EXHIBIT 10.1
THIRD AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
---------------------------
This Third Amendment to Loan and Security Agreement is entered into as of
January 3, 2002 (the "Amendment"), by and between COMERICA BANK - CALIFORNIA
successor in interest to Imperial Bank ("Bank") and PHOTOWORKS, INC.
("Borrower").
RECITALS
--------
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of December 20, 2000, as amended, including without limitation by that
certain First Amendment to Loan and Security Agreement dated as of July 23, 2001
and that certain Second Amendment to Loan and Security Agreement dated as of
October 11, 2001 (collectively, the "Agreement"). The parties desire to amend
the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Borrower may not request nor receive any additional Credit Extensions.
2. In addition to all payments required under the Agreement (including
without limitation monthly payments of accrued interest), Borrower shall pay to
Bank the following amounts on the following dates on account of the outstanding
Advances: (i) $50,000 on the fifteenth (15th) day of each month beginning on
January 15, 2002 and continuing on the same day of each month thereafter through
May 15, 2002 and (ii) $275,000 on each of June 15, 2002, July 15, 2002, August
15, 2002, and September 15, 2002. On the Revolving Maturity Date, all Advances,
and all other amounts owing from Borrower to Bank, shall be immediately due and
payable.
3. Certain defined terms in Section 1.1 of the Agreement are hereby added
or amended to read as follows:
"Committed Revolving Line" means a credit extension of up to One
Million Three Hundred Fifty Thousand Dollars ($1,350,000).
"Revolving Maturity Date" means September 30, 2002.
4. Sections 6.14 and 6.15 of the Agreement are hereby amended in their
entirety to read as follows:
6.14 Liquidity. Borrower shall maintain a balance of unrestricted cash
and cash equivalents plus 75% of Eligible Accounts which is at least one
and one quarter (1.25) times the aggregate amount of all Indebtedness
(including any Contingent Obligations) owing from Borrower to Bank.
6.15 Revenue. As of the last day of each month, Borrower shall show
revenue for the three months immediately preceding the date of measurement,
which is not less than the revenue projected for such months in the July 31
Board Presentation entitled "2002 Worst Case" in the form presented to Bank
on July 17, 2001.
5. Exhibit C to the Agreement is hereby amended and replaced in its
entirety by Exhibit C attached hereto.
1
6. Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in he Agreement. The Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. Except as expressly
set forth herein, the execution, delivery, and performance of this Amendment
shall not operate as a waiver of, or as an amendment of, any right, power, or
remedy of Bank under the Agreement, as in effect prior to the date hereof.
Borrower ratifies and reaffirms the continuing effectiveness of all promissory
notes, guaranties, security agreements, mortgages, deeds of trust, environmental
agreements, and all other instruments, documents and agreements entered into in
connection with the Agreement.
7. Borrower represents and warrants that the Representations and Warranties
contained in the Agreement are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is continuing.
8. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
9. As a condition to the effectiveness of this Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Amendment, duly executed by Borrower;
(b) an amount equal to all Bank Expenses incurred through the date of
this Amendment, plus a $7,500 extension fee, which shall be nonrefundable
as of the date of this Amendment;
(c) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement; and
(d) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
PHOTOWORKS, INC.
By: /s/Xxxx X. Xxxxxxxxxxxxxx
-----------------------------------
Title: Chairman & CEO
COMERICA BANK - CALIFORNIA
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Title: Venture Banking Officer
2
COMERICA BANK - CALIFORNIA SECURITIES ACCOUNT
CONTROL AGREEMENT
TECHNOLOGY & LIFE SCIENCES DIVISION
January 3, 2002
Attn: Secretary
Re: Comerica Bank-California /Security Interest in Securities Account of
PHOTOWORKS, INC.
Dear Sir or Madam:
This agreement ("Control Agreement") is entered by and among Comerica
Bank-California ("Bank"), a California banking corporation, PHOTOWORKS, INC., a
Washington corporation ("Pledgor") and Monarch Funds, a Delaware business trust
(the "Trust"), by Forum Shareholder Services, LLC, a Delaware limited liability
company, as agent therefor.
