EXHIBIT 10.15
SENIOR LOAN AND SECURITY AGREEMENT NO. 0146
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 0146 (this "Security Agreement") is
dated as of March 20, 1998 between DOWNTOWN WEB, INC. DBA XXXXXXX.XXX, a
California corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a
California corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $750,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower
(each, a "Loan" and collectively, the "Loans"). Such borrowings shall be
evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles,
including but not limited to high end PC's, workstations, furniture and office
equipment and also certain custom use equipment, installation and delivery
costs, purchase tax, toolings, software and other items generally considered
fungible or expendable ("Soft Costs") whether now owned by Borrower or hereafter
acquired, and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
(collectively, the "Collateral") which is described on the Note attached hereto
or any subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on
the date set forth above and shall continue thereafter and be in effect so long
as and at any time any Note entered into pursuant to this Security Agreement is
in effect. The Term and monthly payment amount payable with respect to each
item of Collateral shall be as set forth in and as stated in the respective
Note(s). The terms of each Note hereto are subject to all conditions and
provisions of this Security Agreement as it may at any time be amended. Each
Note shall constitute a separate and independent Loan and contractual obligation
of Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot
be canceled or terminated except as expressly provided herein. Borrower agrees
that its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such rent and other sums, are absolute and unconditional and are not subject
to any abatement, reduction, setoff, defense, counterclaim or recoupment due or
alleged to be due to, or by reason of, any past, present or future claims which
Borrower may have against Lender, any assignee, the manufacturer or seller of
the Collateral, or against any person for any reason whatsoever.
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
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conditions of this Security Agreement and so long as no Event of Default or
event which with the giving of notice or passage of time, or both, could become
an Event of Default has occurred or is continuing, Lender hereby agrees to make
one or more senior secured Loans to Borrower, subject to the following
conditions: (i) each Loan shall be evidenced by a Note; (ii) the total
principal amount of the Loans shall not exceed $750,000 in the aggregate (the
"Commitment") provided that no more than 20% of the amount of the utilized
Commitment may be used to finance Soft Costs; (iii) at the time of each Loan, no
Event of Default or event which with the giving of notice or passage of time, or
both, could become an Event of Default shall have occurred and be continuing, as
reasonably determined by Lender, and certified by Borrower; (iv) the amount of
each Loan shall be at least $20,000 except for a final Loan which may be less
than $20,000; (v) Lender shall not be obligated to make any Loan after December
31, 1998; (vi) for each Loan, Borrower shall present to Lender a list of
proposed Collateral for approval by Lender in its sole discretion; (vii) for
each Loan, Borrower shall have provided Lender with each of the closing
documents described in Exhibit A hereto (which documents shall be in form and
substance reasonably acceptable to Lender); (viii) Borrower is performing
substantially in accordance with its business plan referred to as "Autoweb
Quarterly Income Statement" dated December 5, 1997 and "Autoweb Cash Flow thru
12/98" dated 5:07pm 2/26/98 (the "Business Plan"), as may be amended from time
to time in form and substance acceptable to Lender; (ix) there shall be no
material adverse change in Borrower's condition, financial or otherwise, that
would materially impair the ability of Borrower to meet its payment and other
obligations under this Loan (a "Material Adverse Effect") as reasonably
determined by Lender, and Borrower so certifies, from (yy) the date of the most
recent financial statements delivered by Borrower to Lender to (zz) the date of
the proposed Loan; (x) Borrower shall use the proceeds of all Loans hereunder
for working capital; (xi) at the time of each Loan, Borrower has reimbursed
Lender for all UCC filing and search costs, inspection and labeling costs, and
appraisal fees, if any; (xii) all Collateral has been marked and labeled by
Lender or Lender's agent; and (xiii) Lender has received in form and substance
acceptable to Lender: (a) Borrower's interim financial statements signed by a
financial officer of Borrower, (b) for any funding after the first $500,000,
evidence of Borrower's receipt of $5,000,000 equity no later than May 31, 1998
("Equity"); (c) for any funding prior to Borrower's receipt of Equity, evidence
of Borrower's $500,000 cash position or equivalent amount of credit line
availability; and (d) complete copies of the Borrower's audit reports for its
most recent fiscal year, which shall include at least Borrower's balance sheet
as of the close of such year, and Borrower's statement of income and retained
earnings and of changes in financial position for such year, prepared on a
consolidated basis and certified by independent public accountants. Such
certificate shall not be qualified or limited because of restricted or limited
examination by such accountant of any material portion of the company's records.
