Exhibit 10.15
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of September 29, 1998,
by and between SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at Wellesley Office Park, 00 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, doing business under the name
"Silicon Valley East" ("Bank") and C-BRIDGE INTERNET SOLUTIONS, INC. a
Delaware corporation with its chief executive office located at 000 Xxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Borrower").
RECITALS
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Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
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1.1 Definitions. As used in this Agreement, the following terms shall
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have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the
rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor,
as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under either the
Committed Revolving Line or the Working Capital Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person
that is a limited liability company, such Persons, managers and members.
"Agreement" means this Loan and Security Agreement.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency
Proceeding) whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including, without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" means an amount equal to seventy five percent (75%)
of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower.
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"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
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hereto.
"Committed Revolving Line" means a credit extension of up to Two
Million Five Hundred Thousand Dollars ($2,500,000.00).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to
(i) any indebtedness, lease, dividend, letter of credit or other obligation
of another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business.
The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that
such amount shall not in any event exceed the maximum amount of the
obligations under the guarantee or other support arrangement.
"Credit Extension" means each Advance, or any other extension of
credit by Bank for the benefit of Borrower hereunder.
"Devon Property" means the real property and improvements thereon
owned by Devon Xxxx, L.P. located at 000 Xxx Xxxx, Xxxxxxxx,
Xxxxxxxxxxxxx and also know as The Devon Xxxx Farm.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 54. Unless
otherwise agreed to by Bank in writing, Eligible Accounts shall not include
the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed thirty-five
percent (35%) of all Accounts to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank;
(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department,
agency, or instrumentality thereof, except for those Accounts of the
United States or any department, agency or instrumentality thereof as
to which the payee has
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assigned its rights to payment thereof to Bank and the assignment has
been acknowledged, pursuant to the Assignment of Claims Act of 1940,
as amended (31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the
account debtor (sometimes referred to as "contra" accounts, e.g.
accounts payable, customer deposits, credit accounts etc.) against
amounts owed to Borrower;
(g) Accounts generated by demonstration or promotional equipment,
or with respect to which goods are placed on consignment, guaranteed
sale, sale or return, sale on approval, xxxx and hold, or other terms
by reason of which the payment by the account debtor may be
conditional;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for
dispute (but only to the extent of the amount subject to such dispute
or claim), or is subject to any Insolvency Proceeding, or becomes
insolvent, or goes out of business; and
(j) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Guarantor" means any present or future guarantor of the Obligations
arising under the Committed Revolving Line, including, without limitation,
Xxxxxx Xxxxxxxxxxx and Devon Xxxx, L.P.
"Guarantor Obligations" means, from time to time, the outstanding
liability of the applicable Guarantor under its Guaranty.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds
and letters of credit, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and
(d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service,
of every kind and description now or at any time hereafter owned by or in
the custody or possession, actual or constructive, of Borrower, including
such inventory as is temporarily out of its custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of the above.
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"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated from time to
time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means the date which is one year from the Closing
Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after
the commencement of an Insolvency Proceeding and including any debt,
liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Payment Date" means the first (1st) calendar day of each month
commencing on the first such date after the Closing Date and ending on the
Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State
thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from
the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc., and (iii) certificates of deposit maturing no
more than one (1) year from the date of investment therein issued by
Bank.
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"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, provided the
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same have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such Equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that the Lien is
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confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment;
(d) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Borrower's business not interfering
in any material respect with the business of Borrower and its
Subsidiaries taken as a whole, and any interest or title of a lessor,
licensor or under any lease or license provided that such leases,
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subleases, licenses and sublicenses do not prohibit the grant of the
security interest granted hereunder; and
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described
in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental
agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business
entity of which more than fifty percent (50%) of the voting stock or other
equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Total Liabilities" means as of any applicable date, any date as of
which the amount thereof shall be determined, all obligations that should,
in accordance with GAAP be classified as liabilities on the consolidated
balance sheet of Borrower, including in any event all Indebtedness, but
specifically excluding Subordinated Debt.
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"Working Capital Line" means a credit extension of up to One Million
Five Dollars ($1,000,000.00).
1.2 Accounting and Other Terms. All accounting terms not specifically
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defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
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2.1 Advances. Borrower promises to pay to the order of Bank, in lawful
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money of the United States of America, the aggregate unpaid principal amount of
all Advances made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Advances at rates in accordance
with the terms hereof.
2.1 (a) Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make (i) Advances to Borrower:(i) under the Committed Revolving
Line, in an aggregate outstanding amount not to exceed the Committed Revolving
Line, plus (ii) under the Working Capital Line, in an aggregate outstanding
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amount not to exceed the lesser of: (A) the Working Capital Line, or (B) the
Borrowing Base, provided however, that aggregate Advances made to Borrower under
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the Working Capital Line shall not exceed the sum of Five Hundred Thousand
Dollars ($500,000.00) unless and until the Borrower has achieved a net profit
for two (2) consecutive fiscal quarters. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 21 may be repaid and
reborrowed at any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
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based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 21 to Borrower's deposit account.
(c) The Committed Revolving Line and Working Capital Line shall each
terminate on the Maturity Date, at which time all Advances under this Section 21
and other amounts due under this Agreement (except as otherwise expressly
specified herein) shall be immediately due and payable.
2.2 Overadvances. If, at any time or for any reason, the amount of
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Obligations owed by Borrower to Bank pursuant to Section 211, of this Agreement
is greater than (i) with respect to the Committed Revolving Line, the amount of
the Committed Revolving Line, and/or (ii) with respect to the Working Capital
Line, the lesser of (A) the Working Capital Line (subject to the profitability
requirement set forth in Section 2.1.1), or (B) the Borrowing Base, Borrower
shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
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(a) Interest Rate. Except as set forth in Section 23(b), any Advances
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shall bear interest, on the average daily balance thereof, at a per annum rate
equal to one (1.0%) percentage point above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after
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the occurrence of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
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(c) Payments. Interest hereunder shall be due and payable on each
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Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number _____________________ for payments
of principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
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time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under
the Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
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Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
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(a) Facility Fees. Facility Fees equal to (i) Ten Thousand Dollars
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($10,000.00 with respect to the Committed Revolving Line, and (ii) Two
Thousand Five Hundred Dollars with respect to the Working Capital Line,
which fees shall be due on the Closing Date and shall be fully earned and
non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
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and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents, provided
however, that unless an Event of Default has occurred, the Borrower shall
not be obligated to pay fees for any single audit of Borrower's Accounts in
excess of Seven Hundred Fifty Dollars ($750.00);
(c) Bank Expenses. Upon demand from Bank, including, without
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limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and expenses, and, after
the date hereof, all Bank Expenses, including reasonable attorneys' fees
and expenses, as and when they become due.
