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US XXXXXX.XXX, INC.
LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY AGREEMENT is entered into as of September 12,
2001, by and between IMPERIAL BANK ("Bank") and US XXXXXX.XXX, INC., a Delaware
corporation ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, all capitalized
terms shall have the definitions set forth on Exhibit A.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined on Exhibit A shall be construed in accordance with GAAP and all
calculations shall be made in accordance with GAAP. The term "financial
statements" shall include the accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 CREDIT EXTENSIONS. Borrower promises to pay to Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower, together with interest
on the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.
(a) REVOLVING ADVANCES.
(i) AMOUNT. Subject to and upon the terms
and conditions of this Agreement (1) Borrower may request Advances in an
aggregate outstanding amount not to exceed the Committed Revolving Line, minus
any amounts outstanding under the Letter of Credit Sublimit, and (2) amounts
borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at any
time prior to the Revolving Maturity Date, at which time all Advances under this
Section 2.1(a) shall be immediately due and payable. Borrower may prepay any
Advances without penalty or premium.
(ii) FORM OF REQUEST. Whenever Borrower
desires an Advance, Borrower will notify Bank by facsimile transmission or
telephone no later than 3:00 p.m. Pacific time, on the Business Day that the
Advance is to be made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of EXHIBIT C. Bank is authorized
to make Advances under this Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer or a designee thereof, and Borrower shall indemnify and
hold Bank harmless for any damages or loss suffered by Bank as a result of such
reliance. Bank will credit the amount of Advances made under this Section 2.1(a)
to Borrower's deposit account.
(iii) LETTER OF CREDIT SUBLIMIT. Subject
to the availability under the Committed Revolving Line, and in reliance on
the representations and warranties of Borrower set forth herein, at any time
and from time to time from the date hereof through the Business Day
immediately prior to the Revolving Maturity Date, Bank shall issue for the
account of Borrower such standby letters of credit ("Letters of Credit") as
Borrower may request by delivering to Bank a duly executed letter of credit
application on Bank's standard form; provided, however, that the outstanding
and undrawn amounts under all such Letters of Credit (i) shall not at any
time exceed One Million Dollars ($1,000,000) in the aggregate, and (ii)
shall be deemed to constitute Advances for the purpose of calculating
availability under the Committed Revolving Line. Any drawn but unreimbursed
amounts under any Letters of Credit shall be charged as Advances against the
Committed Revolving Line. Unless Borrower shall have deposited with Bank cash
collateral in an amount sufficient to cover all undrawn amounts under each
such Letter of Credit and Bank shall have agreed in writing, no Letter of
Credit shall have an expiration date that is later than the Revolving
Maturity Date. In the event that the Committed Revolving Line is cancelled or
not renewed, then Borrower agrees to deposit with Bank cash collateral in an
amount to secure all outstanding Letters of Credit. All Letters of Credit
shall be in form and substance acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form application and
letter of credit agreement. Borrower will pay any standard issuance and other
fees that Bank notifies Borrower will be charged for issuing and processing
Letters of Credit.
(b) EQUIPMENT ADVANCES.
(i) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make advances (each an "Equipment
Advance" and, collectively, the "Equipment Advances") to Borrower at any time
from the date hereof through the Equipment Advance Availability End Date. The
aggregate outstanding amount of Equipment Advances shall not exceed the
Equipment Line. And Bank may advance up to 30% of the aggregate amount of
outstanding Equipment Advances as Software Equipment Advances; PROVIDED,
HOWEVER, that each Software Equipment Advance shall be in a minimum amount of
$100,000. Each Equipment Advance shall not exceed 100% of the invoice amount of
equipment and software approved by Bank from time to time (which Borrower shall,
in any case, have purchased within 60 days of the date of the corresponding
Equipment Advance), excluding taxes, shipping, warranty charges, freight
discounts, installation expense, and other such soft costs.
(ii) At the time of each Hardware Advance,
the aggregate of the then outstanding principal balance of the Hardware
Advances, if any, shall be added to the new Hardware Advance and the total
aggregate balance of both shall be payable in equal monthly installments,
including all accrued interest thereon, on the last day of each month commencing
on the first (1st) full calendar month following the initial advance and each
such subsequent advance hereunder and continuing on the last day of each
succeeding month until the Equipment Maturity Date, at which time all amounts
due in connection with the Hardware Advances made under this Section 2.1(b) and
any other amounts due under this Agreement shall be immediately due and payable.
