SECOND LOAN AND SECURITY AGREEMENT
Exhibit
10.2
THIS
SECOND LOAN AND SECURITY AGREEMENT (this “Agreement”)
is
entered into as of June 19, 2006, by and among CLARIENT, INC., a Delaware
corporation (“Lender”),
TRESTLE HOLDINGS, INC., a Delaware corporation (“Borrower”)
and
the Guarantors (as defined herein) hereto.
RECITALS
WHEREAS,
Lender is engaged in negotiations with Borrower for the purposes of acquiring
certain assets of Borrower and Trestle Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of Borrower (“Trestle
Sub”),
pursuant to an asset purchase agreement (the “Asset
Purchase Agreement”);
WHEREAS,
Lender previously loaned to Borrower the sum of $250,000 pursuant to a Loan
and
Security Agreement dated February 27, 2006 (as amended to date, the
“Original
Loan and Security Agreement”),
in
order to provide Borrower with additional operating capital while Lender
and
Borrower were negotiating the Asset Purchase Agreement;
WHEREAS,
concurrently with the execution and delivery of the Asset Purchase Agreement
Borrower and Lender now wish to enter into this Second Loan and Security
Agreement, pursuant to which Lender shall lend to Borrower additional funds
from
time to time on a short-term secured basis in the principal amount of up
to
$500,000;
WHEREAS,
each Guarantor acknowledges and confirms that, as a subsidiary of Borrower,
(a)
it will benefit from the advancement of funds under this Agreement, (b) the
loans by Lender constitute valuable consideration to Guarantor, (c) this
Agreement is intended to be an inducement to Lender to extend the loans to
Borrower, and (d) Lender is relying upon the Subsidiary Guarantees (as defined
herein) in making and advancing the loans to Borrower; and
WHEREAS,
Lender, Borrower and each Guarantor desire to enter into this Agreement to
set
forth the terms on which Lender will lend to Borrower and Borrower will repay
loans to Lender.
NOW,
THEREFORE, in consideration of the premises and the mutual agreements contained
herein and for other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. Definitions
and Construction
1.1 Definitions
.
As used
in this Agreement, the following terms shall have the following
definitions:
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“Affiliate”
means
any other Person controlling or controlled by or under common Control with
such
specified Person.
“Agreement”
means
this Second Loan and Security Agreement, as amended, supplemented, waived
or
otherwise modified from time to time pursuant to the terms hereof.
“Asset
Purchase Agreement” shall
have the meanings set forth in the recitals.
“Borrower”
shall
have the meaning set forth in the preamble hereto.
“Borrower
Financial Statements”
means
the consolidated financial statements of Borrower, including the notes thereto,
contained in Borrower’s most recently filed Annual Report on Form 10-KSB and
most recently filed Quarterly Report on Form 10-QSB.
“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 are authorized or required by law to close.
“Collateral” means:
(a) All
present and future accounts, general intangibles and other rights of the
Grantors to the payment of money no matter how evidenced, all chattel paper,
instruments and other writings evidencing any such right, and all goods
repossessed or returned in connection therewith;
(b) All
inventory of Grantors, now owned or hereafter acquired, and all raw materials,
work in process, materials used or consumed in Grantors’ businesses and finished
goods, together with all additions and accessions thereto and replacements
therefor, and products thereof;
(c) All
patents and patent applications of Grantors and all rights corresponding
thereto
throughout the world, and all unpatented or unpatentable developments and
inventions and all license fees, royalties and other similar items received
in
connection therewith;
(d) All
trademarks, service marks and logos of Grantors, and all United States, state
and/or foreign applications for registration thereof, all trade names, trade
styles, designs, and the like, all elements of package or trade dress of
goods,
the goodwill of Grantors’ businesses connected with the use of, and symbolized
by any of the above, and all property of Grantors necessary to produce any
products sold under any of the above;
(e) All
copyrights and copyrighted works in which any Grantor has any right, title,
or
interest throughout the world, all derivative works thereof, all copyright
registrations and all applications therefor, and United States and/or foreign
applications
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for
registration and registrations thereof, and all accounts, accounts receivable
and contracts receivable generated by such copyrights;
(f)
All
computer software programs developed or to be developed by any Grantor or
in
which any Grantor asserts or could assert a proprietary interest; all personal
property, including but not limited to source codes, object codes or similar
information, which is necessary to the practical utilization of such programs;
and all tangible property of Grantors embodying or incorporating any such
programs;
(g) All
trade
secrets, proprietary information, customer lists, instructional materials,
working drawings, manufacturing techniques, process technology documentation,
and product formulations of Grantors and all property and assets of Grantors,
whether tangible or intangible, which are or a Person may deem to be
Intellectual Property of Grantors;
(h) All
rights under any agreement granting any right to use any patent, trademark,
copyright, computer software program or any other property or right to property
specified in paragraphs (c) through (g) above, whether a Grantor is the grantor
or the grantee under such agreement;
(i) All
renewals, modifications, amendments, re-issues, divisions, continuations
in
whole or part, and extensions of any property identified in paragraphs (c)
through (g) above;
(j) All
now
existing and hereafter acquired books and records relating to the foregoing
property identified in paragraphs (a) through (i) above and all equipment
containing such books and records;
(k) All
Proceeds of the foregoing property identified in paragraphs (a) through (j)
above; and
(l) Any
and
all claims, rights and interests in any of the foregoing of the above and
all
substitutions for, additions and accessions to and proceeds
thereof.
“Commitment”
means
Lender’s obligations to make loans to Borrower, subject to and in accordance
with the terms of this Agreement.
“Control”
(including, with correlative meaning, the terms “controlling”,
“controlled
by,”
“under
common Control with”
and
similar phrases) means with respect to any Person, the possession, directly
or
indirectly, of the power to direct, or cause the direction of, the management
or
policies of a Person, whether through the ownership of voting securities,
by
contract or otherwise.
“Copyright
Office”
means
the United States Copyright Office.
“Default” means
any
event, act or condition which with the passing of time or the giving of notice
or both would become an Event of Default hereunder.
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“Default
Rate”
means
the per
annum rate
of
interest equal to 10% per annum, but such rate shall in no event be more
than
the highest rate permitted by applicable law.
“Event
of Default” shall
have the meaning set forth in Section
9.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor or similar
statute and the rules and regulations of the SEC promulgated thereunder as
in
effect from time to time.
“Extraordinary
Corporate Transaction”
means
(a) the sale, lease, license, exchange, disposition of, moving, relocation,
or
transfer or similar transaction involving Borrower’s or any of its Subsidiaries’
assets or of a greater than 10% equity interest in Borrower or any of its
Subsidiaries, or the declaration or payment by Borrower or any of its
Subsidiaries of any dividend, any change in the capital structure of Borrower
or
any of its Subsidiaries; (b) any recapitalization, reorganization, merger,
consolidation or other transaction or transactions (whether by sale, gift
or
other transfer or disposition), which transaction or transactions individually
or in the aggregate result in the transfer of a 10% or greater beneficial
interest in Borrower or any of its Subsidiaries; (c) any transaction involving
the transfer or licensing of any of Borrower’s or its Subsidiaries’ Intellectual
Property to any other Person; or (d) the execution by Borrower or any of
its
Subsidiaries of an agreement, term sheet, letter of intent, exclusive
negotiating agreement or other agreement in principle (whether or not binding
upon Borrower or the other party or parties thereto) relating to any of the
transactions described in clauses (a) through (c) above. Notwithstanding
the
foregoing, the following shall not constitute an Extraordinary Corporate
Transaction: (i) transactions expressly contemplated or permitted by any
written
agreements between Borrower and Lender; (ii) sales of inventory and the grant
of
non-exclusive, limited licenses for software that is embedded in or regularly
accompanies such inventory, all as in the ordinary and usual course of
Borrower’s business as presently conducted; (iii) sales or other dispositions in
the ordinary course of business of assets that have become worn out or obsolete
or that are promptly being replaced; (iv) the sale of accounts and/or
receivables to a factor in the ordinary course of business consistent with
past
practice; (v) Borrower’s repurchase of stock from former contractors or
employees of Borrower or its Subsidiaries in accordance with the terms of
stock
option, stock purchase, profit sharing or similar plans in effect as of the
date
of this Agreement and approved by Borrower’s Board of Directors, at a price not
greater than the actual, cash price that such employee paid to acquire such
securities;
(vi)
Borrower’s entry into capital leases or Indebtedness incurred solely to purchase
equipment that is secured in accordance with clause (e) of the definition
of
Permitted Liens and is not in excess of the lesser of the purchase price
of such
equipment or the fair market value of such equipment on the date of acquisition;
(vii) Borrower’s incurrence of Indebtedness, the proceeds of which are used to
satisfy all outstanding Obligations under this Agreement; and (viii) Borrower’s
issuance of securities under any employee compensatory stock option plan
of
Borrower that has been approved by Borrower’s Board of Directors.
“Funding
Date”
means
any date on which a Loan is made to or for the account of Borrower under
this
Agreement.
“GAAP”
means
generally accepted accounting principles in the United States of America
in
effect from time to time.
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“Governmental
Authority” means
(a)
any federal, state, county, municipal or foreign government, or political
subdivision thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality or public
body, (c) any court or administrative tribunal or (d) with respect to any
Person, any arbitration tribunal or other non-Governmental Authority to whose
jurisdiction that Person has consented.
“Grantors”
means
Borrower and each Guarantor.
“Guarantor”
means
Trestle Acquisition Corp., a Delaware corporation, and any other Person that
executes a counterpart signature page to this Agreement pursuant to Section
4.10
of this
Agreement for the purposes of providing a Subsidiary Guarantee.
“Indebtedness”
means
(without double counting), at any time and with respect to any Person, (a)
indebtedness of such Person for borrowed money (whether by loan or the issuance
and sale of debt securities) or for the deferred purchase price of property
or
services purchased (other than amounts constituting trade payables arising
in
the ordinary course of business); (b) obligations of such Person in respect
of
letters of credit, acceptance facilities, or drafts or similar instruments
issued or accepted by banks and other financial institutions for the account
of
such Person; (c) obligations of such Person under capital leases and any
financing lease involving substantially the same economic effect; (d) deferred
payment obligations of such Person resulting from the adjudication or settlement
of any litigation or claim to the extent not already reflected as a current
liability on the balance sheet of such Person; or (e) indebtedness of others
of
the type described in clauses (a) through (d) which such Person has (i) directly
or indirectly assumed, guaranteed, endorsed (otherwise than for collection
or
deposit in the ordinary course of business), co-made or discounted or sold
with
recourse, or (ii) secured by a Lien on any of the assets of such Person whether
or not such Person has directly or indirectly assumed or guaranteed such
indebtedness.
