28. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed in
the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with the laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
did exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement and each Note shall be in
the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco. BORROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 29. ADDITIONAL INTEREST COMPENSATION: (a) GENERAL. If and as the Note
provides, Borrower shall be required to choose a final payment or Note extension
election ("Additional Interest Compensation") at the expiration of the first
Note's Base Term, then that choice shall be an election of Borrower's Additional
Interest Compensation election for all, but not less than all, of the Collateral
under all Notes under the Security Agreement.
Fair market value shall be determined for the Collateral under all Notes prior
to the first Note's expiration.
Until Borrower fulfills an Additional Interest Compensation election, all
Borrower's Obligations, including payment of the Monthly Payment Amount, shall
continue in full force and effect, on a month-to-month basis.
(b) END OF LOAN POSITION ELECTIONS.
ELECTION NO. I - FOR THE TRADE SHOW BOOTH ONLY:
Make a final payment equal to 15% of the Trade Show Booth Note's original
principal amount.
ELECTION NO. I - FOR ALL OTHER COLLATERAL
Make a final payment equal to the Collateral's fair market value, in no event
less than 10% nor more than 20% of the Note's original principal amount for
such Collateral.
ELECTION NO. 2 - FOR BOTH THE TRADE SHOW BOOTH AND OTHER COLLATERAL
Extend the Note's Base Term for an additional 6 months "Extended Term") for a
monthly rate of 3.175% of the Collateral's original purchase price.
If Borrower fails to timely make the payment required under (a) above, Borrower
shall be deemed to have elected (b).
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED WORLDGATE COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxxxx X. Xxxx
-------------------------------- -----------------------------
Name: Xxxxxx Xxxxx Name: Xxxxxxx X. Xxxx
------------------------------ ---------------------------
Title: VP Title: VP, Corporate Affairs
----------------------------- --------------------------
HEADQUARTERS LOCATION:
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
County of Bucks
EXHIBITS AND SCHEDULES:
Exhibit A - Closing Memorandum
10
AMENDMENT NO. 1 TO SENIOR LOAN AND SECURITY AGREEMENT NO. 0098
THIS AMENDMENT NO. 1 TO SENIOR LOAN AND SECURITY AGREEMENT NO. 0098
("Amendment") is dated as of June 18, 1998, by and between WORLDGATE
COMMUNICATIONS, INC. ("Borrower") and PHOENIX LEASING INCORPORATED ("Lender").
RECITALS
WHEREAS, Borrower and Lender entered into that certain Senior Loan and
Security Agreement No. 0098, dated as of July 15, 1997 (the "Security
Agreement"), pursuant to which Borrower is financing equipment with an
aggregate purchase price of $1,000,000, (the "Initial Commitment");
WHEREAS, Borrower has requested that Lender increase the dollar limit on the
aggregate purchase price of equipment which Lender is willing to finance for
Borrower under the Security Agreement by an additional $1,000,000, (such
increase hereinafter referred to as the "Additional Commitment");
WHEREAS, Lender is willing to provide the Additional Commitment, on the terms
set forth herein and Borrower is willing to agree to such terms; and
WHEREAS, Borrower and Lender now desire to amend the Security Agreement to
provide for the Additional Commitment, and as otherwise provided in this
Agreement;
NOW, THEREFORE, IT IS AGREED THAT:
1. DEFINITIONS. Unless otherwise indicated, words and terms which are
defined in the Security Agreement shall have the same meaning where used
herein. Upon execution of this Amentment, (i) the term "Security Agreement"
shall be deemed to include this Amendment, (ii) the term "Collateral" shall
be deemed to include the "Additional Commitment Collateral," (iii) the term
"Note(s)" shall be deemed to include any "Additional Commitment Note(s)," and
(iv) the term "Loan" shall be deemed to include "Additional Commitment Loan,"
as these terms are defined herein.
