EXHIBIT 10.10
IMPERIAL BANK
MEMBER FDIC
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
THIS SECURITY AND LOAN AGREEMENT (Accounts Receivable) is entered into as
of November 20, 1996 (this "Agreement") between THE AUDIBLE WORDS CORPORATION, a
Delaware corporation (herein called "Borrower") and IMPERIAL BANK (herein called
"Bank").
1. COMMITMENT. Bank hereby commits, subject to all the terms and
conditions of this Agreement and prior to the termination of its commitment as
hereinafter provided, to make loans to Borrower from time to time in such
amounts as may be determined by Bank up to, but not exceeding in the aggregate
unpaid principal balance of $500,000. Loans advanced pursuant to the foregoing
commitment shall be referred to as "Loans." If, at any time or for any reason,
the outstanding principal amount of the Loans is greater than $500,000, Borrower
shall immediately pay to Bank, in cash, the amount of such excess. Any
commitment of Bank, pursuant to the terms of this Agreement, to make advances
shall expire on the Final Payment Date, subject to Bank's right to renew said
commitment in its sole and absolute discretion. Any such renewal of the
commitment shall not be binding upon Bank unless it is in writing and signed by
an officer of the Bank. Provided that no Event of Default has occurred and is
continuing, all or any portion of the Loans advanced by Bank which are repaid by
Borrower shall be available for reborrowing in accordance with the terms hereof.
2. LOANS. The amount of each Loan made by Bank to Borrower hereunder
shall be debited to the loan ledger account of Borrower maintained by Bank
(herein called the "Loan Account") and Bank shall credit the Loan Account with
all loan repayments in respect thereof made by Borrower. Borrower promises to
pay Bank (a) the unpaid balance of Borrower's Loan Account on December 31, 1997
(the "Final Payment Date") and (b) on or before the tenth day of each month,
interest on the average daily unpaid balance of the Loan Account during the
immediately preceding month at the rate of three-quarters of one percent (.75%)
per annum in excess of the rate of interest which Bank has announced as its
prime lending rate (the "Prime Rate") which shall vary concurrently with any
change in such Prime Rate. Interest shall be computed at the above rate on the
basis of the actual number of days during which the principal balance of the
Loan Account is outstanding divided by 360, which shall for interest computation
purposes be considered one year. Bank is hereby authorized to charge Borrower's
deposit account(s) with Bank for all sums due Bank under this Agreement.
3. LOAN REQUESTS. Requests for loans hereunder shall be in writing duly
executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in SECTION 1, which shall
disclose that Borrower is entitled to the amount of loan being requested.
4. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
"ACCOUNTS" means any right to payment for goods sold or leased, or to
be sold or to be leased, or for services rendered or to be rendered no
matter how evidenced, including accounts receivable, contract rights,
chattel paper, instruments, purchase orders, notes, drafts, acceptances,
general intangibles and other forms of obligations and receivables.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of that certain General
Security Agreement (Tangible and Intangible Personal Property) dated as of the
date hereof, made by Borrower in favor of Bank (the "General Security
Agreement") or otherwise.
"FINAL PAYMENT DATE" has the meaning set forth in SECTION 2.
"LOAN DOCUMENTS" means this Agreement. the Warrant to Purchase Stock,
the General Security Agreement, the Agreement to Provide Insurance (Real or
Personal Property), the Trademark Security Agreement, the Copyright Security
Agreement, each as executed by Borrower in favor of Bank, together with all
other documents entered into or delivered pursuant to any of the foregoing.
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in SCHEDULE 1 attached hereto;
(2) liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings;
(3) liens and security interests (i) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing
the acquisition of such equipment and in an amount not greater than
the purchase price thereof or (ii) existing on such equipment at the
time of its acquisition, provided that the lien and security interest
is confined solely to the property so acquired and improvements
thereon, and the proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's
business not interfering in any material respect with the business of
Borrower and any interest or title of a lessor or licensor under any
lease or license, as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, provided that the payment
thereof is not yet required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation,
unemployment insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
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(8) easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) liens in favor of Bank and any of its affiliates and/or
successors and assigns;
(12) any interest or title of a lessor in equipment subject to
any capitalized lease; and
(13) any liens arising from the filing of any financing
statements relating to true leases.
"SUBORDINATED DEBT" means indebtedness of Borrower the payment of
which is fully subordinated in time and right of payment to the Loans and has
been approved in writing by Bank.
