Exhibit 10.5
LOAN AND SECURITY AGREEMENT
No. 11010
This LOAN AND SECURITY AGREEMENT, dated as of June 15, 1999 is entered by
and between:
(1) XXXXX.XXX, INC. (formerly d/b/a XXXXXXXXX.XXX), a Washington
corporation ("Borrower"); and
(2) DOMINION VENTURE FINANCE L.L.C. ("Lender").
RECITALS
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A. Borrower desires to obtain a loan upon the security of certain
equipment owned or to be acquired by Borrower.
B. Lender is willing to make a loan upon the terms and subject to the
conditions set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing and of the covenants,
conditions and agreements set forth herein, the parties agree as follows:
ARTICLE 1. DEFINITIONS.
For purposes of this Loan Agreement the following capitalized terms shall
have the meanings set forth below:
1.1 "Business Day" shall mean any day on which commercial banks are not
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authorized or required to close in San Francisco, California.
1.2 "Closing" shall mean the date, time and place as the parties may agree
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for the consummation of the loan contemplated hereby.
1.3 "Collateral" shall have the meaning set forth in Section 3.1 of this
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Loan Agreement.
1.4 "Commitment" shall have the meaning set forth in Section 2.1 of this
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Loan Agreement.
1.5 "Commitment Termination Date" shall have the meaning set forth in
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Section 2.1 of this Loan Agreement.
1.6 "Contractual Obligation" of any Person shall mean, any indenture,
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note, security, deed of trust, mortgage, security agreement, lease, guaranty,
instrument, contract, agreement or
other form of obligation or undertaking to which such Person is a party or by
which such Person or any of its property is bound.
1.7 "Default" shall mean any event or circumstance not yet constituting
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an Event of Default but which, with the giving of any notice or the lapse of any
period of time or both, would become an Event of Default.
1.8 "Default Rate" shall mean, as of any date of determination, an
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interest rate per annum equal to five percent (5%) in excess of the rate per
annum otherwise applicable on such date.
1.9 "Disclosure Schedule" shall have the meaning set forth in Article 5
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of this Loan Agreement.
1.10 "Eligible Equipment" shall mean computers, furniture, Softcosts, and
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office equipment, to the extent acceptable to Lender; provided that the
aggregate value of Softcosts, defined as software and leasehold improvements, is
not to exceed 25% of the total equipment funded. All New Equipment to be
purchased by Borrower and intended to constitute Collateral must be approved by
Lender and shall be valued at cost (net of freight, taxes, installation and
similar costs). All Used Equipment owned by Borrower as of the date of this
Loan Agreement, or acquired by Borrower after the date of this Loan Agreement in
one or more transactions, and which Borrower intends to constitute Collateral
must be approved by Lender and shall be valued using straight line depreciation
from the original cost (net of freight, taxes, installation and similar costs)
over thirty-six (36) months. All appraisal costs shall be borne by Borrower.
1.11 "Environmental Laws" means all Requirements of Law relating to the
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protection of human health or the environment, including, without limitation,
(a) all Requirements of Law, pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or wastes, whether
solid, liquid, or gaseous in nature; and (b) all Requirements of Law pertaining
to the protection of the health and safety of employees or the public.
1.12 "Equipment" shall have the meaning set forth in Section 3.1 of this
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Loan Agreement.
1.13 "Event of Default" shall have the meaning set forth in Section 10.1
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of this Loan Agreement.
1.14 "Financial Statements" shall mean, with respect to any accounting
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period for any Person, statements of operations, retained earnings and cash flow
of such Person for such period, and balance sheets of such Person as of the end
of such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period
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is less than a full fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding fiscal year, all prepared in reasonable
detail and in accordance with generally accepted accounting principles. Unless
otherwise indicated, each reference to Financial Statements of any Person-shall
be deemed to refer to Financial Statements prepared on a consolidated basis.
1.15 "Governmental Authority" shall mean any domestic or foreign national,
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state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.16 "Governmental Rule" shall mean any law, rule, regulation, ordinance,
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order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
1.17 "Indebtedness" of any Person shall mean and include the aggregate
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amount of, without duplication (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (other than accounts payable
incurred in the ordinary course of business determined in accordance with
generally accepted accounting principles), (d) all obligations under capital
leases of such Person, (e) all obligations or liabilities of others secured by a
lien on. any asset of such Person, whether or not such obligation or liability
is assumed, (f) all guaranties of such Person of the obligations of another
Person; (g) all obligations created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even if the rights and remedies of the seller or lender under such agreement
upon an event of default are limited to repossession or sale of such property),
(h) net exposure under any interest rate swap, currency swap, forward, cap,
floor or other similar contract that is not entered to in connection with a bona
fide hedging operation that provides offsetting benefits to such Person, which
agreements shall be marked to market on a current basis, and (i) all
reimbursement and other payment obligations, contingent or otherwise, in respect
of letters of credit.
1.18 "Lien" shall mean, with respect to any property, any security
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interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation, the
interest of a vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar instrument under
the Uniform Commercial Code or comparable law of any jurisdiction.
1.19 "Loan" shall have the meaning set forth in Section 2.1 of this Loan
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Agreement.
1.20 "Loan Agreement" shall mean this Loan and Security Agreement.
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1.21 "Make-Whole Premium" shall mean an amount equal to the greater of (i)
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zero and (ii) the excess of (x) the sum of the present values, at the date of
prepayment, of the amount of each remaining scheduled payment of interest on and
principal on (and the final payment pursuant to Section 2.2.4 with respect to)
the Loans prepaid, or portion of such payment, which
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will not be required to be made as a result of such prepayment (each such
payment an "Amount Payable" and each such Amount Payable to be discounted
separately at the Treasury Rate, compounded monthly, from the date such Amount
Payable would be due), over (y) the principal amount of the Loans prepaid. The
"Treasury Rate" shall be the rate set forth in The Wall Street Journal for
actively traded U.S. Treasury securities having a maturity of one year on the
third Business Day prior to the date of prepayment, but shall in no event be
greater than eight percent (8%).
1.22 "Material Adverse Effect" shall mean a material adverse effect on (a)
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the business, assets, operations, prospects or financial or other condition of
Borrower and its Subsidiaries, taken as a whole; (b) the ability of Borrower
and its Subsidiaries to pay or perform the Obligations in accordance with the
terms of this Loan Agreement and the other Operative Documents and to avoid an
Event of Default under any Operative Document; or (c) the rights and remedies
of Lender under this Loan Agreement, the other Operative Documents or any
related document, instrument or agreement.
1.23 "New Equipment" shall mean Eligible Equipment purchased with the
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proceeds of a Loan or placed in service not more than ninety (90) days prior to
the date of funding of the applicable Loan.
1.24 "Note" shall mean a promissory note or notes of Borrower
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substantially in the form attached as Exhibit A hereto.
