EXHIBIT 10.1
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
LOUDEYE CORP.
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CONTENTS
1 ACCOUNTING AND OTHER TERM.....................................................1
2 LOAN AND TERMS OF PAYMENT.....................................................2
2.1 Promise to Pay.........................................................2
2.1.1 Term Loan.......................................................2
2.1.2 Guidance Line Facility..........................................2
2.1.3 Committed Equipment Line........................................3
2.2 Fees...................................................................4
3 CONDITIONS OF LOANS...........................................................5
3.1 Conditions Precedent to Initial Credit Extension.......................5
3.2 Conditions Precedent to all Credit Extensions..........................5
4 CREATION OF SECURITY INTEREST.................................................5
4.1 Grant of Security Interest.............................................5
4.2 Authorization to File..................................................5
5 REPRESENTATIONS AND WARRANTIES................................................5
5.1 Due Organization and Authorization.....................................6
5.2 Collateral.............................................................6
5.3 Litigation.............................................................6
5.4 No Material Adverse Change in Financial Statements.....................6
5.5 Solvency...............................................................7
5.6 Regulatory Compliance..................................................7
5.7 Subsidiaries...........................................................7
5.8 Full Disclosure........................................................7
6 AFFIRMATIVE COVENANTS.........................................................7
6.1 Government Compliance..................................................8
6.2 Financial Statements, Reports, Certificates............................8
6.3 Inventory; Returns.....................................................8
6.4 Taxes..................................................................8
6.5 Insurance..............................................................9
6.6 Primary Accounts.......................................................9
6.7 Financial Covenants....................................................9
6.8 Registration of Intellectual Property Rights...........................9
6.9 Further Assurances....................................................10
7 NEGATIVE COVENANTS...........................................................10
7.1 Dispositions..........................................................10
7.2 Changes in Business, Ownership or Business Locations..................10
7.3 Mergers or Acquisitions...............................................11
7.4 Indebtedness..........................................................11
7.5 Encumbrance...........................................................11
7.6 Distributions; Investments............................................11
7.7 Transactions with Affiliates..........................................11
7.8 Subordinated Debt.....................................................11
7.9 Compliance............................................................11
8 EVENTS OF DEFAULT............................................................12
8.1 Payment Default.......................................................12
8.2 Covenant Default......................................................12
8.3 Material Adverse Change...............................................12
8.4 Attachment............................................................12
8.5 Insolvency............................................................13
8.6 Other Agreements......................................................13
8.7 Judgments.............................................................13
8.8 Misrepresentations....................................................13
8.9 Guaranty..............................................................13
8.10 Third Party Obligor...................................................13
9 BANK'S RIGHTS AND REMEDIES...................................................14
9.1 Rights and Remedies...................................................14
9.2 Power of Attorney.....................................................14
9.3 Accounts Collection...................................................15
9.4 Bank Expenses.........................................................15
9.5 Bank's Liability for Collateral.......................................15
9.6 Remedies Cumulative...................................................15
9.7 Demand Waiver.........................................................15
10 NOTICES......................................................................16
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER...................................16
12 GENERAL PROVISIONS...........................................................16
12.1 Successors and Assigns................................................16
12.2 Indemnification.......................................................16
12.3 Time of Essence.......................................................16
12.4 Severability of Provision.............................................16
12.5 Amendments in Writing, Integration....................................17
12.6 Counterparts..........................................................17
12.7 Survival..............................................................17
12.8 Confidentiality.......................................................17
12.9 Attorneys' Fees, Costs and Expenses...................................17
13 DEFINITIONS..................................................................17
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated the
Effective Date, between SILICON VALLEY BANK ("Bank"), a California-chartered
bank with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 and with a loan production office located at 0000 Xxxxxxxx
Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, with a telefacsimile number of (000) 000-0000
and LOUDEYE CORP. ("Borrower"), whose address is 0000 Xxxxxxx Xxxxxx Xxxxx,
Xxxxxxx, XX 00000, with a telefacsimile number of (000) 000-0000 provides the
terms on which Bank will lend to Borrower and Borrower will repay Bank. The
parties agree as follows:
RECITALS
A. Bank and Borrower are parties to that certain Loan and Security
Agreement dated December 31, 2003 (as amended and together with all schedules
made a part thereof, the "Original Agreement"), pursuant to which Bank extended
to Borrower a term loan in the original principal amount of $3,000,000 ("Term
Loan") and a $750,000 guidance line facility (which has terminated in accordance
with its terms).
