LOAN AND SECURITY AGREEMENT No. V07208
Exhibit 10.16
LOAN AND SECURITY AGREEMENT
No. V07208
No. V07208
This Loan and Security Agreement (this “Loan Agreement”), made as of July 31, 2007 by and between
BlueCrest Capital Finance, L.P. (“Lender”), a Delaware limited partnership with its principal place
of business at 000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, and NitroSecurity,
Inc. (“Borrower”), a Delaware corporation with its principal place of business at 000 Xxxxxxxx Xxx,
Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxxxxx 00000.
In consideration of the promises set forth herein, Lender and Borrower agree upon the following
terms and conditions:
1. General Definitions
The following words, terms and /or phrases shall have the meanings set forth thereafter and such
meanings shall be applicable to the singular and plural form thereof giving effect to the numerical
difference:
A. “Account” means any “account,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest and, in any
event, shall include all accounts receivable, book debts, rights to payment, and other forms of
obligations now owned or hereafter received or acquired by or belonging or owing to Borrower
(including under any trade name, style or division thereof), whether or not arising out of goods or
software sold or licensed or services rendered by Borrower or from any other transaction (including
any such obligation that may be characterized as an account or contract right under the UCC), and
all of Borrower’s rights in, to and under all purchase orders or receipts now owned or hereafter
acquired by it for goods or services, and all of Borrower’s rights to any goods represented by any
of the foregoing (including unpaid seller’s rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), and all monies due or
to become due to Borrower under all purchase orders and contracts for the sale of goods or the
performance of services or both by Borrower or in connection with any other transaction (whether or
not yet earned by performance on the part of Borrower), now in existence or hereafter occurring,
including the right to receive the proceeds of said purchase orders and contracts, and all
collateral security and guarantees of any kind given by any Person with respect to any of the
foregoing.
B. “Account Debtor” means any Person obligated on an Account.
C. “Additional Loan Facility” means a revolving line of credit with Lender or a third party
lender pursuant to which Lender or such third party makes advances or payments based on the value
of the Accounts, and (i) if such facility is entered into with Lender, Borrower’s Liabilities
thereunder are secured by a first-priority perfected security interest in the Collateral, and, (ii)
if such facility is entered into with a third party, are subject to an intercreditor agreement
mutually satisfactory to Lender and such third party lender, providing for, among other things, the
subordination by Lender of its liens in the Accounts, Inventory, Deposit Accounts (other than the
Pledged Deposit Account) and the Proceeds thereof.
D. “Affiliate” means, as applied to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. For the purposes of this
definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled
by” and “under common control with”), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote 5% or more of the securities having ordinary voting power for
the election of directors of such Person or (ii) to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting securities or by contract or
otherwise.
E. “Borrower’s Liabilities” means all obligations and liabilities of Borrower to Lender
(including without limitation all debts, claims, and indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing,
due or payable, however evidenced, created, incurred, acquired or owing and however arising,
whether under this Loan Agreement and/or any promissory note or other instrument issued pursuant
hereto or the “Other Agreements” (hereinafter defined), but excluding any obligations and
liabilities arising out of the Warrant and any inchoate indemnity obligations.
F. “Business Day” means a day of the year on which banks are not required or authorized to
close in New York City or Chicago, Illinois.
G. “Cash” means all cash, money (as such term is defined in the UCC), currency, and liquid
funds, wherever held, in which Borrower now or hereafter acquires any right, title, or interest.
H. “Change of Control” means, at any time, (i) the current shareholders of Borrower shall
cease to beneficially own and control, directly or indirectly on a fully diluted basis, a majority
of the economic and voting interests in the capital stock or other ownership interests of Borrower
or (ii) any Person or group other than the current shareholders of Borrower shall have the right to
elect a majority of the seats on Borrower’s board of directors, but excluding any changes resulting
from bona fide venture capital financing (provided Borrower provides the names of such investors to
Lender at least ten (10) Business Days prior to such transaction) and public offerings of the
Borrower’s capital stock.
I. “Charges” means all national, federal, state, county, city, municipal and/or other
governmental taxes, levies, assessments, charges, liens, claims or encumbrances upon and/or
relating to the Collateral, Borrower’s Liabilities, Borrower’s business, Borrower’s ownership
and/or use of any of its assets, and/or Borrower’s income and/or gross receipts.
J. “Chattel Paper” means any “chattel paper,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
K. “Cleanup” means all actions required to: (1) clean up, remove, treat or remediate Hazardous
Materials in the indoor or outdoor environment; (2) prevent the release of Hazardous Materials so
that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (3) perform pre-remedial studies and investigations and post-remedial
monitoring and care; or (4) respond to any government requests for information or documents in any
way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment
or remediation of Hazardous Materials in the indoor or outdoor environment.
L. “Collateral” has the meaning set forth in Section 5.1 hereof.
M. “Copyright License” means any written agreement granting to the Borrower any right to use
any Copyright or Copyright registration, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
N. “Copyrights” means all of the following property, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest: (i) all copyrights,
whether registered or unregistered, held pursuant to the laws of the United States, any State
thereof or of any other country; (ii) all registrations, applications and recordings in the United
States Copyright Office or in any similar office or agency of the United States, of any State
thereof or of any other country; (iii) all continuations, renewals or extensions thereof; and (iv)
all registrations to be issued under any pending applications.
O. “Default” means any condition or event that, after notice or lapse of time or both, would
constitute an Event of Default.
P. “Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and in
any event includes any checking account, savings account, or certificate of deposit now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
Q. “Documents” means any “documents,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
R. “Environmental Claim” means any claim, action, cause of action, investigation or notice
(written or oral) by any Person alleging potential liability (including, without limitation, an
obligation to conduct a Cleanup or potential liability for investigatory costs, Cleanup costs,
governmental response costs, natural resources damages, property damages, personal injuries, or
penalties) arising out of, based on or resulting from (a) the presence or release of any Hazardous
Materials at any location, whether or not owned, leased or operated by Borrower or any of its
Subsidiaries, or (b) circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
S. “Environmental Laws” means all federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment, including, without
limitation, laws relating to releases or threatened releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, release, disposal,
transport or handling of Hazardous Materials, laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous Materials and laws
relating to the management or use of natural resources.
T. “Equipment” means any “equipment”, as such term is defined in the UCC, and in any event
shall include but not be limited to computers and peripherals, laboratory equipment, manufacturing
equipment,
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networking equipment, switching and backbone equipment, servers and routers and other hardware
including disk drives and laser printers, office furniture, fixtures and office equipment, test and
other equipment, and software, and all accessions, additions, attachments, accessories and
improvements thereof and all replacements and/or substitutions therefore and all proceeds and
products thereof.
U. “Event of Default” has the meaning set forth in Section 8.1 hereof.
V. “Financials” means those financial statements described in Section 7.3 hereof.
W. “Fixtures” means any “fixtures,” as such term is defined in the UCC, together with all
right, title and interest of Borrower in and to all extensions, improvements, betterments,
accessions, renewals, substitutes, and replacements of, and all additions and appurtenances to any
of the foregoing property, and all conversions of the security constituted thereby, immediately
upon any acquisition or release thereof or any such conversion, as the case may be, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
X. “GAAP” means generally accepted accounting principles in the United States, in effect from
time to time, consistently applied.
Y. “General Intangibles” means any “general intangibles,” as such term is defined in the UCC,
and, in any event, shall include all right, title and interest which Borrower may now or hereafter
have in or under any rights to payment; payment intangibles; software; proprietary or confidential
information; business records and materials; customer lists; interests in partnerships, joint
ventures, business associations, corporations, and limited liability companies; permits; claims in
or under insurance policies (including unearned premiums and retrospective premium adjustments);
and rights to receive tax refunds and other payments and rights of indemnification now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
Z. “Goods” means any “goods,” as such term is defined in the UCC, now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
AA. “Hazardous Materials” means all substances defined as Hazardous Substances, Oils,
Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan,
40 C.F.R. § 300.5, or defined as such by, or regulated as such under, any Environmental Law.
BB. “Instruments” means any “instrument,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
CC. “Intellectual Property” means all Copyrights; Trademarks; Patents; and Licenses; and
applications therefor and reissues, extensions, or renewals thereof; and goodwill associated with
any of the foregoing; together with rights to xxx for past, present and future infringement of
Intellectual Property and the goodwill associated therewith.
DD. “Inventory” means any “inventory,” as such term is defined in the UCC, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest,
and, in any event, shall include all Goods and personal property that are held by or on behalf of
Borrower for sale or lease or are furnished or are to be furnished under a contract of service, or
that constitute raw materials, work in process or materials used or consumed or to be used or
consumed in Borrower’s business, or the processing, packaging, promotion, delivery or shipping of
the same, and all finished goods, whether or not the same is in transit or in the constructive,
actual or exclusive possession of Borrower or is held by others for Borrower’s account, including
all property covered by purchase orders and contracts with suppliers and all Goods billed and held
by suppliers and all such property that may be in the possession or custody of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents or other Persons.
EE. “Investment Property” means all “investment property,” as such term is defined in the UCC,
and in any event includes any certificated security, uncertificated security, money market funds,
bonds, mutual funds, and U.S. Treasury bills or notes, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
FF. “Letter of Credit Rights” means any “letter of credit rights,” as such term is defined in
the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest, including any right to payment or performance under any letter of credit.
GG. “License” means any Copyright License, Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by Borrower or in which Borrower now holds or
hereafter acquires
any interest and any renewals or extensions thereof.
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HH. “Loan” has the meaning set forth in Section 2.1 hereof.
II. “Material Adverse Effect” means a material adverse effect upon (i) the business
operations, properties, assets, results of operations or condition (financial or otherwise) of
Borrower, (ii) the prospect of repayment of any material portion of Borrower’s Liabilities, (iii)
the validity, perfection, value or priority of Lender’s security interest in the Collateral, (iv)
the enforceability of any material provision of this Loan Agreement or any Other Agreement or (v)
the ability of Lender to enforce its rights and remedies under this Loan Agreement or any Other
Agreement.
JJ. “Other Agreements” means all agreements, instruments and documents, including, without
limitation, the Warrants, any notes, guaranties, letters of credit, mortgages, deeds of trust,
pledges, powers of attorney, consents, assignments, contracts, notices, security agreements,
leases, warrants, account pledge and control agreements, fee arrangements, financing statements and
all other written matter heretofore, now and/or from time to time hereafter executed by and/or on
behalf and/or for the benefit of Borrower and delivered to Lender in connection with this
Agreement.
