LOAN AND SECURITY AGREEMENT
BETWEEN
SILICON VALLEY BANK
AND
OBJECTSPACE, INC.
TABLE OF CONTENTS
Page
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R E C I T A L S 1
AGREEMENT 1
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting and Other Terms 9
2. LOAN AND TERMS OF PAYMENT 10
2.1 Credit Extensions. 11
2.2 Excess Advances. 11
2.3 Interest Rates, Payments, and Calculations 11
2.4 Crediting Payments 13
2.5 Fees 14
2.6 Additional Costs 14
2.7 Term 15
3. CONDITIONS OF LOANS 15
3.1 Conditions Precedent to Initial Credit Extension 15
3.2 Conditions Precedent to all Credit Extensions 16
4. CREATION OF SECURITY INTEREST 16
4.1 Grant of Security Interest 16
4.2 Delivery of Additional Documentation Required 16
4.3 Right to Inspect 16
5. REPRESENTATIONS AND WARRANTIES 17
5.1 Due Organization and Qualification 17
5.2 Due Authorization; No Conflict 17
5.3 No Prior Encumbrances 17
5.4 Bona Fide Eligible Accounts 17
5.5 Merchantable Inventory 17
5.6 Intellectual Property 17
5.7 Name; Location of Chief Executive Office 18
5.8 Litigation 18
5.9 No Material Adverse Change in Financial Statements 18
5.10 Solvency 18
5.11 Regulatory Compliance 18
5.12 Environmental Condition 18
5.13 Taxes 19
5.14 Subsidiaries 19
5.15 Government Consents 19
5.16 Full Disclosure 19
6. AFFIRMATIVE COVENANTS 19
6.1 Good Standing 19
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6.2 Government Compliance 19
6.3 Financial Statements, Reports, Certificates 20
6.4 Inventory; Returns 21
6.5 Taxes 21
6.6 Insurance 21
6.7 Quick Ratio 22
6.8 Debt-Tangible Net Worth Ratio 22
6.9 Tangible Net Worth 22
6.10 Registration of Intellectual Property Rights 22
6.11 Further Assurances 22
6.12 Landlord's Lien Subordination 23
7. NEGATIVE COVENANTS 23
7.1 Dispositions. 23
7.2 Changes in Business, Ownership, Management or Business
Locations 23
7.3 Mergers or Acquisitions 23
7.4 Indebtedness. 23
7.5 Encumbrances. 23
7.6 Distributions. 24
7.7 Investments. 24
7.8 Transactions with Affiliates 24
7.9 Intellectual Property Agreements 24
7.10 Subordinated Debt 24
7.11 Inventory 24
7.12 Compliance 25
7.13 Abandonment of Intellectual Property 25
8. EVENTS OF DEFAULT 25
8.1 Payment Default 25
8.2 Covenant Default 25
8.3 Material Adverse Change 26
8.4 Attachment 26
8.5 Insolvency. 26
8.6 Other Agreements 26
8.7 Subordinated Debt 26
8.8 Judgments 26
8.9 Misrepresentations 27
8.10 Guaranty 27
9. BANK'S RIGHTS AND REMEDIES 27
9.1 Rights and Remedies 27
9.2 Power of Attorney 28
9.3 Accounts Collection 29
9.4 Bank Expenses 29
9.5 Bank's Liability for Collateral 29
9.6 Remedies Cumulative 30
9.7 Demand; Protest 30
10. NOTICES 30
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11. CHOICE OF LAW AND VENUE 30
12. GENERAL PROVISIONS 31
12.1 Successors and Assigns 31
12.2 INDEMNIFICATION 31
12.3 Time of Essence 31
12.4 Severability of Provisions 31
12.5 Amendments in Writing, Integration 32
12.6 Counterparts 32
12.7 Survival 32
12.8 Confidentiality 32
12.9 WAIVER OF JURY TRIAL. 32
12.10 NOTICE OF ORAL AGREEMENT. 33
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of February 9,
1998, by and between SILICON VALLEY BANK, a California-chartered bank ("Bank")
with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 and with a loan production office located at 9020 Capital of
Texas Xxxxxxx Xxxxx, Xxxxxxxx 0, Xxxxx 000, Xxxxxx, Xxxxx 00000 and
ObjectSpace, Inc., a Delaware corporation ("Borrower").
R E C I T A L S
Borrower wishes to obtain credit from time to time from Bank, and
Bank desires to extend credit to Borrower. This Agreement sets forth the terms
on which Bank will advance credit to Borrower, and Borrower will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION1.DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and
hereafter arising accounts, contract rights, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other
technology) or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under
the Committed Revolving Line and shall specifically include any Overadvance.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person's senior executive officers, directors, partners and,
for any Person that is a limited liability company, such Person's, managers
and members.
"Bank Expenses" means all reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the
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preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding)
whether or not suit is brought. "Borrower's Books" means all of Borrower's
books and records including, without limitation: ledgers; records concerning
Borrower's assets or liabilities, the Collateral, business operations or
financial condition; and all computer programs, or tape files, and the
equipment, containing such information.
"Borrowing Base" means an amount equal to (i)
eighty percent (80%) of Eligible Accounts plus (ii) the Overadvance Amount,
each of (i) and (ii) as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a
Saturday, Sunday, or other day on which banks in the State of Texas or the
State of California are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Uniform Commercial Code as in
effect in the State of Texas from time to time.