5. ASSIGNMENT OF ACCOUNTS. Borrower hereby assigns to Bank all Borrower's
present and future Accounts, including all proceeds due thereunder, all
guaranties and security therefor, and hereby grants to Bank a continuing
security interest in all moneys collected as contemplated by SECTION 6 hereof as
security for any and all obligations of Borrower to Bank, whether now owing or
hereafter incurred and whether direct, indirect, absolute or contingent. So long
as a Borrower is indebted to Bank or Bank is committed to extend credit to
Borrower and there shall exist and be continuing an Event of Default, Borrower
will execute and deliver to Bank such assignments, including Bank's standard
forms of Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may require in
order to affirm, effectuate or further assure the assignment to Bank of the
Collateral or to give any third party, including the account debtors obligated
on the Accounts, notice of Bank's interest in the Collateral. Notwithstanding
the foregoing, so long as no Event of Default has occurred and is continuing,
Borrower shall be entitled to use the proceeds of such Accounts in the ordinary
course of its business.
6. COLLECTION OF ACCOUNTS. Until Bank exercises its rights to collect the
Accounts pursuant to SECTION 15, Borrower will collect with diligence all
Borrower's Accounts. Any collection of Accounts by Borrower, whether in the form
of cash, checks, notes, or other instruments for the payment of money (properly
endorsed or assigned where required to enable Bank to collect same), shall be in
trust for Bank. If an Event of Default has occurred, Borrower shall keep all
such collections separate and apart from all other funds and property so as to
be capable of identification as the property of Bank and deliver said
collections daily to Bank in the identical form received. The proceeds of such
collections when received by Bank may be applied by Bank directly to the payment
of Borrower's Loan Account or any other obligation secured hereby. Any credit
given by Bank upon receipt of said proceeds shall be conditional credit subject
to collection. Returned items at Bank's option may be charged to Borrower's
general account. All collections of the Accounts shall be set forth on an
itemized schedule, showing the name of
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the account debtor, the amount of each payment and such other information as
Bank may request.
7. RETURNS AND ADJUSTMENTS. Until Bank exercises its rights to collect
the Accounts pursuant to SECTION 15, Borrower may continue its present policies
with respect to returned merchandise and adjustments. However, Borrower shall
immediately notify Bank of all cases involving repossessions, and material loss
or damage of or to merchandise represented by the Accounts.
8. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (i) That Borrower is duly organized and existing in the State of Delaware
and the execution, delivery and performance of each of the Loan Documents are
within Borrower's corporate powers, have been duly authorized and are not in
conflict with law or the terms of any charter, by-law or other incorporation
papers, or of any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower is bound or affected; (ii) Borrower is, or at the
time the collateral becomes subject to Bank's security interest will be, the
true and lawful owner of and has, or at the time the Collateral becomes subject
to Bank's security interest will have, good and clear title to the Collateral,
subject only to Bank's rights therein and to Permitted Liens; (iii) Each Account
is, or at the time the Account comes into existence will be, a true and correct
statement of a bona fide indebtedness incurred by the debtor named therein in
the amount of the Account for either merchandise sold or delivered (or being
held subject to Borrower's delivery instructions) to, or services rendered,
performed and accepted by, the account debtor; (iv) That there are or will be no
defenses, counterclaims, or setoffs which may be asserted against the Accounts
from time to time, except as permitted in the definition thereof; (v) Any and
all financial information, including information relating to the Collateral,
submitted by Borrower to Bank, whether previously or in the future, is or will
be true and correct; (vi) There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority; (vii) The consolidated and consolidating
balance sheets of Borrower dated as of September 30, 1996, and the related
consolidated and consolidating profit and loss statements for the fiscal year
then ended, a copy of which has heretofore been delivered to Bank by Borrower,
and all other statements and data submitted in writing by Borrower to Bank in
connection with Borrower's request for credit are true and correct, and said
balance sheet and profit and loss statement accurately present the financial
condition of Borrower as of the date thereof and the results of the operations
of Borrower for the period covered thereby, and have been prepared in accordance
with generally accepted accounting principles as applied in the United States of
America on a basis consistently maintained. Since such date, there have been no
material adverse changes in the financial condition of Borrower. Borrower has no
knowledge of any liabilities, contingent or otherwise, at such date not
reflected in said balance sheet, and Borrower has not entered into any special
commitments or substantial contracts which are not reflected in said balance
sheet, other than in the ordinary and normal course of its business, which may
have a materially adverse effect upon its financial condition, operations or
business as now conducted; (viii) Borrower has no any liability for any
delinquent state, local or federal taxes, and, if any such entity has contracted
with any government agency, none has any liability for renegotiation of profits;
and (ix) Borrower, as of the date hereof, possesses all necessary trademarks,
trade names, copyrights, patents, patent rights, and licenses to conduct its
business as now operated, without any known conflict with valid trademarks,
trade names, copyrights, patents and license rights of others.
