EXHIBIT 10.52
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EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT
BY AND AMONG
XXXXXX TECHNOLOGIES, INC. AND ITS SUBSIDIARIES
AND
SILICON VALLEY BANK
FEBRUARY 24, 2004
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THIS EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT (this "Agreement"
or this "Exim Agreement") dated February __, 2004, among SILICON VALLEY BANK
("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and
XXXXXX TECHNOLOGIES, INC. whose address is 000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxx
Xxxxx, Xxxxxxx 00000 (the "Company") and each of the Subsidiaries who now or
hereafter are parties to this Exim Agreement (individually and collectively
"Borrower") provides the terms on which Bank will lend to Borrower and Borrower
will repay Bank. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Exim Agreement will be construed
following GAAP calculations and determinations must be made following GAAP. The
term "financial statements" includes, to the extent prepared, the notes and
schedules. The terms "including" and "includes" always mean "including (or
includes) without limitation" in this or any Loan Document. This Exim Agreement
shall be construed to impart upon Bank a duty to act reasonably at all times.
2. LOAN AND TERMS OF PAYMENT
2.1 ADVANCES.
Borrower will pay Bank the unpaid principal amount of all Advances and
interest on the unpaid principal amount of the Advances.
2.1.1 ADVANCES.
(a) Bank will make Advances not exceeding the Exim Committed Line.
Borrower may request Advances in any month up to the Maximum Amount Available to
be Advanced in such month, provided that at no time the outstanding amount of
Advances exceeds the Exim Committed Line. In the event that the Maximum Amount
Available to be advanced in any month is not advanced pursuant to this
Agreement, the portion which is not advanced will not be available to be
advanced in any subsequent month. Subject to the limitations set forth in this
Agreement, amounts borrowed under this Section may not be reborrowed during the
term of this Exim Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as EXHIBIT B (the "Payment/Advance Form"). Bank
will credit Advances to Borrower's deposit account. Bank may make Credit
Extensions under this Exim Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Credit Extensions
are necessary to meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Borrower will indemnify Bank for any loss suffered by Bank from
that reliance.
(c) The Exim Committed Line terminates on the Exim Maturity Date, when
all Advances and other amounts due under this Exim Agreement are immediately
payable.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 exceed the lesser of
either (i) the Exim Committed Line or (ii) the Maximum Amount Available to be
Advanced, Borrower must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate equal to the greater of (i) six percent
(6.0%) per annum or (ii) two (2.%) percentage points above the Prime Rate. After
an Event of Default, Obligations accrue interest at five percent (5.0%) above
the rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Exim Committed Line is payable on the
fifteen (15th) day of each month. Bank may debit any of Borrower's deposit
accounts, including, the Collateral Account and Account Number 3300291045 for
principal and interest payments when due or any amounts Borrower owes Bank. Bank
will notify Borrower when it debits Borrower's accounts. These debits are not a
set-off. Payments received after 12:00 noon Eastern time are considered received
at the opening of business on the next Business Day. When a payment is due on a
day that is not a Business Day, the payment is due the next Business Day and
additional fees or interest accrue.
2.4 COLLECTIONS FROM ETB CONTRACT.
(a) Borrower shall cause all proceeds and payments arising from the ETB
Contract to be wired into an account maintained at Bank (the "Collateral
Account") per the following wire instructions:
PAY TO: FC-SILICON VALLEY BANK
0000 XXXXXX XXXXX
XXXXX XXXXX, XX 00000, XXX
ROUTING & TRANSIT #: 000000000
SWIFT CODE: XXXXXX0X
FOR CREDIT OF: XXXXXX TECHNOLOGIES, INC.
FINAL CREDIT ACCOUNT #: 3300408851
BY ORDER OF: Empresa de Telecommunicaciones de Bogata
(b) All proceeds and payments arising from the ETB Contract and
received in the Collateral Account, will be applied by Bank, to the Obligations,
prior to the occurrence of an Event of Default to the unpaid principal balance.
(c) In the event that any proceeds or payments arising from the ETB
Contract are received by Borrower they shall be immediately delivered, by
Borrower to Bank in the original form in which received by Borrower not later
than the following Business Day after receipt by Borrower, to be applied to the
Obligations in such order as Bank shall determine. If no Default or Event of
Default has occurred and is continuing and amounts received into the Collateral
Account exceed the Obligations, Borrower may request, and Bank will transfer
such excess amounts into Borrower's operating account at Bank.
2.5 JOINT LIABILITY.
Each Person included in the term "Borrower" hereby covenants and agrees
with Bank as follows:
(a) The Obligations include all present and future indebtedness,
duties, obligations, and liabilities, whether now existing or contemplated or
hereafter arising, of any one or more of the Borrowers.
(b) Reference in this Agreement and the other Loan Documents to the
"Borrower" or otherwise with respect to any one or more of the Persons now or
hereafter included in the definition of "Borrower" shall mean each and every
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such Person and any one or more of such Persons, jointly and severally, unless
the context requires otherwise.
(c) Each Person included in the term "Borrower" in the discretion of
its respective management is to agree among themselves as to the allocation of
the benefits of the Exim Committed Line, provided, however, that each such
Person be deemed to have represented and warranted to Bank at the time of
allocation that each benefit and use of proceeds is permitted under this
Agreement.
(d) For administrative convenience, each Person included in the term
"Borrower" hereby irrevocably appoints the Company as each Borrower's
attorney-in-fact, with power of substitution (with the prior written consent of
Bank in the exercise of its sole and absolute discretion), in the name of the
Company or in the name of any Borrower or otherwise to take any and all actions
with respect to this Agreement, the other Loan Documents, the Obligations and/or
the Collateral (including, without limitation, the proceeds thereof) as the
Company may so elect from time to time, including, without limitation, actions
to (i) request advances under the Exim Committed Line, and direct Bank to
disburse or credit the proceeds of any Advance directly to an account of the
Company, any one or more of such Persons or otherwise, which direction shall
evidence the making of such Advance and shall constitute the acknowledgment by
each such Person of the receipt of the proceeds of such Advance, (ii) enter
into, execute, deliver, amend, modify, restate, substitute, extend and/or renew
this Agreement, any other Loan Documents, security agreements, mortgages,
deposit account agreements, instruments, certificates, waivers, letter of credit
applications, releases, documents and agreements from time to time, and (iii)
endorse any check or other item of payment in the name of such Person or in the
name of the Company. The foregoing appointment is coupled with an interest,
cannot be revoked without the prior written consent of Bank, and may be
exercised from time to time through the Company's responsible Officer, or other
Person or Persons designated by the Company to act from time to time on behalf
of the Company.