"Collateral" means the property described on
EXHIBIT A attached hereto.
"Committed Revolving Line" means a credit extension
of up to Three Million and No/100 Dollars ($3,000,000.00).
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith; provided, however, that such amount shall
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not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Copyrights" means any and all copyright rights,
copyright applications, copyright registrations and like protections in each
work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade secret, now
or hereafter existing, created, acquired or held.
"Credit Extension" means each Advance, Overadvance,
Letter of Credit, or any other extension of credit by Bank for the benefit of
Borrower hereunder.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
assets on the consolidated balance sheet of Borrower and its Subsidiaries as
at such date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its
Subsidiaries, as at such date, plus, to the extent not already included
therein, all outstanding Credit Extensions made under this Agreement,
including all Indebtedness that is payable upon demand or within one year from
the date of determination thereof unless such Indebtedness is renewable or
extendable at the option of Borrower or any Subsidiary to a date more than one
year from the date of determination, but excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise
in the ordinary course of Borrower's business that comply with all of
Borrower's representations and warranties to Bank set forth in Section 5.4;
PROVIDED, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment and upon notification thereof to
Borrower in accordance with the provisions hereof. Unless otherwise agreed to
by Bank in writing, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to
pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to an account debtor,
including Affiliates, whose total obligations to Borrower exceed twenty-five
percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
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(d) Accounts with respect to which the account debtor
does not have its principal place of business in the United States except for
Eligible Foreign Accounts;
(e) Accounts with respect to which the account debtor
is a federal, state, or local governmental entity or any department, agency, or
instrumentality thereof;
(f) Accounts with respect to which Borrower is liable
to the account debtor, but only to the extent of any amounts owing to the
account debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or
promotional equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(h) Accounts with respect to which the account debtor
is an Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(j) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with
respect to which the account debtor does not have its principal place of
business in the United States and that are: (1) covered by credit insurance in
form and amount, and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by one or
more letters of credit either advised or negotiated through Bank or in favor of
Bank as beneficiary, in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank; or (3) that Bank approves on a case-by-case
basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
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"GAAP" means generally accepted accounting principles
as in effect in the United States from time to time.
"Guarantor" means any present or future guarantor of
all or part of the Obligations, including, without limitation, Xxxxx Xxxxxx and
Graham Glass.
"Indebtedness" means (a) all indebtedness for
borrowed money or the deferred purchase price of property or services, including
without limitation reimbursement and other obligations with respect to surety
bonds and letters of credit, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and (d) all
Contingent Obligations.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks, Patents, and Mask Works;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now or
hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to xxx for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights, Patents,
Trademarks, or Mask Works, and all license fees and royalties arising from such
use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks, Patents, or Mask Works; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
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"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership
(including stock, partnership interest or other securities) of any Person, or
any loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Letter of Credit" means a letter of credit or
similar undertaking issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth
in Section 2.1.2.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes that may be executed by Borrower in favor of Bank, and any
other present or future agreement entered into between Borrower and/or for the
benefit of Bank in connection with this Agreement, all as amended, extended or
restated from time to time.
"Mask Works" means all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired;
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maximum Lawful Rate" means the maximum rate of
interest and the term "Maximum Lawful Amount" means the maximum amount of
interest that are permissible under applicable state or federal law for the type
of loan evidenced by the Loan Documents. If the Maximum Lawful Rate is increased
by statute or other governmental action subsequent to the date of this
Agreement, then the new Maximum
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Lawful Rate shall be applicable to the payments provided for hereunder from
the effective date thereof, unless otherwise prohibited by applicable law.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Overadvance" or "Overadvances" means a credit
extension under the Committed Revolving Line that shall not in any case exceed,
in the aggregate and from time to time, Five Hundred Thousand and No/100 Dollars
($500,000.00).
"Overadvance Maturity Date" means June 1, 1998.
"Patents" means all patents, patent applications and
like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Payment Date" means the eighth (8th) calendar day of
each month commencing on the first such date after the Closing Date and ending
on the (i) Overadvance Maturity Date with respect to any and all Overadvances
and (ii) Revolving Maturity Date with respect to all credit extensions, other
than the Overadvances, under the Committed Revolving Line.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
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(a) Investments existing on the Closing Date
disclosed in the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America, any State or any
agency or instrumentality thereof maturing within one (1) year from the date of
acquisition thereof, (ii) commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc., and (iii) certificates of deposit maturing no more than one (1)
year from the date of investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, PROVIDED the same have
no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at the time of
its acquisition, PROVIDED that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment; and
(d) Liens incurred in connection with the extension,
renewal or refinancing of the Indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
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"Quick Assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than ninety (90) days of Borrower determined in accordance
with GAAP. Bank acknowledges that in calculating the accounts receivables
portion of Quick Assets, Borrower classifies accrued revenue as an account
receivable to the extent, and with respect to the month in which, the work was
performed by Borrower. Bank approves of the foregoing calculation of the
accounts receivable portion of Quick Assets to the extent that such calculation
is in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the Controller
of Borrower.
"Revolving Maturity Date" means February 8, 1999.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Tangible Net Worth" means as of any applicable date,
the consolidated total assets of Borrower and its Subsidiaries MINUS, without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) all reserves not already deducted from assets,
AND (ii) Total Liabilities.