Such reports shall be prepared in accordance with generally accepted accounting
principles and practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note which may or may
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not be prepaid in whole or in part. Each Note shall bear interest and be
payable at the times and in the manner provided therein. Following payment of
the Indebtedness related to each Note, Lender shall promptly return such Note,
marked "canceled," to Borrower.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i)
the payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it has full
authority to execute and deliver this Security Agreement and the Notes and
perform the terms hereof and thereof, and this Security Agreement and the Notes
have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) there is
no action or proceeding pending or threatened against Borrower before any court
or administrative agency which might have a Material Adverse Effect on the
business, financial condition or operations of Borrower; (f) at the time any
Loan is made hereunder, Borrower owns and will keep all of the Collateral free
and clear of all liens, claims and encumbrances, and, except for this Security
Agreement, there is no deed of trust, mortgage, security agreement or other
third party interest against any of the Collateral; (g) at the time any Loan is
made hereunder, Borrower has good and marketable title to the Collateral; (h) at
the time any Loan is made hereunder, all Collateral has been received, installed
and is ready for use and is satisfactory in all respects for the purposes of
this Security Agreement; (i) the Collateral is, and will remain at all times
under applicable law, removable personal property, which is free and clear of
any lien or encumbrance except in favor of Lender, notwithstanding the manner in
which the Collateral may be attached to any real property; (j) all credit and
financial information submitted to Lender herewith or at any other time is and
will at the time given be true and correct in all material respects; (k) the
security interest granted to Lender hereunder is a first priority security
interest; and (l)Borrower owes approximately $30,000 to Autonet, Inc. pursuant
to a certain promissory note. Borrower represents and warrants to Lender that
Borrower shall not borrow any additional funds from Autonet, Inc. after March
27, 1998. Borrower shall use its best efforts to promptly obtain an
Intercreditor Agreement from Autonet, Inc.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be
located at the address (the "Collateral Location") shown on Exhibit A to each
Note and shall not be moved without Lender's prior written consent which
location shall in all events be within the United States. All of the records
regarding the Collateral shall be located at 0000 Xxx Xxxxxx, Xxxx. 0, Xxxxx
Xxxxx, XX 00000, or such other location of which Borrower has given notice to
Lender in accordance with this Security Agreement. Lender shall have the right
to inspect Collateral, including records relating thereto, and Borrower's books
and records at any time (upon reasonable notification) during regular business
hours, such books and records to be maintained in accordance with generally
accepted accounting principles. Borrower shall be responsible for all labor,
material and freight charges incurred in connection with any removal or
relocation of Collateral which is requested by Borrower and consented to by
Lender, as well as for any charges due to the installation or moving of the
Collateral. Payments under the Notes and under this Security Agreement shall
continue during any period in which the Collateral is in transit
during a relocation. During Borrower's regular business hours and upon at least
two days' notice to Borrower, Lender or its agent shall xxxx and label
Collateral, which labels (to be provided by Lender) shall state that such
Collateral is subject to a security interest of Lender, and Borrower shall keep
such labels on the Collateral as so labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Borrower will reasonably
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permit Lender to inspect each item of Collateral and its maintenance records
during Borrower's regular business hours. Borrower will at its sole expense
comply with all applicable laws, rules, regulations, requirements and orders
with respect to the use, maintenance, repair, condition, storage and operation
of each item of Collateral. Except as required herein, Borrower will not make
any addition or improvement to any item of Collateral that is not readily
removable without causing material damage to any item or impairing its original
value or utility. Any addition or improvement that is so required or cannot be
so removed will immediately become Collateral of Lender.
