EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
between
ICEWEB, INC., ICEWEB ONLINE, INC., INTERLAN COMMUNICATIONS, INC.,
INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION,
DEVELEMENTS, INC., PROPSTER, INC.
as Co-Borrowers
and
COMERICA BANK,
as Lender
July 21, 2004
This LOAN AND SECURITY AGREEMENT is entered into as of July 21, 2004,
by and between Comerica Bank ("Bank") and IceWeb, Inc., IceWEB Online, Inc.,
Interlan Communications, Inc., Integrated Power Solutions, Inc., The Seven
Corporation, and DevElements, Inc., Propster, Inc. (collectively, jointly and
severally, "Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, all capitalized terms shall
have the definitions set forth on Exhibit A. Any term used in the Code and not
defined herein shall have the meaning given to the term in the Code.
1.2 Accounting Terms. Any accounting term not specifically defined on
Exhibit A shall be construed in accordance with GAAP and all calculations shall
be made in accordance with GAAP. The term "financial statements" shall include
the accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
(a) Promise to Pay. Borrower promises to pay to Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower, together with interest
on the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.
(b) Advances Under Revolving Line.
(i) Amount. Subject to and upon the terms and
conditions of this Agreement (1) Borrower may request Advances in an aggregate
outstanding amount not to exceed the lesser of (A) the Revolving Line or (B) the
Borrowing Base, less any amounts outstanding under the Letter of Credit
Sublimit, and (2) amounts borrowed pursuant to this Section 2.1(b) may be repaid
and reborrowed at any time prior to the Revolving Maturity Date, at which time
all Advances under this Section 2.1(b) shall be immediately due and payable.
Borrower may prepay any Advances without penalty or premium.
(ii) Form of Request. Whenever Borrower desires an
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. Eastern time (1:00 p.m. Eastern time for wire transfers),
on the Business Day that the Advance is to be made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit C. Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a Responsible
Officer, or without instructions if in Bank's discretion such Advances are
necessary to meet Obligations which have become due and remain unpaid. Bank
shall be entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a designee thereof, and
Borrower shall indemnify and hold Bank harmless for any damages or loss suffered
by Bank as a result of such reliance. Bank will credit the amount of Advances
made under this Section 2.1(b) to Borrower's deposit account.
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(iii) Letter of Credit Sublimit. Subject to the
availability under the Revolving Line, and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Business Day immediately prior to the Revolving
Maturity Date, Bank shall issue for the account of Borrower such Letters of
Credit as Borrower may request by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed the Letter of Credit Sublimit, and (ii) shall be deemed to
constitute Advances for the purpose of calculating availability under the
Revolving Line. Any drawn but unreimbursed amounts under any Letters of Credit
shall be charged as Advances against the Revolving Line. All Letters of Credit
shall be in form and substance acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form application and
letter of credit agreement. Borrower will pay any standard issuance and other
fees that Bank notifies Borrower it will charge for issuing and processing
Letters of Credit.
(iv) Collateralization of Obligations Extending
Beyond Maturity. If Borrower has not secured to Bank's satisfaction its
obligations with respect to any Letters of Credit by the Revolving Maturity
Date, then, effective as of such date, the balance in any deposit accounts held
by Bank and the certificates of deposit or time deposit accounts issued by Bank
in Borrower's name (and any interest paid thereon or proceeds thereof, including
any amounts payable upon the maturity or liquidation of such certificates or
accounts), shall automatically secure such obligations to the extent of the then
continuing or outstanding and undrawn Letters of Credit. Borrower authorizes
Bank to hold such balances in pledge and to decline to honor any drafts thereon
or any requests by Borrower or any other Person to pay or otherwise transfer any
part of such balances for so long as the Letters of Credit are outstanding or
continue.
2.2 Overadvances. If the aggregate amount of the outstanding Advances
exceeds the lesser of the Revolving Line or the Borrowing Base at any time,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Advances. Except as set forth in Section 2.3(b),
the Advances shall bear interest, on the outstanding daily balance thereof, at a
variable rate equal to one (1) percentage point above the Prime Rate.
(b) Late Fee; Default Rate. If any payment is not made within
10 days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) 5% of the amount of such unpaid amount or (ii) the
maximum amount permitted to be charged under applicable law. All Obligations
shall bear interest, from and after the occurrence and during the continuance of
an Event of Default, at a rate equal to 5 percentage points above the interest
rate applicable immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on
the seventh (7th) calendar day of each month during the term hereof. Bank shall,
at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Revolving
Line, in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies,
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except that to the extent Borrower uses the Advances to purchase Collateral,
Borrower's repayment of the Advances shall apply on a "first-in-first-out" basis
so that the portion of the Advances used to purchase a particular item of
Collateral shall be paid in the chronological order the Borrower purchased the
Collateral. After the occurrence of an Event of Default, Bank shall have the
right, in its sole discretion, to immediately apply any wire transfer of funds,
check, or other item of payment Bank may receive to conditionally reduce
Obligations, but such applications of funds shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Eastern time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a fee equal to $5,000,
which shall be nonrefundable;
(b) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, and, after the Closing Date, all Bank
Expenses, as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 13.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement together with the Joint and Several
Borrower Rider;
(b) an incumbency certificate and borrowing resolutions from
each entity comprising Borrower;
(c) a financing statement (Form UCC-1);
(d) an intellectual property security agreement executed by
each entity comprising Borrower;
(e) evidence of termination of Borrower's financing agreement
with Commerce Funding a release by Commerce Funding of all Liens securing the
same;
(f) agreement to provide insurance;
(g) payment of the fees and Bank Expenses then due specified
in Section 2.5;
(h) current SOS Reports indicating that except for Permitted
Liens, there are no other security interests or Liens of record in the
Collateral;
(i) an audit of the Collateral, at Borrower's expense, the
results of which shall be satisfactory to Bank;
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(j) current financial statements, including audited statements
for Borrower's most recently ended fiscal year, together with an unqualified
opinion, company prepared consolidated and consolidating balance sheets and
income statements for the most recently ended month in accordance with Section
6.2, and such other updated financial information as Bank may reasonably
request;
(k) current Compliance Certificate in accordance with Section
6.2;
(l) a Warrant in form and substance satisfactory to Bank;
(m) a Collateral Information Certificate; and
(n) such other documents or certificates, and completion of
such other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in the Collateral to secure prompt repayment of any
and all Obligations and to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in later-acquired Collateral. Notwithstanding
any termination, Bank's Lien on the Collateral shall remain in effect for so
long as any Obligations are outstanding.
4.2 Perfection of Security Interest. Borrower authorizes Bank to file
at any time financing statements, continuation statements, and amendments
thereto that (i) either specifically describe the Collateral or describe the
Collateral as all assets of Borrower of the kind pledged hereunder, and (ii)
contain any other information required by the Code for the sufficiency of filing
office acceptance of any financing statement, continuation statement, or
amendment, including whether Borrower is an organization, the type of
organization and any organizational identification number issued to Borrower, if
applicable. Any such financing statements may be signed by Bank on behalf of
Borrower, as provided in the Code, and may be filed at any time in any
jurisdiction whether or not Revised Article 9 of the Code is then in effect in
that jurisdiction. Borrower shall from time to time endorse and deliver to Bank,
at the request of Bank, all Negotiable Collateral and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
Borrower shall have possession of the Collateral, except where expressly
otherwise provided in this Agreement or where Bank chooses to perfect its
security interest by possession in addition to the filing of a financing
statement. Where Collateral is in possession of a third party bailee, Borrower
shall take such steps as Bank reasonably requests for Bank to (i) obtain an
acknowledgment, in form and substance satisfactory to Bank, of the bailee that
the bailee holds such Collateral for the benefit of Bank, (ii) obtain "control"
of any Collateral consisting of investment property, deposit accounts,
letter-of-credit rights or electronic chattel paper (as such items and the term
"control" are defined in Revised Article 9 of the Code) by causing the
securities intermediary or depositary institution or issuing
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bank to execute a control agreement in form and substance satisfactory to Bank.
