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Exhibit 10.7
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LOAN AGREEMENT
Dated as of January 21, 1997
between
CALICO TECHNOLOGY, INC.
as Borrower,
and
VENTURE LENDING & LEASING, INC.,
as Lender
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TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINITIONS................................................. 1
ARTICLE 2 - THE COMMITMENT AND LOANS.................................... 4
2.1 The Commitment............................................. 4
2.2 Limitation on Loans........................................ 4
2.3 Notes Evidencing Loans; Repayment.......................... 5
2.4 Procedures for Borrowing................................... 5
2.5 Interest................................................... 5
2.6 Interest Rate Calculation.................................. 5
2.7 Default Interest........................................... 5
2.8 Lender's Records........................................... 6
2.9 Security................................................... 6
2.10 Issuance of Warrant to Lender.............................. 6
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES.............................. 6
3.1 Due Organization........................................... 6
3.2 Authorization, Validity and Enforceability................. 6
3.3 Compliance with Applicable Laws............................ 7
3.4 Copyrights, Patents, Trademarks and Licenses............... 7
3.5 No Conflict................................................ 7
3.6 No Litigation, Claims or Proceedings....................... 7
3.7 Correctness of Financial Statements........................ 7
3.8 No Subsidiaries............................................ 7
3.9 Environmental Matters...................................... 7
3.10 No Event of Default........................................ 7
3.11 Full Disclosure............................................ 8
ARTICLE 4 - CONDITIONS PRECEDENT........................................ 8
4.1 Conditions to First Loan................................... 8
4.2 Conditions to All Loans.................................... 9
ARTICLE 5 - AFFIRMATIVE COVENANTS....................................... 9
5.1 Notice to Lender........................................... 9
5.2 Financial Statements....................................... 10
5.3 Managerial Assistance from Lender.......................... 10
5.4 Existence.................................................. 11
5.5 Accounting Records......................................... 11
5.6 Compliance With Laws....................................... 11
5.7 Taxes and Other Liabilities................................ 11
5.8 Financial Covenants........................................ 11
5.9 Use of Proceeds............................................ 11
ARTICLE 6 - NEGATIVE COVENANTS.......................................... 11
6.1 Dividends.................................................. 12
6.2 Changes/Mergers............................................ 12
6.3 Sales of Assets............................................ 12
ARTICLE 7 - EVENTS OF DEFAULT........................................... 12
7.1 Events of Default.......................................... 12
ARTICLE 8 - GENERAL PROVISIONS.......................................... 13
8.1 Notices.................................................... 13
8.2 Binding Effect............................................. 13
8.3 No Waiver.................................................. 14
8.4 Rights Cumulative.......................................... 14
8.5 Unenforceable Provisions................................... 14
8.6 Accounting Terms........................................... 14
8.7 Indemnification; Exculpation............................... 14
8.8 Reimbursement.............................................. 14
8.9 Execution in Counterparts.................................. 15
8.10 Entire Agreement........................................... 15
8.11 Governing Law and Jurisdiction............................. 15
8.12 Waiver of Jury Trial....................................... 15
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LIST OF EXHIBITS
Exhibit "A" Form of Note
Exhibit "B" Form of Borrowing Request
Exhibit "C" Security Agreement (Equipment)
Exhibit "D" Form of Warrant
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LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of January 21, 1997, between CALICO
TECHNOLOGY, INC., a California corporation ("Borrower"), and VENTURE LENDING &
LEASING, INC., a Maryland corporation ("VLLI" or "Lender").
WHEREAS, Lender has agreed to make available to Borrower a loan facility
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE 1 -- DEFINITIONS
The definitions appearing in this Agreement or any supplement or addendum
to this Agreement, shall be applicable to both the singular and plural forms of
the defined terms:
"ADDITIONAL INTEREST" means, with respect to each Loan, an amount of
interest payable thereon, in addition to Basic Interest, payable on the
Maturity Date of such Loan in an amount equal to fifteen percent (15%) of the
original principal amount of such Loan.
"AFFILIATE" means any Person which directly or indirectly controls, is
controlled by, or is under common control with, Borrower. "Control,"
"controlled by" and "under common control with" means direct or indirect
possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided that control shall be conclusively presumed when any
Person or affiliated group directly or indirectly owns five percent or more of
the securities having ordinary voting power for the election of directors of a
corporation.
