EXHIBIT 10.24
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PERSISTENCE SOFTWARE, INC.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into
as of March 20, 2003, by and between COMERICA BANK - CALIFORNIA ("Bank") and
PERSISTENCE SOFTWARE, INC. ("Borrower").
RECITALS
A. Bank and Borrower are parties to that certain Amended and Restated
Loan and Security Agreement dated as of March 6, 2002, as amended from time to
time including, but not limited to, by that certain First Amendment to Loan and
Security Agreement dated as of May 6, 2002, that certain Second Amendment to
Loan and Security Agreement dated as of July 3, 2002, that certain Third
Amendment to Loan and Security Agreement dated as of July 17, 2002, and that
certain Fourth Amendment to Loan and Security Agreement dated as of November 15,
2002 (collectively, the "Original Agreement").
B. Borrower and Bank wish to amend and restate the terms of the
Original Agreement. This Agreement sets forth the terms on which Bank will
advance credit to Borrower, and Borrower will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, 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 cash advance or cash advances
under the Revolving Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to seventy percent (70%)
of Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
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"Change in Control" shall mean a transaction in which any
"person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of a sufficient number of shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors, empowering
such "person" or "group" to elect a majority of the Board of Directors of
Borrower, who did not have such power before such transaction.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, or merchant services issued or
provided 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
designed to protect such Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Term Advance, Letter of
Credit, Equipment Advance or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"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,
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, twenty-five
percent (25%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
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(d) Accounts 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;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) 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;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower (including without limitation account debtors which have made deposits
with Borrower), but only to the extent of any amounts owing to the account
debtor against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty
percent (20%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) 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
(k) 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 (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank, or
(ii) are supported by credit insurance acceptable to Bank, or (iii) are Accounts
on which the account debtor is Nokia, the German Labor Unit (BA) or another
account debtor acceptable to Bank.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1(d).
"Equipment Maturity Date" means June 3, 2004.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
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"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means all of Borrower's
right, title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest, 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, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into in
connection with this Agreement, all as amended or extended from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents or (iii) the value or priority of Bank's security interests in the
Collateral.
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"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, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subject to the cap set forth in Section 7.13, Indebtedness
secured by a lien described in clause (c) of the defined term "Permitted Liens,"
provided such Indebtedness does not exceed the lesser of the cost or fair market
value of the equipment financed with such Indebtedness;
(d) Indebtedness to trade creditors incurred in the ordinary
course of Borrower's business; and
(e) Subordinated Debt.
"Permitted Investment" means:
(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 or any agency or any State 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 rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, (iii) certificates of deposit
maturing no more than one (1) year from the date of investment therein issued by
Bank and (iv) Bank's money market accounts.
"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, provided the same have no priority over any of Bank's
security interests;
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(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;
(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.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1(a) hereof.
"Revolving Line" means a credit extension of up to Two Million
Five Hundred Thousand Dollars ($2,500,000).
"Revolving Maturity Date" means April 30, 2004.
"Schedule" means the schedule of exceptions attached hereto and
approved by Bank, 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 any corporation, company or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock or
other units of ownership which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of Borrower and
its Subsidiaries minus intangible assets, plus Subordinated Debt, on a
consolidated basis determined in accordance with GAAP.
"Term Advance" has the meaning set forth in Section 2.1(b).
"Term Maturity Date" means November 1, 2003.
"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 TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
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 shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.
(a) REVOLVING ADVANCES.
(i) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the Revolving Line minus the aggregate undrawn face amount of all
outstanding Letters of Credit, provided that, at any time during which the
aggregate amount of the outstanding Advances plus the aggregate undrawn face
amount of all outstanding Letters of Credit is in excess of $400,000, the
aggregate amount of the outstanding Advances plus the aggregate face amount of
all outstanding Letters of Credit shall not exceed the Borrowing Base. Subject
to the terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1(a) may be repaid and reborrowed at any time prior to the Revolving
Maturity Date, at which time all Advances under this Section 2.1(a) shall be
immediately due and payable. Borrower may prepay any Advances without penalty or
premium.