Borrower will not create any chattel paper without placing a legend on the
chattel paper acceptable to Bank indicating that Bank has a security interest in
the chattel paper. Borrower from time to time may deposit with Bank specific
cash collateral to secure specific Obligations; Borrower authorizes Bank to hold
such specific balances in pledge and to decline to honor any drafts thereon or
any request by Borrower or any other Person to pay or otherwise transfer any
part of such balances for so long as the specific Obligations are outstanding.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is
a corporation duly existing under the laws of the state in which it is
incorporated and qualified and licensed to do business in any state in which the
conduct of its business or its ownership of property requires that it be so
qualified, except where the failure to do so would not reasonably be expected to
cause a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement by which it is
bound, except to the extent such default would not reasonably be expected to
cause a Material Adverse Effect.
5.3 Collateral. Borrower has rights in or the power to transfer the
Collateral, and its title to the Collateral is free and clear of Liens, adverse
claims, and restrictions on transfer or pledge except for Permitted Liens. All
Collateral is located solely in the Collateral States. The Eligible Accounts are
bona fide existing obligations. The property or services giving rise to such
Eligible Accounts has been delivered or rendered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor whose accounts are included in any Borrowing
Base Certificate as an Eligible Account. All Inventory is in all material
respects of good and merchantable quality, free from all material defects,
except for Inventory for which adequate reserves have been made. Except as set
forth in the Schedule, none of the Collateral is maintained or invested with a
Person other than Bank or Bank's Affiliates.
5.4 Intellectual Property Collateral. Borrower is the sole owner of the
Intellectual Property Collateral, except for licenses granted by Borrower to its
customers in the ordinary course of business. To the best of Borrower's
knowledge, each of the Copyrights, Trademarks and Patents is valid and
enforceable, and no part of the Intellectual Property Collateral has been judged
invalid or unenforceable, in whole or in part, and no claim has been made to
Borrower that any part of the Intellectual Property Collateral violates the
rights of any third party except to the extent such claim would not reasonably
be expected to cause a Material Adverse Effect. Except as set forth in the
Schedule, Borrower's rights as a licensee of intellectual property do not give
rise to more than 5% of its gross revenue in any given month, including without
limitation revenue derived from the sale, licensing, rendering or disposition of
any product or service.
5.5 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.
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5.6 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which a likely adverse decision would
reasonably be expected to have a Material Adverse Effect.
5.7 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that are delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated and consolidating financial condition as of the
date thereof and Borrower's consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts
(including trade debts) as they mature; the fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; and Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement.
5.9 Compliance with Laws and Regulations. Borrower and each Subsidiary
have met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied in all material respects with all the
provisions of the Federal Fair Labor Standards Act. Borrower is in compliance
with all environmental laws, regulations and ordinances except where the failure
to comply is not reasonably likely to have a Material Adverse Effect. Borrower
has not violated any statutes, laws, ordinances or rules applicable to it, the
violation of which could reasonably be expected to have a Material Adverse
Effect. Borrower and each Subsidiary have filed or caused to be filed all tax
returns required to be filed, and have paid, or have made adequate provision for
the payment of, all taxes reflected therein except those being contested in good
faith with adequate reserves under GAAP or where the failure to file such
returns or pay such taxes would not reasonably be expected to have a Material
Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments. DevElements, Inc., and Borrower's subsidiary Iceweb Worldwide, Inc.
shall all times remain inactive and Borrower shall not transfer any assets to
either of such entities.
5.11 Government Consents. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except where the failure to do so would not reasonably be expected to cause a
Material Adverse Effect.
5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower is
not a party to, nor is bound by, any license or other agreement that prohibits
or otherwise restricts Borrower from granting a security interest in Borrower's
interest in such license or agreement or any other property.
5.13 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading, it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results.
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6. AFFIRMATIVE COVENANTS.
Borrower covenants that, until payment in full of all outstanding
Obligations, and for so long as Bank may have any commitment to make a Credit
Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing and Government Compliance. Borrower shall maintain
its and each of its Subsidiaries' corporate existence and good standing in the
Borrower State, shall maintain qualification and good standing in each other
jurisdiction in which the failure to so qualify could have a Material Adverse
Effect, and shall furnish to Bank the organizational identification number
issued to Borrower by the authorities of the state in which Borrower is
organized, if applicable. Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply in all material respects
with all applicable Environmental Laws, and maintain all material permits,
licenses and approvals required thereunder where the failure to do so could have
a Material Adverse Effect. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, and shall maintain, and shall cause each
of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which or failure to comply with which would reasonably
be expected to have a Material Adverse Effect.
6.2 Financial Statements, Reports, Certificates. Borrower shall deliver
to Bank: (i) as soon as available, but in any event within 30 days after the end
of each calendar month, a company prepared consolidated and consolidating
balance sheet and income statement covering Borrower's operations during such
period, in a form reasonably acceptable to Bank and certified by a Responsible
Officer; (ii) as soon as available, but in any event within 45 days after the
end of each of Borrower's fiscal quarters and 120 days after the end of each of
Borrower's fiscal years, Borrower's 10-Q and 10-K reports, respectively, as
filed with the Securities and Exchange Commission year; (iii) if applicable,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt; (iv)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of $50,000 or more; (v) promptly upon
receipt, each management letter prepared by Borrower's independent certified
public accounting firm regarding Borrower's management control systems; (vi)
such budgets, sales projections, operating plans or other financial information
generally prepared by Borrower in the ordinary course of business as Bank may
reasonably request from time to time; and (vii) within 30 days of the last day
of each fiscal quarter, a report signed by Borrower, in form reasonably
acceptable to Bank, listing any applications or registrations that Borrower has
made or filed in respect of any Patents, Copyrights or Trademarks and the status
of any outstanding applications or registrations, as well as any material change
in Borrower's Intellectual Property Collateral, including but not limited to any
subsequent ownership right of Borrower in or to any Trademark, Patent or
Copyright not specified in Exhibits A, B, and C of any Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this
Agreement.
(a) Within 30 days after the last day of each month, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit D hereto, together with aged
listings by invoice date of accounts receivable and accounts payable.
(b) Within 30 days after the last day of each month, Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate certified as of the last day of the applicable month and signed by a
Responsible Officer in substantially the form of Exhibit E hereto.
(c) As soon as possible and in any event within 3 calendar
days after becoming aware of the occurrence or existence of an Event of Default
hereunder, a written statement of a Responsible Officer setting forth details of
the Event of Default, and the action which Borrower has taken or proposes to
take with respect thereto.
(d) Bank shall have a right from time to time hereafter to
audit Borrower's Accounts and appraise Collateral at Borrower's expense,
provided that such audits will be conducted no more often than every six (6)
months unless an Event of Default has occurred and is continuing.
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Borrower may deliver to Bank on an electronic basis any certificates,
reports or information required pursuant to this Section 6.2, and Bank shall be
entitled to rely on the information contained in the electronic files, provided
that Bank in good faith believes that the files were delivered by a Responsible
Officer. If Borrower delivers this information electronically, it shall also
deliver to Bank by U.S. Mail, reputable overnight courier service, hand
delivery, facsimile or .pdf file within 5 Business Days of submission of the
unsigned electronic copy the certification of monthly financial statements, the
intellectual property report, the Borrowing Base Certificate and the Compliance
Certificate, each bearing the physical signature of the Responsible Officer.
6.3 Inventory; Returns. Borrower shall keep all Inventory in good and
merchantable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist on the
Closing Date. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims involving more than $50,000.
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, due
and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, including, but not limited
to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability,
and will execute and deliver to Bank, on demand, proof satisfactory to Bank
indicating that Borrower or a Subsidiary has made such payments or deposits and
any appropriate certificates attesting to the payment or deposit thereof;
provided that Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.5 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain liability
and other insurance in amounts and of a type that are customary to businesses
similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and all liability insurance policies shall show Bank as an additional
insured and specify that the insurer must give at least 20 days notice to Bank
before canceling its policy for any reason. Upon Bank's request, Borrower shall
deliver to Bank certified copies of the policies of insurance and evidence of
all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, all proceeds payable under any such policy shall, at Bank's
option, be payable to Bank to be applied on account of the Obligations.
6.6 Deposit and Investment Accounts. Borrower shall maintain all its
depository, operating and investment accounts with Bank or Bank's Affiliates.
6.7 Financial Covenants. Borrower shall at all times maintain the
following financial ratios and covenants, calculated on a consolidated basis:
(a) Quick Ratio. A ratio of Cash plus net trade Accounts to
Current Liabilities minus Subordinated Debt, calculated on a consolidated basis,
of at least 1.00 to 1.00.