(iii) Interest on each Software Equipment
Advance shall begin to accrue on the funding date of the relevant Software
Equipment Advance. Each Software Equipment Advance shall be payable in eighteen
(18) equal monthly principal installments, plus all accrued interest, beginning
on the date that is one month after such Software Equipment Advance is funded
and continuing on the same day of each subsequent month thereafter (or on the
last day of the month if the date of funding was on the 31st day of any month)
through the date that is 18 months after such Software Equipment Advance funding
date.
(iv) Equipment Advances may not be prepaid.
Any Equipment Advance or portion thereof, once repaid may not be reborrowed.
(v) When Borrower desires to obtain an
Equipment Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than 3:00 p.m.
Pacific time one Business Day before the day on which the Equipment Advance is
to be made. Such notice shall be substantially in the form of EXHIBIT C. The
notice shall be signed by a Responsible Officer or its designee and include a
copy of the invoice for any Equipment to be financed.
2.2 OVERADVANCES. If the aggregate amount of the outstanding
Advances and Equipment Advances exceeds the Committed Revolving Line at any
time, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATES.
(i) ADVANCES. Except as set forth in Section
2.3(b), the Advances, shall bear interest, on the outstanding daily balance
thereof, at a rate equal to 2.50% above the Prime Rate.
(ii) EQUIPMENT ADVANCES. Except as set forth
in Section 2.3(b), the Equipment Advances shall bear interest, on the
outstanding daily balance thereof, at a rate equal to 2.75% above the Prime
Rate.
(b) LATE FEE; DEFAULT RATE. If any payment is
not made within five (5) Business Days after the date such payment is due,
Borrower shall pay Bank a late fee equal to the lesser of (i) 5% of the amount
of such unpaid amount or (ii) the maximum amount permitted to be charged under
applicable law. All Obligations shall bear interest, from and after the
occurrence and during the continuance of an Event of Default, at a rate equal to
five percentage points above the interest rate applicable immediately prior to
the occurrence of the Event of Default.
(c) PAYMENTS. Interest on the Advances shall be
due and payable on the last calendar day of each month during the term hereof.
Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder. Bank shall, at its option, charge such interest, all Bank
Expenses, and all Periodic Payments against any of Borrower's deposit accounts,
including Account Number 00-000-000 (such debits are not a setoff), or against
the Committed Revolving Line, in which case those amounts shall thereafter
accrue interest at the rate then applicable hereunder.
(d) COMPUTATION. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased, effective as of the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a 360 day
year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. On the Closing Date, a
Facility Fee equal to $15,000, which shall be nonrefundable;
(b) LETTER OF CREDIT FEE. A Letter of Credit
Fee equal to 1.50% of the face amount of each Letter of Credit issued, such fee
shall be due and payable upon issuance of each Letter of Credit, and annually
thereafter, to the extent that such Letter of Credit remains outstanding;
(c) BANK EXPENSES. On the Closing Date, all
Bank Expenses incurred through the Closing Date, including reasonable attorneys'
fees and expenses, and after the Closing Date, all Bank Expenses,
including reasonable attorneys' fees and expenses, as and when they become due,
provided that such Bank Expenses owed by Borrower shall be capped at $20,000.
(d) DOCUMENTATION FEE. In addition to any
other amounts due, or to become due with the execution of this Agreement,
Borrower agrees to pay to Bank a Documentation Fee in the amount of $1,000, such
fee due and payable at the Closing Date.
2.6 TERM. This Agreement shall become effective on the Closing
Date and, subject to Section 12.7, shall continue in full force and effect for a
term ending on the Equipment Maturity Date.