"AGREEMENT" means this Loan Agreement as it may be amended or supplemented
from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.), as amended.
"BASIC INTEREST" means the fixed rate of interest payable on the
outstanding balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds of a Loan
are disbursed by Lender.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City or San Francisco are authorized or
required by law to close.
"CLOSING DATE" means the date of this Agreement.
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"COLLATERAL" has the meaning ascribed thereto in the Security Agreement.
"COMMITMENT" means the obligation of Lender to make Loans to Borrower in
an aggregate, original principal amount not exceeding One Million Five Hundred
Thousand Dollars ($1,500,000).
"DEFAULT" means an event which with the giving of notice, passage of time,
or both would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.7.
"DESIGNATED RATE" means a fixed rate of interest per annum applicable to a
Loan calculated at (i) a twelve percent (12%) interest rate until the date the
first installment of Principal and Basic Interest is due and payable and (ii) a
seven percent (7.00%) interest rate thereafter.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, or safety matters.
"EQUIPMENT" means all of Debtor's specific equipment and software
identified and described on Schedule 1 attached to the Security Agreement and
incorporated herein by reference (as such Schedule may be amended or
supplemented from time to time) all replacements, parts, and accessions
thereto, and all proceeds thereof arising from the sale, lease, rental or other
use or disposition thereof, including all rights to payment with respect to
insurance or condemnation, returned premiums, or any cause of action relating
to any of the foregoing.
"EVENT OF DEFAULT" means any event described in Article 7.
"GAAP" means generally accepted accounting principles and practices
consistent with those principles and practices promulgated or adopted by the
Financial Accounting Standards Board and the Board of the American Institute of
Certified Public Accountants, their respective predecessors and successors.
Each accounting term used but not otherwise expressly defined herein shall have
the meaning given it by GAAP.
"INDEBTEDNESS" of any Person means at any date, without duplication and
without regard to whether matured or unmatured, absolute or contingent: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially
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similar securities; (vii) all obligations of such Person in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock, now or hereafter outstanding, except to the extent that
such obligations remain performable solely at the option of such Person; (viii)
all obligations to repurchase assets previously sold (including any obligation
to repurchase any accounts or chattel paper under any factoring, receivables
purchase, or similar arrangement); (ix) obligations of such Person under
interest rate swap, cap, collar or similar hedging arrangements; and (x) all
obligations of others of any type described in clause (i) through clause (ix)
above guaranteed by such Person.
"INTERIM PERIOD" means the period commencing on the Borrowing Date and
continuing on (i) the first day of the fourth (4th) month immediately following
the Borrowing Date, if the Borrowing Date is the first day of a calendar month,
or (ii) the first day of the fifth (5th) month immediately following the
Borrowing Date if the Borrowing Date is other than the first day of a Calendar
month.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before
any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
of relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"LIEN" means any voluntary or involuntary security interest, mortgage,
pledge, claim, charge, encumbrance, title retention agreement, or third party
interest, covering all or any part of the property of Borrower or any other
Person.
"LOAN" means an extension of credit by Lender under Section 2 of this
Agreement.
"LOAN DOCUMENTS" means, individually and collectively, this Agreement,
each Note, the Security Agreement and any other security or pledge
agreement(s), and all other contracts, instruments, addenda and documents
executed in connection with this Agreement or the extensions of credit which
are the subject of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a
material adverse change in, or a material adverse effect upon, the operations,
business, properties, or condition (financial or otherwise) of Borrower; (b) a
material impairment of the ability of Borrower to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against Borrower
of any Loan Document.
"MATURITY DATE" means, with regard to each Note, the date on which payment
of all outstanding principal and accrued interest, including Additional
Interest, is due, whether at stated maturity or by acceleration.
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"NOTE" means a promissory note substantially in the form of Exhibit "A"
hereto, executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all advances, debts, liabilities, obligations
covenants and duties arising under any Loan Document, owing by Borrower to
Lender, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising.