(b) Tangible Net Worth. A Tangible Net Worth of not less than
the following amounts:
8
Period Amount
------ ------
Through January 30, 2005 $190,000
January 31, 2005 - April 29, 2005 $250,000
April 30, 2005 - June 29, 2005 $300,000
June 30, 2005 and thereafter $350,000
6.8 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as the case
may be, those registrable intellectual property rights now owned or hereafter
developed or acquired by Borrower, to the extent that Borrower, in its
reasonable business judgment, deems it appropriate to so protect such
intellectual property rights.
(b) Borrower shall promptly give Bank written notice of any
applications or registrations of intellectual property rights filed with the
United States Patent and Trademark Office, including the date of such filing and
the registration or application numbers, if any.
(c) Borrower shall (i) give Bank not less than 30 days prior
written notice of the filing of any applications or registrations with the
United States Copyright Office, including the title of such intellectual
property rights to be registered, as such title will appear on such applications
or registrations, and the date such applications or registrations will be filed;
(ii) prior to the filing of any such applications or registrations, execute such
documents as Bank may reasonably request for Bank to maintain its perfection in
such intellectual property rights to be registered by Borrower; (iii) upon the
request of Bank, either deliver to Bank or file such documents simultaneously
with the filing of any such applications or registrations; (iv) upon filing any
such applications or registrations, promptly provide Bank with a copy of such
applications or registrations together with any exhibits, evidence of the filing
of any documents requested by Bank to be filed for Bank to maintain the
perfection and priority of its security interest in such intellectual property
rights, and the date of such filing.
(d) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect and maintain the perfection and priority of Bank's security interest in
the Intellectual Property Collateral.
(e) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the trade secrets, Trademarks, Patents and
Copyrights, (ii) use commercially reasonable efforts to detect infringements of
the Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any material Trademarks,
Patents or Copyrights to be abandoned, forfeited or dedicated to the public
without the written consent of Bank, which shall not be unreasonably withheld.
(f) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section 6.8, provided such audit may not occur
more often than twice per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.8 to take but which Borrower fails to take, after 15 days' notice to
Borrower. Borrower shall reimburse and indemnify Bank for all reasonable costs
and reasonable expenses incurred in the reasonable exercise of its rights under
this Section 6.8.
6.9 Consent of Inbound Licensors. Prior to entering into or becoming
bound by any license or agreement, Borrower shall: (i) provide written notice to
Bank of the material terms of such license or agreement with a description of
its likely impact on Borrower's business or financial condition; and (ii) in
good faith use
9
commercially reasonable efforts to obtain the consent of, or waiver by, any
person whose consent or waiver is necessary for Borrower's interest in such
licenses or contract rights to be deemed Collateral and for Bank to have a
security interest in it that might otherwise be restricted by the terms of the
applicable license or agreement, whether now existing or entered into in the
future, provided, however, that the failure to obtain any such consent or waiver
shall not constitute a default under this Agreement.
6.10 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the outstanding Obligations are paid in full or for
so long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following without Bank's prior written consent:
7.1 Dispositions. Convey, sell, lease, license, transfer or otherwise
dispose of (collectively, to "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, or move cash balances on
deposit with Bank to accounts opened at another financial institution, other
than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in Control. Change
its name or the Borrower State or relocate its chief executive office without 30
days prior written notification to Bank; replace its chief executive officer or
chief financial officer without 30 days prior written notification to Bank;
engage in any business, or permit any of its Subsidiaries to engage in any
business, other than or reasonably related or incidental to the businesses
currently engaged in by Borrower; change its fiscal year end; have a Change in
Control.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) such transactions do not in the aggregate exceed $50,000
during any fiscal year, (ii) no Event of Default has occurred, is continuing or
would exist after giving effect to such transactions, (iii)such transactions do
not result in a Change in Control, and (iv) Borrower is the surviving entity.
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with respect
to any of its property, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, or permit any of its Subsidiaries so
to do, except for Permitted Liens, or covenant to any other Person that Borrower
in the future will refrain from creating, incurring, assuming or allowing any
Lien with respect to any of Borrower's property.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments, or maintain or invest any of its property with
a Person other than Bank or Bank's Affiliates or permit any Subsidiary to do so
unless such Person has entered into a control agreement with Bank, in form and
substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.
10
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
affecting Bank's rights contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent.
7.10 Inventory and Equipment. Store the Inventory or the Equipment with
a bailee, warehouseman, or similar third party unless the third party has been
notified of Bank's security interest and Bank (a) has received an acknowledgment
from the third party that it is holding or will hold the Inventory or Equipment
for Bank's benefit or (b) is in possession of the warehouse receipt, where
negotiable, covering such Inventory or Equipment. Except for Inventory sold in
the ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment only at the
location set forth in Section 10 and such other locations of which Borrower
gives Bank prior written notice and as to which Bank files a financing statement
where needed to perfect its security interest.
7.11 No Investment Company; Margin Regulation. Become or be controlled
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay any of the Obligations
when due;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections
6.2, 6.6, or 6.7, or violates any of the covenants contained in Article 7 of
this Agreement; or
(b) If Borrower fails or neglects to perform or observe any
other material term, provision, condition, covenant contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition or covenant that can be cured, has failed to cure such
default within 10 days after Borrower receives notice thereof or any officer of
Borrower becomes aware thereof; provided, however, that if the default cannot by
its nature be cured within the 10 day period or cannot after diligent attempts
by Borrower be cured within such 10 day period, and such default is likely to be
cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed 30 days) to attempt to
cure such default, and within such reasonable time period the failure to have
cured such default shall not be deemed an Event of Default but no Credit
Extensions will be made;
8.3 Defective Perfection. If Bank shall receive at any time following
the Closing Date an SOS Report indicating that except for Permitted Liens,
Bank's security interest in the Collateral is not prior to all other security
interests or Liens of record reflected in the report;
8.4 Material Adverse Change. If there occurs a material adverse change
in Borrower's prospects, business or financial condition, or if there is a
material impairment in the prospect of repayment of any portion of the
Obligations or a material impairment in the perfection, value or priority of
Bank's security interests in the Collateral;
11
8.5 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within 10 days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be made during such cure period);
8.6 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
8.7 Other Agreements. If there is a default or other failure to perform
in any agreement to which Borrower is a party with a third party or parties
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of $50,000
or that could have a Material Adverse Effect;
8.8 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent the payment is allowed under any
subordination agreement entered into with Bank;
8.9 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least $50,000 shall be
rendered against Borrower and shall remain unsatisfied and unstayed for a period
of 10 days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of the judgment); or
8.10 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the continuance
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.6, all Obligations shall become immediately due and payable without
any action by Bank);
(b) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and (ii) pay in advance all Letter of Credit fees scheduled to be
paid or payable over the remaining term of the Letters of Credit, and Borrower
shall promptly deposit and pay such amounts;
(c) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
12
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, and (ii) indebtedness at any
time owing to or for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate. Bank may sell the Collateral
without giving any warranties as to the Collateral. Bank may specifically
disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral. If Bank sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Bank,
and applied to the indebtedness of the purchaser. If the purchaser fails to pay
for the Collateral, Bank may resell the Collateral and Borrower shall be
credited with the proceeds of the sale;
(i) Bank may credit bid and purchase at any public sale;
(j) Apply for the appointment of a receiver, trustee,
liquidator or conservator of the Collateral, without notice and without regard
to the adequacy of the security for the Obligations and without regard to the
solvency of Borrower, any guarantor or any other Person liable for any of the
Obligations; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
Bank may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions
13
with respect to Borrower's policies of insurance; (f) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (g) to modify, in its
sole discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibits A, B, and C, thereof, as
appropriate, to include reference to any right, title or interest in any
Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims to
have any right, title or interest; and (h) to file, in its sole discretion, one
or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Borrower where permitted by law;
provided Bank may exercise such power of attorney to sign the name of Borrower
on any of the documents described in clauses (g) and (h) above, regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. At any time after the occurrence and during
the continuation of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank's trustee, and immediately deliver such
payments to Bank in their original form as received from the account debtor,
with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under the Revolving Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.5 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. Bank has no obligation to clean up
or otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.