“Intellectual
Property”
means
licenses,
permits, franchises, authorizations, patents, copyrights, trademarks, trade
secrets, trade names, inventions, discoveries, designs, patentable technology
and art, methodologies, trade secrets, know how, service marks, Internet
domain
names and any other tangible, intangible or intellectual property
rights.
“Intellectual
Property Security Agreements”
means
the Intellectual Property Security Agreements by and between Lender and each
of
Grantors, in substantially the form attached hereto as Exhibit
A.
“Lender”
shall
have the meaning set forth in the preamble hereto.
“Lender’s
Expenses” means
all
reasonable costs or expenses (including reasonable attorneys’ fees and expenses)
incurred by Lender in connection with enforcing or defending the Loan Documents,
including in the exercise of any rights or remedies afforded hereunder or
under
applicable law, whether or not suit is brought.
“Lien” means
any
pledge, bailment, lease, mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, encroachment, lien (statutory or otherwise), claim,
option, reservation, priority, preferential arrangement, easement or other
encumbrance of any kind.
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“Loans”
shall
have the meaning
given such term in Section 2.1 and “Loan”
shall
mean any one of the Loans.
“Loan
Documents”
means,
collectively, this Agreement, the Note, the Intellectual Property Security
Agreements and any and all other agreements, certificates, instruments or
documents made, given or delivered in connection with the consummation of
the
transactions contemplated by this Agreement.
“Maturity
Date” means,
with respect to each Loan, the first to occur of (a) an Extraordinary Corporate
Transaction, (b) the date of acceleration of the Loan by Lender following
an Event of Default, (c) the Outside Date (as such term is defined in the
Asset
Purchase Agreement) or (d) following termination of the Asset Purchase Agreement
under circumstances resulting in any accelerated repayment of the “Bridge Notes”
pursuant to Section 10.4 of the Asset Purchase Agreement, the date such
accelerated repayment is to be made pursuant to Section 10.4 of the Asset
Purchase Agreement.
“Minimum
Funding Amount”
means
$125,000.
“Note”
means
the secured promissory note in the form attached hereto as Exhibit
B
issued
pursuant to this Agreement.
“Notice
of Borrowing”
means
a
Notice
of
Borrowing in substantially the form of Exhibit
C hereto.
“Obligations” means
all
Indebtedness, fees, charges, expenses and attorneys’ fees and costs and other
amounts, obligations, covenants, and duties owing by Borrower to Lender pursuant
to or evidenced by the Loan Documents (whether or not for the payment of
money),
whether direct or indirect, absolute or contingent, due or to become due,
now
existing or hereafter arising, including the principal and interest and any
other amounts due with respect to any Loan, and all Lender’s Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
“Obligee
Guarantee”
shall
have the meaning set forth in Section
4.7.
“Original
Loan and Security Agreement”
shall
have the meaning set forth in the recitals.
“Permitted
Liens”
means
the following:
(a) The
Liens
created by this Agreement;
(b) The
liens
created by the Original Loan and Security Agreement;
(c) Any
Liens
existing as of the date hereof and disclosed in Schedule 1.1(a);
(d) Liens
for
Taxes, fees, assessments or other charges or levies of a Governmental Authority,
either not delinquent or being contested in good faith by appropriate
proceedings, provided
the
same
have no superior priority over Lender’s Lien in the Collateral and have been
reserved for on Borrower’s Books;
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(e) Liens
to
secure payment of worker’s compensation, employment insurance, or other social
security obligations of Borrower in the ordinary course of Borrower’s
business;
(f) Liens
(i)
upon or in any equipment (other than inventory) acquired or held by Borrower,
to
secure the purchase price of such equipment or Indebtedness incurred solely
for
the purpose of financing the acquisition of such equipment, or (ii) existing
on
such equipment at the time of its acquisition from a Person that is not an
Affiliate of Borrower, provided
that
the
Lien is confined solely to the equipment so acquired, and the Proceeds of
such
equipment;
(g) Liens
on
equipment leased by Borrower pursuant to an operating lease in the ordinary
course of business (including Proceeds thereof and accessions thereto) incurred
solely for the purpose of financing the lease of such equipment;
(h) Leases
or
subleases and licenses or sublicenses granted in the ordinary course of
Borrower’s business and any interest or title of lessor or licensor under any
lease or license if the leases, subleases, licenses or sublicenses do not
prohibit granting Lender a security interest;
(i) Easements,
reservations, rights-of-way, restrictions, minor defects or irregularities
in
title and other similar charges or encumbrances affecting real property that
could not reasonably be expected to have a material adverse effect on the
financial condition, operations or business of Borrower;
(j) Liens
that are not prior to the Lien of Lender which constitute rights of set-off
of a
customary nature or banker’s Liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with arrangements
entered into with banks in the ordinary course of business;
(k) Liens
of
materialmen, mechanics, warehousemen, carriers, or other similar Liens arising
in the ordinary course of business or by operation of law or regulation and
securing obligations not yet due;
(l) Liens
incurred in connection with the extension, renewal or refinancing of Borrower’s
Indebtedness secured by Liens of the type described in clause (b) 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; and
(m) Liens
on
present and future accounts and receivables which are sold or factored in
the
ordinary course of business consistent with past practice and general
intangibles relating thereto.
“Person” means
and
includes any individual, any partnership, any corporation, any business trust,
any joint stock company, any limited liability company, any unincorporated
association or any other entity and any Governmental Authority.
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“Proceeds”
means
whatever is received when Collateral, proceeds or equipment are sold, exchanged,
collected or otherwise disposed of, both cash and non-cash, including the
proceeds of insurance payable by reason of loss of or damage to Collateral
or
proceeds and any license fees, royalties and other similar items received
in
connection with Collateral.
“Property” means
any
interest in any kind of property or asset, whether real, personal or mixed,
whether tangible or intangible.
“PTO”
means
the United States Patent and Trademark Office.
“Responsible
Officer”
means
each of the President and the Chief Financial Officer of Borrower.
“SEC”
means
the United States Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any successor or similar statute
and
the rules and regulations of the SEC promulgated thereunder as in effect
from
time to time.
“Subsidiary” means
any
corporation, partnership or other legal entity of which 50% or more of the
outstanding capital stock or other equity interests entitled to vote for
the
election of directors or other governing body of such corporation or other
legal
entity (otherwise than as the result of a default) is owned directly or
indirectly by Borrower or any Subsidiary of Borrower.
“Subsidiary
Guarantee”
means
the guarantee by each Guarantor of the Obligations under this Agreement and
the
Note, as provided by this Agreement.
“Tax”
or
“Taxes”
means
(a) any and all taxes (whether federal, state and local, domestic or foreign)
including income, gross receipts, profits, property, sales, use, capital
stock,
net worth, occupation,
value
added, ad valorem, transfer, franchise, recapture, excise, windfall,
withholding, payroll, social security, workers’ compensation, unemployment
compensation or employment taxes, tariffs, imposts, duties, levies, fees
or
governmental charges of any nature whatsoever, together with any interest,
penalties or additions to tax imposed with respect to any of the foregoing,
and
(b) any obligations under any agreements or arrangements with respect to
any tax
or taxes described in clause (a) above.
“Tax
Return”
means
any return, declaration, report, claim for refund, information return or
statement, estimated return or statement or other document (including any
related or supporting estimates, elections, schedules, statements or
information) filed or required to be filed in connection with the determination,
assessment or collection of any Tax or the administration of any laws,
statutes,
treaties, regulations or administrative requirements relating to any
Tax.
“Trestle
Sub”
shall
have the meaning set forth in the recitals.
“UCC”
means
the Uniform Commercial Code of the State of California as in effect on the
date
hereof and as amended from time to time hereafter or, when used in relation
to
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a
specific filing or termination, the Uniform Commercial Code of the State
wherein
such filing or termination statement is made.
1.2 Other
Interpretive Provisions
.
References
in this Agreement to “Articles,” “Sections,” “Exhibits,” “Schedules” and
“Annexes” are to recitals, articles, sections, exhibits, schedules and annexes
herein and hereto unless otherwise indicated. References in this Agreement
and
each of the other Loan Documents to any document, instrument or agreement
shall
include (a) all exhibits, schedules, annexes and other attachments thereto,
(b) all documents, instruments or agreements issued or executed in
replacement thereof, and (c) such document, instrument or agreement, or
replacement or predecessor thereto, as amended, modified and supplemented
from
time to time and in effect at any given time. The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement or any other
Loan Document shall refer to this Agreement or such other Loan Document,
as the
case may be, as a whole
and
not to any particular provision of this Agreement or such other Loan Document,
as the case may be. The words “include” and “including” and words of similar
import when used in this Agreement or any other Loan Document shall not be
construed to be limiting or exclusive. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms
of such
terms. Unless otherwise indicated in this Agreement or any other Loan Document,
all accounting terms used in this Agreement or any other Loan Document shall
be
construed, and all accounting and financial computations hereunder or thereunder
shall be computed, in accordance with GAAP.
2. Loan
And Terms Of Payment
2.1 Commitment
.
Subject
to the terms and conditions of this Agreement and relying upon the
representations and warranties herein set forth as and when made or deemed
to be
made, Lender agrees to make loans to Borrower upon the Borrower’s request in
accordance with Section
2.2
hereof,
from time to time prior to the Maturity Date (the “Loans”);
provided
that
the
amount of the initial Loan shall be $250,000 and that the aggregate principal
amount of the Loans requested shall not exceed $500,000 and, except with
the
prior consent of Lender in Lender’s sole discretion, the amount of each
requested Loan for any Loan other than the initial Loan shall not be less
than
the Minimum Funding Amount. If prepaid, the principal of the Loans may not
be
re-borrowed.
2.2 Procedure
for Requesting
a Loan
(a) Notice.