"Total Liabilities" means as of any applicable date,
any date as of which the amount thereof shall be determined, all obligations
that should, in accordance with GAAP be classified as liabilities on the
consolidated balance sheet of Borrower, including in any event all Indebtedness,
but specifically excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark
rights, whether registered or not, applications to register and registrations of
the same and like protections, and the entire goodwill of the business of
Borrower connected with and symbolized by such trademarks.
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1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and
all calculations and determinations made hereunder shall be made in
accordance with GAAP. When used herein, the term "financial statements" shall
include the notes and schedules thereto. The terms "including" and "includes"
shall always be read as meaning "including (or includes) without limitation",
when used herein or in any other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the
order of Bank, in lawful money of the United States of America, the aggregate
unpaid principal amount of all Credit Extensions made by Bank to Borrower
hereunder. Borrower also promises to pay interest on the unpaid principal
amount of such Advances at rates in accordance with the terms hereof.
2.1.1 (a) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) the Committed Revolving Line or
the Borrowing Base, whichever is less, minus (ii) the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) and any Letter of Credit Reserve. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time, on the Business Day that the Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of EXHIBIT B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
(c) The Committed Revolving Line shall
terminate on the Revolving Maturity Date, at which time all Advances under
this Section 2.1 and other amounts due under this Agreement (except as
otherwise expressly specified herein) shall be immediately due and payable.
Notwithstanding the foregoing, Bank's commitment to make any Overadvance
shall terminate on the Overadvance Maturity Date at which time all
outstanding Overadvance principal plus all accrued interest not yet paid
shall be immediately due and payable.
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2.1.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of
this Agreement, Bank agrees to issue or cause to be issued Letters of Credit for
the account of Borrower in an aggregate outstanding face amount not to exceed
(i) the lesser of the Committed Revolving Line or the Borrowing Base minus (ii)
the then outstanding principal balance of the Credit Extensions; PROVIDED that
the face amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve) shall not in
any case exceed One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00). Each Letter of Credit shall have an expiry date no later than
one hundred eighty (180) days after the Revolving Maturity Date provided that
Borrower's Letter of Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank at any time after the Revolving Maturity Date if the
term of this Agreement is not extended by Bank. All Letters of Credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of standard Application and
Letter of Credit Agreement; provided, that Bank shall not charge any fee in
connection with (x) its reissuance of the three Letters of Credit in the
aggregate face amount of One Million Eighty-Six Thousand Six Hundred Six and
68/100 Dollars ($1,086,606.68), replacing those three Letters of Credit
currently issued for the account of Borrower by a third Person or (y) its
issuance of a Letter of Credit for the account of Borrower in the amount of One
Hundred Fifty-Six Thousand Five Hundred Forty-Five Dollars and No/100 Dollars
($156,545.00).
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. BORROWER SHALL INDEMNIFY, DEFEND, PROTECT, AND
HOLD BANK HARMLESS FROM ANY AND ALL LOSS, COST, EXPENSE OR LIABILITY, INCLUDING,
WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES, ARISING OUT OF OR IN CONNECTION
WITH ANY LETTERS OF CREDIT.
(c) Borrower may request that Bank issue a
Letter of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing rate of
exchange in Austin, Texas for sales of that other currency for cable transfer to
the country of which it is the currency.
(d) Upon the issuance of any letter of
credit payable in a currency other than United States Dollars, Bank shall create
a reserve under the Committed Revolving Line for letters of credit against
fluctuations in currency exchange rates, in an amount equal to ten percent (10%)
of the face amount of such letter of credit ("Letter of Credit Reserve"). The
amount of such reserve may be amended by Bank from time to time to account for
fluctuations in the exchange rate.
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The availability of funds under the Committed Revolving Line shall be reduced
by the amount of such reserve for so long as such letter of credit remains
outstanding.
2.2 EXCESS ADVANCES. If, at any time or for any reason,
the amount of Obligations owed by Borrower to Bank pursuant to Section 2.1.1
and 2.1.2 of this Agreement is greater than the lesser of (i) the Committed
Revolving Line or (ii) the Borrowing Base, Borrower shall immediately pay to
Bank, in cash, the amount of such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section
2.3(b), all Advances, other than Overadvances, shall bear interest, on the
average daily balance thereof, at a per annum rate equal to seventy-five
percentage points (0.75%) above the Prime Rate. Except as set forth in
Section 2.3(b), all Overadvances shall bear interest, on the average daily
balance thereof, at a per annum rate equal to one and one-half percent
percentage points (1.5%) above the Prime Rate.
(b) DEFAULT RATE. All Obligations shall bear interest,
from and after the occurrence of an Event of Default, at the "Default
Interest Rate". The Default Interest Rate shall be, at Bank's option, (i) the
Maximum Lawful Rate, if such Maximum Lawful Rate is established by applicable
law; or (ii) the interest rate applicable immediately prior to the occurrence
of the Event of Default plus five (5) percentage points, if no Maximum Lawful
Rate is established by applicable law; or (iii) eighteen percent (18%) per
annum; or (iv) such lesser rate of interest as Bank in its sole discretion
may choose to charge; but never more than the Maximum Lawful Rate or at a
rate that would cause the total interest contracted for, charged or received
by Bank to exceed the Maximum Lawful Amount.