2. AMENDMENTS. The Security Agreement is hereby amended as follows:
(a) Following Section 3, a new Section 3A is added as follows:
3A. LENDER ADDITIONAL COMMITMENT. (a) GENERAL TERMS. Subject to the
terms and conditions of this Security Agreement and so long as no Event of
Default or event which with the giving of notice or passage of time, or both,
could become an Event of Default has occurred or is continuing, upon full
funding of the Initial Commitment, Lender hereby agrees to make one or more
additional senior secured Loans "Additional Commitment Loans" to Borrower,
subject to the following conditions: (i) each Additional Commitment Loan
shall be evidenced by an Additional Commitment Note; (ii) the total principal
amount of the Additional Commitment Loans shall not exceed $1,000,000 in the
aggregate (the "Additional Commitment"), but in any event the Initial
Commitment together with the Additional Commitment shall not exceed
$2,000,000 ("Total Commitment"); (iii) no more than $250,000 of the
Additional Commitment may be used for the Borrower's trade show booth
upgrade; (iv) at the time of each Additional Commitment Loan, no Event of
Default or event which with the giving of notice or passage of time, or both,
could become an Event of Default shall have occurred and be continuing, as
reason-
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ably determined by Lender, and certified by Borrower, (v) the amount of each
Additional Commitment Loan shall be at least $50,000 except for a final
Additional Commitment Loan which may be less than $50,000; (vi) Lender shall
not be obligated to make any Additional Commitment Loan after March 31, 1999;
(vii) for each Additional Commitment Loan, Borrower shall present to Lender a
list of proposed Additional Commitment Collateral for approval by Lender in
its sole discretion; (viii) for each Additional Commitment Loan, Borrower
shall have provided Lender with each of the closing documents described in
Exhibit A hereto (which documents shall be in form and substance reasonably
acceptable to Lender); (ix) Borrower is performing according to its business
plan referred to as "WorldGate Communications, Inc. Projected Balance Sheets,
Statement of Cash Flows and Statement of Operations" cover dated April 27,
1998, viable only through December 31, 1999 (the "Additional Commitment
Business Plan"), as may be amended from time to time in form and substance
acceptable to Lender; (x) there shall be no material adverse change in
Borrower's condition, financial or otherwise, that would materially impair
the ability of Borrower to meet its payment and other obligations under this
Additional Commitment Loan (a "Material Adverse Effect") as reasonably
determined by Lender, and Borrower so certifies, from (yy) the date of the
most recent financial statements delivered by Borrower to Lender to (zz) the
date of the proposed Additional Commitment Loan; (xi) prior to payment in
full of all Additional Commitment Notes, Borrower shall not offer any loan
secured by any equipment, furniture or fixtures to any other person or entity
other than Lender, unless Lender declines to finance such transaction or
Borrower and Lender are unable to agree on the terms of such financing; (xii)
Borrower shall use the proceeds of all Additional Commitment Loans hereunder
to purchase or reimburse the purchase of Additional Commitment Collateral;
(xiii) at the time of each Additional Commitment Loan, Borrower has
reimbursed Lender for all UCC filing and search costs, inspection and
labeling costs, and appraisal fees, if any; (xiv) all Additional Commitment
Collateral has been marked and labeled by Lender or Lender's agent; and (xv)
Lender has received in form and substance acceptable to Lender: (a)
Borrower's interim financial statement signed by a financial officer of
Borrower, (b) prior to each funding, hardcopy evidence of Borrower's cash
position; and (d) complete copies of the Borrower's audit reports for its
most recent fiscal year, which shall include at least Borrower's balance
sheet as of the close of such year, and Borrower's statement of income and
retained earnings and of changes in financial position for such year,
prepared on a consolidated basis and certified by independent public
accountants. Such certificate shall not be qualified or limited because of
restricted or limited examination by such accountant of any material portion
of the company's records. Such reports shall be prepared in accordance with
generally accepted accounting principles and practices consistently applied.