"PERMITTED LIENS" means the following:
(a) liens and security interests existing as of the date hereof and
disclosed in the Schedule hereto;
(b) liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Lender's security
interests;
(c) liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons or entities imposed without
action of such parties, provided that the payment thereof is not yet required;
(d) liens incurred or deposits made in the ordinary course of Borrower's
business in connection with workers's compensation, unemployment insurance,
social security and other like laws;
(e) liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default hereunder; and
(f) easements, reservations, rights-of-way, restrictions, minor defects
or irregularities in titles and other similar charges or encumbrances affecting
real property not interfering in any material respect with the ordinary conduct
of Borrower's business.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly underwritten
public offering of Borrower's common stock with aggregate proceeds of not less
than $20,000,000 (prior to underwriting expenses and commissions).
"RELATED PERSON" means any Affiliate of Borrower, or any officer,
employee, director or shareholder of Borrower or any Affiliate.
"SECURITY AGREEMENT" means the Security Agreement substantially in the form
of Exhibit "C" hereto, executed by Borrower.
"TERMINATION DATE" means the earlier of: (a) the date Lender accelerates
the Loan pursuant to the rights of Lender under Article 7, or (b) June 30, 1998.
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"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of this
Agreement, Lender agrees to make term loans to Borrower from time to time from
the Closing Date and to, but not including, the Termination Date in an
aggregate principal amount not exceeding the Commitment for purposes of
financing Borrower's acquisition of Equipment. The Commitment is not a
revolving credit commitment, and Borrower shall not have the right to repay and
reborrow hereunder.
2.2 LIMITATION ON LOANS. Each Loan shall be in an amount not to exceed
one hundred percent (100%) of the amount paid or payable by Borrower to a
non-affiliated manufacturer, vendor or dealer for an item of Equipment as shown
on an invoice therefor (excluding any commissions and any portion of the
payment which relates to the servicing of the equipment and sales taxes payable
by Borrower upon acquisition, and delivery charges). Lender shall not be
obligated to make any Loan under its Commitment if at the time of or after
giving effect to the proposed Loan Lender would no longer qualify as: (A) a
"venture capital operating company" under U.S. Department of Labor Regulations
Section 2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended;
and (B) a "business development company" under the provisions of federal
Investment Company Act of 1940, as amended, and (C) a "regulated investment
company" under the provisions of the Internal Revenue Code of 1986, as amended.
Each Loan requested by Borrower to be made on a single Business Day shall be
for a principal amount of Fifty Thousand Dollars ($50,000) or a multiple
thereof, except to the extent the remaining Commitment is a lesser amount. Up
to fifty percent (50%) of the Loans may be used to finance software.
2.3 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by a
separate Note payable to the order of Lender substantially in the form of
Exhibit "A" to this Agreement, in the total principal amount of the Loan. Each
Note shall be payable as follows: Principal and Basic Interest shall be paid in
thirty six (36) equal and successive monthly payments, in advance, beginning on
the forth full month following the Borrowing Date and continuing on the first
Business Day of each Month thereafter; provided, that if the Borrowing Date of
a Loan is not the first day of a month, then (i) the 36th-month amortization
period shall commence on the first day of the fifth (5th) month following the
Borrowing Date, and (ii) Borrower shall pay to Lender, in advance on the
Borrowing Date a payment of Interim Period Interest that will accrue on such
Loan from the Borrowing Date through the last day of such month. Borrower shall
also prepay on the Borrowing Date the last amortization installment payment.
The Additional Interest on each Loan shall be paid on the first Business Day of
the forty first (41st) full month after the Borrowing Date of such Loan. The
payment of amortization installments of principal of and interest on a Loan in
advance results in a higher effective rate of interest than the stated
Designated Rate applicable to such Loan.
2.4 PROCEDURES FOR BORROWING.
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(a) Borrower shall give Lender at least five (5) Business Days'
prior to a proposed Borrowing Date written notice of any request for borrowing
hereunder (a "Borrowing Request"). Each Borrowing Request shall be in
substantially the form of Exhibit "B" hereto, shall be executed by the chief
financial officer of Borrower, and shall state how much is requested, and shall
be accompanied by copies of invoices for the Equipment to be financed and such
additional information and documentation as Lender may deem reasonably
necessary to determine whether the proposed borrowing will comply with the
limitations in Section 2.2. To the Borrower's best knowledge after due inquiry
of its senior officers, the Borrowing Request shall also certify that all
Equipment to be financed thereby is owned by Borrower free and clear of all
Liens except in favor of Lender.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing
Date, if Borrower has satisfied the conditions precedent in Article 4, Lender
shall make the Loan available to Borrower in immediately available funds.
