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EXHIBIT 10.38
E-LOAN, INC.
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION.........................................1
1.1 Definitions.................................................1
1.2 Accounting and Other Terms..................................7
2. LOAN AND TERMS OF PAYMENT............................................7
2.1 Credit Extensions...........................................7
2.2 Overadvances................................................9
2.3 Interest Rates, Payments, and Calculations..................10
2.4 Crediting Payments..........................................10
2.5 Fees........................................................10
2.6 Additional Costs............................................11
2.7 Term........................................................11
3. CONDITIONS OF LOANS..................................................11
3.1 Conditions Precedent to Initial Credit Extension............11
3.2 Conditions Precedent to all Credit Extensions...............12
4. CREATION OF SECURITY INTEREST........................................12
4.1 Grant of Security Interest..................................12
4.2 Delivery of Additional Documentation Required...............12
4.3 Right to Inspect............................................12
5. REPRESENTATIONS AND WARRANTIES.......................................13
5.1 Due Organization and Qualification..........................13
5.2 Due Authorization; No Conflict..............................13
5.3 No Prior Encumbrances.......................................13
5.4 Bona Fide Accounts..........................................13
5.5 Merchantable Inventory......................................13
5.6 Intellectual Property.......................................13
5.7 Name; Location of Chief Executive Office....................13
5.8 Litigation..................................................14
5.9 No Material Adverse Change in Financial Statements..........14
5.10 Solvency....................................................14
5.11 Regulatory Compliance.......................................14
5.12 Environmental Condition.....................................14
5.13 Taxes.......................................................14
5.14 Subsidiaries................................................15
5.15 Government Consents.........................................15
5.16 Full Disclosure.............................................15
6. AFFIRMATIVE COVENANTS................................................15
6.1 Good Standing...............................................15
6.2 Government Compliance.......................................15
6.3 Financial Statements, Reports, Certificates.................15
6.4 Inventory; Returns..........................................16
6.5 Taxes.......................................................16
6.6 Insurance...................................................16
6.7 Principal Depository........................................17
6.8 Quick Ratio.................................................17
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6.9 Profitability/Loss..........................................17
6.10 Liquidity, Debt Service Coverage............................17
6.11 Further Assurances..........................................17
7. NEGATIVE COVENANTS...................................................17
7.1 Dispositions................................................17
7.2 Changes in Business, Ownership, Management or Business
Locations...................................................17
7.3 Mergers or Acquisitions.....................................18
7.4 Indebtedness................................................18
7.5 Encumbrances................................................18
7.6 Distributions...............................................18
7.7 Investments.................................................18
7.8 Transactions with Affiliates................................18
7.9 Intellectual Property Agreements............................18
7.10 Subordinated Debt...........................................19
7.11 Inventory...................................................19
7.12 Compliance..................................................19
8. EVENTS OF DEFAULT....................................................19
8.1 Payment Default.............................................19
8.2 Covenant Default............................................19
8.3 Material Adverse Change.....................................20
8.4 Attachment..................................................20
8.5 Insolvency..................................................20
8.6 Other Agreements............................................20
8.7 Subordinated Debt...........................................20
8.8 Judgments...................................................20
8.9 Misrepresentations..........................................20
9. BANK'S RIGHTS AND REMEDIES...........................................21
9.1 Rights and Remedies.........................................21
9.2 Power of Attorney...........................................22
9.3 Accounts Collection.........................................22
9.4 Bank Expenses...............................................22
9.5 Bank's Liability for Collateral.............................23
9.6 Remedies Cumulative.........................................23
9.7 Demand; Protest.............................................23
10. NOTICES..............................................................23
11. CHOICE OF LAW AND VENUE..............................................23
12. GENERAL PROVISIONS...................................................24
12.1 Successors and Assigns......................................24
12.2 Indemnification.............................................25
12.3 Time of Essence.............................................25
12.4 Severability of Provisions..................................25
12.5 Amendments in Writing, Integration..........................25
12.6 Counterparts................................................25
12.7 Survival....................................................25
12.8 Confidentiality.............................................25
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This LOAN AND SECURITY AGREEMENT is entered into as of December 9,
1998, by and between SILICON VALLEY BANK ("Bank") and E-LOAN, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions.
As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a loan advance under
the Committed Revolving Line.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, partners and, for
any Person that is a limited liability company, such Persons, managers and
members.