(c) PAYMENTS. Interest hereunder shall be due and
payable on each Payment Date. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION.
(i) CHANGES. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest
hereunder shall be increased or decreased effective as of 12:01 a.m. on the
day the Prime Rate is changed, by an amount equal to such change in the Prime
Rate.
(ii) SPREADING OF INTEREST. Because of the
possibility of irregular periodic balances of principal, the fluctuating
nature of the interest rate, or premature payment, the total interest that
will accrue under this Agreement cannot be determined in advance. Bank does
not intend to contract for, charge or receive more than the Maximum Lawful
Rate or Maximum Lawful Amount permitted by applicable state or federal law,
and to prevent such an occurrence Bank and Borrower agree that
12
all amounts of interest, whenever contracted for, charged or received by
Bank, with respect to the loan of money evidenced by the Loan Documents,
shall be spread, prorated or allocated over the full period of time the
Obligations are unpaid, including the period of any renewal or extension
thereof. If the maturity of the Obligations is accelerated for any reason
whether as a lawsuit or an Event of Default or otherwise prior to the full
stated term, the total amount of interest contracted for, charged or received
to the time of such demand shall be spread, prorated or allocated along with
any interest thereafter accruing over the full period of time that the
Obligations thereafter remain unpaid for the purpose of determining if such
interest exceeds the Maximum Lawful Amount.
(iii) EXCESS INTEREST. At maturity (whether by
acceleration or otherwise) or on earlier final payment of the Obligations,
Bank shall compute the total amount of interest that has been contracted for,
charged or received by Bank or payable by Borrower hereunder and compare such
amount to the Maximum Lawful Amount that could have been contracted for,
charged or received by Bank. If such computation reflects that the total
amount of interest that has been contracted for, charged or received by Bank
or payable by Borrower exceeds the Maximum Lawful Amount, then Bank shall
apply such excess to the reduction of the principal balance and not to the
payment of interest; or if such excess interest exceeds the unpaid principal
balance, such excess shall be refunded to Borrower. This provision concerning
the crediting or refund of excess interest shall control and take precedence
over all other agreements between Borrower and Bank so that under no
circumstances shall the total interest contracted for, charged or received by
Bank exceed the Maximum Lawful Amount.
(iv) DAILY COMPUTATION OF INTEREST. To the extent
permitted by applicable law, Bank at its option may either (i) calculate the
per diem interest rate or amount based on the actual number of days in the
year (365 or 366, as the case may be), and charge that per diem interest rate
or amount each day, or (ii) calculate the per diem interest rate or amount as
if each year has only 360 days, and charge that per diem interest rate or
amount each day for the actual number of days of the year (365 or 366 as the
case may be). If the Loan Documents call for monthly payments, Bank at its
option may determine the payment amount based on the assumption that each
year has only 360 days and each month has 30 days. In no event shall Bank
compute the interest in a manner that would cause Bank to contract for,
charge or receive interest that would exceed the Maximum Lawful Rate or the
Maximum Lawful Amount.
(v) REVOLVING LOAN ACCOUNTS AND USURY CEILING. In
no event shall Chapter 346 of the Texas Finance Code, as supplemented by the
Texas Credit Title ("Texas Finance Code")(which regulates certain revolving
loan accounts and revolving tri-party accounts) apply to this Agreement or
Borrower's payment obligations hereunder. To the extent that Chapter 303 of
the Texas Finance Code, is applicable to this Agreement, the "weekly ceiling"
specified in such Chapter 303 is the
13
applicable ceiling; provided that, if any applicable law permits greater
interest, the law permitting the greatest interest shall apply.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment, whether directed to
Borrower's deposit account with Bank or to the Obligations or otherwise,
shall be immediately applied to conditionally reduce Obligations, but shall
not be considered a payment in respect of the Obligations unless such payment
is of immediately available federal funds or unless and until such check or
other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment
received by Bank after 12:00 noon Pacific time shall be deemed to have been
received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable
for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to Twenty-Two
Thousand Five Hundred and No/100 Dollars ($22,500.00), which fee shall be due
on the Closing Date and shall be fully earned and non-refundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) BANK EXPENSES. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses, and,
after the date hereof, all Bank Expenses, including reasonable attorneys'
fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, after the date
hereof, any regulation, treaty or official directive or the interpretation or
application thereof by any court or any governmental authority charged with
the administration thereof or the compliance with any guideline or request of
any central bank or other governmental authority (whether or not having the
force of law):
(a) subjects Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder by Borrower
or otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net
14
income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets
held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect
to its performance under this Agreement, and the result of any of the
foregoing is to increase the cost to Bank, reduce the income receivable by
Bank or impose any expense upon Bank with respect to the Obligations, Bank
shall notify Borrower thereof within one hundred eighty (180) days of Bank
incurring any such reduced income or increased cost or expense. Borrower
agrees to pay to Bank the amount of such increase in cost, reduction in
income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by Bank of a statement of the
amount and setting forth Bank's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest
error.