2.6 Additional Costs. In case any law, regulation, treaty or official
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directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise
with respect to the transactions contemplated hereby (except for taxes on
the overall net income of Bank imposed by the United States of America or
any political subdivision thereof);
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(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. Except as otherwise set forth herein, this Agreement shall
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become effective on the Closing Date and, subject to Section 127, shall continue
in full force and effect for a term ending on the Maturity Date. Notwithstanding
the foregoing, Bank shall have the right to terminate its obligation to make
Credit Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default. Notwithstanding
termination of this Agreement, Bank's lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
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3.1 Conditions Precedent to Initial Advance. The obligation of Bank to
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make the initial Advance is subject to the condition precedent that Bank shall
have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) a negative pledge agreement covering intellectual property;
(d) an opinion of Borrower's counsel;
(e) limited guaranties by each Guarantor of the Committed Revolving
Line only;
(f) financing statements (Forms UCC-1);
(g) insurance certificate;
(h) payment of the fees and Bank Expenses then due specified in
Section 25 hereof;
(i) Certificate of Foreign Qualification (if applicable);
(j) Agreement to Provide Warrant;
(k) Anti-Dilution Agreement;
(l) Registration Rights Agreement; and
(m) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
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3.2 Conditions Precedent to all Advances. The obligation of Bank to make
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each Advance, including the initial Advance, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 21; and
(b) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though
made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making
of each Advance shall be deemed to be a representation and warranty by
Borrower on the date of such Advance as to the accuracy of the facts
referred to in this Section 32(b).
4. CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
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continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding, whether under the Committed Revolving Line,
Working Capital Line, or otherwise.
4.2 Delivery of Additional Documentation Required. Borrower shall from
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time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
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agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
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corporation duly existing and in good standing under the laws of the State of
Delaware and is qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
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performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles/Certificate of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound. Borrower
is not in default under any agreement to which it is a party or by which it is
bound, which default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
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the Collateral, free and clear of Liens, except for Permitted Liens.
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5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
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existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are included in any
Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
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good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in the
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Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name other than
that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no actions
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or proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could have a Material Adverse Effect or a material adverse
effect on Borrower's interest or Bank's security interest in the Collateral.
5.8 No Material Adverse Change in Financial Statements. All consolidated
--------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not
been a material adverse change in the consolidated financial condition of
Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.9 Solvency. The fair saleable value of Borrower's assets (including
--------
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and upon execution of this Agreement, Borrower
shall be able to pay its debts (including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment.
-10-
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
-----
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein, except
those being contested in good faith by proper proceedings with adequate reserves
under GAAP.
5.13 Subsidiaries. Borrower does not own any stock, partnership interest
------------
or other equity securities of any Person, except for Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained all
-------------------
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other statement made
---------------
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver
-------------------------------------------
to Bank: (a) as soon as available, but in any event within thirty (30) days
after the end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
in a form and certified by an officer of Borrower reasonably acceptable to Bank;
(b) as soon as available, but in any event within one hundred fifty (150) days
after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (c)
within five (5) days of filing, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders or to any
holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (e) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
-11-
Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
---------
accounts receivable.
Within thirty (30) days after the last day of each month, Borrower shall
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit D hereto.
---------
Within (30) days after the last day of each quarter, the Borrower shall
cause (i) Xxxxxx Xxxxxxxxxxx to deliver a Compliance Certificate in a form
acceptable to the Bank together with copies of brokerage statements, mortgages
statements and such other additional documentation as may be necessary or
requested by the Bank to demonstrate the liquidity required under Section 6.10
of this Agreement, and (ii) Devon Xxxx, L.P. to deliver a Compliance Certificate
in a form acceptable to the Bank together with copies of mortgage statements
verifying the balances due under its existing loans with Xxxxxxx Xxxxx, or any
other Person, secured by the Devon Property, together with such other additional
documentation as may be necessary or requested by the Bank to demonstrate the
required value of the Devon Property as set forth in Section 6.10.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that (i) such audits will be conducted
no more often than every six (6) months unless an Event of Default has occurred
and is continuing, and (ii) the amount the Borrower shall be obligated to pay
for such audits prior to the occurrence of an Event of Default shall be limited
to Seven Hundred Fifty Dollars ($750.00) for each such audit.
The Borrower shall cause Devon Xxxx, L.P. to assist the Bank in obtaining
a current appraisal (the "Appraisal") of the Devon Property within sixty (60)
days of the Closing Date by an appraiser satisfactory to the Bank. The
Appraisal shall be in form and substance satisfactory to the Bank and the costs
of the Appraisal shall be borne by the Borrower.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
-----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
(i) the amount or validity of such payment is contested in good faith by
appropriate proceedings, (ii) Borrower or Subsidiary, as the case may be, has
established proper reserves (to the extent required by GAAP) and (iii) no lien
other than a Permitted Lien results.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
-12-
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Revenues. Borrower shall have minimum quarterly gross revenues of (i)
--------
One Million Dollars ($1,000,000.00), for the first quarter of 1999, (ii) One
Million Two Hundred Thousand Dollars ($1,200,000.00), for the second quarter of
1999, (iii) One Million Four Hundred Thousand Dollars ($1,400,000.00), for the
third quarter of 1999, and (iv) Two Million Dollars ($2,000,000.00), for the
fourth quarter of 1999.