1.25 "Obligations" shall mean and include all loans, advances, debts,
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liabilities, and obligations, including, without limitation, the noncancelable
obligation to make each payment scheduled to be made under Sections 2.2.2, 2.2.3
and 2.2.4, howsoever arising, owed by Borrower to Lender of every kind and
description (whether or not evidenced by any note or instrument and whether or
not for the payment of money), now existing or hereafter arising under or
pursuant to the terms of this Loan Agreement or the other Operative Documents,
including, without limitation, all interest, Make-Whole Premium, fees, charges,
expenses, attorneys' fees and costs and accountants' fees and costs chargeable
to and payable by Debtor hereunder and thereunder, in each case, whether direct
or indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as amended from time to time
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding.
1.26 "Operative Documents" shall mean, collectively, the Loan Agreement,
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the Notes and the other documents executed in connection herewith.
1.27 "Permitted Liens" shall mean and include: (a) Liens for taxes or
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other Governmental Charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided provision is made to
the reasonable satisfaction of Lender for the eventual payment thereof if
subsequently found payable; (b) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of business
for sums not overdue or being contested in good faith, provided provision is
made to the reasonable satisfaction of Lender for the eventual payment thereof
if subsequently found
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payable; and (c) Liens in favor of Lender; (d) Liens on any of the Company's
assets other than the Equipment; and (e) Liens subordinate to those of the
Lender.
1.28 "Person" shall mean and include an individual, a partnership, a
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corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a Governmental Authority.
1.29 "Requirement of Law" applicable to any Person shall mean (a) the
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articles or certificate of incorporation, bylaws or other governing documents of
such Person, (b) any Governmental Rule applicable to such Person, (c) any
license, permit, approval or other authorization granted by any Governmental
Authority to or for the benefit of such Person and (d) any judgment, decision or
determination of any Governmental Authority or arbitrator, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
1.30 "Subsidiary" of any Person shall mean (a) any corporation of which
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more than fifty percent (50%) of the issued and outstanding equity securities
having ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any
partnership, joint venture, or other association of which more than fifty
percent (50%) of the equity interest having the power to vote, direct or control
the management of such partnership, joint venture or other association is at the
time owned and controlled by such Person, by such Person and one or more of the
other Subsidiaries or by one or more of such Person's other subsidiaries and (c)
any other Person included in the financial statements of such Person on a
consolidated basis. Any reference to a Subsidiary without designation of the
ownership of such Subsidiary shall be deemed to refer to a Subsidiary of
Borrower.
1.31 "Used Equipment" shall mean Eligible Equipment which is not New
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Equipment.
ARTICLE 2. THE LOANS.
2.1 Commitment. Subject to the terms and conditions of this Loan
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Agreement, from time to time on or prior to June 15, 2000 (the "Commitment
Termination Date), Lender agrees to advance to Borrower term loans (the "Loans")
in an aggregate principal amount of up to Three Million Dollars ($3,000,000)
(the "Commitment"). Loans shall be made not more often than monthly.
2.2 Loan Payments.
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2.2.1 Loan Interest. Borrower shall pay interest in advance on the
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unpaid principal amount of each Loan from the date of such Loan until such Loan
is paid in full, at an initial rate of interest equal to eight percent (8%) per
annum, based upon a year of 360 days and actual days elapsed. At each funding
under the Loan, the Interest Rate will be adjusted based on
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the change in yield, if any, for U.S. Treasury Notes of comparable maturity as
quoted in the Wall Street Journal three days before the date of funding. The
Treasury rate assumed for the initial rate of interest above for 36 (month
Treasury Notes is 5.22%. For each basis point change from this Treasury rate,
the Interest Rate will be adjusted by one basis point and a new Interest Rate
calculated. The Interest Rate for each funding shall be fixed for each Loan
Term. f Borrower pays interest on such Loan which is determined to be in excess
of the then legal maximum rate, then that portion of each interest payment
representing an amount in excess of the then legal maximum rate shall be deemed
a payment of principal and applied against the principal of the Loan.
2.2.2 Payments of Principal and Interest. Borrower shall make
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thirty-six (36) equal payments of principal and interest (payable in advance),
which payments shall fully amortize the principal and interest due on the Loan
over such thirty-six (36) month period, on the first Business Day of each month
until the Loan is paid in full.
2.2.3 Interim Interest Payment. Concurrently, with the funding of
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each Loan, Borrower shall make an advance payment of interest for the period
from the date of funding to the first Business Day of the month after the
funding of such Loan.
2.2.4 Final Payment. On the date on which the last payment is due
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under Section 2.2.2 with respect to each Loan, Borrower shall pay to Lender, in
addition to any remaining unpaid principal and accrued interest and all other
amounts previously due with respect to such Loan, an amount equal to fifteen
percent (15%) of the original principal amount of such Loan.
2.2.5 Prepayment. Upon three (3) Business Days' prior written notice
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to Lender, Borrower may, at its option, at any time, prepay all and not less
than all of the Loans, (or in the case of a prepayment pursuant to Section 6.10,
in an amount equal to the replacement value of the item of Equipment) at a
prepayment price equal to the outstanding principal amounts of the Loans, (or in
the case of a prepayment pursuant to Section 6.10, in an amount equal to the
replacement value of the item of Equipment), plus interest accrued thereon
through and including the date of such prepayment, plus a premium equal to the
Make-Whole Premium. If an Event of Default occurs and is continuing, and Lender
exercises its right under Section 10 to accelerate the Loan, Borrower expressly
agrees that the amount then due and payable shall include the Make-Whole Premium
as of the date of such acceleration.
Use of Proceeds; the Loan and the Note; Disbursement.
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2.2.6 Use of Proceeds. The proceeds of the Loan shall be used solely
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for purchasing Eligible Equipment.
2.2.7 The Loan and the Notes. The obligation of Borrower to repay
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the aggregate unpaid principal amount of and interest on each Loan shall be
evidenced by a Note setting forth the principal amount of such Loan and the
payments due with respect thereto. Any failure by Lender to obtain or retain
such a Note shall not limit or otherwise affect the obligations of Borrower to
pay amounts due hereunder with respect to a Loan.
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2.2.8 Disbursement. Subject to the satisfaction of the conditions
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set forth in this Agreement, Lender shall disburse each Loan to Borrower as
directed in writing by Borrower.
2.3 Other Payment Terms.
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2.3.1 Place and Manner. Borrower shall make all payments due to
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Lender in lawful money of the United States, in immediately available funds, at
the address for payments specified in Section 11.5.
2.3.2 Date. Whenever any payment due hereunder shall fall due on a
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day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
2.3.3 Default Rate. If any amounts required to be paid by Borrower
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under this Agreement or the other Operative Documents (including principal or
interest payable on the Loan, any fees or other amounts) remain unpaid after
such amounts are due, Borrower shall pay interest on the aggregate, outstanding
principal balance hereunder from the date due until such past due amounts are
paid in fall, at a per annum rate equal to the Default Rate. All computations
of such interest shall be based on a year of 360 days and actual days elapsed.