2.5 INTEREST. Basic Interest on the outstanding principal balance of the
each Loan shall accrue daily from the Borrowing Date until the Maturity Date at
the Designated Rate. On the Maturity Date of a Loan, Borrower shall pay the
Additional Interest thereon.
2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and
fees under this Agreement and any Loan Document, shall be calculated for actual
days elapsed on the basis of a 360-day year, which results in higher interest,
charge or fee payments that if a 365-day year were used. In no event shall
Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest with
respect to any Loan shall bear interest from their respective maturities,
whether scheduled or accelerated, at the Designated Rate for such Loan plus
four percent (4.00%) per annum, until paid in full, whether before or after
judgment (the "Default Rate"). Borrower shall pay such interest on demand.
2.8 LENDER'S RECORDS. Principal, Basic Interest, Additional Interest and
all other sums owed under any Loan Document shall be evidenced by entries in
records maintained by Lender for such purpose. Each payment on and any other
credits with respect to principal, Basic Interest, Additional Interest and all
other sums outstanding under any Loan Document shall be evidenced by entries
in such records. Absent manifest error, Lender's records shall be conclusive
evidence thereof.
2.9 SECURITY. As security for all Obligations to Lender, Borrower shall
grant concurrently to Lender, or ensure that Lender is concurrently granted,
perfected security interests of first priority in all of the Equipment and other
Collateral pursuant to the Security Agreement, subject only to Permitted Liens.
2.10 ISSUANCE OF WARRANT TO LENDER. As additional consideration for the
commitment of the Loans under this Agreement, upon the making of, Lender shall
be entitled to receive a warrant to purchase a number of shares of Series B
Preferred Stock of Borrower ("Warrant Shares") with an aggregate
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initial exercise price of $56,000 determined on the basis of a per share
exercise price of $2.40. The warrant issued under this Agreement shall be in
substantially the form attached hereto as Exhibit "D"; shall be transferable by
Lender, subject to compliance with applicable securities laws; shall expire not
earlier than November 21, 2004; and shall include piggy-back registration
rights, "net issuance" provisions, and anti-dilution protections reasonably
satisfactory to Lender and its counsel.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that as of the Closing Date and each
Borrowing Date:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and
validly existing in good standing under the laws of California, and is duly
qualified to conduct business and is in good standing in each other
jurisdiction where the nature of its business requires it to be qualified,
except that the failure to so qualify would have a Material Adverse Effect on
Borrower.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery
and performance of all Loan Documents executed by Borrower are within
Borrower's powers, have been duly authorized, and are not in conflict with
Borrower's articles of incorporation or by-laws, or the terms of any charter or
other organizational document of Borrower, as amended from time to time; and
all such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully
conduct the business in which it is engaged, and to any sales, leases or the
furnishing of services by Borrower, including without limitation those
requiring consumer or other disclosures, the noncompliance with which would
have a Material Adverse Effect.
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.
(a) To Borrower's best knowledge, borrower owns or is licensed or
otherwise has the right to use all of the patents, trademarks, service marks,
trade names, copyrights, contractual franchises, authorizations and other
rights that are reasonably necessary for the operation of its business, without
conflict with the rights of any other Person.
(b) No slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by Borrower infringes upon any rights held by any other Person.
(c) No claim or litigation regarding any of the foregoing is pending
or to Borrower's knowledge, threatened, which, in earlier case, could
reasonably be expected to have a Material Adverse Effect.
3.5 NO CONFLICT. The execution, delivery, and performance of Borrower of
all Loan Documents are not in conflict with any law, rule, regulation,
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order or directive, or any indenture, agreement, or undertaking to which
Borrower is a party or by which Borrower may be bound or affected.
3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened against or affecting Borrower or its property.
3.7 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of September 30, 1996; and, since that date there has
been no Material Adverse Change.
3.8 NO SUBSIDIARIES. Borrower is not a majority owner of or in a control
relationship with any other business entity.