(ii) 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(a) to
Borrower's deposit account.
(b) TERM ADVANCES. As of the Closing Date, there are outstanding
term advances (the "Term Advances") in an aggregate principal amount equal to
$174,745 under the Original Agreement. Borrower shall not request nor receive
any further Term Advances. Interest shall continue to accrue on the Term
Advances at the rate specified in Section 2.3. Borrower shall continue to make
monthly payments on the Term Advances in the principal amount of $21,843.15,
plus all accrued interest, on the first day of each month through the Term
Maturity Date, at which time all Term Advances shall be immediately due and
payable. Term Advances, once repaid, may not be reborrowed. Borrower may prepay
any Term Advances without penalty or premium.
(c) LETTERS OF CREDIT.
(i) Subject to the terms and conditions of this Agreement,
at any time prior to the Revolving Maturity Date, Bank agrees to issue or cause
to be issued letters of credit for the account of Borrower (each, a "Letter of
Credit" and collectively, the "Letters of Credit") in an aggregate outstanding
face amount not to exceed the Revolving Line minus the aggregate amount of the
outstanding Advances at any time, provided (i) that the aggregate face amount of
all outstanding Letters of Credit shall not exceed $400,000 and (ii) that at any
time the aggregate amount of the outstanding Advances plus the aggregate undrawn
face amount of all outstanding Letters of Credit is in excess of $400,000, the
aggregate amount of the outstanding Advances plus the aggregate undrawn face
amount of all outstanding Letters of Credit shall not exceed the Borrowing Base.
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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 (the "Application"),
which Borrower hereby agrees to execute, including Bank's standard fee equal to
1.0% per annum of the face amount of each Letter of Credit. On any drawn but
unreimbursed Letter of Credit, the unreimbursed amount shall be deemed an
Advance under Section 2.1(a). Prior to the Revolving Maturity Date, Borrower
shall secure in cash all obligations under any outstanding Letters of Credit on
terms acceptable to Bank.
(ii) The obligation of Borrower to 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, the Application, and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend, protect, and hold
Bank harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit, except for expenses caused by Bank's gross negligence or
willful misconduct.
(d) Equipment Advances. As of the Closing Date, there are
outstanding equipment advances (the "Equipment Advances") in an aggregate
principal amount equal to $132,658 under the Original Agreement. Borrower shall
not request nor receive any further Equipment Advances. Interest shall continue
to accrue on the Equipment Advances at the rate specified in Section 2.3.
Borrower shall continue to make monthly payments on the Equipment Advances in
the principal amount of $8,229, plus all accrued interest, on the first day of
each month through the Equipment Maturity Date, at which time all Equipment
Advances shall be immediately due and payable. Equipment Advances, once repaid,
may not be reborrowed. Borrower may prepay any Equipment Advances without
penalty or premium.
2.2 OVERADVANCES. If the aggregate amount of the outstanding
Advances plus the aggregate undrawn face amount of all outstanding Letters of
Credit is greater than $400,000 and exceeds the lesser of the Revolving Line or
the Borrowing Base at any time, Borrower shall immediately pay to Bank, in cash,
the amount of such excess or cash secure such excess in a manner satisfactory to
Bank.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATES.
(i) ADVANCES. Except as set forth in Section 2.3(b), the
Advances shall bear interest, on the outstanding Daily Balance thereof, at a
rate equal to one and one half percent (1.5%) above the Prime Rate.
(ii) TERM ADVANCES. Except as set forth in Section 2.3(b),
the Term Advances shall bear interest, on the outstanding Daily Balance thereof,
at a rate equal to one half percent (0.50%) above the Prime Rate.
(iii) EQUIPMENT ADVANCES. Except as set forth in Section
2.3(b), the Equipment Advances shall bear interest, on the outstanding Daily
Balance thereof, at a rate equal to one percent (1.00%) above the Prime Rate.
(b) LATE FEE; DEFAULT RATE. If any payment is not made within
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) PAYMENTS. Interest hereunder shall be due and payable on the
first (1st) calendar day of each month during the term hereof. Bank shall, at
its option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
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interest at the rate then applicable hereunder. All payments shall be free and
clear of any taxes, withholdings, duties, impositions or other charges, to the
end that Bank will receive the entire amount of any Obligations payable
hereunder, regardless of source of payment.
