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EXHIBIT 10.17
IMPERIAL BANK
MEMBER FDIC
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between AUDIONET INC., a Delaware corporation
therein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided 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, the following Borrowing Base:
80% of Eligible Accounts
and in no event more than $1,000,000.00
2. 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
"Loan Account") and Bank shall credit the Loan Account with all loan
repayments made by Borrower. Borrower promises to pay Bank (a) the unpaid
balance of Borrower's Loan Account [RIDER 2(i)] 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
one-quarter percent (.250) per annum in excess of the rate of interest
which Bank has announced as its prime lending rate ("Prime Rate") which
shall vary concurrently with a 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. Such notice may be given verbally in writing and
should be effective upon receipt by Borrower. The amount of interest
payable each month by Borrower shall not be less than a minimum monthly
charge of $ 0.00 . Bank is hereby authorized to charge Borrower's
deposit account(s) with Bank for all sums due Bank under this Agreement.
3. 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 matters referred to in Section 1, which shall disclose that Borrower
is entitled to the amount of loan being requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
A. "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.
B. "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.
C. "Eligible Accounts" means all of Borrower's Accounts excluding [RIDER
4.C.(i)].
5. Borrower hereby assigns to Bank all Borrower's present and future
Accounts, including all proceeds due thereunder, all guaranties and
security therefore and hereby grants to Bank a continuing security
interest in all moneys in the Collateral Account referred to in 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 Borrower is indebted to Bank or Bank is
committed to extend credit to Borrower, Borrower will execute and deliver
to Bank such assignments, including Bank 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.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10. Borrower will collect with diligence all Borrower's Accounts,
providing that no legal action shall be maintained thereon or in connection
therewith without Bank's prior written consent. 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, and
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 the account debtor, the amount of each payment and such
other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect to
returned merchandise and adjustments. However, Borrower shall immediately
notify Bank of all cases involving [RIDER 7(i)] returns, repossessions, and
loss or damage of or to merchandise represented by the Accounts and of any
credits, adjustments or disputes arising in connection with the goods or
services represented in the Accounts and, in any of such events, Borrower
will immediately pay to Bank from its own funds (and not from the proceeds
of accounts or inventory) for application to Borrower's Loan Account or any
other obligation secured hereby the amount of any credit for such returned
or repossessed merchandise and adjustments made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a corporation,
that Borrower is duly organized and existing in the State of its
incorporation and the execution, delivery and performance hereof are
within Borrower's corporate powers, have been duly authorized and are not
in conflict with laws 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 found 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; (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 defense
counterclaims, or setoffs which may be asserted against the Accounts; and
(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.
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9. Borrower will: (i) Furnish Bank such financial statements and information
[RIDER 9(i)]; (iii) [RIDER 9(ii)] Permit representatives of Bank to inspect
the Borrower's books and records relating to the Collateral and make
extracts therefrom at any reasonable time 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; (iv) Promptly
notify Bank of any attachment or other legal process leveled 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; (v)
Reimburse Bank upon demand for any and all legal costs, including
reasonable attorney's 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; (vi) Notify Bank of each location and of each office of Borrower
at which records of Borrower relating to the Accounts are kept; (vii)
Provide, maintain and deliver to Bank policies insuring the Collateral
against loss or damage by such risks and such amounts, forms and companies
as Bank may require and with loss payable solely to Bank, and, in the event
Bank takes possession of the Collateral the insurance policy or policies
and any unearned 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;
(viii) in the event the unpaid balance of Borrower's Loan Account shall
exceed the maximum amount of outstanding loans which Borrower is entitled
under Section 1 hereof, Borrower shall immediately pay to Bank, from its
own funds and not from the proceeds of Collateral for credit to Borrower's
Loan Account the amount of such excess.
10. [RIDER 10(i)] Bank may at any time, 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, demand, xxx for, collect and give acquittances for any and all
moneys due or to become due upon the Accounts; to compromise, prosecute or
defer 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.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or
grant a security interest in any of the Collateral other than to Bank, or
execute any financing statements covering the Collateral in favor of any
secured party or person other than Bank.
12. Should: (i) Default. [RIDER 12(i)], 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 Bank 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 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 as 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 expended 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 Security Agreement. Borrower hereby promises and agrees to
pay Bank any deficiency.
13. If any writ of attachment, garnishment, execution or other legal process be
issued against any property of Borrower, or if any assessment for taxes
against Borrower, other than real property, is made by the Federal or State
government or any department thereof, the obligation of Bank to make loans
to Borrower as provided in Section 1 hereof shall immediately terminate and
the unpaid balance of the Loan Account, all other obligations secured
hereby and all other sums due hereunder shall immediately become due and
payable without demand, presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in
connection with the transaction contemplated herein at any time subsequent
to four months from the time such items are delivered to Bank.
15. 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.
*16. Additional Provisions: Subject to the Conditions, Restrictions and
Limitations contained in the Credit Terms and Conditions dated November 18,
1997. See attached Reference Provision. A default under any obligation of
the undersigned to Bank shall be a default hereunder. In the event of a
conflict between this agreement and the commitment letter dated October 22,
1997, the terms of the Commitment letter shall supersede the terms of this
agreement.
Executed this 15th day of December, 1997
AUDIONET INC. a Delaware Corporation
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(Name of Borrower)
IMPERIAL BANK BY: /s/ XXXX XXXXX CFO
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(Authorized Signature and Tile)
BY: /s/ XXXX XXXXXX Asst. VP BY:
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Title (Authorized Signature and Title)
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RIDERS TO SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
BY AUDIONET, INC.
IN FAVOR OF IMPERIAL BANK
DATED AS OF DECEMBER 15, 1997
RIDER 2(i): at the earlier of an event of default or maturity of the loan.
RIDER 4.C.(i): the accounts designated as excluded in paragraph 5.A. of the
Commitment Letter dated October 22, 1997 executed by Bank and
Borrower and such other accounts as Bank reasonably determines
should be excluded.
RIDER 7(i): material
RIDER 9(i): pursuant to paragraph 4 of the Credit Terms & Conditions dated
December 15, 1997 (hereafter referred to as "CTC"); (ii) 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
RIDER 9(ii): per paragraph 6.A. of the Commitment Letter dated 22, 1997
executed by Bank and Borrower,
RIDER 10(i): Upon Default (as defined in the CTC),
RIDER 12(i): (as defined in the CTC)