Whenever
Borrower desires that Lender make a Loan (other than the initial Loan), Borrower
shall so notify Lender by telephone at least five Business Days in advance
of
the desired Funding Date, which notice shall be irrevocable. Each such telephone
notification shall be promptly confirmed by a Notice of Borrowing.
(b) Disbursement.
Subject
to the satisfaction of the conditions set forth in Sections
3.1 and
3.2
with
respect to the initial Loan and the satisfaction of the conditions
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set
forth
in Section
3.2 with
respect to each subsequent Loan, Lender shall disburse the requested Loan;
provided
that
the
initial Loan shall be deemed to have been requested by Borrower and shall
be
disbursed by Lender as soon as practicable but no later than the next succeeding
Business Day following execution of this Agreement and the satisfaction of
the
conditions under Sections 3.1 and 3.2 or such other date as the parties hereto
shall agree.
2.3 Loan
Interest Rate.
Borrower
shall pay interest on the unpaid principal amount of each Loan from the Funding
Date of such Loan until such Loan has been paid in full, at
a
per
annum rate
of
8%. All computations of interest on each Loan shall be based on a year of
360
days for actual days elapsed provided,
however,
that
per diem interest shall be calculated on the basis of the actual number of
days
elapsed over a year of 365 days. Notwithstanding any other provision hereof,
the
amount of interest payable hereunder shall not in any event exceed the maximum
amount permitted by applicable law.
2.4 Termination
of Commitment.
Notwithstanding
anything in the Loan Documents, Lender’s Commitment shall terminate on the
earlier of (i) at Lender’s sole election, the occurrence and continuance of any
Default or Event of Default hereunder, (ii) the Maturity Date, and (iii)
termination of the Asset Purchase Agreement for any reason.
2.5 Use
of Proceeds
.
The
proceeds of the Loans shall be used solely for working capital
purposes.
2.6 Maturity
.
All
unpaid principal and accrued interest with respect to each Loan, together
with
all other Obligations, shall be due and payable in full on the Maturity Date.
Borrower shall not be obligated to make any principal or interest payments
on
the Loans other than upon the Maturity Date. Lender may, and is hereby
authorized by Borrower to, endorse in Borrower’s Books appropriate notations
regarding Lender’s interest in the Loans; provided,
however, that
the
failure to make, or an error in making, any such notation shall not limit
or
otherwise affect the Obligations of Borrower hereunder.
2.7 Repayments
.
(a) Mandatory
Payment. Upon
the
Maturity Date, all Obligations shall become immediately due and payable and
Borrower
shall immediately pay to Lender the outstanding principal amount of each
Loan,
all accrued interest on such Loans and all other sums, if any, that shall
have
become due and payable hereunder with respect to the Obligations.
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(b) Optional
Prepayment; No Prepayment Penalty. In
addition to the provisions of Section
2.7(a),
Borrower
may prepay any Loan without penalty, premium or other charge. Prepayments
shall
be applied first to Obligations other than accrued interest and principal,
then
to accrued and unpaid interest through and including the date of payment
and
then to principal.
2.8 Other
Payment Terms.
(a) Place
and Manner. Borrower
shall make all payments due to Lender by payment to Lender at the address
specified in Section
11,
in
lawful
money of the United States and in same day or immediately available
funds.
(b) Default
Rate. If
either
(i) any amounts required to be paid by Borrower under this Agreement or the
other Loan Documents (including principal, interest, or any fees or other
amounts) remain unpaid after such amounts are due, or (ii) an Event of
Default has occurred and is continuing, Borrower shall pay interest on the
aggregate, outstanding Obligations hereunder from the date due or from the
date
of the Event of Default, as applicable, until such past due amounts are paid
in
full or until all Events of Defaults are cured, as applicable, at a per
annum rate
equal to the Default Rate. All computations of such interest shall be based
on a
year of 360 days for actual days elapsed; provided,
however,
that
per diem interest shall be calculated on the basis of the actual number of
days
elapsed over a year of 365 days.
2.9 Crediting
Payments
.
The
receipt by Lender of any wire transfer of funds, check, or other item of
payment
shall be immediately applied conditionally to reduce Obligations, but shall
not
be considered a payment on account unless such wire transfer is of immediately
available federal funds and is made to the appropriate deposit account of
Lender
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 Lender after 3:00 p.m.
California time shall be deemed to have been received by Lender as of the
opening of business on the immediately following Business Day.
3. Conditions
of Loans
3.1 Conditions
Precedent to Initial Loan
.
The
obligation of Lender to make the initial Loan is subject to the conditions
precedent that:
(a) Lender
shall have received
this
Agreement duly executed by Grantors.
(b) Lender
shall have received a copy of the resolutions of Borrower’s Board of Directors,
in form and substance reasonably satisfactory to Lender, authorizing (1)
the
execution, delivery and performance of this Agreement and the other Loan
Documents, (2) the Loans contemplated hereunder, and (3) the transactions
contemplated thereunder, certified by the Secretary of the Borrower as of
the
Funding Date of the initial Loan,
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11
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which
certificate shall be in form and substance satisfactory to Lender and shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded and are in full force and effect.
(c) A
Responsible Officer of Borrower shall have executed and delivered to Lender
the
Note in the amount of $500,000.
(d) Lender
shall have received such documents, instruments and agreements, including
UCC
financing statements or amendments to UCC financing statements and documents
or
filings with the PTO, the Copyright Office or any applicable state office,
as
Lender shall reasonably request to evidence the perfection and first priority
(subject to Permitted Liens) of the security interests in the Collateral
granted
to Lender pursuant to Section
5,
including an Intellectual Property Security Agreement for each Grantor, in
each
case executed and delivered by duly authorized officers of Grantors, together
with completed schedules thereto in form and substance satisfactory to the
Lender.
(e) Lender
shall have received a certificate of each Grantor, dated the Funding Date
of the
initial Loan, as to the incumbency and signature of the officers of such
Grantor
executing any Loan Document, in form and substance satisfactory to Lender,
duly
executed by the Secretary of each Grantor.
(f) Lender
shall have received copies of the articles of incorporation and bylaws of
each
Grantor, certified as of the Funding Date of the initial Loan as true, complete
and correct copies thereof by the Secretary of each Grantor.
(g) Lender
shall have received a good standing certificate from each Grantor’s state of
incorporation and the states in which Grantor’s principal place of business is
located, together with certificates of the applicable Governmental Authorities
stating that such Grantor is in compliance with the franchise tax laws of
each
such state, each dated as of a recent date.
3.2 Conditions
Precedent to each
Loan
.
The
obligation of Lender to make each Loan, including the initial Loan, except
as
specifically noted, is further subject to the following conditions:
(a) Other
than with respect to the initial Loan, Borrower
and Lender shall have executed a Notice of Borrowing with respect to the
proposed Loan.
(b) Each
of
the representations and warranties made by Grantors pursuant to this Agreement
or any other Loan Document and each of the representations and warranties
contained in any certificate or statement furnished at any time by or on
behalf
of each Grantor pursuant to this Agreement or any other Loan Document or
certificate or other document delivered herewith or therewith, shall, except
to
the extent that they relate to a particular date, be true, complete and correct
in all respects on and as of the date it was made and on and as of such date
as
if made on and as of such date. Each Grantor shall have complied with each
and
every covenant and agreement contained herein, no Default or Event of Default
shall have occurred and be continuing on such date or after
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12
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giving
effect to the Loan. With respect to the initial Loan, Lender shall have received
a certificate, in form and substance satisfactory to Lender, duly executed
by a
Responsible Officer and dated as of the Funding Date of the initial Loan,
to the
foregoing effect.
3.3 Covenant
to Deliver
.
Borrower agrees to deliver each item required to be delivered to Lender as
a
condition to the Loan, if such Loan is made. Borrower expressly agrees that
the
extension of such Loan prior to the receipt by Lender of any such item shall
not
constitute a waiver by Lender of Borrower’s obligation to deliver such
item.
4. Subsidiary
Guarantees
4.1 Guarantee.
Subject
to this Article
3,
each of
the Guarantors hereby, jointly and severally, unconditionally guarantees
to
Lender and its successors and assigns, irrespective of the validity and
enforceability of any of the Loan Documents or the Obligations of Borrower
hereunder or thereunder, that:
(a) the
principal of and interest on the
Note
shall be promptly paid in full when due, whether at maturity, by acceleration
or
otherwise, and interest on the overdue principal of and interest on the Note
at
the Default Rate, if applicable, and all other Obligations of Borrower to
Lender, shall be promptly paid in full or performed, all in accordance with
the
terms hereof and thereof; and
(b) in
case
of any extension of time of payment or renewal of the Note or any of such
other
Obligations, that the same shall be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
Failing
payment when due of any amount so guaranteed or any performance so guaranteed
for whatever reason, the Guarantors shall be jointly and severally obligated
to
pay the same immediately. Each Guarantor agrees that this is a guarantee
of
payment and not a guarantee of collection.
4.2 Guarantee
Absolute and Unconditional. The
Guarantors hereby agree that their obligations hereunder are unconditional,
irrespective of the validity, regularity or enforceability of this Agreement,
the Note or any other Loan Document, the absence of any action to enforce
the
same, any waiver or consent by Lender or its successors or assigns with respect
to any provisions hereof or thereof, the recovery of any judgment against
Borrower, any action to enforce the same or any other circumstance which
might
otherwise constitute a legal or equitable discharge or defense of a
guarantor.
4.3 Amendments,
etc. with respect to the Borrower Obligations.
Each
Guarantor shall remain obligated hereunder and under each other Loan Document
notwithstanding that, without any reservation of rights against any Guarantor
and without notice to or further assent by any Guarantor, any demand for
payment
of any of the Obligations made by Lender may be rescinded by Lender and any
of
the Obligations continued, and the Obligations, or the liability of any other
Person upon or for any part thereof, or any collateral
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13
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security
or guarantee therefor or right of offset with respect thereto, may, from
time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by Lender, and the other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part,
as
Lender may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by Lender for the payment of
the
Obligations may be sold, exchanged, waived, surrendered or released. Lender
shall have no obligation to protect, secure, perfect or insure any Lien at
any
time held by it as security for the Obligations or for the guarantee contained
in this Article
3
or any
property subject thereto.