2.3.4 Commitment Fee. Lender has received a commitment fee from
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Borrower in the amount of $4,000 (the "Commitment Fee"). The Commitment Fee
will be applied by Lender pro rata (based on the ratio of the principal amount
of the Loan to the amount of the Commitment) to the Advance Payment delivered to
Lender under Section 3.2 in connection with each Loan. If all or any part of
the Commitment is not funded prior to the Commitment Termination Date, any
portion of the Commitment Fee not set aside for application as set forth in the
previous sentence shall be retained by Lender as compensation for expenses.
ARTICLE 3. CREATION OF SECURITY INTEREST.
3.1 Grant of Security Interest. As collateral security for the
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Obligations, Borrower hereby grants to Lender a continuing security interest in
and to the following property and interests in property of Borrower (the
"Collateral"):
All right, title, interest, claims and demands of Borrower in and to
each and every item of equipment, fixtures or personal property now or
hereafter listed on Schedule I hereto, whether now owned or hereafter
acquired, together with all substitutions, renewals or replacements of and
additions, improvements, accessions, replacement parts and accumulations to
any and all of such equipment, fixtures or personal property (collectively,
the "Equipment"), together with all proceeds thereof, including, without
limitation, insurance, condemnation, requisition or similar payments, and
all proceeds from sales, renewals, releases or other dispositions thereof.
Schedule I and Schedule II shall be deemed amended upon the execution of each
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Note to identify (i) the items of Equipment financed with the Loan evidenced by
such Note and in which a security interest is granted hereunder and (ii) the
locations of such items of Equipment, and such
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amendment shall be effective whether or not a listing of such items or locations
is actually appended thereto.
3.2 Advance Payment. As additional security for the Obligations,
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Borrower shall deposit with Lender upon the Closing an amount equal to the last
month's payment on the amount of the Commitment (the "Advance Payment") which
shall be held by Lender (without payment of interest thereon). A pro rata
portion of the Advance Payment shall be deemed to pay as of the date of this
Loan Agreement the last payment due on each Loan. If the Commitment is not fully
utilized by the Commitment Termination Date, Lender shall retain the unutilized
portion of the Advance Payment as compensation for expenses. Borrower hereby
grants to Lender a security interest in such Advance Payment. Lender shall be
under no obligation to segregate the Advance Payment from its other funds.
3.3 Liabilities Unconditional. Borrower is and shall remain absolutely
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and unconditionally liable for the performance of its obligations under the
Operative Documents, including without limitation any deficiency by reason of
the failure of the Collateral to satisfy all amounts due Lender under the Note
or pursuant to any other Operative Document.
ARTICLE 4. CLOSING.
4.1 Conditions to Closing. The obligation of Lender to fund a Loan shall
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be subject to the following conditions precedent:
4.1.1 Conditions to Closing. Lender shall have received in
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connection with the Closing in form and substance satisfactory to Lender.
(a) This Loan Agreement, duly executed by Borrower;
(b) Copies, certified by the Secretary or Assistant
Secretary of Borrower, of: (A) the Articles of
Incorporation and Bylaws of Borrower (as amended to the
date of this Loan Agreement), (B) the resolutions
adopted by Borrower's board of directors authorizing
the transaction and the documents being executed in
connection therewith, and (C) the incumbency of the
officers executing this Loan Agreement and the other
Operative Documents on behalf of Borrower.
(c) Subject to the restrictions set forth in the definition
of Eligible Equipment, if a Loan includes software
which is intended to become Collateral under such Loan
and the aggregate cost of such software exceeds Thirty
Thousand Dollars ($30,000), then Lender may request
that assignment or sublicensing documentation in form
and substance satisfactory to Lender be executed prior
to the inclusion of the software as Collateral under
such Loan and Borrower shall use commercially
reasonable efforts to accommodate said request with the
vendor of such software.
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(d) Good Standing Certificate(s) (including tax status if
available) with respect to Borrower from Borrower's state of
incorporation and principal place of business, if different,
(each) dated a date reasonably close to the date of this
Loan Agreement.
(e) Evidence of the insurance coverage required by Section 6.6
of this Loan Agreement.
(f) All necessary consents of shareholders and other third
parties, if any, with respect to the subject matter of the
Loan Agreement and the other documents being executed in
connection therewith.
(g) All other documents as Lender shall have reasonably
requested.
4.1.2 Conditions to Funding of Each Loan. Prior to the funding of each
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Loan, the following conditions with respect to such Loan shall have been
satisfied or waived by Lender:
(a) Borrower shall have executed and delivered a Note prepared
by Lender setting forth the terms of the Loan.
(b) Borrower shall have provided to Lender, with respect to the
Equipment constituting Collateral, such invoices, bills of
sale, receipts, agreements, canceled checks, and other
documents as Lender shall reasonably request to evidence the
ownership by Borrower of, and the payment in full of the
purchase price of such Equipment, each in form and substance
reasonably satisfactory to Lender; and, except with the
prior written consent of Lender which shall not be
unreasonably withheld, all such Equipment shall be Eligible
Equipment and acceptable to Lender as to value and type.
(c) Borrower shall have taken such actions, if any, as Lender
shall reasonably determine are necessary or desirable to
perfect and protect its security interest in the Collateral
and the priority thereof.
(d) No Event of Default or Default shall have occurred and be
continuing.
(e) In Lender's sole discretion, there shall not have occurred
any Material Adverse Effect.
(f) The representations and warranties contained in this
Agreement and the other Operative Documents to which
Borrower is a party, as modified by any Disclosure Schedule,
shall be true and correct in all material respects as if
made on the date of funding of the Loan and the items listed
on such Disclosure Schedule shall be reasonably acceptable
to Lender.
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(g) Each of the Operative Documents remains in full force and
effect.
(h) The requested date of funding the Loan shall not be later
than June 15, 2000.
(i) Borrower shall have provided to Lender a Landlord Waiver in
the form of Exhibit B hereto or otherwise in form and
substance satisfactory to Lender, from each owner of record
of real property at which items of Collateral will be
located, setting forth the rights of Lender with respect to
such items of Collateral.
(j) Borrower shall have provided to Lender a UCC-1 financing
statement duly executed by Borrower for each state (and
county, if applicable) in which Equipment financed by the
Loan is or will be located.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
Except as set forth on Schedule II hereto (the "Disclosure Schedule"),
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Borrower represents and warrants to Lender:
5.1 Due Incorporation, Qualification. etc. Each of Borrower and its
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Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation; (ii) has the power and
authority to own, lease and operate its properties and carry on its business as
now conducted; and (iii) is duly qualified, licensed to do business and in good
standing as a foreign corporation in each jurisdiction where the failure to be
so qualified or licensed could reasonably be expected to have a Material Adverse
Effect.