(b) Service and Repair. With respect to computer equipment, other than personal
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computers, Borrower has entered into, and will maintain in effect, vendor's
standard maintenance contract or another contract satisfactory to Lender for a
period equal to the term of each Loan and extensions thereto which provides for
the maintenance of the Collateral in good condition and working order and
repairs and replacement of parts thereof, all in accordance with the terms of
such maintenance contract. Borrower shall have that Collateral certified for the
vendor's standard maintenance agreement before Lender acquires any interest in
the Collateral as provided in this Security Agreement. With respect to any other
Collateral, Borrower will at its sole expense maintain and service and repair
any damage to each item of Collateral in a manner consistent with prudent
industry practice and Borrower's own practice so that such item of Collateral is
at all times (i) in the same condition as when delivered to Borrower, except for
ordinary wear and tear, and (ii) in good operating order for the function
intended by its manufacturer's warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." No later than the first payment date following such
Casualty Occurrence, or, if there is no such payment date, no later than thirty
(30) days after such Casualty Occurrence, Borrower shall, at its election,
either: (a) repair the Collateral returning it to good operating condition, or
(b) replace the Collateral with Collateral acceptable to Lender in its
reasonable discretion, in good condition and repair taking all steps required by
Lender to perfect Lender's first priority security interest therein and (which
replacement Collateral shall be subject to the terms of this Security
Agreement), or (c) on the first day payment is due on any Note following the
Casualty Occurrence, or if there is no such payment date, thirty (30) days after
such Casualty Occurrence, pay to Lender an amount equal to the Balance Due (as
defined below) for each lost or damaged item of Collateral. The Balance Due for
each such item is the sum of: (i) all amounts for each item which may be then
due or accrued to the payment date, plus (ii) as of such payment date, an amount
equal to the product of the fraction specified below times the sum of all
remaining payments under the respective Note, including the amount of any
mandatory or optional payment required or permitted to be paid by Borrower to
Lender at the maturity of the Note. The numerator of the fraction shall be the
collateral value (as set forth on the applicable Note) of the item and the
denominator shall be the aggregate collateral value of all items under the Note.
Upon the making of such payments, Lender shall release such item of Collateral
from its lien hereunder.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value of
the Collateral and in no event for less than the
amount payable following a Casualty Occurrence (as provided in Section 9). Such
insurance shall provide for a loss payable endorsement to Lender and/or any
assignee of Lender. Borrower shall maintain commercial general liability
insurance, including products liability and completed operations coverage, with
respect to loss or damage for personal injury, death or property damage in an
amount not less than $2,000,000 in the aggregate, naming Lender and/or Lender's
assignee as additional insured. Such insurance shall contain insurer's agreement
to give thirty (30) days' advance written notice to Lender before cancellation
or material change of any policy of insurance. Borrower will provide Lender and
any assignee of Lender with a certificate of insurance from the insurer
evidencing Lender's or such assignee's interest in the policy of insurance. Such
insurance shall cover any Casualty Occurrence to any unit of Collateral.
Notwithstanding anything in Section 9 or this Section 10 to the contrary, this
Security Agreement and Borrower's obligations hereunder shall remain in full
force and effect with respect to any unit of Collateral which is not subject to
a Casualty Occurrence. If Borrower fails to provide or maintain insurance as
required herein, Lender shall have the right, but shall not be obligated, to
obtain such insurance. In that event, Borrower shall pay to Lender the cost
thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules
and regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual audited
financial statements within ninety (90) days following the end of Borrower's
fiscal year, unaudited quarterly financial statements within forty-five (45)
days after the end of each fiscal quarter, and within thirty (30) days of the
end of each month a financial statement for that month prepared by Borrower, and
including an income statement and balance sheet, all of which shall be certified
by an officer of Borrower as true and correct and shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and such other information as Lender may reasonably request; and (e) promptly
(but in no event more than five (5) days after the occurrence of such event)
notify Lender of any change in Borrower's condition during the commitment period
which constitutes a Material Adverse Effect, and of the occurrence of any Event
of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower (excluding, however, actions
brought by Borrower against Lender for breach of contract)or any third party by
reason of the occurrence or existence (or alleged occurrence or existence) of
any act or event relating to or caused by any portion of the Collateral, or its
purchase, acceptance, possession, use, maintenance or transportation, including
without limitation, consequential or special damages of any kind, any failure on
the part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon Lender's
request, will, at Borrower's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
by Borrower and reasonably approved by
Lender. Borrower's obligations under this Section 12 shall survive the payment
in full of all the Indebtedness and the performance of all Obligations with
respect to acts or events occurring or alleged to have occurred prior to the