(b) THE NOTES. Each Additional Commitment Loan shall be evidenced
by an Additional Commitment Note which may not be prepaid in whole or in
part. Each Additional Commitment Note shall bear interest and be payable at
the times and in the manner provided therein. Following payment of the
Indebtedness related to each Additional Commitment Note, Lender shall
promptly return such Additional Commitment Note, marked "canceled," to
Borrower.
(c) SPECIFIC TERMS - TRADE SHOW BOOTH ADDITIONAL COMMITMENT
COLLATERAL. Borrower and Lender agree that if, upon the expiration of the
Additional Commitment Period, the amount funded allocable to Borrower's trade
show booth, inclusive of the upgrade, exceeds thirty-five percent (35%) of
the Total Commitment utilized as of such expiration date, then, at Lender's
option, Borrower shall pay to Lender an amount equal to such excess ("Excess
Payment"). Borrower agrees to pay the Excess Payment to Lender within thirty
(30) days of Lender's invoice
2
to be held and applied by Lender in accordance with the Additional Security
Section below. Such Excess Payment shall not constitute a prepayment of
interest or principal and shall be applied first to Borrower's Additional
Interest Compensation, as hereinafter defined, with any remaining funds to be
applied pro rata to the last monthly payment due under each Additional
Commitment Note.
(b) Following Section [25], a new Section [25A] is added as follows:
25A. ADDITIONAL COMMITMENT FEE. Borrower has paid to Lender a
commitment fee ("Additional Commitment Fee") of Five Thousand Dollars
($5,000) with respect to the Additional Commitment. The Additional Commitment
Fee shall be applied by Lender first to reimburse Lender for all
out-of-pocket UCC search costs, inspections and appraisal fees incurred by
Lender, and then proportionally to the first month's payment under each
Additional Commitment Note, in the proportion that the collateral value for
such Additional Commitment Note bears to the Additional Commitment. However,
the portion of the Additional Commitment Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligation to fund Additional Commitment Loans pursuant to Section 3A.
3. REPRESENTATIONS AND WARRANTIES: Borrower hereby reconfirms as of the
date hereof, its representations and warranties set forth in Section 5 of the
Security Agreement.
4. CONTINUED VALIDITY OF SECURITY AGREEMENT. Except as amended by this
Amendment, the Security Agreement shall continue in full force and effect as
originally constituted and is ratified and affirmed by the parties hereto.
Such Amendment shall not amend or otherwise affect any of the Notes executed
and delivered by Borrower prior to the the date hereof.
5. AUTHORIZATION. Each party represents to the other that the individual
executing this Amendment on its behalf is the duly appointed signatory of
such party to this Amendment and that such individual is authorized to
execute this Amendment by or on behalf of such party and to take all action
required by the terms of this Amendment.
6. WHEN AMENDMENT IS EFFECTIVE. This Amendment shall be binding and deemed
effective when executed by Borrower and accepted and executed by Lender. Upon
such effectiveness this Amendment shall be deemed to have amended the
Security Agreement as provided herein.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. NO NOVATION. This Amendment is not intended to be, and shall not be
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Security Agreement shall remain in full force
and effect.
9. SEVERABILITY. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining the
legal enforceability of any specific provision.
10. ENTIRE AGREEMENT. The Security Agreement as amended by this Amendment
constitutes the entire agreement between Borrower and Lender with respect to
the subject matter hereof and supersedes all prior and contemporaneous
negotiations, communications, discussions and agreements concerning such
subject matter.
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Borrower acknowledges and agrees that Lender has not made any representation,
warranty or covenant in connection with this Amendment.
11. CONFLICTS. In the event of any conflict between the terms of this
Amendment and the terms of the Security Agreement, the terms of this
Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
LENDER: BORROWER:
PHOENIX LEASING INCORPORATED WORLDGATE COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxx X. Xxxx
------------------------------- ------------------------------
Name: Xxxxx Xxxxxxxx Name: Xxxxx X. Xxxx
------------------------------- ------------------------------
Title: Contract Administrator Title: CFO
------------------------------- ------------------------------
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