6.9 Profitability. Borrower shall not have quarterly net losses in excess
-------------
of (i) Seven Hundred Thousand Dollars ($700,000.00), for the first quarter
ending of 1999, (ii) Six Hundred Thousand Dollars ($600,000.00), for the second
quarter of 1999, and (iii) Three Hundred Thousand Dollars ($300,000.00), for the
third quarter ending of 1999. Additionally, the Borrower shall have a minimum
quarterly net profit of One Hundred Thousand Dollars ($100,000.00), for the
fourth quarter of 1999.
6.10 Guarantor Liquidity. The Borrower shall cause each Guarantor to be
-------------------
in compliance with the following:(i) Xxxxxx Xxxxxxxxxxx shall maintain at all
times a minimum Liquid Net Worth Ratio equal to or greater than 2.0:1.0. The
term "Liquid Net Worth Ratio" as used in this Section 6.10 shall equal (1) (A)
the combined value of cash, bonds, and marketable securities traded on the NYSE,
NASDAQ, and/or AMEX stock exchanges owned by Xxxxxx Xxxxxxxxxxx, less (B) his
----
Indebtedness to any Person, as determined in accordance with GAAP, divided by
------- --
(2) the Guarantor Obligations of Xxxxxx Xxxxxxxxxxx, and (ii) the Devon Property
shall have a minimum Equity Value Ratio equal to or greater than 1.7:1.0. The
term "Equity Value Ratio" as used in this Section 6.10 shall equal (1) the sum
of (A) the most recent appraised fair market value of the Devon Property, less
----
(B) the outstanding balance owed with respect to any liens, mortgages, or other
encumbrances recorded or filed against the Devon Property divided by (2) the
------- --
Guarantor Obligations of Devon Xxxx, L.P.
6.11 Further Assurances. At any time and from time to time Borrower shall
------------------
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
------------
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers: (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business; or (iv) of worn-out or
obsolete Equipment.
7.2 Changes in Business, Ownership, or Management, Business Locations.
-----------------------------------------------------------------
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto), or
suffer a material change in Borrower's
-13-
ownership or management. Borrower will not, without at least thirty (30) days
prior written notification to Bank, relocate its chief executive office or add
any new offices or business locations.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
-----------------------
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
------------
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
-------------
payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
----------------------------
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
-----------------
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or a company controlled
----------
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral; or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
---------------
Obligations.
-14-
8.2 Covenant Default.
----------------
(a) If Borrower fails to perform any obligation under Sections 63,
6.5, 66, 67, 68, 69, or 6.10, or violates any of the covenants contained in
Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material adverse change
-----------------------
in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets is attached,
----------
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
---------
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of forty (40) days (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
-15-
8.10 Guaranty. Any guaranty of all or a portion of the Obligations ceases
--------
for any reason to be in full force and effect, or any Guarantor fails to perform
any obligation under any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now or hereafter in
any warranty or representation set forth in any guaranty of all or a portion of
the Obligations or in any certificate delivered to Bank in connection with such
guaranty, or any of the circumstances described in Sections 84, 85 or 88 occur
with respect to any Guarantor, or the Guarantor fails to comply with the
covenants pertaining to the applicable Guarantor set forth in Section 6.
8.11 Notwithstanding Section 8.2(a) of this Article, in the event the
Borrower (or Guarantor) fails to perform its obligations under any one or more
of Sections 6.8, 6.9, or 6.10 only, such failure shall not constitute an Event
of Default only with respect to the Committed Revolving Line provided each
Guarantor delivers or provides within fourteen (14) days of notice of non-
compliance, collateral to secure each guaranty, which collateral shall be in
form and substance satisfactory to the Bank in its sole discretion and may
include, without limitation, (i) marketable securities or other cash collateral
from Xxxxxx Xxxxxxxxxxx, and (ii) a mortgage granted to the Bank on the Devon
Property.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the continuance
-------------------
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in
Section 85 all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower
and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such payments and
do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to
be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's
premises, Borrower hereby grants Bank a license to enter such premises and
to occupy the same, without charge;
(e) Without notice to Borrower set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein)
the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section
91, to use, without charge, Borrower's labels, patents, copyrights, mask
works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in completing production of, advertising
for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this Section 91, Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit;
-16-
(g) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in whatever manner or order it deems appropriate;
(h) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
(i) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
-----------------
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; provided Bank may exercise such power of attorney to
sign the name of Borrower on any of the documents described in Section 42
regardless of whether an Event of Default has occurred. The appointment of Bank
as Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuance
-------------------
of an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
-------------
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line and/or Working Capital Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 66 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
-------------------
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein as provided
under the Code, by law, or in equity. No exercise by Bank of one right or
remedy shall be deemed an
-17-
election, and no waiver by Bank of any Event of Default on Borrower's part shall
be deemed a continuing waiver. No delay by Bank shall constitute a waiver,
election, or acquiescence by it. No waiver by Bank shall be effective unless
made in a written document signed on behalf of Bank and then shall be effective
only in the specific instance and for the specific purpose for which it was
given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of protest,
---------------
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower C-Bridge Internet Solutions, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, Vice President, Finance
FAX: (000) 000-0000
If to Bank Silicon Valley Bank
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xx. Xxxx X. Xxxxxxxxx, Vice President
FAX: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY WAIVER
------------------------------------
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA XXXXX COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES
-18-
AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-----------------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall, indemnify, defend, protect and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall
--------------------------
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be amended
----------------------------------
or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in this
--------
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
12.8 Countersignature. This Agreement shall become effective only when it
----------------
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
C-BRIDGE INTERNET SOLUTIONS, INC.
By: /s/ Xxxxxx Xxxxxxxxxxx
________________________________________
Title: President and CEO
_____________________________________
-19-
By: /s/ Xxxxxxx X. Xxxxxx
________________________________________
Title: VP Finance
_____________________________________
SILICON VALLEY BANK, d/b/a SILICON VALLEY
EAST
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Assistant Vice President
SILICON VALLEY BANK
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Loan Documentation Officer
(Signed in Santa Xxxxx County, California)
-20-
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of the above,
and Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, claims, literature, reports, catalogs, income
tax refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned
by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to include any
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing.