B. Borrower has requested Bank to extend a new equipment term loan
facility in the amount of $2,500,000 and a new guidance line facility in the
amount of $1,500,000.
C. Bank and Borrower desire in this Agreement (1) to amend and
restate the Original Agreement in accordance with the provisions herein and (2)
to set forth their agreement with respect to the credit facilities described
herein.
1 ACCOUNTING AND OTHER TERM
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Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
This Agreement amends and restates in its entirety the Original
Agreement; provided, however, that nothing contained herein is intended to amend
or impair any other agreement, instrument, statement, or certificate delivered
in connection with the Original Agreement or the effect or efficacy thereof. All
Loan Documents executed in connection with the Original Agreement shall remain
in full force and effect and all references therein to "Loan and Security
Agreement" shall henceforth refer to this Agreement. The parties acknowledge and
agree that all security agreements, pledge agreements, financing statements, and
other Loan Documents executed in connection with the Original Agreement
creating, evidencing or perfecting Bank's security interests in and liens
against the Collateral, shall remain in full force and effect and shall secure
all of Borrower's Obligations, as such Obligations may be amended or restated in
this Agreement. Borrower agrees to execute such amendments to any such Loan
Documents, or such amended and restated security agreements, as are deemed
necessary by Bank to reflect the terms of this Agreement.
2 LOAN AND TERMS OF PAYMENT
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2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 TERM LOAN.
(a) Term Loan. Bank made the Term Loan pursuant to the terms and
conditions of the Original Agreement. The interest rate and repayment terms of
the Term Loan are set forth in Section 2.3.3 hereof. When repaid, the Term Loan
may not be reborrowed. As of the Effective Date, the outstanding principal
balance of the Term Loan is $1,750,000.05.
(b) Interest Rate. The Term Loan accrues interest on the outstanding
principal balance at a per annum rate of 0.5 percentage point(s) above the Prime
Rate. After an Event of Default, Obligations accrue interest at 5 percent above
the rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(c) Payments. On January 1, 2004, Borrower will pay Bank an amount
equal to all accrued interest on the Term Loan. Commencing on February 1, 2004,
Borrower will pay 36 equal monthly installments of principal of $83,333.33 plus
accrued interest (the "Term Loan Payment"). Each Term Loan Payment is payable on
the 1st of each month during the term of the loan. Borrower's final Term Loan
Payment, due on the Term Loan Maturity Date, includes all outstanding Term Loan
principal and accrued interest. Bank may debit any of Borrower's deposit
accounts including Account Number 3300398140 for Term Loan Payments or any
amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits
Borrower's accounts. These debits are not a set-off. Payments received after
12:00 noon Pacific time are considered received at the opening of business on
the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
(d) Prepayment. Borrower may not prepay all or any portion of the
Term Loan prior to December 31, 2004 unless concurrently with such prepayment
Borrower pays Bank an amount equal to 2 percent of the prepaid portion of the
Term Loan. Borrower shall provide 3 Business Days' written notice to Bank prior
to any such prepayment. All prepayments shall be applied first to accrued
interest on the Term Loan and then to the outstanding principal balance of the
Term Loan in the inverse order of maturity.
2.1.2 GUIDANCE LINE FACILITY
Through the date that is 364 days after the Effective Date, (the
"Guidance Line Maturity Date"), Borrower may use up to $1,500,000 (the "Guidance
Line Facility") for the support of existing or the issuance of new standby
letters of credit (the "Letters of Credit") and for Bank's cash management
services, which may include merchant services, direct deposit of payroll,
business credit card, and check cashing services identified in various cash
management services agreements related to such services (the "Cash Management
Services"). Each Letter of Credit will have an expiry date of no later than 270
days after the Guidance Line Maturity Date, but Borrower's reimbursement
obligation will be secured by cash on terms acceptable to Bank at any time after
the Guidance Line Maturity Date. Any other Obligations outstanding under the
Guidance Line Facility will be immediately due and payable on the Guidance Line
Maturity Date. Borrower agrees to execute any further documentation in
connection with the Letters of Credit and Cash Management Services as Bank may
reasonably request. Borrower acknowledges that the guidance line facility
provided under the Original Agreement has terminated.