3. CONDITIONS OF LOANS.
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) an officer's certificate of Borrower
with respect to incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) a financing statement (Form UCC-1);
(d) an intellectual property security agreement;
(e) agreement to provide insurance;
(f) payment of the fees and Bank Expenses then
due specified in Section 2.5;
(g) an audit of the Collateral, the results of
which shall be satisfactory to Bank; provided, that the audit on Borrower's
accounts receivable shall occur by October 1, 2001;
(h) current financial statements in accordance
with Section 6.2;
(i) A Warrant to purchase 3,750 shares of
Borrower's Series A1 Preferred Stock, par value $.001 per share, at an exercise
price of $100.00 per share, which may be converted into 777,412 shares of
Borrower's Common Stock at an exercise price of $0.48237 per share on Bank's
form, with a 7-year maturity, inclusive of certain provisions to include but not
be limited to assignability to Bank's affiliates, antidilution protection and a
net exercise provision, and on the same terms as provided to Pequot Capital in
the last equity round, except that Bank shall have piggyback and S-3
registration rights; and
(j) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the
Payment/Advance Form as provided in Section 2.1; and
(b) the representations and warranties contained
in Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would exist after giving effect to
such Credit Extension (provided, however, that those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral to secure prompt repayment of any and all
Obligations and to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in later-acquired Collateral. Notwithstanding
any termination, Bank's Lien on the Collateral shall remain in effect for so
long as any Obligations are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours but no more than once a year
(unless an Event of Default has occurred and is continuing), to inspect
Borrower's Books and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing under the laws of its state of
incorporation and qualified and licensed to do business in any state in which
the conduct of its business or its ownership of property requires that it be so
qualified, except where the failure to do so could not reasonably be expected to
cause a Material Adverse Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement by which it is
bound, which default could have a Material Adverse Effect.
5.3 COLLATERAL. Borrower has good title to the Collateral,
free and clear of Liens, except for Permitted Liens. All Inventory is in all
material respects of good and merchantable quality, free from all material
defects, except for Inventory for which adequate reserves have been made.
5.4 INTELLECTUAL PROPERTY COLLATERAL. Borrower is the sole
owner of the Intellectual Property Collateral, except for licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Copyrights, Trademarks and Patents is valid and enforceable, and no part of the
Intellectual Property Collateral has been judged invalid or unenforceable, in
whole or in part, and no claim has been made that any part of the Intellectual
Property Collateral violates the rights of any third party except to the extent
such claim could not reasonably be expected to cause a Material Adverse Effect.
Except as set forth in the Schedule, Borrower's rights as a licensee of any one
particular intellectual property license do not give rise to more than 5% of its
gross revenue in any given month, including without limitation revenue derived
from the sale, licensing, rendering or disposition of any product or service.
5.5 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.6 LITIGATION. Except as set forth in the Schedule, there are
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which a likely adverse decision
could reasonably be expected to have a Material Adverse Effect, or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral.
5.7 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.8 SOLVENCY, PAYMENT OF DEBTS. Borrower is able to pay its
debts (including trade debts) as they mature; the fair saleable value of
Borrower's assets (including goodwill minus disposition costs) exceeds the fair
value of its liabilities; and Borrower is not left with unreasonably small
capital after the transactions contemplated by this Agreement.
5.9 COMPLIANCE WITH LAWS AND REGULATIONS. Borrower and each
Subsidiary have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. No event has occurred resulting
from Borrower's failure to comply with ERISA that is reasonably likely to result
in Borrower's incurring any liability that could have a Material Adverse Effect.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of the important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied in all material
respects with all the provisions of the Federal Fair Labor Standards Act.
Borrower is in compliance with all environmental laws, regulations and
ordinances except where the failure to comply is not reasonably likely to have a
Material Adverse Effect. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect. Borrower and each Subsidiary have filed or caused to be filed
all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein except those being
contested in good faith with adequate reserves under GAAP.
5.10 SUBSIDIARIES. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.11 GOVERNMENT CONSENTS. Borrower and each Subsidiary have
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted, except where the failure to do so could not reasonably be expected to
cause a Material Adverse Effect.
5.12 INBOUND LICENSES. Except as disclosed on the Schedule,
Borrower is not a party to, nor is bound by, any material license or other
agreement that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower's interest in such material license or agreement
or any other property.
5.13 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank taken together with all such certificates and written statements furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading, it being recognized by Bank that the
projections and forecasts provided by Borrower in good faith and based upon
reasonable assumptions are not to be viewed as facts and that actual results
during the period or periods covered by any such projections and forecasts may
differ from the projected or forecasted results.