"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; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding),
whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" means, for any applicable date of
determination, an amount equal to eighty percent (80%) of Borrower's brokerage
and referral fee revenue, calculated on a trailing three-month rolling average
basis, as determined by Bank with reference to the most recent financial
statements of Borrower delivered pursuant to Section 6.3 hereof.
"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.
"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.
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"Committed Revolving Line" means a credit extension
of up to One Million Five Hundred Thousand Dollars ($1,500,000).
"Committed Equipment Line" means a credit extension
of up to Three Million Five Hundred Thousand Dollars ($3,500,000).
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted or
sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall 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, Equipment
Advance, Letter of Credit or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current assets
on the consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendable at the
option of Borrower or any Subsidiary to a date more than one year from the date
of determination, but excluding Subordinated Debt.
"Debt Service Coverage" means, as measured quarterly
as of the last day of each fiscal quarter of Borrower, on a consolidated basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the sum
of (i) net income for such quarter, plus (ii) depreciation and amortization of
intangible assets and other non-cash charges to income for such quarter plus
(iii) quarterly interest expense minus (iv) capitalized software expense for
such quarter to (b) an amount equal to the sum of (x) all scheduled repayments
and mandatory prepayments of principal on account of long-term Indebtedness for
such quarter plus (y) quarterly interest expense.
"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 2.1.5.
"Equipment Availability End Date" has the meaning set
forth in Section 2.1.5.
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"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles
as in effect in the United States 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.
"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, Patents, and Mask Works;
(b) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available
to Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to xxx for and collect such damages for said use
or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents, Trademarks, or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights;
(f) All amendments, renewals and extensions of any of
the Copyrights, Trademarks, Patents or Mask Works; and
(g) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership 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.
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"Letter of Credit" means a letter of credit or
similar undertaking issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth
in Section 2.1.2.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other present or future
agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated from time
to time.
"Mask Works" means all mask works or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means September 8, 2002.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Patents" means all patents, patent applications and
like protections, including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Payment Date" means the eighth (8th) calendar day of
each month, commencing on the first such date after the Closing Date and ending
on the Maturity Date.
"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) Indebtedness to trade creditors and with respect
to surety bonds and similar obligations incurred in the ordinary course of
business;
(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of Borrower
(provided that the primary obligations are not prohibited hereby), and
Indebtedness of any Subsidiary to any other Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of any other
Subsidiary (provided that the primary obligations are not prohibited hereby);
(f) Indebtedness secured by Permitted Liens;
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(g) Capital leases or indebtedness incurred solely to
purchase equipment which is secured in accordance with clause (c) of "Permitted
Liens" below and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of acquisition;
and
(h) Extensions, refinancings, modifications,
amendments and restatements of any of items of Permitted Indebtedness (a)
through (g) above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
"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 the highest rating obtainable from either
Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank;
(c) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transaction in the
ordinary course of business;
(d) Investments accepted in connection with Transfers
permitted by Section 7.1;
(e) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business, and (iii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower's Board of Directors;
(f) Investments (including debt obligations) received
in connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business;
(g) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary course of
business;
(h) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions to, customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
paragraph (i) shall not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions permitted
under Section 7.3;
(j) Deposit accounts of Borrower in which Bank has a
Lien prior to any other Lien; and
(k) Deposit accounts of any Subsidiaries maintained
in the ordinary course of business.
"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;
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(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, provided the same have
no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens on Equipment leased by Borrower or any
Subsidiary pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for
the purpose of financing the lease of such Equipment (including Liens pursuant
to leases permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement);
(e) Leases or subleases and licenses or sublicenses
granted to others in the ordinary course of Borrower's business not interfering
in any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any lease
or license, provided that such leases, subleases, licenses and sublicenses do
not prohibit the grant of the security interest granted hereunder;
(f) Liens on assets (including the proceeds thereof
and accessions thereto) that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation that
existed at the time it became or becomes a Subsidiary); provided such Liens are
not granted in contemplation of or in connection with the acquisition of such
asset by Borrower or a Subsidiary;
(g) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
8.8;
(h) Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances affecting real property not constituting a Material Adverse
Effect;
(i) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods;
(j) Liens that are not prior to the Lien of Bank
which constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangement entered in to with banks in the
ordinary course of business;
(k) Earn-out and royalty obligations existing on the
date hereof or entered into in connection with an acquisition permitted by
Section 7.3;
(l) Liens on insurance proceeds in favor of insurance
companies granted solely as security for financed premiums; and
(m) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a), (c), (d), (e), (f) and (k) 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.