KK. “Patent License” means any written agreement granting to Borrower any right with respect
to any invention on which a Patent is in existence or a Patent application is pending, in which
agreement Borrower now holds or hereafter acquires any interest.
LL. “Patents” means all of the following property, now owned or hereafter acquired by
Borrower: (a) all letters patent of, or rights corresponding thereto, in the United States or in
any other country, all registrations and recordings thereof, and all applications for letters
patent of, or rights corresponding thereto, in the United States or any other country, including
registrations, recordings and applications in the United States Patent and Trademark Office or in
any similar office or agency of the United States, any State thereof or any other country; (b) all
reissues, continuations, continuations-in-part or extensions thereof; (c) all xxxxx patents,
divisionals, and patents of addition; and (d) all patents to be issued under any such applications.
MM. “Permitted Debt” means (i) Borrower’s indebtedness to Lender under this Loan Agreement or
any of the Other Agreements; (ii) Subordinated Debt; (iii) the Additional Loan Facility; (iv)
indebtedness to trade creditors incurred in the ordinary course of business on ordinary trade terms
and accrued expenses incurred in the ordinary course of business; (v) indebtedness (including
capitalized leases) incurred for the purpose of financing all or any part of the acquisition costs
of Equipment, not to exceed $500,000 in aggregate principal amount; and (vi) any extension, renewal
or refinancing of the indebtedness described in clause (v) above, provided that the principal
amount and interest rate on such indebtedness may not be increased.
NN. “Permitted Liens” means all (i) Charges for amounts not yet delinquent or being contested
in good faith by appropriate proceedings and for which adequate reserves have been made in
accordance with GAAP; (ii) statutory liens of landlords, carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not yet delinquent or that are
being contested in good faith by appropriate proceedings being diligently conducted and for which
Borrower maintains adequate reserves in accordance with GAAP; (iii) liens arising from judgments,
decrees or attachments in circumstances which do not constitute an Event of Default hereunder; (iv)
the following deposits, to the extent made in the ordinary course of business: deposits under
worker’s compensation, unemployment insurance, social security and other similar laws, or to secure
the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or
to secure indemnity, performance or other similar bonds for the performance of bids, tenders or
contracts (other than for the repayment of borrowed money) or to secure statutory obligations
(other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to
secure indemnity, performance or other similar bonds; (v) banker’s liens, rights of setoff and
similar liens arising by operation of law on deposits made in the ordinary course of business,
provided such liens do not arise in respect of borrowed money; (vi) liens on and security interests
on Equipment (and the Proceeds thereof), securing indebtedness not to exceed, in aggregate
principal amount, $500,000, provided that such liens and security interests attach only to the
Equipment so acquired and to the Proceeds thereof and do not encumber any other Collateral of
Borrower; (vii)liens securing the Additional Loan Facility; (viii) liens securing Subordinated
Debt; (ix) liens on security deposits or on other assets securing letters of credit in favor of
Borrower’s landlords in the ordinary course of business; and (x) liens in connection with letters
of credit securing obligations of Borrower to parties outside of United States and given in the
ordinary course of business.
OO. “Person” means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association, corporation, institution,
entity, party or government (whether national, federal, state, county, city, municipal or
otherwise, including without limitation, any
instrumentality, division, agency, body or department thereof).
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PP. “Pledged Account” means Borrower’s Deposit Account, maintained at Bank of America, N.A. or
at such successor bank selected by Borrower to replace Bank of America, N.A. with respect to such
Deposit Account and which is, on or before August 31, 2007, subject to a deposit account control
agreement in favor of Lender pursuant to Section 5.4 hereof, or, except as permitted in Section
7.2(m) hereof, any other Deposit Account or Securities Account maintained at another bank or
financial institution at which such Deposit Account or Securities Account may be maintained
pursuant to a replacement account control agreement.
QQ. “Proceeds” means “proceeds,” as such term is defined in the UCC.
RR. “Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents, Chattel Paper,
Supporting Obligations, letters of credit, proceeds of any letter of credit, and Letter of Credit
Rights, and (ii) all customer lists, software, and business records related thereto.
SS. “Securities Account” means any “securities account” as such term is defined in the UCC,
and in any event includes any account to which a financial asset is or may be credited in
accordance with an agreement under which the person maintaining the account undertakes to treat the
person for whom the account is maintained as entitled to exercise the rights that comprise the
financial asset.
TT. “Subordinated Debt” means any indebtedness of Borrower to a third party, subordinated to
the rights of Lender hereunder pursuant to the terms and conditions of a subordination agreement
satisfactory to Lender in its sole discretion, which indebtedness shall not be secured by any of
the Collateral.
UU. “Subsidiary” means, with respect to any Person, any corporation, partnership, limited
liability company, association, joint venture or other business entity of which more than 50% of
the total voting power of shares of stock or other ownership interests entitled (without regard to
the occurrence of any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
VV. “Supporting Obligations” means any “supporting obligations,” as such term is defined in
the UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
WW. “Term Loan” has the meaning set forth in Section 2.1 hereof.
XX. “Trademark License” means any written agreement granting to Borrower any right to use any
Trademark or Trademark registration, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
YY. “Trademarks” means all of the following property, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest: (a) all trademarks,
tradenames, corporate names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have appeared or appear, and
designs of like nature, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and any applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or any political
subdivision thereof, and (b) all reissues, extensions or renewals thereof.
ZZ. “UCC” means the Uniform Commercial Code as in effect from time to time in the State of
Illinois, provided that if by reason of mandatory provisions of law, the perfection, the effect of
perfection or non-perfection or the priority of the security interest granted hereunder in any
Collateral (as hereinafter defined) or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect on or after the date hereof in other jurisdiction(s), then
“UCC” means the Uniform Commercial Code as in effect on or after the date hereof in such other
jurisdiction(s) for the purposes of the provisions hereof relating to such perfection, effect of
perfection or non-perfection, or priority or availability of such remedy.
AAA. “Warrant” has the meaning set forth in Section 2.5(b) hereof.
2. The Loans
2.1 Term Loan. On the terms and subject to the conditions contained in this Loan Agreement,
including those listed in Section 2.5 hereof, Lender shall loan to Borrower on or prior to August
31, 2007, a term loan (the “Term Loan”), in those amount(s) listed on one or more funding requests
submitted to Lender in such form and substance
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reasonably acceptable to the Lender, the proceeds of which are to be used for working capital and
general business purposes. In no event shall the aggregate amount of the advances made hereunder
exceed Two Million Dollars ($2,000,000.00). This is not a revolving line of credit and Borrower
may not repay and re-borrow the amounts advanced or to be advanced under this Section 2.1. Each
advance in respect of the Term Loan (each, a “Loan”), other than the initial Loan, shall be made on
notice (substantially in the form of Exhibit B hereto) given by Borrower to Lender not later than
9:00 a.m. (prevailing Chicago time) not less than five (5) Business Days prior to the date of such
proposed borrowing. Any advance in respect of the Term Loan shall be repaid in thirty-six (36)
equal monthly scheduled installments of principal and interest (paid in arrears), such payments to
be made on the first Business Day of each month, commencing on the first Business Day of the month
following the date of such borrowing.
2.2 Evidence and Nature of Loans. Each Loan will be evidenced by one or more promissory
notes (in form attached hereto as Exhibit C) to be executed and delivered by Borrower to Lender
before or concurrently with Lender’s disbursement of such Loan to or for the account of Borrower.
All of Borrower’s Liabilities (including all Loans under this Loan Agreement) shall be secured by
Lender’s security interest in the Collateral and by all other security interests, liens, claims and
encumbrances now and/or from time to time hereafter granted by Borrower to Lender, whether
hereunder or under the Other Agreements.
2.3 Use of Proceeds. Borrower warrants and represents to Lender that Borrower shall use the
proceeds of each Loan made by Lender to Borrower pursuant to this Loan Agreement and any advances
made pursuant to the Other Agreements solely for legal and proper corporate purposes (duly
authorized by its Board of Directors) and consistent with all applicable laws and statutes.
2.4 Direction to Remit. Borrower hereby authorizes and directs Lender to disburse, for and
on behalf of Borrower and for Borrower’s account, the proceeds of the Loan made by Lender to
Borrower pursuant to this Loan Agreement to such Person or Persons as an officer or director of
Borrower shall direct, whether in writing or orally.
2.5 Conditions Precedent. (a) The following conditions precedent must be met before each
Loan is made hereunder: (i) No event, condition or change that has had, or would reasonably be
expected to have, a Material Adverse Effect shall have occurred since the date of this Loan
Agreement, (ii) The representations and warranties contained in this Loan Agreement and in the
Other Agreements shall be true and correct on and as of the date of such Loan, (iii) As of the
date of such Loan, no event shall have occurred and be continuing or would result from such Loan or
the application of the proceeds thereof that would constitute an Event of Default or a Default,
(iv) Borrower shall have successfully closed an equity or Subordinated Debt financing on or after
the date of this Loan Agreement whereby Borrower shall have received net proceeds in such financing
not less than the amount of the Loan, proven to the reasonable satisfaction of Lender, on or prior
to the date of the Loan, and (v) Such other conditions precedent regarding documentation and
information as Lender may reasonably impose upon Borrower from time to time. For each Loan made
hereunder after the initial Loan, it shall be a condition precedent hereunder that Borrower shall
have delivered any account control agreements required hereunder in respect of the Pledged
Account(s), each executed by Borrower and applicable financial institution(s) for the benefit of
Lender.
(b) In addition, the following conditions precedent must be met before the initial Loan is
made hereunder: (i) Payment of all fees required under Section 3.2 of this Loan Agreement, (ii)
Receipt by Lender of satisfactory release documents from any and all conflicting secured creditors
(other than holders of Permitted Liens), (iii) Receipt by Lender of appropriate filings and other
means of perfecting its security interest in the Collateral, including but not limited to specific
assignments of Collateral consisting of instruments or evidenced by titles requested by Lender,
(iv) Lender shall have received copies of the certificates of insurance contemplated under Section
5.6 hereof and the 2005 and 2006 audited financial statements along with the interim unaudited
financial statements for the first fiscal quarter of 2007, (v) Receipt by Lender of adequate proof
of free and clear ownership of the Collateral, including but not limited to paid in full invoices
and cancelled checks or other means of payment for said invoices requested by Lender, (vi) Receipt
by Lender of a Warrant to purchase 142,858 shares of Borrower’s Series C Preferred Stock at a
purchase price of $1.40 per share in form and substance satisfactory to Lender (the “Warrant”),
(vii) Receipt by Lender of a Subordination Agreement, in form and substance satisfactory to Lender
in its sole discretion, in respect of the Subordinated Debt, and (viii) Delivery by Borrower of a
legal opinion of counsel to Borrower relating to this Loan Agreement and the Other Agreements in
form and substance satisfactory to Lender.