6. AFFIRMATIVE COVENANTS.
Borrower covenants that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING AND GOVERNMENT COMPLIANCE. Borrower shall
maintain its and each of its Subsidiaries' corporate existence in its
jurisdiction of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify could have a Material Adverse Effect. Borrower
shall meet, and shall cause each Subsidiary to meet, the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with
all statutes, laws, ordinances and government rules and regulations to which it
is subject, and shall maintain, and shall cause each of its Subsidiaries to
maintain, in force all licenses, approvals and agreements, the loss of which or
failure to comply with which could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower
shall deliver to Bank: (a) as soon as available, but in any event within 30 days
after the end of each calendar month, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, in a form acceptable to Bank and certified by a Responsible
Officer; (b) as soon as available, but in any event within 120 days after the
end of Borrower's fiscal year commencing December 31, 2001, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an opinion which is unqualified or otherwise consented to
in writing by Bank on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) if applicable, copies
of all statements, reports and notices sent or made available generally by
Borrower to its security holders or to any holders of Subordinated Debt and all
reports on Forms 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of $100,000 or more;
(e) such budgets, sales projections, operating plans or other financial
information generally prepared by Borrower in the ordinary course of business as
Bank may reasonably request from time to time, including the minutes from
Borrower's board of directors; and (f) within 30 days of the last day of each
fiscal quarter, a report signed by Borrower, in form reasonably acceptable to
Bank, listing any applications or registrations that Borrower has made or filed
in respect of any Patents, Copyrights or Trademarks and the status of any
outstanding applications or registrations, as well as any material change in
Borrower's Intellectual Property Collateral, including but not limited to any
subsequent ownership right of Borrower in or to any Trademark, Patent or
Copyright not specified in EXHIBITS A, B, and C of the Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this
Agreement.
(a) Within 30 days after the last day of each
month, Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of EXHIBIT D hereto.
(b) Bank shall have a right from time to time
hereafter to audit Borrower's accounts receivable and appraise Collateral during
normal business hours at Borrower's expense. An audit of Borrower's accounts
receivable shall take place no later than October 1, 2001. Future audits shall
take place on a semi-annual basis unless an Event of Default has occurred and is
continuing, or if requested on a more frequent basis by Bank.
(c) Borrower shall immediately provide Bank with
a detailed schedule of all equipment purchases and associated expenses in
connection with each Equipment Advance.
6.3 INVENTORY; RETURNS. Borrower shall keep all Inventory in
good and merchantable condition, free from all material defects except for
Inventory for which adequate reserves have been made. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist on
the Closing Date. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims involving more than $100,000.
6.4 TAXES. Borrower shall make, and cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law,
including, but not limited to, those laws concerning income taxes, F.I.C.A.,
F.U.T.A. and state disability, and will execute and deliver to Bank, on demand,
proof satisfactory to Bank indicating that Borrower or a Subsidiary has made
such payments or deposits and any appropriate certificates attesting to the
payment or deposit thereof; provided that Borrower or a Subsidiary need not make
any payment if the amount or validity of such payment is contested in good faith
by appropriate proceedings and is reserved against (to the extent required by
GAAP) by Borrower.
6.5 INSURANCE.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain liability and other insurance in amounts and of a type that are
customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as reasonably satisfactory
to Bank. All policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee, and all liability insurance policies shall show Bank as
an additional insured and specify that the insurer must give at least 20 days
notice to Bank before canceling its policy for any reason. Upon Bank's request,
Borrower shall deliver to Bank certified copies of the policies of insurance and
evidence of all premium payments. If no Event of Default has occurred and is
continuing, proceeds payable under any casualty policy will, at Borrower's
option, be payable to Borrower to replace the property subject to the claim,
provided that any such replacement property shall be deemed Collateral in which
Bank has been granted a first priority security interest. If an Event of Default
has occurred and is continuing, all proceeds payable under any such policy
shall, at Bank's option, be payable to Bank to be applied on account of the
Obligations.
6.6 PRIMARY DEPOSITORY. Borrower shall maintain all
substantive investment, depository, and cash-equivalent balances in Borrower's
primary demand deposit account at Bank.
6.7 FINANCIAL COVENANTS. Borrower shall maintain, as of the
last day of each calendar month unless stated otherwise,
(a) MINIMUM LIQUIDITY. Effective September 30,
2001, Liquidity equal to or greater than three months of Cash Burn calculated on
a three month trailing average; PROVIDED, HOWEVER, that at all times on and
after the closing date of the Series C Round, Borrower shall maintain Liquidity
equal to or greater than 1.5 times current liabilities and all bank debt.
