EXHIBIT 10.44
This LOAN AND SECURITY AGREEMENT dated February 15, 2002, between
SILICON VALLEY BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 with a loan production office at 0000 Xxxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, XX 00000 and INFONOW CORPORATION ("Borrower"), whose address is
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, XX 00000 provides the terms on which
Bank will lend to Borrower and Borrower will repay Bank. The parties agree as
follows:
1 ACCOUNTING AND OTHER TERMS
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Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.
2 LOAN AND TERMS OF PAYMENT
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2.1 Promise to Pay.
Borrower promises to pay Bank the unpaid principal amount of all
Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding the lesser of (A) the
Committed Revolving Line minus all amounts for services utilized under the Cash
Management Services Sublimit or (B) the Borrowing Base. Amounts borrowed under
this Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
(d) If Borrower's Obligations under Section 2.1.1 exceed the lesser of
either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess.
2.1.2 Cash Management Services Sublimit.
Borrower may use up to $200,000 for Bank's Cash Management Services,
which may include merchant services, direct deposit of payroll, business credit
card, and check cashing services identified in various cash management services
agreements related to such services (the "Cash Management Services"). Such
aggregate amounts utilized under the Cash Management Services Sublimit will at
all times reduce the amount otherwise available to be borrowed under the
Committed Revolving Line. Any amounts Bank pays on behalf of Borrower or any
amounts that are not paid by Borrower for any Cash Management Services will be
treated as Advances under the Committed Revolving Line and will accrue interest
at the rate for Advances.
2.1.3 Equipment Facility.
(a) Subject to the terms and conditions of this Agreement, Bank agrees
to lend to Borrower, from time to time prior to the Commitment Termination Date,
equipment advances (each an "Equipment Advance" and collectively the "Equipment
Advances") in an aggregate amount not to exceed the Committed Equipment Line.
When repaid, the Equipment Advances may not be re-borrowed. The proceeds of the
Equipment Advances will be used solely to purchase Eligible Equipment or to
reimburse Borrower for the purchase of Eligible Equipment purchased within 90
days of the Equipment Advance. Each Equipment Advance shall be considered a
promissory note evidencing the amounts due hereunder for all purposes. Each
Equipment Advance may not exceed 100% of the Original Stated Cost, provided that
for the first Equipment Advance only, the amount thereof may equal the current
net book value of the unencumbered Eligible Equipment which will be subject
thereto and which is acceptable to Bank and was purchased more than 90 days
prior to the date of such Equipment Advance. For purposes of this Section, the
minimum amount of each Equipment Advance is $50,000 and the maximum number of
Equipment Advances that will be made is 8.
(b) To obtain an Equipment Advance, Borrower will deliver to Bank a
completed supplement in substantially the form attached as Exhibit E ("Loan
Supplement") signed by a Responsible Officer or his or her designee, copies of
invoices for the Financed Equipment and such additional information as Bank may
request at least five (5) Business Days before the proposed funding date (the
"Funding Date"). On each Funding Date, Bank will specify in the Loan Supplement
for each Equipment Advance, the Basic Rate, the Loan Factor, and the Payment
Dates. If Borrower satisfies the conditions of each Equipment Advance specified
herein, Bank will disburse such Equipment Advance by internal transfer to
Borrower's deposit account with Bank.
(c) Bank's obligation to lend hereunder shall terminate on the earlier
of (i) the occurrence and continuance of an Event of Default, or (ii) the
Commitment Termination Date.
2.2 Interest Rate and Payments on Committed Revolving Line.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 1.25 percentage points above the Prime
Rate. After an Event of Default, Obligations accrue interest at 5 percent above
the rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable
on the same date of each month as the date of the month this Agreement is dated.
Payments received after 12:00 noon Pacific time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest accrue.
2.3 Interest Rate and Payments on Committed Equipment Line.
(a) Principal and Interest Payments On Payment Dates. Borrower will
repay the Equipment Advances on the terms provided in the Loan Supplement.