2.6 Payments and Taxes. Any and all payments made by Borrower under this Loan Agreement or
any Other Agreement shall be made free and clear of and without deduction for any and all present
or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other
charges imposed by any governmental authority (including any interest, additions to tax or
penalties applicable thereto) other than any taxes imposed on or measured by Lender’s overall net
income and franchise taxes imposed on it (in lieu of net income taxes), by a jurisdiction (or any
political subdivision thereof) as a result of Lender being organized or resident, conducting
business (other than a business deemed to arise from Lender having executed, delivered or performed
its obligations
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or received a payment under, or enforced, or otherwise with respect to, this Loan Agreement or any
Other Agreement) or having its principal office in such jurisdiction (“Indemnified Taxes”).
If any Indemnified Taxes shall be required by law to be withheld or deducted from or in respect of
any sum payable under this Loan Agreement or any Other Agreement to Lender (w) an additional amount
shall be payable as may be necessary so that, after making all required withholdings or deductions
(including withholdings or deductions applicable to additional sums payable under this Section)
Lender receives an amount equal to the sum it would have received had no such withholdings or
deductions been made, (x) Borrower shall make such withholdings or deductions, (y) Borrower shall
pay the full amount withheld or deducted to the relevant taxing authority or other authority in
accordance with applicable law and (z) upon request, Borrower shall deliver to Lender evidence of
such payment. Borrower’s obligation hereunder shall survive the termination of this Loan
Agreement.
2.7 Additional Loan Facility. Notwithstanding any other provision hereof, Lender
acknowledges that Borrower may desire to enter into an Additional Loan Facility, and Borrower
agrees that Lender shall be offered the opportunity to provide such Additional Loan Facility, if
Borrower seeks such financing on or before the earlier of (a) August 1, 2010 or (b) the termination
of this Loan Agreement. In such event, Borrower shall provide Lender with a summary of the
principal terms of a financing arrangement with a third party (the “Proposed Financing”), and
Lender shall thereafter have ten (10) Business Days to provide an approved commitment for such
Additional Loan Facility (subject only to final documentation consistent with such terms) on terms
no less favorable to the Borrower than the Proposed Financing. To the extent that Lender does not
provide such Additional Loan Facility substantially in accordance with the terms of the Proposed
Financing, Lender agrees to consent to such borrowing and liens and promptly enter into an
intercreditor agreement mutually acceptable to third party lender and Lender (as further described
in the definition of Additional Loan Facility above) to allow Borrower to effectuate the same with
such third party lender.
3. Interest, Fees and Repayment
3.1 Interest. Each Term Loan shall bear interest payable monthly in arrears on the first
Business Day of each month, calculated on the basis of a 360 day year comprised of twelve (12)
thirty day months at a per annum rate equal to the interest rate specified in the related note (the
“Loan Interest Rate”), which rate shall be the sum of (i) 775 basis points plus (ii) the greater of
(a) 4.60% or (b) the yield on Three-Year U.S. Treasury Notes on the date of such Loan, as reported
in the Federal Reserve Statistical Release H-15 or in such other publication as Lender may
reasonably select. In no event shall interest accrue or be payable in connection with any Loan in
an amount in excess of that permitted under applicable law. If the note(s) so provide, the
interest thereunder may be precomputed for the period ending when payments thereunder are due and
on the assumption that all payments will be made on their respective due dates. Payments due under
any note and not made by their scheduled due date for a period in excess of five (5) days
thereafter shall be overdue and shall be subject to a service charge in an amount equal to two
percent (2%) of the delinquent amount, but not more than the maximum rate permitted by law,
whichever is less. In addition, and notwithstanding the forgoing, during the continuance of an
Event of Default all outstanding Borrower Liabilities in respect of the Loans shall bear interest
(payable on demand) at a rate that is two percent (2%) per annum in excess of the Loan Interest
Rate applicable to each Loan and other Borrower Liabilities from time to time.
3.2 Fees. Borrower agrees to pay to Lender a fee of $25,000 to cover due
diligence and other costs and expenses (including legal fees) incurred in connection with the
origination of the Loan, of which Lender acknowledges receipt of $25,000. All fees payable
hereunder shall be earned when due and payable hereunder, and shall not be refundable in whole or
in part.
3.3 Repayment. Borrower’s Liabilities under this Loan Agreement are absolute and
unconditional. Any and all costs, fees and expenses payable pursuant to this Loan Agreement or any
of the Other Agreements shall be payable by Borrower to Lender or to such other person or persons
designated by Lender, on demand. All payments to Lender shall be payable by 2:00 p.m. (prevailing
Chicago time) at Lender’s principal place of business specified at the beginning of this Loan
Agreement or at such other place or places as Lender may designate in writing to Borrower. All
payments to Persons other than Lender shall be payable at such place or places as Lender may
designate in writing to Borrower.
3.4 Application of Payments. Provided that an “Event of Default” (hereinafter defined)
does not exist, the application of payments received by Lender pursuant to this Loan Agreement
shall be applied first to any and all late charges, fees and expenses then due and payable; second
to interest then due and payable hereunder; third to the principal of the Loans then due and
payable, fourth to the remaining Loans then outstanding and finally, to any other Borrower
Liabilities then outstanding. From and after an Event of Default, Lender shall have the continuing
and exclusive right to apply any and all such payments received by Lender to any portion of
Borrower’s Liabilities, including to any of Borrower’s Liabilities arising under any of the Other
Agreements. Solely for the purpose of
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computing interest earned by Lender, payments received by Lender shall be applied as aforesaid on
the Business Day following receipt by Lender. Checks or other items of payment received after 2:00
p.m. prevailing Chicago, Illinois time shall be deemed received the following Business Day.
3.5 Accuracy of Statements Each statement of account by Lender delivered to Borrower
relating to Borrower’s Liabilities shall be presumed correct and accurate (absent manifest error).
Any objection to the statement that Borrower may have must be delivered to Lender within thirty
(30) days after Borrower’s receipt of said statement.
4. Term and Prepayment
4.1 Term. This Loan Agreement shall be in effect until the indefeasible payment in full to
Lender of all of Borrower’s Liabilities. Except as provided below, Borrower has no right to prepay
Borrower’s Liabilities under this Loan Agreement and the Other Agreements.
4.2 Voluntary Prepayment. Borrower may, upon at least ten (10) Business Days prior written
notice to Lender (stating the proposed date of prepayment, prepay the outstanding principal amount
of any Term Loan then outstanding in whole, or in part, by paying to Lender, immediately available
funds, an amount equal to the sum of (i) the principal amount of the Term Loan to be prepaid (but
not less than $250,000), (ii) all accrued and unpaid interest, fees and expenses on the Term Loan
being prepaid through the date of prepayment, and (iii) in the event that such prepayment is made
on or prior to the October 1, 2008, a prepayment premium equal to 1% of the principal amount being
prepaid.
5. Collateral and Security
5.1 Grant of Security Interest. To further secure to Lender the prompt full and faithful
payment and performance of Borrower’s Liabilities and the prompt, full and complete performance by
Borrower of each of its covenants and duties under this Loan Agreement and the Other Agreements,
Borrower grants to Lender, a valid, first priority continuing security interest in and lien upon
all of the following (except as to assets or property with Permitted Liens, upon which a lien which
may be other than a first priority lien is granted), whether now owned or hereafter acquired and
wherever located:
| (i) | All Receivables; | ||
| (ii) | All Equipment; | ||
| (iii) | All Fixtures; | ||
| (iv) | All General Intangibles; | ||
| (v) | All Inventory; | ||
| (vi) | All Investment Property; | ||
| (vii) | the Pledged Account; | ||
| (viii) | All Cash; | ||
| (ix) | All Documents; | ||
| (x) | All Proceeds from the sale, transfer or other disposition of Intellectual Property; | ||
| (xi) | All other Goods and tangible and intangible personal property of Borrower other than Intellectual Property, whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and | ||
| (xii) | to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing and all attachments, accessories, accessions, replacements, substitutions, additions or improvements to any of the foregoing, wherever located and all products and proceeds of the foregoing including without limitation proceeds of insurance policies insuring the foregoing and all books and records with respect thereto; |
(all of the foregoing personal property is hereinafter sometimes individually and sometimes
collectively referred to as “Collateral”). Notwithstanding anything herein contained or construed
to the contrary, Borrower is not granting to Lender, and Lender is not receiving from Borrower, any
grant of a security interest in any of Borrower’s now owned or hereafter acquired Intellectual
Property (other than a security interest in the Proceeds from the sale, transfer or other
disposition of Intellectual Property); provided, however, that software, firmware
and operating systems that
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cannot be removed from the Collateral without rendering the Collateral inoperable shall be deemed
to be part of the “Collateral” unless such construction is prohibited by or inconsistent with any
relevant license or other agreement respecting such software, firmware or operating system.
Borrower shall make appropriate entries upon its financial statements and its books and records
disclosing Lender’s security interest in the Collateral.
Borrower hereby further agrees that, except as expressly permitted herein including with respect to
Permitted Liens, Borrower shall not hereafter grant a security interest in or pledge of its
Intellectual Property to any other party.
5.2 Further Assurances. Borrower shall execute and/or deliver to Lender, at any time and
from time to time hereafter at the request of Lender, all agreements, instruments, UCC financing
statements (or other required perfection instruments), documents and other written matter
(hereinafter individually and/or collectively, referred to as “Additional Documentation”) that
Lender reasonably may request, in a form and substance reasonably acceptable to Lender, to perfect
and maintain Lender’s perfected security interest in the Collateral. Borrower, irrevocably, (a)
hereby makes, constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower’s true and lawful attorney (and agent-in-fact) to sign the name of Borrower on
the Additional Documentation and to deliver the Additional Documentation to such Persons as Lender,
in its sole and absolute discretion, may elect, (b) authorizes completion and filing of any such
Additional Documentation by Lender or its agents, whether paper or electronic, (c) hereby ratifies
and confirms the completion and filing of Additional Documentation by Lender or its agent, paper or
electronic, occurring prior to the date hereof, and (d) declares that Borrower has the present
intention to authenticate and process any such Additional Documentation, whether paper or
electronic, and whether or not completed and filed by Lender or its agents before or after the date
hereof. Borrower shall execute and/or deliver to Lender upon request any agreements, instruments,
documents or written matter to consummate the transactions contemplated herein.