(b) EBITDA NEGATIVE VARIANCE. Effective November
30, 2001, and monthly thereafter, an EBITDA negative variance not exceed 20% of
the Plan Projections;
(c) MONTHLY CASH BURN. Effective August 30,
2001, total monthly Cash Burn not to exceed 110% of the Plan Projections; and
(d) OPERATING PERFORMANCE. Actual company
revenues of no less than (1) 75% of the Plan Projections for the month of August
2001; (2) 80% of the Plan Projections for the month of September 2001; and (3)
85% of the Plan Projections effective October 2001, and continuing monthly
thereafter.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower shall register or cause to be
registered on an expedited basis (to the extent not already registered) with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable: (i) those intellectual property rights listed on
EXHIBITS A, B and C to the Intellectual Property Security Agreement delivered
to Bank by Borrower in connection with this Agreement, within 30 days of the
date of this Agreement, (ii) all registrable intellectual property rights
Borrower has developed as of the date of this
Agreement but heretofore failed to register, within 30 days of the date of
this Agreement, and (iii) those additional intellectual property rights
developed or acquired by Borrower from time to time in connection with any
product, promptly following development or acquisition, but in any event
prior to the sale or licensing of such product to any third party, and prior
to Borrower's use of such product (including without limitation major
revisions or additions which significantly improve the functionality of the
intellectual property rights listed on such EXHIBITS A, B and C). Borrower
shall give Bank notice of all such applications or registrations.
(b) Borrower shall execute and deliver such
additional instruments and documents from time to time as Bank shall reasonably
request to perfect Bank's security interest in the Intellectual Property
Collateral.
(c) Borrower shall (i) protect, defend and
maintain the validity and enforceability of the Trademarks, Patents and
Copyrights, (ii) use its best efforts to detect infringements of the Trademarks,
Patents and Copyrights and promptly advise Bank in writing of material
infringements detected and (iii) not allow any material Trademarks, Patents or
Copyrights to be abandoned, forfeited or dedicated to the public without the
written consent of Bank, which shall not be unreasonably withheld.
(d) Bank may audit Borrower's Intellectual
Property Collateral to confirm compliance with this Section 6.8, provided such
audit may not occur more often than once per year, unless an Event of Default
has occurred and is continuing. Bank shall have the right, but not the
obligation, to take, at Borrower's sole expense, any actions that Borrower is
required under this Section 6.8 to take but which Borrower fails to take, after
15 days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.8.
6.9 CONSENT OF INBOUND LICENSORS. Prior to entering into or
becoming bound by any material license or agreement, Borrower shall: (i) provide
written notice to Bank of the material terms of such license or agreement with a
description of its likely impact on Borrower's business or financial condition;
and (ii) use best efforts to obtain the consent of, or waiver by, any person
whose consent or waiver is necessary for Borrower's interest in such material
licenses or contract rights to be deemed Collateral and for Bank to have a
security interest in it that might otherwise be restricted by the terms of the
applicable material license or agreement, whether now existing or entered into
in the future.
6.10 COMPLIANCE WITH VISA MERCHANT CARD SERVICES
(a) Borrower shall comply at all times with all
of the requirements set forth in VISA's 14-month remediation program and shall
retain access to VISA Merchant Card services.
(b) Commencing on or before January 30, 2002,
and continuing up to and including January 31, 2003, Borrower shall cause itself
to be removed from VISA's Merchant Chargeback Monitoring Program (the
"Program").
(c) Borrower shall provide Bank with written
certification by Borrower's Board of Directors has implemented and is fully
utilizing CVV-2 at the earlier of: (i) Verisign's certification of CVV-2
compatibility, or (ii) March 31, 2002.
(d) Until Borrower implements CVV-2, Borrower
shall include within its monthly financial reporting to Bank, Borrower's Board
of Directors' written certification that Borrower is observing a "No Questions
Asked" refund policy for billing disputes involving either fraud or customer
dissatisfaction.
6.11 FURTHER ASSURANCES. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following without Bank's prior
written consent, which shall not be unreasonably withheld:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively, to "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than Permitted
Transfers.
7.2 CHANGE IN BUSINESS; CHANGE IN CONTROL OR EXECUTIVE OFFICE.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than or reasonably related or incidental to the businesses
currently engaged in by Borrower. Borrower will not have a Change in Control and
will not, without 30 days prior written notification to Bank, relocate its chief
executive office.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), 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) such transactions do not in the aggregate exceed
$100,000 and (ii) no Event of Default has occurred, is continuing or would exist
after giving effect to the transactions.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or allow any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens, or covenant to any other
Person that Borrower in the future will refrain from creating, incurring,
assuming or allowing any Lien with respect to any of Borrower's property.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except that Borrower may repurchase the stock of former
employees pursuant to stock repurchase agreements as long as an Event of Default
does not exist prior to such repurchase or would not exist after giving effect
to such repurchase.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
7.9 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 INVENTORY AND EQUIPMENT. Store the Inventory or the
Equipment with a bailee, warehouseman, or similar party unless Bank has received
a pledge of the warehouse receipt covering such Inventory. Except for Inventory
sold in the ordinary course of business and except for such other locations as
Bank may approve in writing, Borrower shall keep the Inventory and Equipment
only at the location set forth in Section
10 and such other locations of which Borrower gives Bank prior written notice
and as to which Borrower signs and files a financing statement where needed to
perfect Bank's security interest.