3.9 ENVIRONMENTAL MATTERS. Borrower is in compliance with Environmental
Laws, except to the extent a failure to be in such compliance could not
reasonably be expected to have a Material Adverse Effect on Borrower's
operations, properties or financial condition.
3.10 NO EVENT OF DEFAULT. No Default or Event of Default has occurred and
is continuing.
3.11 FULL DISCLOSURE. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified
in Section 4.2, subject to the fulfillment of the following conditions and to
the receipt by Lender of the documents described below, duly executed and in
form and substance satisfactory to Lender and its counsel:
(a) RESOLUTIONS. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) INCUMBENCY AND SIGNATURES. A certificate of the secretary of
Borrower certifying the names of the officer or officers of Borrower authorized
to sign the Loan Documents, together with a sample of the true signature of
each such officer.
(c) OPINION OF COUNSEL. The opinion of Xxxx, Xxxx Xxxx &
Freidenrich, counsel for Borrower, together with any opinions, certificates and
other matters on which such opinion relies.
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(d) ARTICLES AND BY-LAWS. Certified copies of the Articles
of Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) THE AGREEMENT. A counterpart of this Agreement with all
schedules completed and attached thereto, and disclosing such information as is
acceptable to Lender.
(f) SECURITY AGREEMENT. A Security Agreement executed by
Borrower, substantially in the form of Exhibit "C", together with filing copies
(or other evidenced of filing satisfactory to Lender and its counsel) of such
Uniform Commercial Code financing statements, collateral assignments and
termination statements, with respect to the Collateral (as defined in such
Security Agreement) as Lender shall request.
(g) LIEN SEARCHES. Uniform Commercial Code lien, judgment,
bankruptcy and tax lien searches of borrower from the California Secretary of
State, as of a date reasonably satisfactory to Lender and its counsel.
(h) GOOD STANDING CERTIFICATE. A Certificate of Good
Standing as of a date acceptable to Lender with respect to Borrower from the
California Secretary of State.
(i) WARRANT. A warrant issued by Borrower to Lender
exercisable for the Warrant Shares, as described in Section 2.11 hereof.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its
initial Loan and each subsequent Loan is subject to the following further
conditions precedent that:
(a) NO DEFAULT. No Default of Event of Default has
occurred and is continuing or will result from the making of any such Loan,
and the representations and warranties of Borrower contained in Article 3 of
this Agreement are true and correct as of the Borrowing Date of such Loan.
(b) NO ADVERSE MATERIAL CHANGE. No Material Adverse Change
shall have occurred since the date of the most recent financial statements
submitted to Lender.
(c) NOTE. Borrower shall have delivered an executed Note
evidencing such Loan, in form and substance satisfactory to Lender.
(d) BORROWING REQUEST. Borrower shall have delivered to
Lender a Borrowing request for such Loan.
(e) VCOC LIMITATION. The making of the Loan will not result
in a violation of the condition applicable to lender described in Section 2.2.
ARTICLE 5 -- AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of
all obligations to Lender, Borrower will:
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5.1 NOTICE TO LENDER. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding
affecting Borrower where the amount claimed against Borrower is Fifty Thousand
Dollars ($50,000) or more, or where the granting of the relief requested would
have a Material Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority.
(c) The occurrence of any Event of Default or any event which could
have a Material Adverse Effect on Lenders Collateral.
(d) Any change in the location of any of Borrower's places of
business at least thirty (30) days in advance of such change, or of the
establishment of any new, or the discontinuance of any existing, place of
business.
(e) Any other matter which has resulted or might result in a
Material Adverse Change.
5.2 FINANCIAL STATEMENTS. Deliver to Lender or cause to be delivered to
Lender, in form and detail satisfactory to Lender the following financial
information, which Borrower warrants shall be accurate and complete in all
material respects:
(a) MONTHLY FINANCIAL STATEMENTS. As soon as available but no later
than thirty (30) days after the end of each month, Borrower's balance sheet as
of the end of such period, and Borrower's income statement for such period and
for that portion of Borrower's financial reporting year ending with such
period, prepared and attested by a responsible financial officer of Borrower as
being complete and correct and fairly presenting Borrower's financial condition
and the results of Borrower's operations. After a Qualified Public Offering,
the foregoing interim financial statements shall be delivered no later than 45
days after each fiscal quarter and for the quarter-annual fiscal period then
ended.