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ______________________________
FAX#: (408) __________________________ TIME: _______________________
FROM:___________________________________________________________________________
BORROWER'S NAME
FROM:___________________________________________________________________________
AUTHORIZED SIGNER'S NAME
________________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE:__________________________________________________________________________
FROM ACCOUNT #______________________________
TO ACCOUNT#_________________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
BANK USE ONLY:
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
_________________________
Authorized Requester
___________________________________
Authorized Signature (Bank)
Phone #____________________________
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: C-Bridge Internet Solutions, Inc. Bank: Silicon Valley Bank
Commitment Amount: $1,000,000.00*
* provided Borrower has met consecutive quarterly profitability requirements set
forth in Section 2.1.1 of the Loan and Security Agreement, otherwise,
$500,000.00
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________ $_____________________
2. Additions (please explain on reverse) $_____________________
3. TOTAL ACCOUNTS RECEIVABLE $_____________________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_____________________
5. Balance of 50% over 90 day accounts $_____________________
6. Concentration Limits $_____________________
7. Foreign Accounts $_____________________
8. Governmental Accounts $_____________________
9. Contra Accounts $_____________________
10. Promotion or Demo Accounts $_____________________
11. Intercompany/Employee Accounts $_____________________
12. Other (please explain on reverse) $_____________________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_____________________
14. Eligible Accounts (#3 minus #13) $_____________________
15. LOAN VALUE OF ACCOUNTS (75% of #14) $_____________________
BALANCES
16. Maximum Loan Amount $_____________________
17. Total Funds Available (Lesser of #16 or #15) $_____________________
18. Present balance owing on Line of Credit $_____________________
19. Outstanding under Sublimits ( ) $_____________________
20. RESERVE POSITION (#17 minus #18 and #19) $_____________________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
RECEIVED BY:____________________
DATE:________________
C-Bridge Internet Solutions, Inc. REVIEWED BY:____________________
COMPLIANCE STATUS: YES / NO
By: _______________________
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: C-BRIDGE INTERNET SOLUTIONS, INC.
The undersigned authorized officer of C-BRIDGE INTERNET SOLUTIONS, INC.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending ______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that such compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 150 days Yes No
10Q and 10K Within 5 days after filing with the SEC Yes No
A/R Agings Monthly within 20 days Yes No
Guarantor liquidity Quarterly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Revenues
Q199 $1,000,000.00 $________ Yes No
Q299 $1,200,000.00 $________ Yes No
Q399 $1,400,000.00 $________ Yes No
Q499 $2,000,000.00 $________ Yes No
Maximum Losses/Profitability:
Q199 $ (700,000.00) $________ Yes No
Q299 $ (600,000.00) $________ Yes No
Q399 $ (300,000.00) $________ Yes No
Q499 $ 100,000.00 $________ Yes No
Guarantor Liquidity*
Xxxxxx Xxxxxxxxxxx 2.0:1.0 _____:1.0 Yes No
Devon Property 1.7:1.0 _____:1.0 Yes No
*See Section 6.10 to Loan and Security Agreement
BANK USE ONLY
RECEIVED BY:____________________
COMMENTS REGARDING EXCEPTIONS: DATE:________________
Sincerely, REVIEWED BY:____________________
COMPLIANCE STATUS: YES / NO
_______________________ Date:_____________
Signature
________________________
Title
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of January 27, 1999, by
and between C-BRIDGE INTERNET SOLUTIONS, INC., a Delaware corporation with its
principal place of business at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000
(the "Borrower") and SILICON VALLEY BANK, a California-chartered bank ("Bank"),
with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000
and with a loan production office located at Wellesley Office Park, 00 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, doing business under the name "Silicon
Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a Loan and
Security Agreement dated September 29, 1998 (as amended, the "Loan Agreement")
which established in favor of the Borrower a (i) a working capital line of
credit in the maximum principal amount of One Million Dollars ($1,000,000.00),
and (ii) a revolving line of credit in the maximum principal amount of Two
Million Five Hundred Thousand Dollars ($2,500,000.00). Capitalized terms used
but not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
-------------------------
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents"). Additionally,
Borrower has agreed not to further encumber its Intellectual Property pursuant
to a Negative Pledge Agreement dated September 29, 1998.
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
Modification(s) to Loan Agreement.
---------------------------------
The Loan Agreement shall be amended by the deletion in its entirety of
Section 6.3 and the insertion in its stead of the following:
"6.3 Financial Statements, Reports, Certificates. Borrower shall deliver
-------------------------------------------
to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance
sheet and income statement covering Borrower's (unconsolidated) operations
during such period, in a form and certified by an officer of Borrower
reasonably acceptable to Bank; (b) as soon as available, but in any event
no later than January 31, 1999, the preliminary consolidated fiscal year
end financial statements of Borrower prepared in accordance with GAAP by an
independent certified public accounting firm reasonably acceptable to Bank,
together with a letter from such accounting firm stating that the final
financial statements are not anticipated to change; (c) within five (5)
days of filing, copies of all statements, reports and notices sent or made
available generally by Borrower to its security holders or to any holders
of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with
the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000) or
more; and (e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together with aged
listings of accounts receivable.
Within thirty (30) days after the last day of each month, Borrower shall
deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of
Exhibit D hereto.
---------
Within (30) days after the last day of each quarter, the Borrower shall
cause (i) Xxxxxx Xxxxxxxxxxx to deliver a Compliance Certificate in a form
acceptable to the Bank together with copies of brokerage statements,
mortgages statements and such other additional documentation as may be
necessary or requested by the Bank to demonstrate the liquidity required
under Section 6.10 of this Agreement, and (ii) Devon Xxxx, L.P. to deliver
a Compliance Certificate in a form acceptable to the Bank together with
copies of mortgage statements verifying the balances due under its existing
loans with Xxxxxxx Xxxxx, or any other Person, secured by the Devon
Property, together with such other additional documentation as may be
necessary or requested by the Bank to demonstrate the required value of the
Devon Property as set forth in Section 6.10.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that (i) such audits will be
conducted no more often than every six (6) months unless an Event of
Default has occurred and is continuing, and (ii) the amount the Borrower
shall be obligated to pay for such audits prior to the occurrence of an
Event of Default shall be limited to Seven Hundred Fifty Dollars ($750.00)
for each such audit.