4.4 Waivers.
Each
Guarantor hereby waives, for the benefit of Lender and its successors,
indorsees, transferees and assigns:
(a) any
right
to require any Person, as a condition of payment or performance by such
Guarantor, to (i) proceed against Borrower, any other guarantor (including
any
other Guarantor) of the Obligations or any other Person, (ii) proceed against
or
exhaust any security held from Borrower, any such other guarantor or any
other
Person, (iii) proceed against or have resort to any balance of any deposit
account or credit on the books of Lender and its successors, indorsees,
transferees and assigns in favor of Borrower or any other Person, or (iv)
pursue
any other remedy in the power of Lender and its respective successors,
indorsees, transferees and assigns whatsoever;
(b) any
defense arising by reason of the incapacity, lack of authority or any disability
or other defense of Borrower or any other Guarantor including any defense
based
on or arising out of the lack of validity or the unenforceability of the
Obligations or any agreement or instrument relating thereto or by reason
of the
cessation of the liability of Borrower or any other Guarantor from any cause
other than payment in full of the Obligations;
(c) any
defense based upon any statute or rule of law which provides that the obligation
of a surety must be neither larger in amount nor in other respects more
burdensome than that of the principal;
(d) any
defense based upon any errors or omissions in the administration of the
Obligations by any agent, Lender and their respective successors, indorsees,
transferees and assigns, except behavior which amounts to bad faith;
(e) (i)
any
principles or provisions of law, statutory or otherwise, which are or might
be
in conflict with the terms hereof and any legal or equitable discharge of
such
Guarantor’s obligations hereunder, (ii) the benefit of any statute of
limitations affecting such Guarantor’s liability hereunder or the enforcement
hereof, (iii) any rights to set-offs, recoupments and counterclaims, and
(iv) promptness, diligence and any requirement that any agent, Lender, and
their respective successors, indorsees, transferees and assigns protect,
secure,
perfect or insure any security interest or lien or any property subject thereto;
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14
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(f) notices,
demands, presentments, protests, notices of protest, notices of dishonor
and
notices of any action or inaction, including acceptance hereof, notices of
default hereunder, or any agreement or instrument related thereto, notices
of
any renewal, extension or modification of the Obligations or any agreement
related thereto, notices of any extension of credit to Borrower and notices
of
any of the matters referred to in Section 2
and any
right to consent to any thereof; and
(g) any
defenses or benefits that may be derived from or afforded by law which limit
the
liability of or exonerate guarantors or sureties, or which may conflict with
the
terms hereof. Each Guarantor hereby waives and relinquishes any duty on the
part
of Lender (should any such duty exist) to disclose to any Guarantor any matter
of fact or other information related to the business, operations or condition
(financial or otherwise) of Borrower or its properties or to any Loan Document
or the transactions undertaken pursuant to, or contemplated by, any such
Loan
Document, whether now or in the future known by Lender.
4.5 Authority
of Guarantors or Borrower. It
is not
necessary for Lender and its respective successors, indorsees, transferees
and
assigns to inquire into the capacity or powers of any Guarantor or Borrower
or
the officers, directors or any agents acting or purporting to act on behalf
of
any of them.
4.6 Bankruptcy.
(a) The
guarantee contained in this Article
3
shall
continue to be effective, or be reinstated, as the case may be, if at any
time
payment, or any part thereof, of any of the Obligations is rescinded or
recovered directly or indirectly from Lender or its respective successors,
indorsees, transferees, and assignees as a preference, fraudulent transfer
or
otherwise, or must otherwise be restored or returned by Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower
or any Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, Borrower
or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
(b) So
long
as any Obligations remain outstanding, no Guarantor shall, without the prior
written consent of Lender, commence or join with any other Person in commencing
any bankruptcy, reorganization or insolvency case or proceeding of or against
Borrower or any other Guarantor. The obligations of Guarantors hereunder
shall
not be reduced, limited, impaired, discharged, deferred, suspended or terminated
by any case or proceeding, voluntary or involuntary, involving the bankruptcy,
insolvency, receivership, reorganization, liquidation or arrangement of Borrower
or any other Guarantor or by any defense which Borrower or any other Guarantor
may have by reason of the order, decree or decision of any court or
administrative body resulting from any such proceeding.
4.7 Subordination
of Other Obligations. Any
Indebtedness of Borrower or any Guarantor now or hereafter held by any Guarantor
(the “Obligee
Guarantor”)
is
hereby
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15
-
subordinated
in right of payment to the Obligations, and any such indebtedness collected
or
received by the Obligee Guarantor after an Event of Default has occurred
and is
continuing shall be held in trust and shall forthwith be paid over for the
benefit of Lender and its respective successors, indorsees, transferees and
assigns to be credited and applied against the Obligations but without
affecting, impairing or limiting in any manner the liability of the Obligee
Guarantor under any other provision hereof.
4.8 Subrogation.
Each
Guarantor agrees that it shall not be entitled to any right of subrogation
in
relation to Lender in respect of any of the Obligations until payment in
full of
all Obligations guaranteed hereby. Each Guarantor further agrees that, as
between the Guarantors, on the one hand, and Lender, on the other hand, (a)
the
maturity of the Obligations guaranteed hereby may be accelerated as provided
in
Article
9
hereof
for the purposes of the Subsidiary Guarantees, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the
obligations guaranteed hereby, and (b) in the event of any declaration of
acceleration of such obligations, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for the
purpose of the Subsidiary Guarantees.
4.9 Limitation
on Guarantor Liability.
Each
Guarantor, and by its acceptance of the Note, Lender, hereby confirms that
it is
the intention of all such parties that the Subsidiary Guarantee of such
Guarantor not constitute a fraudulent transfer or conveyance for purposes
of any
law or statute relating to bankruptcy, the Uniform Fraudulent Conveyance
Act,
the Uniform Fraudulent Transfer Act or any similar federal or state law to
the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, Lender and the Guarantors hereby irrevocably agree that the
obligations of such Guarantor shall be limited to the maximum amount that
shall,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from
or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article
3,
result
in the obligations of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
4.10 Additional
Subsidiary Guarantees. In
the
event that Borrower creates or acquires any Subsidiary after the date of
this
Agreement, then that newly acquired or created Subsidiary shall become a
Guarantor, and execute a counterpart signature page to this Agreement to
secure
the Subsidiary Guarantee. Such newly acquired or created Subsidiary shall
also
execute all security agreements (including an Intellectual Property Security
Agreement) reasonably requested by Lender to secure its interest in the
Collateral, and such documents and filings as reasonably requested by Lender
to
evidence
the perfection and first priority of the security interests in the Collateral
subject to Permitted Liens.
Borrower shall cause such Subsidiary to comply with the provisions of this
Section
4.10
and this
Article
4,
to the
extent applicable.
5. Creation
Of Security Interest
5.1 Creation
of Security Interest
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16
-
.
This
Agreement constitutes a “security agreement” within the meaning of the UCC.
In
order
to secure the payment and performance of the Obligations, each
Grantor hereby grants,
assigns, transfers, pledges, and sets over
to
Lender, subject to the Permitted Liens, a
first-priority security interest in and Lien on all of that Grantor’s
right, title and interest in and to the Collateral, in each case whether
now
owned or hereafter at any time acquired by the Grantor and wherever
located.
5.2 Perfection
of Security Interests
.
(a) Filing
of Financing Statements.
Without
limiting any rights of Lender under the UCC, each Grantor hereby
authorizes Lender to file one or more financing or continuation statements,
and
amendments thereto, including one or more financing statements indicating
that
such financing statements cover all assets or all personal property (or words
of
similar effect) of such Grantor,
in each
case without the signature of such Grantor,
and
regardless of whether any particular asset described in such financing
statements falls within the scope of the UCC or the granting clause of this
Agreement.
(b) PTO
Filings.
On a
continuing basis, each Grantor
shall
make, execute, acknowledge and deliver, and file and record in the proper
filing
and recording places, all such instruments and documents, including any
documents for filing with the PTO, the Copyright Office or any applicable
state
office as Lender may reasonably request. Lender may record this Agreement,
an
abstract thereof, or any other document describing Lender’s interest in the
Collateral with the PTO or the Copyright
Office
at the
expense of Lender.
5.3 Duration
of Security Interest
.
Each
Grantor agrees that this Agreement shall create a continuing security interest
in the Collateral which shall remain in effect until the payment in full
and the
satisfaction of all Obligations, whereupon such security interest shall
terminate. Notwithstanding anything to the contrary herein, the security
interest created by this Agreement (including all representations, warranties
and covenants contained herein) shall continue to be effective or be reinstated,
as the case may be, if at any time any amount received by Lender in respect
of
the Obligations is rescinded or must otherwise be restored or returned by
Lender
or its respective successors, indorsees, transferees and assignees as a
preference, fraudulent transfer or otherwise, or must be restored or redeemed
by
Lender upon or as a result of, the appointment of a receiver, intervenor
or
conservator of, or trustee or similar officer for any Grantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made. Upon termination of the security interest, Lender shall, at the Grantors’
sole cost and expense, execute such further documents and take such further
actions as may be necessary to effect the release contemplated by this
Section
5.3,
including duly executing and delivering termination statements for filing
in all
relevant jurisdictions under the UCC. Notwithstanding anything to the contrary
herein, upon the factoring of any of the Grantor’s accounts and receivables in
the ordinary course of business and consistent with past practices, Lender’s
security interest in such accounts and receivables will be automatically
released and of no further force and effect.
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17
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5.4 Possession
of Collateral
.
So long
as no Event of Default has occurred and is continuing, each Grantor shall
remain
in full possession, enjoyment and control of its Collateral (except only
as may
be otherwise required by Lender for perfection of its security interest therein)
and shall be entitled to manage, operate and use the same and each part thereof
with the rights and franchises appertaining thereto; provided,
however,
that
the possession, enjoyment, control and use of the Collateral shall at all
times
be subject to the observance and performance of the terms of this
Agreement.
5.5 Delivery
of Additional Documentation Required
.
Each
Grantor shall from time to time execute and deliver to Lender, all documents
Lender may reasonably request, in form satisfactory to Lender, to perfect
and
continue Lender’s first priority, perfected security interests in the Collateral
(subject to Permitted Liens) and in order to consummate fully all of the
transactions contemplated under the Loan Documents.