1. This Control Agreement concerns securities account No. XXXXXXX and any
other account (collectively, the "Securities Account") established by Pledgor
with Trust. Pursuant to that certain Loan and Security Agreement dated as of
December 20, 2000, as amended from time to time, including without limitation by
that certain First Amendment to Loan and Security Agreement dated as of July 23,
2001, that certain Second Amendment to Loan and Security Agreement dated as of
October 11, 2001, and that certain Third Amendment to Loan and Security
Agreement dated as of the date hereof (collectively, the "Security Agreement"),
Bank has a security interest in all of Pledgor's present and future right, title
and interest in, to and under the Securities Account maintained with Trust in
connection with the securities, securities entitlements or other investment
property, instruments and financial assets contained in the Securities Account,
and all investment property, instruments and financial assets at any time held
or maintained in the Securities Account, together with all investment property,
instruments and financial assets substituted therefore or for any part thereof,
all interest, dividends, increases, profits, new financial assets or other
increments, distributions or rights of any kind received on account of any of
the foregoing, and all other income received in connection therewith and all
products or proceeds thereof (whether cash or non-cash proceeds)(collectively,
the "Securities Entitlement"). Bank, Pledgor and Trust are entering into this
Control Agreement to perfect Bank's security interest in the Securities Account.
2. The Securities Entitlement is to be held in the Securities Account and
is and will remain subject to a first priority security interest in favor of
Bank. The Securities Account is not a margin account or subject to check writing
privileges. All rights of Trust in the Securities Account except for Permitted
Liens as defined below shall be subordinated and postponed in favor of Bank's
rights and interests therein under and pursuant to the Security Agreement.
3. Until Trust is notified to the contrary by Bank in any entitlement order
or other notice ("Notice"), Trust is authorized to act upon the instruction of
Pledgor, or its authorized representatives, and comply with Pledgor's (or its
authorized representatives) instructions for the following purposes:
[X] make trades of any and all of the financial assets held in the
Securities Account &/or
3
[X] receiving any distributions relating to the Securities Entitlement
&/or
[X] making any withdrawals of any and all of the financial assets held in
the Securities Account or the proceeds thereof.
Upon and following receipt of Notice, (i) Trust shall immediately cease
complying with instructions concerning the Securities Account and the Securities
Entitlement originated by the Pledgor, or its representatives, and thereafter
shall comply with the instructions of Bank without further consent by Pledgor;
(ii) Trust is not authorized to release any of the Securities Entitlement or any
proceeds thereof or make any distribution from the Securities Account to any
party other than Bank, until otherwise instructed by Bank in writing; (iii)
Trust is instructed to hold the Securities Account and Securities Entitlement
for the benefit of Bank; and (iv) Bank is the only person authorized to make any
withdrawals of and/or to authorize or receive any distribution of or relating to
the Securities Entitlement.
4. By its execution hereof, Trust acknowledges and agrees to the terms set
forth herein, and that this Control Agreement constitutes written notice to
Trust and acknowledgment by Trust of Bank's security interest in the Securities
Account. Said security interest shall be noted by the Trust on its books and
records.
5. Trust has established the Securities Account in Pledgor's name. A true
and complete copy of the account agreement entered into between Pledgor and
Trust with respect to the Securities Account (the "Account Agreement") is
attached as Exhibit A. Exhibit A is a complete and accurate statement of the
investment property, financial assets and credit balances credited to the
Securities Account as of the date(s) set forth in the statement. Except for the
claims and interest of Bank and Pledgor in the Securities Account and liens to
secure fees owed to Trust by Pledgor with respect to the operation of the
Securities Account ("Permitted Liens"), Trust does not know of any claim to or
interest in the Securities Account.
6. Trust shall send copies of all statements and confirmations regarding
the Securities Account simultaneously to Pledgor and to Bank. Trust shall
promptly notify Bank and Pledgor if a person asserts a lien, encumbrance or
adverse claim against the Securities Account.