2.7 TERM. Except as otherwise set forth herein, this
Agreement shall become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for a term ending on the
Revolving Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long
as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) an intellectual property security agreement;
(d) guaranties by the Guarantors;
15
(e) UCC-1 financing statements covering the Collateral
and UCC-3 termination statements or assignments in favor of Bank from each
Person that has a security interest in the Collateral or any part thereof;
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;
(h) Certificate of Foreign Qualification (if applicable);
and
(i) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The
obligation of Bank to make each Credit Extension, including the initial
Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form
as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral and all proceeds thereof, in order to secure
prompt payment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently
existing Collateral, and will constitute a valid, first priority security
interest in Collateral acquired after the date hereof. Borrower acknowledges
that Bank may place a "hold" on any deposit account pledged as Collateral to
secure the Obligations. Notwithstanding termination of this Agreement, Bank's
Lien on the Collateral shall remain in effect for so long as any Obligations
are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank,
all Negotiable
16
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice,
from time to time during Borrower's usual business hours, to inspect
Borrower's Books and to make copies thereof and to check, test, and appraise
the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws
of its state of incorporation and qualified and licensed to do business in,
and is in good standing in Texas, and in any other state in which the conduct
of its business or its ownership of property requires that it be so qualified.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound,
which default could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona
fide existing obligations. The service or property giving rise to such
Eligible Accounts has been performed or delivered to the account debtor or to
the account debtor's agent for immediate shipment to and unconditional
acceptance by the account debtor. Borrower has not received notice of actual
or imminent Insolvency Proceeding of any account debtor whose accounts are
included in any Borrowing Base Certificate as an Eligible Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 INTELLECTUAL PROPERTY. Borrower is the owner of the
Patents, Trademarks, Copyrights and Mask Works subject to licenses granted by
Borrower to
17
its customers in the ordinary course of business. To Borrower's knowledge,
each of the Patents is valid and enforceable, and no part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
Collateral violates the rights of any third party. Except for and upon the
filing with the United States Patent and Trademark Office with respect to the
Patents and Trademarks and the Register of Copyrights with respect to the
Copyrights and Mask Works necessary to perfect the security interests created
hereunder, and except as has been already made or obtained, no authorization,
approval or other action by, and no notice to or filing with, any United
States governmental authority or United States regulatory body is required
either (i) for the grant by Borrower of the security interest granted hereby
or for the execution, delivery or performance of Loan Documents by Borrower in
the United States or (ii) for the perfection in the United States or the
exercise by Bank of its rights and remedies hereunder.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in the Schedule, Borrower has not done business and will not without
at least thirty (30) days prior written notice to Bank do business under any
name other than that specified on the signature page hereof. The chief
executive office of Borrower is located at the address indicated in Section 10
hereof.
5.8 LITIGATION. Except as set forth in the Schedule, there
are no actions or proceedings pending, or, to Borrower's knowledge, threatened
by or against Borrower or any Subsidiary before any court or administrative
agency in which an adverse decision could have a Material Adverse Effect on
Borrower's interest or Bank's security interest in the Collateral.
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated financial condition as of the date thereof
and Borrower's consolidated results of operations for the period then ended.
There has not been a material adverse change in the consolidated financial
condition of Borrower since the date of the most recent of such financial
statements submitted to Bank on or about the Closing Date.
5.10 SOLVENCY. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from
Borrower's failure to comply with ERISA that is reasonably likely to result in
Borrower's incurring any liability that could have a Material Adverse Effect.
Borrower is not an "investment
18
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T and U of the Board of Governors of the
Federal Reserve System). Borrower has complied with all the provisions of the
Federal Fair Labor Standards Act. Borrower has not violated any statutes,
laws, ordinances or rules applicable to it, violation of which could have a
Material Adverse Effect.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release,
or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste
or hazardous substance disposal site, or a candidate for closure pursuant to
any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste
or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or caused
to be filed all tax returns required to be filed on a timely basis, and has
paid, or has made adequate provision for the payment of, all taxes reflected
therein.
5.14 SUBSIDIARIES. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that
are necessary for the continued operation of Borrower's business as currently
conducted.
5.16 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
19
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment
to make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of
its Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in Texas and every other jurisdiction
in which the failure to so qualify could have a Material Adverse Effect.
Borrower shall maintain in force, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, all licenses, approvals and agreements, the loss of which could have
a Material Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance
with which could have a Material Adverse Effect on the Collateral or the
priority of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower
shall deliver to Bank: (a) as soon as available, but in any event within
thirty (30) days after the end of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, in a form and certified by an officer of Borrower
reasonably acceptable to Bank; (b) as soon as available, but in any event
within one hundred twenty (120) days after the end of each of Borrower's
fiscal years, other than Borrower's fiscal year 1997 for which Borrower shall
have one hundred eighty (180) days, audited consolidated financial statements
of Borrower prepared in accordance with GAAP, consistently applied, together
with an unqualified opinion on such financial statements of an independent
certified public accounting firm reasonably acceptable to Bank; (c) within
five (5) days of filing, copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or to any holders
of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower
or any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand and No/100 Dollars ($100,000.00) or more;
(e) prompt notice of any material change in the composition of the
Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of the Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
effects the value of the Intellectual Property Collateral; and (f) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
20
Borrower shall deliver to Bank a Borrowing Base Certificate signed by
a Responsible Officer in substantially the form of EXHIBIT C hereto, together
with aged listings of accounts receivable and accounts payable (i) within
twenty (20) days after the last day of each month in which no Overadvance is
outstanding or (ii) by 3:00 p.m. Central Time on the last business day of each
week in which an Overadvance is outstanding.