Borrower will make payments monthly in advance of principal and accrued interest
for each Equipment Advance (collectively, "Scheduled Payments"), on the first
Business Day of the month following the Funding Date (or commencing on the
Funding Date if the Funding Date is the first Business Day of the month) with
respect to such Equipment Advance and continuing thereafter during the Repayment
Period on the first Business Day of each calendar month (each a "Payment Date"),
in an amount equal to the Loan Factor multiplied by the Loan Amount for such
Equipment Advance as of such Payment Date. All unpaid principal and accrued
interest is due and payable in full on the last Payment Date with respect to
such Equipment Advance. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day. An
Equipment Advance may only be prepaid in accordance with Section 2.3 (e).
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(b) Interest Rate. Borrower will pay interest on the Payment Dates (as
described above) at the per annum rate of interest equal to the Basic Rate. Any
amounts outstanding during the continuance of an Event of Default shall bear
interest at a per annum rate equal to the Basic Rate plus five percent (5%). If
any change in the law increases Bank's expenses or decreases its return from the
Equipment Advances, Borrower will pay Bank upon request the amount of such
increase or decrease.
(c) Interim Payment. In addition to the Scheduled Payments, on the
Funding Date for each Equipment Advance (unless the Funding Date is the first
Business Day of the month) Borrower shall pay to Bank, on behalf of Bank, an
amount (the "Interim Payment") equal to (i) the initial Equipment Advance
multiplied by (ii) the Basic Rate divided by (iii) 360 days and then multiplied
by (iv) the number of days from the actual Funding Date of the Equipment Advance
until the first day of the month following such Equipment Advance.
(d) Mandatory Prepayment Upon an Acceleration. If the Equipment
Advances are accelerated following the occurrence of an Event of Default, then
Borrower will immediately pay to Bank (i) all unpaid Scheduled Payments
(including principal and interest) with respect to each Equipment Advance, (ii)
all remaining Scheduled Payments (including principal and interest), (iii) all
unpaid accrued interest, including the default rate of interest, to the date of
the prepayment, and (iv) all other sums, if any, that shall have become due and
payable with respect to any Equipment Advance.
(e) Permitted Prepayment of Loans. Borrower shall have the option to
prepay all, but not less than all, of the Equipment Advances advanced by Bank
under this Agreement, provided Borrower (i) provides written notice to Bank of
its election to prepay the Equipment Advances at least ten (10) days prior to
such prepayment, and (ii) pays, on the date of the prepayment (A) all unpaid
Scheduled Payments (including principal and interest) with respect to each
Equipment Advance; (B) all unpaid principal contained in the remaining Scheduled
Payments; (C) all unpaid accrued interest to the date of the prepayment; and (D)
all other sums, if any, that shall have become due and payable hereunder with
respect to this Agreement.
2.4 Authorization to Debit Accounts.
Bank may debit any of Borrower's deposit accounts including Account
Number ____________________________ for principal and interest payments
currently owing to Bank. Bank will promptly notify Borrower when it debits
Borrower's accounts. These debits are not a set-off.
2.5 Fees.
(a) Commitment Fees. Borrower will pay to Bank a fully earned,
non-refundable commitment fee of $5,000.00 in connection with the Committed
Revolving Line and a fully-earned, non-refundable commitment fee of $5,000.00 in
connection with the Committed Equipment Line, each payable on the Closing Date.
(b) Bank Expenses. Borrower will pay to Bank all Bank Expenses
(including reasonable attorneys' fees and reasonable expenses), as defined in
this Agreement, incurred through and after the date of this Agreement, are
payable when due.
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3 CONDITIONS OF LOANS
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3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees it
requires.
3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
4.2 Authorization to File.
Borrower authorizes Bank to file financing statements without notice
to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5 REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have
been duly authorized, and do not conflict with Borrower's formation documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
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5.2 Collateral.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. Borrower has no other deposit account, other than the deposit
accounts described in the Schedule. The Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. The Collateral is not in the possession of any
third party bailee (such as at a warehouse). In the event that Borrower, after
the date hereof, intends to store or otherwise deliver the Collateral to such a
bailee, then Borrower will receive the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Bank. Borrower has no notice of any actual or imminent
Insolvency Proceeding of any account debtor whose accounts are an Eligible
Account in any Borrowing Base Certificate. To the knowledge of Borrower,
Inventory is in all material respects of good and marketable quality, free from
material defects. Borrower is the sole owner of the Intellectual Property,
except for non-exclusive licenses granted to its customers in the ordinary
course of business. Each Patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and no legal proceeding has been initiated against Borrower claiming that
any part of the Intellectual Property violates the rights of any third party.
