EXHIBIT 10.46
LOAN AND SECURITY AGREEMENT
Dated as of February 12, 1999
between
XXXXX.XXX, Inc.
a Delaware corporation
as "Borrower",
and
VENTURE LENDING & LEASING II, INC.,
a Maryland corporation
as "Lender"
LOAN AND SECURITY AGREEMENT
The Borrower and Lender identified on the cover page of this document
have entered or anticipate entering into one or more transactions pursuant to
which Lender agrees to make available to Borrower a loan facility governed by
the terms and conditions set forth in this document and that certain Supplement
executed by Borrower and Lender and of even date herewith which incorporates
this document by reference (the "Supplement"). The Supplement constitutes a
supplement to and forms part of this document, and shall be read and construed
as one with this document, so that this document and the Supplement constitute a
single agreement between the parties (collectively referred to as this
"Agreement").
Accordingly, the parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS. The terms defined in Article 10 and in the Supplement will
have the meanings therein specified for purposes of this Agreement.
1.2 INCONSISTENCY. In the event of any inconsistency between the provisions
of any Supplement and this document, the provisions of the Supplement shall
govern.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of this Agreement,
Lender agrees to make Loans to Borrower from time to time from the Closing Date
and to, but not including, the Termination Date in an aggregate principal amount
not exceeding the Commitment. The Commitment is not a revolving credit
commitment, and Borrower does not have the right to repay and reborrow
hereunder. Each Loan requested by Borrower to be made on a single Business Day
shall be for a minimum principal amount set forth in the Supplement, except to
the extent the remaining Commitment is a lesser amount.
2.2 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by a
separate Note payable to the order of Lender, in the total principal amount of
the Loan. Principal and interest of each Loan shall be payable at the times and
in the manner set forth in the Note.
2.3 PROCEDURES FOR BORROWING.
(a) Borrower shall give Lender, at least five (5) Business Days' prior to a
proposed Borrowing Date, written notice of any request for borrowing hereunder
(a "Borrowing Request"). Each Borrowing Request shall be in substantially the
form of Exhibit "B" to the Supplement, shall be executed by a responsible
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executive or financial officer of Borrower, and shall state the loan type(s) and
amount(s) requested, and shall be accompanied by such other information and
documentation as Lender may reasonably request.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing Date, if
Borrower has satisfied the conditions precedent in Article 4, Lender shall make
the Loan available to Borrower in immediately available funds, less the amount
of the broker's fee described in Section (2)D. of the Supplement.
2.4 INTEREST. Basic Interest on the outstanding principal balance of the
each Loan shall accrue daily at the Designated Rate from the Borrowing Date
until the Maturity Date.
2.5 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment with respect
to each Loan on the Maturity Date of such Loan.
2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and fees
under this Agreement and any Loan Document, shall be calculated for actual days
elapsed on the basis of a 360-day year, which results in higher interest, charge
or fee payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay Lender interest, charges or fees at a rate in excess of the
highest rate permitted by applicable law from time to time in effect.
2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest or the
Terminal Payment with respect to any Loan shall bear interest from their
respective maturities, whether scheduled or accelerated, at the Designated Rate
for such Loan plus five percent (5.00%) per annum, until paid in full, whether
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before or after judgment (the "Default Rate"). Borrower shall pay such interest
on demand.
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2.8 INTENTIONALLY OMITTED
2.9 LENDER'S RECORDS. Principal, Basic Interest, Terminal Payments and all
other sums owed under any Loan Document shall be evidenced by entries in records
maintained by Lender for such purpose. Each payment on and any other credits
with respect to principal, Basic Interest, Terminal Payments and all other sums
outstanding under any Loan Document shall be evidenced by entries in such
records. Absent manifest error, Lender's records shall be conclusive evidence
thereof.