7. Trust shall not agree with any third party that Trust will comply with
entitlement orders from the third party. Trust shall not amend the Account
Agreement, including its choice of law clause and the provision providing for
treatment of property held in the Securities Account as a financial asset,
without Bank's written consent. Trust shall not permit Pledgor to terminate the
Securities Account.
8. The rights and powers granted herein to Bank have been granted in order
to perfect its security interest in the Securities Account, are powers coupled
with an interest and will neither be affected by the death or bankruptcy of the
Pledgor nor by the lapse of time. Trust's obligations under this Control
Agreement shall continue in effect until the security interest of Bank in the
Securities Account has been terminated pursuant to the terms of the Security
Agreement and Bank has notified you of such termination in writing. Upon receipt
of such notice Trust's obligations under this Control Agreement with respect to
the operation and maintenance of the Securities Account after the receipt of
such notice shall terminate, Bank shall have no further right to originate
entitlement orders concerning the Securities Account and Trust may take such
steps as the Pledgor may request to vest full ownership and control of the
Securities Account in the Pledgor, including, but not limited to, removing the
name of Bank from the Securities Account or transferring all of the financial
assets and credit balances in the Securities Account to another securities
account in the name of the Pledgor or its designee.
9. This Control Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the parties hereto, and shall be governed by, and
in accordance with, the laws of the State of California without regard to
conflict of laws principles.
4
10. Each of the Pledgor and the Bank hereby agrees to indemnify the Trust
for, defend the Trust against and hold the Trust harmless from all claims,
demands, suits, expenses (including attorneys' fees), losses and damages
resulting from or arising out of this Control Agreement and not due to the
Trust's gross negligence or willful misconduct, including as a result of the
Trust's actions in honoring instructions from any properly authorized person
believed to be authorized prior to receipt of notification to the contrary or
refusing to honor instructions from persons not demonstrated to the Trust's
satisfaction to be so authorized. The Pledgor and the Bank agree that, in the
event of any dispute between them or either of them and a third person in
connection with which the Trust becomes subject to conflicting claims with
respect the Securities Account, the Trust may in its sole and absolute
discretion initiate an interpleader action, in which the Pledgor and the Bank
consent to being joined, to determine the relative rights of the claimants with
respect to the Securities Account.
11. This Control Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which taken together shall
constitute one and the same instrument.
12. Pledgor acknowledges that this Control Agreement supplements Pledgor's
existing agreements with Trust. This Control Agreement does not create any
obligation or duty of Trust other than those expressly set forth herein. If this
Control Agreement conflicts with any other agreement between Trust and Pledgor,
the terms of this Control Agreement shall prevail.
13. This Control Agreement is an integrated agreement and supplements all
negotiations and agreement with respect to the subject matter hereof. Any
amendments hereto shall be in writing and signed by all parties.
14. Unless otherwise provided in this Control Agreement, all notices or
demands relating to this Control Agreement shall be in writing and (except for
account statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered, sent by
certified mail or by facsimile to Bank, Pledgor or Trust, as the case may be, at
the address set forth below:
If to Bank: Comerica Bank-California
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn.: Xxxxx Xxxxxx
Facsimile: 000-000-0000
If to Pledgor: PHOTOWORKS, INC.
0000 00xx Xxxxxx Xxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxx Bond
FAX: (000) 000-0000
If to Trust: Monarch Funds
X.X. Xxx 000
Xxxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Attn.: Secretary
15. WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND FOR THEIR MUTUAL BENEFIT,
5
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.
Please sign where indicated below to reflect your acknowledgment of and
agreement to the foregoing terms and conditions.
Very truly yours,
COMERICA BANK-CALIFORNIA,
a California banking corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Title: Venture Banking Officer
PHOTOWORKS, INC.
Pledgor
By: /s/ Xxxx X. Xxxxxxxxxxxxxx
-----------------------------------
Title: Chairman & CEO
By:
---------------------------------------------
Title:
------------------------------------------
MONARCH FUNDS,
a Delaware business trust
By: Forum Shareholders Services, LLC,
a Delaware limited liability company, as agent
By:
----------------------------------------------
Title: Director
Exhibit A
Account Agreement
7
COMERICA BANK - CALIFORNIA SECURITIES ACCOUNT
CONTROL AGREEMENT
TECHNOLOGY & LIFE SCIENCES DIVISION
January 3, 2002
Attn: Xxxx Xxxxxx
Re: Comerica Bank - California / Security Interest in Securities Account of
PHOTOWORKS, INC.