The Borrower shall cause Devon Xxxx, L.P. to assist the Bank in obtaining
a current appraisal (the "Appraisal") of the Devon Property to be completed
no later than March 31, 1999 by an appraiser satis factory to the Bank.
The Appraisal shall be in form and substance satisfactory to the Bank and
the costs of the Appraisal shall be borne by the Borrower."
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
------------------------------
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker, endorser, or guarantor will be released by virtue of this
Loan Modification Agreement.
-2-
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County, California.
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
C-BRIDGE INTERNET SOLUTIONS, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Xxxxxx Xxxxxxxxxxx By:
----------------------------- -----------------------------
Name: Xxxxxx Xxxxxxxxxxx Name:
--------------------------- ---------------------------
Title: CEO Title:
-------------------------- --------------------------
Each of the undersigned, limited guarantors of the Indebtedness of the Borrower
to the Bank, hereby acknowledges and consents to the foregoing modification to
the Loan Agreement and ratifies, confirms, and reaffirms that each of their
respective limited guaranties remain in full force and effect.
DEVON XXXX LIMITED PARTNERSHIP
By Devon Xxxx Corporation, its General Partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------
Xxxx X. Xxxxxxx, Xx., President
/s/ Xxxxxx Xxxxxxxxxxx
--------------------------------------
Xxxxxx Xxxxxxxxxxx, Individually
-3-
SILICON VALLEY BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
Name: Xxxxxxxx X. Xxxxxxxx
Title: Assistant Vice President
(signed in Santa Xxxxx County, California)
-4-
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of April 7,
1999, by and between C-BRIDGE INTERNET SOLUTIONS, INC., a Delaware corporation
with its principal place of business at 000 Xxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 ("Borrower") and SILICON VALLEY BANK, a California-chartered
bank ("Bank"), with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, XX 00000 and with a loan production office located at Wellesley Office
Park, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of September 29, 1998, evidenced by, among other documents,
a certain Loan and Security Agreement dated as of September 29, 1998, as amended
by a Loan Modification Agreement dated as of January 27, 1999 (as amended, the
"Loan Agreement"). The Loan Agreement established in favor of the Borrower: (i)
a working capital line of credit in the maximum principal amount of One Million
Dollars ($1,000,000.00) (the "Working Capital Line"), and (ii) a revolving line
of credit in the maximum principal amount of Two Million Five Hundred Thousand
Dollars ($2,500,000.00) (the "Committed Revolving Line"). Capitalized terms
used but not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
-------------------------
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents"). Additionally,
Borrower has agreed not to further encumber its Intellectual Property pursuant
to a Negative Pledge Agreement dated as of September 29, 1998.
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement.
---------------------------------
1. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
""Borrowing Base" means an amount equal to seventy five
percent (75%) of Eligible Accounts, as determined by Bank
with reference to the most recent Borrowing Base Certificate
delivered by Borrower."
and inserting in lieu thereof the following:
""Borrowing Base" means an amount equal to: (i) seventy five
percent (75.0%) of Eligible Accounts, as determined by Bank
with reference to the most recent Borrowing Base Certificate
delivered by Borrower, MINUS (ii) at any time prior to the
Debt Service Coverage Event, the Obligations outstanding
under the Committed Equipment Line."
2. The Loan Agreement shall be amended by inserting immediately
after the definition of "Committed Revolving Line" appearing in
Section 1.1 thereof the following definition:
""Committed Equipment Line" means a credit extension of up
to Two Hundred Thousand Dollars ($200,000.00)."
3. The Loan Agreement shall be amended by inserting immediately
after the definition of "Current Liabilities" appearing in
Section 1.1 thereof the following definitions:
""Debt Service Coverage Event" means the first day of the
calendar month immediately following the achievement by the
Borrower of a Debt Service Coverage Ratio of at least 1.5 to
1.0 for the two prior consecutive fiscal quarters of the
Borrower, as confirmed by Bank with reference to the most
recent Compliance Certificate delivered by Borrower.
"Debt Service Coverage Ratio" means the Borrower's earnings
after tax plus interest and non-cash expenses (depreciation
and amortization) divided by the current portion of its long
term debt, plus interest."
4. The Loan Agreement shall be amended by inserting immediately
after the definition of "Equipment" appearing in Section 1.1
thereof the following definitions:
""Equipment Advance" has the meaning set forth in Section
2.1.2.
"Equipment Availability End Date No. 1" means June 30, 1999.
"Equipment Availability End Date No. 2" means December 31,
1999.
"Equipment Maturity Date No. 1" means June 5, 2002.
"Equipment Maturity Date No. 2" means December 5, 2002."
5. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
"Maturity Date" means the date which is one year from the
Closing Date."
and inserting in lieu thereof the following:
""Maturity Date" means, as applicable, (i) the Revolving
Maturity Date with respect to Advances under the Committed
Revolving Line and the Working Capital Line pursuant to
Section 2.1.1, and (ii) the Equipment Maturity Date No. 1
and the Equipment Maturity Date No. 2, as applicable, with
respect to Equipment Advances pursuant to Section 2.1.2."
6. The Loan Agreement shall be amended by inserting immediately
after the definition of "Responsible Officer" appearing in
Section 1.1 thereof the following definition:
""Revolving Maturity Date" means September 29, 1999."
7. The Loan Agreement shall be amended by deleting the following
text appearing as paragraph (c) of Section 2.1.1 thereof:
"(c) The Committed Revolving Line and Working Capital Line
shall each terminate on the Maturity Date, at which time all
Advances under this Section 21 and other amounts due under
this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable."
and inserting in lieu thereof the following:
-2-
"(c) The Committed Revolving Line and Working Capital Line
shall each terminate on the Revolving Maturity Date, at
which time all Advances under this Section 21 and other
amounts due under this Agreement (except as otherwise
expressly specified herein) shall be immediately due and
payable."
8. The Loan Agreement shall be amended by inserting immediately
after Section 2.1.1 thereof the following new section entitled
"Equipment Advances":
"2.1.2 Equipment Advances.