payment in full of all the Indebtedness and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to Lender's income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement, the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY
EXCEPT TO A SUCCESSOR IN INTEREST TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS OF
BORROWER; PROVIDED, HOWEVER, THAT, THE FINANCIAL CONDITION OF SUCH SUCCESSOR IS
GREATER THAN OR EQUAL TO BORROWER AS DETERMINED IN GOOD FAITH BY LENDER AND THE
SUCCESSOR'S BUSINESS AND ITS MAJOR INVESTORS ARE REASONABLY ACCEPTABLE TO
LENDER. LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS
SECURITY INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE
OR IN PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO
BORROWER. If Borrower is given notice of such assignment it agrees to
acknowledge receipt thereof in writing and Borrower shall execute such
additional documentation as Lender's assignee and/or secured party shall
reasonably require at Lender's expense. Each such assignee and/or secured party
shall have all of the rights, but (except as provided in this Section 15) none
of the obligations, of Lender under this Security Agreement, unless such
assignee or secured party expressly agrees to assume such obligations in
writing. Borrower shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Borrower may have against Lender.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lender, or its assignees, secured parties, or their
agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the terms and
conditions of this Security Agreement. Subject to the foregoing, the Notes and
this Security Agreement shall inure to the benefit of, and are binding upon, the
successors and assignees of the parties hereto. Borrower acknowledges that any
such assignment by Lender will not change Borrower's duties or obligations under
this Security Agreement and the Notes or increase any burden or risk on
Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
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conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes shall prove to have been incorrect in any
material respect when made or given; (iv) Borrower's failure to comply with or
perform any material term, covenant or condition of this Security Agreement or
any Note or under any other agreement between Borrower and Lender or under any
lease or mortgage of real property covering the location of the Collateral if
such failure to comply or perform is not cured by Borrower within thirty (30)
days after Borrower knows of the noncompliance or nonperformance or notice from
Lender or such longer period that Borrower is diligently attempting to effect
such cure; (v) seizure of any of the Collateral under legal process; (vi) the
filing by or against Borrower or any guarantor under any guaranty executed in
connection with this Security Agreement ("Guarantor") of a petition for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors; (vii) the
voluntary or involuntary making of an assignment of a substantial portion of its
assets by Borrower or by any Guarantor for the benefit of its creditors, the
appointment of a receiver or trustee for Borrower or any Guarantor or for any of
Borrower's or Guarantor's assets, the institution by or against Borrower or any
Guarantor of any formal or informal proceeding for dissolution, liquidation,
settlement of claims against or winding up of the affairs of Borrower or any
Guarantor provided that in the case of all such involuntary proceedings, same
are not dismissed within sixty (60) days after commencement; (viii) the making
by Borrower or by any Guarantor of a transfer of all or a material portion of
Borrower's or Guarantor's assets or inventory not in the ordinary course of
business.
(b) Remedies. If any Event of Default has occurred, Lender may in its
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sole discretion exercise one or more of the following remedies with respect to
any or all of the Collateral: (i) declare due any or all of the aggregate sum
of all remaining payments under the Notes, including the amount of any mandatory
or optional payment required or permitted to be paid by Borrower to Lender at
the maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate
court action or actions either at law or in equity to enforce Borrower's
performance of the applicable covenants of the Notes and this Security Agreement
or to recover all damages and expenses incurred by Lender by reason of an Event
of Default; (iii) except as provided by law, without court order or prior
demand, enter upon the premises where the Collateral is located and take
immediate possession of and remove it without liability of Lender to Borrower or
any other person or entity; (iv) terminate this Security Agreement and sell the
Collateral at public or private sale, or otherwise dispose of, hold, use or
lease any or all of the Collateral in a commercially reasonable manner; or (v)
exercise any other right or remedy available to it under applicable law. If
Lender has declared due any or all of the Remaining Payments, Borrower will pay
immediately to Lender, without duplication, (A) the Remaining Payments, (B) all
amounts which may be then due or accrued, and (C) all other amounts due under
this Security Agreement and under the Notes (Lender's Return, as referred to
below, means the amounts described in clauses (A), (B) and (C) above). The net
proceeds of any sale or lease of such Collateral will be credited against
Lender's Return. The net proceeds of a sale of the Collateral pursuant to this
Section 16(b) is defined as the sales price of the Collateral less selling
expenses, including, without limitation, costs of remarketing the Collateral and
all refurbishing costs and commissions paid with respect to such remarketing.
The net proceeds of a lease of the Collateral pursuant to this Section 16(b) is
defined as the amount equal to the monthly payments due under such lease
(discounted at 6% per annum compounded monthly on the basis of a 360 day year
(the "Discount Rate") plus the residual value of the Collateral at the end of
the basic term of such lease, as reasonably determined by Lender, and discounted
at the Discount Rate.