(e) Each Person included in the term "Borrower" hereby irrevocably
authorizes Bank to make Advance to any one or more all of such Person, pursuant
to the provisions of this Agreement upon the written, oral or telephone request
any one or more of the Persons who is from time to time a Responsible Officer of
the Company under the provisions of the most recent certificate of corporate
resolutions and/or incumbency of the Person included in the term "Borrower" on
file with Bank and also upon the written, oral or telephone request of any one
of the Persons who is from time to time a Responsible Officer of the Company
under the provisions of the most recent certificate of corporate resolutions
and/or incumbency for the Company on file with Bank.
(f) Bank assumes no responsibility or liability for any errors,
mistakes, and/or discrepancies in the oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations between
Bank and any one or more of the Persons included in the term "Borrower" or Bank
in connection with any Credit Extension or any other transaction in connection
with the provisions of this Agreement.
2.6 INTER-COMPANY DEBT, CONTRIBUTION.
Without implying any limitation on the joint and several nature of the
Obligations, Bank agrees that, notwithstanding any other provision of this
Agreement, the Persons included in the term "Borrower" may create reasonable
inter-company indebtedness between or among the Persons included in the term
"Borrower" with respect to the allocation of the benefits and proceeds of the
Credit Extensions under this Agreement. The Persons included in the term
"Borrower" agree among themselves, and Bank consents to that agreement, that
each such Person shall have rights of contribution from all of the such Persons
to the extent such Person incurs Obligations in excess of the proceeds of the
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Advances received by, or allocated to purposes for the direct benefit of, such
Person. All such indebtedness and rights shall be, and are hereby agreed by the
Persons included in the term "Borrower" to be, subordinate in priority and
payment to the indefeasible repayment in full in cash of the Obligations, and,
unless Bank agrees in writing otherwise, shall not be exercised or repaid in
whole or in part until all of the Obligations have been indefeasibly paid in
full in cash. Each Person included in the term "Borrower" agrees that all of
such inter-company indebtedness and rights of contribution are part of the
Collateral and secure the Obligations. Each Person included in the term
"Borrower" hereby waives all rights of counter claim, recoupment and offset
between or among themselves arising on account of that indebtedness and
otherwise. No Person included in the term "Borrower" shall evidence the
inter-company indebtedness or rights of contribution by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any Lien or security.
2.7 BORROWERS ARE INTEGRATED GROUP.
Each Person included in the term "Borrower" hereby represents and
warrants to Bank that each of them will derive benefits, directly and
indirectly, from each Letter of Credit and from each Credit Extension, both in
their separate capacity and as a member of the integrated group to which each
such Person belongs and because the successful operation of the integrated group
is dependent upon the continued successful performance of the functions of the
integrated group as a whole, because (i) the terms of the Credit Extension
provided under this Agreement are more favorable than would otherwise would be
obtainable by such Persons individually, and (ii) the additional administrative
and other costs and reduced flexibility associated with individual loan
arrangements which would otherwise be required if obtainable would substantially
reduce the value to such Persons of the Credit Extension.
2.8 PRIMARY OBLIGATIONS.
The obligations and liabilities of each Person included in the term
"Borrower", as guarantor under this Section 2.8 shall be primary, direct and
immediate, shall not be subject to any counterclaim, recoupment, set off,
reduction or defense based upon any claim that such Person may have against any
one or more of the other Persons included in the term "Borrower", Bank and/or
any other guarantor and shall not be conditional or contingent upon pursuit or
enforcement by Bank of any remedies it may have against Persons included in the
term "Borrower" with respect to this Agreement, or any of the other Loan
Documents, whether pursuant to the terms thereof or by operation of law. Without
limiting the generality of the foregoing, Bank shall not be required to make any
demand upon any of the Persons included in the term "Borrower", or to sell the
Collateral or otherwise pursue, enforce or exhaust its or their remedies against
the Persons included in the term "Borrower" or the Collateral either before,
concurrently with or after pursuing or enforcing its rights and remedies
hereunder. Any one or more successive or concurrent actions or proceedings may
be brought against each Person included in the term "Borrower" under this
Section 2.8, either in the same action, if any, brought against any one or more
of the Persons included in the term "Borrower" or in separate actions or
proceedings, as often as Bank may deem expedient or advisable. Without limiting
the foregoing, it is specifically understood that any modification, limitation
or discharge of any of the liabilities or obligations of any one or more of the
Persons included in the term "Borrower", any other guarantor or any obligor
under any of the Loan Documents, arising out of, or by virtue of, any
bankruptcy, arrangement, reorganization or similar proceeding for relief of
debtors under federal or state law initiated by or against any one or more of
the Persons included in the term "Borrower", in their respective capacities as
borrowers and guarantors under this Section 2.8, or under any of the Loan
Documents shall not modify, limit, lessen, reduce, impair, discharge, or
otherwise affect the liability of each Borrower under this Section 2.8 in any
manner whatsoever, and this Section 2.8 shall remain and continue in full force
and effect. It is the intent and purpose of this Section 2.8 that each Person
included in the term "Borrower" shall and does hereby waive all rights and
benefits which might accrue to any other guarantor by reason of any such
proceeding, and the Persons included in the term "Borrower" agree that they
shall be liable for the full amount of the obligations and liabilities under
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this Section 2.8 regardless of, and irrespective to, any modification,
limitation or discharge of the liability of any one or more of the Persons
included in the term "Borrower", any other guarantor or any obligor under any of
the Loan Documents, that may result from any such proceedings.
2.9 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$37,500, $15,000 of which has been paid to Bank, $15,000 of which is due on the
Closing Date, and the balance of which ($7,500) is due on the first anniversary
date of the Closing Date; and
(b) Bank Expenses. All Bank Expenses incurred through and after the
date of this Exim Agreement, (including reasonable attorneys' fees and expenses)
payable when due.
(c) Exim Fee. A facility fee equal to $100 will be due on the Closing
Date.
(d) Exim Bank Expenses. On the Closing Date, Exim Bank Expenses
incurred through the date hereof.