5.3 Litigation.
Except as shown in the Schedule or in Borrower's reports filed with
the Securities and Exchange Commission, copies of which have been provided to
Bank, there are no actions or proceedings pending or, to the knowledge of
Borrower's Responsible Officers, threatened by or against Borrower or any
Subsidiary in which a likely adverse decision could reasonably be expected to
cause a Material Adverse Change.
5.4 No Material Adverse Change in Financial Statements.
All consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any Material Adverse Change in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 Solvency.
Borrower is able to pay its debts (including trade debts) as they
become due.
5.6 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors). Borrower
has complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and extensions and paid, or made adequate provision to pay, all
material taxes, except those being contested in good faith with adequate
reserves under GAAP. To the knowledge of Borrower, Borrower and each Subsidiary
has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.
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5.7 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 Full Disclosure.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ and could differ substantially from the projected and
forecasted results.
6 AFFIRMATIVE COVENANTS
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Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a Material Adverse Change to Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a Material Adverse Change to Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) a prompt report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of $100,000 or
more; (iv) other financial information Bank reasonably requests; and (v) prompt
notice of any material change in the composition of the Intellectual Property,
including any subsequent ownership right of Borrower in or to any Copyright,
Patent or Trademark not shown in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that would cause a Material
Adverse Change in the value of the Intellectual Property.
(b) Within 30 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged listings of accounts receivable and accounts
payable and a schedule of deferred revenue.
(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit D.
(d) Borrower will allow Bank to audit Borrower's Collateral at
Borrower's expense. Such audits will be conducted no more often than once every
year after the initial audit, unless an Event of Default has occurred and is
continuing.
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6.3 Inventory; Returns.
Borrower will keep all Inventory, if any, in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its account debtors will follow Borrower's customary practices as they exist
at execution of this Agreement. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims, that involve more than $50,000.
6.4 Taxes.
Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5 Insurance.
Borrower will keep its business and the Collateral insured for risks
and in amounts standard for Borrower's industry, and as Bank may reasonably
request. Insurance policies will be in a form, with companies, and in amounts
that are reasonably satisfactory to Bank in Bank's reasonable discretion. All
property policies will have a lender's loss payable endorsement showing Bank as
an additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 30 days
notice before canceling its policy. At Bank's request, Borrower will deliver a
certificate of insurance evidencing such coverage. If no Event of Default has
occurred and is continuing, proceeds payable under any casualty policy will, at
Borrower's option, be payable to Borrower to replace the property subject to the
claim, provided that any such replacement property shall be deemed Collateral in
which Bank has been granted a first priority security interest. If an Event of
Default has occurred and is continuing, then, at Bank's option, proceeds payable
under any policy will be payable to Bank on account of the Obligations.
6.6 Primary Accounts.
Borrower will maintain its primary banking relationship with Bank,
which relationship shall include Borrower maintaining account balances in any
accounts at or through Bank representing at least 85% of all account balances of
Borrower at any financial institution.
6.7 Financial Covenants.
Borrower will maintain as of the last day of each month:
(i) Liquidity Coverage. A ratio of unrestricted cash (and
equivalents) held at Bank plus all of Borrower's Accounts
divided by unpaid Equipment Advances plus any other
indebtedness owing to Bank of not less than 1.50 to 1.00.
(ii) EBITDA. A minimum amount of its earnings before interest,
taxes, depreciation and amortization of $60,000 calculated
for the previous 3 months as of the end of each month.
(iii) Maximum Pre-tax Loss. A monthly pre-tax loss not in excess
of $250,000 for the months of February, 2002 and March, 2002
and not in excess of $200,000 each month thereafter.
6.8 Registration of Intellectual Property Rights.
At such time as Borrower determines that it is appropriate to do so,
Borrower will register with the United States Patent and Trademark Office or the
United States Copyright Office Borrower's Intellectual Property that is
determined by Borrower to be material to Borrower's business and additional
Intellectual Property rights developed or acquired including significant
revisions or additions to or with any product before the sale or licensing of
the product to any third party.