7.11 COMPLIANCE. Become or be controlled by an "investment
company," except Pequot Capital Management and affiliates, within the meaning of
the Investment Company Act of 1940, or become principally engaged in, or
undertake as one of its important activities, the business of extending credit
for the purpose of purchasing or carrying margin stock, or use the proceeds of
any Credit Extension for such purpose. Fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur, fail to comply with the Federal Fair Labor Standards
Act or violate any law or regulation, which violation could reasonably be
expected to have a Material Adverse Effect, or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral, or permit any of
its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay any of the
Obligations and such failure continues for 5 Business Days or more after the due
date, provided that within such 5 Business Day cure period, the failure to pay
shall not be deemed an Event of Default, but no Credit Extensions will be made;
8.2 COVENANT DEFAULT. If Borrower fails to perform any
obligation under Article 6 or violates any of the covenants contained in Article
7 of this Agreement, or fails or neglects to perform or observe any other
material term, provision, condition, covenant contained in this Agreement, in
any of the Loan Documents, or in any other present or future agreement between
Borrower and Bank and as to any default under such other term, provision,
condition or covenant that can be cured, has failed to cure such default within
ten days after Borrower receives notice thereof or any officer of Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the ten day period or cannot after diligent attempts by
Borrower be cured within such ten day period, and such default is likely to be
cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed 30 days) to attempt to
cure such default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default but no Credit
Extensions will be made;
8.3 MATERIAL ADVERSE CHANGE. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Bank's security
interests in the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within 30 days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement
to which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of $100,000 or that could
have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on
account of Subordinated Debt, except to the extent the payment is allowed under
any subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least $100,000 shall
be rendered against Borrower and shall remain unsatisfied and unstayed for a
period of 10 days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of the judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5, all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to
or for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims
directly with account debtors for amounts, upon terms and in whatever order that
Bank reasonably considers advisable;
(d) Make such payments and do such acts as Bank
considers necessary or reasonable to protect its security interest in the
Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and
to make the Collateral available to Bank as Bank may designate. Borrower
authorizes Bank to enter the premises where the Collateral is located, to take
and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien which in
Bank's determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned premises, Borrower hereby grants Bank a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
(e) Set off and apply to the Obligations any and
all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness at
any time owing to or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any
public sale; and
(i) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
xxxx of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; (f)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; (g) to modify, in its sole discretion, any intellectual property
security agreement entered into between Borrower and Bank without first
obtaining Borrower's approval of or signature to such modification by amending
EXHIBITS A, B, and C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired by
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower no
longer has or claims to have any right, title or interest; (h) to file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (i) to transfer the Intellectual Property Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code; provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. At any time during the term of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following after reasonable notice to Borrower: (a) make payment of the same or
any part thereof; (b) set up such reserves under the Revolving Facility as Bank
deems necessary to protect Bank from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type discussed in Section 6.5
of this Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies
with reasonable banking practices and Section 9-207 of the Code, Bank shall not
in any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 DEMAND; PROTEST. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: US XXXXXX.XXX, INC.
0000 Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: [*]
FAX: [*]
with a copy to: US XXXXXX.XXX, INC.
0000 Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: [*]
FAX: [*]
If to Bank: Imperial Bank
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: [*]
FAX: [*]
with a copy to: IMPERIAL BANK
Emerging Growth Division
Five Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: [*]
FAX: [*]
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall defend, indemnify and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. All amendments to or
terminations of this Agreement must be in writing. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement, if any, are
merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 SURVIVAL. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY. In handling any confidential information
Bank and all employees and agents of Bank shall exercise the same degree of care
that Bank exercises with respect to its own proprietary information of the same
types to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Agreement except that disclosure of such
information may be made (i) to the subsidiaries or affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Loans,
provided that they have entered into a comparable confidentiality agreement in
favor of Borrower and have delivered a copy to Borrower, (iii) as required by
law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
US XXXXXX.XXX, INC.,
a Delaware corporation
By: [*] /s/
------ -------------------------
Title: [*]
--- -----------------------------
IMPERIAL BANK
By: [*] /s/
------ -------------------------
Title: [*]
--- -----------------------------
EXHIBIT A
DEFINITIONS
"Accounts" means all presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods (including, without limitation, the licensing of software
and other technology) or the rendering of services by Borrower, whether or not
earned by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a cash advance or cash advances under the
Revolving Facility.