2.10 GRANT OF SECURITY INTERESTS. To secure the timely payment and performance
of all of Borrower's Obligations to Lender, Borrower hereby grants to Lender
continuing security interests in all of the Collateral to the Closing Date. If
upon payment in full of all Obligations in respect of the Term Loan there remain
outstanding Obligations in respect of any Equipment Loans, and if no Event of
Default then exists, then Lender shall release its security interests in all
Collateral except Equipment and Proceeds and Records relating solely to
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Equipment. If upon payment in full of all Obligations in respect of all
Equipment Loans there remain outstanding Obligations in respect of the Term
Loan, and if no Event of Default then exists, then Lender shall release its
security interests in all Collateral comprising Equipment and Proceeds and
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Records relating solely to Equipment.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that, except as set forth in the Supplement
or any schedule of exceptions executed by the parties, as of the Closing Date
and each Borrowing Date:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to conduct business and is in good standing
in each other jurisdiction in which its business is conducted or its properties
are located, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery and
performance of all Loan Documents executed by Borrower are within Borrower's
powers, have been duly authorized, and are not in conflict with Borrower's
articles or certificate of incorporation or by-laws, or the terms of any charter
or other organizational document of Borrower, as amended from time to time; and
all such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully conduct
the business in which it is engaged, and to any sales, leases or the furnishing
of services by Borrower, including without limitation those requiring consumer
or other disclosures, the noncompliance with which would have a Material Adverse
Effect.
3.4 NO CONFLICT. The execution, delivery, and performance by Borrower of all
Loan Documents are not in conflict with any law, rule, regulation, order or
directive, or any indenture, agreement, or undertaking to which Borrower is a
party or by which Borrower may be bound or affected except where such conflict
would not reasonably be expected to have a Material Adverse Effect.
3.5 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax claim,
proceeding or dispute pending, or, to the knowledge of Borrower, threatened
against or affecting Borrower or its property that would reasonably be expected
to have a Material Adverse Effect.
3.6 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements
which have been delivered to Lender have been prepared in accordance with GAAP;
and, since that date there has been no Material Adverse Change.
3.7 NO SUBSIDIARIES. Borrower is not a majority owner of or in a control
relationship with any other business entity.
3.8 ENVIRONMENTAL MATTERS. Borrower has reviewed, or caused to be reviewed
on its behalf, all Environmental Laws applicable to its business operations and
materials handled therein, and as a result thereof has reasonably concluded that
Borrower is in compliance with such Environmental Laws, except to the extent a
failure to be in such compliance
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would not reasonably be expected to have a Material Adverse Effect on Borrower's
operations, properties or financial condition.
3.9 NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is
continuing.
3.10 FULL DISCLOSURE. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
3.11 SPECIFIC REPRESENTATIONS REGARDING COLLATERAL.
(a) TITLE. Except for the security interests created by this Agreement and
Permitted Liens, (i) Borrower is and will be the unconditional legal and
beneficial owner of the Collateral, and (ii) the Collateral is genuine and
subject to no Liens, rights or defenses of others. There exist no prior
assignments or encumbrances of record with the U.S. Patent and Trademark Office
affecting any Collateral in favor of any third party other than Lender.
(b) RIGHTS TO PAYMENT. The names of the obligors, amount owing to Borrower,
due dates and all other information with respect to the Rights to Payment are
and will be correctly stated in all material respects in all Records relating to
such Rights to Payment. Borrower further represents and warrants, to its
knowledge, that each Person appearing to be obligated on such a Right to Payment
has authority and capacity to contract and is bound as it appears to be.
(c) LOCATION OF COLLATERAL. Borrower's chief executive office, Inventory,
Records, Equipment, and any other offices or places of business are located at
the address(es) shown on the Supplement.
(d) BUSINESS NAMES. Other than its full corporate name, Borrower has not
conducted business using any trade names or fictitious business names except as
shown on the Supplement.
3.12 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.
(a) Borrower owns or is licensed or otherwise has the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other similar rights that are reasonably
necessary for the operation of its business, without conflict with the rights of
any other Person.
(b) To Borrower's knowledge, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by Borrower infringes upon any rights held by any
other Person.