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Borrower will (i) protect, defend and maintain the validity and
enforceability of Borrower's Intellectual Property and promptly advise Bank in
writing of any legal proceeding against Borrower for material infringements and
(ii) not allow any Intellectual Property that is determined by Borrower to be
material to Borrower's business to be abandoned, forfeited or dedicated to the
public without Bank's written consent, which consent shall not be unreasonably
withheld.
6.9 Further Assurances.
Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
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Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) of worn-out, damaged, or obsolete Equipment; or (iv) of
assets valued at less than $50,000 in aggregate.
7.2 Changes in Business, Ownership, or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership of greater than 25% (other
than by the sale of Borrower's equity securities in a public offering or to
venture capital investors so long as Borrower identifies the venture capital
investors or strategic investments prior to the closing of the investment).
Borrower will not, without at least 30 days prior written notice, relocate its
chief executive office or add any new offices or business locations in which
Borrower maintains or stores over $25,000 in Borrower's assets or property.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or permit
any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
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7.6 Distributions; Investments.
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
7.7 Transactions with Affiliates.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.8 Subordinated Debt.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 Compliance.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
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Any one of the following is an Event of Default:
8.1 Payment Default.
If Borrower fails to pay any of the Obligations within 3 days after
their due date. During any such 3 day period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 Covenant Default.
If Borrower does not perform any obligation in Section 6 or violates
any covenant in Section 7 or does not perform or observe any other material
term, condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or cannot
be cured after Borrower's attempts within 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not
more than 30 days) to attempt to cure the default. During the additional time,
the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
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8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations, other than due to general economic conditions, or (iii) is a
material impairment of the value of the Collateral or a negative change in the
priority of Bank's security interests in the Collateral; and the occurrence of
any one of which shall, for purposes of this Agreement, constitute a "Material
Adverse Change";
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could reasonably be expected to cause a Material
Adverse Change;
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $100,000 not
covered by insurance is rendered against Borrower and is unsatisfied and
unstayed for 10 days (but no Credit Extensions will be made before the judgment
is stayed or satisfied); or
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
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9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
10
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 Accounts Collection.
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
11
9.5 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and the Code, it is
not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to
the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other person. Borrower
bears all risk of loss, damage or destruction of the Collateral.
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right or
remedy is not an election, and Bank's waiver of any Event of Default is not a
continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
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All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE
--------------------
Colorado law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in the City and County of Denver, Colorado.
12 GENERAL PROVISIONS
------------------
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12
12.3 Time of Essence.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 Severability of Provision.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 Amendments in Writing, Integration.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
13
13 DEFINITIONS
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13.1 Definitions.
In this Agreement:
"Accounts" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the
Committed Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Basic Rate" is, as of the Funding Date, the per annum rate of
interest (based on a year of 360 days) equal to nine percent (9%).
"Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"Borrowing Base" is 75% of Eligible Accounts as determined by Bank
from Borrower's most recent Borrowing Base Certificate; provided, however, that
Bank may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which both the Bank and the Borrower are closed.
"Cash Management Services" are defined in Section 2.1.2.
"Closing Date" is the date of this Agreement.
"Code" is the Uniform Commercial Code, as applicable.
"Collateral" is the property described on Exhibit A.
"Commitment Termination Date" is February 15, 2003.
"Committed Equipment Line" is a Credit Extension of up to $1,000,000.
"Committed Revolving Line" is a Credit Extension of up to $1,000,000.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
14
"Copyrights" are all copyright rights, applications or registrations
and like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Advance, Equipment Advance or any other
extension of credit by Bank for Borrower's benefit.
"Current Assets" are amounts that under GAAP should be included on
that date as current assets on Borrower's consolidated balance sheet.
"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"Deferred Maintenance Revenue" is all amounts received in advance of
performance under maintenance contracts or support contracts and not yet
recognized as revenue.