"Affiliate" means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person's senior
executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including reasonable
attorneys' fees and expenses) incurred in connection with the preparation,
negotiation, administration, and enforcement of the Loan Documents; reasonable
Collateral audit fees; and Bank's reasonable attorneys' fees and expenses
incurred in amending, enforcing or defending the Loan Documents (including fees
and expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records including: ledgers;
records concerning Borrower's assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files, and
the equipment, containing such information.
"Business Day" means any day that is not a Saturday, Sunday, or other day on
which banks in the State of California or Washington are authorized or required
to close.
"Cash Burn" means an amount equal to prior months unrestricted cash minus the
current month's ending unrestricted cash that has been adjusted for any changes
to cash as a result of financial debt, stock, paid-in-capital and minority
interest.
"Change in Control" shall mean a transaction in which any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such "person" or
"group" to elect a majority of the Board of Directors of Borrower, who did not
have such power before such transaction.
"Closing Date" means September 12, 2001.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT B attached hereto and all
Negotiable Collateral and Intellectual Property Collateral to the extent not
described on EXHIBIT B, except to the extent any such property (i) is
nonassignable by its terms without the consent of the licensor thereof or
another party (but only to the extent such prohibition on transfer is
enforceable under applicable law, including, without limitation, Section 9318(4)
of the Code), or (ii) the granting of a security interest therein is contrary to
applicable law, provided that upon the cessation of any such restriction or
prohibition, such property shall automatically become part of the Collateral.
"Committed Revolving Line" means a Credit Extension of up to $2,000,000
(inclusive of any amounts outstanding under the Letter of Credit Sublimit).
"Contingent Obligation" means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable; (ii) any obligations with respect to undrawn letters of credit issued
for the account of that Person; and (iii) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.
"Credit Extension" means each Advance, Equipment Advance, issuance of a Letter
of Credit, or any other extension of credit by Bank for the benefit of Borrower
hereunder.
"Current Assets" means, as of any applicable date, all amounts that should, in
accordance with GAAP, be included as current assets on the consolidated balance
sheet of Borrower and its Subsidiaries as at such date.
"Deferred Revenue" means all amounts received in advance of performance under
contracts and not yet recognized as revenue.
"EBITDA" means, in any fiscal period, Borrower's consolidated net income or net
loss (other than extraordinary or non-recurring gains of Borrower for such
period), plus (i) the amount of all interest expense, income tax expense,
depreciation expense and amortization expense of Borrower for such period, on a
consolidated basis, and plus or minus (as the case may be) (ii) any other
non-cash charges which have been added or subtracted, as the case may be, in
calculating Borrower's consolidated net income for such period.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1(b).
"Equipment Advance Availability End Date" means November 30, 2001.
"Equipment Line" means a Credit Extension of up to $1,000,000.
"Equipment Maturity Date" means February 28, 2004.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"Event of Default" has the meaning assigned in Section 8.
"GAAP" means generally accepted accounting principles as in effect from time to
time.
"Hardware Advance" means an Equipment Advance that is not a Software
Equipment Advance.
"Indebtedness" means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property Collateral" means all of Borrower's right, title, and
interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property rights
in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but
not the obligation, to xxx for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to
the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Letter of Credit Fee" means the fee set forth in Section 2.5(b).
"Letter of Credit Sublimit" means a sublimit under the Committed Revolving Line
not to exceed $1,000,000 for Letters of Credit.
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Liquidity" means unrestricted cash and cash equivalents plus net accounts
receivable aged 90 days or less, and less Deferred Revenue.