(c) No claim or litigation regarding any of the foregoing is pending or, to
Borrower's knowledge, threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is pending or
proposed which, in either case, would reasonably be expected to have a Material
Adverse Effect.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Section
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4.2, subject to the fulfillment of the following conditions and to the receipt
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by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
(a) RESOLUTIONS. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) INCUMBENCY AND SIGNATURES. A certificate of the secretary of Borrower
certifying the names of the officer or officers of Borrower authorized to sign
the Loan Documents, together with a sample of the true signature of each such
officer.
(c) LEGAL OPINION. The opinion of legal counsel for Borrower as to such
matters as Lender may reasonably request, including the matters covered by
Sections 3.1, 3.2, 3.4 and 3.5 hereof.
(d) ARTICLES AND BY-LAWS. Certified copies of the Articles or Certificate of
Incorporation and
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By-Laws of Borrower, as amended through the Closing Date.
(e) THIS AGREEMENT. A counterpart of this Agreement and the Supplement, with
all schedules completed and attached thereto, and disclosing such information as
is acceptable to Lender.
(f) FINANCING STATEMENTS. Filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination statements, with
respect to the Collateral as Lender shall request.
(g) PATENT AND TRADEMARK ASSIGNMENTS. If required by the Supplement, patent
and trademark collateral assignments executed by Borrower.
(h) LIEN SEARCHES. Uniform Commercial Code lien, judgment, bankruptcy and tax
lien searches of Borrower from such jurisdictions or offices as Lender may
reasonably request, all as of a date reasonably satisfactory to Lender and its
counsel.
(i) GOOD STANDING CERTIFICATE. A Certificate of status or good standing of
Borrower as of a date acceptable to Lender from the jurisdiction of Borrower's
organization and any foreign jurisdictions where a failure to be so qualified
would reasonably be expected to have a Material Adverse Effect.
(j) WARRANT. A warrant issued by Borrower to Lender exercisable for such
number, type and class of shares of Borrower's capital stock, and for an initial
exercise price as is specified in the Supplement.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its initial
Loan and each subsequent Loan is subject to the following further conditions
precedent that:
(a) NO DEFAULT. No Default or Event of Default has occurred and is continuing
or will result from the making of any such Loan, and the representations and
warranties of Borrower contained in Article 3 of this Agreement are true and
correct in all material respects as of the Borrowing Date of such Loan.
(b) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of the most recent financial statements submitted to
Lender.
(c) BORROWING REQUEST. Borrower shall have delivered to Lender a Borrowing
Request for such Loan.
(d) NOTE. Borrower shall have delivered an executed Note evidencing such
Loan, in form and substance satisfactory to Lender.
(e) SUPPLEMENTAL LIEN FILINGS. Borrower shall have executed and delivered
such amendments or supplements to this Agreement and such financing statements
as Lender may reasonably request in connection with the proposed Loan, in order
to create or perfect or to maintain the perfection of Lender's Liens on the
Collateral.
(f) VCOC LIMITATION. Lender shall not be obligated to make any Loan under its
Commitment if at the time of or after giving effect to the proposed Loan Lender
would no longer qualify as: (A) a "venture capital operating company" under U.S.
Department of Labor Regulations Section 2510.3-101(d), Title 29 of the Code of
Federal Regulations, as amended; and (B) a "business development company" under
the provisions of federal Investment Company Act of 1940, as amended; and (C) a
"regulated investment company" under the provisions of the Internal Revenue Code
of 1986, as amended.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all obligations
to Lender, Borrower will:
5.1 NOTICE TO LENDER. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding affecting
Borrower where the amount claimed against Borrower is at the Threshold Amount or
more, or where the granting of the relief requested would have a Material
Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority, where such dispute would reasonably be
expected to have a Material Adverse Effect.
(c) The occurrence of any Event of Default or any event which with the giving
of notice, the passage of time, or both, would constitute an Event of Default.
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(d) Any change in the location of any of Borrower's places of business or
Collateral at least thirty (30) days in advance of such change, or of the
establishment of any new, or the discontinuance of any existing, place of
business.
(e) Any dispute or default by Borrower or any other party under any joint
venture, partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement which
could reasonably be expected to have a Material Adverse Effect.