2.1.3 COMMITTED EQUIPMENT LINE.
(a) Equipment Advances. Subject to the terms and conditions of this
Agreement, Bank agrees to lend to Borrower, from time to time prior to the
Equipment Availability End Date, equipment advances (each an "Equipment Advance"
and collectively the "Equipment Advances") in an aggregate amount not to exceed
the Committed Equipment Line. When repaid, the Equipment Advances may not be
re-borrowed. The proceeds of the Equipment Advances will be used solely to
reimburse Borrower for the purchase of Eligible Equipment purchased within 120
days of the Funding Date for such Equipment Advance. Each Equipment Advance
shall be considered a promissory note evidencing the amounts due hereunder for
all purposes. Bank's obligation to lend under this Section 2.1.3 shall terminate
on the earlier of (i) the occurrence and continuance of an Event of Default, or
(ii) the Equipment Availability End Date. For purposes of this Section, the
minimum amount of each Equipment Advance is $250,000. Bank's obligation to lend
the undisbursed portion of the Committed Equipment Line will terminate if, in
Bank's sole discretion, there has been a material adverse change in the general
affairs, management, results of operation, condition (financial or otherwise) or
the prospects of Borrower, whether or not arising from transactions in the
ordinary course of business, or there has been any material adverse deviation by
Borrower from the most recent business plan of Borrower presented to and
accepted by Bank prior to the execution of this Agreement.
(b) Funding. To obtain an Equipment Advance, Borrower will deliver to
Bank a completed Payment/Advance Form signed by a Responsible Officer or his or
her designee, copies of invoices for the Equipment to be financed with the
proceeds of the Equipment Advance and such additional information as Bank may
request at least five (5) Business Days before the proposed Funding Date. If
Borrower satisfies the conditions of each Equipment Advance specified herein,
Bank will disburse such Equipment Advance by internal transfer to Borrower's
deposit account with Bank. Each Equipment Advance may not exceed 100% of the
Original Stated Cost. Computer software, taxes, shipping charges, training and
installation expenses related to the Eligible Equipment may constitute up to 25%
of the aggregate Equipment Advances through and including such Funding Date.
(d) Interest Rate. Equipment Advances accrue interest from the date
of the Equipment Advance at the per annum rate of interest equal to 0.5
percentage points above the Prime Rate, determined by Bank as of the Funding
Date for each Equipment Advance. After an Event of Default, Obligations accrue
interest at 5 percent above the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Prime Rate changes.
Interest is computed on a 360 day year for
the actual number of days elapsed. If any change in the law increases Bank's
expenses or decreases its return from the Equipment Advances, Borrower will pay
Bank upon request the amount of such increase or decrease.
(e) Payments. With respect to each Equipment Advance, Borrower will
make one payment of accrued interest on the first day of the month following the
applicable Funding Date. Thereafter, Borrower will pay 36 equal installments of
principal plus accrued interest, payable on the first day of each month. All
unpaid principal and accrued interest for each Equipment Advance is due and
payable on the three year anniversary of the first day of the month following
the Funding Date for such Equipment Advance. Bank may debit any of Borrower's
deposit accounts including Account Number 3300398140 for principal and interest
payments or any amounts Borrower owes Bank. Bank will promptly notify Borrower
when it debits Borrower's accounts. These debits are not a set-off. Payments
received after 12:00 noon Pacific time are considered received at the opening of
business on the next Business Day. When a payment is due on a day that is not a
Business Day, the payment is due the next Business Day and additional interest
shall accrue. An Equipment Advance may only be prepaid in accordance with
Sections 2.1.3(f).