(d) COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon 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. On the Closing Date and on each anniversary of
the Closing Date, a Facility Fee equal to Twelve Thousand Five Hundred Thousand
Dollars ($12,500), which shall be nonrefundable and which Bank shall charge
against any of Borrower's deposit accounts; and
(b) BANK EXPENSES. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses and, after the Closing Date, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, 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 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. 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.
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2.7 TERM. This Agreement shall become effective on the Closing
Date and, subject to Section 12.7, shall continue in full force and effect for
so long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, 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
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(d) 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;
(b) receipt by Bank of (i) 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, (ii) a company
prepared consolidated balance sheet, income, and cash flow statement covering
Borrower's operations for the month ended immediately prior to the date on which
the applicable Credit Extension is requested, prepared in accordance with GAAP
on a consolidated and consolidating basis, consistently applied, in a form
acceptable to Bank and certified by a Responsible Officer, and (iii) a current
Compliance Certificate signed by a Responsible Officer in substantially the form
of EXHIBIT D hereto; and
(c) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment 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.
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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 Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
the perfection of Bank's security interests 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 but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary
is a corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any material agreement to which it is a party or by which it is bound.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and marketable title to
its property, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations. The property and services giving rise to such Eligible
Accounts has been delivered or rendered to the account debtor or to the account
debtor's agent for immediate and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is 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, except
for Inventory for which adequate reserves have been made.
5.6 INTELLECTUAL PROPERTY COLLATERAL. Borrower is the sole owner of
the Intellectual Property Collateral, except for non-exclusive licenses granted
by Borrower to its customers in the ordinary course of business. 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 as set forth in the Schedule,
Borrower's rights as a licensee of intellectual property do not give rise to
more than five percent (5%) of its gross revenue in any given month, including
without limitation revenue derived from the sale, licensing, rendering or
disposition of any product or service. Except as set forth in the Schedule,
Borrower is not a party to, or bound by, any agreement that restricts the grant
by Borrower of a security interest in Borrower's rights under such agreement.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof. All Borrower's
Inventory and Equipment is located only at the location set forth in Section 10
hereof and Borrower has paid for and owns all Equipment financed by Bank
hereunder.
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5.8 LITIGATION. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect, or 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 and consolidating financial statements related to Borrower and any
Subsidiary that Bank has received from Borrower fairly present in all material
respects Borrower's financial condition as of the date thereof and Borrower's
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.
5.10 SOLVENCY, PAYMENT OF DEBTS. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA, and no event has occurred resulting from Borrower's
failure to comply with ERISA that could result in Borrower's incurring any
material liability. Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and U
of the Board of Governors of the Federal Reserve System). Borrower has complied
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. Except as disclosed in the Schedule,
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 releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary have filed or caused to be
filed all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein.
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 have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could have a Material Adverse Effect. 5.16 ACCOUNTS.
None of Borrower's nor any Subsidiary's property is maintained or invested with
a Person other than Bank.
5.17 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.
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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 each jurisdiction in which it is
required under applicable law. Borrower shall maintain, and shall cause each of
its Subsidiaries to maintain, in force 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.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver the following to Bank: (a) as soon as available, but in any event within
forty five (45) days after the end of each quarter, a company prepared
consolidated balance sheet, income, and cash flow statement covering Borrower's
operations during such period, prepared in accordance with GAAP on a
consolidated and consolidating basis, consistently applied, in a form acceptable
to Bank and certified by a Responsible Officer (in the alternative, Borrower
shall deliver such financial information on a monthly basis within twenty (20)
days after the end of each month for any month in which the aggregate amount of
the outstanding Advances plus the aggregate undrawn face amount of all
outstanding Letters of Credit exceeded $400,000 at any time); (b) as soon as
available, but in any event within ninety (90) days after the end of Borrower's
fiscal year, audited consolidated and consolidating 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) 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
Forms 10-K and 10-Q filed with the Securities and Exchange Commission (to the
extent their delivery is not already required pursuant to subsections (a) and
(b) above); (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 Fifty Thousand
Dollars ($50,000) or more; (e) such budgets, sales projections, operating plans
or other financial information as Bank may reasonably request from time to time
generally prepared by Borrower in the ordinary course of business; and (f)
within forty five (45) days of the last day of each fiscal quarter, a report
signed by Borrower, in form reasonably acceptable to Bank, listing any
applications or registrations that Borrower has made or filed in respect of any
Patents, Copyrights or Trademarks and the status of any outstanding applications
or registrations, as well as any material change in Borrower's intellectual
property, including but not limited to any subsequent ownership right of
Borrower in or to any Trademark, Patent or Copyright not specified in EXHIBITS
A, B, and C of the Intellectual Property Security Agreement delivered to Bank by
Borrower in connection with this Agreement.