(f) Any other matter which has resulted or might reasonably result in a
Material Adverse Change.
5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to be delivered to
Lender, in form and detail satisfactory to Lender the following financial
information, which Borrower warrants shall be accurate and complete in all
material respects:
(a) MONTHLY FINANCIAL STATEMENTS. As soon as available but no later than
thirty (30) days after the end of each month, Borrower's balance sheet as of the
end of such period, and Borrower's income statement for such period and for that
portion of Borrower's financial reporting year ending with such period, prepared
and attested by a responsible financial officer of Borrower as being complete
and correct and fairly presenting Borrower's financial condition and the results
of Borrower's operations. After a Qualified Public Offering, the foregoing
interim financial statements shall be delivered no later than 45 days after each
fiscal quarter and for the quarter-annual fiscal period then ended.
(b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no later than one
hundred twenty (120) days after and as of the end of each financial reporting
year, a complete copy of Borrower's audit report, which shall include balance
sheet, income statement, statement of changes in equity and statement of cash
flows for such year, prepared and certified by an independent certified public
accountant selected by Borrower and satisfactory to Lender (the "Accountant").
The Accountant's certification shall not be qualified or limited due to a
restricted or limited examination by the Accountant of any material portion of
Borrower's records or otherwise.
(c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and (b) above, a certificate
of the chief financial officer of Borrower substantially in the form of Exhibit
"C" to the Supplement (i) setting forth in reasonable detail any calculations
required to establish whether Borrower is in compliance with any financial
covenants or tests set forth in the Supplement, and (ii) stating whether any
Default or Event of Default exists on the date of such certificate, and if so,
setting forth the details thereof and the action which Borrower is taking or
proposes to take with respect thereto.
(d) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES. Promptly after sending,
issuing, making available, or filing, copies of all statements released to any
news media for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders, and, not
later than five (5) days after actual filing or the date such filing was first
due, all registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission, or any other governmental
or regulatory authority.
(e) OTHER INFORMATION. Such other statements, lists of property and accounts,
budgets, forecasts, reports, or other information as Lender may from time to
time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a "venture capital
operating company" to participate in, and influence the conduct of management of
Borrower through the exercise of "management rights," as such terms are defined
in 29 C.F.R. (S) 2510.3-101(d), and:
(a) Permit Lender to make available to Borrower, at no cost to Borrower,
"significant managerial assistance", as defined in Section 2(a)(47) of the
Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors, employees
or affiliates, (ii) Borrower's allowing Lender to provide recommendations of
prospective candidates for election to Borrower's Board of Directors, or (iii)
Lender, at Borrower's request, seeking the services of third-party consultants
to aid Borrower with respect to its management and operations;
(b) Permit Lender to make available consulting and advisory services to
officers of Borrower regarding Borrower's equipment acquisition and financing
plans, and such other matters affecting the business, financial
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condition and prospects of Borrower as Lender shall reasonably deem relevant;
and
(c) If Lender reasonably believes that financial or other developments
affecting Borrower have impaired or are likely to impair Borrower's ability to
perform its obligations under this Agreement, permit Lender reasonable access to
Borrower's management and/or Board of Directors and opportunity to present
Lender's views with respect to such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form of
business, and all rights and privileges necessary or desirable in the normal
course of its business; and keep all Borrower's property in good working order
and condition, ordinary wear and tear excepted.
5.5 INSURANCE. Maintain and keep in force insurance with an insurance
carrier having a policyholder rating of not less than "A" and financial category
rating of Class VII in "Best's Insurance Guide," unless otherwise approved by
Lender and in such amounts and types as is usual in the business carried on by
Borrower. Such insurance policies must be in form and substance satisfactory to
Lender, and shall list Lender as an additional insured or loss payee, as
applicable, on endorsement(s) in form reasonably acceptable to Lender. Borrower
shall furnish to Lender such endorsements, and upon Lender's request, copies of
any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and records, and
prepare all financial statements in accordance with GAAP, and in compliance with
the regulations of any governmental or regulatory authority having jurisdiction
over Borrower or Borrower's business; and permit employees or agents of Lender
at such reasonable times as Lender may request, at Borrower's expense, to
inspect Borrower's properties, and to examine, and make copies and memoranda of
Borrower's books, accounts and records.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party, except where the failure to so comply would not have a Material Adverse
Effect.