2.10 USE OF PROCEEDS.
Borrower will use the proceeds of the Advances only for the purposes
specified in the Borrower Agreement. Borrower will not use the proceeds of the
Advances for any purpose prohibited by the Borrower Agreement.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) the Revolving Note;
(c) an Export-Import Bank Borrower Agreement;
(d) an Export-Import Bank Guarantee;
(e) an Intellectual Property Security Agreement in form and substance
satisfactory to Bank;
(f) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(g) financing statements (Forms UCC-1);
(h) insurance certificate;
(i) payment of the fees and Bank Expenses then due specified in Section
2.4 hereof;
(j) Certificate of Foreign Qualification (if applicable); and
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(k) such other documents, and completion of such other matters, as Bank
may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES.
Bank's obligations to make each Advance, including the initial Advance,
is subject to the following:
(a) timely receipt of an Availability Certificate (as hereinafter
defined) relating to the request;
(b) receipt of a Payment/Advance Form;
(c) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Advance and no Event of Default may have occurred and be continuing, or result
from the Advance. Each Advance is Borrower's representation and warranty on that
date that the representations and warranties of Section 5 remain true; and
(d) the Exim Guarantee will be in full force and effect.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Any security interest
will be a first priority security interest in the Collateral. After an Event of
Default, Bank may place a "hold" on any deposit account pledged as Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified. The execution, delivery and performance
of the Loan Documents have been duly authorized, and do not conflict with
Borrower's formation documents, nor constitute an event of default under any
material agreement by which Borrower is bound. Borrower is not in default under
any agreement to which or by which it is bound in which the default could cause
a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens. The ETB
Contract is a bona fide, existing obligation of ETB, and the service or property
which are being invoiced has been performed or delivered to ETB or its agent for
immediate shipment to and unconditional acceptance of the service or property
invoiced to ETB. Borrower has no notice of any actual or imminent Insolvency
Proceeding of ETB.
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5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to Borrower's knowledge, threatened by or against Borrower or any
Subsidiary in which an adverse decision could cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
5.5 SOLVENCY.
The fair salable 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 in this Exim
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations G, T and U of the Federal Reserve Board of Governors) . Borrower has
complied with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules, the violation of which could cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all taxes. Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
its business as currently conducted.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 ETB CONTRACT.
The ETB Contract is in full force and effect and Borrower has no
knowledge of any actual or threatened default under the ETB Contract. Borrower
has full right and title to the ETB Contract and it is not subject to any other
Liens. The ETB Contract requires that all payments under the ETB Contract be
made by wire transfer. Pursuant to the requirements of this Agreement, Borrower
shall at all times cause all payments under the ETB Contract to be wired
directly into the Collateral Account.
5.9 FULL DISCLOSURE.
No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank contains any untrue statement of
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a material fact or omits to state a material fact necessary to make the
statements contained in the certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all 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 on Borrower's business or operations. Borrower will
comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or cause a Material
Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period, a schedule of deferred revenue, all in a form and
certified by a Responsible Officer acceptable to Bank; (ii) as soon as
available, but no later than one hundred twenty (120) days after the last day of
Borrower's fiscal year, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an opinion which is unqualified or
otherwise consented to by Bank on the financial statements from an independent
certified public accounting firm acceptable to Bank; (iii) a prompt 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 $100,000 or
more; (iv) any material changes with respect to the ETB Contract, including any
notices received in connection therewith; (v) budgets, sales projections,
operating plans for each fiscal year, in draft form prior to fiscal year end and
approved by Borrower's Board of Directors not later than sixty (60) days after
the end of each fiscal year; and (vi) other financial information Bank requests.
(b) Within thirty (30) days after the last day of each month, Borrower
will deliver to Bank an Availability Certificate signed by a Responsible Officer
in the form of EXHIBIT C (an "Availability Certificate"), with aged listings of
accounts receivable and accounts payable.
(c) Within thirty (30) days after the last day of each month, Borrower
will deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of EXHIBIT D.
(d) Within thirty (30) days after the last day of each month, Borrower
will deliver to Bank with the monthly financial statements an update on the ETB
Contract, which shall include, without limitation, project status,
implementation schedule evidence of shipment and deliverables, cash receipts,
planned invoice dates and such other information as Bank may request from time
to time, all certified by a Responsible Officer
(e) Allow Bank to audit Borrower's Collateral at Borrower's expense,
which expense will be $750 per day per auditor, plus out of pocket expenses.
Such audits will be conducted no more often than every three (3) months unless
an Event of Default has occurred and is continuing.
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6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Exim Agreement. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments and will deliver
to Bank, on demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks
and in amounts, as Bank requests. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
will have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least 20 days notice before canceling
its policy. At Bank's request, Borrower will deliver a certificate of insurance
and evidence of all premium payments. Proceeds payable under any policy will, at
Bank's option, be payable to Bank on account of the Obligations. Bank
acknowledges that insurance currently in effect is acceptable based on current
conditions.
6.6 BORROWER AGREEMENT.
Borrower will comply with all terms of the Borrower Agreement. If any
provision of the Borrower Agreement conflicts with any provision contained in
this Exim Agreement, the more strict provision, with respect to the Borrower,
will control.
6.7 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each month (unless
otherwise stated below):
(a) TANGIBLE NET WORTH. A Tangible Net Worth of at least $4,000,000.
(b) MINIMUM CASH RECEIPTS UNDER THE ETB CONTRACT. The Company shall
have received not less than the following amounts on a cumulative basis under
the ETB Contract:
MINIMUM CUMULATIVE CASH RECEIPTS: MONTH ENDING:
$396,500 February 29, 2004;
$641,500 March 31, 2004;
$663,500 May 31, 2004;
$1,738,500 June 30, 2004;
$1,916,500 August 31, 2004;
$2,442,500 September 30, 2004;
$2,455,500 October 31, 2004;
$3,145,500 November 30, 2004;
$3,545,500 December 31, 2004;
$4,961,500 January 31, 2005;
$5,231,500 February 28, 2005; and
$5,843,500 April 30, 2005.
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6.8 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts
with Bank, including not less than ninety percent (90%) of Borrower's total cash
and investments.
6.9 ETB CONTRACT.
Borrower will perform all of its obligations under the ETB Contract on
a timely basis and immediately notify Bank of any material occurrences under the
ETB Contract.