5.6 Right
to Inspect
.
Lender
(through any of its officers, employees, or agents) shall have the right,
upon
reasonable prior notice, from time to time during any Grantor’s usual business
hours, to inspect such Grantor’s Books and to make copies thereof and to check,
test, and appraise the Collateral in order to verify such Grantor’s financial
condition or the amount, condition of, or any other matter relating to, the
Collateral.
5.7 Authorization
to Supplement
.
If any
Grantor shall obtain rights to any new Intellectual Property, including any
patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any
patent,
the provisions of this Agreement shall automatically apply thereto. Such
Grantor(s) shall give prompt notice in writing to Lender with respect to
any
such new Intellectual Property rights. Without limiting the Grantors’
obligations under this Section
5.7,
each
Grantor authorizes Lender unilaterally to modify this Agreement by amending
Schedule
6.8
to
include any such new patent rights. Notwithstanding the foregoing, no failure
to
so modify this Agreement or amend Schedule
6.8
shall in
any way affect, invalidate or detract from Lender’s continuing security interest
in all Collateral, whether or not listed on Schedule
6.8.
6. Representations
And Warranties
Each
Grantor, jointly and severally, represents and warrants as follows:
6.1 Due
Organization and Qualification
.
Each
Grantor
(a) is
duly organized and validly existing under the laws of the State of Delaware
and
(b) is duly qualified to do business and is in good standing in all other
jurisdictions in which the nature of its business or the ownership or leasing
of
its properties makes such authorization or qualification necessary except
for
such jurisdictions where the failure to be so
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18
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authorized
or qualified could not materially adversely effect such Grantor’s
ability
to satisfy its obligations under this Agreement and the Loan.
6.2 Authority
.
Each
Grantor has all necessary power and authority to execute, deliver, and perform
in accordance with the terms thereof, the Loan Documents to which it is a
party.
Each Grantor
has the
power and authority, and the legal right, to own and operate its property,
to
lease the property it operates as lessee or lessor and to conduct the business
in which it is presently engaged and presently proposes to engage.
6.3 Subsidiaries
.
No
Grantor has any Subsidiaries, except those listed in Schedule
6.3
hereto.
6.4 Conflict
with Other Instruments, etc
.
Neither
the execution and delivery of any Loan Document to which any Grantor is a
party
nor the consummation of the transactions therein contemplated nor compliance
with the terms, conditions and provisions thereof will conflict with or result
in a breach of (a) any of the terms, conditions or provisions of the articles
of
incorporation and the by-laws, or other organizational documents of such
Grantor
or (b) any law or any regulation, order, writ, injunction or decree of any
court
or Governmental Authority or (c) any material agreement or instrument to
which
such Grantor is a party or by which it or any of its properties is bound
or to
which it or any of its properties is subject, or constitute a default
thereunder, except to the extent that such conflict, breach or default could
not
reasonably be expected to have a material adverse effect on the ability of
such
Grantor to perform its obligations under this Agreement, or result in the
creation or imposition of any Lien, other than Permitted Liens.
6.5 Authorization;
Enforceability
.
Each
Grantor
has the
power and authority, and the legal right, to make, execute, deliver and perform
the Loan Documents, borrow or guaranty each Loan hereunder, as the case may
be,
and to consummate the transactions contemplated hereby and thereby, and such
Grantor
has
taken all necessary action to authorize the execution, delivery and performance
of the Loan Documents, the borrowing of each Loan on the terms and conditions
of
this Agreement, and the consummation of the transactions contemplated hereby
and
thereby. No consent or authorization of, filing with, notice to or other
similar
act by or in respect of, any Governmental Authority or any other Person is
required to be obtained or made by or on behalf of such Grantor
in
connection with the execution, delivery, performance, validity or enforceability
of the Loan Documents to which it is a party, the borrowing or the guaranty
of
such Loan hereunder, as the case may be, or the consummation of the transactions
contemplated hereby and thereby. Each of the Loan Documents has been duly
executed and delivered by such Grantor. Each of the Loan Documents constitutes
a
legal, valid and binding obligation of such Grantor
enforceable against such
Grantor
in
accordance with its respective terms.
6.6 No
Prior Encumbrances
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19
-
.
Each
Grantor has good and indefeasible title to the Collateral consisting of
Intellectual Property held by it, free and clear of all Liens except for
the
first priority lien held by the Lender and Permitted Liens of the type described
in clauses (a), (b), (d) and (e) of the definition of Permitted Liens contained
herein. Each Grantor has good and indefeasible title to all other Collateral
held by it, free and clear of all Liens except for the first priority lien
held
by the Lender and Permitted Liens.
6.7 Name;
Location of Chief Executive Office, Principal Place of Business and
Collateral
.
No
Grantor has done business under any name other than that specified on the
signature page hereof. The chief executive office, principal place of business,
and the place where each Grantor maintains its records concerning the Collateral
are presently located at the addresses set forth on Schedule 6.7.
All of
the tangible Collateral, including the books and records related thereto,
is
presently located at the addresses set forth on Schedule
6.7.
6.8 Intellectual
Property
.
A true,
correct and complete list of all of the existing Collateral consisting of
patents and patent applications or registrations, registered trademarks and
registered copyrights owned by each Grantor, in whole or in part, is set
forth
in Schedule
6.8.
No
claim of infringement has been made or threatened in writing or otherwise
with
respect to any of Borrower’s Intellectual Property.
6.9 Litigation
.
To
Grantors’ knowledge, there are no actions or proceedings pending by or against
Borrower before any court or administrative agency in which an adverse decision
could have a material adverse effect on the Grantors, taken as a whole, or
the
aggregate value of the Collateral. No Grantor has knowledge of any such
threatened actions or proceedings. Borrower will promptly notify Lender in
writing if any action, proceeding or governmental investigation involving
a
Grantor is commenced that may result in damages or costs to the Grantors,
taken
as a whole, of $50,000 or more in the aggregate.
6.10 Liabilities
.
Other
than with respect to the Loan, Grantors do not have any Indebtedness except
as
described on Schedule
6.10.
6.11 Financial
Statements
.
The
Borrower Financial Statements present fairly in all material respects Borrower’s
consolidated financial condition as of the dates thereof and Borrower’s
consolidated results of operations at the dates and during the periods indicated
therein in accordance with GAAP (subject, in the case of unaudited statements,
to normal, recurring year-end adjustments). The Borrower Financial Statements
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with GAAP applied on
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20
-
a
basis
consistent throughout the periods indicated and consistent with each other
(except as may be expressly indicated in the notes thereto or, in the case
of
unaudited statements included in Quarterly Reports on Forms 10-QSB, as permitted
by Form 10-QSB of the SEC).
6.12 Solvency
.
Borrower and each of its Subsidiaries is solvent and able to pay its debts
(including trade debts) as they mature.
6.13 Taxes
.
Borrower
has filed all federal, state and local, domestic or foreign Tax Returns and
all
other Tax Returns that are required to be filed by it and it has paid all
Taxes
due pursuant to such returns or pursuant to any deficiency, notice of proposed
assessment, audit, assessment or other similar notice received by it in writing
other than those being contested in good faith in appropriate proceedings
and
for which reserves have been established in the Borrower Financial Statements
and any other financial statements of Borrower delivered to Lender prior
to the
date hereof. There are no audits, assessments or claim for assessments, and
no
basis upon which such a claim can be made to the best knowledge of Borrower
after reasonable review and due inquiry. The charges, accrual and reserves
on
Borrower’s books and records in respect of Taxes are adequate. Borrower has not
given or been requested to give a waiver of the statute of limitations relating
to the payment of federal or other Taxes or the audit of any Tax
period.
6.14 Full
Disclosure
.
No
Grantor
has knowledge of any fact that could materially adversely affect the ability
of
any Grantor to perform its obligations under this Agreement, the Note or
the
other Loan Documents or which could result in an Event of Default.
7. Affirmative
Covenants
Each
Grantor covenants and agrees that, until the full and complete payment of
the
Obligations, such Grantor shall do all of the following:
7.1 Payment
of Obligations
.
Pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all of its obligations of whatever nature,
except where the amount or validity thereof is currently being contested
in good
faith by appropriate proceedings diligently conducted and which are reserved
against on Borrower’s Books and except for those obligations communicated by
Borrower to Lender in writing to the extent Borrower has reached an agreement
with the obligee of such obligations to extend the maturity date
thereof.
7.2 Good
Standing
.
Maintain its corporate existence and its good standing in the State of Delaware
and maintain qualification in each jurisdiction in which the failure to so
qualify could reasonably be expected to have a material adverse effect on
the
financial condition, operations or business of the Grantors, taken as a
whole.
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7.3 Maintenance
of Agreements
.
Maintain in force all licenses, approvals and agreements, the loss of which
would reasonably be likely to have a material adverse effect on such Grantor’s
ability to perform its obligations under this Agreement.
7.4 Notice
of Defaults
.
As soon
as possible, and in any event within five days after the discovery of a Default
or an Event of Default provide Lender with a certificate signed by a Responsible
Officer setting forth the facts relating to or giving rise to such Default
or
Event of Default and the action which Borrower proposes to take with respect
thereto.
7.5 Taxes
.
Make
due and timely payment or deposit of all federal, state, and local Taxes
required of it by law or imposed upon any properties belonging to it, and
each
Grantor will make timely payment or deposit of all Tax payments and withholding
Taxes required of it by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
Taxes, and will, upon request, furnish Lender with proof reasonably satisfactory
to Lender indicating that such Grantor has made such payments or deposits;
provided
that
such Grantor need not make any payment if the amount or validity of such
payment
is contested in good faith by appropriate proceedings and is adequately reserved
against by such Grantor.
7.6 Use;
Maintenance
.
At its
expense, maintain the Collateral in good condition, reasonable wear and tear
excepted, and comply in all material respects with all laws, rules and
regulations to which the use and operation of the Collateral may be or become
subject. So long as no Event of Default has occurred and is continuing, Grantors
shall have the right to quietly possess and use the Collateral as provided
herein without interference by Lender.
7.7 Loss;
Damage; Destruction and Seizure
.