5.2 Authority. The execution, delivery and performance by Borrower of
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each Operative Document to be executed by Borrower and the consummation of the
transactions contemplated thereby (i) are within the power of Borrower and (ii)
have been duly authorized by all necessary actions on the part of Borrower.
5.3 Enforceability. Each Operative Document executed, or to be executed,
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by Borrower has been, or will be, duly executed and delivered by Borrower and
constitutes, or will constitute, a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except as
limited by bankruptcy, insolvency or other similar laws of general application
relating to or affecting the enforcement of creditors' rights generally and
general principles of equity.
5.4 Non-Contravention. The execution and delivery by Borrower of the
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Operative Documents executed by Borrower and the performance and consummation of
the transactions contemplated thereby do not and will not (i) violate any
Requirement of Law applicable to Borrower; (ii) violate any provision of, or
result in the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of notice or lapse of time or both), any
Contractual Obligation of Borrower, or (iii) result in the creation or
imposition of any Lien upon
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any property, asset or revenue of Borrower (except such Liens as may be created
in favor of Lender pursuant to this Loan Agreement or the other Operative
Documents).
5.5 Approvals. No consent, approval, order or authorization of, or
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registration, declaration or filing with, any Governmental Authority or other
Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Operative
Documents executed by Borrower and the performance and consummation of the
transactions contemplated thereby.
5.6 No Violation or Default. None of Borrower or Borrower's Subsidiaries
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is in violation of or in default with respect to (i) any Requirement of Law;
(ii) any Contractual Obligation (nor is there any waiver in effect which, if not
in effect, would result in such a violation or default), where, in each case,
such violation or default, individually, or together with all such violations or
defaults, could reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, none of Borrower or Borrower's
Subsidiaries (A) has violated any Environmental Laws, (B) has any liability
under any Environmental Laws or (C) has received notice or other communication
of an investigation or is under investigation by any Governmental Authority
having authority to enforce Environmental Laws, where such violation, liability
or investigation could reasonably be expected to have a Material Adverse Effect.
No Event of Default or Default has occurred and is continuing.
5.7 Litigation. No actions (including, without limitation, derivative
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actions), suits, proceedings or investigations are pending or, to the knowledge
of Borrower, threatened against Borrower or Borrower's Subsidiaries at law or in
equity in any court or before any other Governmental Authority which if
adversely determined (i) could reasonably be expected (alone or in the
aggregate) to have a Material Adverse Effect or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance by Borrower of
the Operative Documents or the transactions contemplated thereby.
5.8 Title. Borrower has good and marketable title to all Collateral, free
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and clear of all Liens, other than Permitted Liens.
5.9 Financial Statements. The Financial Statements of Borrower which have
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been delivered to Lender (i) are in accordance with the books and records of
Borrower and its Subsidiaries, which have been maintained in accordance with
good business practice; (ii) have been prepared in conformity with generally
accepted accounting principles; and (iii) fairly present the consolidated
financial position of Borrower as of the dates presented therein and the results
of operations, changes in financial positions or cash flows, as the case may be,
for the periods presented therein. As of the date hereof, none of Borrower or
any of Borrower's Subsidiaries has any contingent obligations, liability for
taxes or other outstanding obligations which are material in the aggregate,
except as disclosed in the most recent audited Financial Statements furnished by
Borrower to Lender prior to the date hereof.
5.10 Governmental Charges. To Borrower's knowledge, each of Borrower and
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its Subsidiaries has filed or caused to be filed all tax returns which are
required to be filed by it. To Borrower's knowledge, Borrower and Borrower's
Subsidiaries have paid, or made provision for
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the payment of, all taxes and other Governmental Charges which have or may have
become due pursuant to said returns or otherwise, except such Governmental
Charges, if any, which are being contested in good faith and as to which
adequate reserves (determined in accordance with generally accepted accounting
principals) have been provided or which could not reasonably be expected to have
a Material Adverse Effect if unpaid.
5.11 Catastrophic Events; Labor Disputes. None of Borrower or Borrower's
-----------------------------------
Subsidiaries and none of their properties is or has been affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or other casualty that could reasonably be
expected to have a Material Adverse Effect. There are no disputes presently
subject to grievance procedure, arbitration or litigation under any of the
collective bargaining agreements, employment contracts or employee welfare or
incentive plans to which Borrower or Borrower's Subsidiaries is a party, and
there are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Borrower, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a Material Adverse
Effect.
5.12 No Material Adverse Effect. To Borrower's knowledge, no event has
--------------------------
occurred and no condition exists which could reasonably be expected to have a
Material Adverse Effect.
5.13 Accuracy of Information Furnished. None of the Operative Documents
---------------------------------
and none of the other certificates, statements or information furnished to
Lender by or on behalf of Borrower or Borrower's Subsidiaries in connection with
the Operative Documents or the transactions contemplated thereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.14 First Priority. Assuming the timely filing of financing statements
--------------
covering the Collateral, the security interest granted hereby constitutes a
first priority security interest in and Lien on all of the Collateral, subject
only to Permitted Liens.
5.15 Principal Place of Business. The principal place of business and
---------------------------
chief executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral is set forth in Section 11.5.
ARTICLE 6. COVENANTS OF BORROWER.
While any Obligations remain outstanding:
6.1 Financial Statements; Other Information. Borrower shall provide to
---------------------------------------
Lender the financial statements specified in this Section 6.1, prepared in
accordance with generally accepted accounting principles, consistently applied
(except, in the case of unaudited financial statements, for the absence of
footnotes and normal year-end adjustments); provided, however, that after the
effective date of the initial registration statement covering a public offering
of Borrower's securities, Borrower shall only be required to deliver those
financial statements required to be
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filed by the Securities and Exchange Commission, to be provided as soon as
practicable and no less frequently than quarterly.
6.1.1 As soon as practicable (and in any event within thirty (30)
days after the end of each month), a reasonably detailed balance sheet as of the
end of such month and the related statements of income or loss, cash flow and
capital structure of the Borrower during such month (including notification of
the commencement of any material litigation by or against Borrower), certified
by Borrower's Chief Executive Officer or Chief Financial Officer fairly to
present the data reflected therein.
6.1.2 As soon as practicable (and in any event within ninety (90)
days alter the end of each fiscal year), audited balance sheets as of the end of
such year (consolidated if applicable), and related statements of income or
loss, retained earnings or deficit, cash flows and capital structure of Borrower
for such year, setting forth in comparative form the corresponding figures for
the preceding fiscal year, and accompanied by an audit report and opinion of the
independent certified public accountants of recognized national standing
selected by Borrower.