------------------
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make advances (each an "Equipment
Advance" and collectively, the "Equipment Advances") to
Borrower in an aggregate amount not to exceed the Committed
Equipment Line in the following manner: (i) at any time
through the Equipment Availability End Date Xx. 0 (xxx
"Xxxxxxxxx Xxxx Xx. 0"), xxx (xx) at any time from July 1,
1999 through the Equipment Availability End Date No. 2, in
an aggregate amount no greater than the Committed Equipment
Line, less the outstanding principal amounts advanced
pursuant to Equipment Line No. 1 (the "Equipment Line No.
2"). To evidence the Equipment Advance or Equipment
Advances, Borrower shall deliver to Bank, at the time of
each Equipment Advance request, an invoice for the equipment
to be purchased or refinanced. Equipment Advance requests
under Equipment Line No. 1 shall only be permitted for
Equipment purchased between January 1, 1999 and June 30,
1999. Equipment Advance requests under Equipment Line No. 2
shall only be permitted for Equipment purchased between June
1, 1999 and after December 31, 1999. Each invoice submitted
at the time of each Equipment Advance request may not be
more than sixty (60) days past the invoice date in order to
be eligible for an Equipment Advance. Notwithstanding the
foregoing, the initial Equipment Advance request by the
Borrower may include Equipment invoices purchased on or
after January 1, 1999 which are greater than sixty (60) days
past the invoice date, provided that such initial Equipment
Advance request is received by Bank on or before May 7,
1999. The Equipment Advances shall be used only to purchase
or refinance Equipment and shall not exceed One Hundred
Percent (100%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes,
shipping, warranty charges, freight discounts and
installation expense. Software shall not constitute greater
than twenty-five percent (25.0%) of aggregate Equipment
Advances.
(b) Interest shall accrue from the date of each Equipment
Advance at the per annum rate equal to the aggregate of the
Prime Rate, plus One and One-Half percent (1.50%), and shall
be payable monthly on the fifth calendar day of each month.
Any Equipment Advances made pursuant to the Equipment Line
No. 1 that are outstanding on the Equipment Availability End
Date No. 1 will be payable in Thirty-Six (36) equal monthly
installments of principal, plus all accrued interest,
beginning on the fifth day of the month following the
Equipment Availability End Date No. 1 and ending on the
Equipment Maturity Date No. 1. Any Equipment Advances made
pursuant to the Equipment Line No. 2 that are outstanding on
the Equipment Availability End Date No. 2 will be payable in
Thirty-Six (36) equal monthly installments of principal,
plus all accrued interest, beginning on the fifth day of the
month following the Equipment Availability End Date No. 2
-3-
and ending on the Equipment Maturity Date No. 2. Equipment
Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no
later than 3:00 p.m. Eastern time one (1) Business Day
before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B.
The notice shall be signed by a Responsible Officer or its
designee and include a copy of the invoice for the Equipment
to be financed."
9. The Loan Agreement shall be amended by deleting the following
text appearing in Section 6.3 entitled "Financial Statements,
Reports, Certificates":
"Bank shall have a right from time to time hereafter to
audit Borrower's Accounts at Borrower's expense, provided
that (i) such audits will be conducted no more often than
every six (6) months unless an Event of Default has occurred
and is continuing, and (ii) the amount the Borrower shall be
obligated to pay for such audits prior to the occurrence of
an Event of Default shall be limited to Seven Hundred Fifty
Dollars ($750.00) for each such audit.
The Borrower shall cause Devon Xxxx, L.P. to assist the
Bank in obtaining a current appraisal (the "Appraisal") of
the Devon Property to be completed no later than March 31,
1999 by an appraiser satisfactory to the Bank. The
Appraisal shall be in form and substance satisfactory to the
Bank and the costs of the Appraisal shall be borne by the
Borrower."
and inserting in lieu thereof the following:
"Bank shall have a right from time to time hereafter to
audit Borrower's Accounts at Borrower's expense, provided
that such audits will be conducted no more often than every
six (6) months unless an Event of Default has occurred and
is continuing. The Borrower shall provide the Bank with
access to all of its records and financial information so
that the next such audit of Borrower's Accounts shall be
completed on or before August 31, 1999."
10. The Loan Agreement shall be amended by deleting the following
text appearing as Section 6.9 thereof:
"6.9 Profitability. Borrower shall not have quarterly net
-------------
losses in excess of (i) Seven Hundred Thousand Dollars
($700,000.00), for the first quarter ending of 1999, (ii)
Six Hundred Thousand Dollars ($600,000.00), for the second
quarter of 1999, and (iii) Three Hundred Thousand Dollars
($300,000.00), for the third quarter ending of 1999.
Additionally, the Borrower shall have a minimum quarterly
net profit of One Hundred Thousand Dollars ($100,000.00),
for the fourth quarter of 1999."
and inserting in lieu thereof the following:
"6.9 Profitability. Borrower shall maintain, as of the
-------------
last day of each quarter: (i) a maximum net loss of Seven
-4-
Hundred Thousand Dollars ($700,000.00) for the first quarter
of 1999, (ii) a maximum net loss of Six Hundred Thousand
Dollars ($600,000.00) for the second quarter of 1999, (iii)
a maximum net loss of Three Hundred Thousand Dollars
($300,000.00) for the third quarter of 1999, (iv) a minimum
net profit of One Hundred Thousand Dollars ($100,000.00) for
the fourth quarter of 1999, and (v) a minimum net profit of
One Dollar ($1.00) for each quarter thereafter."
11. The Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Negative Pledge
Agreement dated as of September 29, 1998, between Borrower and
Bank, and acknowledges, confirms and agrees that said Negative
Pledge Agreement shall remain in full force and effect.
12. The Borrowing Base Certificate appearing as EXHIBIT C to the Loan
---------
Agreement is hereby replaced with the Compliance Certificate
attached as EXHIBIT A hereto.
---------
13. The Compliance Certificate appearing as EXHIBIT D to the Loan
---------
Agreement is hereby replaced with the Compliance Certificate
attached as EXHIBIT B hereto.
---------
4. FEE. Borrower shall pay to Bank a modification fee equal to Two Thousand
---
Dollars ($2,000.00), which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof. The Borrower shall also reimburse
Bank for all legal fees and expenses incurred in connection with this amendment
to the Existing Loan Documents.