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"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.
"Quick Assets" means, as of any applicable date, the
unrestricted cash; unrestricted cash-equivalents; net, billed accounts
receivable and investments with maturities of fewer than one year of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the Controller
of Borrower.
"Revolving Maturity Date" means the date immediately
preceding the first anniversary of the Closing Date.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Tangible Net Worth" means, as of any applicable
date, the consolidated total assets of Borrower and its Subsidiaries minus,
without duplication, (i) the sum of any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities.
"Total Liabilities" means, as of any applicable date,
all obligations that should, in accordance with GAAP, be classified as
liabilities on the consolidated balance sheet of Borrower, including in any
event all Indebtedness, but specifically excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark
rights, whether registered or not, applications to register and registrations of
the same and like protections, and the entire goodwill of the business of
Assignor connected with and symbolized by such trademarks.
1.2 Accounting and Other Terms.
All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations and
determinations made hereunder shall be made in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and schedules
thereto. The terms "including" / "includes" shall always be read as meaning
"including (or includes) without limitation," when used herein or in any other
Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.
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2.1.1 Revolving Advances
(a) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) (a) the Committed Revolving Line
minus the Credit Card Sublimit minus the Merchant Services Sublimit, or (b) the
Borrowing Base, whichever is less, minus (ii) the face amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit);
provided, that Borrower shall not request or receive any Advances until Bank has
received Borrower's financial projections for the 1999 fiscal year. Subject to
the terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1.1 may be repaid and reborrowed at any time prior to the Revolving
Maturity Date.
(b) Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time, on the Business Day that the Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
(c) The Committed Revolving Line shall
terminate on the Revolving Maturity Date, at which time all Advances under this
Section 2.1.1 shall be immediately due and payable.
2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of
this Agreement, Bank agrees to issue or cause to be issued Letters of Credit for
the account of Borrower in an aggregate outstanding face amount not to exceed
(i) the lesser of (a) the Committed Revolving Line minus the Credit Card
Sublimit, minus the Merchant Services Sublimit, or (b) the sum of the Borrowing
Base plus $1,100,000, whichever is less, minus (ii) the then outstanding
principal balance of the Advances. Each Letter of Credit shall have an expiry
date no later than the Revolving Maturity Date. 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.
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. Borrower shall indemnify, defend, protect and hold
Bank harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrower may request that Bank issue a
Letter of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrower of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing rate of
exchange in San Francisco, California, for sales of that other currency for
cable transfer to the country of which it is the currency.
(d) Upon the issuance of any Letter of
Credit payable in a currency other than United States Dollars, Bank shall create
a reserve under the Committed Revolving Line for Letters of Credit against
fluctuations in currency exchange rates, in an amount equal to ten percent (10%)
of the face amount of such
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Letter of Credit. The amount of such reserve may be amended by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Committed Revolving Line shall be reduced by the amount of such
reserve for so long as such Letter of Credit remains outstanding.
2.1.3 Credit Card Sublimit.
Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued corporate credit cards for
the executives of Borrower in an aggregate credit limit not to exceed Five
Hundred Thousand Dollars ($500,000) (the "Credit Card Sublimit"). All agreements
executed in connection with the Credit Card Sublimit shall be, in form and
substance, acceptable to Bank, in its sole discretion.
2.1.4 Merchant Services Sublimit.
Subject to the terms and conditions of this
Agreement, Borrower may utilize up to an aggregate amount not to exceed One
Hundred Thousand Dollars ($100,000) (the "Merchant Services Sublimit") for
merchant credit card services provided by Bank as defined in that certain
Merchant Services Agreement provided to Borrower in connection herewith (a
"Merchant Service", or the "Merchant Services"). Any amounts actually paid by
Bank in respect of a Merchant Service or Merchant Services shall, when paid,
constitute an Advance under the Committed Revolving Line.