(f) Prepayment. Borrower may not prepay all or any portion of an
Equipment Advance prior to the one year anniversary of the Effective Date unless
concurrently with such prepayment Borrower pays Bank an amount equal to 1
percent of the prepaid portion of the Equipment Advance. Borrower shall provide
30 Business Days' written notice to Bank prior to any such prepayment. All
prepayments shall be applied first to accrued interest on the Equipment Advance
and then to the outstanding principal balance of the Equipment Advance in the
inverse order of maturity. On and after the one year anniversary of the
Effective Date, Borrower shall have the option to prepay all, but not less than
all, of the outstanding principal balance of such Equipment Advance, provided
Borrower provides written notice to Bank of its election to prepay the Equipment
Advance at least thirty (30) days prior to such prepayment, and pays, on the
date of the prepayment all outstanding principal, all unpaid accrued interest to
the date of the prepayment; and all other sums, if any, that shall have become
due and payable hereunder with respect to this Agreement. Borrower shall provide
30 Business Days' written notice to Bank prior to any such prepayment.
2.2 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable facility fee of
$2,500 for the Committed Equipment Line due on the Closing Date; and
(b) Letter of Credit Fee: On the issuance of each Letter of Credit, a
fully earned, non-refundable issuance fee in an amount equal to (i) 1.0 percent
per annum of the face amount of the Letter of Credit plus (ii) Bank's customary
fees and handling charges; and
(c) Cash Management Services Fees: Bank's customary fees related to
Cash Management Services; and
(d) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
3 CONDITIONS OF LOANS
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3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form for Equipment
Advances; and
(b) the representations and warranties in Section 5 must be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default may have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true.
4 CREATION OF SECURITY INTEREST
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4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any certificate of deposit pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
4.2 AUTHORIZATION TO FILE.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral. Borrower hereby
acknowledges and agrees that all UCC financing statements previously filed by
Bank shall remain in full force and effect and secure the Obligations.
5 REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in valid existence
and/or good standing in its state of formation and qualified and licensed to do
business in, and in valid existence and/or good standing in, any state in which
the conduct of its business or its ownership of property requires that it be
qualified, except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. Borrower has not changed its state of formation
or its organizational structure or type or any organizational number (if any)
assigned by its jurisdiction of formation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. Borrower has no other deposit accounts, other than the deposit
accounts described in the Schedule. The Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. The Collateral is not in the possession of any
third party bailee (such as at a warehouse). In the event that Borrower, after
the date hereof, intends to store or otherwise deliver the Collateral to such a
bailee, then Borrower will receive the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such Collateral
for the benefit of Bank. All Inventory is in all material respects of good and
marketable quality, free from material defects. Borrower is the sole owner of
the Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading (it
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results).
6 AFFIRMATIVE COVENANTS
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Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) a prompt 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 $250,000 or
more; (iv) budgets, sales projections, operating plans or other financial
information Bank reasonably requests; and (v) prompt notice of any material
change in the composition of the Intellectual Property, including any subsequent
ownership right of Borrower in or to any Copyright, Patent or Trademark not
shown in any intellectual property security agreement between Borrower and Bank
or knowledge of an event that materially adversely affects the value of the
Intellectual Property.
(b) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit C.
(c) Upon the occurrence and continuation of an Event of Default,
allow Bank to audit Borrower's Collateral at Borrower's expense.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims that involve more than $100,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts standard for Borrower's industry, and as Bank may reasonably request.
Insurance policies will be in a form, with companies, and in amounts that are
satisfactory to Bank in Bank's reasonable discretion. All property policies will
have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least 20 days notice before canceling
its policy. At Bank's request, Borrower will deliver certified copies of
policies and evidence of all premium payments. Proceeds payable under any policy
will, at Bank's option, be payable to Bank on account of the Obligations.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary banking relationship with Bank, which
relationship shall include Borrower maintaining account balances in all
operating and investment accounts at or through Bank representing at least 51%
of all account balances of Borrower.
6.7 FINANCIAL COVENANTS.
(a) Borrower will maintain as of the last day of each month:
(i) QUICK RATIO (ADJUSTED). A Quick Ratio (Adjusted) of at
least 2.25 to 1.00. For purposes of this covenant, "Quick Ratio (Adjusted)" is a
ratio of (A) Quick Assets to (B) the aggregate amount of Borrower's Obligations,
plus the face amount of outstanding Letters of Credit.
(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at least (A)
$15,000,000, through June 30, 2005, $10,000,000 through September 30, 2005, and
$8,000,000 thereafter, plus (B) 100 percent of all net (after fees and expenses)
consideration received for equity securities and Subordinated Debt during the
Relevant Period, plus (C) 50 percent of Borrower's aggregate net income for each
fiscal quarter of Borrower (with no deductions for net losses) during the
Relevant Period. For purposes of this covenant, the term "Relevant Period" means
the period commencing with Borrower's fiscal quarter ending on December 31, 2004
and ending with Borrower's fiscal quarter ending immediately prior to the
measurement date.