5.3 Inspection of Collateral. Lender (by any of its officers, employees and/or agents)
shall have the right, at any time or times during Borrower’s usual business hours, and upon
reasonable notice (provided that no Event of Default has occurred and is continuing), to inspect
the Collateral and all related records (and the premises upon which it is located) and to verify
the amount and condition of or any other and all financial records and matters whether or not
relating to the Collateral. During the continuance of an Event of Default, all reasonable costs,
fees and expenses incurred by Lender, or for which Lender has become obligated, in connection with
such inspection and/or verification shall be payable by Borrower to Lender. Borrower agrees to use
its reasonable efforts to cause its employees and agents to cooperate with Lender in all
inspections.
5.4 Pledged Account; Proceeds of Collateral. (a) Borrower shall deliver, or cause to be
delivered to Lender an account control agreement in form and substance satisfactory to Lender and
duly authorized, executed and delivered by Borrower and such bank or financial institution where
Borrower maintains a Pledged Account; provided, however, that Lender will not exercise its right to
control amounts in any Pledged Account unless an Event of Default hereunder or under the Other
Agreements has occurred and is continuing.
(b) All proceeds arising from the disposition of any Collateral by Borrower shall be
deposited in the Pledged Account within one Business Day after receipt by Borrower. Nothing in
this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Loan
Agreement.
5.5 Third Party Claims. Lender, in its sole and absolute discretion, without waiving or
releasing any obligation, liability or duty of Borrower under this Loan Agreement or the Other
Agreements or any Event of Default, may (but shall be under no obligation to) at any time or times
hereafter, pay, acquire and/or accept an assignment of any security interest, lien, encumbrance or
claim asserted (other than Permitted Liens) by any Person against the Collateral. All sums paid by
Lender in respect thereof and all costs, fees and expenses, including reasonable attorneys’ fees,
court costs, expenses and other charges relating thereto incurred by Lender on account thereof
shall be payable by Borrower to Lender.
5.6 Insurance.
Borrower shall at all times throughout the term of this Loan Agreement and any extension hereof
procure and maintain at its own expense the following minimum insurance coverages which shall be
provided by insurance carriers with an AM Best rating of A, Class C or as otherwise
acceptable to Lender and with such deductibles and exclusions as approved by Lender: (1) All risk
property damage insurance covering the Collateral which shall include but not be limited to fire
and extended coverage and where applicable mechanical breakdown and electrical malfunction, and
which shall be written in amount not less than the greater of (x) the outstanding loan balance or
(y) the current replacement cost; and, (2) Commercial general liability insurance which may include
excess liability insurance written on occurrence basis with a limit of not less than $2,000,000,
and (3) Workers’ compensation insurance in accordance with statutory limits and employers’
liability coverage which may include excess liability in
an amount not less than $1,000,000, whether pursuant to the terms of the TriNet Agreement or
otherwise.
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Any insurance carried and maintained in accordance with this Loan Agreement by Borrower shall be
endorsed to provide that: (i) Lender shall be additional insured and loss payee with respect to
the property insurance described in subsection (1) of the prior paragraph (and such insurance shall
provide that the interest of Lender shall not be invalidated by any act or neglect of Lender,
Borrower or other person), and Lender shall be an additional insured with respect to the liability
insurance described in subsection (2) of the prior paragraph; and (ii) The insurers thereunder
waive all rights of subrogation against Lender, any right of setoff and counterclaim and any other
right to deduction due to outstanding premiums, whether by attachment or otherwise; and (iii) Such
insurance shall be primary without right of contribution of any other insurance carried by or on
behalf of Lender; and (iv) Inasmuch as such policies are written to cover more than one insured,
all terms, conditions, insuring agreements and endorsements (other than the limits of liability)
shall operate in the same manner as if there were a separate policy covering each insured; and (v)
If such insurance is canceled for any reason whatsoever, including nonpayment of premium, or any
substantial change is made in the coverage that affects the interests of Lender, such cancellation
or change shall not be effective as to Lender until thirty (30) days after receipt by Lender of
written notice sent by registered mail from such insurer of such cancellation or change; providing,
however, that such thirty (30) day period shall be reduced to ten (10) days in the case where
cancellation results from the nonpayment of premiums. Borrower, irrevocably, appoints Lender as
Borrower’s true and lawful attorney (and agent-in fact) for the purpose of making, settling and
adjusting claims under such policies, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies and for making all
determinations and decisions with respect to such policies, and such appointment will be
immediately effective upon the occurrence and during the continuation of an Event of Default
hereunder.
On or before the initial funding by Lender hereunder, and at each policy anniversary date, Borrower
shall arrange to furnish Lender with appropriate Certificates of Insurance. Such Certificates of
Insurance shall be executed by each insurer or by an authorized representative of each insurer, and
shall identify insurers, the type of insurance, the insurance limits and the policy term and shall
specifically list the special endorsements (i) through (v) above.
In case of the failure to procure or maintain such insurance, Lender shall have the right, but not
the obligation, to obtain such insurance and any premium paid by Lender shall be immediately due
and payable by Borrower to Lender. The maintenance of any policy or policies of insurance pursuant
to this Section shall not limit any obligation or liability of Borrower pursuant to any other
Sections or provisions of this Loan Agreement.
5.7 Charges on Collateral. Borrower shall not permit any Charges (other than Permitted
Liens) to arise, or to remain, and Borrower shall pay promptly when due, and discharge, such
Charges except where contested in good faith with appropriate reserves in accordance with GAAP and
such action stays any seizure of Collateral. In the event Borrower, at any time or times hereafter,
shall fail to pay such Charges when due or to obtain such discharges, except where contested in
good faith and such action stays any seizure of Collateral, Borrower shall so advise Lender thereof
in writing. Lender may, without waiving or releasing any obligation or liability of Borrower
hereunder or Event of Default, in its sole and absolute discretion, at any time or times
thereafter, make such payment, or any part thereof, or obtain such discharge and take any other
action with respect thereto which Lender deems advisable. All sums so paid by Lender and any
expenses, including reasonable attorneys’ fees, court costs, expenses and other charges relating
thereto, shall be payable by Borrower to Lender upon demand.
5.8 UCC Filing Authorization. Borrower hereby authorizes Lender and its counsel and other
representatives to file, at any time on or after the date hereof, Uniform Commercial Code financing
statements and continuation statements, and amendments to financing statements, in any
jurisdictions and with any filing offices as Lender may determine, in its sole discretion, are
necessary or advisable to perfect the security interests granted to Lender hereunder and under the
Other Agreements. Such financing statements may describe the Collateral in the same manner as
described herein or therein or may contain an indication or description of Collateral that
describes such property in any other manner as Lender may determine is necessary or advisable to
ensure the perfection of the security interest in the Collateral.
5.9 Accounts. So long as no Event of Default has occurred and is continuing, subject to
Section 7.4 hereof, Borrower may settle, adjust or compromise any claim, offset, counterclaim or
dispute with any Account Debtor. At any time that an Event of Default has occurred and is
continuing, Lender may, at its option, notify Borrower that Lender intends to have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute with Account
Debtors or grant any credits, discounts or allowances and on and after such notice from Lender to
Borrower, Lender shall have such exclusive right.