Borrower agrees to pay all reasonable out-of-pocket costs of Lender incurred in
enforcement of this Security Agreement, the Notes or any instrument or agreement
required under this Security Agreement, including, but not limited to reasonable
attorneys' fees and litigation expenses and fees of collection agencies ("Remedy
Expenses"). At Lender's request, Borrower shall assemble the Collateral and
make it available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part
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of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First, to the payment of reasonable costs and expenses of suit or
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foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
Second, to the payment of all other amounts not described in item
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Third below due under this Security Agreement and all Notes;
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Third, to pay Lender an amount equal to Lender's Return, to the extent
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not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever may
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lawfully be entitled to receive it.
(d) Effect of Delay; Waiver; Foreclosure on Collateral. No delay or
--------------------------------------------------
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial,
by Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies
exercised hereunder or thereunder. Lender shall not be required first to
foreclose on the Collateral prior to bringing an action against Borrower for
sums owed to Lender under this Security Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 10% of
any payment owed Lender by Borrower which is not paid when due (taking into
account applicable grace periods), for every month such payment is not paid when
due, but in no event an amount greater than the highest rate permitted by
applicable law. If such amounts have not been received by Lender at Lender's
place of business or by Lender's designated agent by the date such amounts are
due under this Security Agreement or the Notes, Lender shall xxxx Borrower for
such charges. Borrower acknowledges that invoices for amounts due hereunder or
under the Notes are sent by Lender for Borrower's convenience only. Borrower's
non-receipt of an invoice will not relieve Borrower of its obligation to make
payments hereunder or under the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower will execute all financing
statements pursuant to the Uniform Commercial Code and all such other documents
reasonably requested by Lender to perfect Lender's security interests hereunder.
Borrower authorizes Lender to file financing statements signed only by Lender
(where such authorization is permitted by law) at all places where Lender deems
necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs
and expenses including reasonable attorney's fees and the fees of collection
agencies, incurred by Lender (a) in enforcing any of the terms, conditions or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
is filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent, which shall not
be given for changes that will affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or which
in any way affect the value of the Collateral for purposes of resale or lease.
All
attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lessor.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement
will be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original
of each Note and it shall be marked "Original," and all other counterparts will
be duplicates. To the extent, if any, that any Notes(s) to this Security
Agreement constitutes chattel paper (or as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction) no security
interest in any Note(s) may be created in any documents other than the
"Original."
SECTION 25. SOFTWARE. For the term of this Security Agreement, and so long as
no Event of Default has occurred and is continuing, Lender hereby assigns to
Borrower all of Lender's rights, if any, under any license agreement executed by
Lender in connection with the Collateral (except for any right of Lender to be
reimbursed for the license fee). Borrower agrees to be bound by the provisions
of any such license agreement and to perform all obligations of Lender (except
Lender's payment obligations) thereunder. Borrower acknowledges that all of
Borrower's obligations under the Security Agreement with respect to the
Collateral will apply equally to the software, including but not limited to
Borrower's obligation to pay rent to Lender.