Within fifteen (15) days after the last day of each month in which the
aggregate amount of the outstanding Advances plus the aggregate undrawn face
amount of all outstanding Letters of Credit exceeds $400,000 at any time,
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.
Borrower shall deliver to Bank with the quarterly and (if required)
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 and appraise Collateral at Borrower's expense, provided that such
audits will be conducted no more often than every six (6) months unless an Event
of Default has occurred and is continuing.
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6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist 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 Dollars
($50,000).
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 contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
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 business, 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 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 twenty
(20) days notice to Bank before canceling its policy for any reason. Upon 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 ACCOUNTS. Borrower shall maintain and shall cause each of its
Subsidiaries to maintain its primary depository, operating, and investment
accounts with Bank and/or Comerica Securities, Inc.
6.8 MAXIMUM LOSSES. Borrower shall not show a loss (measured on a
consolidated basis in accordance with GAAP) in excess of the following amounts
for any of the corresponding quarters:
---------------------------------- -------------------------
QUARTER ENDING MAXIMUM LOSS
---------------------------------- -------------------------
March 31, 2003 ($1,250,000)
June 30, 2003 ($750,000)
September 30, 2003 ($250,000)
---------------------------------- -------------------------
Borrower shall show a profit of at least One Dollar ($1.00) for the quarter
ending December 31, 2003 and for each quarter thereafter.
6.9 TANGIBLE NET WORTH. On a consolidated basis, Borrower shall
maintain a Tangible Net Worth of at least $2,250,000, provided that such
required amount shall increase by 50% of Borrower's net income after taxes in
each quarter after the Closing Date and by 75% of any proceeds received by
14
Borrower from the sale or issuance of its equity or debt securities after the
Closing Date. This covenant shall be measured as of the last day of each
quarter, provided that, at any time that the aggregate amount of the outstanding
Advances plus the aggregate undrawn face amount of all outstanding Letters of
Credit is in excess of $400,000, this covenant shall be measured as of the last
day of each month.
6.10 MINIMUM CASH BALANCE. Borrower shall maintain at all times a
balance of unrestricted cash held in the United States of at least (i)
$4,500,000 PLUS (ii) the aggregate amount of all outstanding Advances.
6.11 INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as the case may be, those
registerable intellectual property rights now owned or hereafter developed or
acquired by Borrower, to the extent that Borrower, in its reasonable business
judgment, deems it appropriate to so protect such intellectual property rights.
(b) Borrower shall promptly give Bank written notice of any
applications or registrations of intellectual property rights filed with the
United States Patent and Trademark Office, including the date of such filing and
the registration or application numbers, if any. Borrower shall (i) give Bank
not less than 30 days prior written notice of the filing of any applications or
registrations with the United States Copyright Office, including the title of
such intellectual property rights to be registered, as such title will appear on
such applications or registrations, and the date such applications or
registrations will be filed, and (ii) prior to the filing of any such
applications or registrations, shall execute such documents as Bank may
reasonably request for Bank to maintain its perfection in such intellectual
property rights to be registered by Borrower, and upon the request of Bank,
shall file such documents simultaneously with the filing of any such
applications or registrations. Upon filing any such applications or
registrations with the United States Copyright Office, Borrower shall promptly
provide Bank with (i) a copy of such applications or registrations, without the
exhibits, if any, thereto, (ii) evidence of the filing of any documents
requested by Bank to be filed for Bank to maintain the perfection and priority
of its security interest in such intellectual property rights, and (iii) the
date of such filing.