(b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no later
than ninety (90) days after and as of the end of each financial reporting year,
a complete copy of Borrower's audit report, which shall include balance sheet,
income statement, statement of changes in equity and statement of cash flows
for such year, prepared and certified by an independent certified public
accountant selected by Borrower and reasonably satisfactory to Lender (the
"Accountant"). The Accountant's certification shall not be qualified or limited
due to a restricted or limited examination by the Accountant of any material
portion of Borrower's records or otherwise.
(c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of
each set of financial statements referred to in paragraphs (a) and (b) above, a
certificate of the chief financial officer of Borrower stating whether any
Default or Event of Default exists on the date of such certificate, and if so,
setting forth the details thereof and the action which Borrower is taking or
proposes to take with respect thereto.
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(d) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES. Promptly after
sending, issuing, making available, or filing, copies of all statements
released to any news media for publication, all reports, proxy statements, and
financial statements that Borrower sends or makes available to its
stockholders, and, not later than five (5) days after actual filing or the date
such filing was first due, all registration statements and reports that
Borrower files or is required to file with the Securities and Exchange
Commission.
(e) OTHER INFORMATION. Such other statements, lists of property and
accounts, budgets, forecasts, reports, or other information as Lender may
reasonably from time to time request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a "venture
capital operating company" to participate in, and influence the conduct of
management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. Section 2510.3-101(d), and:
(a) Permit Lender to make available to Borrower, at no cost to
Borrower, "significant managerial assistance", as defined in Section 2(a)(47)
of the Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors,
employees or affiliates, (ii) Borrower's allowing Lender to provide
recommendations of prospective candidates for election to Borrower's Board of
Directors, or (iii) Lender, at Borrower's request, seeking the services of
third-party consultants to aid Borrower with respect to its management and
operations;
(b) Permit Lender to make available consulting and advisory services
to officers of Borrower regarding Borrower's equipment acquisition and
financing plans, and such other matters affecting the business, financial
condition and prospects of Borrower as Lender shall reasonably deem relevant;
and
(c) If Lender reasonably believes that financial or other
developments affecting Borrower have impaired or are likely to impair
Borrower's ability to perform its obligations under this Agreement, permit
Lender reasonable access to Borrower's management and/or Board of Directors and
opportunity to present Lender's views with respect to such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form
of business, and all rights and privileges necessary or desirable in the normal
course of its business.
5.5 ACCOUNTING RECORDS. Maintain adequate books, accounts and records,
and prepare all financial statements in accordance with GAAP, and in compliance
with the regulations of any governmental or regulatory authority having
jurisdiction over Borrower or Borrower's business; and permit employees or
agents of Lender at such reasonable times as Lender may request, at Borrower's
expense, to inspect Borrower's properties, and to examine, and make copies and
memoranda of Borrower's books, accounts and records.
5.6 COMPLIANCE WITH LAWS. Materially comply with all laws (including
Environmental Laws), rules, regulations applicable to, and all orders and
directives of any governmental or regulatory authority having jurisdiction
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over, Borrower or Borrower's business, and with all material agreements to
which Borrower is a party, except to extent a failure to so comply could not be
reasonably expected to have a Material Adverse Effect on Borrower's operations,
properties or financial conditions.
5.7 TAXES AND OTHER LIABILITIES. Pay all Borrower's obligations when due;
pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.8 FINANCIAL COVENANTS. Comply with the terms of all financial covenants
contained in any addendum to this Agreement.
5.9 USE OF PROCEEDS. Use the proceeds of Loans only as set forth in
Article 2 of this Agreement; and not directly or indirectly to purchase or
carry any margin stock, as defined from time to time by the Board of Governors
of the Federal Reserve System in Federal Regulation U.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all
obligations to Lender; Borrower will not:
6.1 DIVIDENDS. Except after a Qualified Public Offering, pay any
dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except dividends
or other distributions solely of capital stock of Borrower and departed
Employee Stock repurchases in the ordinary course of business.