9.6 No Obligation to Pursue Others. Bank has no obligation to attempt
to satisfy the Obligations by collecting them from any other person liable for
them and Bank may release, modify or waive any collateral provided by any other
Person to secure any of the Obligations, all without affecting Bank's rights
against Borrower. Borrower waives any right it may have to require Bank to
pursue any other Person for any of the Obligations.
9.7 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given. Borrower expressly agrees that this Section 9.7
may not be waived or modified by Bank by course of performance, conduct,
estoppel or otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the
Obligations.
14
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: IceWEB, Inc.
000 Xxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxx Xxxxxxxx
FAX: (000) 000-0000
If to Bank: Comerica Bank
0000 Xxxxxxxxx Xxx., Xxxxx 0000
Xx Xxxxxxx, XX 00000
Attn: Manager
FAX: (000) 000-0000
with a copy to: Comerica Bank
00000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. Bank AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY Bank OR
BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
12. JUDICIAL REFERENCE.
If and only if the jury trial waiver set forth in Section 11 of this
Agreement is invalidated for any reason by a court of law, statute or otherwise,
the reference provisions set forth below shall be substituted in place of the
jury trial waiver. So long as the jury trial waiver remains valid, the reference
provisions set forth in this Section shall be inapplicable.
12.1 Mechanics. Each controversy, dispute or claim (each, a "Claim")
between the parties arising out of or relating to this Agreement, any security
agreement executed by Borrower in favor of Bank, any note executed by Borrower
in favor of Bank or any other document, instrument or agreement executed by
Borrower with or in favor of Bank (collectively in this Section, the "Loan
Documents"), other than (i) all matters in connection with
15
nonjudicial foreclosure of security interests in real or personal property; or
(ii) the appointment of a receiver or the exercise of other provisional remedies
(any of which may be initiated pursuant to applicable law) that are not settled
in writing within fifteen (15) days after the date on which a party subject to
the Loan Documents gives written notice to all other parties that a Claim exists
(the "Claim Date") shall be resolved by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor sections ("CCP"), which shall constitute the
exclusive remedy for the resolution of any Claim concerning the Loan Documents,
including whether such Claim is subject to the reference proceeding. Except as
set forth in this section, the parties waive the right to initiate legal
proceedings against each other concerning each such Claim. Venue for these
proceedings shall be in the Superior Court in the County where the real
property, if any, is located or in a County where venue is otherwise appropriate
under state law (the "Court"). By mutual agreement, the parties shall select a
retired Judge of the Court to serve as referee, and if they cannot so agree
within fifteen (15) days after the Claim Date, the Presiding Judge of the Court
(or his or her representative) shall promptly select the referee. A request for
appointment of a referee may be heard on an ex parte or expedited basis. The
referee shall be appointed to sit as a temporary judge, with all the powers for
a temporary judge, as authorized by law, and upon selection should take and
subscribe to the oath of office as provided for in Rule 244 of the California
Rules of Court (or any subsequently enacted Rule). Each party shall have one
peremptory challenge pursuant to CCP ss.170.6. Upon being selected, the referee
shall (a) be requested to set the matter for a status and trial-setting
conference within fifteen (15) days after the date of selection and (b) if
practicable, try any and all issues of law or fact and report a statement of
decision upon them within ninety (90) days of the date of selection. The referee
will have power to expand or limit the amount of discovery a party may employ.
Any decision rendered by the referee will be final, binding and conclusive, and
judgment shall be entered pursuant to CCP ss.644 in any court in the State of
California having jurisdiction. The parties shall complete all discovery no
later than fifteen (15) days before the first trial date established by the
referee. The referee may extend such period in the event of a party's refusal to
provide requested discovery for any reason whatsoever, including, without
limitation, legal objections raised to such discovery or unavailability of a
witness due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Either party may take depositions upon seven (7) days
written notice, and shall respond to requests for production or inspection of
documents within ten (10) days after service. All disputes relating to discovery
which cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
12.2 Procedures. Except as expressly set forth herein, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. Except for trial, all proceedings and hearings conducted
before the referee shall be conducted without a court reporter unless a party
requests a court reporter. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. Subject to the
referee's power to award costs to the prevailing party, the parties shall
equally bear the costs of the court reporter at the trial and the referee's
expenses
12.3 Application of Law. The referee shall determine all issues in
accordance with existing California case and statutory law. California rules of
evidence applicable to proceedings at law will apply to the reference
proceeding. The referee shall be empowered to enter equitable as well as legal
relief, to provide all temporary and/or provisional remedies and to enter
equitable orders that shall be binding upon the parties. At the close of the
reference proceeding, the referee shall issue a single judgment at disposing of
all the claims of the parties that are the subject of the reference. The parties
reserve the right (i) to contest or appeal from the final judgment or any
appealable order or appealable judgment entered by the referee and (ii) to
obtain findings of fact, conclusions of laws, a written statement of decision,
and (iii) to move for a new trial or a different judgment, which new trial, if
granted, shall be a reference proceeding under this provision.
12.4 Repeal. If the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration
conducted by a retired judge of the Court, in accordance with the California
Arbitration Act ss.1280 through ss.1294.2 of the CCP as amended from time to
time. The limitations with respect to discovery as set forth in this Section
shall apply to any such arbitration proceeding.
16
13. GENERAL PROVISIONS.
13.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties and shall bind all persons who become bound as a debtor to this
Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
13.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank,
its officers, employees and agents as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct. In each such case, Borrower shall be permitted
to choose the counsel (if any is required) who will represent Bank in the
proceedings for which defense, and/or indemnification, and/or hold harmless is
required, subject to Bank's approval of such counsel, which approval shall not
be unreasonably withheld or delayed.
13.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
13.4 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
13.5 Amendments in Writing, Integration. All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.
13.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
13.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make any Credit
Extension to Borrower. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 13.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
13.8 Confidentiality. In handling any confidential information, Bank
and all employees and agents of Bank shall exercise the same degree of care that
Bank exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby received
or received pursuant to this Agreement except that disclosure of such
information may be made (i) to the subsidiaries or Affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Loans,
provided that they have entered into a comparable confidentiality agreement in
favor of Borrower and have delivered a copy to Borrower, (iii) as required by
law, regulations, rule or order, subpoena, judicial order or similar order, (iv)
as may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ICEWEB, INC.
By:
-------------------------------------------------
Xxxx X. Xxxxxxxxxx, Chairman & Chief Executive Officer
By:
-------------------------------------------------
Xxxxxxx X. Xxxxxxx, Xx., Chief Operating Officer
By:
--------------------------------------------------
Title:
ICEWEB ONLINE, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
INTERLAN COMMUNICATIONS, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
INTEGRATED POWER SOLUTIONS, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
THE SEVEN CORPORATION
By:
-------------------------------------------------
Title:
----------------------------------------------
DEVELEMENTS, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
PROPSTER, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
18
COMERICA BANK
By:
-------------------------------------------------
Title:
----------------------------------------------
19
EXHIBIT A
DEFINITIONS
"Accounts" means all presently existing and hereafter arising accounts, contract
rights, payment intangibles and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a cash advance or cash advances under the
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or controls
directly or indirectly such Person, any Person that controls or is controlled by
or is under common control with such Person, and each of such Person's senior
executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses (including reasonable
attorneys' fees and expenses, whether generated in-house or by outside counsel)
incurred in connection with the preparation, negotiation, administration, and
enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank's
reasonable attorneys' fees and expenses (whether generated in-house or by
outside counsel) incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
"Borrower State" means,. as to IceWEB, Inc, Delaware, and as to the other
entities comprising Borrower, Virginia, which is in each case the state under
whose laws that entity is organized.
"Borrower's Books" means all of Borrower's books and records including: ledgers;
records concerning Borrower's assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files, and
the equipment, containing such information.
"Borrowing Base" means an amount equal to 80% of Eligible Accounts, as
determined by Bank with reference to the most recent Borrowing Base Certificate
delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or other day on
which banks in the State of California are authorized or required to close.
"Cash" means unrestricted cash and cash equivalents.
"Change in Control" shall mean a transaction in which any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such "person" or
"group" to elect a majority of the Board of Directors of Borrower, who did not
have such power before such transaction.
"Chief Executive Office State" means Virginia, where Borrower's chief executive
office is located.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code as amended or supplemented
from time to time.