(c) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect and maintain the priority of Bank's security interest in the
Intellectual Property Collateral. Borrower shall (i) protect, defend and
maintain the validity and enforceability of the trade secrets, Trademarks,
Patents and Copyrights, (ii) use commercially reasonable efforts to detect
infringements of the Trademarks, Patents and Copyrights and promptly advise Bank
in writing of material infringements detected and (iii) not allow any material
Trademarks, Patents or Copyrights to be abandoned, forfeited or dedicated to the
public without the written consent of Bank, which shall not be unreasonably
withheld.
(d) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section, provided such audit may not occur more
often than twice per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after 15 days' notice to
Borrower. Borrower shall reimburse and indemnify Bank for all reasonable costs
and reasonable expenses incurred in the reasonable exercise of its rights under
this Section.
6.12 FURTHER ASSURANCES. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
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,
15
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (iii) Transfers of worn-out
or obsolete Equipment which was not financed by Bank.
7.2 CHANGE IN BUSINESS; CHANGE IN CONTROL OR EXECUTIVE OFFICE.
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
cease to conduct business in the manner conducted by Borrower as of the Closing
Date; or suffer or permit a Change in Control; or without thirty (30) days prior
written notification to Bank, relocate its chief executive office or state of
incorporation; or without Bank's prior written consent, change the date on which
its fiscal year ends.
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.
Notwithstanding the foregoing, this Section 7.3 shall not apply to acquisitions
in which the sole consideration is Borrower's stock or cash (provided that the
aggregate amount of all cash used by Borrower for acquisitions shall not exceed
$1,000,000 in the aggregate during the terms of the Original Agreement and this
Agreement), Borrower is the surviving entity, and, after giving effect to such
transaction, there is no Change in Control, provided that (i) the acquired
entity is in a line of business directly related to Borrower's line of business
and (ii) at the time of any such transaction an Event of Default has not
occurred which is continuing and no Event of Default would exist after giving
effect to any such transaction.
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. Agree with any Person other
than Bank not to grant a security interest in, or otherwise encumber, any of its
property, or permit any Subsidiary to do so.
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 (other than distributions payable solely in Borrower's equity securities),
or permit any of its Subsidiaries to do so, except that Borrower may repurchase
the stock of former employees pursuant to stock repurchase agreements as long as
an Event of Default does not exist prior to such repurchase or would not exist
after giving effect to such repurchase.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments; or maintain or invest any of its property with
a Person other than Bank or permit any of its Subsidiaries to do so unless such
Person has entered into an account control agreement in form and substance
satisfactory to Bank; or suffer or permit any Subsidiary to be a party to, or be
bound by, an agreement that restricts such Subsidiary from paying dividends or
otherwise distributing property to Borrower. Allow any money or other assets
with an aggregate value of more than $1,000,000 to be conveyed or transferred to
another entity or other entities (including a Subsidiary) by any means,
including without limitation in the form of an Investment, an Account, a loan, a
guaranty of the Indebtedness of another, a pledge of assets in supports of the
obligations of another, an advance for operational purposes and/or otherwise,
during the term of this Agreement.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
7.9 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
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7.10 INVENTORY AND EQUIPMENT. Store the Inventory or the Equipment
with a bailee, warehouseman, or other third party unless the third party has
been notified of Bank's security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank's benefit or (b) is in pledge possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment. Store
or maintain any Equipment or Inventory at a location other than the location set
forth in Section 10 of this Agreement.
7.11 COMPLIANCE. Become an "investment company" or be controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. 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 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.
7.12 NEGATIVE PLEDGE AGREEMENTS. Permit the inclusion in any
contract to which it or a Subsidiary becomes a party of any provisions that
could restrict or invalidate the creation of a security interest in any of
Borrower's or such Subsidiary's property.