"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, except for an
account debtor rated Baa or better by Xxxxx'x Investors Services, Inc.
or BBB or better by Standard & Poor's Corporation for which the
percentage may be 35%, for the amounts that exceed that percentage,
unless Bank approves in writing in advance;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States, unless the account debtor has
its principal place of business in Canada and is rated Baa or better
by Xxxxx'x Investors Services, Inc. or BBB or better by Standard &
Poor's Corporation (provided that the maximum advanced against such
Canadian Accounts may not exceed $200,000), or unless approved by Bank
on a case by case basis;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality of any
such entity;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on
approval, xxxx and hold, retainage, or other terms if account debtor's
payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank reasonably believes there may be a basis for
dispute (but only up to the disputed or claimed amount), or if the
Account Debtor is subject to an Insolvency Proceeding, or becomes
insolvent, or goes out of business; and
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
15
"Eligible Equipment" is general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, and, subject to the
limitations set forth below, Other Equipment that complies with all of
Borrower's representations and warranties to Bank and which is acceptable to
Bank in all respects. All Equipment financed with the proceeds of Equipment
Advances shall be new, provided that Bank, in its sole discretion, may finance
used equipment.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" is defined in Section 2.1.3.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"Financed Equipment" is defined in the Loan Supplement.
"Funding Date" is any date on which an Equipment Advance is made to or
on account of Borrower.
"GAAP" is generally accepted accounting principles.
"Guarantor" is any present or future guarantor of the Obligations
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations. Indebtedness does not include items that may become
mandated by law, ordinance or government agency.
"Insolvency Proceeding" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is:
(a) Copyrights (whether published of not), Trademarks, Patents, and
Mask Works including amendments, renewals, extensions, and all licenses or other
rights to use and all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to xxx and
collect damages for use or infringement of the intellectual property rights
above; and
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
16
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process of a tangible nature and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or later owned by or in the custody or
possession, actual or constructive, of Borrower, including inventory temporarily
out of its custody or possession or in transit and including returns on any
accounts or other proceeds (including insurance proceeds) from the sale or
disposition of any of the foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Amount" is the aggregate amount of the Equipment Advance.
"Loan Documents" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"Loan Factor" is the percentage which results from amortizing the
Equipment Advance over the Repayment Period, using the Basic Rate as the
interest rate.
"Loan Supplement" is attached as Exhibit E.
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change" is described in Section 8.3.
"Maturity Date" is, with respect to each Equipment Advance, the last
day of the Repayment Period for such Equipment Advance, or if earlier, the date
of acceleration of such Equipment Advance by Bank following an Event of Default.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Original Stated Cost" is (i) the original cost to the Borrower of the
item of new Eligible Equipment net of any and all freight, installation, tax or
(ii) the fair market value assigned to such item of used Eligible Equipment by
mutual agreement of Borrower and Bank at the time of making of the Equipment
Advance.
"Other Equipment" is leasehold improvements, intangible property such
as computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property as well as items sometimes called soft costs, including
sales tax, freight and installation expenses. Unless otherwise agreed to by
Bank, not more than 25% of the Equipment financed with the proceeds of each
Equipment Advance shall consist of Other Equipment.
"Patents" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
17
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Indebtedness secured by Permitted Liens; and
(f) Indebtedness in the form of liabilities involving employees,
payroll, taxes and similar items included in the liability section of Borrower's
balance sheet.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing
Date; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if
it is not Bank's lowest rate.
"Repayment Period" as to the Equipment Advances, is 36 months.
18
"Responsible Officer" is each of the Chief Executive Officer, the
Chief Financial Officer and the Vice President, Controller and Treasurer of
Borrower.
"Revolving Maturity Date" is February 14, 2003.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"Subsidiary" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" is on any day, obligations that should, under
GAAP, be classified as liabilities on Borrower's consolidated balance sheet,
including all Indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"Trademarks" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
BORROWER:
InfoNow Corporation
By:
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Title:
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BANK:
SILICON VALLEY BANK
By:
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Title:
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19
EXHIBIT A
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The Collateral consists of all of Borrower's right, title and interest in
and to the following whether owned now or hereafter arising:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any and
all credit insurance, insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
letter of credit rights, certificates of deposit, instruments and chattel paper
and electronic chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyrights, copyright applications, copyright registration and like
protection in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, service marks and applications
therefor, whether registered or not, and the goodwill of the business of
Borrower connected with and symbolized by such trademarks, any trade secret
rights, software, software code, algorithms, technology, designs, discoveries,
processes, improvements, formulas, derivative works, including any rights to
unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired; or any
claims for damage by way of any past, present and future infringement of any of
the foregoing (collectively, the "Intellectual Property"), except that the
Collateral shall include the proceeds of all the Intellectual Property that are
accounts, (i.e. accounts receivable) of Borrower, or general intangibles
consisting of rights to payment, if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual
Property is necessary to have a security interest in such accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property, then the
Collateral shall automatically, and effective as of the Closing Date, include
the Intellectual Property to the extent necessary to permit perfection of Bank's
security interest in such accounts and general intangibles of Borrower that are
proceeds of the Intellectual Property.