6.10 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property and
additional Intellectual Property rights developed or acquired including
revisions or additions with any product before the sale or licensing of the
product to any third party, unless Borrower determines in its reasonable
business judgment not to register its Intellectual Property.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property material
to Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent.
6.11 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action
as Bank requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Exim Agreement.
7. NEGATIVE COVENANTS
Borrower will not do any of the following, without Bank's prior written
consent:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"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; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or have a material
change in its ownership of greater than 25% (other than by the sale of
Borrower's equity securities in a public offering or to venture capital
investors so long as Borrower identifies and advises Bank of the venture capital
investors prior to the closing of the investment). Borrower will not, without at
least 30 days prior written notice, 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 any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
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and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
twenty five percent (25%) of Tangible Net Worth. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock, except as contemplated by the
preliminary proxy filed by Borrowers on January 28, 2004.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter or permit any material transaction with
any Affiliate, except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Advance for that 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, if the violation
could have a material adverse effect on Borrower's business or operations or
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.
7.10 BORROWER AGREEMENT.
Violate or fail to comply with any provision of the Borrower Agreement.
7.11 EXIM AGREEMENT.
Take an action, or permit any action to be taken, that causes, or could
be expected to cause, the Exim Guarantee to not be in full force and effect.
11
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within three days of
when due. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);
8.2 COVENANT DEFAULT.
If Borrower violates any covenant in Section 7 or does not perform or
observe any other material term, condition or covenant in this Exim Agreement,
any Loan Documents, or in any agreement between Borrower and Bank and as to any
default under a term, condition or covenant that can be cured, has not cured the
default within 10 days after it occurs, or if the default cannot be cured within
10 days or cannot be cured after Borrower's attempts within 10 day period, and
the default may be cured within a reasonable time, then Borrower has an
additional period (of not more than 30 days) to attempt to cure the default.
During the additional time, the failure to cure the default is not an Event of
Default (but no Advances will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
If there occurs a material adverse effect on (a) the business, assets,
operations, prospects or financial or other condition of Borrower, (b)
Borrower's ability to pay or perform the Obligations in accordance with the
terms thereof, (c) the Collateral or Bank's Liens on the Collateral or the
priority of such Lien or (d) Lender's rights and remedies under the Loan
Documents.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Advances will be made
during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Advances will be made before any
Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;
12
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Advances
will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Exim Agreement or in any writing delivered to Bank or to
induce Bank to enter this Exim Agreement or any Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Exim Agreement or under any other agreement between Borrower and
Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies with respect to any Collateral; (iv) settle and adjust disputes and
claims about the Accounts directly with account debtors, for amounts and on
terms Bank determines reasonable; and (v) transfer the Collateral into the name
13
of Bank or a third party as the Code permits. Bank may exercise the power of
attorney to sign Borrower's name on any documents necessary to perfect or
continue the perfection of any security interest under any Loan Document
regardless of whether an Event of Default has occurred. Bank's appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Advances terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent in its reasonable discretion. Any amounts paid by
Bank are Bank Expenses and immediately due and payable, bearing interest at the
then applicable rate and secured by the Collateral. No payments by Bank are
deemed an agreement to make similar payments in the future or Bank's waiver of
any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices it is not liable
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Exim Agreement, the Loan
Documents, and all other agreements are cumulative. Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank's exercise of one
right or remedy is not an election, and Bank's waiver of any Event of Default is
not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, 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 held by Bank on which Borrower is
liable.
9.8 EXIM NOTIFICATION.
Bank has the right to immediately notify Exim Bank in writing if it has
knowledge of any of the following events: (1) any failure to pay any amount due
under this Exim Agreement; (2) the outstanding Credit Extensions exceed the
Maximum Amount Available to be Advanced; (3) any failure to pay when due any
14
amount payable to Bank under any Loan owing by Borrower to Bank; (4) the filing
of an action for debtor's relief by, against or on behalf of Borrower; (5) any
threatened or pending material litigation against Borrower, or any dispute
involving Borrower.
If Bank sends a notice to Exim Bank, Bank has the right to send Exim
Bank a written report on the status of events covered by the notice every 30
days after the date of the original notification, until Bank files a claim with
Exim Bank or the defaults have been cured (but no Credit Extensions may be
required during the cure period unless Exim Bank gives its written approval). If
directed by Exim Bank, Bank will have the right to exercise any rights it may
have against the Borrower to demand the immediate repayment of all amount
outstandings under the Exim Loan Documents.
9.9 EXIM DIRECTION.
Upon the occurrence of an Event of Default, Exim Bank shall have the
right to (i) direct Bank to exercise the remedies specified in Section 9.1 and
(ii) request that Bank accelerate the maturity of any other loans to Borrower.
10. NOTICES
All notices or demands by any party about this Exim Agreement or any
other related agreement must be in writing and be personally delivered or sent
by an overnight delivery service, by certified mail, postage prepaid, return
receipt requested, or by telefacsimile to the addresses first written above and
with respect to Borrower, with a copy to Borrower's legal department. A Party
may change its notice address by giving the other Party written notice.
11. CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER
Georgia law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in the State of Georgia provided, however, that if
for any reason the Bank can not avail itself of the courts of the State of
Georgia, the Borrower and Bank each submit to the jurisdiction of the State and
Federal Courts in Santa Xxxxx County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Exim Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Exim Agreement or
any rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has 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
under this Exim Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
15
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including 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 in this
Exim Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Exim Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Exim Agreement must be in writing. This Exim
Agreement represents the entire agreement about this subject matter, and
supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Exim Agreement merge into this Exim
Agreement and the Loan Documents.
12.6 COUNTERPARTS.
This Exim Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 EFFECTIVE DATE.
Notwithstanding anything set forth in this Exim Agreement or any Loan
Document to the contrary, this Exim Agreement and all of the Loan Documents
shall not be effective until the date on which the Bank executes this Exim
Agreement as indicated on the signature page to this Exim Agreement.
12.8 SURVIVAL.
All covenants, representations and warranties made in this Exim
Agreement continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until all
statutes of limitations for actions that may be brought against Bank have run.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
12.10 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but in no
event less than reasonable care, but disclosure of information may be made (i)
to Bank's subsidiaries or affiliates in connection with their business with
Borrower, (ii) to prospective transferees or purchasers of any interest in the
loans (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee or purchasers agreement of the terms of
this provision), (iii) as required by law, regulation, subpoena, or other order,
16
(iv) as required in connection with Bank's examination or audit and (v) as Bank
considers appropriate in its reasonable discretion in exercising remedies under
this Exim Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.11 EFFECTIVE DATE.