7.13 CAPITAL EXPENDITURES. On a consolidated basis, Borrower's
capital expenditures and payments on equipment leases (including all purchase
money transactions) shall not exceed $2,000,000 in any given year.
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, when due, any of the
Obligations;
8.2 COVENANT DEFAULT. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or 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 Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the 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 Credit Extensions will be required to be made
during such cure period);
8.3 MATERIAL ADVERSE EFFECT. If there occurs any circumstance or
circumstances that could have a Material Adverse Effect;
8.4 ATTACHMENT. If any 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 ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
17
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be 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 thirty (30) 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 or other failure to
perform in any agreement to which Borrower is a party or by which it is bound
resulting in a right by a third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of Fifty
Thousand Dollars ($50,000); or which 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 Fifty Thousand
Dollars ($50,000) 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); or
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 delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5, 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) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
18
(e) 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;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Dispose of the Collateral by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Bank determines is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (g)
to 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) to transfer the
Intellectual Property Collateral into the name of Bank or a third party to the
extent permitted under the California Uniform Commercial Code; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred, including without limitation to modify, in its sole discretion, any
intellectual property security agreement entered into between Borrower and Bank
without first obtaining Borrower's approval of or signature to such modification
by amending Exhibits A, B, and C, thereof, as appropriate, to include reference
to any right, title or interest in any Copyrights, Patents or Trademarks
acquired by Borrower after the execution hereof or to delete any reference to
any right, title or interest in any Copyrights, Patents or Trademarks in which
Borrower no longer has or claims to have any right, title or interest. 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 Credit Extensions hereunder is terminated.
9.3 ACCOUNTS COLLECTION. At any time during the term of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under a loan facility in Section 2.1 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
19
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 inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
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, 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, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: PERSISTENCE SOFTWARE, INC.
0000 Xxxxx Xxxxxxxx Xxxxxxxxx 0xx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxxxxxxx Xxxxxxx
If to Bank: Comerica Bank-California
0000 X. Xx Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Manager
FAX: (000) 000-0000
with a copy to: Comerica Bank-California
000 Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxx Xxxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
20
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BORROWER AND BANK 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.
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 defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
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.
12.5 AMENDMENTS IN WRITING, INTEGRATION. Neither this Agreement nor
the Loan Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, 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 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement is intended
to and does completely amend and restate, without novation, the Original
Agreement. All security interests granted under the Original Agreement are
hereby confirmed and ratified and shall continue to secure all Obligations under
this Agreement.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PERSISTENCE SOFTWARE, INC.
By: /s/ Xxxxxxxxx Xxxxxxx
Title: Chief Financial Officer
COMERICA BANK - CALIFORNIA
By: /s/ Xxx Xxxxxxx
Title: Assistant Vice President
22
DEBTOR PERSISTENCE SOFTWARE, INC.
SECURED PARTY: COMERICA BANK - CALIFORNIA
EXHIBIT A
---------
COLLATERAL DESCRIPTION ATTACHMENT
TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance
receivables), chattel paper (including tangible and electronic chattel paper),
deposit accounts, documents (including negotiable documents), equipment
(including all accessions and additions thereto), general intangibles (including
payment intangibles and software), goods (including fixtures), instruments
(including promissory notes), inventory (including all goods held for sale or
lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the forgoing, or any parts thereof
or any underlying or component elements of any of the forgoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to xxx in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;
(c) all trademarks, service marks, trade names and service
names and the goodwill associated therewith, together with the right to
trademark and all rights to renew or extend such trademarks and the right (but
not the obligation) of Secured Party to xxx in its own name and/or in the name
of the Debtor for past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the
United States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to xxx in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any
of the foregoing, including, without limitation, insurance proceeds, and all
supporting obligations and the security therefor or for any right to payment.
All terms above have the meanings given to them in the California Uniform
Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions, added by Stats.
1999, c.991 (S.B. 45), Section 35, operative July 1, 2001.
23
EXHIBIT B
---------
TECHNOLOGY & LIFE SCIENCES DIVISION
LOAN ANALYSIS
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00* P.M., P.S.T.