"Collateral" means the property described on Exhibit B attached hereto and all
Negotiable Collateral and Intellectual Property Collateral to the extent not
described on Exhibit B, except to the extent any such property (i) is
nonassignable by its terms without the consent of the licensor thereof or
another party (but only to the extent such
A-1
prohibition on transfer is enforceable under applicable law, including, without
limitation, Sections 9406 and 9408 of the Code), or (ii) the granting of a
security interest therein is contrary to applicable law, provided that upon the
cessation of any such restriction or prohibition, such property shall
automatically become part of the Collateral.
"Collateral State" means the state or states where the Collateral is located,
which is Virginia.
"Contingent Obligation" means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable; (ii) any obligations with respect to undrawn letters of credit,
corporate credit cards or merchant services issued for the account of that
Person; and (iii) all obligations arising under any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term "Contingent Obligation" shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.
"Credit Extension" means each Advance or any other extension of credit by Bank
to or for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts that should, in
accordance with GAAP, be included as current assets on the consolidated balance
sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all amounts that should,
in accordance with GAAP, be included as current liabilities on the consolidated
balance sheet of Borrower and its Subsidiaries, as at such date, plus, to the
extent not already included therein, undrawn Letters of Credit, if any, but
specifically excluding any cash-secured Obligations.
"Eligible Accounts" means those Accounts that arise in the ordinary course of
Borrower's business that comply with all of Borrower's representations and
warranties to Bank set forth in Section 5.3; provided, that Bank may change the
standards of eligibility based upon Bank's audit of the Collateral or by giving
Borrower 30 days prior written notice. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay in full within 90
days of invoice date;
(b) Credit balances over 90 days;
(c) Accounts with respect to an account debtor, 25% of whose Accounts the
account debtor has failed to pay within 90 days of invoice date;
(d) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed 25% of all
Accounts, to the extent such obligations exceed the aforementioned
percentage, except as approved in writing by Bank;
(e) Accounts with respect to which the account debtor does not have its
principal place of business in the United States, except for Eligible
Foreign Accounts;
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(f) Accounts with respect to which the account debtor is the United States
or any department, agency, or instrumentality of the United States,
except for Accounts of the United States if the payee has assigned its
payment rights to Bank and the assignment has been acknowledged under
the Assignment of Claims Act of 1940 (31 U.S.C. 3727);
(g) Accounts with respect to which Borrower is liable to the account debtor
for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(h) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, demo
or promotional, or other terms by reason of which the payment by the
account debtor may be conditional;
(i) Accounts with respect to which the account debtor is an officer,
employee, agent or Affiliate of Borrower;
(j) Accounts that have not yet been billed to the account debtor or that
relate to deposits (such as good faith deposits) or other property of
the account debtor held by Borrower for the performance of services or
delivery of goods which Borrower has not yet performed or delivered
other than with respect to maintenance services;
(k) Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which Bank believes, in its
sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject
to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(l) Accounts the collection of which Bank reasonably determines after
inquiry and consultation with Borrower to be doubtful; and
(m) Retentions and hold-backs.
"Eligible Foreign Accounts" means Accounts which otherwise qualify as Eligible
Accounts with respect to which the account debtor does not have its principal
place of business in the United States and that are (i) supported by one or more
letters of credit in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank, (ii) insured by the Export Import Bank of the
United States, (iii) generated by an account debtor with its principal place of
business in Canada, provided that the Bank has perfected its security interest
in the appropriate Canadian province, or (iv) approved by Bank on a case-by-case
basis. All Eligible Foreign Accounts must be calculated in U.S. Dollars.
"Environmental Laws" means all laws, rules, regulations, orders and the like
issued by any federal state, local foreign or other governmental or
quasi-governmental authority or any agency pertaining to the environment or to
any hazardous materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos or other similar materials.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles, consistently applied, as
in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters
A-3
of credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any Person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property Collateral" means all of Borrower's right, title, and
interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property rights
in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but
not the obligation, to xxx for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to
the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which Borrower has any
interest.
"Investment" means any beneficial ownership of (including stock, partnership or
limited liability company interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Letter of Credit" means a commercial or standby letter of credit or similar
undertaking issued by Bank at Borrower's request in accordance with Section
2.1(b)(iii).
"Letter of Credit Sublimit" means a sublimit for Letters of Credit under the
Revolving Line not to exceed $500,000.
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or notes executed
by Borrower, and any other document, instrument or agreement entered into in
connection with this Agreement, all as amended or extended from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the business
operations, condition (financial or otherwise) or prospects of Borrower and its
Subsidiaries taken as a whole, (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents, (iii)
Borrower's interest in, or the value, perfection or priority of Bank's security
interest in the Collateral.
A-4
"Negotiable Collateral" means all of Borrower's present and future letters of
credit of which it is a beneficiary, drafts, instruments (including promissory
notes), securities, documents of title, and chattel paper, and Borrower's Books
relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring payments that
Borrower may now or hereafter become obligated to pay to Bank pursuant to the
terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this Agreement
or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Indebtedness not to exceed $50,000 in the aggregate in any fiscal year
of Borrower secured by a lien described in clause (c) of the defined
term "Permitted Liens," provided such Indebtedness does not exceed the
lesser of the cost or fair market value of the equipment financed with
such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(f) Extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or
the terms modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i) Marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency or any State thereof
maturing within one year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one year from the date of
creation thereof and currently having rating of at least A-2 or P-2
from either Standard & Poor's Corporation or Xxxxx'x Investors Service,
(iii) Bank's certificates of deposit maturing no more than one year
from the date of investment therein, and (iv) Bank's money market
accounts;
(c) Repurchases of stock from former employees or directors of Borrower
under the terms of applicable repurchase agreements (i) in an aggregate
amount not to exceed $50,000 in any fiscal year, provided that no Event
of Default has occurred, is continuing or would exist after giving
effect to the repurchases, or (ii) in any amount where the
consideration for the repurchase is the cancellation of indebtedness
owed by such former employees to Borrower regardless of whether an
Event of Default exists;
(d) Investments accepted in connection with Permitted Transfers;
A-5
(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower and
Investments by Borrower in Subsidiaries not to exceed $50,000 in the
aggregate in any fiscal year;
(f) Investments not to exceed $50,000 in the aggregate in any fiscal year
consisting of (i) travel advances and employee relocation loans and
other employee loans and advances in the ordinary course of business,
and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant
to employee stock purchase plan agreements approved by Borrower's Board
of Directors;
(g) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of Borrower's
business;
(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business, provided that this
subparagraph (h) shall not apply to Investments of Borrower in any
Subsidiary; and
(i) Joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the non-exclusive licensing of
technology, the development of technology or the providing of technical
support, provided that any cash Investments by Borrower do not exceed
$50,000 in the aggregate in any fiscal year.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule
(excluding Liens to be satisfied with the proceeds of the Advances) or
arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which Borrower maintains adequate
reserves, provided the same have no priority over any of Bank's
security interests;
(c) Liens not to exceed $50,000 in the aggregate (i) upon or in any
Equipment acquired or held by Borrower or any of its Subsidiaries to
secure the purchase price of such Equipment or indebtedness incurred
solely for the purpose of financing the acquisition or lease of such
Equipment, or (ii) existing on such Equipment at the time of its
acquisition, provided that the Lien is confined solely to the property
so acquired and improvements thereon, and the proceeds of such
Equipment;
(d) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clauses
(a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being
extended, renewed or refinanced does not increase; and
(e) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Sections 8.5 or 8.9.
"Permitted Transfer" means the conveyance, sale, lease, transfer or disposition
by Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business;
(c) worn-out or obsolete Equipment; or
(d) other assets of Borrower or its Subsidiaries that do not in the
aggregate exceed $50,000 during any fiscal year.
A-6
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank, as its "prime rate," whether or not such announced rate is
the lowest rate available from Bank.
"Profitability" means net income after tax.
"Responsible Officer" means each of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Line" means a Credit Extension of up to $500,000.
"Revolving Maturity Date" means July 20, 2005.
"Schedule" means the schedule of exceptions attached hereto and approved by
Bank, if any.
"SOS Reports" means the official reports from the Secretaries of State of each
Collateral State, Chief Executive Office State and the Borrower State and other
applicable federal, state or local government offices identifying all current
security interests filed in the Collateral and Liens of record as of the date of
such report.