Notwithstanding anything set forth in this Exim Agreement or any Loan
Document to the contrary, this Agreement and all of the Loan Documents shall not
be effective until the date on which the Bank executes this Exim Agreement as
indicated on the signature page to this Agreement.
13. DEFINITIONS
13.1 DEFINITIONS.
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the Exim
Committed Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER AGREEMENT" is the Export-Import Bank of the United States
Working Capital Guarantee Program Borrower Agreement between Borrower and Bank.
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CLOSING DATE" is the date of this Exim Agreement.
"CODE" is the Georgia Uniform Commercial Code.
"COLLATERAL" is all payments and proceeds at any time payable under the
ETB Contract and the property described on EXHIBIT A.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
17
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the rules and regulations promulgated thereunder.
"ETB CONTRACT" means Borrower's export contract dated May 21 2003 (as
amended with Empresa de Telecommunicaciones de Bogata (the "ETB").
"EXIM BANK" is the Export-Import Bank of the United States.
"EXIM BANK EXPENSES" are all audit fees and expenses; reasonable costs
or expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Exim Loan Documents
(including appeals or Insolvency Proceedings) and the fees that the Bank pays to
the Exim Bank in consideration of the issuance of the Exim Guarantee.
"EXIM COMMITTED LINE" is Two Million Dollars ($2,000,000).
"EXIM GUARANTEE" is that certain Master Guarantee Agreement or other
agreement, as amended from time to time, the terms of which are incorporated
into this Exim Agreement.
"EXIM LOAN DOCUMENTS" is the Exim Agreement, any note or notes executed
by Borrower or any other agreement entered into in connection with this Exim
Loan Agreement, pursuant to which Exim Bank guarantees Borrower's obligations
under this Exim Agreement.
"EXIM MATURITY DATE" is May __, 2005.
"GAAP" generally accepted accounting principles issued by the American
Institute of Certified Public Accountants as in effect from time to time.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVENTORY" is 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
18
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Exim Agreement, any note, or
notes or guaranties executed by Borrower or Guarantor, and any other present or
future agreement between Borrower and/or for the benefit of Bank in connection
with this Exim Agreement, all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"MAXIMUM AMOUNT AVAILABLE TO BE ADVANCED" means the following amounts
as of the last day of each applicable month:
Closing Date $ 1,189,000;
February 2004 $ 543,000;
March 2004 $ 622,000;
June 2004 $ 209,000;
September 2004 $ 123,000; and
December 2004 $ 20,000.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and
Exchange Contracts and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Exim Agreement or any
other Loan Document;
(b) Indebtedness existing on the Closing Date and shown on 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 INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.
19
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Exim Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, IF they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, IF the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses do not prohibit the grant of a
lien or security interest on them;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), BUT any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"RESPONSIBLE OFFICER" is each person named on a borrowing resolution
now or hereafter delivered by Borrower to Bank.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries, plus Subordinated Debt, MINUS, (i) any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, Patents, trade and service marks and names, Copyrights and
research and development expenses except prepaid expenses, and (c) reserves not
already deducted from assets, AND (ii) Total Liabilities.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
20
BORROWER:
Xxxxxx Technologies, Inc.
BY: /s/ XXXX X. XXXXXX
---------------------------------
Name: Xxxx X. Xxxxxx
Title: VP & General Counsel
Xxxxxx IAC, LLP
BY: /s/ XXXXXX QUICK
---------------------------------
Name: Xxxxxx Quick
Title: Manager
DSI, Inc.
BY: /s/ XXXX X. XXXXXX
---------------------------------
Name: Xxxx X. Xxxxxx
Title: VP & General Counsel
Xxxxxx Solutions, Inc.
BY: /s/ XXXX X. XXXXXX
---------------------------------
Name: Xxxx X. Xxxxxx
Title: VP & General Counsel
BANK:
SILICON VALLEY BANK
BY: /s/ XXXXXXX X. XXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Sr. Vice President
Effective Date: February 24, 2004
21
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
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;
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;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
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;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All 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; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
22
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#: (000) 000-0000 TIME:
------------------------
-------------------------------------------------------------------------------
FROM:
-------------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
----------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
--------------------------------------------------------
PHONE NUMBER:
-----------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
-------------------------- --------------------
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
-----------------------------------
PRINCIPAL PAYMENT (ONLY) $
-----------------------------------
INTEREST PAYMENT (ONLY) $
-----------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
-----------------------------------
OTHER INSTRUCTIONS:
-----------------------------------------------------------
-------------------------------------------------------------------------------
All Borrower's representations and warranties in the Export-Import Bank Loan and
Security Agreement are true, correct and complete in all material respects on
the date of the telephone request for and Advance confirmed by this Borrowing
Certificate; but those representations and warranties expressly referring to
another date shall be true, correct and complete in all material respects as of
that 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 Phone #
---------------------------------------- ----------------------------
Received By (Bank) Phone #
----------------------------------
Authorized Signature (Bank)
EXHIBIT C
AVAILABILITY CERTIFICATE
Borrower: Xxxxxx Technologies, Inc. and its Subsidiaries Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Commitment Amount: $2,000,000
------------------- --------------------------------- -------------------------------- ---------------------------------
Month Maximum Amount Available to be Amount Advanced Month to Date Cumulative Amount Outstanding
Advanced (Not to Exceed $2,000,000)
------------------- --------------------------------- -------------------------------- ---------------------------------
Closing Date $1,189,000
------------------- --------------------------------- -------------------------------- ---------------------------------
February 2004 $543,000
------------------- --------------------------------- -------------------------------- ---------------------------------
March 2004 $622,000
------------------- --------------------------------- -------------------------------- ---------------------------------
June 2004 $209,000
------------------- --------------------------------- -------------------------------- ---------------------------------
September 2004 $123,000
------------------- --------------------------------- -------------------------------- ---------------------------------
December 2004 $20,000
------------------- --------------------------------- -------------------------------- ---------------------------------
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS AVAILABILITY CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE LOAN AND SECURITY AGREEMENT BETWEEN THE
UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
Xxxxxx Technologies, Inc. BANK USE ONLY
Rec'd By:
-------------
By: Auth. Signer
-------------------------
Authorized Signer Date:
-------------
Verified:
-------------
Auth. Signer
Date:
-------------
------------------------
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: XXXXXX TECHNOLOGIES, INC.