DEADLINE FOR EQUIPMENT ADVANCES IS 3:00 P.M., P.S.T. **
DEADLINE FOR WIRE TRANSFERS IS 1:30 P.M., P.S.T.
*AT MONTH END AND THE DAY BEFORE A HOLIDAY, THE CUT OFF TIME
IS 1:30 P.M., P.S.T.
**SUBJECT TO 3 DAY ADVANCE NOTICE.
TO: Loan Analysis DATE:____________ TIME:_____________
FAX #: (000) 000-0000
====================================================================================================================
FROM: PERSISTENCE SOFTWARE, INC. TELEPHONE REQUEST (For Bank Use Only):
Borrower's Name
The following person is authorized to request the loan payment
transfer/loan advance on the designated account and is known to me.
FROM: _______________________________
Authorized Signer's Name
FROM: _______________________________ ________________________________________
Authorized Signature (Borrower) Authorized Request & Phone #
PHONE #: ____________________________ ________________________________________
Received by (Bank) & Phone #
FROM ACCOUNT#: ______________________
(please include Note number, if applicable) ________________________________________
TO ACCOUNT #: _______________________ Authorized Signature (Bank)
(please include Note number, if applicable)
====================================================================================================================
====================================================================================================================
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT For Bank Use Only
-------------------------- -----------------------
PRINCIPAL INCREASE* (ADVANCE) $_______________________ Date Rec'd:
PRINCIPAL PAYMENT (ONLY) $_______________________ Time:
Comp. Status: YES NO
Status Date:
OTHER INSTRUCTIONS: Time:
___________________________________________________________________ Approval:
___________________________________________________________________
====================================================================================================================
All representations and warranties of Borrower stated in the Loan Agreement are true, correct and complete in all
material respects as of the date of the telephone request for and advance confirmed by this Borrowing Certificate,
including without limitation the representation that Borrower has paid for and owns the equipment financed by the
Bank; provided, however, that those representations and warranties the date expressly referring to another date
shall be true, correct and complete in all material respects as of such date.
*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE) YES NO
If YES, the Outgoing Wire Transfer Instructions must be completed below.
====================================================================================================================
OUTGOING WIRE TRANSFER INSTRUCTIONS Fed Reference Number Bank Transfer Number
---------------------------------------------------------
THE ITEMS MARKED WITH AN ASTERISK (*) ARE REQUIRED TO BE COMPLETED.
--------------------------------------------------------------------------------------------------------------------
*Beneficiary Name
--------------------------------------------------------------------------------------------------------------------
*Beneficiary Account Number
--------------------------------------------------------------------------------------------------------------------
*Beneficiary Address
--------------------------------------------------------------------------------------------------------------------
Currency Type US DOLLARS ONLY
--------------------------------------------------------------------------------------------------------------------
*ABA Routing Number (9 Digits)
--------------------------------------------------------------------------------------------------------------------
*Receiving Institution Name
--------------------------------------------------------------------------------------------------------------------
*Receiving Institution Address
--------------------------------------------------------------------------------------------------------------------
*Wire Account $
====================================================================================================================
24
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------------------------------------------
Borrower: PERSISTENCE SOFTWARE, INC. Lender: Comerica Bank-California
Commitment Amount: $2,500,000
--------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $___________
5. Balance of 25% over 90 day accounts $___________
6. Concentration Limits $___________
7. Foreign Accounts $___________
8. Governmental Accounts $___________
9. Contra Accounts $___________
10. Demo Accounts $___________
11. Intercompany/Employee Accounts $___________
12. Other (please explain on reverse) $___________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
14. Eligible Accounts (#3 minus #13) $___________
15. LOAN VALUE OF ACCOUNTS (greater of $400,000 or 70% of #14) $___________
BALANCES
16. Maximum Loan Amount $___________
17. Total Funds Available [Lesser of #16 or #15] $___________
18. Present balance owing on Line of Credit $___________
19. Outstanding under Sublimits (Letters of Credit) $___________
20. RESERVE POSITION (#17 minus #18 and #19) $___________
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND CORRECT, AND THAT THE INFORMATION
REFLECTED IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN
AND SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND COMERICA BANK-CALIFORNIA.