6.2 Other Information. Borrower shall simultaneously provide to Lender
-----------------
copies of all reports (including, but not limited to financial), that are sent
to shareholders of the Company.
6.3 Suits. Borrower shall deliver to Lender, promptly after the
-----
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which suits or proceedings if decided
adversely to Borrower could reasonably be expected to have a Material Adverse
Effect.
6.4 Financing Statements and Other Actions Regarding Collateral. At the
-----------------------------------------------------------
reasonable request of Lender, Borrower shall join Lender in executing and
delivering one or more financing statements or other documents or instruments in
form and substance satisfactory to Lender for filing or recording in any state,
county or other jurisdiction Lender or its legal counsel reasonably deems
advisable to perfect the security interests granted hereunder. Borrower agrees
that Lender may file this Loan Agreement as a Financing Statement in any such
jurisdiction.
6.5 Corporate Identity. Borrower shall notify Lender in writing prior to
------------------
any change in Borrower's principal place of business or chief executive office
and any proposed or actual change of Borrower's name, identity or corporate
structure.
6.6 Insurance. Borrower shall, at its own expense, maintain the following
---------
types of insurance, with companies with an A-5 Best rating or better, acceptable
to Lender:
6.6.1 Personal property insurance on all property owned by Borrower
(including without limitation all of the Equipment) in an agreed amount based
upon the following:
(a) Standard "all risk" property insurance, including boiler
and machinery insurance, and flood insurance if any
Equipment is located in an identified "flood hazard area,"
in which flood
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insurance has been made available pursuant to the National
Flood Insurance Act of 1968;
(b) The amount of such insurance covering the Equipment shall
be not less than the fair market value of the Equipment.
The amount of such -insurance allocable to loss or damage
or personal property shall not have a deductible in excess
of One Thousand Dollars ($1,000) per occurrence. Such
insurance shall contain an endorsement issued by the
insurer (as opposed to a certificate issued by an agent of
the insurer) in which Lender is named as loss payee with
respect to the Equipment, and shall set aside the amount
stated in Section 6.6.1(b) for the sole benefit of, and
payable directly to, Lender. Employee dishonesty insurance
payable to Lender with respect to the theft of the
Equipment. Business interruption insurance in an amount at
all times of Two Hundred Fifty Thousand Dollars ($250,000)
per occurrence. Commercial general liability insurance
covering bodily injury (including death) and property
damage, naming Lender, its directors, officers, agents and
employees as an Additional Insureds on all policies
(evidenced by an endorsement issued by the insurer (as
opposed to a certificate issued by an agent of the
insurer)), and providing total limits in amounts as are at
the time carried by entities engaged in the same or
similar business and which are similarly situated, but in
no event less than Two Million Dollars ($2,000,000) for
combined single limit occurrence. All such policies shall
cover any injury or damage occasioned by, or occurring
upon, Borrower's premises, products, operations and, at
Lender's option, explosion, collapse and underground
hazards. All such policies shall contain contractual
liability coverage including all liability assumed under
this agreement, and a cross liability clause providing
that such insurance shall, except with respect to the
limits of liability, apply separately to each insured.
Workers compensation insurance. All insurance specified in
this Section 6.6 shall be primary over, and in no event
shall, any insurance carried by Lender be called upon to
contribute to any loss relating to or arising out of this
Loan Agreement. All insurance shall be in effect, and
shall be evidenced by policies and/or endorsements
delivered to Lender no later than twenty (20) days after
the date upon which Borrower executes this Loan Agreement.
Notwithstanding anything to the contrary contained in this
Loan Agreement, Lender shall have no obligation to
purchase any Equipment until all policies are in place.
All such policies shall provide for at least thirty (30)
days' prior written notice to Lender in the event of any
cancellation, non-renewal or material change in coverage,
and Lender shall receive a copy of
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any and all endorsements or other documentation relating
to such policies.
6.7 Title. Borrower shall promptly notify Lender in writing of any event
-----
which materially affects the value of the Collateral, the ability of Borrower or
Lender to dispose of the Collateral, or the rights or remedies of Lender in
relation thereto, including, but not limited to, the levy of any legal process
against the Collateral. Borrower shall deliver to Lender any and all evidence
of ownership of, and certificates of title to, any and all of the Equipment.
Borrower shall not grant to any Person (other than Lender or the holder of a
Permitted Lien) a Lien in the Collateral.
6.8 Further Identification of Collateral. Borrower shall furnish to
------------------------------------
Lender from time to time such statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Lender may reasonably request, all in reasonable detail.
6.9 Good Repair. Borrower shall keep and maintain all Collateral in good
-----------
operating condition and repair, subject to ordinary wear and tear, make all
necessary repairs thereto and replacement of parts thereof so that the value and
operating efficiency thereof shall at all times be maintained and preserved;
and Borrower shall keep complete and accurate books and records with respect to
the Collateral, including maintenance records.
6.10 Loss; Damage; Destruction and Seizure.
-------------------------------------
6.10.1 If while payment Obligations are outstanding any item of
Equipment is lost, stolen, destroyed, damaged or seized by a Governmental
Authority (an "Event of Loss"), then, at Borrower's option, either (i) Lender
shall receive from the proceeds of insurance maintained pursuant to Section 6.6,
from any award paid by the seizing Governmental Authority or, to the extent not
received from the proceeds of insurance or award or both, from Borrower, on or
before the next scheduled payment date succeeding such Event of Loss, an amount
equal to the replacement value of the item of Equipment subject to the Event of
which shall be held as additional Collateral for the Loan, or (ii) if no Event
of Default has occurred and is continuing, Borrower may use any such proceeds to
purchase an item of Equipment to replace the item of Equipment which was subject
to the Event of Loss and such replacement Equipment shall become part of the
Collateral. On the date of receipt by Lender of the amount specified
hereinabove with respect to each such item of Collateral subject to an Event of
Loss, the provisions of this Agreement shall terminate as to such Collateral.
Any proceeds of insurance maintained by Borrower with respect to the Collateral
pursuant to Section 6.6 and received by Borrower shall be paid to Lender
promptly upon their receipt by Borrower. If any proceeds of insurance or awards
received from Governmental Authorities are in excess of the amount owed under
this Section 6.10.1, Lender shall promptly remit to Borrower the amount in
excess of the amount to be held by Lender.
6.10.2 So long as no Event of Default has occurred and is continuing,
any proceeds of insurance maintained pursuant to Section 6.6 received by Lender
or Borrower with
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respect to an item of Collateral the repair of which is practicable shall, at
the election of Borrower, be applied either to the repair or replacement of such
Collateral or, upon Lender's receipt of evidence of the repair or replacement of
the Collateral reasonably satisfactory to Lender, to the reimbursement of
Borrower for the cost of such repair or replacement. All replacement parts and
equipment acquired by Borrower in replacement of Collateral pursuant to this
Section 6.10 shall immediately become part of the Collateral upon acquisition by
Borrower. Borrower shall take such actions and provide such documentation as may
be reasonably requested by Lender to protect and preserve Lender's first
priority security interest and otherwise to avoid any impairment of Lender's
rights under the Operative Documents, in connection with such repair or
replacement.