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
6. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
------------------------------
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of
Bank and Borrower to retain as liable parties all makers of Existing Loan
Documents, unless the party is expressly released by Bank in writing. No maker
will be released by virtue of this Loan Modification Agreement.
9. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County, California.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
-5-
This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
C-BRIDGE INTERNET SOLUTIONS, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST SILICON VALLEY EAST
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxx Name: Xxxx Xxxxxxxxx
Title: V.P. Finance and Administration Title: Senior Vice President
SILICON VALLEY BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
Name: Xxxxxxxx X. Xxxxxxxx
Title: Assistant Vice President
(signed in Santa Xxxxx County, California)
Each of the undersigned, limited guarantors of the Indebtedness of the Borrower
to the Bank, hereby acknowledges and consents to the foregoing modification to
the Loan Agreement and ratifies, confirms, and reaffirms that each of their
respective limited guaranties remain in full force and effect.
DEVON XXXX LIMITED PARTNERSHIP
By Devon Xxxx Corporation, its General Partner
By: /s/ Xxxx X. Xxxxxxx, Xx.
-------------------------------------------
Xxxx X. Xxxxxxx, Xx., President
/s/ Xxxxxx Xxxxxxxxxxx
----------------------------------
XXXXXX XXXXXXXXXXX, Individually
-6-
EXHIBIT A
BORROWING BASE CERTIFICATE
Borrower: C-BRIDGE INTERNET SOLUTIONS, INC. Bank: Silicon Valley Bank
Commitment Amount: $1,000,000.00*
* provided Borrower has met consecutive quarterly profitability requirements set
forth in Section 2.1.1 of the Loan and Security Agreement, otherwise,
$500,000.00
ACCOUNTS RECEIVABLE
1) Accounts Receivable Book Value as of $
----------
2) Additions (please explain on reverse) $
----------
3) TOTAL ACCOUNTS RECEIVABLE $
----------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4) Amounts over 90 days due $
----------
5) Balance of 50% over 90 day accounts $
----------
6) Concentration Limits $
----------
7) Ineligible Foreign Accounts $
----------
8) Governmental Accounts $
----------
9) Contra Accounts $
----------
10) Promotion or Demo Accounts $
----------
11) Intercompany/Employee Accounts $
----------
12) Other (please explain on reverse) $
----------
13) TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------
14) Eligible Accounts (#3 minus #13) $
----------
15) LOAN VALUE OF ACCOUNTS (75.0% of #14) $
----------
BALANCES
16) Maximum Loan Amount $
----------
17) Total Funds Available [Lesser of #16 or #15] $
----------
18) Present balance owing on Line of Credit $
----------
19) Outstanding under Committed Equipment Line $
----------
(only prior to Debt Service Coverage Event)
20) RESERVE POSITION (#17 minus #18 and #19) $
----------
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
RECEIVED BY:
--------------------------- ---------------------
DATE:
----------------
By: REVIEWED BY:
------------------------ ---------------------
Authorized Signature COMPLIANCE STATUS: YES / NO
-7-
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: C-BRIDGE INTERNET SOLUTIONS, INC.
The undersigned authorized officer of C-BRIDGE INTERNET SOLUTIONS, INC.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending with all required
--------------
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that such compliance is determined not just at the date this
certificate is delivered.
Please indicate compliance status by circling yes/no under "complies" column.
Reporting Covenant Required Complies
------------------------------------------ -------------------------- ------------
Monthly financial statements and CC Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 150 days Yes No
10Q and 10K Within 5 days after filing with the SEC Yes No
BBC & A/R Agings Monthly within 20 days Yes No
Guarantor liquidity Quarterly within 30 days Yes No
Financial Covenant Required Actual Complies
------------------------------------------ ------------------------- ------------ --------
Maintain on a Quarterly Basis:
Minimum Revenues:
Q199 $1,000,000.00 $ Yes No
-----------
Q299 $1,200,000.00 $ Yes No
-----------
Q399 $1,400,000.00 $ Yes No
-----------
Q499 $2,000,000.00 $ Yes No
-----------
Maximum Losses/Profitability:
Q199 ($700,000.00) $ Yes No
----------
Q299 ($600,000.00) $ Yes No
----------
Q399 ($300,000.00) $ Yes No
----------
Q499 $ 100,000.00 $ Yes No
----------
Each Quarter thereafter $ 1.00 $ Yes No
----------
Guarantor Liquidity*
Xxxxxx Xxxxxxxxxxx 2.0:1.0 :1.0 Yes No
-----
Devon Property 1.7:1.0 :1.0 Yes No
-----
*See Section 6.10 of the Loan and Security Agreement
Comments Regarding Exceptions:
Sincerely, BANK USE ONLY
RECEIVED BY:
---------------------
--------------------------- DATE:
Signature ----------------
REVIEWED BY:
--------------------------- ---------------------
Title COMPLIANCE STATUS: YES / NO
-8-
THIRD LOAN MODIFICATION AGREEMENT
This Third Loan Modification Agreement is entered into as of September 29,
1999, by and between C-BRIDGE INTERNET SOLUTIONS, INC., a Delaware corporation
with its principal place of business at 000 Xxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 ("Borrower") and SILICON VALLEY BANK, a California-chartered
bank ("Bank"), with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, XX 00000 and with a loan production office located at Wellesley Office
Park, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of September 29, 1998, evidenced by, among other documents,
a certain Loan and Security Agreement dated as of September 29, 1998, as amended
by a Loan Modification Agreement dated as of January 27, 1999, as amended by a
Second Loan Modification Agreement dated as of April 7, 1999 (as amended, the
"Loan Agreement"). The Loan Agreement established in favor of the Borrower:
(i) a working capital line of credit in the maximum principal amount of One
Million Dollars ($1,000,000.00) (the "Working Capital Line"), (ii) a revolving
line of credit in the maximum principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) (the "Committed Revolving Line"), and (iii) an
equipment line of credit in the maximum principal amount of Two Hundred Thousand
Dollars ($200,000.00) (the "Committed Equipment Line"). Capitalized terms used
but not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
-------------------------
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement.