2.1.5 Equipment Advances.
(a) Subject to and upon the terms and
conditions of this Agreement, at any time from the date hereof through September
8, 1999 (the "Equipment Availability End Date"), Bank agrees to make advances
(each an "Equipment Advance" and, collectively, the "Equipment Advances") to
Borrower in an aggregate outstanding amount not to exceed the Committed
Equipment Line; provided, that Borrower shall not request or receive Equipment
Advances in excess of $1,000,000 in the aggregate until Bank has received
Borrower's financial projections for the 1999 fiscal year. To evidence the
Equipment Advance or Equipment Advances, Borrower shall deliver to Bank, within
thirty (30) days after the date of each Equipment Advance request, an invoice
for the equipment or software to be purchased. The Equipment Advances shall be
used only to purchase or refinance Equipment and software purchased on or after
April 1, 1998 and shall not exceed one hundred percent (100%) of the invoice
amount of such equipment or software approved from time to time by Bank,
excluding taxes, shipping, warranty charges, freight discounts and installation
expense.
(b) Interest shall accrue from the date of
each Equipment Advance at the rate specified in Section 2.3(a), and shall be
payable monthly for each month through the month in which the Equipment
Availability End Date falls. Any Equipment Advances that are outstanding on the
Equipment Availability End Date will be payable in thirty-six (36) equal monthly
installments of principal, plus all accrued interest, beginning on the Payment
Date of each month following the Equipment Availability End Date and ending on
the Maturity Date, at which time all amounts owing under this Agreement shall be
immediately due and payable. Equipment Advances, once repaid, may not be
reborrowed.
(c) When Borrower desires to obtain an
Equipment Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than 3:00 p.m.
Pacific time one (1) Business Day before the day on which the Equipment Advance
is to be made. Such notice shall be substantially in the form of Exhibit B. The
notice shall be signed by a Responsible Officer or its designee and include a
copy of the invoice for the Equipment to be financed.
2.2 Overadvances.
If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess. If, at any time or for any reason, the amount of Obligations owed
by Borrower to Bank pursuant to Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 is
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greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base plus $1,100,000, Borrower shall immediately pay to Bank, in cash,
the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section
2.3(b), any Advances and/or Equipment Advances shall bear interest on the
average daily balance thereof, at a per annum rate equal to the Prime Rate plus
0.50%.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence 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 each Payment Date. Borrower hereby authorizes Bank to debit any
accounts with Bank, including, without limitation, Account Number __________ for
payments of principal and interest due on the Obligations and any other amounts
owing by Borrower to Bank. Bank will notify Borrower of all debits which Bank
has made against Borrower's accounts. Any such debits against Borrower's
accounts in no way shall be deemed a set-off. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. 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, whether directed to Borrower's deposit account with Bank
or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees.
Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Ten
Thousand Dollars ($10,000), which fee shall be due on the Closing Date and shall
be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
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(c) Bank Expenses. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and expenses not in excess of
$2,500 and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs.
In case any change in 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), in each case
after the date of this Agreement:
(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
any loans, 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; provided, however, that Borrower shall
not be liable for any such amount attributable to any period prior to the date
of hundred eighty (180) days prior to the date of such statement.
2.7 Term.
Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations (excluding
Obligations under Section 2.6 and 12.2 to the extent they remain inchoate at the
time outstanding payment obligations are paid in full) are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
The obligation of Bank to make the initial Credit
Extension is subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) financing statements (Forms UCC-1);
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(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(f) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions.
The obligation of Bank to make each Credit Extension,
including the initial Credit Extension, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance
Form as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Advance as to the
accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt payment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations, in each case, to the extent that a
security interest in such Collateral can be perfected by the filing of a
financing statement or, in the case of Collateral consisting of instruments,
documents, chattel paper or certificated securities, to the extent that Bank
takes possession of such Collateral. Bank agrees to execute and deliver to
Borrower from time to time such subordination agreements as Borrower may request
and as are necessary to give to other lenders which finance equipment for
Borrower a first priority security interest in the equipment financed so long as
the Liens and the Indebtedness incurred with respect to such equipment financing
are permitted under this Agreement. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required.
Borrower shall from time to time execute and deliver
to Bank, at the request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue perfected Bank's security
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, to inspect Borrower's Books and
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to make copies thereof and to check, test, and appraise the Collateral in order
to verify Borrower's financial condition or the amount, condition of, or any
other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification.
Borrower and each Subsidiary is a corporation duly existing
and in good standing under the laws of its state of incorporation and qualified
and licensed to do business in, and is in good standing in, any state in which
the conduct of its business or its ownership of property requires that it be so
qualified, except for states as to which any failure to so qualify would not
have a Material Adverse Effect.