6.2 CHANGES/MERGERS. Liquidate or dissolve, or enter into any
consolidation, merger, partnership, joint venture or other combination, except
for recorporation mergers and joint ventures, strategic alliances, licensing
and similar arrangements customary in Borrower's industry for businesses in the
development stage of Borrower and which do not require Borrower to assume or
otherwise become liable for the obligations of any third party not directly
related to or arising out of such arrangement or, without the prior written
consent of Lender, which shall not be unreasonably withheld or delayed require
Borrower to transfer ownership of assets to such joint venture or other entity;
prepay any subordinated debt, debt for borrowed money, or debt secured by any
permitted Lien, or enter into or modify any agreement as a result of which the
terms of payment of any such debt are waived and modified.
6.3 SALES OF ASSETS. Sell, transfer, lease or otherwise dispose of any of
Borrower's assets except for fair consideration and in the ordinary course of
its business; or enter into any sale or leaseback agreement covering any of
Borrower's fixed or capital assets financed hereunder.
ARTICLE 7 - EVENT OF DEFAULT
7.1 EVENTS OF DEFAULT. Upon the occurrence and during the continuation of
any Default, the obligation of Lender to make any additional Loan shall be
suspended. The occurrence of any of the following shall terminate any
obligation of Lender to make any additional Loan; and shall, at
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the option of Lender (1) make all sums of Basic Interest, principal, Additional
Interest and any other amounts owing under any Loan Documents immediately due
and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor or any other notices or demands,
and (2) give Lender the right to exercise any other right or remedy provided by
contract to applicable law:
(a) Borrower shall fail to make any payment of principal or interest
under this Agreement, or to pay any fees or other charges when due under any
Loan Document, and such failure continues for three (3) Business Days or more
after the same first becomes due; or an Event of Default as defined in any other
Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower shall prove to have been
false or misleading in any material respect when made or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they become
due or shall commence any Insolvency Proceeding with respect to itself; an
involuntary Insolvency Proceeding shall be filed against Borrower, or a
custodian, receiver, trustee, assignee for the benefit of creditors, or other
similar official, shall be appointed to take possession, custody or control of
the properties of Borrower, and such involuntary Insolvency Proceeding,
petition or appointment is acquiesced to by Borrower or is not dismissed within
sixty (60) days; or the dissolution or termination of the business of Borrower.
(d) Borrower shall be in default beyond any applicable period of
grace or cure under any other agreement involving the borrowing of money, the
purchase of property, the advance of credit or any other monetary liability of
any kind to Lender or to any Person which results in the acceleration of
payment of such obligation in an amount in excess of One Hundred Thousand
Dollars ($100,000).
(e) Any governmental or regulatory authority shall take any judicial
or administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the reasonable
judgment of Lender, might have a Material Adverse Effect.
(f) Any sale, transfer or other disposition of all or a substantial
or material part of the assets of Borrower, including without limitation to any
trust or similar entity, shall occur.
(g) Any judgment(s) singly or in the aggregate in excess of One
Hundred Thousand Dollars ($100,000) or more not covered by insurance shall be
entered against Borrower which remain unsatisfied, unvacated or unstayed
pending appeal for twenty (20) or more days after entry thereof.
(h) Borrower shall fail to perform any of its duties or obligations
under any Loan Document not specifically referenced in this Article 7.
ARTICLE 8 - GENERAL PROVISIONS
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8.1 NOTICES. Any notice given by any party under any Loan Document shall
be in writing and personally delivered, sent by overnight courier, or United
States mail, postage prepaid, or sent by facsimile, to be promptly confirmed in
writing, or other authenticated message, charges prepaid, to the other party's
or parties' addresses shown on the signature pages hereto. Each party may
change the address or facsimile number to which notices, requests and other
communications are to be sent by giving written notice of such change to each
other party. Notice given by hand delivery shall be deemed received on the date
delivered; if sent by overnight courier, on the next Business Day after
delivery to the courier service; if by first class mail, on the third Business
Day after deposit in the U.S. Mail; and if by telecopy, on the date of
transmission.
8.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer Borrower's rights or
obligations under any Loan Document without Lender's prior written consent.
Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
obligations under the Loan Documents. In connection with any of the foregoing,
Lender may disclose all documents and information which Lender now or hereafter
may have relating to the Loans, Borrower, or its business.