ARTICLE 7. CONFIDENTIALITY.
Lender agrees to hold non-public information received by it in confidence
and shall not disclose such information to third parties except to the extent
any disclosure of such information is required by auditors, lenders, a court of
competent jurisdiction or governmental authority, or to its partners or the
partners of its affiliated investment funds. Lender further agrees to use its
commercially reasonable efforts to bind those third parties to whom non-public
information is disclosed to the terms of this Article 7.
ARTICLE 8. PRESERVATION OF COLLATERAL BY LENDER.
Should Borrower fall or refuse to make any payment, perform or observe any
other covenant, condition or obligation, or take any other action which Borrower
is obligated under any Operative Document to make, perform, observe, take or do
at the time or in the manner provided in any Operative Document, then at
Lender's sole and absolute discretion, without notice to or demand upon Borrower
and without releasing Borrower from any obligation, covenant or condition in any
Operative Document, Lender may make, perform, observe, take or do the same in
such manner and to such extent as Lender may deem necessary to protect its
security interest in or the value of the Collateral, and Borrower shall be
liable to Lender for all costs and expenses incurred by Lender in connection
therewith.
ARTICLE 9. INSPECTION RIGHTS; LOCATION.
9.1 Inspection. Borrower hereby grants Lender or its agents, from time to
----------
time upon not less than forty-eight (48) hours' advance written notice to
Borrower during Borrower's normal business hours, the right to enter Borrower's
premises for the purposes of inspecting all items of Collateral and ascertaining
their location and condition. Borrower shall make reasonably available to
Lender or its representative its personnel knowledgeable in the location,
function and condition of such Collateral and shall reasonably assist Lender and
its representatives in their inspection of such Collateral.
9.2 Location. Borrower shall keep the Collateral at the location
--------
specified in Section 11.5, the locations specified in Schedule III hereto as it
may be amended from time to time and such other locations as Lender shall
consent to in writing, all of which locations shall be in the
-16-
state of Washington. Borrower shall not permit any Collateral to be moved to a
new location without the prior written consent of Lender.
ARTICLE 10. EVENTS OF DEFAULT.
10.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" under this Loan Agreement and the Notes:
10.1.1 Failure to Pay. Borrower shall fail to pay when due any
--------------
principal, interest or other payment required under the terms of this Loan
Agreement or any other Operative Document on the .date due and such payment
shall not have been made within five (5) Business Days of the due date; or
10.1.2 Insurance. Borrower or any of its Subsidiaries shall fail to
---------
observe or perform any covenant set forth in Section 6.6 and such failure shall
continue for a period of five (5) Business Days after notice thereof is given to
Borrower by Lender; or
10.1.3 Breaches of Other Covenants. Borrower or any of its
---------------------------
Subsidiaries shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in this Loan Agreement or the other Operative
Documents (other than those specified in Sections 10.1.1 and 10.1.2) and such
failure shall continue for ten (10) Business Days; or
10.1.4 Representations and Warranties. Any representation,
------------------------------
warranty, certificate, or other statement (financial or otherwise) made or
furnished by or on behalf of Borrower to Lender in writing in connection with
this Loan Agreement or any of the other Operative Documents, or as an inducement
to Lender to enter into this Loan Agreement, shall be false, incorrect,
incomplete or misleading in any material respect when made or furnished; or
10.1.5 Other Payment Obligations. Borrower or any of its
-------------------------
Subsidiaries shall fail to make any payment when due under the terms of any
Indebtedness to be paid by such Person (excluding this Loan Agreement and the
other Operative Documents but including any other Indebtedness of Borrower or
any of its Subsidiaries to Lender) and such failure shall continue beyond any
period of grace provided with respect thereto, or shall default in the
observance or performance of any other agreement, term or condition contained in
any such Indebtedness, and the effect of such failure or default is to cause, or
permit the holder or holders thereof to cause Indebtedness in an aggregate
amount of Fifty Thousand Dollars ($50,000) or more to become due prior to its
stated date of maturity; or
10.1.6 Voluntary Bankruptcy or Insolvency Proceedings. Borrower or
----------------------------------------------
any of its Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property, (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated in full
or in part, (v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
-17-
its property by any official in an involuntary case or other proceeding
commenced against it, or (vi) take any action for the purpose of affecting any
of the foregoing; or
10.1.7 Involuntary Bankruptcy or Insolvency Proceedings.
------------------------------------------------
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Borrower or any of its Subsidiaries or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Borrower or any of
its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement; or
10.1.8 Judgments. A final judgment or order for the payment of
---------
money in excess of Fifty Thousand Dollars ($50,000) shall be rendered against
Borrower or any of its Subsidiaries and the same shall remain undischarged for a
period of thirty (30) days during which execution shall not ( be effectively
stayed, or any judgment, writ, assessment, warrant of attachment, or execution
or similar process shall be issued or levied against a substantial part of the
property of Borrower or any of its Subsidiaries and such judgment, writ, or
similar process shall not be released, stayed, vacated or otherwise dismissed
within thirty (30) days after issue or levy; or
10.1.9 Operative Documents. Any Operative Document or any material
-------------------
term thereof shall cease to be, or be asserted by Borrower not to be, a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms or if the Liens of Lender in the Collateral shall cease to be or shall not
be valid, first priority perfected Liens or Borrower shall assert that such
Liens are not valid, first priority and perfected Liens.
10.2 Rights of Lender upon Default. Upon the occurrence or existence of
-----------------------------
any Event of Default (other than an Event of Default referred to in Sections
10.1.6 and 10.1.7) and at any time thereafter during the continuance of such
Event of Default, Lender may, by written notice to Borrower, declare all
outstanding Obligations payable by Borrower hereunder (including a Make-Whole
Premium) to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Notes to the contrary notwithstanding. Upon
the occurrence or existence of any Event of Default described in Sections 10.1.6
and 10.1.7, immediately and without notice, all outstanding Obligations payable
by Borrower hereunder (including a Make-Whole Premium) shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary notwithstanding.