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| 6. | Warranties and Representations | |
| 6.1 | Borrower Representations. Borrower warrants and represents to Lender, as of the date hereof and as of the date of any Loan made hereunder, that: | |
| (a) | Borrower is and at all times hereafter shall be (i) a Person having that legal name and organizational structure as set forth above, duly organized and existing and in good standing under the laws of the state of its organization as set forth above and (ii) qualified or licensed to do business in all other states in which the laws require Borrower to be so qualified and/or licensed, except if the failure to do so would not reasonably be expected to have a Material Adverse Effect. | |
| (b) | Borrower is duly authorized and empowered to enter into, execute, deliver and perform this Loan Agreement and the Other Agreements and the execution, delivery and/or performance by Borrower of this Loan Agreement and the Other Agreements, and the use by Borrower of the proceeds of the Loans hereunder, shall not, by the lapse of time, the giving of notice or otherwise, (i) conflict with or constitute a violation of any applicable law (including, without limitation, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof), (ii) breach any provision contained in Borrower’s organizational documents, or (iii) breach any material agreement, instrument or document to which Borrower is now or hereafter a party or by which it is or may become bound or give rise to or result in any default thereunder. | |
| (c) | This Loan Agreement is (and when executed or delivered, each Other Agreement will be) the legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles (whether enforcement is sought in equity or at law). | |
| (d) | Except as disclosed to Lender in writing prior to the date hereof, there are no actions or proceedings which are pending, or to its knowledge threatened, against Borrower which would reasonably be expected to have a Material Adverse Effect. Borrower is not in breach of or a party to any contract or agreement or subject to any charge, restriction, judgment, decree or order which has or would reasonably be expected to have a Material Adverse Effect, nor is Borrower in default with respect to any indenture, security agreement, mortgage, deed or other similar agreement relating to the borrowing of monies to which it is a party or by which it is bound. | |
| (e) | Borrower has all licenses, patents, copyrights, trademarks, trade names, governmental permits, certificates, consents and franchises necessary to continue to conduct its business as previously conducted by it and to own or lease and operate its properties as now owned or leased by it except for any which would not reasonably be expected to have a Material Adverse Effect. : | |
| (f) | The unaudited financial statements for the first quarter of 2007 and the audited financial statements for 2005 and 2006 delivered by Borrower to Lender prior to the date hereof and the Financials delivered by Borrower to Lender pursuant to Section 7.3 hereof fairly present the assets, liabilities and financial condition and results of operations of Borrower as of the dates and for the periods stated therein and have been prepared in accordance with GAAP (subject to the absence of footnotes and normal year end adjustments), and no event, condition or change that has had, or would reasonably be expected to have, a Material Adverse Effect has occurred since the date of this Loan Agreement. | |
| (g) | As to the Accounts and other Collateral, (i) Borrower has and at all times hereafter shall have good, indefeasible and merchantable title to and ownership of the Collateral and the Accounts described and/or listed on any certificate or schedule relating to the Accounts delivered to Lender, free and clear of all liens, claims, security interests and encumbrances except those of Lender and Permitted Liens; (ii) the Collateral shall be kept and/or maintained solely at the addresses identified in writing to Lender, which as of the date hereof are: (x) 000 Xxxxxxxx Xxx, Xxxxxxxxxx, XX 00000, (y) 0000 Xxxx Xxxxxxxx, Xxxxx Xxxxx, XX, and (z) 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxxx Xxxxxxxx 00000; (iii) Borrower, immediately on demand by Lender, shall deliver to Lender any and all evidence of ownership of, including without limitation, vendor invoices and proofs of payment thereof, certificates of title to and applications for title to, any Collateral; (iv) Borrower shall keep and maintain the Collateral in good operating condition and repair, ordinary wear and tear excepted, and shall make all necessary replacements thereof and renewals thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved in all material respects; and (v) Borrower shall not permit any of the Collateral to become a fixture to real estate or accession to other personal property. | |
| (h) | As to Lender’s security interest, (i) Lender’s security interest in the Collateral is now perfected and has a first priority (subject to Permitted Liens); (ii) the offices and/or locations where Borrower keeps the Collateral and Borrower’s books and records concerning the Collateral are at the locations identified to Lender in writing and |
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| Borrower shall not remove such books and records and/or the Collateral therefrom to any other location unless Borrower gives Lender written notice thereof at least thirty (30) days prior thereto and the same is within the contiguous forty-eight (48) states of the United States of America; and (iii) the addresses identified to Lender in writing as Borrower’s chief executive office and principal place(s) of business are Borrower’s sole offices and place(s) of business, and Borrower, by written notice delivered to Lender at least thirty (30) days prior thereto, shall advise Lender of any change thereto. |
| (i) | Borrower is not an “investment company” or a company “controlled” by an “investment company” as such terms are defined in the Investment Company Act of 1940. | |
| (j) | All income and other tax returns and reports required to be filed by Borrower have been timely filed (subject to any applicable extensions), and all taxes shown on such tax returns to be due and payable and all other assessments, fees and governmental charges upon Borrower and its properties, assets, income, businesses and franchises have been paid when due and payable except to the extent that (A) such taxes, assessments, charges or claims (i) are being contested in good faith by appropriate proceedings (promptly instituted and diligently conducted) so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (ii) such proceeding shall stay the attachment, sale, disposition, foreclosure or forfeiture of any asset of Borrower in connection with any such contested tax, assessment, charge or claim or, (B) the failure to timely pay such taxes, assessments, charges or claims would not reasonably be expected to have a Material Adverse Effect. All necessary and appropriate estimated payments (including any interest and penalties) in respect of assessed tax liability under Borrower’s state and federal tax returns have been made on a timely basis. | |
| (k) | As of the date hereof and of each Loan (i) the sum of Borrower’s debt (including contingent liabilities) does not exceed the present fair saleable value of Borrower’s present assets; (ii) Borrower’s capital is not unreasonably small in relation to its business as it exists and as is contemplated at such time; and (iii) Borrower has not incurred and does not intend to incur, or believe that it will incur, debts beyond its ability to pay such debts as they become due. | |
| (l) | No information furnished to Lender by or on behalf of Borrower for use in connection with the transactions contemplated hereby contains or will contain, any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections contained in Borrower’s financial statements or sales projections are based upon good faith estimates and assumptions believed by Borrower to be reasonable at the time made. There are no facts known to Borrower that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect. | |
| (m) | Borrower has provided to Lender on or prior to the date hereof a schedule that correctly identifies, as of the date hereof, the ownership interest (including all options, warrants and other rights to acquire capital stock) of Borrower and each of its Subsidiaries as of the date hereof. | |
| (n) | (i) Borrower (A) has been and is in compliance in all material respects with all applicable Environmental Laws; (B) has not received any communication, whether from a governmental authority or otherwise, alleging that Borrower is not in such compliance, and there are no past or present actions, activities, circumstances conditions, events or incidents that would reasonably be expected to prevent or interfere with such compliance in the future; (ii) there is no Environmental Claim pending or, to the best knowledge of Borrower, threatened against Borrower or against any Person whose liability for any Environmental Claim Borrower has or would reasonably be likely to have retained or assumed either contractually or by operation of law; and (iii) there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, threatened release or presence of any Hazardous Material, which would reasonably be expected to result in any material Environmental Claim against Borrower or, to the best knowledge of Borrower, against any Person whose liability for any material Environmental Claim Borrower has or would reasonably be expected to have retained or assumed either contractually or by operation of law. | |
| (o) | (i) Borrower is an “operating company” within the meaning of the regulations of the United States Department of Labor included within 29 CFR Section 2510.3-101 (the “DOL Regulations”) or is in compliance with such other exception as may be available under such regulations to prevent the assets of Borrower from being treated as the assets of any employee benefit plan for purposes of the DOL Regulations [Under review] and (ii) Borrower nor any subsidiary of Borrower complies in all material respects with any obligations to make contributions to any employee benefit plan that is subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute (“ERISA”). |
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7. Affirmative and Negative Covenants
7.1 Affirmative Covenants. Borrower covenants with Lender that Borrower shall, and shall
cause each of its Subsidiaries to: (a) preserve and keep in full force and effect its existence and
all rights and franchises, licenses and permits material to its business, except where the failure
to do so would not reasonably be expected to result in a Material Adverse Effect, (b) pay all
income and other taxes and assessments imposed upon it or any of its properties or assets or in
respect of any of its income, businesses or franchises before any penalty or fine accrues thereon,
except as contested in good faith with any reserves required by GAAP and such action stays the
seizure of Collateral, (c) comply in all material respects with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority, (d) keep adequate books of
record and account, in which complete entries shall be made of all financial transactions and the
assets and of its business, (e) on or prior to August 15, 2007, use commercially reasonable efforts
to deliver to Lender duly executed landlord or collateral access agreements, in form and substance
satisfactory to Lender, for all premises (including offices and co-location facilities) at which
any Collateral is located (other than Borrower’s offices in Portsmouth, New Hampshire for which
Borrower covenants to deliver a duly executed landlord agreement to Lender on or prior to August
15, 2007), and (f) promptly take any and all necessary Cleanup action on, under or affecting any
property owned, leased or operated by Borrower as required by law, and conduct and complete such
Cleanup action in material compliance with all applicable Environmental Laws.
7.2 Negative Covenants Borrower covenants with Lender that Borrower shall not, and shall
not permit any of its Subsidiaries to: (a) grant a security interest in, assign, sell or transfer
any of the Collateral or any of its Intellectual Property to any person or permit, grant, or suffer
or permit a lien, claim or encumbrance upon any of the Collateral or Intellectual Property, except
for (i) Permitted Liens or (ii) the sale of Inventory and obsolete, worn out or unneeded Equipment
in the ordinary course of business; (b) permit or suffer any Charges to attach to or affect any of
the Collateral (other than Permitted Liens); (c) permit or suffer any receiver, trustee or assignee
for the benefit of creditors to be appointed to take possession of any of the Collateral; (d) merge
or consolidate with or acquire any Person except in a transaction in which Borrower is the
surviving Person or, if Borrower is not the surviving Person, such transaction does not result in a
Change of Control; (e) incur or permit or suffer to exist any indebtedness for borrowed money or
for the deferred purchase price for property or services (other than Permitted Debt); (f)
voluntarily prepay any indebtedness prior to its scheduled maturity other than pursuant to the
terms hereof or as permitted under any subordination or intercreditor agreement executed by the
Lender and any other creditor; (g) make or pay (i) any dividend or other distribution, direct or
indirect, on account of any shares of any class of stock of Borrower or (ii) any redemption,
retirement or similar payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Borrower or any outstanding warrants, options or other rights to
acquire such shares; (h) enter into any transaction with any Affiliate or any transaction
(including, without limitation, any sale of assets, but excluding any Subordinated Debt or equity
investment not otherwise prohibited hereunder) not in the ordinary course of its business; (i) make
any change in any of its business objectives, purposes and operations, which has, or would
reasonably be expected to have, a Material Adverse Effect; (j) without thirty (30) days’ prior
written notice to Lender, make any change in its legal name or state of formation or organization;
(k) fail to comply in any material respect with any obligation to contribute to any employee
benefit plan that is subject to Title IV of ERISA; (l) take any action or fail to take an action
if, as a result of such action or inaction, Borrower would fail to qualify as an “operating
company” within the meaning of the DOL Regulations or otherwise comply with such other exception as
may be available under such regulations to prevent the assets of Borrower from being treated as the
assets of any employee benefit plan for purposes of the DOL Regulations; and (m) Borrower may not
open or maintain any Deposit Account or Securities Account (other than a Pledged Account) unless
Borrower maintains an aggregate balance in the Pledged Account(s) which is in excess of 105% of the
then current principal amount outstanding under the Term Loan.
7.3 Covenants regarding Financial Statements. Borrower shall cause to be furnished to
Lender, (i) commencing with the fiscal year end 2007, the audited fiscal year end financial
statements of Borrower (which shall not include a “going concern” exception (other than such
exception if based upon the amount of cash on the financial statements of Borrower and the need to
raise additional financing) or any exception relating to scope of review) no later than 180 days
after the related fiscal year end, (ii) no later than 30 days after the related month end, the
internally prepared monthly financial statements of Borrower, certified by Borrower’s chief
financial officer, each containing consolidated and consolidating profit and loss statements for
the month then ended and for Borrower’s fiscal year to date, consolidated and consolidating balance
sheets as at the last day of such month and a consolidated and consolidating statement of cash
flows for the month then ended and for Borrower’s fiscal year to date, (iii) summary monthly bank
statements, no later than 30 days after the related month end, reflecting month-end cash balances,
(iv) a monthly Compliance and Disclosure Certificate, substantially in the form of Exhibit A
attached
13
hereto and made a part hereof, (v) promptly upon Borrower’s Board of Directors approval thereof,
copies of Borrower’s annual operating plan and any revisions thereto and (vi) such other financial
and business information of Borrower as Lender may reasonably require, including such other
financial and operating performance data as is provided to its outside investors or commercial
lenders and, if applicable, required to be provided to shareholders by the Securities and Exchange
Commission. Each financial statement to be furnished to Lender must be prepared in accordance with
GAAP (subject to normal year end adjustments and the absence of footnotes). Borrower also agrees to
promptly provide to Lender notice of, and such other data and information (financial and otherwise)
at any time and from time to time reasonably requested by Lender relating to, any legal actions or
proceedings pending, or to Borrower’s knowledge, threatened in writing against Borrower or the
occurrence of any event or change that has, or would reasonably be expected to have, a Material
Adverse Effect. Financial statements may be delivered via electronic mail to Lender.