Each
Grantor shall bear the risk of the Collateral held by it being lost, stolen,
destroyed, damaged beyond repair, rendered permanently unfit for use, or
seized
by a Governmental Authority for any reason whatsoever at any time until the
expiration or termination of this Agreement.
7.8 Further
Assurances
.
At any
time and from time to time Borrower shall, at its expense, execute and deliver
such further instruments and take such further action as may reasonably be
requested by Lender (including
obtaining any bailee acknowledgments required by Lender), in order to perfect
and protect the security interests granted or purported to be granted hereby
and
to enable Lender to exercise and enforce its rights and remedies hereunder
with
respect to any Collateral.
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8. Negative
Covenants
Each
Grantor covenants and agrees that until the full and complete payment of
the
Obligations, such Grantor will not do any of the following:
8.1 Chief
Executive Office; Location of Collateral
.
During
the continuance of this Agreement, change the chief executive office or
principal place of business or remove or cause to be removed the Collateral
or
the records concerning the Collateral from the premises listed on Schedule
6.7 without
10 days prior written notice to Lender.
8.2 Change
of Name or State of Incorporation
.
Change
such Grantor’s name or state of incorporation.
8.3 Limitation
on Indebtedness
.
Create,
incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness
of each Grantor under this Agreement
and the
Original Loan and Security Agreement;
(b) other
Indebtedness (including accrued interest thereon) outstanding on the original
Funding Date and listed on Schedule
6.10 and
any
refinancing thereof, provided
that
such refinancing does not increase the principal amount of the Indebtedness
being refinanced or the interest rate applicable thereto; and
(c) Indebtedness
not to exceed $100,000 in the aggregate at any time outstanding.
8.4 Liens
.
Create,
incur, assume or suffer to exist any Lien or any other encumbrance of any
kind
with respect to any of its Property, whether now owned or hereafter acquired,
except for Permitted Liens.
9. Events
Of Default
Any
one
or more of the following events shall constitute an Event of Default under
this
Agreement:
9.1 Payment
Default
.
If
Borrower fails to pay when due and payable or when declared due and payable
in
accordance with the Loan Documents, any portion of the Obligations.
9.2 Certain
Covenant Defaults
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.
If any
Grantor fails to perform any obligation under Section
7.6,
or
violates any of the covenants contained in Article
8
of this
Agreement.
9.3 Other
Covenant Defaults
.
If any
Grantor fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant, or agreement contained in this Agreement,
in any
of the other Loan Documents, or in any other present or future agreement
between
any Grantor and Lender that does not provide for a specific exception from
this
Section
9.3,
and as
to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within 15 Business
Days after Borrower’s
knowledge of the
occurrence of such default.
9.4 Material
Adverse Effect
.
If
following the date hereof there occurs an event, act, condition or change
which
had, has or could reasonably be expected to (a) materially impair the prospects
of repayment of any portion of the Obligations owing to Lender or a material
impairment of the value or priority of Lender’s security interests in the
Collateral or
(b) materially impair any right or remedy of the Lender under any Loan
Document.
9.5 Other
Agreements
.
Default
shall be made with respect to any payment of any Indebtedness of Borrower
under
the Original Loan and Security Agreement or other Indebtedness in excess
of
$50,000 when due or the performance of any covenant, agreement or other
obligation incurred in connection with any such Indebtedness, if the effect
of
such default is to permit the acceleration of the maturity of such Indebtedness
and such default shall not be remedied, cured, waived or consented to by
the
holder of such Indebtedness within the applicable grace
period, or any other circumstances arise (other than the mere passage of
time)
by reason of which Borrower is required to repurchase or offer to holders
of
Indebtedness of any such Person, the opportunity to have purchased, any such
Indebtedness.
9.6 Judgments
.
Final
judgment for the payment of money shall be rendered by a court of competent
jurisdiction against a Grantor
and
such
Grantor
shall
not
discharge the same or provide for its discharge in accordance with its terms,
or
procure a stay of execution thereof within 10 days from the date of entry
thereof and within a period of 30 days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and cause
the execution thereof to be stayed during such appeal, and such judgment
together with all other such judgments of the Borrower or its Subsidiaries
shall
exceed in the aggregate $50,000.
9.7 Misrepresentations
.
If any
warranty, representation, statement, or report made to Lender by any Grantor
or
any officer, employee, agent, or director of a Grantor is untrue in any material
respect when made.
9.8 Enforceability
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.
If any
Loan Document shall in any material respect cease to be, or any Grantor shall
assert that any Loan Document is not, a legal, valid and binding obligation
of
such Grantor enforceable against it in accordance with its terms. If
the
Loan
Documents shall, for any reason, not give or shall cease to give Lender a
perfected Lien in all of the Collateral with the priority contemplated by
such
Loan Documents and subject to no other Liens (except for Permitted Liens),
other
than by actions of the Lender.
9.9 Bankruptcy
or Insolvency
.
(a) A
Grantor
shall commence any case, proceeding or other action (i) under any existing
or
future law or statute of any jurisdiction, domestic or foreign, relating
to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have
an
order for relief entered with respect to it, or seeking to adjudicate it
a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (ii) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its Property, or a Grantor shall make a general assignment
for the benefit of its creditors;
(b) There
shall be commenced against a Grantor any case, proceeding or other action
of a
nature referred to in clause (a) above which (i) results in the entry of
an
order for relief or any such adjudication or appointment or (ii) remains
undismissed, undischarged, unstayed or unbonded for a period of 30 days;
(c) There
shall be commenced against a Grantor any case, proceeding or other action
seeking issuance of a warrant or writ of attachment, execution, distraint
or
similar process against all or any substantial part of its Property which
results in the entry of an order for such relief which shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from
the
entry thereof;
(d) A
Grantor
shall take any corporate action in furtherance of, or indicating its consent
to,
approval of or acquiescence in, any of the acts set forth in clause (a),
(b), or
(c) above; or
(e) a
Grantor
shall be generally unable to, or shall admit its general inability to, pay
its
debts (except
for those debts communicated by Borrower to Lender in writing to the extent
Borrower has reached an agreement with the obligee of such debts to extend
the
maturity date thereof) as they become due.
9.10 Extraordinary
Corporate Transaction
.
If
there shall occur any Extraordinary Corporate Transaction.
10. Lender’s
Rights And Remedies
10.1 Rights
and Remedies
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.
Upon
the occurrence and during the continuance of an Event of Default, Lender
may
terminate or suspend its Commitment. In addition, upon the occurrence and
during
the continuance of an Event of Default, Lender shall have the rights, options,
duties and remedies of a secured party as permitted by law and, in addition
to
and without limitation of the foregoing, Lender may, at its election, without
notice of election and without demand, do any one or more of the following,
all
of which are authorized by the Grantors:
(a) Declare
all Obligations, whether evidenced by this Agreement, by any of the other
Loan
Documents, or otherwise, including the outstanding principal amount of
each
Loan, immediately due and payable (provided that upon the occurrence of an
Event
of Default described in Section
9.9
all
Obligations shall become immediately due and payable without any action by
Lender);
(b) Without
notice to or demand upon any Grantor, make such payments and do such acts
as
Lender considers necessary or reasonable to protect its security interest
in the
Collateral. Each Grantor agrees to assemble the Collateral if Lender so
requires, and to make the Collateral available to Lender as Lender may
designate. Each Grantor authorizes Lender 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 Lien which in
Lender’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
the Grantors’ owned premises, such Grantor hereby grants Lender a license to
enter into possession of such premises and to occupy the same, without charge,
for up to 120 days in order to exercise any of Lender’s rights or remedies
provided herein, at law, in equity, or otherwise;
(c) Without
notice to any Grantor, set off and apply to the Obligations any and all
Indebtedness at any time owing to or for the credit or the account of a
Grantor;
(d) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Lender
is
hereby granted a license or other right, solely pursuant to the provisions
of
this Section
10.1,
to
use,
without charge, Grantors’ 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 Lender’s exercise of its rights under this Section
10.1,
Grantors’
rights under all licenses and all franchise agreements shall inure to Lender’s
benefit;
(e) 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 Grantors’ premises) as Lender determines are commercially
reasonable;
(f) Lender
may credit bid and purchase at any public sale; and
(g) Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by the Grantors.
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10.2 Waiver
by Grantors
.
Upon
the occurrence and during the continuance of an Event of Default, to the
extent
permitted by law, each Grantor covenants that it will not at any time insist
upon or plead, or in any manner whatever claim or take any benefit or advantage
of, any stay or extension law now or at any time hereafter in force, nor
claim,
take nor insist upon any benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Collateral
or any part thereof prior to any sale or sales thereof to be made pursuant
to
any provision herein contained, or to the decree, judgment or order of any
court
of competent jurisdiction; nor, after such sale or sales, claim or exercise
any
right under any statute now or hereafter made or enacted by any state or
otherwise to redeem the Property so sold or any part thereof, and, to the
full
extent legally permitted, except as to rights expressly provided herein,
hereby
expressly waives for itself and on behalf of each and every Person, except
decree or judgment creditors of such Grantor acquiring any interest in or
title
to the Collateral or any part thereof subsequent to the date of this Agreement,
all benefit and advantage of any such law or laws, and covenants that it
will
not invoke or utilize any such law or laws or otherwise hinder, delay or
impede
the execution of any power herein granted and delegated to Lender, but will
suffer and permit the execution of every such power as though no such power,
law
or laws had been made or enacted.
10.3 Lender
to Hold in Trust
.
Upon
the occurrence and during the continuance of an Event of Default, each Grantor
will, upon receipt by it of any revenue, income, profits or other sums in
which
a security interest is granted hereunder, payable pursuant to any agreement
or
otherwise, or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such sum, hold the sum or instrument
in
trust for Lender, segregate such sum or instrument from its own assets and
forthwith, without any notice, demand or other action whatsoever (all notices,
demands, or other actions on the part of the Lender being expressly waived),
endorse, transfer and deliver any such sums or instruments or both, to Lender
to
be applied to the repayment of the Loans in accordance with the provisions
of
this Agreement.
10.4 Effect
of Sale
.
Any
sale, whether under any power of sale hereby given or by virtue of judicial
proceedings, shall operate to divest all right, title, interest, claim and
demand whatsoever, either at law or in equity, of Grantors in and to the
Property sold, and shall be a perpetual bar, both at law and in equity, against
Grantors, their successors and assigns, and against any and all Persons claiming
the Property sold or any part thereof under, by or through Grantors, their
successors or assigns.