Within thirty (30) days after the last day of each month, Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of
EXHIBIT D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than once every twelve (12) months unless an Event of
Default has occurred and is continuing; notwithstanding the foregoing, and so
long as no Event of Default has occurred and is continuing, Bank may audit
Borrower's Accounts no more often than once every six (6) months if Borrower
has not received at least Five Million and No/100 Dollars ($5,000,000.00)
equity from an issuance of its securities by June 1, 1998.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in
good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of
Borrower, as they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where the return, recovery, dispute or claim
involves more than Fifty Thousand and No/100 Dollars ($50,000.00).
6.5 TAXES. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law,
and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make, and will
cause each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including,
but not limited to, those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon
request, furnish Bank with proof satisfactory to Bank indicating that Borrower
or a Subsidiary has made such payments or deposits; provided that Borrower or
a Subsidiary need not make any payment if the amount or validity of such
payment is (i) contested in good faith by appropriate proceedings , (ii) is
reserved against (to the extent required by GAAP) by Borrower and (iii) no
Lien other than a Permitted Lien results.
21
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as are reasonably satisfactory
to Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must
give at least fifteen (15) days notice to Bank before canceling its policy for
any reason. At Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 QUICK RATIO. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to Current Liabilities
less deferred maintenance revenue of at least 1.25 to 1.0.
6.8 DEBT-TANGIBLE NET WORTH RATIO. Borrower shall maintain,
as of the last day of each calendar month, a ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more
than 1.50 to 1.0.
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as of the
last day of each calendar month, a Tangible Net Worth of not less than Three
Million and No/100 Dollars ($3,000,000.00) ("Minimum Tangible Net Worth")
which Minimum Tangible Net Worth shall, automatically and without any further
action by Bank or Borrower, be increased by one-half of the amount of equity
received by Borrower in connection with any issuance of its securities.
6.10 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Within three (3) days thereof, Borrower shall give
Bank notice of its registration with the United States Patent and Trademark
Office or its filing with the United States Copyright Office, as applicable,
of those intellectual property rights referred to in the Intellectual Property
Security Agreement and exhibits thereto and those additional intellectual
property rights developed or acquired by Borrower from time to time in
connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or
22
additions to the intellectual property rights listed in the Intellectual
Property Security Agreement and exhibits thereto.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time and take such further action as
Bank shall reasonably request to enable Bank to perfect Bank's security
interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents, Copyrights, and Mask
Works and (ii) use its best efforts to detect infringements of the Trademarks,
Patents, Copyrights and Mask Works and promptly advise Bank in writing of
material infringements detected.
(d) Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required
under this Section 6.10 to take but which Borrower fails to take, after
fifteen (15) days notice to Borrower. BORROWER SHALL REIMBURSE AND INDEMNIFY
BANK FOR ALL REASONABLE COSTS AND REASONABLE EXPENSES INCURRED IN THE
REASONABLE EXERCISE OF ITS RIGHTS UNDER THIS SECTION 6.10.
6.11 FURTHER ASSURANCES. At any time and from time to time,
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes
of this Agreement.
6.12 LANDLORD'S LIEN SUBORDINATION. No later than thirty
(30) days after the date hereof, Borrower shall deliver to Bank a
Subordination of Lien from each Person who leases real property to Borrower in
form and substance acceptable to Bank. Borrower acknowledges and agrees that
no Credit Extensions will be made if such subordinations are not delivered by
the date set forth above.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than Transfers:
(i) of inventory in the ordinary course of business, (ii) of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business; (iii) that constitute
payment of normal and usual operating expenses in the ordinary course of
business; or (iv) of worn-out or obsolete Equipment.
23
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS
LOCATIONS. Engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower
and any business substantially similar or related thereto (or incidental
thereto), or suffer a material change in Borrower's ownership or management or
if Xxxxx Xxxxxx or Xxxxxx Xxxxx ceases to be an employee or director of
Borrower and replacements reasonably satisfactory to Bank are not made in
within thirty (30) days. Borrower will not, without at least thirty (30) days
prior written notification to Bank, relocate its chief executive office or add
any new offices or business locations.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist
any Lien with respect to any of its property, or assign or otherwise convey
any right to receive income, including the sale of any Accounts, or permit any
of its Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock; provided, Borrower may purchase the Put Shares (as
defined in that certain Stock Purchase Agreement ("Stock Purchase Agreement")
dated August 21, 1996 between Xxxxx Xxxx and Borrower) from Xxxxx Xxxx under
and as provided in the Stock Purchase Agreement. Borrower will not, without
the prior written consent of Bank, supplement, amend, modify or waive in any
way any provision of the Stock Purchase Agreement. Borrower agrees and
acknowledges that foregoing right of Borrower to purchase the Put Shares is
not a waiver of any Event of Default which might be created by such purchase,
other than the general prohibition on dividends, distributions or other
payments set forth in the first sentence of this Section 7.6 and as otherwise
set forth in Section 7.8 below.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so
to do, other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Other than Borrower's
right to purchase the Put Shares pursuant to and in accordance with Section
7.6 above, directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's
24
business, upon fair and reasonable terms that are no less favorable to
Borrower than would be obtained in an arm's length transaction with a
nonaffiliated Person. Borrower agrees and acknowledges that right of Borrower
to purchase the Put Shares pursuant to and in accordance with Section 7.6
above is not a waiver of any Event of Default which might be created by such
purchase, other than the general prohibition on any material transaction with
an Affiliate of Borrower set forth in the first sentence of this Section 7.8
and as otherwise set forth in Section 7.6 above.