(b) If Borrower fails to maintain any of the financial covenants set
forth in Section 6.7(a), Borrower shall, within five business days of such
default, secure the outstanding principal balance of all Credit Extensions with
cash, on terms acceptable to Bank. Compliance with this Section 6.7(b) shall
cure the underlying financial covenant default.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower shall not register any Copyrights or Mask Works with the United
States Copyright Office unless it (i) has given at least three Business Days'
prior notice to Bank of its intent to register such Copyrights or Mask Works and
has provided Bank with a copy of the application it intends to file with the
United States Copyright Office
(excluding exhibits thereto); (ii) executes a security agreement or such other
documents as Bank may reasonably request in order to maintain the perfection and
priority of Bank's security interest in the Copyrights proposed to be registered
with the United States Copyright Office; and (iii) records such security
documents with the United States Copyright Office contemporaneously with filing
the Copyright application(s) with the United States Copyright Office. Borrower
shall promptly provide to Bank a copy of the Copyright application(s) filed with
the United States Copyright Office, together with evidence of the recording of
the security documents necessary for Bank to maintain the perfection and
priority of its security interest in such Copyrights or Mask Works. Borrower
shall provide written notice to Bank of any application filed by Borrower in the
United States Patent and Trademark Office for a patent or to register a
trademark or service xxxx within 30 days of any such filing.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property material
to Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
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Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership of greater than 25% (other
than by the sale of Borrower's equity securities in a public offering). Borrower
will not, without at least 30 days prior written notice, relocate its chief
executive office or add any new offices or business locations in which Borrower
maintains or stores over $25,000 in Borrower's assets or property. Borrower
shall not change the location of any Collateral. Borrower has identified the
location of its fixed assets on the Schedule to this Agreement.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower. Borrower shall not reincorporate, or permit any of
its Subsidiaries to reincorporate.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower or any of the senior executive
officers, directors, or partners of 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 nonaffiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation, if the violation could reasonably be
expected to have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change, or permit
any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
-----------------
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 3 days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under Sections 6.2 or
6.7 or 6.8 or violates any of the covenants contained in Article 7 of this
Agreement; or
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Credit Extensions will be made
during such cure period).
8.3 MATERIAL ADVERSE CHANGE.
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $250,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $100,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied);
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document; or
8.9 GUARANTY.
Any guaranty of any Obligations ceases for any reason to be in full
force or any Guarantor does not perform any obligation under any guaranty of the
Obligations, or any material misrepresentation or material misstatement exists
now or later in any warranty or representation in any guaranty of the
Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to
any Guarantor.
8.10 THIRD PARTY OBLIGOR.
Any Loan Document executed by a Third Party Obligor ceases for any
reason to be in full force or any Third Party Obligor does not perform any
obligation under any Loan Document executed by such Third Party Obligor, or any
material misrepresentation or material misstatement exists now or later in any
warranty or representation in any Loan Document executed by such Third Party
Obligor or in any certificate delivered to Bank in connection with any such Loan
Document, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to
any Third Party Obligor.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
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, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or
the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property 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, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's
name on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and the Code, it is
not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to
the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other person. Borrower
bears all risk of loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, 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 held by Bank on which Borrower is
liable.
10 NOTICES
-------
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
------------------------------------------
Washington law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in King County, Washington.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
------------------
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has 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
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including 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 in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge 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, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
-----------
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including
licensing software and other technology) or provision of services, all credit
insurance, guaranties, other security and all merchandise returned or reclaimed
by Borrower and Borrower's Books relating to any of the foregoing.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.2.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED EQUIPMENT LINE" is a Credit Extension of up to $2,500,000
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Equipment Advance, Letter of Credit, Term
Loan, or any other extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"EFFECTIVE DATE" is the date Bank executes this Agreement.
"ELIGIBLE EQUIPMENT" is general purpose computer equipment, office
equipment, test and laboratory equipment, and furnishings. Notwithstanding the
foregoing, "Eligible Equipment" shall not include any equipment unless and until
Bank holds a first, valid, binding, perfected security interest in any such
equipment. All Equipment financed with the proceeds of Equipment Advances shall
be new; provided that Bank in its sole discretion, may finance used equipment.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.3.