---------------------------------
1. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
""Revolving Maturity Date" means September 29, 1999."
and inserting in lieu thereof the following:
""Revolving Maturity Date" means December 29, 1999."
2. The Loan Agreement shall be amended by deleting the following
text appearing as Section 6.9 thereof:
"6.9 Profitability. Borrower shall maintain, as of the
-------------
last day of each quarter: (i) a maximum net loss of Seven
Hundred Thousand Dollars ($700,000.00) for the first quarter
of 1999, (ii) a maximum net loss of Six Hundred Thousand
Dollars ($600,000.00) for the second quarter of 1999, (iii)
a maximum net loss of Three Hundred Thousand Dollars
($300,000.00) for the third quarter of 1999, (iv) a minimum
net profit of One Hundred Thousand Dollars ($100,000.00) for
the fourth quarter of 1999, and (v) a minimum net profit of
One Dollar ($1.00) for each quarter thereafter."
and inserting in lieu thereof the following:
"6.9 Profitability. Borrower shall maintain, as of the
-------------
last day of each of the following quarters: (i) a maximum
net loss of Seven Hundred Thousand Dollars ($700,000.00) for
the first quarter of 1999, and (ii) a maximum net loss of
Six Hundred Thousand Dollars ($600,000.00) for the second
quarter of 1999."
3. The Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Negative Pledge
Agreement dated as of September 29, 1998, between Borrower and
Bank, and acknowledges, confirms and agrees that said Negative
Pledge Agreement shall remain in full force and effect.
4. FEE. Borrower shall pay to Bank a modification fee equal to Five Hundred
---
Dollars ($500.00), which fee shall be due on the date hereof and shall be deemed
fully earned as of the date hereof. The Borrower shall also reimburse Bank for
all legal fees and expenses incurred in connection with this amendment to the
Existing Loan Documents.
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
6. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
------------------------------
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of
Bank and Borrower to retain as liable parties all makers of Existing Loan
Documents, unless the party is expressly released by Bank in writing. No maker
will be released by virtue of this Loan Modification Agreement.
9. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County, California.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
-2-
This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
C-BRIDGE INTERNET SOLUTIONS, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxxx
------------------------------ ------------------------------
Name: Xxxxxxx Xxxxxx Name: Xxxxxx Xxxxxxxxx
---------------------------- ----------------------------
Title: V.P. of Finance and Title: SVP
Administration ---------------------------
---------------------------
SILICON VALLEY BANK
By:_________________________________________
Name:_______________________________________
Title:______________________________________
(signed in Santa Xxxxx County, California)
Each of the undersigned, limited guarantors of the Indebtedness of the Borrower
to the Bank, hereby acknowledges and consents to the foregoing modification to
the Loan Agreement and ratifies, confirms, and reaffirms that each of their
respective limited guaranties remain in full force and effect.
DEVON XXXX LIMITED PARTNERSHIP
By Devon Xxxx Corporation, its General Partner
By: /s/ Xxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxx X. Xxxxxxx, Xx.
--------------------------------------
Title: President
-------------------------------------
/s/ Xxxxxx Xxxxxxxxxxx
--------------------------------
XXXXXX XXXXXXXXXXX, Individually
-3-
EXHIBIT A
BORROWING BASE CERTIFICATE
Borrower: C-BRIDGE INTERNET SOLUTIONS, INC. Bank: Silicon Valley Bank
Commitment Amount: $1,000,000.00*
* provided Borrower has met consecutive quarterly profitability requirements set
forth in Section 2.1.1 of the Loan and Security Agreement, otherwise,
$500,000.00
ACCOUNTS RECEIVABLE
1) Accounts Receivable Book Value as of _________ $______________
2) Additions (please explain on reverse) $______________
3) TOTAL ACCOUNTS RECEIVABLE $______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4) Amounts over 90 days due $______________
5) Balance of 50% over 90 day accounts $______________
6) Concentration Limits $______________
7) Ineligible Foreign Accounts $______________
8) Governmental Accounts $______________
9) Contra Accounts $______________
10) Promotion or Demo Accounts $______________
11) Intercompany/Employee Accounts $______________
12) Other (please explain on reverse) $______________
13) TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $______________
14) Eligible Accounts (#3 minus #13) $______________
15) LOAN VALUE OF ACCOUNTS (75.0% of #14) $______________
BALANCES
16) Maximum Loan Amount $______________
17) Total Funds Available [Lesser of #16 or #15] $______________
18) Present balance owing on Line of Credit $______________
19) Outstanding under Committed Equipment Line $______________
(only prior to Debt Service Coverage Event)
20) RESERVE POSITION (#17 minus #18 and #19) $______________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
RECEIVED BY:__________________
DATE:________________
___________________________ REVIEWED BY:__________________
COMPLIANCE STATUS: YES / NO
By: _______________________
Authorized Signer
-4-
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: C-BRIDGE INTERNET SOLUTIONS, INC.
The undersigned authorized officer of C-BRIDGE INTERNET SOLUTIONS, INC.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending ______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that such compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements and CC Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 150 days Yes No
10Q and 10K Within 5 days after filing with the SEC Yes No
BBC & A/R Agings Monthly within 20 days Yes No
Guarantor liquidity Quarterly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Revenues:
Q199 $1,000,000.00 $________ Yes No
Q299 $1,200,000.00 $________ Yes No
Q399 $1,400,000.00 $________ Yes No
Q499 $2,000,000.00 $________ Yes No
Maximum Losses/Profitability:
Q199 ($700,000.00) $________ Yes No
Q299 ($600,000.00) $________ Yes No
Each Quarter thereafter $ 1.00 $________ Yes No
Guarantor Liquidity*
Xxxxxx Xxxxxxxxxxx 2.0:1.0 _____:1.0 Yes No
Devon Property 1.7:1.0 _____:1.0 Yes No
*SEE SECTION 6.10 OF THE LOAN AND SECURITY AGREEMENT
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
RECEIVED BY:___________________
Sincerely, DATE:__________________________
REVIEWED BY:___________________
_______________________ Date:_______________ COMPLIANCE STATUS: YES / NO
Signature
____________________________
Title 522790.5 (56120/112)
-5-