7.4 Further Covenants. (a) Borrower may not grant any credit, discount, allowance or
extension, or enter into any agreement for any of the foregoing, except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrower’s business in accordance
with Borrower’s historic credit and collection practices and policies without the prior consent of
Lender.
(b) Lender shall have the right upon the occurrence and during the continuation of an Event
of Default, in Lender’s name or in the name of a nominee of Lender, to verify the validity, amount
or any other matter relating to any Accounts, by mail, telephone, facsimile transmission or
otherwise.
7.5 Indemnification and Liability. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, reasonable costs and expenses (including reasonable
attorneys’ fees), of every nature, character and description, which Lender may sustain or incur
based upon or arising out of the Collateral, any of Borrower’s Liabilities, any relationship or
agreement between Lender and Borrower, or any other matter, cause or thing whatsoever occurred,
done, omitted or suffered to be done by Lender relating to Borrower or Borrower’s Liabilities
(except any such claims or liabilities resulting from the gross negligence or willful misconduct of
Lender). Should any third-party suit or proceeding be instituted by or against Lender with respect
to any Collateral or relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents Borrower’s books and records, to the
extent reasonably necessary in order for Lender to prosecute or defend any such suit or proceeding.
Borrower’s obligation hereunder shall survive termination of this Loan Agreement.
8. Default
8.1 Events of Default. The occurrence of any one of the following events shall constitute
a default (“Event of Default”) by Borrower under this Loan Agreement: (a) if Borrower fails to pay
any principal of any Loans when due and payable or fails to pay any other Borrower’s Liabilities
within five (5) days after the same are due and payable; (b) if any representation, warranty,
financial statement, statement, report or certificate made, deemed made or delivered by Borrower,
or any of its officers, employees or agents, to Lender is not true and correct when made, deemed
made or delivered; (c) if Borrower fails or neglects to perform, keep or observe any term,
provision, condition or covenant contained in this Loan Agreement or in the Other Agreements, which
is required to be performed, kept or observed by Borrower, other than the payment of Borrower’s
Liabilities, and, in the case of any covenant contained in Section 7.1 hereof or in the Warrant,
the same is not cured within fifteen (15) days; (d) if any of the Collateral or any other of
Borrower’s other material assets are attached, seized, subjected to a writ or distress warrant, or
are levied upon, or come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors, and the same is not released or satisfied within fifteen (15) days; (e)
if any event, condition or change shall occur that has had a Material Adverse Effect; (f) if a
petition under any section or chapter of the Bankruptcy Code or any similar law or regulation shall
be filed by or against Borrower, which, in the case of any filing against the Borrower, is not
dismissed in 45 days, or if Borrower shall make an assignment for the benefit of its creditors or
if any case or proceeding is filed by Borrower for its dissolution or liquidation, (g) if Borrower
is enjoined, restrained or in any way prevented by court order from conducting all or any material
part of its business affairs; (h) if an application is made by Borrower or any Person for the
appointment of a receiver, trustee or custodian for the Collateral or any of Borrower’s assets and
such action is not dismissed within fifteen (15) days; (i) if a notice of lien or Charges are filed
of record with respect to any of the Collateral by any Person except for Permitted Liens; (j) if
any Change of Control shall occur; (k) if any money judgment (in excess of $250,000), writ or
warrant of attachment or similar process (if not adequately covered by insurance by a solvent and
unaffiliated insurance company) shall be entered or filed against Borrower or any of its
Subsidiaries or any of their respective assets; (l) this Loan Agreement or any Other Agreement
shall for any reason fail or cease to be valid and binding on, or enforceable against, Borrower or
Borrower shall so assert; (m) this Loan Agreement or any Other Agreement
14
shall for any reason cease to be in full force and effect or cease to create a valid and
enforceable lien and security interest on any Collateral purported to be covered thereby or any
such lien and security interest shall fail or cease to be a perfected and first priority lien and
security interest (subject to Permitted Liens); (n) if Borrower is in default (i) in the payment of
any of Borrower’s debt to Lender under any Other Agreement; or (ii) in the payment of any debt to
any Person other than Lender in excess of $250,000 or, in the case of clause (i) or (ii), any other
event shall occur or condition shall exist under any agreement or instrument relating to any such
debt and the holders of such debt (or any agent or trustee on their behalf) accelerate the maturity
of such indebtedness; or (o) on or before August 31, 2007, Borrower fails to execute and deliver an
account control agreement in respect of the Pledged Account(s). Borrower shall provide to the
Lender prompt written notice of the occurrence of any Default or Event of Default under this
Section 8.1 promptly (but in no event more than one (1) Business Day) after becoming aware of such
events or circumstances. Failure of Borrower to give such notice promptly shall constitute an
Event of Default hereunder.
8.2 Lender’s Rights and Remedies. Upon an Event of Default under Section 8.1(f), without
notice by Lender to, or demand by Lender of, Borrower, all of Borrower’s Liabilities shall be
automatically accelerated and shall be due and payable forthwith and any other commitments to
provide any financing hereunder shall automatically terminate, and upon any other Event of Default,
without notice by Lender, to or demand by Lender of, Borrower, Lender may accelerate all of
Borrower’s Liabilities and same shall be due and payable forthwith and/or Lender may terminate any
other commitments to provide any financing hereunder. Lender may, in its sole and absolute
discretion: (a) exercise any one or more of the rights and remedies accruing to a lender under the
UCC or other applicable law of the relevant state or states or other applicable jurisdiction, and
in equity, and under any other instrument or agreement now or in the future entered into between
Lender and Borrower, including under this Loan Agreement and the Other Agreements; (b) enter, with
or without process of law and without breach of the peace, any premises where the Collateral or the
books and records of Borrower related thereto is or may be located, and without charge or liability
to Lender therefor seize and remove the Collateral (and copies of Borrower’s books and records
relating to the Collateral) from said premises and/or remain upon said premises and use the same
(together with said books and records) for the purpose of collecting, preparing and disposing of
the Collateral; (c) sell, lease, license or otherwise dispose of the Collateral or any part thereof
by one or more contracts at one or more public or private sales for cash or credit, provided,
however, that Borrower shall be credited with the net proceeds of such sale(s) only when such
proceeds are actually received by Lender; and (d) require Borrower to assemble the Collateral and
make it available to Lender at a place or places to be designated by Lender which is reasonably
convenient to Lender and Borrower.
In addition, at any time an Event of Default has occurred and is continuing, Lender may, in its
discretion, enforce the rights of Borrower against any Account Debtor, secondary obligor or other
obligor in respect of any of the Accounts. Without limiting the generality of the foregoing, at
any time or times that an Event of Default has occurred and is continuing, Lender may, in its
discretion, at such time or times (1) notify any or all Account Debtors, secondary obligors or
other obligors in respect thereof that the Accounts have been assigned to Lender and that Lender
has a security interest therein and Lender may direct any or all Account Debtors, secondary
obligors and other obligors to make payment of Accounts directly to Lender, (2) extend the time of
payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and
upon any terms or conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the Account Debtor or any secondary obligors or other obligors in
respect thereof without affecting any of Borrower’s Liabilities, (3) demand, collect or enforce
payment of any Accounts or such other obligations, but without any duty to do so, and Lender shall
not be liable for any failure to collect or enforce the payment thereof nor for the negligence of
its agents or attorneys with respect thereto and (4) take whatever other action Lender may deem
necessary or desirable for the protection of its interests. At any time that an Event of Default
has occurred and is continuing, at Lender’s request, all invoices and statements sent to any
Account Debtor shall state that the Accounts and such other obligations have been assigned to
Lender and are payable directly and only to Lender and Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the performance of services
giving rise to any Accounts as Lender may require.
All of Lender’s rights and remedies under this Loan Agreement and the Other Agreements are
cumulative and non-exclusive. Exercise or partial exercise by Lender of one or more of its rights
or remedies shall not be deemed an election, nor bar Lender from subsequent exercise or partial
exercise of any other rights or remedies. Lender agrees to give notice of any sale to Borrower at
least ten (10) Business Days prior to any public sale or at least ten (10) Business Days before the
time after which any private sale may be held. Borrower agrees that Lender may purchase any such
Collateral (including by way of credit bid), and may postpone or adjourn any such sale from time to
time by an announcement at the time and place of sale or by announcement at the time and place of
such postponed or
15
adjourned sale, without being required to give a new notice of sale. Borrower agrees that, subject
to applicable law, Lender has no obligation to preserve rights against prior parties to the
Collateral.
8.3 Power of Attorney. Upon the occurrence of any Event of Default, without limiting
Lender’s other rights and remedies, Borrower grants to Lender an irrevocable power of attorney
coupled with an interest (in addition to such other powers of attorney granted to Lender elsewhere
in this Loan Agreement), authorizing and permitting Lender at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower’s expense, to execute on behalf of
Borrower any Additional Documentation, or such other instruments or documents as may be reasonably
necessary in order to exercise a right of Borrower or Lender, including but not limited to the
execution of any proof of claim in bankruptcy, any notice of lien, claim of mechanic’s or other
lien, or assignment or satisfaction of mechanic’s or other lien, or to take control in any manner
of any cash or non-cash proceeds of Collateral and take any action or pay any sum required of
Borrower pursuant to this Loan Agreement and any Other Agreement. In no event shall Lender’s
rights under the foregoing power of attorney or any of Lender’s other rights under this Loan
Agreement be deemed to indicate that Lender is in control of the business, management or properties
of Borrower.