"EQUIPMENT AVAILABILITY END DATE" is October 31, 2005.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"FUNDING DATE" is any date on which an Equipment Advance is made to or
on account of Borrower.
"GAAP" is generally accepted accounting principles.
"GUARANTOR" is any present or future guarantor of the Obligations.
"GUIDANCE LINE FACILITY" is defined in Section 2.1.2.
"GUIDANCE LINE MATURITY DATE" is defined in Section 2.1.2.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in
computer software and computer software products now or later existing, created,
acquired or held;
(c) All design rights which may be available to Borrower now
or later created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to xxx and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is 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 later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, the Third Party
Security Agreement, any note, or notes or guaranties executed by Borrower or any
Third Party Obligor, and any other present or future agreement between Borrower
and/or any Third Party Obligor for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is described in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"ORIGINAL STATED COST" is (i) the original cost to Borrower of the item
of new Eligible Equipment net of any and all freight, installation, and tax, or
(ii) the fair market value assigned to such item of used Eligible Equipment by
mutual agreement of Borrower and Bank at the time of making the Equipment
Advance.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
"PAYAMENT/ADVANCE FORM" is attached as Exhibit B.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a)....Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b)....Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c)....Purchase money Liens (i) on Equipment acquired or held by
Borrower or its Subsidiaries incurred for financing the acquisition of the
Equipment, or (ii) existing on equipment when acquired, if the Lien is confined
to the property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's domestic, unrestricted
cash, cash equivalents, plus 50 percent of net billed accounts receivable and
investments with maturities of fewer than 24 months determined according to
GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TERM LOAN" is a single-advance term loan in an amount equal to
$3,000,000.
"TERM LOAN MATURITY DATE" is January 1, 2007.
"THIRD PARTY OBLIGOR" means any person or entity, other than Borrower,
obligated under any of the Loan Documents,
"THIRD PARTY SECURITY AGREEMENT" means the third party pledge and
security agreement made by Overpeer, Inc. for the benefit of Bank of even date
herewith, as amended, extended or restated.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and the current portion of Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
BORROWER:
LOUDEYE CORP.
By: /s/ Xxx Xxxxxxx
______________________________
Title: CFO and COO
___________________________
Date executed by Borrower: March 30, 2005
BANK:
SILICON VALLEY BANK
By: /s/ Xxxx Xxxxxxxx
______________________________
Title: Relationship Manager
___________________________
Date executed by Bank: March 30, 2005 (the "Effective Date")
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following whether owned now or hereafter arising:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising rights to payment of any kind,
including accounts, contract rights, royalties, license rights and all other
forms of obligations owing to Borrower arising out of the sale or lease of
goods, the licensing of technology or the rendering of services by Borrower (as
such definitions may be amended from time to time according to the Code) whether
or not earned by performance, and any and all credit insurance, insurance
(including refund) claims and proceeds, guaranties, and other security therefor,
as well as all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, letter of credit rights, certificates of deposit, instruments
and chattel paper and electronic chattel paper now owned or hereafter acquired
and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyrights, copyright applications, copyright registration and like
protection in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, and the goodwill of the business of
Borrower connected with and symbolized by such trademarks, any trade secret
rights, including any rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; or any claims for damage by way of any past, present and
future infringement of any of the foregoing (collectively, the "Intellectual
Property"), except that the Collateral shall include the proceeds of all the
Intellectual Property including proceeds from the sale, licensing or other
disposition of the Intellectual Property and proceeds that are accounts, (i.e.
accounts receivable) of Borrower, or general intangibles consisting of rights to
payment and, if a judicial authority (including a U.S. Bankruptcy Court) holds
that a security interest in the underlying Intellectual Property is necessary to
have a security interest in such proceeds, including accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property, then the
Collateral shall automatically, and effective as of the Closing Date, include
the Intellectual Property to the extent necessary to permit perfection of Bank's
security interest in such accounts and general intangibles of Borrower that are
proceeds of the Intellectual Property.
Borrower and Bank are parties to that certain Negative Pledge Agreement,
whereby Borrower, in connection with Bank's loan or loans to Borrower, has
agreed, among other things, not to sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of its Intellectual
Property, without Bank's prior written consent.