9. NEGATIVE COVENANTS. Borrower agrees that so long as it is indebted to
Bank, neither Borrower, nor any of its subsidiaries will, without prior written
consent of Bank:
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A. Make any substantial change in the character of its business.
B. Create, incur, assume or permit to exist any indebtedness for
borrowed monies other than loans from Bank except obligations now existing as
shown in the financial statement dated September 30, 1996, excluding those being
refinanced by Bank, Subordinated Debt, the indebtedness referred to in clause
(3)(i) of the definition of Permitted Liens, sale and leaseback transactions to
the extent that from and after November 1, 1996 the proceeds thereof shall not
exceed $500,000 and bona fide equipment or software leases; or sell or transfer,
either with or without recourse, any accounts or notes receivable or any monies
due or to become due.
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in Bank's favor.
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary course of Borrower's business or other assets which are obsolete or
otherwise considered surplus), or execute any financing statements covering the
Collateral in favor of any secured party or person other than Bank.
E. Make any loans or advances to any person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances made in the ordinary course of business
are not made to any person or entity which is controlled by or under common
control with Borrower) or make any investment in the securities of any person or
other entity other than the United States Government; or guarantee or otherwise
become liable upon the obligation of any person or other entity, except by
endorsement of negotiable instruments for deposit or collection in the ordinary
and normal course of its business.
F. Purchase or otherwise acquire the assets or business of any
person or other entity; or liquidate, dissolve, merge or consolidate, or
commence any proceedings therefore; or except in the ordinary and normal course
of its business, sell (including without limitation the selling of any property
or other asset accompanied by the leasing back of the same) any assets including
any fixed assets, any property, or other assets necessary for the continuance of
its business as now conducted.
G. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock.
10. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank,
it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Furnish Bank periodically, in such form and detail and at such
times as Bank may require, statements showing aging and reconciliation of the
Accounts and collections thereon;
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C. Permit representatives of Bank to inspect the Borrower's books
and records relating to the Collateral and make extracts therefrom at any
reasonable time, provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business, and to arrange for verification of the
Accounts, under reasonable procedures, acceptable to Bank, directly with the
account debtors or otherwise at Borrower's expense;
D. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
E. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any sums
payable by Borrower under Borrower's Loan Account or any other obligation
secured hereby, enforcing any term or provision of this Security Agreement or
otherwise or in the. checking, handling and collection of the Collateral and the
preparation and enforcement of any agreement relating thereto;
F. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
G. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable solely to Bank, and, in
the event Bank takes possession of the Collateral, the insurance policy or
policies and any uneamed or returned premium thereon shall at the option of Bank
become the sole property of Bank, such policies and the proceeds of any other
insurance covering or in any way relating to the Collateral, whether now in
existence or hereafter obtained, being hereby assigned to Bank;
H. In the event the unpaid balance of Borrower's Loan Account shall
exceed the maximum amount of outstanding loans to which Borrower is entitled
under SECTION 1 hereof, as applicable, Borrower shall immediately pay to Bank
for credit to such Loan Account the amount of such excess;
I. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the State of Delaware and any other state(s) in which Borrower
conducts its business;
J. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as loss payee;
K. Pay and discharge, before the same becomes delinquent and before
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (a) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any materially adverse affect upon its financial condition or the loss of
any right of redemption from any
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sale thereunder; and (b) it shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting practice)
deemed by it adequate with respect thereto;
L. Maintain a standard and modern system of accounting in accordance
with generally accepted accounting principles on a basis consistently
maintained; permit Bank's representatives to have access to, and to examine its
properties, books and records at all reasonable times; provided that Bank shall
use its best efforts to not interfere with the conduct of Borrower's business.