10.3 Rights Regarding Collateral. Borrower agrees that when any Event of
---------------------------
Default has occurred and is continuing, Lender shall have the tights, options,
duties and remedies of a secured party as permitted by law and, in addition to
and without limiting the foregoing, Lender may exercise any one or more or all,
and in any order, of the remedies herein set forth, including the following:
(a) Lender, personally or by agents or attorneys, shall have the right (subject
to compliance with any applicable mandatory legal requirements) to require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by Lender or to take immediate possession of the Collateral, or
any portion thereof, and for that purpose may pursue
-18-
the same wherever it may be found, and may enter any premises of Borrower, with
or without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold; (b) Lender
may, if at the time such action may be lawful and always subject to compliance
with any mandatory legal requirements, either with or without taking possession
and either before or after taking possession, without instituting any legal
proceedings whatsoever, having first given notice of such sale by registered or
certified mail to Borrower once at least ten (10) days prior to the date of such
sale, and having first given any other notice which may be required by law, sell
and dispose of the Collateral, or any part thereof, at a private sale or at
public auction, to the highest bidder, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as Lender may
determine, and at any place (whether or not it be the location of the Collateral
or any part thereof) designated in the notice referred to above. To the extent
permitted by applicable law, any such sale or sales may be adjourned from time
to time by announcement at the time and place appointed for such sale or sales,
or for any such adjourned sale or sales, without further published notice, and
Borrower, Lender or the holder or holders of the Note, or of any interest
therein, may bid and become the purchaser at any such sale; and (c) Lender may
proceed to protect and enforce this Agreement and the other Operative Documents
by suit or suits or proceedings in equity, at law or in bankruptcy, arid whether
for the specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted; or for foreclosure hereunder, or
for the appointment of a receiver or receivers for any real property security or
any part thereof, or for the recovery of judgment for the Obligations or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law.
10.4 Waiver by Borrower. Upon the occurrence of an Event of Default, to
------------------
the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower, acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of this
Agreement, all benefit and advantage of any such law or laws, and covenants that
it will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to Lender, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted.
10.5 Effect of Sale. Any sale, whether under any power of sale available
--------------
to Lender or by virtue of judicial proceedings, shall operate to divest all
right, title, interest, claim and demand whatsoever, either at law or in equity,
of Borrower in and to the property sold, and shall be a perpetual bar, both at
law and in equity, against Borrower, its successors and assigns, and against
-19-
any and all persons claiming the property sold or any part thereof under, by or
through Borrower, its successors or assigns.
10.6 Application of Collateral Proceeds. The proceeds and/or avails of
----------------------------------
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows: (a) First, to the payment of
reasonable costs and expenses, including all amounts expended to preserve the
value of the Collateral, of foreclosure or suit, if any, and of such sale and
the exercise of any other rights or remedies, and of all proper fees, expenses,
liability and advances, including reasonable legal expenses and attorneys' fees,
incurred or made hereunder by Lender; (b) Second, to the payment to Lender of
the amount then owing or unpaid on the Note, and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid upon the
Note, then first, to the unpaid interest thereon, and second, to unpaid
principal thereof; such application to be made upon presentation of the Note,
and the notation thereon of the payment, if partially paid, or the surrender and
cancellation thereof, if fully paid; (c) Third, to the payment of other amounts
then payable to Lender under any of the Operative Documents; and (d) Fourth, to
the payment of the surplus, if any, to Borrower, it successors and assigns, or
to whomsoever may be lawfully entitled to receive the same.
10.7 Reinstatement of Rights. If Lender shall have proceeded to enforce
-----------------------
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent jurisdiction),
Lender shall be restored to its former position and rights hereunder with
respect to the property subject to the security interest created under this
Agreement.
ARTICLE 11. MISCELLANEOUS.
11.1 Modifications, Amendments or Waivers. The provisions of any
------------------------------------
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required. No delay
---------------------------------------------------------
or failure of Lender in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a tight,
power or remedy preclude any further exercise thereof or of any other tight,
power or remedy. The tights and remedies hereunder of Lender are cumulative and
not exclusive of any rights or remedies which it would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of
Lender of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
11.3 Expenses; Indemnification. Borrower agrees upon demand to pay or
-------------------------
reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and
-20-
expenses of counsel for Lender, from time to time arising in connection with the
enforcement or collection of sums due under the Operative Documents. Borrower
shall indemnify, reimburse and hold Lender and its permitted assigns, each of
Lender's or its permitted assigns' partners, and each of their respective
successors, assigns, agents, officers, directors, shareholders, servants, agents
and employees harmless from and against all liabilities, losses, damages,
actions, suits, demands, claims of any kind and nature (including claims
relating to environmental discharge, cleanup or compliance), all costs and
expenses whatsoever to the extent they may be incurred or suffered by such
indemnified party in connection therewith (including reasonable attorneys' fees
and expenses), fines, penalties (and other charges of applicable governmental
authorities), licensing fees relating to any item of Collateral, damage to or
loss of use of property (including consequential or special damages to third
parties or damages to Borrower's property), or bodily injury to or death of any
person (including any agent or employee of Borrower) (each, a "Claim"), directly
or indirectly relating to or arising out of the use of the proceeds of the Loan,
including acquisition, use, ownership, operation, possession, control, storage,
return or condition of any item of Equipment constituting Collateral (regardless
of whether such item of Equipment is at the time in the possession of Borrower),
the falsity of any representation or warranty of Borrower or Borrower's failure
to comply with the terms of this Agreement or any other Operative Document
during the Term. The foregoing indemnity shall cover, without limitation, (i)
any Claim in connection with a design or other defect (latent or patent) in any
item of Equipment constituting Collateral, (ii) any Claim for infringement of
any patent, copyright, trademark or other intellectual property right, (iii) any
Claim resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials from any
item of Equipment financed by a Loan or constituting Collateral, including any
Claims asserted or arising under any Environmental Law, or (iv) any Claim for
negligence or strict or absolute liability in tort; provided, however, that
Borrower shall not indemnify Lender for any liability incurred by Lender as a
direct and sole result of Lender's gross negligence or willful misconduct. Such
indemnities shall continue in full force and effect, notwithstanding the
expiration or termination of this Agreement. Upon Lender's written demand,
Borrower shall assume and diligently conduct, at its sole cost and expense, the
entire defense of Lender and its permitted assigns, each of Lender's or its
permitted assigns' partners, and each of their respective successors, assigns,
agents, officers, directors, shareholders, servants, agents and employees
against any indemnified Claim described in this Section 11.3. Borrower shall not
settle or compromise any Claim against or involving Lender without first
obtaining Lender's written consent thereto, which consent shall not be
unreasonably withheld.
11.4 Waivers; Limitation on Damages. (a) Borrower shall give Lender
------------------------------
written notice within three hundred sixty-five (365) days of obtaining knowledge
of the occurrence of any claim or cause of action it believes it has, or may
seek to assert to allege against Lender, whether such claim is based in law or
equity, arising under or related to this Agreement or any of the other Operative
Documents or to the transactions contemplated hereby or thereby, or any act or
omission to act by Lender with respect hereto or thereto, and that if it shall
fail to give such notice to Lender with regard to any such claim or cause of
action, Borrower shall be deemed to have waived, and shall be forever barred
from bringing or asserting such claim or cause of action in any suit, action or
proceeding in any court or before any governmental agency or authority or any
arbitrator. (b) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
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IN THIS AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM
LENDER UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
11.5 Notices; Payments. All notices and other communications given to or
-----------------
made upon any party hereto in connection with this Agreement shall be in writing
(including telexed, telecopied or telegraphic communication) and mailed (by
certified or registered mail), telexed, telegraphed, telecopied or delivered to
the respective parties, as follows:
Borrower: XXXXX.XXX, INC.