Dear Sir or Madam:
This agreement ("Control Agreement") is entered by and among COMERICA BANK
- CALIFORNIA ("Bank"), PHOTOWORKS, INC. ("Pledgor") and Comerica Securities,
Inc. ("Securities Intermediary").
1. This Control Agreement concerns securities account No. XXXXXXX and any
other account (collectively, the "Securities Account") established by Pledgor
with Securities Intermediary. Pursuant to that certain Loan and Security
Agreement dated as of December 20, 2000, as amended from time to time, including
without limitation by that certain First Amendment to Loan and Security
Agreement dated as of July 23, 2001, that certain Second Amendment to Loan and
Security Agreement dated as of October 11, 2001, and that certain Third
Amendment to Loan and Security Agreement dated as of the date hereof
(collectively, the "Security Agreement"), Bank has a security interest in all of
Pledgor's present and future right, title and interest in, to and under the
Securities Account maintained with Securities Intermediary in connection with
the securities, securities entitlements or other investment property,
instruments and financial assets contained in the Securities Account, and all
investment property, instruments and financial assets at any time held or
maintained in the Securities Account, together with all investment property,
instruments and financial assets substituted therefore or for any part thereof,
all interest, dividends, increases, profits, new financial assets or other
increments, distributions or rights of any kind received on account of any of
the foregoing, and all other income received in connection therewith and all
products or proceeds thereof (whether cash or non-cash proceeds)(collectively,
the "Securities Entitlement"). Bank, Pledgor and Securities Intermediary are
entering into this Control Agreement to perfect Bank's security interest in the
Securities Account.
2. The Securities Entitlement is to be held in the Securities Account and
is and will remain subject to a first priority security interest in favor of
Bank. The Securities Account is not a margin account or subject to check writing
privileges. All rights of Securities Intermediary in the Securities Account
except for Permitted Liens as defined below shall be subordinated and postponed
in favor of Bank's rights and interests therein under and pursuant to the
Security Agreement.
3. Until Securities Intermediary is notified to the contrary by Bank in any
entitlement order or other notice ("Notice"), Securities Intermediary is
authorized to act upon the instruction of Pledgor, or its authorized
representatives, and comply with Pledgor's (or its authorized representatives)
instructions for the following purposes:
[X] make trades of any and all of the financial assets held in the
Securities Account &/or
8
[X] receiving any distributions relating to the Securities Entitlement &/or
[X] making any withdrawals of any and all of the financial assets held in
the Securities Account or the proceeds thereof.
Upon and following receipt of Notice, (i) Securities Intermediary shall
immediately cease complying with instructions concerning the Securities Account
and the Securities Entitlement originated by the Pledgor, or its
representatives, and thereafter shall comply with the instructions of Bank
without further consent by Pledgor; (ii) Securities Intermediary is not
authorized to release any of the Securities Entitlement or any proceeds thereof
or make any distribution from the Securities Account to any party other than
Bank, until otherwise instructed by Bank in writing; (iii) Securities
Intermediary is instructed to hold the Securities Account and Securities
Entitlement for the benefit of Bank; and (iv) Bank is the only person authorized
to make any withdrawals of and/or to authorize or receive any distribution of or
relating to the Securities Entitlement.
4. By its execution hereof, Securities Intermediary acknowledges and agrees
to the terms set forth herein, and that this Control Agreement constitutes
written notice to Securities Intermediary and acknowledgment by Securities
Intermediary of Bank's security interest in the Securities Account. Said
security interest shall be noted by the Securities Intermediary on its books and
records.