5.2 Due Authorization; No Conflict.
The execution, delivery, and performance of the Loan Documents
are within Borrower's powers, have been duly authorized, and are not in conflict
with nor constitute a breach of any provision contained in Borrower's
Articles/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 except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the Borrower's or other party's consent and the Loan Documents
constitute an assignment. Borrower is not in default under any agreement to
which it is a party or by which it is bound, which default could reasonably be
expected to have a Material Adverse Effect.
5.3 No Prior Encumbrances.
Borrower has good and indefeasible title to the Collateral,
free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Accounts.
The Accounts are bona fide existing obligations. The service
or property giving rise to such Accounts has been performed or delivered to the
account debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor.
5.5 Merchantable Inventory.
All Inventory is in all material respects of good and
marketable quality, free from all material defects.
5.6 Intellectual Property.
Borrower is the 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.
5.7 Name; Location of Chief Executive Office.
Except as disclosed in the Schedule, Borrower has not done
business and will not, without at least thirty (30) days prior written notice to
Bank, do business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof.
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5.8 Litigation.
Except as set forth in the Schedule, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could reasonably be expected to 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 financial statements related to Borrower and
any Subsidiary that have been delivered by Borrower to Bank fairly present in
all material respects Borrower's consolidated financial condition as of the date
thereof and Borrower's consolidated results of operations for the period then
ended. There has not been a material adverse change in the consolidated
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank on or about the Closing Date.
5.10 Solvency.
The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.11 Regulatory Compliance.
Borrower and each Subsidiary has met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that could reasonably be expected to have a Material Adverse Effect. 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 its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition.
None of Borrower's or any Subsidiary's properties or assets
has ever been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in accordance with applicable law; to the best of
Borrower's knowledge, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any Subsidiary resulting in the release or other disposition of hazardous waste
or hazardous substances into the environment.
5.13 Taxes.
Borrower and each Subsidiary has filed or caused to be filed
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein, except
those being contested in good faith by proper proceedings with adequate reserves
under GAAP.
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5.14 Subsidiaries.
Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.15 Government Consents.
Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted except
where the failure to obtain any such consent, approval or authorization, to make
any such declaration or filing, or to be given any such notice could not
reasonably be expected to have a Material Adverse Effect.
5.16 Full Disclosure.
No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower are not to be viewed as facts and that actual
results during the period or period covered by any such projections and
forecasts may differ from the projected or forecasted results).
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 the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, in force all licenses, approvals and agreements, the loss of which
could reasonably be expect to 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
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as
available, but in any event within thirty (30) days after the end of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, in a form and certified
by an Officer of Borrower reasonably acceptable to Bank; (b) as soon as
available, but in any event within one hundred twenty (120) days after the end
of Borrower's fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) within five (5) days
of filing, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any
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holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000) or more; (e) as soon as
available, but in any event not later than December 31, 1998, Borrower's
financial projections for the 1999 fiscal year, approved by Borrower's board of
directors; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within thirty (30) days after the last day of each
month, Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit C hereto.
6.4 Inventory; Returns.
Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand 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 (i)contested in good faith
by appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as are reasonably satisfactory to
Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. At Bank's request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor. So long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
to the replacement or repair of destroyed or damaged property; provided, that
after the occurrence and during the continuance of an Event of Default, 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.
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6.7 Principal Depository.
Borrower shall maintain its principal depository and
operating accounts with Bank.
6.8 Quick Ratio.
Borrower shall maintain, as of the last day of each
calendar month, a ratio of Quick Assets to Current Liabilities of at least 2.0
to 1.0.
6.9 Profitability/Loss.
Borrower shall not incur a loss of more than
$2,500,000 for the fiscal quarter ended December 31, 1998. Prior to February 15,
1999, Borrower and Bank shall agree upon minimum operating performance covenants
for the fiscal quarter ended March 31, 1999 and thereafter. If no agreement has
been made by such date, this Agreement shall automatically terminate, and all
Obligations owing hereunder shall be immediately due and payable.