7.9 INTELLECTUAL PROPERTY AGREEMENTS. Permit the inclusion
in any material contract to which it becomes a party of any provisions that
could or might in any way prevent the creation of a security interest in
Borrower's rights and interests in any property included within the definition
of the Intellectual Property Collateral acquired under such contracts, except
to the extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgement.
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of any
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives
Bank prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest.
7.12 COMPLIANCE. Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for
such purpose; fail to meet the minimum funding requirements of ERISA; permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur;
fail to comply with the Federal Fair Labor Standards Act or violate any other
law or regulation, which violation could have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on
the Collateral; or permit any of its Subsidiaries to do any of the foregoing.
7.13 ABANDONMENT OF INTELLECTUAL PROPERTY. If an Event of
Default has occurred and is continuing, allow any Trademarks, Patents,
Copyrights, or Mask Works to be abandoned, forfeited or dedicated to the
public without the written consent of Bank.
25
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, within five
(5) calendar days of when due, any of the Obligations.
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.7, 6.8, 6.9 or 6.10 or violates any of the covenants contained
in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can
be cured, has failed to cure such default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall
have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an
Event of Default (provided that no Advances will be required to be made
during such cure period).
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a
material adverse change in the business, operations, or condition (financial
or otherwise) of the Borrower, or (ii) is a material impairment of the
prospect of repayment of any portion of the Obligations or (iii) is a
material impairment of the value or priority of Bank's security interests in
the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within thirty
(30) days, or if Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its
business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's assets, or if a notice of
lien, levy, or assessment is filed of record with respect to any of
Borrower's assets by the United States Government, or any department, agency,
or instrumentality thereof, or by any state, county, municipal, or
governmental agency, and the same is not paid within thirty (30) days after
Borrower receives notice thereof, provided that none of the
26
foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by
Borrower (provided that no Credit Extensions will be required to be made
during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency
Proceeding is commenced against Borrower and is not dismissed or stayed
within forty-five (45) days (provided that no Credit Extensions will be made
prior to the dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any
agreement to which Borrower is a party with a third party or parties
resulting in the exercise of a right by such third party or parties to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand and No/100 Dollars ($100,000.00) or that could have a
Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed
under any subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at least One
Hundred Thousand and No/100 Dollars ($100,000.00) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of ten (10)
days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of such judgment);
8.9 MISREPRESENTATIONS. If any material misrepresentation
or material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate or writing delivered to
Bank by Borrower or any Person acting on Borrower's behalf pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document; or
8.10 GUARANTY. Any guaranty of all or a portion of the
Obligations ceases for any reason to be in full force and effect, or any
Guarantor fails to perform any obligation under any guaranty of all or a
portion of the Obligations, or any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set
forth in any guaranty of all or a portion of the Obligations or in any
certificate delivered to Bank in connection with such guaranty, or any of the
circumstances described in Sections 8.4, 8.5 or 8.8 occur with respect to any
Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during
the continuance of an Event of Default, Bank may, at its election, without
notice of its
27
election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;
(f) Without notice to Borrower, set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge,
28
Borrower's labels, patents, copyrights, mask works, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Bank's exercise of its rights under
this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(h) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to the
Obligations in whatever manner or order it deems appropriate;
(i) Bank may credit bid and purchase at any public
sale, or at any private sale as permitted by law; and
(j) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
(k) Bank shall have a non-exclusive, royalty-free
license to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the occurrence
of an Event of Default.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence
and during the continuance of an Event of Default, Borrower hereby
irrevocably appoints Bank (and any of Bank's designated officers, or
employees) as Borrower's true and lawful attorney to: (a) send requests for
verification of Accounts or notify account debtors of Bank's security
interest in the Accounts; (b) endorse Borrower's name on any checks or other
forms of payment or security that may come into Bank's possession; (c) sign
Borrower's name on any invoice or xxxx of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) make, settle,
and adjust all claims under and decisions with respect to Borrower's policies
of insurance; and (e) settle and adjust disputes and claims respecting the
Accounts directly with account debtors, for amounts and upon terms which Bank
determines to be reasonable; (f) modify, in its sole discretion, any
intellectual property security agreement entered into between Borrower and
Bank without first obtaining Borrower's approval of or signature to such
modification by amending Exhibit A, Exhibit B, Exhibit C and Exhibit D,
thereof, as appropriate, to include reference to any right, title or interest
in any Copyrights, Patents, Trademarks, Mask Works acquired by Borrower after
the execution hereof or to delete any reference to any right, title or
interest in any Copyrights, Patents, Trademarks, or Mask Works in which
Borrower no longer has or claims any right, title or interest; (g) file, in
its sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature
of Borrower where permitted by law; and (h) transfer the Intellectual
Property Collateral into the name of Bank or a third party to the extent
permitted under the Code provided Bank may exercise such power of attorney to
sign
29
the name of Borrower on any of the documents described in Section 4.2
regardless of whether an Event of Default has occurred. The appointment of
Bank as Borrower's attorney in fact, and each and every one of Bank's rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing
funds to Borrower of Bank's security interest in such funds and verify the
amount of such Account. Borrower shall collect all amounts owing to Borrower
for Bank, receive in trust all payments as Bank's trustee, and if requested
or required by Bank, immediately deliver such payments to Bank in their
original form as received from the account debtor, with proper endorsements
for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts
or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of
the following: (a) make payment of the same or any part thereof; (b) set up
such reserves under the Committed Revolving Line as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by
Bank to make similar payments in the future or a waiver by Bank of any Event
of Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank
complies with reasonable banking practices, Bank shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other
person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies, not expressly set
forth herein, and as provided under the Code, by law, or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any Event of Default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only in
the specific instance and for the specific purpose for which it was given.