8.3 CONFIDENTIALITY. Lender agrees to hold in confidence any
confidential information it receives from Borrower pursuant hereto, except for
disclosure: (a) to legal counsel and accountants for Lender or any assignee;
(b) to other professional advisors to Lender or any assignee; (c) to regulatory
officials having jurisdiction over Lender or any assignee; (d) as required by
law or legal process or in connection with any legal proceeding to which Lender
(or any assignee) and Borrower are adverse parties; and (e) in connection with
a disposition or proposed disposition in any or all of Lender's rights and
benefits hereunder. For purposes of this section, "confidential information"
shall mean any information respecting Borrower other than (i) information which
is or becomes generally available to the public other than as a result of a
disclosure by Lender or any assignee in violation of this section; (ii)
information which becomes available to Lender or any assignees from any other
source (other than Borrower) which is not known by Lender or such assignee to
be bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligations of confidentiality to Borrower with respect to the
information made available; and (iii) information known by Lender or any
assignee on a non-confidential basis prior to its disclosure to Lender or the
assignee by Borrower.
8.4 NO WAIVER. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power,
right, or privilege under any Loan Document shall operate as a waiver thereof,
and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right
or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after
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default, and such acceptance shall not constitute a waiver of said default or
an extension of the Maturity Date unless Lender agrees otherwise in writing.
8.5 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
8.6 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document executed
by Borrower which is prohibited or unenforceable in any jurisdiction, shall be
so only as to such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of any such Loan Document
shall remain valid and enforceable.
8.7 ACCOUNTING TERMS. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined
and prepared in accordance with GAAP.
8.8 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend
and indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, reasonable attorneys' fees and costs) and other
amounts incurred by Lender and each such Agent, arising from (i) the matters
contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; provided, however, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This indemnification shall survive the payment and satisfaction of all of
Borrower's obligations to Lender.
8.9 REIMBURSEMENT. Borrower shall reimburse Lender for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation, negotiation, amendment, interpretation and enforcement of the Loan
Documents, including without limitation during any workout, attempted workout,
and/or in connection with the rendering of legal advice as to Lender's rights,
remedies and obligations under the Loan Documents, (b) collecting any sum which
becomes due Lender under any Loan Document, (c) any proceeding for declaratory
relief, any counterclaim to any proceeding, the foregoing notwithstanding,
Borrower shall not be responsible for more than $250 of Lender's fees and
expenses in documenting the credit facility or any appeal, or (d) the
protection, preservation or enforcement of any rights of Lender. For the
purposes of this section, attorneys' fees shall include, without limitation,
fees incurred in connection with the following: (1) contempt proceedings; (2)
discovery; (3) any motion, proceeding or other activity of any kind in
connection with an Insolvency Proceeding; (4) garnishment, levy, and debtor and
third party examinations; and (5) postjudgment motions and proceedings of any
kind, including without limitation any activity taken to collect or enforce
any judgment. All of the foregoing costs and expenses shall be payable upon
demand by Lender, and if not paid within forty-five (45) days of presentation
of invoices shall bear interest at the highest applicable Default Rate.
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8.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts which, when taken together, shall constitute but one
agreement.
8.11 ENTIRE AGREEMENT. The Loan Documents are intended by the
parties as the final expression of their agreement and therefore contain the
entire agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
8.12 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN, CENTRAL OR
SOUTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. BORROWER AND LENDER EACH
WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
8.13 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY, WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATION TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
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IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement as of the date set forth in the preamble.
Addresses for Notices: CALICO TECHNOLOGY, INC.
Calico Technology, Inc. By: /s/ XXXXXX XXXXX
0 Xxxxx Xxxxxx Xxxxxx ------------------------------------
Xxx Xxxx, XX 00000 Name: Xxxxxx Xxxxx
Attn: Xxxxxx Xxxxx Its: President & CEO
Venture Lending & Leasing, Inc. VENTURE LENDING & LEASING, INC.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxxxx By: /s/ XXXXXXXX X. XXXXXXXXX
President & Chief Financial Officer ------------------------------------
Fax No. 000-000-0000 Name: Xxxxxxxx X. Xxxxxxxxx
Its: President
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