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee
("Fee") of $10,000. The Fee shall be applied by Lender first to reimburse
Lender for all out-of-pocket UCC and other search costs, inspections and
labeling costs and appraisal fees, if any, incurred by Lender, and then
proportionally to the first monthly payment for each Note hereunder in the
proportion that the Collateral value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligation to fund Loans pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at 0000 Xxxxxx Xxxxxxxxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000, Attention: Asset Management and to Borrower at
0000 Xxx Xxxxxx, Xxxx. 0, Xxxxx Xxxxx, XX 00000, Attention: Xxx Xxxxxxxx.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such
corporate resolutions, financial statements and other documents as Lender shall
reasonably request from time to time. (b) Borrower represents that the
Collateral hereunder is used solely for business purposes. (c) Time is of the
essence with respect to this Security Agreement. (d) Borrower acknowledges that
Borrower has read this Security Agreement and the Notes, understands them and
agrees to be bound by their terms and further agrees that this Security
Agreement and the Notes constitute the entire agreement between Lender and
Borrower with respect to the subject matter hereof and supersede all previous
agreements, promises, or representations. (e) This Security Agreement and the
Notes may not be changed, altered or modified except by an instrument signed by
an officer or authorized representative of Lender and Borrower. (f) Any failure
of Lender to require strict performance by Borrower or any waiver by Lender of
any provision herein or in a Note shall not be construed as a consent or waiver
of any other breach of the same or any other provision. (g) If any provision of
this Security Agreement or any Note is held invalid, such invalidity shall not
affect any other provisions hereof or thereof. (h) The obligations
of Borrower to pay the Indebtedness and perform the Obligations shall survive
the expiration or earlier termination of this Security Agreement and each Note
until all Obligations of Borrower to Lender have been met and all liabilities of
Borrower to Lender and any assignee have been paid in full. (i) Borrower will
notify Lender at least 30 days before changing its name or principal place of
business. (j) Borrower will, at its expense, promptly execute and deliver to
Lender such documents and assurances (including financing statements) and take
such further action as Lender may reasonably request in order to carry out the
intent of this Security Agreement and Lender's rights and remedies. (k) Borrower
hereby appoints Lender (and each of Lender's officers, employees or agents
designated by Lender), with full power of substitution by Lender, as Borrower's
attorney, with power to execute and deliver on Borrower's behalf financing
statements and other documents necessary to perfect and/or give notice of
Lender's security interest in any of the Collateral.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed in
the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with the laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement and each Note shall be in
the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco. BORROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 30. ADDITIONAL INTEREST COMPENSATION:
(a) General. Borrower shall have the option to choose a final payment or Note
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extension election ("Additional Interest Compensation") at the expiration of the
first Note's term. Borrower shall provide written notice of its election to
Lender at least 90 days prior to the end of the term of the first Note. That
choice shall be an election of Borrower's additional interest compensation
election for all, but not less than all, of the Collateral under all Notes under
the Security Agreement. In the event Borrower does not provide 90 days' prior
written notice of its election, Borrower shall be deemed to have elected
Election No. 2.
(b) End of Loan Position Elections. As Additional Interest Compensation,
------------------------------
Borrower shall have the option:
Election No. 1: Make a final payment equal to 15% of the Note's original
--------------
principal amount.
Election No. 2: Extend the Note's term for an additional 12 months ("Extended
--------------
Term") for a monthly rate of 1.5% of the Note's original principal amount.
SECTION 31. ADJUST-A-LOAN OPTION:
General: During the term of any Note ("Old Note"), Borrower shall have the
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option to remove all or part of such Old Note's Collateral ("Removed
Collateral") and obtain financing from Lender for new Collateral ("New
Collateral") under a new Note ("New Note"), subject to the following:
(a) New Note Amount: The principal amount of the New Note shall be the sum
---------------
of: (i) the remaining payments attributable to the Removed Collateral due under
the Old Note , including the Additional Interest Compensation payment,
("Remaining Payments") and (ii) the cost of the New Collateral. The Remaining
Payments shall be discounted to present value at a rate of 6% per annum,
compounded monthly. The principal amount of the New Note shall be reduced by
any trade-in value or resale proceeds received by Lender for the Removed
Collateral. For purposes of this Section, the Additional Interest Compensation
payment shall be assumed to be the greatest amount Borrower would be required to
pay under Election No. 1 in Section 30 above.
(b) Old Note Amount: If any item of Collateral remains on the Old Note,
---------------
the monthly payment amount for the Old Note will be reduced in proportion to the
Removed Collateral's value.
(c) Option Preconditions: Borrower's right to exercise this Adjust-A-Loan
--------------------
Option ("Option") is conditioned upon the following: (i) no Event of Default
under the Security Agreement has theretofore occurred or is continuing; (ii) the
New Note financing terms are subject to Lender's then current loan rates and
documentation requirements; (iii) Lender is satisfied with Borrower's
creditworthiness; (iv) the New Collateral is acceptable to Lender; (v) Borrower
has given Lender at least 90 days' prior written notice of its desire to
exercise the Option; (vi) the principal amount of the New Note using the formula
set forth in (a) above is not less than zero.
PHOENIX LEASING INCORPORATED DOWNTOWN WEB, INC. DBA XXXXXXX.XXX
By:___________________________ By:_______________________________
Name:_________________________ Name (Print):_____________________
Title:________________________ Title:____________________________
HEADQUARTERS LOCATION:
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0000 Xxx Xxxxxx, Xxxx. 0
Xxxxx Xxxxx, XX 00000
County of Santa Xxxxx
EXHIBITS AND SCHEDULES:
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Exhibit A -- Closing Memorandum