9. General Provisions
9.1 Notices. All notices, demands or other communications required or permitted to be given
or delivered under or by reason of the provisions hereof shall be in writing and shall be deemed to
have been given when (i) delivered personally to the recipient, (ii) sent via facsimile
transmission, (iii) the next Business Day after having been sent to the recipient by reputable
overnight courier service (charges prepaid) or (iv) three Business Days after having been mailed to
the recipient by certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to the parties hereunder at their
respective addresses and transmission numbers indicated on the signature page hereof, or to such
other address or to the attention of such other person as the recipient party has specified by
prior written notice to the sending party.
9.2 Severability. Should any provision of this Loan Agreement be held by any court of
competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of
this Loan Agreement, which shall continue in full force and effect.
9.3 Integration; Modification. This Loan Agreement, the Other Agreements and such other
written agreements, documents and instruments as may be executed in connection herewith or pursuant
hereto are the final, entire and complete agreement between Borrower and Lender and supersede all
prior and contemporaneous negotiations and oral representations and agreements, all of which are
merged and integrated in this Loan Agreement and the Other Agreements. There are no oral
understandings, representations or agreements between the parties which are not set forth in this
Loan Agreement or the Other Agreements or in other written instruments, documents or agreements
signed by the parties in connection herewith. If any provision contained in this Loan Agreement is
in conflict with, or inconsistent with, any provision in the Other Agreements, the provision
contained in this Loan Agreement shall govern and control, it being the intent of the parties,
however, that the terms of each of the Loan Agreement and the Other Agreements shall be remain in
full force and effect. This Loan Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Lender.
9.4 Time of Essence. Time is of the essence in the performance by Borrower of each and
every obligation under this Loan Agreement.
9.5 Attorneys’ Fees and Other Costs. Borrower shall reimburse Lender for all out-of-pocket
costs and expenses, including but not limited to reasonable attorneys’ fees and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Lender
in connection with any amendment or waiver to this Loan Agreement or any Other Agreement; seeking
to enforce any of its rights hereunder against Borrower or the Collateral, including in bankruptcy;
enforcing Lender’s security interest in the Collateral, and representing Lender in all such
matters. Borrower shall also pay Lender’s standard charges for returned checks in effect from time
to time. Borrower’s obligation hereunder shall survive termination of this Loan Agreement.
9.6 Benefit of Agreement; Assignment. The provisions of this Loan Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries
and representatives of Borrower and Lender; provided, however, that Borrower may not assign or
transfer any of its rights under this Loan Agreement without the prior written consent of Lender,
and any prohibited assignment shall be void. Borrower hereby consents to Lender’s sale, assignment,
transfer or other disposition, at any time and from time to time hereafter, of this Loan Agreement,
or the Other Agreements, or of any portion thereof, including without limitation Lender’s rights,
titles, interests, remedies, powers and/or duties, provided that Lender shall give Borrower three
(3) Business Days’ prior notice of
16
any such assignment. Borrower shall establish and maintain a record of ownership (the
“Register”) in which it agrees to register by book entry Lender’s and each initial and
subsequent assignee’s interest in each Loan, and in the right to receive any payments hereunder and
any assignment of any such interest. Notwithstanding anything to the contrary contained in this
Loan Agreement, the Loans (including the notes in respect of such Loans) are registered obligations
and the right, title, and interest of Lender and its assignees in and to such Loans shall be
transferable upon notation of such transfer in the Register, pursuant to Borrower’s obligation
above. In no event is any note to be considered a bearer instrument or bearer obligation. This
Section shall be construed so that the Loans are at all times maintained in “registered form”
within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Internal Revenue Code and any
related regulations (or any successor provisions of the Code or such regulations).
If any initial or subsequent assignee (each a “Transferee”) is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of Columbia (a
“Non-U.S. Lender”), such Non-U.S. Lender shall deliver to Borrower a United States Internal Revenue
Service Form W-8, or any subsequent versions thereof or successors thereto (and, if applicable, a
certificate representing that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of
the Internal Revenue Code, is not a ten (10%) percent shareholder (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) of Borrower and is not a controlled foreign corporation
related to Borrower (within the meaning of Section 864(d)(4) of the Internal Revenue Code)),
properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from U.S.
Federal withholding tax on payments by Borrower hereunder. Such forms shall be delivered by any
Transferee that is a Non-U.S. Lender on or before the date it becomes a party to this Agreement
(or, in the case of a Transferee that is a participant, on or before the date such participant
becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S. Lender changes its
applicable lending office by designating a different lending office that is outside the United
States (a “New Lending Office”). In addition, a Non-U.S. Lender shall upon written notice from
Borrower promptly deliver such new forms as are required by the Internal Revenue Code or the
regulations issued thereunder to claim exemption from, or reduction in the rate of (to the extent
not exempted completely pursuant to a change in applicable laws or regulation after the date of
such assignment), U.S. Federal withholding tax upon the obsolescence or invalidity of any form
previously delivered by such Non-U.S. Lender. Notwithstanding any other provision of this section,
a Non-U.S. Lender shall not be required to deliver any form pursuant to this section that such Non
U.S. Lender is not legally able to deliver. Borrower shall not be required to indemnify any
Non-U.S. Lender or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to Section 2.6 to the extent that (i) the obligation to
withhold amounts with respect to United States Federal withholding tax was applicable on the date
such Non-U.S. Lender became a party to this Agreement (or, in the case of a Transferee that is a
participant, on the date such participant became a Transferee hereunder) or, with respect to
payments to a New Lending Office, the date such Non-U.S. Lender designated such New Lending Office
with respect to a Loan; provided, that, this provision shall not apply to the extent the indemnity
payment or additional amounts any Transferee, acting through a New Lending Office, would be
entitled to receive (without regard to this paragraph) do not exceed the indemnity payment or
additional amounts that the person making the assignment, participation or transfer to such
Transferee making the designation of such New Lending Office, would have been entitled to receive
in the absence of such assignment, participation, transfer or designation or (ii) the obligation to
pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender to
deliver to Borrower the forms specified above.
9.7 Joint and Several Liability. If Borrower consists of more than one Person, their
liability shall be joint and several, and the compromise of any claim with, or the release of, any
Borrower shall not constitute a compromise with, or a release of, any other Borrower.
9.8 Paragraph Headings. Paragraph headings are only used in this Loan Agreement for
convenience. The term “including”, whenever used in this Loan Agreement, shall mean “including but
not limited to”. This Loan Agreement has been fully reviewed and negotiated between the parties and
no uncertainty or ambiguity in any term or provision of this Loan Agreement shall be construed
strictly against Lender or Borrower under any rule of construction or otherwise.
9.9 Interest Laws. Notwithstanding any provision to the contrary contained in this Loan
Agreement or any Other Agreement, Borrower shall not be required to pay, and Lender shall not be
permitted to collect, any amount of interest in excess of the maximum amount of interest permitted
by applicable law (“Excess Interest”). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Loan Agreement or in any Other
Agreement, then in such event: (1) the provisions of this subsection shall govern and control; (2)
Borrower shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may
have received hereunder or under any Other Agreement shall be, at such Lender’s option, (a) applied
as a credit against the outstanding principal balance of Borrower’s Liabilities or accrued and
unpaid interest (not to exceed the
17
maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein or in any Other Agreement shall be
automatically reduced to the maximum lawful rate allowed from time to time under applicable law
(the “Maximum Rate”), and this Loan Agreement and the Other Agreements shall be deemed to have been
and shall be, reformed and modified to reflect such reduction; and (5) Borrower shall not have any
action against Lender for any damages arising out of the payment or collection of any Excess
Interest.
9.10 No Implied Waivers. Lender’s failure at any time or times hereafter to exercise any
rights or remedies or to require strict performance by Borrower of any provision of this Loan
Agreement shall not waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith and all rights and remedies shall continue in full force and
effect until all of Borrower’s Liabilities have been fully and indefeasibly paid and performed. Any
suspension or waiver by Lender of an Event of Default by Borrower under this Loan Agreement or the
Other Agreements shall not suspend, waive or affect any other Event of Default by Borrower under
this Loan Agreement or the Other Agreements, whether the same is prior or subsequent thereto and
whether of the same or of a different type. No waiver by Lender of any Event of Default or of any
of the undertakings, agreements, warranties, covenants and representations of Borrower contained in
this Loan Agreement or the Other Agreements shall be effective unless specifically waived by an
instrument in writing signed by an officer of Lender.
9.11 Acceptance by Lender. This Loan Agreement shall become effective upon acceptance by
Lender, in writing, at its principal place of business as set forth above. If so accepted by
Lender, this Loan Agreement and the Other Agreements shall be deemed to have been made at said
place of business.
9.12 LAW AND VENUE. THIS LOAN AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS. BORROWER CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF XXXX, STATE OF
ILLINOIS. BORROWER WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST BORROWER BY LENDER OR TO ASSERT THAT ANY ACTION INSTITUTED BY LENDER OR BORROWER IN
SUCH COURT IS AN IMPROPER VENUE OR SUCH ACTION SHOULD BE TRANSFERRED TO A MORE CONVENIENT FORUM.
9.13 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH WAIVE THE RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS LOAN AGREEMENT
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.14 CONFIDENTIALITY. The provisions of this Loan Agreement and the Other Agreements shall
be held in strictest confidence by Borrower and Lender and shall not be publicized or disclosed in
any manner whatsoever; provided, however, that Borrower and Lender may disclose this Loan Agreement
and the Other Agreements in confidence to its attorneys, accountants, auditors, insurers, tax
preparers, and financial advisors, and insofar as such disclosure may be necessary to consummate,
amend or enforce the Loan Agreement or the Other Agreements or as otherwise required by law.
Signature Page Follows:
18
In Witness Whereof, this Loan and Security Agreement has been duly executed as of the day and year
first above written.