"Subordinated Debt" means any debt incurred by Borrower that is subordinated in
writing to the debt owing by Borrower to Bank on terms reasonably acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation, partnership or limited liability company or
joint venture in which (i) any general partnership interest or (ii) more than
50% of the stock, limited liability company interest or joint venture of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity, at the time as of which any determination is
being made, is owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof shall be
determined, the sum of the capital stock, partnership interest or limited
liability company interest of Borrower and its Subsidiaries, plus Subordinated
Debt, minus intangible assets, determined in accordance with GAAP.
"Trademarks" means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.
A-7
DEBTOR: ICEWEB, INC., ICEWEB ONLINE, INC., INTERLAN COMMUNICATIONS, INC.,
INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION, DEVELEMENTS, INC.,
PROPSTER, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or "Debtor")
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts,
documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale
or lease or to be furnished under a contract of service, and including
returns and repossessions), investment property (including securities and
securities entitlements), letter of credit rights, money, and all of
Debtor's books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records;
(b) all common law and statutory copyrights and copyright registrations,
applications for registration, now existing or hereafter arising, in the
United States of America or in any foreign jurisdiction, obtained or to be
obtained on or in connection with any of the foregoing, or any parts
thereof or any underlying or component elements of any of the foregoing,
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Secured Party to xxx
in its own name and/or in the name of the Debtor for past, present and
future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and the
goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to xxx in its own name and/or in the name of
the Debtor for past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United States Patent
and Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation,
the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee,
(iii) income, royalties, damages, payments, accounts and accounts
receivable now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past,
present or future infringements thereof, (iv) right (but not the
obligation) to xxx in the name of Debtor and/or in the name of Secured
Party for past, present and future infringements thereof, (v) rights
corresponding thereto throughout the world in all jurisdictions in which
such patents have been issued or applied for, and (vi) reissues, divisions,
continuations, renewals, extensions and continuations-in-part with respect
to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All
terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including
revised Division 9 of the Uniform Commercial Code-Secured Transactions,
added by Stats. 1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.
B-1
SCHEDULE OF EXCEPTIONS
Permitted Indebtedness (Exhibit A)
Permitted Investments (Exhibit A)
Permitted Liens (Exhibit A)
Prior Names (Section 5.5)
Litigation (Section 5.6)
Inbound Licenses (Section 5.12)
Corporation Resolutions and Incumbency Certification
Authority to Procure Loans
I certify that I am the duly elected and qualified Secretary of [ICEWEB, INC.,
ICEWEB ONLINE, INC., INTERLAN COMMUNICATIONS, INC., INTEGRATED POWER SOLUTIONS,
INC., THE SEVEN CORPORATION, DEVELEMENTS, INC., PROPSTER, INC.] a
[Delaware/Virginia] corporation; that the following is a true and correct copy
of resolutions duly adopted by the Board of Directors of the Corporation in
accordance with its bylaws and applicable statutes.
Copy of Resolutions:
Be it Resolved, That:
1. Any one (1) of the following __________________________ (insert titles
only) of the Corporation are/is authorized, for, on behalf of, and in the
name of the Corporation to:
(a) Negotiate and procure loans, letters of credit and other credit or
financial accommodations from Comerica Bank ("Bank"), a Michigan
banking corporation, including, without limitation, that certain Loan
and Security Agreement dated as of July 21, 2004, as may subsequently
be amended from time to time.
(b) Discount with the Bank, commercial or other business paper belonging
to the Corporation made or drawn by or upon third parties, without
limit as to amount;
(c) Purchase, sell, exchange, assign, endorse for transfer and/or deliver
certificates and/or instruments representing stocks, bonds, evidences
of Indebtedness or other securities owned by the Corporation, whether
or not registered in the name of the Corporation;
(d) Give security for any liabilities of the Corporation to the Bank by
grant, security interest, assignment, lien, deed of trust or mortgage
upon any real or personal property, tangible or intangible of the
Corporation;
(e) Issue a warrant or warrants to purchase the Corporation's capital
stock; and
(f) Execute and deliver in form and content as may be required by the Bank
any and all notes, evidences of Indebtedness, applications for letters
of credit, guaranties, subordination agreements, loan and security
agreements, financing statements, assignments, liens, deeds of trust,
mortgages, trust receipts and other agreements, instruments or
documents to carry out the purposes of these Resolutions, any or all
of which may relate to all or to substantially all of the
Corporation's property and assets.
2. Said Bank be and it is authorized and directed to pay the proceeds of any
such loans or discounts as directed by the persons so authorized to sign,
whether so payable to the order of any of said persons in their individual
capacities or not, and whether such proceeds are deposited to the
individual credit of any of said persons or not;
3. Any and all agreements, instruments and documents previously executed and
acts and things previously done to carry out the purposes of these
Resolutions are ratified, confirmed and approved as the act or acts of the
Corporation.
4. These Resolutions shall continue in force, and the Bank may consider the
holders of said offices and their signatures to be and continue to be as
set forth in a certified copy of these Resolutions delivered to the Bank,
until notice to the contrary in writing is duly served on the Bank (such
notice to have no effect on any action previously taken by the Bank in
reliance on these Resolutions).
5. Any person, corporation or other legal entity dealing with the Bank may
rely upon a certificate signed by an officer of the Bank to effect that
these Resolutions and any agreement, instrument or document executed
pursuant to them are still in full force and effect and binding upon the
Corporation.
6. The Bank may consider the holders of the offices of the Corporation and
their signatures, respectively, to be and continue to be as set forth in
the Certificate of the Secretary of the Corporation until notice to the
contrary in writing is duly served on the Bank.
I further certify that the above Resolutions are in full force and effect
as of the date of this Certificate; that these Resolutions and any
borrowings or financial accommodations under these Resolutions have been
properly noted in the corporate books and
1
records, and have not been rescinded, annulled, revoked or modified; that
neither the foregoing Resolutions nor any actions to be taken pursuant to
them are or will be in contravention of any provision of the articles of
incorporation or bylaws of the Corporation or of any agreement, indenture
or other instrument to which the Corporation is a party or by which it is
bound; and that neither the articles of incorporation nor bylaws of the
Corporation nor any agreement, indenture or other instrument to which the
Corporation is a party or by which it is bound require the vote or consent
of shareholders of the Corporation to authorize any act, matter or thing
described in the foregoing Resolutions.
I further certify that the following named persons have been duly elected to the
offices set opposite their respective names, that they continue to hold these
offices at the present time, and that the signatures which appear below are the
genuine, original signatures of each respectively:
(PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)
NAME (Type or Print) TITLE SIGNATURE
-------------------------- ---------------- --------------------------
-------------------------- ---------------- --------------------------
-------------------------- ---------------- --------------------------
-------------------------- ---------------- --------------------------
-------------------------- ---------------- --------------------------
-------------------------- ---------------- --------------------------
-------------------------- ---------------- --------------------------
In Witness Whereof, I have affixed my name as Secretary and have caused the
corporate seal (where available) of said Corporation to be affixed on July 21,
2004.
------------------------------
Secretary
***
The Above Statements are Correct. ______________________________________________
SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE.
A SHAREHOLDER OTHER THAN SECRETARY WHEN
SECRETARY IS AUTHORIZED TO SIGN ALONE.
Failure to complete the above when the Secretary is authorized to sign alone
shall constitute a certification by the Secretary that the Secretary is the sole
Shareholder, Director and Officer of the Corporation.
2
COMERICA BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
(Revolver)
Name(s): ICEWEB, INC., ICEWEB ONLINE, INC. INTERLAN COMMUNICATIONS, INC.,
INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION, DEVELEMENTS, INC.,
PROPSTER, INC.
Date: July 21, 2004
$500,000 Credited to deposit account No. 1892725092 when
Advances are requested or disbursed to Borrower by
cashiers check or wire transfer
Amounts paid to others on your behalf:
$ to Bank counsel fees and expenses
$ to _______________
$ to _______________
$500,000 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Comerica Bank to disburse the loan proceeds as stated above.
_________________________________ _________________________________
Signature Signature
AGREEMENT TO PROVIDE INSURANCE
TO: COMERICA BANK Date: July 21, 2004
00 X. Xxxxxxx Xxxx
Xxx Xxxx, XX 00000
Borrower: ICEWEB, INC., ICEWEB ONLINE, INC., INTERLAN COMMUNICATIONS,
INC., INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION,
DEVELEMENTS, INC., PROPSTER, INC.