M. Upon Bank's request, and not less frequently than once per
calendar quarter, deliver to Bank and Bank's designated counsel executed
originals of Patent Security Agreement in the form of EXHIBIT A attached hereto
and incorporated herein by this reference, Copyright Security Agreement in the
form of EXHIBIT B attached hereto and incorporated herein by this reference and
Trademark Security Agreement in the form of Exhibit C attached hereto and
incorporated herein by this reference, each with appropriate insertions and
schedules sufficient for perfecting Bank's security interest in all patents,
patent licenses, trademarks, trademark licenses, copyrights and copyright
licenses to which Borrower then has any right, title or interest; and
N. Maintain its properties, equipment and facilities in good order
and repair.
11. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with generally accepted accounting principles as generally used in
the United States of America applied on a basis consistent with previous years.
Compliance with financial covenants shall be calculated and monitored on a
monthly basis, except as shall be expressly stated to the contrary. Borrower
affirmatively covenants that so long as any loans, obligations or liabilities
remain outstanding or unpaid to Bank, it will, on a consolidated basis:
A. Beginning with the period ending June 30, 1997, maintain a
minimum tangible net worth (meaning the excess of all assets, excluding any
value for goodwill, trademarks, patents, copyrights, organization expense and
other similar intangible items, over its liabilities, less subordinated debt) of
not less than $500,000.
B. As soon as it is available, but not later than 20 days after and
as of the end of each month, deliver to Bank a financial statement consisting of
a balance sheet and profit and loss statement in form satisfactory to Bank, and
a Compliance Certificate in the form of EXHIBIT D attached hereto and
incorporated herein by this reference, certified by an officer of Borrower.
C. As soon as it is available, but not later than 90 days after the
end of Borrower's fiscal year, deliver to Bank a report of audit of Borrower's
consolidated financial statements together with changes in financial position
certified without negative qualification by an independent certified public
accountant selected by Borrower but acceptable to Bank.
D. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank.
E. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower
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in an amount in excess of $50,000.
12. LOAN FEE. In addition to any other amounts due, or to become due, in
lieu of a loan fee, Borrower agrees to deliver to Bank (when available) four (4)
Audible Words players and docking units.
13. BANKING RELATIONSHIP. Borrower will maintain its primary banking and
investment accounts with Bank.
14. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "Event of Default": (i) Default be made in the
payment of any obligation by Borrower under any Loan Document; (ii) Subject to
clause (i) above, breach be made in any warranty, statement, promise, term or
condition, contained herein or in any other Loan Document and the same shall not
have been cured to the satisfaction of Bank within 15 days after Borrower shall
have become aware thereof, whether by written notice from Bank, or otherwise,
(except that no cure period shall exist for breaches in respect of Borrower's
obligations under XXXXXXX 0, XXXXXXXXXXX 00.X, X, X, X, X, X and J, SUBSECTIONS
11.A, B and C of this Agreement, and SECTIONS 1 and 2 of the General Security
Agreement; (iii) Any statement, warranty or representation made by Borrower at
any time proves false; (iv) Borrower defaults in the repayment of any principal
of or the payment of any interest on any indebtedness exceeding in the aggregate
principal amount $10,000 or breaches or violates any term or provision of any
promissory note, loan agreement, mortgage, indenture or other evidence of such
indebtedness pursuant to which amounts outstanding in the aggregate exceed
$10,000 if the effect of such breach is to permit the acceleration of such
indebtedness, whether or not waived by the note holder or obligee, and such
failure shall not have been cured to Bank's satisfaction within fifteen (15)
calendar days after Borrower shall become aware thereof, whether by written
notice from Bank or otherwise, or there has in fact been an acceleration of such
indebtedness; (v) Borrower becomes insolvent or make an assignment for the
benefit of creditors; (vi) Any proceeding be commenced by Borrower under any
bankruptcy, reorganization, arrangement, readjustment of debt or moratorium law
or statute or, any such a proceeding is commenced against Borrower and is not
dismissed or stayed within ten (10) days (provided that no Loans will be made
prior to the dismissal of such proceeding); (vii) Any money judgment, writ of
attachment, gamishment, execution or other legal process be entered against
Borrower or issued against any material property of Borrower which is not fully
covered by insurance (subject to reasonable deductibles) and remains unvacated,
unbonded, unstayed or unpaid or undischarged for more than fifteen (15) days
(whether or not consecutive) or in any event later than five (5) days prior to
the date of any proposed sale thereunder, or if any assessment for taxes against
Borrower other than real property, is made by the Federal or State government or
any department thereof; or (viii) Any material adverse change in Borrower's
financial condition, prospects or operations which materially impairs the
prospect of Borrower's payment or performance of its obligations under the Loan
Documents. Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its option and without demand first made and without
notice to Borrower, do any one or more of the following: (a) Terminate its
obligation to make loans to Borrower as provided in SECTION 1 hereof; (b)
Declare all sums secured hereby immediately due and payable; (c) Immediately
take possession of the Collateral wherever it may be found, using all necessary
force so to do, or require Borrower to assemble the Collateral and make it
available to Bank at a place designated by Xxxxx which is reasonably convenient
to Borrower and Bank, and Borrower waives all claims for damages due to or
arising from or connected with any such taking; (d) Proceed in the foreclosure
of Bank's security interest and sale of the Collateral in any manner permitted
by law, or provided for herein; (e) Sell, lease or otherwise dispose of the
Collateral at public or private sale, with or without having the Collateral at
the place of sale, and upon terms and in such manner
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as Bank may determine, and Bank may purchase same at any such sale; (f) Retain
the Collateral in full satisfaction of the obligations secured thereby; (g)
Exercise any remedies of a secured party under the Uniform Commercial Code.