The undersigned authorized officer of Xxxxxx Technologies, Inc.
("Borrower") certifies that under 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 in
the Agreement are true and correct on this date. Attached are the required
documents supporting the certification. In addition, the undersigned authorized
officer of Borrower certifies that Borrower and each Subsidiary (i) has timely
filed all required tax returns and paid, or made adequate provision to pay, all
material taxes, except those being contested in good faith with adequate
reserves under GAAP and (ii) does not have any legal actions pending or
threatened against Borrower or any Subsidiary which Borrower has not previously
notified in writing to Bank. The Officer certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) consistently
applied from one period to the next except as explained in an accompanying
letter or footnotes. The Officer acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that 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 + CC + Deferred Rev. Monthly within 30 days Yes No
Annual (Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and every 4 months Yes No
Availability Certificate Monthly within 30 days Yes No
ETB Contract Updates Monthly within 30 days Yes No
Preliminary Draft Operating Budgets and Projections Before FYE Yes No
Board Approved Operating Budgets and Projections w/i60 days after FYE Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Tangible Net Worth $4,000,000 $________ Yes No
Minimum ETB Cash Receipts on a cumulative basis by:
February 29, 2004 $396,500 $_________ Yes No
March 31, 2004 $641,500 $_________ Yes No
May 31, 2004 $663,500 $_________ Yes No
June 30, 2004 $1,738,500 $_________ Yes No
August 31, 2004 $1,916,500 $_________ Yes No
September 30, 2004 $2,442,500 $_________ Yes No
October 31, 2004 $2,455,500 $_________ Yes No
November 30, 2004 $3,145,500 $_________ Yes No
December 31, 2004 $3,545,500 $_________ Yes No
January 31, 2005 $4,961,500 $_________ Yes No
February 28, 2005 $5,231,500 $_________ Yes No
April 30, 2005 $5,843,500 $_________ Yes No
Have there been updates to Borrower's intellectual property, if appropriate? Yes / No
BANK USE ONLY
--------------------------------------------------------------------------------
Received by:
---------------------------------------
AUTHORIZED SIGNER
Date:
----------------------------------------------
Verified:
------------------------------------------
AUTHORIZED SIGNER
Date:
----------------------------------------------
Compliance Status: Yes No
--------------------------------------------------------------------------------
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
-----------------------------------------------
SIGNATURE
-----------------------------------------------
TITLE
-----------------------------------------------
DATE
SCHEDULE TO LOAN AND SECURITY AGREEMENT
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement):
Xxxxxx Technologies, Inc.
Xxxxxx Solutions, Inc.
DSI, Inc.
Xxxxxx IAC, LLC
Borrower's State of formation:
Delaware (all)
Borrower has operated under only the following other names (if none, so state):
None in the last five years
All other addresses at which the Borrower does business in the U.S. are as
follows (attach additional sheets if necessary and include all warehouse
addresses):
Xxxxxx Technologies, Inc.:
000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, XX 00000
Xxxxxx Solutions, Inc.:
000 Xxxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, XX 00000
00000 Xxxxx Xxxxx 00, Xxxxxxxxxxxx, XX 00000
Borrower has deposit accounts and/or investment accounts located ONLY at the
following U.S. institutions:
List Acct. Numbers:
Xxxxxx Technologies, Inc. - 3300291045 and 330291098 and 886-00504
(mutual fund account)
Xxxxxx Solutions, Inc. - 3300378587
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:
Xxxxxx Solutions, Inc.:
Security interests in equipment leases
Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
Xxxxxx Technologies, Inc.:
Promissory Note executed by Focus Financial Corp. and warrants
related to purchase of PartnerCommunity - The Company holds a
promissory note for $200,000 due at the end of 2005 which
bears interest at a rate of 8% per year annually; and five
year warrants to purchase 1,200,000 shares of PartnerCommunity
preferred stock at $.10 per share. The note receivable is
fully reserved at $200,000 since the collectibility is
questionable. The warrants are on the Company's balance sheet
recorded at $165,700.
InfoDesk, Inc., 16,204 shares of Common Stock
Xxxxx Xxxxxx Promissory Note - The Company holds a $33,000
note receivable from a former employee that is due in
September 2004.
Xxxxxx Solutions, Inc. (all of these investments are being sold)
MetLife, 124 shares of Common Stock
ICG Communications, Inc., 314 shares of Common Stock and
warrants to purchase an additional 52 shares
Prudential, 794 shares of Common Stock
SUBORDINATED DEBT:
Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
Xxxxxx Technologies, Inc.:
Surety bonds associated with ETB project
Letter of Credit (with SVB) related to Boca lease in the
amount of $52,000 dated January 2004. The amount of the letter
of credit will be reduced each year over the 5 year period
lease.
Letter of Credit (with SVB) related to financing of 2003-2004
insurance premiums in the amount of $530,000. This letter of
credit expires in November 2004 and will be reduced by $53,055
each month beginning in February 2004.
Letter of Credit (with SVB) related to Corporate AMEX account
in the amount of $30,000. AMEX requires this letter of credit
as long as the Company has a corporate credit card program.
This will be outstanding for as long as the corporate program
is in place.
Severance obligations for management - The Company has
employment agreements with its management. Generally, the
agreement for Mr. Quick provides for 24 months of severance;
the agreements for the senior business team (7 persons)
provides for 12 months of severance; and the agreements for
key and impact employees and director level managers provide
for four and three months respectively.
U.S. Leases:
Xxxxxx Technologies, Inc.:
000 Xxxxx Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, XX 00000
(Five year lease commitment commencing March 2004)
000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx
(subleased, not used)
Xxxxxx Solutions, Inc.:
000 Xxxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, XX
00000 (commitment through June 2004)
00000 Xxxxx Xxxxx 00, Xxxxxxxxxxxx, XX 00000
(commitment through November 2004)
Capital and operating lease arrangements with various lenders for
equipment and furniture.
The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
registration):
None
The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is NOT registered with the United States Copyright
Office. (Please include versions which are not registered:
Xxxxxx Technologies, Inc.:
BillPlex
RevChain
Xxxxxx Solutions, Inc.