6.10 Liquidity, Debt Service Coverage.
(a) Subject to the remainder of this section,
Borrower shall maintain, as of the last day of each calendar month, a Liquidity
Ratio of at least 2.0 to 1.0. Notwithstanding the foregoing, if Borrower attains
two consecutive quarters of profitability and a Debt Service Coverage of not
less than 1.5 to 1.0, then Liquidity Ratio will no longer be tested and instead
Borrower shall maintain, as of the last day of each of Borrower's fiscal
quarters, a Debt Service Coverage of at least 1.5 to 1.0. For purposes of this
Section, "Liquidity Ratio" means as of any date for which it is tested, the
ratio of (a) an amount equal to (i) cash and cash equivalents minus (ii) the
aggregate amount of outstanding Advances under Section 2.1.1 to (b) the
aggregate amount of outstanding Equipment Advances.
6.11 Further Assurances.
At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business, (iii) Transfers of worn-out or obsolete Equipment
or Equipment financed by other vendors, (iv) Transfers which constitute
liquidation of Investments permitted under Section 7.7, and (v) other Transfers
not otherwise permitted by this Section 7.1 not exceeding One Hundred Thousand
Dollars ($100,000) in the aggregate in any fiscal year.
7.2 Changes in Business, Ownership, Management or
Business Locations.
Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership or
management. Borrower will not,
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without at least thirty (30) days prior written notification to Bank, relocate
its chief executive office or add any new offices or business locations.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person if no Event
of Default has occurred and is continuing or would exist after giving effect to
such action, provided that this Section 7.3 shall not apply to (i) the purchase
of inventory, equipment or intellectual property rights in any transaction
valued at less than One Hundred Thousand Dollars ($100,000) in the ordinary
course of business, (ii) transactions among Subsidiaries or among Borrower and
its Subsidiaries in which Borrower is the surviving entity, or (iii) such
transactions that do not involve an amount that in the aggregate exceeds Two
Million Dollars ($2,000,000) during the term of this Agreement.
7.4 Indebtedness.
Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances.
Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions.
Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, provided, that (i) Borrower may declare and make any dividend payment or
other distribution payable in its equity securities, (ii) Borrower may convert
any of its convertible securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefor and (iii) for so
long as an Event of Default has not occurred, Borrower may repurchase stock from
former employees of Borrower in accordance with the terms of repurchase or
similar agreements between Borrower and such employees.
7.7 Investments.
Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates.
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 and except for transactions with
a Subsidiary that are upon fair and reasonable terms and transactions
constituting Permitted Investments.
7.9 Intellectual Property Agreements.
Borrower shall not permit the inclusion in any
material contract to which it becomes a party of any provisions that could or
might in any way prevent the creation of a security interest in Borrower's
rights and interests in any property included within the definition of the
Intellectual Property Collateral acquired under such contracts, except to the
extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgment.
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7.10 Subordinated Debt.
Make any payment in respect of any Subordinated Debt,
or permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank's prior written
consent.
7.11 Inventory.
Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 Compliance.
Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for such
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
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.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.6, 6.7, 6.8, 6.9, 6.10 or 6.11 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period);
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8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the
business, operations, or condition (financial or otherwise) of Borrower or (ii)
is a material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral;
8.4 Attachment.
If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within 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
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 Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements.
If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could reasonably be expect to 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 or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
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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) Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Liquidate any Exchange Contracts not yet settled
and demand that Borrower immediately deposit cash with Bank in an amount
sufficient to cover any losses incurred by Bank due to liquidation of the
Exchange Contracts at the then prevailing market price;
(e) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(f) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge, in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;
(g) Without notice to Borrower set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge, Borrower's labels, patents, copyrights, mask works,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and, in connection with Bank's exercise of its rights
under this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(i) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's
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premises) as Bank determines is commercially reasonable, and apply the proceeds
thereof to the Obligations in whatever manner or order Bank deems appropriate;
(j) Bank may credit bid and purchase at any public
sale, or at any private sale as permitted by law; and
(k) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
(l) Bank shall have a non-exclusive, royalty-free
license to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the occurrence
of an Event of Default.
9.2 Power of Attorney.
Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; (e) settle and adjust disputes and
claims respecting the accounts directly with account debtors, for amounts and
upon terms which Bank determines to be reasonable; (f) 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 (g) 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. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection.
At any time from the date 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, if requested or required by Bank, immediately deliver such payments to Bank
in their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
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9.5 Bank's Liability for Collateral.
So long as Bank complies with its obligations under
Section 9207 of the Code, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not expressly set forth herein 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, by 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: E-Loan, Inc.
0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx
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.
11. CHOICE OF LAW AND VENUE
The Loan Documents shall be governed by, and construed in
accordance with, the internal laws of the State of 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
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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.