Prior to any such disposition, Bank may, at its option. cause any of the
Collateral to be repaired or reconditioned in such manner and to such extent as
Bank may deem advisable, and any sums expanded therefor by Bank shall be repaid
by Borrower and secured hereby. Bank shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
estop or prevent Bank from pursuing any further remedy which it may have
hereunder or by law. If a sufficient sum is not realized from any such
disposition of Collateral to pay all obligations secured by this Agreement,
Borrower hereby promises and agrees to pay Bank any deficiency.
15. COLLECTION OF ACCOUNTS BY BANK. After and during the continuance of an
Event of Default Bank may, without prior notice to Borrower, collect the
Accounts and may give notice of assignment to any and all account debtors, and
Borrower does hereby make, constitute and appoint Bank its irrevocable, true and
lawful attorney with power to receive, open and dispose of all mail addressed to
Borrower, to endorse the name of Borrower upon any checks or other evidences of
payment that may come into the possession of Bank upon the Accounts to endorse
the name of the undersigned upon any document or instrument relating to the
Collateral; in its name or otherwise, to demand, xxx for, collect and give
acquittances for any and all moneys due or to become due upon the Accounts; to
compromise, prosecute or defend any action, claim or proceeding with respect
thereto; and to do any and all things necessary and proper to carry out the
purpose herein contemplated.
16. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four months from the time such items are delivered to Bank.
17. NO ORIGINAL ISSUE DISCOUNT. Borrower and Bank hereby acknowledge and
agree that the Warrant to Purchase Stock (the "Warrant") transferred to Bank in
connection herewith is part of an investment unit within the meaning of Section
1273(c)(2) of the Internal Revenue Code which includes the Loans. Borrower and
Bank further agree as between Borrower and Bank, that the fair market value of
the Warrant is equal to [US$500] and that, pursuant to Treas. Reg. (S) 1.1273-
2(h), [US$500] of the issue price of the investment unit will be allocable to
the Warrant and the balance shall be allocable to the Loans. Borrower and Bank
agree to prepare their federal income tax returns in a manner consistent with
the foregoing agreement and, pursuant to Treas. Reg. (S) 1.1273. the original
issue discount on the Loans shall be considered to be zero.
18. ADDITIONAL PROVISIONS. Nothing herein shall in any way limit the
effect of the conditions set forth in any other security or other agreement
executed by Borrower, but each and every condition hereof shall be in addition
thereto.
19. MISCELLANEOUS PROVISIONS.
A. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
B. All rights and remedies existing under this Agreement or any
other Loan
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Document are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
C. All headings and captions in this Agreement and any related
documents are for convenience only and shall not have any substantive effect.
D. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law.
BANK: BORROWER:
IMPERIAL BANK THE AUDIBLE WORDS CORPORATION,
a Delaware corporation
By: /s/ Xxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxx
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Xxx Xxxxxxx Xxxxxxx X. Xxxxx
Senior Vice President Chief Financial Officer
LIST OF EXHIBITS
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SCHEDULE 1 - List of Liens and Security Interests
EXHIBIT A - Patent Security Agreement
EXHIBIT B - Copyright Security Agreement
EXHIBIT C - Trademark Security Agreement
EXHIBIT D - Compliance Certificate
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