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
Fax To: Date:
-----------------------------------
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[ ] Loan Payment:
InfoNow Corporation (Borrower)
------------------------------
From Account # To Account #
--------------------------------- -----------------------------------
(Deposit Account #) (Loan Account #)
Principal $ and/or Interest $
--------------------------------- -----------------------------------
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects to on the
date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:
Authorized Signature: Phone Number:
--------------------------------- -----------------------------------
================================================================================
[ ] LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the
funds from this loan advance are for an outgoing wire.
From Account # To Account #
--------------------------------- -----------------------------------
(Loan Account #) (Deposit Account #)
Amount of Advance $
---------------------------------
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects to on the
date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:
Authorized Signature: Phone Number:
--------------------------------- -----------------------------------
================================================================================
OUTGOING WIRE REQUEST
Complete only if all or a portion of funds from the loan advance above are
to be wired. Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name: Amount of Wire: $
--------------------------------- -----------------------------------
Beneficiary Bank: Account Number:
--------------------------------- -----------------------------------
City and Sate:
---------------------------------
Beneficiary Bank Transit (ABA) Beneficiary Bank Code
#: __ __ __ __ __ __ __ __ (Swift, Sort, Chip, etc.): _ _ _ _
(For International Wire Only)
Intermediary Bank: Transit (ABA) #:
--------------------------------- -----------------------------------
For Further Credit to:
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Special Instruction:
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By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer
service(s), which agreements(s) were previously received and executed by me
(us).
Authorized Signature: 2nd Signature (If Required):
--------------------------------- -----------------------------------
Print Name/Title: Print Name/Title:
--------------------------------- -----------------------------------
Telephone # Telephone #
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EXHIBIT C
BORROWING BASE CERTIFICATE
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Borrower: InfoNow Corporation Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Commitment Amount: $1,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________
$ _________
2. Additions (please explain on reverse)
$ _________
3. TOTAL ACCOUNTS RECEIVABLE
$ _________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
----------------
5. Balance of 50% over 90 day accounts $
----------------
6. Credit balances over 90 days $
----------------
7. Concentration Limits (25% or, if rated, 35%) $
----------------
8. Foreign Accounts (except rated Canadians, to $200,000) $
----------------
9. Governmental Accounts $
----------------
10. Contra Accounts $
-----------------
11. Promotion or Demo Accounts $
----------------
12. Intercompany/Employee Accounts $
----------------
13. Other $
----------------
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
$ _________
15. Eligible Accounts (#3 minus #14)
$ _________
16. LOAN VALUE OF ACCOUNTS (75% of #15)
$ _________
BALANCES
17. Maximum Loan Amount $
---------------
18. Total Funds Available [Lesser of #17 or #16]
$ _________
19. Present balance owing on Line of Credit $
---------------
20. Outstanding under Sublimits, if any $
---------------
21. RESERVE POSITION (#18 minus #19 and #20)
$ _________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
InfoNow Corporation
By:
--------------------------------------
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: INFONOW CORPORATION
The undersigned authorized officer of InfoNow Corporation ("Borrower")
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached
are the required documents supporting the certification. The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements + CC Monthly within 30 days Yes No
Annual (Audited) FYE within 120 days Yes No
A/R & A/P Agings & Deferred Revenue Monthly within 30 days Yes No
Collateral Audit Initial and Annual Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Liquidity Coverage 1.50:1.00 _____:1.00 Yes No
Minimum EBITDA (rolling 3 months) $60,000 $________ Yes No
Maximum Pre-tax Loss $250,000 for 2/02 $________ Yes No
and 3/02, then $200,000
Have there been updates to Borrower's intellectual property, if appropriate? Yes / No
Comments Regarding Exceptions: See Attached.