30
9.7 DEMAND; PROTEST. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, notice of intent to accelerate, notice of
acceleration, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be
liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by facsimile to Borrower or to Bank, as the case may be, at its
addresses set forth below:
If to Borrower: ObjectSpace, Inc.
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxx, Vice President and Chief Financial
Officer
Fax: 972/000-0000
If to Bank: Silicon Valley Bank
9020 Capital of Xxxxx Xxxxxxx Xxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx, Assistant Vice President
Fax: 512/000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
31
11. CHOICE OF LAW AND VENUE
THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW AS IF PERFORMED ENTIRELY WITHIN THE STATE OF
TEXAS BY TEXAS RESIDENTS. EACH OF BORROWER AND BANK HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
XXXXXX, STATE OF TEXAS.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of
each of the parties; PROVIDED, HOWEVER, that neither this Agreement nor any
rights hereunder may be assigned by Borrower without Bank's prior written
consent, which consent may be granted or withheld in Bank's sole discretion.
Bank shall have the right without the consent of or notice to Borrower to
sell, transfer, negotiate, or grant participation in all or any part of, or
any interest in, Bank's obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. BORROWER SHALL, INDEMNIFY, DEFEND,
PROTECT AND HOLD HARMLESS BANK AND ITS DIRECTORS, OFFICERS, EMPLOYEES, AND
AGENTS AGAINST: (A) ALL OBLIGATIONS, DEMANDS, CLAIMS, AND LIABILITIES CLAIMED
OR ASSERTED BY ANY OTHER PARTY IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS; AND (B) ALL LOSSES OR BANK EXPENSES IN
ANY WAY SUFFERED, INCURRED, OR PAID BY BANK AS A RESULT OF OR IN ANY WAY
ARISING OUT OF, FOLLOWING, OR CONSEQUENTIAL TO TRANSACTIONS BETWEEN BANK AND
BORROWER WHETHER UNDER THE LOAN DOCUMENTS, OR OTHERWISE (INCLUDING WITHOUT
LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES), EXCEPT FOR LOSSES CAUSED
BY BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
12.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific
provision. If any term, provision, covenant, or condition of this Agreement
is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired, or invalidated and this
Agreement shall be construed as if such invalid, void or unenforceable
provision had never been contained herein.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement
cannot be amended or terminated except by a writing signed by Borrower and
Bank. All prior agreements, understandings, representations, warranties, and
negotiations between the
32
parties hereto with respect to the subject matter of this Agreement, if any,
are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but one and
the same Agreement.
12.7 SURVIVAL. All covenants, representations and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding. The obligations of Borrower to
indemnify Bank with respect to the expenses, damages, losses, costs and
liabilities described in Section 12.2 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought
against Bank have run.
12.8 CONFIDENTIALITY. In handling any confidential
information of Borrower, Bank shall exercise the same degree of care that it
exercises with respect to its own proprietary information of the same types
to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Agreement except that disclosure of
such information may be made (i) to the Subsidiaries or Affiliates of Bank in
connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in
the loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii)
as required by law, regulation, rule or order, subpoena, judicial order or
similar order, (iv) as may be required in connection with the examination,
audit or similar investigation of Bank, and (v) as Bank may deem appropriate
in connection with the exercise of any remedies hereunder. Confidential
information hereunder shall not include information that either: (a) is in
the public domain or in the knowledge or possession of Bank when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank through
no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank
does not have actual knowledge that such third party is prohibited from
disclosing such information.
12.9 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
33
12.10 NOTICE OF ORAL AGREEMENT. THIS AGREEMENT AND THE
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
OBJECTSPACE, INC.
By: /s/ XXXXXXX X. XXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
------------------------------------
Title: Vice President, Cfo
-----------------------------------
SILICON VALLEY BANK
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx, Assistant Vice
President
34
SCHEDULE TO LOAN AND SECURITY AGREEMENT
DATED FECRUARY 9, 1998
SCHEDULE TO LOAN AND SECURITY AGREEMENT PAGE 1 OF 3
-------------------------------------------------------
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, investment
property, letters of credit, certificates of deposit, instruments and chattel
paper now owned or hereafter acquired and Borrower's Books relating to the
foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
SCHEDULE TO LOAN AND SECURITY AGREEMENT PAGE 2 OF 3
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(g) All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
SCHEDULE TO LOAN AND SECURITY AGREEMENT PAGE 3 OF 3
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