NetworkStrategies
Simpliciti
Asuriti
The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number and attach a copy of the registration.):
Xxxxxx Technologies, Inc.:
------------------------------------------------------------------------------------------------------------
APPLICATION
FILE NO. SERIAL NO. TITLE OF INVENTION PATENT NO.
530-A99-017 09/032,529 CUSTOMIZABLE ELECTRONIC INVOICE WITH OPTIONAL SECURITY 6,282,552
530-A99-018 09/149,495 DYNAMICALLY CONFIGURABLE AND EXTENSIBLE RATING ENGINE 6,182,054
530-A99-024 09/290,804 BILLING SYSTEM FOR DISTRIBUTING THIRD PARTY MESSAGES TO FORM 6,493,722
A COMMUNITY OF SUBSCRIBERS TO NEGOTIATE A GROUP PURCHASE
FROM THE THIRD PARTY
530-A99-028 09/477,458 DATA ELEMENT CHARACTERISTICS 6,526,409
------------------------------------------------------------------------------------------------------------
The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent and a copy
of the application.):
Xxxxxx Technologies, Inc.:
------------------------------------------------------------------------------------------------------------
530-A00-001 09/567,935 CONFIGURATION, MANAGEMENT AND CONTROL FOR BUSINESS MODEL DATA AS APPLIED
TO A BILLING SYSTEM
530-A00-005 10/117,377 METHOD AND SYSTEM FOR RULE BASED VALIDATION PRIOR TO COMMITTING DATA TO A
DATABASE SYSTEM
------------------------------------------------------------------------------------------------------------
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
Xxxxxx Tecnologies, Inc.:
----------------- ------------------- --------------------------------------------- -------------------
Serial Number Reg. Number Word Xxxx Country
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76286985 2571368 XXXXXX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76283488 2536545 XXXXXX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76283491 2614921 D USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76283490 2607338 XXXXXX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76283489 2607337 XXXXXX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76180308 2707643 REVCHAIN USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76219462 REVENUE CHAIN MANAGEMENT USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76218795 REVENUE CHAIN MANAGEMENT USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76200640 2707672 POWERING YOUR REVENUE CHAIN USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76200638 IIA USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76200637 POWERING YOUR REVENUE CHAIN USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76180311 2660442 REVCHAIN USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
76408915 2685050 XXXXXX TECHNOLOGIES, INC USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75554059 2287878 BILLPLEX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75408918 2667479 XXXXXX TECHNOLOGIES, INC. USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75408917 2240499 BILLPLEX LOGO USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75408916 2373397 XXXXXX LOGO USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75378116 SMART INVOICE USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75378112 INTELLIGENT XXXX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75152485 2248476 PRESENCE USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75152483 BILLPLEX USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75152482 2191766 WORLDWIDE CASINO USA
----------------- ------------------- --------------------------------------------- -------------------
----------------- ------------------- --------------------------------------------- -------------------
75319632 2215969 REVENUE CHAIN MANAGEMENT USA
----------------- ------------------- --------------------------------------------- -------------------
Xxxxxx Solutions, Inc.:
----------------------------------------------- --------------------- --------------------------------
Xxxx Serial # Registration # (if available)
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
Abiliti Solutions 76/337,430
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
BillingCentral 76/350,531 2,631,506
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
EventProcessor 76/350,532 2,631,507
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
NetworkStrategies 1,715,320
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
A Better Way to Xxxx 76/350,530
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
Xxxxxxxxxx.xxx 76/422,621
----------------------------------------------- --------------------- --------------------------------
----------------------------------------------- --------------------- --------------------------------
Simply Better Event Management 76/436,170
----------------------------------------------- --------------------- --------------------------------
Borrower is not subject to litigation which would have a material adverse effect
on the Borrower's financial condition, except the following (attach additional
comments, if needed):
XXXXXX XXXXXX X. XXXXXX TECHNOLOGIES, INC., ET AL. On December 5, 2001, a
class action complaint was filed in the United States District Court for the
Southern District of New York. On April 22, 2002 an amended complaint was filed
by two plaintiffs purportedly on behalf of persons purchasing the Company's
common stock between September 20, 1999 and December 6, 2000. The complaint is
styled as XXXXXX XXXXXX, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED,
VS. XXXXXX TECHNOLOGIES, INC., BANCBOSTON XXXXXXXXX XXXXXXXX INC., XXXXXXXXX &
XXXXX LLC, XXXXXXX XXXXX XXXXXX INC., XXXXX XXXXXX, XXXXX X. XXXXX AND XXXXXXX
X. XXXXXX. The individual defendants, Messrs. Xxxxx, Xxxxxx and Xxxxxx, have
entered into tolling agreements with the plaintiffs resulting in their dismissal
from the case without prejudice. The remaining defendants include us and certain
of the underwriters from the Company's initial public offering ("IPO"). More
than 300 similar class action lawsuits filed in the Southern District of New
York against numerous companies and their underwriters have been consolidated
for pretrial purposes before one judge under the caption "In re Initial Public
Offering Securities Litigation. The complaint includes allegations of violations
of (i) Section 11 of the Securities Act of 1933 by all named defendants, (ii)
Section 15 of the Securities Act of 1933 by the individual defendants and (iii)
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder by the underwriter defendants. Specifically, the plaintiffs allege in
the complaint that, in connection with the IPO, the defendants failed to
disclose "excessive commissions" purportedly solicited by and paid to the
underwriter defendants in exchange for allocating shares of the Company's common
stock in the IPO to the underwriter defendants' preferred customers. Plaintiffs
further allege that the underwriter defendants had agreements with preferred
customers tying the allocation of shares sold in the IPO to the preferred
customers' agreements to make additional aftermarket purchases at pre-determined
prices. Plaintiffs further allege that the underwriters used their analysts to
issue favorable reports about the Company to further inflate the Company's share
price following the IPO. Plaintiffs claim that the defendants knew or should
have known of the underwriters' actions and that the failure to disclose these
alleged arrangements rendered the prospectus included in the Company's
registration statement on Form S-1 filed with the SEC in September 1999
materially false and misleading. Plaintiffs seek unspecified damages and other
relief. In June 2003, the Company approved the terms of a proposed settlement
involving the plaintiffs, the insurance companies and numerous issuers,
including the Company and the individual defendants, that includes a waiver by
the insurance companies of any retention amounts under the policies. Court
approval of the settlement is required. Under the terms of the proposed
settlement, there would be no liability to be recorded by the Company other than
legal fees incurred in the initial defense of the action, which are immaterial.