In consideration of a loan in the amount of $500,000 secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force
during the term of the loan.
I/We also agree to advise the below named agent to add Comerica Bank as
lender's loss payable on the new or existing insurance policy, and to
furnish Bank at above address with a copy of said policy/endorsements
and any subsequent renewal policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements
on the real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of
Comerica Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent Telephone No.:
Agent's Address:
Signature of Obligor:
-------------------------------
Signature of Obligor:
-------------------------------
________________________________________________________________________________
FOR Bank USE ONLY
INSURANCE VERIFICATION: Date:______________________________
Person Spoken to:__________________________________________
Policy Number:_____________________________________________
Effective From:________________ To: _______________________
Verified by:_______________________________________________
COMERICA BANK
AUTOMATIC DEBIT AUTHORIZATION
Member FDIC
To: Comerica Bank
Re: Loan # ___________________________________
You are hereby authorized and instructed to charge account no. 1892725092 in the
name of:
ICEWEB, INC., ICEWEB ONLINE, INC., INTERLAN COMMUNICATIONS, INC., INTEGRATED
POWER SOLUTIONS, INC., THE SEVEN CORPORATION, DEVELEMENTS, INC., PROPSTER, INC.
for principal, interest and other payments due on above referenced loan as set
forth below and credit the loan referenced above.
_X__ Debit each interest payment as it becomes due according to the
terms of the Loan and Security Agreement and any renewals or amendments
thereof.
_X__ Debit each principal payment as it becomes due according to the
terms of the Loan and Security Agreement and any renewals or amendments
thereof.
_X__ Debit each payment for Bank Expenses as it becomes due according
to the terms of the Loan and Security Agreement and any renewals or
amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature: IceWEB, Inc. Date: July 21, 2004
By_______________________
Title:___________________
Secured Party: COMERICA BANK
Debtor: ICEWEB, INC., ICEWEB ONLINE, INC., INTERLAN COMMUNICATIONS, INC.,
INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION, DEVELEMENTS, INC.,
PROPSTER, INC.
EXHIBIT A to UCC Financing Statement
COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or "Debtor")
whether presently existing or hereafter created or acquired, and wherever
located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel paper
(including tangible and electronic chattel paper), deposit accounts,
documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale
or lease or to be furnished under a contract of service, and including
returns and repossessions), investment property (including securities and
securities entitlements), letter of credit rights, money, and all of
Debtor's books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records;
(b) all common law and statutory copyrights and copyright registrations,
applications for registration, now existing or hereafter arising, in the
United States of America or in any foreign jurisdiction, obtained or to be
obtained on or in connection with any of the foregoing, or any parts
thereof or any underlying or component elements of any of the foregoing,
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Secured Party to xxx
in its own name and/or in the name of the Debtor for past, present and
future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and the
goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the
obligation) of Secured Party to xxx in its own name and/or in the name of
the Debtor for past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United States Patent
and Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation,
the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee,
(iii) income, royalties, damages, payments, accounts and accounts
receivable now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past,
present or future infringements thereof, (iv) right (but not the
obligation) to xxx in the name of Debtor and/or in the name of Secured
Party for past, present and future infringements thereof, (v) rights
corresponding thereto throughout the world in all jurisdictions in which
such patents have been issued or applied for, and (vi) reissues, divisions,
continuations, renewals, extensions and continuations-in-part with respect
to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the foregoing,
including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All
terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including
revised Division 9 of the Uniform Commercial Code-Secured Transactions,
added by Stats. 1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.
JOINT AND SEVERAL BORROWER RIDER
This JOINT AND SEVERAL BORROWER RIDER (this "Rider"), dated as of July
21, 2004, is executed by ICEWEB, INC., ICEWEB ONLINE, INC., INTERLAN
COMMUNICATIONS, INC., INTEGRATED POWER SOLUTIONS, INC., THE SEVEN CORPORATION,
DEVELEMENTS, INC., PROPSTER, INC. (collectively "Borrowers" and each
individually a "Borrower"), in favor of and delivered to COMERICA BANK ("Bank").
WHEREAS, Borrowers are contemporaneously herewith executing and
delivering to Bank (a) that certain Loan and Security Agreement, dated as of
even date herewith (the "Agreement") and (b) that certain Intellectual Property
Agreement, dated as of even date herewith (the "IP Agreement") (the Agreement
and the IP Agreement, together with any and all other agreements, instruments
and documents executed by Borrowers in connection therewith, and as all of the
foregoing may be amended, restated, supplemented or modified from time to time
in accordance with their terms, are collectively referred to herein as the "Loan
Documents");
WHEREAS, each Borrower is interested in the financial success of the
other Borrower and each Borrower will directly and materially benefit from the
financial accommodations which Bank will extend to Borrowers pursuant to the
Loan Documents; and
WHEREAS, in order to induce Bank to extend financial accommodations to
Borrowers, and in consideration thereof, Borrowers have agreed to execute and
deliver this Rider to Bank, which Rider shall be a rider to the Loan Documents.
NOW THEREFORE, the parties hereto agree as follows:
1. Each Borrower agrees that it is jointly and severally, directly and
primarily liable to Bank for payment in full of all amounts owing to Bank under
the Loan Documents, whether for principal, interest or otherwise (collectively,
the "Obligations") and that such liability is independent of the duties,
obligations, and liabilities of the other Borrower. Bank may bring a separate
action or actions on each, any, or all of the Obligations against either
Borrower, whether action is brought against the other Borrower or whether the
other Borrower are joined in such action. In the event that either Borrower
fails to make any payment of any Obligations on or before the due date thereof,
the other Borrower immediately shall cause such payment to be made or each of
such Obligations to be performed, kept, observed, or fulfilled, subject to any
grace period or other terms of the Loan Documents.
2. The Loan Documents are a primary and original obligation of each
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect. Each Borrower agrees that its liability under
the Loan Documents shall be immediate and shall not be contingent upon the
exercise or enforcement by Bank of whatever remedies it may have against the
other Borrower, or the enforcement of any lien or realization upon any security
Bank may at any time possess. Each Borrower consents and agrees that Bank shall
be under no obligation to marshal any assets of the other Borrower against or in
payment of any or all of the Obligations.
3. Each Borrower acknowledges that it is presently informed as to the
financial condition of the other Borrower and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Borrower hereby covenants that it will continue to keep
informed as to the financial condition of the other Borrower, the status of the
other Borrower and of all circumstances which bear upon the risk of nonpayment.
Absent a written request from either Borrower to Bank for information, such
Borrower hereby waives any and all rights it may have to require Bank to
disclose to such Borrower any information which Bank may now or hereafter
acquire concerning the condition or circumstances of the other Borrower.
4. The liability of each Borrower under the Loan Documents includes
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Obligations after prior Obligations have
been satisfied in whole or in part. To the maximum extent permitted by law, each
Borrower hereby waives any right to revoke its liability under the Loan
Documents as to future indebtedness, and in connection therewith, each Borrower
hereby waives any rights it may have under Section 2815 of the California Civil
Code. If such a revocation is effective notwithstanding the foregoing waiver,
each Borrower acknowledges and agrees that (a) no such revocation shall be
effective until written notice thereof has been received by Bank, (b) no such
revocation shall apply to any Obligations in existence on such date (including,
any subsequent continuation, extension, or renewal thereof, or change in the
interest rate, payment terms, or other terms and conditions thereof), (c) no
such revocation shall apply to any Obligations made or created after such date
to the extent made or created pursuant to a legally binding commitment of Bank
in existence on the date of such revocation, (d) no payment by such Borrower or
from any other source prior to the date of such revocation shall reduce the
maximum obligation of the other Borrower hereunder, and (e) any payment by such
Borrower or from any source other than Borrowers, subsequent to the date of such
revocation, shall first be applied to that portion of
1
the Obligations as to which the revocation is effective and to the extent so
applied shall not reduce the maximum obligation of each Borrower hereunder.