(a) 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 participations in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder, subject to the provisions of this
Section 12.1.
(b) Bank may sell, negotiate or grant participations
to other financial institutions in all or part of the obligations of the
Borrower outstanding under the Loan Documents, without notice to or the approval
of Borrower; provided that any such sale, negotiation or participation shall be
in compliance with the applicable federal and state securities laws and the
other requirements of this Section 12.1. Notwithstanding the sale, negotiation
or grant of participations, Bank shall remain solely responsible for the
performance of its obligations under this Agreement, and Borrower shall continue
to deal solely and directly with Bank in connection with this Agreement and the
other Loan Documents.
(c) The grant of a participation interest shall be on
such terms as Bank determines are appropriate, provided only that (1) the holder
of such a participation interest shall not have any of the rights of Bank under
this Agreement except, if the participation agreement so provides, rights to
demand the payment of costs of the type described in Section 2.6, provided that
the aggregate amount that the Borrower shall be required to pay under Section
2.6 with respect to any ratable share of the Committed Revolving Line or any
Advance (including amounts paid to participants) shall not exceed the amount
that Borrower would have had to pay if no participation agreements had been
entered into, and (2) the consent of the holder of such a participation interest
shall not be required for amendments or waivers of provisions of the Loan
Agreement other than those which (i) increase the amount of the Committed
Revolving Line, (ii) extend the term of this Agreement, (iii) decrease the rate
of interest or the amount of any fee or any other amount payable to Bank under
this Agreement, (iv) reduce the principal amount payable under this Agreement,
or (v) extend the date fixed for the payment of principal or interest or any
other amount payable under this Agreement.
(d) Bank may assign, from time to time, all or any
portion of the Committed Revolving Line to an Affiliate of Bank or to The
Federal Reserve Bank or, subject to the prior written approval of Borrower
(which approval will not be unreasonably withheld), to any other financial
institution; provided, that (i) the amount of the Committed Revolving Line being
assigned pursuant to each such assignment shall in no event be less than Five
Hundred Thousand Dollars ($500,000) and shall be an integral multiple of One
Hundred Thousand Dollars ($100,000) and (ii) the parties to each such assignment
shall execute and deliver to Borrower an assignment agreement in a form
reasonably acceptable to each. Upon such execution and delivery, from and after
the effective date specified in such assignment agreement (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such assignment
agreement, have the rights and obligations of a Bank hereunder and (y) Bank
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such assignment agreement, relinquish its rights and be released
from its obligations under this Agreement (other than pursuant to this Section
12.1(d)), and, in the case of an assignment agreement covering all or the
remaining portion of Bank's rights and obligations under this Agreement, Bank
shall cease to be a party hereto. In the event of an assignment hereunder, the
parties agree to amend this Agreement to
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the extent necessary to reflect the mechanical changes which are necessary to
document such assignment. Each party shall bear its own expenses (including
without limitation attorneys' fees and costs) with respect to such an amendment.
12.2 Indemnification.
Borrower shall indemnify, defend, protect 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 the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions.
Each provision of this Agreement shall be severable
from every other provision of this Agreement for the purpose of determining the
legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration.
This Agreement cannot be amended or terminated except
by a writing signed by Borrower and Bank. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival.
All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they
remain inchoate at the time the outstanding payment Obligations are paid in
full) 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, provided that
so long as the obligations referred to in the first sentence of this Section
12.7 have been satisfied, and Bank has no commitment to make any Credit
Extensions or to make any other loans to Borrower, Bank shall release all
security interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality.
In handling any confidential information, Bank shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement,
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided
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that they have entered into a comparable confidentiality agreement in favor of
Borrower and have delivered a copy to Borrower, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may deem appropriate in connection with
the exercise of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
E-LOAN, INC.
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------
Title: Chief Financial Officer
---------------------------------
SILICON VALLEY BANK
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Title: Assistant Vice President
---------------------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing;
(g) All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
A-1
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
----------------------
FAX#: (000) 000-0000 TIME:
----------------------
FROM:
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
----------------------------------------------------------
PHONE NUMBER:
------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
---------------- ----------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
-----------------------------------
PRINCIPAL PAYMENT (ONLY) $
-----------------------------------
INTEREST PAYMENT (ONLY) $
-----------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
-----------------------------------
OTHER INSTRUCTIONS:
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--------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and Security
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; 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.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
----------------------------------- ----------------------------
Authorized Requester Phone #
----------------------------------- ----------------------------
Received By (Bank) Phone #
--------------------------------------
Authorized Signature (Bank)
B-1
32
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: E-LOAN, INC.