10.5 Power
of Attorney in Respect of the Collateral
.
Each
Grantor does hereby irrevocably appoint Lender (which appointment is coupled
with an interest) on the occurrence and continuance of an Event of Default,
the
true and lawful attorney in fact of such Grantor with full power of
substitution, for it and in its name: (a) to ask, demand, collect, receive,
receipt for, xxx for, compound and give acquittance for any and all rents,
issues, profits, avails, distributions, income, payment draws and other sums
in
which a security interest is granted under Section
5
with
full power to settle, adjust or compromise any
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27
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claim
thereunder as fully as if Lender were a “Grantor” itself, (b) to receive payment
of and to endorse the name of a Grantor to any items of Collateral (including
checks, drafts and other orders for the payment of money) that come into
Lender’s possession or under Lender’s control, (c) to make all demands, consents
and waivers, or take any other action with respect to, the Collateral, (d)
in
Lender’s discretion to file any claim or take any other action or proceedings,
either in its own name or in the name of such Grantor or otherwise, which
Lender
may reasonably deem necessary or appropriate to protect and preserve the
right,
title and interest of Lender in and to the Collateral, or (e) to otherwise
act
with respect thereto as though Lender were the outright owner of the
Collateral.
10.6 Remedies
Cumulative
.
Lender’s rights and remedies under this Agreement, the Loan Documents, and all
other agreements shall be cumulative. Lender shall have all other rights
and
remedies not inconsistent herewith as provided under the UCC, by law, or
in
equity. No exercise by Lender of one right or remedy shall be deemed an
election, and no waiver by Lender of any Event of Default on Borrower’s part
shall be deemed a continuing waiver. No delay by Lender shall constitute
a
waiver, election, or acquiescence by it.
10.7 Application
of Collateral Proceeds
.
The
Proceeds of the Collateral, or any part thereof, and the proceeds and the
avails
of any remedy hereunder (as well as any other amounts of any kind held by
Lender
at the time of or received by Lender after, the occurrence of an Event of
Default hereunder) shall be paid to and applied as follows:
(a) First,
to
the
payment of any Lender’s Expenses;
(b) Second,
to
the
payment to Lender of the amount then owing or unpaid on the Loans and all
other
Obligations with respect to each Loan, and if such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid upon
the
Loans, then to the unpaid interest thereon, then to the unpaid principal
amount
of the Loans, and then to the payment of other amounts then payable to Lender
under any of the Loan Documents; and
(c) Third,
to
the
payment of the surplus, if any, to the applicable Grantor, its successors
and
assigns, or to whomsoever may be lawfully entitled to receive the
same.
10.8 Reinstatement
of Rights
.
If
Lender shall have proceeded to enforce any right under this Agreement or
any
other Loan Document by foreclosure, sale, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely, then and in every such case (unless otherwise
ordered by a court of competent jurisdiction), Lender shall be restored to
its
former position and rights hereunder with respect to the Property subject
to the
security interest created under this Agreement.
10.9 Lender’s
Liability for Collateral
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.
So long
as Lender complies with its obligations, if any, under Section 9207 of the
UCC,
Lender 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 Grantors.
10.10 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
Lender
on which Borrower may in any way be liable.
11. 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 certified mail, postage prepaid,
return
receipt requested, or by prepaid facsimile to Borrower and/or Guarantors
or to
Lender, as the case may be, at their respective addresses set forth
below:
If
to
Borrower: Trestle
Holdings, Inc.
or
to any
Guarantor: 000
Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
Mr. Xxxxx Xxxx
FAX:
(000) 000-0000
If
to
Lender: Clarient,
Inc.
00
Xxxxxxxx
Xxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xx. Xxx Xxxxxxx
FAX:
(000)
000-0000
The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the
other.
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 Grantors without Lender’s
prior written consent, which consent may be granted or withheld in Lender’s sole
discretion. Lender shall have the right without the consent of or notice
to any
Grantor to sell, transfer, negotiate, or grant participations in all or any
part
of, or any interest in such Lender’s rights and benefits hereunder.
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12.2 Time
of Essence
.
Time is
of the essence for the performance of all obligations set forth in this
Agreement.
12.3 Severability
of Provisions
.
In
case
any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, it shall, to the extent possible, be modified in such manner
as
to be valid, legal and enforceable but so as to most nearly retain the intent
of
the parties, and if such modification is not possible, such provision shall
be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement and the future
application of such provision shall not in any way be affected or impaired
thereby.
12.4 Entire
Agreement; Construction; Amendments and Waivers
.
(a) This
Agreement
and each
of the other Loan Documents dated as of the date hereof, taken together,
constitute and contain the entire agreement between the Grantors and Lender
and
supersede any and all prior agreements, negotiations, correspondence,
understandings and communications between the parties, whether written or
oral,
respecting the subject matter hereof.
(b) This
Agreement is the result of negotiations between and has been reviewed by
the
Grantors and Lender executing this Agreement as of the date hereof and their
respective counsel; accordingly,
this
Agreement shall be deemed to be the product of the parties hereto, and no
ambiguity shall be construed in favor of or against Grantors or Lender.
(c) Any
and
all amendments, modifications, discharges or waivers of, or consents to any
departures from any provision of this Agreement or of any of the other Loan
Documents shall not be effective without the written consent of Lender. Any
waiver or consent with respect to any provision of the Loan Documents shall
be
effective only in the specific instance and for the specific purpose for
which
it was given. No notice to or demand on any Grantor in any case shall any
Grantor to any other or further notice or demand in similar or other
circumstances. No delay or omission of Lender to exercise any right, whether
before or after a default hereunder, shall impair any such right or shall
be
construed to be a waiver of any right or default, and the acceptance at any
time
by Lender of any past-due amount shall not be deemed to be a waiver of the
right
to require prompt payment when due of any other amounts then or thereafter
due
and payable.
(d) Any
amendment, modification, waiver or consent effected in accordance with this
Section
12.4 shall
be
binding upon Lender and on the Grantors.
12.5 Reliance
by Lender
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.
All
covenants, agreements, representations and warranties made herein by the
Grantors, notwithstanding any investigation by Lender, be deemed to be material
to and to have been relied upon by Lender.
12.6 No
Set-Offs by Grantors
.
All
sums payable by the Grantors pursuant to this Agreement or any of the other
Loan
Documents shall be payable without notice or demand and shall be payable
in
United States Dollars without set-off or reduction of any manner
whatsoever.
12.7 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.
12.8 Survival
.
All
covenants, representations and warranties made in this Agreement shall continue
in full force and effect so long as any Obligations remain outstanding.
12.9 Relationship
of Parties
.
The
Grantors and Lender acknowledge, understand and agree that the relationship
between the Grantors and Lender is and at all time shall remain solely that
of a
borrower and lender or a guarantor and lender, as the case may be. Lender
shall
not under any circumstances be construed to be a partner or joint venturer
of
any Grantor or any of its Affiliates; nor shall Lender under any circumstances
be deemed to be in a relationship of confidence or trust or a fiduciary
relationship with any Grantor or any of its Affiliates, or to owe any fiduciary
duty to any Grantor or any of its Affiliates. Lender does not undertake or
assume any responsibility or duty to any Grantor or any of its Affiliates
to
select, review, inspect, supervise, pass judgment upon or otherwise inform
any
Grantor or any of its Affiliates of any matter in connection with its or
their
Property, any Collateral held by Lender or the operations of any Grantor
or any
of its Affiliates. Grantors and each of their Affiliates shall rely entirely
on
their own judgment with respect to such matters, and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or
assumed
by Lender in connection with such matters is solely for the protection of
Lender, and neither any Grantor nor any of its Affiliates is entitled to
rely
thereon.
12.10 Public
Announcements
.
Grantors shall consult with and obtain the prior written consent of Lender
before issuing any press release or otherwise making any public announcement,
statement or acknowledgment of the existence of, or reveal publicly the terms,
conditions and status of, the transactions provided for herein and shall
not
issue any such press release or make any such public statement prior to such
consultation and consent; provided,
however,
that
(1) following execution of this Agreement, Borrower shall be permitted to
file a
Current Report on Form 8-K
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with
the
U.S. Securities & Exchange Commission in the form agreed to by Borrower and
Lender, and (2) in the event any material development or change related to
or
affecting this Agreement has occurred and Borrower in good faith determines
that
it is required by applicable law to make a press release or public announcement,
such press release or public announcement shall not constitute a breach of
this
Agreement if Borrower shall have (a) given, to the extent reasonably possible,
a
copy of the proposed release or statement to Lender not less than two Business
Days prior to its first use or publication, (b) attempted, to the extent
reasonably possible, to clear such announcement, statement, acknowledgment
or
revelation with Lender and (c) considered in good faith any comments or changes
Lender has offered to the proposed announcement or statement.
12.11 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 THE GRANTORS AND LENDER HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF ORANGE,
STATE OF CALIFORNIA. GRANTORS HEREBY
WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH
SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL (RETURN RECEIPT REQUESTED)
DIRECTED TO THEIR ADDRESS SET FORTH HEREIN AND SERVICE SO MADE SHALL BE DEEMED
TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN
THE
U.S. MAILS, OR, AT LENDER’S OPTION, BY SERVICE UPON THE GRANTORS IN ANY OTHER
MANNER PROVIDED UNDER THE RULES OF ANY SUCH COURTS. GRANTORS
AND LENDER 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.
12.12 No
Obligation to Enter into Further
Agreements
.
Each
party acknowledges and agrees that this Agreement is not intended to create
any
legally binding obligations on the parties with respect to any transaction
other
than the transactions contemplated by this Agreement, and does not create
any
such legally binding obligations of any kind whatsoever with respect to entering
into any potential strategic transaction between the parties. Neither the
discussions or negotiations between the parties hereto nor this Agreement
is
intended to, and they do not, create any fiduciary or other special duties
or
other obligations between the parties hereto in any respect, including any
implied covenant of good faith or fair dealing.