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
Lender: DOMINION VENTURE FINANCE L.L.C.
00 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
11.6 Severability. If any provision of any Operative Document is held
------------
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
11.7 Survival. All representations, warranties, covenants and agreements
--------
of Borrower contained herein or made in writing in connection herewith shall
survive the execution and delivery of the Operative Documents, the making of
Loan hereunder, the granting of security and the issuance of the Note.
11.8 Governing Law. This Agreement, the other Operative Documents and the
-------------
rights and obligations of the parties hereto and thereto together with matters
arising in connection therewith, shall be governed by and construed and enforced
in accordance with the laws of the
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State of California. Any action to enforce this Agreement against Borrower may
be brought in California or, with regard to Collateral, may also be brought
wherever such Collateral is located.
11.9 Successors and Assigns. This Agreement and the other Operative
----------------------
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lender. Lender may
assign all or any portion of its rights hereunder and under one or more Notes to
any of its affiliated investment funds (an "Assignee") and may sell such rights
to any other financial entity (a "Participant") participation interests in
Lender's rights under this Agreement and the other Operative Documents. Lender
may disclose the Operative Documents and any other financial or other
information relating to Borrower or any Subsidiary to any potential Assignee or
Participant, provided that such Participant agrees to protect the
confidentiality of such documents and information using the same measures that
it uses to protect its own confidential information.
11.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
11.11 Further Assurances. Borrower will, at its own expense, from time to
------------------
time do, execute, acknowledge and deliver all and every further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
11.12 Right of First Offer. So long as any Obligations are outstanding
--------------------
hereunder, Borrower shall provide Lender with all requests for additional debt
or lease financing prior to the time that such requests are provided to other
financing sources. Should Borrower and Lender fail to agree on the terms and
conditions of such financing within ten (10) Business Days of receipt of a
request from Borrower, then Borrower may accept a funding source other than
Lender.
11.13 Power of Attorney in Respect of the Collateral. Borrower does
----------------------------------------------
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower with full power of
substitution, for it and in its name (a) to perform (but Lender shall not be
obligated to and shall incur no liability to Borrower or any third party for
failure to perform) any act which Borrower is obligated by this Agreement to
perform, (b) to ask, demand, collect, receive, receipt for, xxx for, compound
and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a security interest
is granted under Section 3.1 with full power to settle, adjust or compromise any
claim thereunder as fully as if Lender were Borrower itself, (c) to receive
payment of and to endorse the name of Borrower to any items of Collateral
(including checks, drafts and other orders for the payment of money) that come
into Lender's possession or under Lender's control, (d) to make all demands,
consents and waivers, or take any other action with respect to, the Collateral,
(e) in Lender's discretion, to file any claim or take any other action or
institute proceedings, either in its own name or in the name of Borrower or
otherwise, which Lender may reasonably deem necessary or
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appropriate to protect and preserve the right, title and interest of Lender in
and to the Collateral, and (f) to otherwise act with respect thereto as though
Lender were the outright owner of the Collateral; provided, however, that the
power of attorney herein granted shall be exercisable only upon the occurrence
and during the continuation of an Event of Default unless in Lender's reasonable
opinion immediate action is necessary to preserve or protect the Collateral.
Borrower agrees to reimburse Lender upon demand for all reasonable costs and
expenses, including attorneys' fees and expenses, which Lender may incur while
acting as Borrower's attorney in fact hereunder, all of which costs and expenses
are included within the Obligations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the date first written above.
LENDER: BORROWER:
DOMINION VENTURE FINANCE L.L.C. XXXXX.XXX, INC.
a Delaware Limited Liability Company a Washington corporation
By: DOMINION CAPITAL MANAGEMENT L.L.C. By: /s/: Xxxx Xxxxxxx
a Delaware Limited Liability company,
its Managing Member Name: Xxxx Xxxxxxx
By: /s/: Xxxxx Xxxxxxx Title: CFO
Name: Xxxxx Xxxxxxx
Title: VP Finance
SCHEDULE I
Collateral
----------
SCHEDULE II
Disclosure Schedule
-------------------
SCHEDULE III
Collateral Locations
--------------------
EXHIBIT A
SECURED PROMISSORY NOTE
-----------------------
$________________ Dated: ____________, 199_
FOR VALUE RECEIVED, the undersigned, XXXXX.XXX, INC. ("Borrower"), a
Washington corporation, HEREBY PROMISES TO PAY to the order of DOMINION VENTURE
FINANCE L.L.C., a Delaware Limited Liability Company ("Lender") the principal
amount of _____________________Dollars ($________) or such lesser amount as
shall equal the aggregate outstanding principal balance of the Loan made by
Lender to Borrower pursuant to the Loan and Security Agreement referred to below
(the "Loan Agreement"), and to pay all other amounts due with respect to the
Loan, on the dates and in the amounts set forth in the Loan Agreement.
The principal amount of this Note shall be payable in_________ (___)
consecutive monthly payments, the first_________ (___) of which shall be in the
amount of _____________________ ($_________) per month, and the _________ (__th)
of which shall be in the amount of______________________ ($________), each of
which shall be payable on the first day of each month commencing on ___________,
199_. This Note shall bear interest at a per annum rate of interest equal to
_________percent (___%) per annum based upon a year of 360 days and actual days
elapsed. If any interest is determined to be in excess of the then legal
maximum rate, then that portion of each interest payment representing an amount
in excess of the then legal maximum rate shall be deemed a payment of principal
and applied against the principal of the Loan.
On the date on which the last payment is due pursuant to the preceding
paragraph, a final payment in addition to any remaining unpaid principal and
accrued interest and all other amounts previously due hereunder, in the amount
of $___________ shall be payable.
Concurrently, with the funding of the Loan evidenced by this Note, Borrower
has made an advance payment of interest for the period from the date hereof to
the first Business Day of the month after the date hereof.
Whenever any payment due hereunder shall fall on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of interest or
fees, as the case may be.
Principal, interest, premium, if any, and all other amounts due with
respect to each Loan, are payable in lawful money of the United States of
America to Lender at the address specified in the Loan Agreement. All payments
made with respect to this Note shall be recorded by Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of the Loan and Security Agreement, dated as of [Date], between
Borrower and Lender. The Loan Agreement, among other things, (a) provides for
the making of a secured Loan by Lender to Borrower equal to
***Nothing after this on Original***
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