The undersigned authorized officer of E-Loan, Inc. hereby certifies
that in accordance with the terms and conditions of the 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 in all material respects
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. The Officer expressly acknowledges that no
borrowings may be requested by Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER
"COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on the following Basis:
Minimum Quick Ratio (Monthly) 2.0:1.0 _____:1.0 Yes No
Liquidity Ratio (Monthly)(1) 2.0:1.0 _____:1.0 Yes No
Minimum Debt Service(Quarterly)(2) 1.5:1.0 _____:1.0 Yes No
Profitability: Quarterly $________(3) $________ Yes No
(1)Converts to Debt Service Coverage after two consecutive quarters of Debt
Service Coverage of at least 1.5 to 1.0.
(2)Tested after conversion of Liquidity Ratio.
(3)No loss exceeding $2,500,000 for the fiscal quarter ended 12/31/98.
Subsequent operating performance covenants to be agreed upon by 2/15/99.
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
---------------------------------
SIGNATURE
---------------------------------
TITLE
---------------------------------
DATE
BANK USE ONLY
Received by:
----------------------------------------
AUTHORIZED SIGNER
Date:
-----------------------------------------------
Verified:
-------------------------------------------
AUTHORIZED SIGNER
Date:
-----------------------------------------------
Compliance Status: Yes No
D-1
33
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: E-Loan, Inc. Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $1,500,000, and a Variable Rate, Equipment Line of Credit in a
principal amount up to $3,500,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: working capital and
purchase of equipment.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line Equipment Line
Amount paid to Borrower directly: $ $
-------- -------
Undisbursed Funds $ $
-------- -------
Principal $ $
-------- -------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $
-----------
$10,000 Loan Fee
$ Accounts Receivables Audit
-----
Other Charges Paid in Cash: $
-----------
$ UCC Search Fees
-----
$ UCC Filing Fees
-----
$ Patent Filing Fees
-----
$ Trademark Filing Fees
-----
$ Copyright Filing Fees
-----
$ Outside Counsel Fees and Expenses (Estimate)
-----
Total Charges Paid in Cash $
-----------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered __________ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF DECEMBER 9, 1998.
BORROWER:
E-Loan, Inc.
----------------------------
Authorized Officer
34
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: E-Loan, Inc. BANK: Silicon Valley Bank
INSURANCE REQUIREMENTS. E-Loan, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be cancelled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of December 9, 1998, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER
9, 1998.
GRANTOR:
E-Loan, Inc.
x /s/ Xxxxx Xxxxxxxxx
------------------------------
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
---------------------------------------- -----------------
AGENT'S NAME:
------------------------------------------------------------------
INSURANCE COMPANY:
-------------------------------------------------------------
POLICY NUMBER:
-----------------------------------------------------------------
EFFECTIVE DATES:
---------------------------------------------------------------
COMMENTS:
----------------------------------------------------------------------
35
CORPORATE RESOLUTIONS TO BORROW
BORROWER: E-Loan, Inc.
I, the undersigned Secretary or Assistant Secretary of E-Loan, Inc.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of .
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and 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
(or by other duly authorized corporate action in lieu of a meeting), duly called
and held, at which a quorum was present and voting, 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 POSITIONS ACTUAL SIGNATURES
------------------------- ------------------- ----------------------------
Xxxxxxxxx Xxxxxx CEO /s/ Xxxxx Xxxxxx
------------------------- ------------------- ----------------------------
Xxxxxx Xxxxxxxxx President /s/ Xxxxxx Xxxxxxxxx
------------------------- ------------------- ----------------------------
Xxxxx Xxxxxxxxx CFO /s/ Xxxxx Xxxxxxxxx
------------------------- ------------------- ----------------------------
------------------------- ------------------- ----------------------------
acting for an 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 Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of December 9, 1998 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Bank's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
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.
1
36
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
ISSUE WARRANTS. To issue warrants to purchase the Corporation's capital
stock, for such series and number, and on such terms, as an officer of the
Corporation shall deem appropriate.
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 12/11, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ Xxxxx Xxxxxx
------------------------------
2