"Loan Documents" means, collectively, this Agreement, any note or notes executed
by Borrower, and any other agreement entered into between Borrower and Bank in
connection with this Agreement, all as amended or extended from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the business
operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and future letters of
credit of which it is a beneficiary, notes, drafts, instruments, securities,
documents of title, and chattel paper, and Borrower's Books relating to any of
the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring payments that
Borrower may now or hereafter become obligated to pay to Bank pursuant to the
terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this Agreement
or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Indebtedness not to exceed $100,000 in the aggregate secured by a lien
described in clause (c) of the defined term "Permitted Liens," provided
such Indebtedness does not exceed the lesser of the cost or fair market
value of the equipment financed with such Indebtedness; and
(d) Subordinated Debt.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i) Marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency or any State thereof
maturing within one year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one year from the date of
creation thereof and currently having rating of at least A-2 or P-2
from either Standard & Poor's Corporation or Xxxxx'x Investors Service,
(iii) Bank's certificates of deposit maturing no more than one year
from the date of investment therein, and (iv) Bank's money market
accounts;
(c) Repurchases of stock from former employees or directors of Borrower
under the terms of applicable repurchase agreements in an aggregate
amount not to exceed $100,000 in the aggregate in any fiscal year,
provided that no Event of Default has occurred, is continuing or would
exist after giving effect to the repurchases;
(d) Investments accepted in connection with Permitted Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries not to exceed $100,000 in the
aggregate in any fiscal year;
(f) Investments consisting of (i) travel advances and employee relocation
loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating
to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plan agreements approved by
Borrower's Board of Directors;
(g) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of Borrower's
business;
(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business, provided that this
subparagraph (h) shall not apply to Investments of Borrower in any
Subsidiary; and
(i) Joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the non-exclusive licensing of
technology, the development of technology or the providing of technical
support, provided that any cash Investments by Borrower do not exceed
$100,000 in the aggregate in any fiscal year.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule or
arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which Borrower maintains adequate
reserves, provided the same have no priority over any of Bank's
security interests;
(c) Liens not to exceed $100,000 in the aggregate (i) upon or in any
Equipment acquired or held by Borrower or any of its Subsidiaries to
secure the purchase price of such Equipment or indebtedness incurred
solely for the purpose of financing the acquisition of such Equipment,
or (ii) existing on such Equipment at the time of its acquisition,
provided that the Lien is confined solely to the property so acquired
and improvements thereon, and the proceeds of such Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clauses
(a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase;
(e) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Sections 8.4 or 8.8;
(f) Liens in favor of other financial institutions arising in connection
with Borrower's deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such
deposit accounts; and
(g) Other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a Material
Adverse Effect on borrower and its Subsidiaries taken as a whole.
"Permitted Transfer" means the conveyance, sale, lease, transfer or disposition
by Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business;
(c) surplus, worn-out or obsolete Equipment; or
(d) other assets of Borrower or its Subsidiaries which do not in the
aggregate exceed $100,000
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Plan Projections" means those certain projections set forth in most recent
business plan delivered to Bank prior to the Closing Date.
"Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank, as its "prime rate," whether or not such announced rate is
the lowest rate available from Bank.
"Responsible Officer" means each of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which Borrower may request Bank to
issue Advances, as specified in Section 2.1(a) hereof.
"Revolving Maturity Date" means September 11, 2002.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Series C Round" means Borrower's next round of equity financing.
"Software Equipment Advances" means Equipment Advances requested by Borrower to
fund software procurement critical to the operations of Borrower.
"Subordinated Debt" means any debt incurred by Borrower that is subordinated to
the debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and
identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any general
partnership interest or (ii) more than 50% of the stock of which by the terms
thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity, at the time as of which any determination is being made,
is owned by Borrower, either directly or through an Affiliate.
"Trademarks" means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.
DEBTOR US XXXXXX.XXX, INC.
SECURED PARTY: IMPERIAL BANK
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or "Debtor")
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts,
documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale
or lease or to be furnished under a contract of service, and including
returns and repossessions), investment property (including securities and
securities entitlements), letter of credit rights, money, and all of
Debtor's books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records;
(b) all common law and statutory copyrights and copyright registrations,
applications for registration, now existing or hereafter arising, in the
United States of America or in any foreign jurisdiction, obtained or to be
obtained on or in connection with any of the forgoing, or any parts thereof
or any underlying or component elements of any of the forgoing, together
with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Secured Party to xxx
in its own name and/or in the name of the Debtor for past, present and
future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and the
goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to xxx in its own name and/or in the name of
the Debtor for past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United States Patent
and Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation,
the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee,
(iii) income, royalties, damages, payments, accounts and accounts
receivable now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past,
present or future infringements thereof, (iv) right (but not the
obligation) to xxx in the name of Debtor and/or in the name of Secured
Party for past, present and future infringements thereof, (v) rights
corresponding thereto throughout the world in all jurisdictions in which
such patents have been issued or applied for, and (vi) reissues, divisions,
continuations, renewals, extensions and continuations-in-part with respect
to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All
terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including
revised Division 9 of the Uniform Commercial Code-Secured Transactions,
added by Stats. 1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