PERSISTENCE SOFTWARE, INC.
By:
-------------------------------------
Authorized Signer
25
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: COMERICA BANK - CALIFORNIA
FROM: PERSISTENCE SOFTWARE, INC.
The undersigned authorized officer of PERSISTENCE SOFTWARE, INC. hereby certifies that in accordance with
the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are
true and correct as of the date hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Financial statements Quarterly within 45 days (monthly w/in 20 Yes No
days if Line exposure > $400,000)
Annual (CPA Audited) FYE within 90 days Yes No
10K and 10Q When filed Yes No
A/R Audit Semi-Annual Yes No
A/R & A/P Agings, Borrowing Base Cert. Monthly within 15 days if Line exposure > Yes No
$400,000
IP Report Quarterly within 45 days Yes No
Total amount of Borrower's cash and investments Amount: $________ Yes No
Total amount of Borrower's cash and investments Amount: $________ Yes No
maintained with Bank
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly / Monthly* Basis:
Maximum Loss ** _____:1.00 Yes No
Minimum Tangible Net Worth $2,250,000 increased by $________ Yes No
50% of Borrower's
quarterly net income
after taxes and by 75%
of any equity proceeds
Minimum Unrestricted Cash Balance $4,500,000 plus amount $_________ Yes No
of outstanding Advances
* These covenants shall be measured as of the last day of each quarter, provided that, at any time that the
aggregate amount of the outstanding Advances plus the aggregate undrawn face amount of all outstanding
Letters of Credit is in excess of $400,000, this covenant shall be measured as of the last day of each
month.
** Borrower shall not show a loss (measured in accordance with GAAP) in excess of the following amounts for
any of the corresponding quarters: March 31, 2003 ($1,250,000); June 30, 2003 ($750,000); September 30,
2003 ($250,000). Borrower shall show a profit of at least One Dollar ($1.00) for the quarter ending
December 31, 2003 and for each quarter thereafter.
COMMENTS REGARDING EXCEPTIONS: See Attached.
BANK USE ONLY
Received by: ________________________________________
Sincerely, AUTHORIZED SIGNER
Date: _______________________________________________
_________________________________________________ Verified: ___________________________________________
SIGNATURE AUTHORIZED SIGNER
_________________________________________________ Date:________________________________________________
TITLE
Compliance Status Yes No
_________________________________________________
DATE
26
SCHEDULE OF EXCEPTIONS
----------------------
PERMITTED INDEBTEDNESS (Section 1.1)
----------------------
None.
PERMITTED INVESTMENTS (Section 1.1)
---------------------
None.
PERMITTED LIENS (Section 1.1)
---------------
None.
PRIOR NAMES (Section 5.7)
-----------
None.
LITIGATION (Section 5.8)
----------
None.
27
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
BORROWER: PERSISTENCE SOFTWARE, INC.
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of PERSISTENCE
SOFTWARE, INC. (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation, as amended, and the
Restated Bylaws of the Corporation, each of which is in full force and effect on
the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITION ACTUAL SIGNATURES
----- -------- -----------------
______________________ __________________________ _________________________
______________________ __________________________ _________________________
______________________ __________________________ _________________________
______________________ __________________________ _________________________
acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from COMERICA BANK -
CALIFORNIA ("Bank"), on such terms as may be agreed upon between the officers,
employees, or agents of the Corporation and Bank, such sum or sums of money as
in their judgment should be borrowed, without limitation.
EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank that certain
Amended and Restated Loan and Security Agreement dated as of March 20, 2003 (the
"Loan Agreement") and any other agreement entered into between Corporation and
Bank in connection with the Loan Agreement, including any amendments, all as
amended or extended from time to time (collectively, with the Loan Agreement,
the "Loan Documents"), and also to execute and deliver to Bank one or more
renewals, extensions, modifications, refinancings, consolidations, or
substitutions for the Loan Documents, or any portion thereof.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Documents, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Documents.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on March 20, 2003 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED AND ATTESTED BY:
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