[Signature
page follows]
-
32
-
In
Witness Whereof,
the
parties hereto have caused this Agreement to be executed as of the date first
above written.
|
BORROWER:
|
LENDER:
|
|
TRESTLE
HOLDINGS, INC.
|
CLARIENT,
INC.
|
|
By:
Name:
Title:
|
By:
Name:
Title:
|
|
GUARANTORS:
By
its signature, each of the undersigned consents to becoming a Guarantor
under this Agreement and affirms its obligation to be bound
hereby.
|
|
|
TRESTLE
ACQUISITION CORP.
|
__________________________
|
|
By:
Name:
Title:
|
By:
Name:
Title:
|
-
33
-
|
Exhibits
|
|||
|
A
|
Form
of Intellectual Property Security Agreement
|
||
|
B
|
Form
of Note
|
||
|
C
|
Form
of Notice of Borrowing
|
||
|
Schedules:
|
|||
|
1.1(a)
|
Existing
Liens
|
||
|
6.3
|
Subsidiaries
|
||
|
6.7
|
Location
of Records and Collateral
|
||
|
6.8
|
Patents
and Patent Applications, Trademarks, Copyrights
|
||
|
6.10
|
Existing
Indebtedness
|
||
Exhibit
A
INTELLECTUAL
PROPERTY SECURITY AGREEMENT
INTELLECTUAL
PROPERTY SECURITY AGREEMENT (this “Agreement”)
is
entered into as of June 19, 2006 by and between by and between CLARIENT,
INC., a
Delaware corporation (“Lender”),
and
TRESTLE HOLDINGS, INC., a Delaware corporation (“Borrower”).
RECITALS
A. Lender
has agreed to make certain advances of money from time to time and to extend
certain financial accommodations to Borrower (the “Loan”)
in the
amount and manner set forth in that certain Second Loan and Security Agreement
dated as of June 19, 2006 by and between Lender, Borrower and Guarantors
(as the
same may be amended, modified or supplemented from time to time, the
“Loan
Agreement”).
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Loan Agreement. Lender is willing to make the Loan to
Borrower, but only upon the condition, among others, that Borrower shall
grant
to Lender a security interest in all of its copyrights, trademarks and patents
to secure the obligations of Borrower under the Loan Agreement.
B. Pursuant
to the terms of the Loan Agreement, Borrower has granted to Lender a security
interest in all of Borrower’s right, title and interest, whether presently
existing or hereafter acquired, in, to and under all of the Collateral,
including, without limitation, all of its copyrights, trademarks and
patents.
NOW,
THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound, as collateral security for
the
prompt and complete payment when due of its obligations under the Loan Agreement
and the other Loan Documents, Borrower hereby represents, warrants, covenants
and agrees as follows:
AGREEMENT
To
secure
its obligations under the Loan Documents and under all other agreements now
existing or hereafter arising between Borrower and Lender, Borrower assigns
to
Lender for security purposes, and grants and pledges to Lender, a security
interest in all of Borrower’s right, title and interest in, to and under its
Intellectual Property Collateral (including, without limitation, those
copyrights, patents and trademarks listed on Schedules A, B and C hereto),
together with the goodwill of the businesses associated with the trademarks,
and
including, without limitation, all proceeds thereof (such as, by way of example
but not by way of limitation, license royalties and proceeds of infringement
suits), the right to xxx for past, present and future infringements, all
rights
corresponding thereto throughout the world and all re-issues, re-examinations,
divisions continuations, renewals, termination rights, extensions and
continuations-in-part thereof.
This
security interest is granted in conjunction with the security interest granted
to Lender under the Loan Agreement. The rights and remedies of Lender with
respect to the security interest granted hereby are in addition to those
set
forth in the Loan Agreement and the
A-
other
Loan Documents, and those which are now or hereafter available to Lender
as a
matter of law or equity. Each right, power and remedy of Lender provided
for
herein or in the Loan Agreement or any of the Loan Documents, or now or
hereafter existing at law or in equity shall be cumulative and concurrent
and
shall be in a addition to every right, power or remedy provided for herein
and
the exercise by Lender of any one or more of the rights, powers or remedies
provided for in this Agreement, the Loan Agreement or any of the other Loan
Documents, or now or hereafter existing at law or in equity, shall not preclude
the simultaneous or later exercise by any person or entity, including Lender,
of
any or all other rights, powers or remedies.
Borrower
represents and warrants that Schedules A, B, and C attached hereto set forth
any
and all intellectual property rights in connection to which Borrower has
registered or filed an application with either the United States Patent and
Trademark Office or the United States Copyright Office, as
applicable.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and all of which counterparts
together shall constitute one and the same instrument.
THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY CONFLICT
OF LAW PROVISIONS, EXCEPT TO THE EXTENT GOVERNED BY FEDERAL LAW, IN WHICH
CASE
FEDERAL LAW SHALL APPLY.
This
Agreement may not be amended, supplemented or modified, nor may the obligations
of the parties hereto be waived, except pursuant to a writing signed by both
Lender and Borrower.
Borrower
may not assign its rights or obligations under this Agreement or otherwise
encumber or hypothecate its Intellectual Property Collateral without the
consent
of Lender. This Agreement shall be binding upon and inure to the benefit
of
Lender and Borrower and their respective successors and permitted
assigns.
[Signatures
on Next Page]
A-
IN
WITNESS WHEREOF, the parties have caused this Intellectual Property Security
Agreement to be duly executed by its officers thereunto duly authorized as
of
the first date written above.
|
BORROWER:
|
LENDER:
|
|
TRESTLE
HOLDINGS, INC.
|
CLARIENT,
INC.
|
|
By:
Name:
Title:
|
By:
Name:
Title:
|
|
Trestle
Holdings, Inc.
000
Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxxxx 00000
FAX:
(000) 000-0000
|
Clarient,
Inc.
00
Xxxxxxxx
Xxxxx
Xxxxx, Xxxxxxxxxx 00000
FAX:
(000) 000-0000
|
A-
SCHEDULE
A
Registered
Copyrights
A-
SCHEDULE
B
Patents
A-
SCHEDULE
C
Trademarks
A-
Exhibit
b
FORM
OF NOTE
SECURED
PROMISSORY NOTE
$500,000Dated:
June 19, 2006
FOR
VALUE
RECEIVED, the undersigned, TRESTLE HOLDINGS, INC., a Delaware corporation
(“Borrower”),
hereby promises to pay to the order of CLARIENT, INC., a Delaware corporation
(“Lender”)
the
principal sum of Five Hundred Thousand Dollars ($500,000) or such lesser
amount
as has been advanced but not yet repaid under the Second Loan and Security
Agreement referred to below, plus interest in the amount provided below,
on the
Maturity Date. Capitalized terms not defined in this Note shall have the
meanings given to such capitalized terms in the Second Loan and Security
Agreement (as defined herein).
Interest
on the unpaid principal amount of each Loan evidenced by this Note from the
Funding Date of such Loan shall accrue at 8% per
annum based
on
a year of 360 days for actual days elapsed; provided,
however,
that
per diem interest shall be calculated on the basis of the actual number of
days
elapsed over a year of 365 days.
Principal,
interest and all other amounts due with respect to the Loans, are payable
in
lawful money of the United States of America to Lender as set forth in the
Second Loan and Security Agreement. The principal amount of each Loan and
the
interest rate applicable thereto, and all payments made with respect thereto,
shall be recorded by Lender and, prior to any transfer hereof, endorsed on
the
grid attached hereto which is part of this Note.
This
Note
is the Note referred to in, and is entitled to the benefits of, the Second
Loan
and Security Agreement, dated as of June 19, 2006, to which Borrower and
Lender
are parties (the “Second
Loan and Security Agreement”).
The
Second Loan and Security Agreement, among other things, (a) provides for
the
making of secured Loans to Borrower, and (b) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events.
This
Note
and the obligation of Borrower to repay the unpaid principal amount of the
Loans, interest on the Loans and all other amounts due Lender under the Loan
Documents are secured under the Second Loan and Security Agreement.
Presentment
for payment, demand, notice of protest and all other demands and notices
of any
kind in connection with the execution, delivery, performance and enforcement
of
this Note are hereby waived.
Borrower
shall pay all reasonable fees and expenses, including, without limitation,
reasonable attorneys’ fees and costs, incurred by Lenders in the enforcement or
attempt to enforce any of Borrower’s obligations hereunder not performed when
due. This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of California.
B-
IN
WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one
of its
officers thereunto duly authorized on the date hereof.
TRESTLE
HOLDINGS, INC.
By:
Name:
Title:
B-
Exhibit
C
NOTICE
OF BORROWING
June
19,
2006
Clarient,
Inc.
00
Xxxxxxxx
Xxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xx. Xxx Xxxxxxx
Ladies
and Gentlemen:
Reference
is made to the Second Loan and Security Agreement dated as of June 19, 2006
(as
it has been and may be amended from time to time, the “Loan
Agreement,” the
capitalized terms used herein as defined therein), between CLARIENT,
INC., TRESTLE HOLDINGS, INC. (the
“Company”)and
the
GUARANTORS.
Capitalized terms not defined in this Notice of Borrowing shall have the
meanings given to such terms in the Loan Agreement.
The
undersigned is the Chief Financial Officer of the Company, and hereby requests
a
Loan under the Loan Agreement, and in that connection certifies as
follows:
1. The
amount of the proposed Loan is $[250,000]. The requested Funding Date of
the
proposed Loan is ________, 2006.
2. As
of
this date, no Event of Default, or event which with notice or the passage
of
time would constitute an Event of Default, has occurred and is continuing,
or
will result from the making of the proposed Loan.
3. All
of
the representations and warranties contained in Article
6
of the
Loan Agreement and in each of the Loan Documents, and the information set
forth
in the schedules thereto, are and will be true and correct in all material
respects, both before and after giving effect to the proposed Loan and to
the
application of the proceeds thereof, as though made on such date, unless
stated
to relate to a specific earlier date, in which case such representations
and
warranties shall be true and correct in all material respects as of such
earlier
date; and
4. No
event
which could reasonably be expected to have a material adverse effect on the
ability of Borrower to fulfill its obligations under the Loan Agreement has
occurred since the date of the most recent financial statements submitted
to you
by the Company.
The
Company agrees to notify you promptly before the funding of the Loan if any
of
the matters to which I have certified above shall not be true and correct
on the
requested Funding Date for such Loan.
Very
truly yours,
_________________________