There is no assurance that a settlement with the plaintiffs will be finalized.
In the event that the settlement is not finalized and approved by the court, the
Company intends to defend vigorously against the plaintiffs' claims. The Company
believes that it is entitled to indemnification by the underwriters under the
terms of the underwriting agreements. The Company has notified the underwriters
of the action, but the underwriters have not yet agreed to indemnify the
Company. The lead underwriter, BancBoston Xxxxxxxxx Xxxxxxxx Inc., has ceased
doing business and there is no assurance it will have the financial resources to
provide indemnification. Currently the amount of a loss, if any, cannot be
determined.
XXXXXXX V. ABILITI SOLUTIONS, INC., XXXXXX TECNOLOGIES, INC., AND
XXXXXX SOLUTIONS, INC. On August 1, 2003, a First Amended Petition, styled as
XXXXX X. XXXXXXX AND XXXXX X. XXXXXX VS. ABILITI SOLUTIONS, INC., A CORPORATION,
AND XXXXXX TECHNOLOGIES, INC., A CORPORATION, AND XXXXXX SOLUTIONS, INC., A
CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF XXXXXX, was filed in the Circuit
Court of the County of St. Louis, State of Missouri. The First Amended Petition
added Xxxxxx Technologies and Xxxxxx Solutions as defendants in the named
action. The First Amended Petition contains certain allegations against Abiliti
related to the non-payment of certain promissory notes in the aggregate
principal amount of $1.2 million. The promissory notes that are the subject of
the First Amended Petition are liabilities that were retained by Abiliti
pursuant to the terms of the Abiliti Acquisition. The plaintiffs allege that the
purchase of substantially all of the assets and certain liabilities of Abiliti
constituted a de facto merger and, as a result, Xxxxxx Technologies and its
indirect wholly owned subsidiary, Xxxxxx Solutions, are responsible for payment
of the promissory notes and indemnification of the plaintiffs in connection with
Abiliti's counterclaim against the plaintiffs. The First Amended Petition also
seeks to set aside the transfer of Abiliti assets as a fraudulent transfer. In
December, 2003, the court granted summary judgment to the plaintiffs on the
promissory notes awarding a judgment in the amount of $1,796,938.14. However,
the plaintiffs are not permitted to execute on the judgment until such time as
the senior debt (Xxxxxxx notes and Series B stock) is paid in full. The issue of
successor liability has not yet been determined. It is unclear at this time
whether the plaintiffs will continue to pursue this claim since the stay of
execution of judgment would also apply to Xxxxxx. Xxxxxx Solutions and Xxxxxx
Technologies believe that they are entitled to indemnification by Abiliti
pursuant to the terms of the Purchase Agreement relating to the Abiliti
Acquisition. The Company has provided notice to Albacore Holdings, Inc.
("Albacore"), formerly known as Abiliti, of the action and Albacore has assumed
the defense of the First Amended Petition on the Company's behalf. However,
there can be no assurance that Albacore will have the financial resources to
defend and/or settle the claims, pay any judgment ultimately obtained by
plaintiffs, or continue to provide indemnification in connection with this
matter. Due to the early stage of the proceeding, a loss, if any, cannot be
determined.
XXXXXX SOLUTIONS, INC., XXXXXX TECHNOLOGIES, INC. AND ALBACORE
HOLDINGS, INC. X. XXXXXXXX XXXXX XXXXXX & XXXXX CAPITAL, INC. AND XXXXXXXX XXXXX
XXXXXX & XXXXX FINANCIAL ADVISORS, INC. Xxxxxx, Xxxxxx Solutions and Albacore
filed a declaratory judgment action against Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Capital, Inc. and Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc.
("Houlihan") seeking a declaration that they are not liable to Houlihan for fees
under an engagement letter between Abiliti Solutions, Inc. and Xxxxxxxx (a
liability Xxxxxx assumed in the acquisition of Abiliti). Xxxxxxxx has filed a
counterclaim in excess of $800,000. The parties have reached a settlement in
principal pursuant to which the action and counterclaim would be dismissed, full
releases would be exchanged and Xxxxxx would pay Xxxxxxxx approximately $55,000.
The parties are in the process of documenting the settlement.
XXXXXX SOLUTIONS, INC. V. DATA INTEGRATION SYSTEMS, INC. Xxxxxx filed a
collection action against Data Integration Systems, Inc. ("DIS") in December,
2003 for seeking contractual damages of $694,600. DIS recently filed a
counterclaim for damages in the amount of $1,500,000. The nature of the alleged
damages is unclear. Due to the early stage of the proceeding, a loss, if any,
cannot be determined with respect to this litigation.
XXXXXX XXXXXX V. ALBACORE HOLDINGS, INC. B/D/A ABILITI SOLUTIONS, INC.,
XXXXXX SOLUTIONS, INC. AND XXXXXX QUICK. On January 13, 2004, Xxxxxx Xxxxxx
filed an action against Albacore and Xxxxxx Solutions, Inc. alleging Missouri
Human Rights Act violations and battery. Xxxxxx Solutions and Xxxxxx
Technologies believe that they are entitled to indemnification by Abiliti
pursuant to the terms of the Purchase Agreement relating to the Abiliti
Acquisition. The Company has provided notice to Albacore Holdings, Inc.,
formerly known as Abiliti, of the action and Albacore has assumed the defense of
the First Amended Petition on the Company's behalf. However, there can be no
assurance that Albacore will have the financial resources to defend and/or
settle the claims, pay any judgment ultimately obtained by plaintiffs, or
continue to provide indemnification in connection with this matter. Due to the
early stage of the proceeding, a loss, if any, cannot be determined with respect
to this litigation.
Tax ID Number
Xxxxxx Technologies, Inc. - 00-0000000
Xxxxxx Solutions, Inc. - 00-0000000
DSI, Inc. - 00-0000000
Xxxxxx IAC, LLC - None
Organizational Number, if any:
Xxxxxx Technologies, Inc. - DE State ID# 3057786
Xxxxxx Solutions, Inc. - DE State ID# 3576193
DSI, Inc. - DE State ID# 3576328
Xxxxxx IAC, LLC - DE State ID# 3141816