Sincerely, BANK USE ONLY
Received by:
---------------------------
InfoNow Corporation AUTHORIZED SIGNER
Date:
-------------------------------------- ---------------------------
SIGNATURE Verified:
---------------------------
-------------------------------------- AUTHORIZED SIGNER
TITLE Date:
Compliance Status: Yes No
--------------------------------------
DATE
EXHIBIT E
FORM OF LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT No. [ ]
LOAN AGREEMENT SUPPLEMENT No.[ ], dated , 2002 ("Supplement"), to the Loan and
Security Agreement dated as of February___, 2002 (the "Loan Agreement) by and
between the undersigned ("Borrower"), and Silicon Valley Bank ("Bank").
Capitalized terms used herein but not otherwise defined herein are used with the
respective meanings given to such terms in the Loan Agreement.
To secure the prompt payment by Borrower of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrower of all the
terms contained in the Loan Agreement, Borrower grants Bank, a first priority
security interest in each item of equipment and other property described in
Annex A hereto, which equipment and other property shall be deemed to be
additional Financed Equipment and Collateral. The Loan Agreement is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto.
The proceeds of the Loan should be transferred to Borrower's account with Bank
set forth below:
Bank Name: Silicon Valley Bank
Account No.:
----------------------------
Borrower hereby certifies that (a) the foregoing information is true and correct
and authorizes Bank to endorse in its respective books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth in the Loan Terms
Schedule; (b) the representations and warranties made by Borrower in the Loan
Agreement are true and correct on the date hereof and will be true and correct
on such Funding Date. No Event of Default has occurred and is continuing under
the Loan Agreement. This Supplement may be executed by Borrower and Bank in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
This Supplement is delivered as of this day and year first above written.
SILICON VALLEY BANK INFONOW CORPORATION
By: By:
-------------------------------------- -----------------------------------
Name: Name:
-------------------------------------- -----------------------------------
Title: Title:
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Annex A - Description of Financed Equipment
Annex B - Loan Terms Schedule
Annex A to Exhibit E
--------------------
The Financed Equipment being financed with the Equipment Advance for which this
Loan Agreement Supplement is being executed is listed below. Upon the funding of
such Equipment Advance, this schedule automatically shall be deemed to be a part
of the Collateral.
Description of Equipment: Make Xxxxx Xxxxxx # Xxxxxxx #
Xxxxx X to Exhibit E
--------------------
LOAN TERMS SCHEDULE #________
Loan Funding Date: , 2002
--------------
Original Loan Amount: $
--------------
Basic Rate: 9.0%
Loan Factor: %
--------------
Scheduled Payment Dates and Amounts*:
One (1) payment of $_______ due ______________
______ payments of $_______ due monthly in advance from ____ through ____.
One (1) payment of $_______ due ______________
Maturity Date:
--------------
Final Payment: If required, an additional amount equal to the Final Payment
Percentage multiplied by the Loan Amount then in effect, shall be paid on
the Maturity Date with respect to such Loan.
Payment No. Payment Date
1
2
3
4
.. . .
35
[36]
.. . .
*/ The amount of each Scheduled Payment will change as the Loan Amount changes.
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of February 15, 2002, by and
between InfoNow Corporation ("Borrower") and Silicon Valley Bank ("Bank").
In connection with, among other documents, the Loan and Security Agreement (the
"Loan Documents") being concurrently executed herewith between Borrower and
Bank, Borrower agrees as follows:
1. Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's
intellectual property, including, without limitation, the following:
a. Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or
hereafter existing, created, acquired or held;
b. All mask works or similar rights available for the protection of
semiconductor chips, now owned or hereafter acquired;
c. Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
d. Any and all design rights, which may be available to Borrower now
or hereafter existing, created, acquired or held;
e. All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the
same, including without limitation the patents and patent
applications;
f. Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks;
g. Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the
right, but not the obligation, to xxx for and collect such
damages for said use or infringement of the intellectual property
rights identified above;
h. All licenses or other rights to use any of the Copyrights,
Patents, Trademarks or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by such
license or rights;
i. All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks, Patents, or Mask Works; and
j. All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing;
2. It shall be an event of default under the Loan Documents between Borrower
and Bank if there is a breach of any term of this Negative Pledge
Agreement.
3. Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Documents.
BORROWER:
INFONOW CORPORATION
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
BANK:
SILICON VALLEY BANK
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