5. Securities Intermediary has established the Securities Account in
Pledgor's name. A true and complete copy of the account agreement entered into
between Pledgor and Securities Intermediary with respect to the Securities
Account (the "Account Agreement")is attached as Exhibit A. Exhibit A is a
complete and accurate statement of the investment property, financial assets and
credit balances credited to the Securities Account as of the date(s) set forth
in the statement. Except for the claims and interest of Bank and Pledgor in the
Securities Account and liens to secure fees owed to Securities Intermediary by
Pledgor with respect to the operation of the Securities Account ("Permitted
Liens"), Securities Intermediary does not know of any claim to or interest in
the Securities Account.
6. Securities Intermediary shall send copies of all statements and
confirmations regarding the Securities Account simultaneously to Pledgor and to
Bank. Securities Intermediary shall promptly notify Bank and Pledgor if a person
asserts a lien, encumbrance or adverse claim against the Securities Account.
7. Securities Intermediary shall not agree with any third party that
Securities Intermediary will comply with entitlement orders from the third
party. Securities Intermediary shall not amend the Account Agreement, including
its choice of law clause and the provision providing for treatment of property
held in the securities account as a financial asset, without Bank's written
consent. Securities Intermediary shall not permit Pledgor to terminate the
Securities Account.
8. The rights and powers granted herein to Bank have been granted in order
to perfect its security interest in the Securities Account, are powers coupled
with an interest and will neither be affected by the death or bankruptcy of the
Pledgor nor by the lapse of time. Securities Intermediary's obligations under
this Control Agreement shall continue in effect until the security interest of
Bank in the Securities Account has been terminated pursuant to the terms of the
Security Agreement and Bank has notified you of such termination in writing.
Upon receipt of such notice Securities Intermediary's obligations under this
Control Agreement with respect to the operation and maintenance of the
Securities Account after the receipt of such notice shall terminate, Bank shall
have no further right to originate entitlement orders concerning the Securities
Account and Securities Intermediary may take such steps as the Pledgor may
request to vest full ownership and control of the Securities Account in the
Pledgor, including, but not limited to, removing the name of Bank from the
Securities Account or transferring all of the financial assets and credit
balances in the Securities Account to another securities account in the name of
the Pledgor or its designee.
9
9. This Control Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the parties hereto, and shall be governed by, and
in accordance with, the laws of the State of California without regard to
conflict of laws principles.
10. This Control Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which taken together shall
constitute one and the same instrument.
11. Pledgor acknowledges that this Control Agreement supplements Pledgor's
existing agreements with Securities Intermediary. This Control Agreement does
not create any obligation or duty of Securities Intermediary other than those
expressly set forth herein. If this Control Agreement conflicts with any other
agreement between Securities Intermediary and Pledgor, the terms of this Control
Agreement shall prevail.
12. This Control Agreement is an integrated agreement and supplements all
negotiations and agreement with respect to the subject matter hereof. Any
amendments hereto shall be in writing and signed by all parties.
13. Unless otherwise provided in this Control Agreement, all notices or
demands relating to this Control Agreement shall be in writing and (except for
account statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered, sent by
certified mail or by facsimile to Bank, Pledgor or Securities Intermediary, as
the case may be, at the address set forth below:
If to Bank: Comerica Bank-California
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn.: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
If to Pledgor: PHOTOWORKS, INC.
0000 00xx Xxxxxx Xxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxx Bond
FAX: (000) 000-0000
If to Securities Intermediary: Comerica Securities, Inc.
0000 Xx. XxXxxxxxx Xxxx., 00xx. Xxxxx
Xxxxxxxxx XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxxx
14. WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND FOR THEIR MUTUAL BENEFIT,
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.
Please sign where indicated below to reflect your acknowledgment of and
agreement to the foregoing terms and conditions.
10
Very truly yours,
COMERICA BANK - CALIFORNIA
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Title: Venture Banking Officer
PHOTOWORKS, INC.
Pledgor
By: /s/ Xxxx X. Xxxxxxxxxxxxxx
--------------------------------------
Title: Chairman & CEO
By:
-----------------------------------
Title:
--------------------------------
COMERICA SECURITIES, INC.
Securities Intermediary
By:
-----------------------------------
Title:
--------------------------------
11
Exhibit A
Account Agreement
12