5. (a) Each Borrower absolutely, unconditionally, knowingly, and
expressly waives:
(i) (1) notice of acceptance hereof (2) notice of any loans or
other financial accommodations made or extended under the Loan Documents or the
creation or existence of any Obligations; (3) except as otherwise set forth in
the Loan Documents, notice of the amount of the Obligations, subject, however,
to each Borrower's right to make inquiry of Bank to ascertain the amount of the
Obligations at any reasonable time; (4) notice of any adverse change in the
financial condition of the other Borrower or of any other fact that might
increase such Borrower's risk hereunder; (5) except as otherwise set forth in
the Loan Documents, notice of presentment for payment, demand, protest, and
notice thereof as to any instruments among the Loan Documents; (6) except as
otherwise set forth in the Loan Documents, notice of any Default or Event of
Default under the Loan Documents; and (7) all other notices (except if such
notice is specifically required to be given to Borrowers hereunder or under the
Loan Documents) and demands to which such Borrower might otherwise be entitled.
(ii) its right, under Sections 2845 or 2850 of the California
Civil Code, or otherwise, to require Bank to institute suit against, or to
exhaust any rights and remedies which Bank has or may have against, the other
Borrower or any third party, or against any collateral for the Obligations
provided by the other Borrower, or any third party. In this regard, each
Borrower agrees that it is bound to the payment of all Obligations, whether now
existing or hereafter accruing, as fully as if such Obligations were directly
owing to Bank by such Borrower. Each Borrower further waives any defense arising
by reason of any disability or other defense (other than the defense that the
Obligations shall have been fully and finally performed and indefeasibly paid)
of the other Borrower or by reason of the cessation from any cause whatsoever of
the liability of the other Borrower in respect thereof.
(iii) (1) any rights to assert against Bank any defense (legal
or equitable), set-off, counterclaim, or claim which such Borrower may now or at
any time hereafter have against the other Borrower or any other party liable to
Bank; (2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Obligations or any security
thereafter; and (3) any defense such Borrower has to performance hereunder, and
any right such Borrower has to be exonerated, provided by Sections 2819, 2822,
or 2825 of the California Civil Code, or otherwise, arising by reason of: the
impairment or suspension of Bank's rights or remedies against the other
Borrower; the alteration by Bank of the Obligations; any discharge of the other
Borrower's obligations to Bank by operation of law as a result of Bank's
intervention or omission; or the acceptance by Bank of anything in partial
satisfaction of the Obligations.
(b) Each Borrower hereby absolutely, unconditionally, knowingly, and
expressly waives: (i) any right of subrogation such Borrower has or may have as
against the other Borrower with respect to the Obligations; (ii) any right to
proceed against the other Borrower, guarantor or other surety, now or hereafter,
for contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which such Borrower
may now have or hereafter have as against the other Borrower with respect to the
Obligations; and (iii) any right to proceed or seek recourse against or with
respect to any property or asset of the other Borrower.
(c) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS RIDER, TO THE EXTENT APPLICABLE, EACH BORROWER
HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES
NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY
UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810,
2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850.
6. Each Borrower consents and agrees that, without notice to or by such
Borrower, and without affecting or impairing the liability of such Borrower
hereunder, Bank may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the payment
of, or discharge the performance of, or may refuse to or otherwise not enforce
the Loan Documents, or any part thereof, with respect to the other Borrower;
(b) release the other Borrower or grant other indulgences to the other
Borrower in respect thereof;
(c) amend or modify in any manner and at any time (or from time to
time) any of the Loan Documents with the consent of any one Borrower; or
2
(d) release or substitute any guarantor, if any, of the Obligations, or
enforce, exchange, release, or waive any security for the Obligations or any
other guaranty of the Obligations, or any portion thereof.
7. Bank shall have the right to seek recourse against each Borrower to
the fullest extent provided for herein, and no election by Bank to proceed in
one form of action or proceeding, or against any party, or on any obligation,
shall constitute a waiver of Bank's right to proceed in any other form of action
or proceeding or against other parties unless Bank has expressly waived such
right in writing. Specifically, but without limiting the generality of the
foregoing, no action or proceeding by Bank under the Loan Documents shall serve
to diminish the liability of any Borrower under this Rider except to the extent
that Bank finally and unconditionally shall have realized indefeasible payment
by such action or proceeding.
8. The Obligations shall not be considered indefeasibly paid for
purposes of this Rider unless and until all payments to Bank are no longer
subject to any right on the part of any person, including either Borrower,
either Borrower as a debtor in possession, or any trustee (whether appointed
pursuant to 11 U.S.C., or otherwise) of either Borrower's assets to invalidate
or set aside such payments or to seek to recoup the amount of such payments or
any portion thereof, or to declare the same to be fraudulent or preferential.
Upon such full and final performance and indefeasible payment of the
Obligations, Bank shall have no obligation whatsoever to transfer or assign its
interest in the Loan Documents to either Borrower. In the event that, for any
reason, any portion of such payments to Bank is set aside or restored, whether
voluntarily or involuntarily, after the making thereof, then the obligation
intended to be satisfied thereby shall be revived and continued in full force
and effect as if said payment or payments had not been made, and each Borrower
shall be liable for the full amount Bank is required to repay plus any and all
costs and expenses (including attorneys' fees and attorneys' fees incurred
pursuant to 11 U.S.C.) paid by Bank in connection therewith.
9. Bank and Borrowers have agreed, in lieu of maintaining separate loan
accounts on Bank's books in the name of each of the Borrowers, that Bank may
maintain a single loan account under the name of Borrowers (the "Loan Account").
Loans made under the Agreement shall be made jointly and severally to Borrowers
and shall be charged to the Loan Account, together with all interest and other
charges as permitted under and pursuant to this Agreement. The Loan Account
shall be credited with all repayments of Obligations received by Bank, on behalf
of Borrowers, from either Borrower pursuant to the terms of the Agreement.
10. Bank shall render to IceWEB, Inc., on behalf of Borrowers, one
statement of the Loan Account, which shall be deemed to be an account stated as
to each Borrower and which will be deemed correct and accepted by each Borrower
unless Bank receives a written statement of exceptions from either Borrower
within ninety (90) days after such statement has been rendered by Bank,
provided, that Bank will have up to 90 days from the time it receives any such
written exceptions from either Borrower to respond to any such exceptions. Each
Borrower hereby expressly agrees and acknowledges that Bank shall have no
obligation to account separately to such Borrower.
11. Requests for advances under the Agreement may be made by either
Borrower, pursuant to the terms thereof. Each Borrower expressly agrees and
acknowledges that Bank shall have no responsibility to inquire into the
correctness of the apportionment or allocation of or any disposition by either
Borrower of (a) any advances or loans under the Agreement, or (b) any of the
expenses and other items charged to the Loan Account pursuant to the Agreement.
All such advances and loans and such expenses and other items shall be made for
the collective, joint, and several account of Borrowers and shall be charged to
the Loan Account.
12. Each Borrower agrees and acknowledges that Bank shall incur no
liability to either Borrower as a result of the administration of the Agreement
on a combined basis, as set forth in this Rider. Each Borrower hereby agrees to
indemnify and hold Bank harmless from and against any and all liability,
expense, loss, damage, claim of damage, or injury, made against Bank by either
Borrower or by any other person or entity, arising from or incurred by reason of
such administration of the Agreement.
13. Each Borrower represents and warrants to Bank that the collective
administration of the loans is being undertaken by Bank pursuant to this Rider
because Borrowers are integrated in their operation and administration and
require financing on a basis permitting the availability of credit from time to
time to each of Borrower. Each Borrower will derive benefit, directly or
indirectly, from such collective administration and credit availability because
the successful operation of each Borrower is enhanced by the continued
successful performance of the integrated group. Nothing in this Rider, express
or implied, is intended to confer upon any persons, other than the parties to
this Rider, and Bank, and their respective successors and assigns, any rights or
remedies under or by reason of this Rider.
14. This Rider shall append and shall be part and parcel of the Loan
Documents, and this Rider shall be governed by and construed in accordance with
all of the terms of the Loan Documents.
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IN WITNESS WHEREOF, this Rider has been executed and delivered as of
the date first above written.
ICEWEB, INC.
By:
-------------------------------------------------
Title:
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ICEWEB, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
ICEWEB ONLINE, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
INTERLAN COMMUNICATIONS, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
INTEGRATED POWER SOLUTIONS, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
THE SEVEN CORPORATION
By:
-------------------------------------------------
Title:
----------------------------------------------
DEVELEMENTS, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
PROPSTER, INC.
By:
-------------------------------------------------
Title:
----------------------------------------------
4
COMERICA BANK
By:
-------------------------------------------------
Title:
----------------------------------------------
5