Borrower:
|
Accepted By: | |||||
Borrower:
|
NITROSECURITY, INC. | Lender: | BlueCrest capital finance, l.p. | |||
| By: BlueCrest Capital Finance GP, LLC, | ||||||
| its general partner | ||||||
By:
|
/s/ Xxxx X. Xxxxxxx | By: | /s/ Xxxx Xxxx | |||
Name:
|
Xxxx X. Xxxxxxx | Name: | Xxxx Xxxx | |||
Title:
|
Chief Financial Officer | Title: | Managing Director | |||
Address for
|
000 Xxxxxxxx Xxx, Xxxxx 000 | Address for | 000 Xxxx Xxxxxxxxxx, Xxxxx 000 | |||
Xxxxxxx:
|
Xxxxxxxxxx, XX 00000 | Notices: | Xxxxxxx, XX 00000 | |||
| Attention: Legal Department | ||||||
Telephone:
|
000-000-0000 | Telephone | 000-000-0000 | |||
Facsimile:
|
000-000-0000 | Facsimile: | 312-443-0126 | |||
| with a copy to: | ||||||
| 000 Xxxx Xxxxxxxxxx, Xxxxx 000 | ||||||
| Xxxxxxx, XX 00000 | ||||||
| Attention: Xxxx Xxxx | ||||||
| Telephone: | 000-000-0000 | |||||
| Facsimile: | 000-000-0000 |
19
EXHIBIT A
Officer’s Compliance and Disclosure Certificate
(attachment to monthly financial reports)
(attachment to monthly financial reports)
Reference is hereby made to certain loan or credit agreements (together with all
instruments, documents and agreements entered into in connection therewith, the “Loan Documents”)
by and between BlueCrest Capital Finance, L.P. (“Lender “) and NitroSecurity, Inc. (“Borrower”).
The undersigned, , hereby certifies to Lender that he/she is the duly elected and
acting of Borrower and that the following are true and correct in all material
respects:
| (i) | FINANCIAL STATEMENTS — General. The attached financial statements fairly reflect the financial condition of Borrower in all material respects in accordance with GAAP, subject to normal year end adjustments and the absence of footnotes, except as disclosed on the attached Schedule of Financial Statement Exceptions (if none, so state on said Schedule). No event, condition or change that has had, or would reasonably be expected to have, a Material Adverse Effect has occurred since the date of the Loan Agreement; | ||
| (ii) | FINANCIAL STATEMENTS – Off-Balance Sheet. All material financial obligations and contingent obligations of Borrower not otherwise listed and itemized on the attached financial statements, are disclosed on the attached Schedule of Financial Statement Exceptions, including but not limited to material off-balance sheet leasing obligations, and guarantees of financial obligations of Borrower, its affiliates, subsidiaries, officers and related parties (if none, so state on said Schedule); | ||
| (iii) | REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in the Loan Agreement are true and correct in all material respects on the date hereof, except for any representations and warranties that expressly relate to a specific prior date and except for any changes permitted under the Loan Agreement; | ||
| (iv) | COMPLIANCE WITH APPLICABLE LAW. Except as noted on the attached Schedule of Compliance Issues, there are no material events whereby Borrower is conducting business contrary to applicable law; | ||
| (v) | ABSENCE OF DEFAULT. Except as noted on the attached Schedule of Compliance Issues, no Default or Event of Default exists on the date hereof; and | ||
| (vi) | LITIGATION. There are no litigation or regulatory proceedings pending or threatened in writing against Borrower except as are listed on the attached Schedule of Compliance Issues (if none, so state on said Schedule). |
The
undersigned has executed this certificate, in his capacity as ___ of the Company and not
individually, as of , 200_.
Signature:
|
|
By (printed name and title):
|
|
20
SCHEDULE OF FINANCIAL STATEMENT EXCEPTIONS
SCHEDULE OF COMPLIANCE ISSUES
Signatory Initials:
21
EXHIBIT B
FUNDING REQUEST NO. ___
FOR
LOAN AND SECURITY AGREEMENT NO. V07208
BY AND BETWEEN
BLUECREST CAPITAL FINANCE, L.P., AS LENDER
AND
NITROSECURITY, INC., AS BORROWER
LOAN AND SECURITY AGREEMENT NO. V07208
BY AND BETWEEN
BLUECREST CAPITAL FINANCE, L.P., AS LENDER
AND
NITROSECURITY, INC., AS BORROWER
Borrower hereby requests an advance under the terms of the above described Loan and Security
Agreement (the “Loan Agreement”) in the original principal amount of Dollars
($ ).
Borrower hereby acknowledges and agrees that the representations and warranties as set forth in the
Loan Agreement are true and correct on the date hereof (except for any representations and
warranties that expressly relate to a specific prior date and except for any changes permitted
under the Loan Agreement), and further agrees that any and all Conditions Precedent set forth in
Section 2.5(a) (and with respect to the initial funding set forth in Section 2.5(b)) to the making
of an advance by the Lender set forth in the Loan Agreement either have been satisfied or waived,
or will be satisfied as a result of the making by Lender of this advance.
The advance requested hereby shall be secured by the Collateral as defined in the Loan Agreement.
The undersigned certifies that the undersigned is a duly authorized signatory of the Borrower, and
that as such the undersigned is authorized to execute this request on behalf of the Borrower and
not in his or her individual capacity.
| NITROSECURITY, INC. Borrower |
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| By: |
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| Name: | ||||||
| Its: | ||||||
| Date: | ||||||
22
EXHIBIT C
PROMISSORY NOTE
Dated: , 0000
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Xxxxxxx, Xxxxxxxx |
The undersigned, NitroSecurity, Inc., a Delaware corporation with its principal place of business
at 000 Xxxxxxxx Xxx, Xxxxxxxxxx, XX (hereinafter referred to as “Borrower”), promises to pay to
BlueCrest Capital Finance, L.P. (“Lender”) or its
registered assigns ___ Dollars ($___)
at its office at Chicago, Illinois, or at such other place as Lender or its registered assigns may
appoint, plus interest thereon as set forth herein.
Interest on the principal amount outstanding shall accrue at the rate equal to ___% per
annum, computed on the basis of a 360-day year of twelve 30-day months, and on the assumption that
each payment of principal shall be made in a timely manner (the “Loan Interest Rate”).
Principal and interest hereunder shall be payable on the first calendar day of each month, or, if
the first calendar day of any month is not a business day, then on the next succeeding business day
(each a “Payment Date”), in the amounts set forth below. Borrower agrees to make (i) thirty-six
(36) payments of principal and interest (paid in arrears) in the amount of $___ each,
commencing on the second Payment Date occurring after the date of this Note (each, a “Periodic
Payment”) and continuing on each Payment Date thereafter until the amounts of principal and
interest owing under the Note are paid in full; provided, however, that the final Periodic Payment
shall additionally include any accrued and unpaid interest and other charges then outstanding. The
foregoing payments include interest at the Loan Interest Rate, which is precomputed for the period
ending when such payments are due and on the assumption that all payments will be made on their
respective due dates. Borrower further agrees to pay a per diem interest charge equal to
$___ per day from and including the date that the Lender makes the advance to which this
Note relates, to and excluding the first Payment Date hereunder.
Any payment of principal and/or interest which is past due for a period in excess of five (5) days
after its due date shall be overdue and shall be subject to a service charge in an amount equal to
two percent (2%) of the delinquent amount, but not more than the maximum rate permitted by law,
whichever is less. In addition, and notwithstanding the forgoing, during the continuance of an
Event of Default all outstanding Borrower Liabilities in respect of the Loans (including the Loan
evidenced by this Promissory Note) shall bear interest (payable on demand) at a rate that is two
percent (2%) per annum in excess of the Loan Interest Rate (the “Default Interest Rate”) and the
monthly payment of principal and interest shall be recalculated at the Default Interest Rate.
Borrower shall additionally be liable for any costs or expenses incurred by Lender in collecting
any sums due from Borrower to Lender including all reasonable attorneys’ fees and legal expenses
incurred by Lender if this note is placed with an attorney for collection.
Demand, presentment for payment, notice of non-payment and protest are hereby waived by the
undersigned.
This Note is made by Borrower and delivered to Lender in relation to that certain Funding Request
No. ___ issued by Borrower pursuant to that certain Loan and Security Agreement No. V07305 dated as
of July 31, 2007 (“Loan Agreement”) by and between Borrower as Borrower and Lender. This Note is
issued under the terms of and is entitled to the benefits of the Loan Agreement, to which reference
is hereby made for a statement of the nature and extent of the protection and security afforded and
the rights of the payee hereof and the rights and obligations of the undersigned. Lender’s books
and records shall be dispositive evidence of the amount disbursed pursuant to this Note and the
Loan Agreement.
Upon an “Event of Default,” as defined in the Loan Agreement, this Note may become or be declared
due in the manner and with the effect provided in the Loan Agreement.
Lender (or its registered assigns) shall not be required to look to any collateral for the payment
of this Note, but may proceed against Borrower, or any guarantor hereof in such manner as it deems
desirable. None of the rights or remedies of Lender (or its registered assigns) hereunder or under
the Loan Agreement are to be deemed waived or affected by any failure to exercise same.
All remedies conferred upon Lender (or its registered assigns) under this Note, the Loan Agreement
or any other instrument or agreement to which the undersigned or any guarantor hereof is a party or
under any or all of them is bound, shall be cumulative and not exclusive, and such remedies may be
exercised concurrently or consecutively at the option of Lender or its registered assigns.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE
OF ILLINOIS. AT THE ELECTION OF LENDER AND WITHOUT LIMITING LENDER’S RIGHT TO COMMENCE AN ACTION
IN OTHER JURISDICTION, BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY
00
XXXXX (XXXXXXX, XXXXX OR LOCAL) HAVING SITUS WITHIN XXXX COUNTY IN THE STATE OF ILLINOIS, EXPRESSLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE BY CERTIFIED MAIL, POSTAGE PREPAID,
DIRECTED TO THE LAST KNOWN ADDRESS OF BORROWER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN
(10) DAYS AFTER THE DATE OF MAILING HEREOF. BORROWER HEREBY WAIVES ANY RIGHT TO ASSERT THAT ANY
ACTION INSTITUTED BY LENDER OR BORROWER IN SUCH COURT IS AN IMPROPER VENUE OR SUCH ACTION SHOULD BE
TRANSFERRED TO A MORE CONVENIENT FORUM. LENDER AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL
BY JURY.
BORROWER AGREES THAT ALL PAYMENTS AND OTHER OBLIGATIONS DUE AND OWING UNDER THIS NOTE AND EACH
OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE PAID IN FULL WITHOUT OFFSET OR DEDUCTION
FOR ANY REASON, AND BORROWER HEREBY WAIVES ANY RIGHT OF OFFSET ARISING FOR ANY REASON WITH RESPECT
TO ANY PAYMENT OR OTHER OBLIGATION DUE AND OWING UNDER THIS NOTE AND EACH OTHER DOCUMENT EXECUTED
IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the undersigned hereunto sets its hand and seal as of the date first set forth
above.
NitroSecurity, Inc.
Borrower
Borrower
By:
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Title: |
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24