5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's obligations when due;
pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.9 SPECIAL COLLATERAL COVENANTS.
(a) MAINTENANCE OF COLLATERAL; INSPECTION. Do all things reasonably necessary
to maintain, preserve, protect and keep all Collateral in good working order and
salable condition, ordinary wear and tear excepted, deal with the Collateral in
all ways as are considered good practice by owners of like property, and use the
Collateral lawfully and, to the extent applicable, only as permitted by
Borrower's insurance policies. Maintain, or cause to be maintained, complete and
accurate Records relating to the Collateral. Upon reasonable prior notice at
reasonable times during normal business hours, Borrower hereby authorizes
Lender's officers, employees, representatives and agents to inspect the
Collateral and to discuss the Collateral and the Records relating thereto with
Borrower's officers and employees, and, in the case of any Right to Payment,
with any Person which is or may be obligated thereon.
(b) FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to Lender
all financing statements, notices and other documents (including, without
limitation, any filings with the United States Patent and Trademark Office) from
time to time reasonably requested by Lender to maintain a first perfected
security interest in the Collateral in favor of Lender; perform such other acts,
and execute and deliver to Lender such additional conveyances, assignments,
agreements and instruments, as Lender may at any time request in connection with
the administration and enforcement of this Agreement or Lender's rights, powers
and remedies hereunder.
(c) LIENS. Not create, incur, assume or permit to exist any Lien or grant
any other Person a negative pledge on any Collateral, except Permitted Liens.
(d) DOCUMENTS OF TITLE. Not sign or authorize the signing of any financing
statement or other document naming Borrower as debtor or obligor, or acquiesce
or cooperate in the issuance of any xxxx of lading, warehouse receipt or other
document or instrument of title with respect to any Collateral,
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except those negotiated to Lender, or those naming Lender as secured party.
(e) DISPOSITION OF COLLATERAL. Not sell, transfer, lease or otherwise
dispose of any Equipment; or dispose of any other Collateral except for fair
consideration and in the ordinary course of its business.
(f) CHANGE IN LOCATION OR NAME. Without at least 30 days' prior written
notice to Lender: (a) not relocate any Collateral or Records, its chief
executive office, or establish a place of business at a location other than as
specified in the Supplement; and (b) not change its name, mailing address,
location of Collateral, or its legal structure.
(g) DECALS, MARKINGS. At the request of Lender, firmly affix a decal,
stencil or other marking to designated items of Equipment, indicating thereon
the security interest of Lender.
(h) AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. Obtain and maintain such
acknowledgments, consents, waivers and agreements from the owner, lienholder,
mortgagee and landlord with respect to any real property on which Equipment is
located as Lender may from time to time reasonably require, all in form and
substance reasonably satisfactory to Lender.
(i) CERTAIN AGREEMENTS ON RIGHTS TO PAYMENT. Other than in the ordinary
course of business, not make any material discount, credit, rebate or other
reduction in the original amount owing on a Right to Payment or accept in
satisfaction of such a Right to Payment less than the original amount thereof.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all obligations
to Lender, Borrower will not (without Lender's prior written consent):
6.1 INDEBTEDNESS. Be indebted for borrowed money, the deferred purchase
price of property, or leases which would be capitalized in accordance with GAAP;
or become liable as a surety, guarantor, accommodation party or otherwise for or
upon the obligation of any other Person, except:
(a) Indebtedness incurred for the acquisition of supplies or inventory on
normal trade credit; unsecured indebtedness for money borrowed for working
capital or general corporate purposes from a commercial bank or institutional
lender up to $500,000.00 in aggregate principal amount outstanding at any time;
and other indebtedness incurred pursuant to one or more transactions permitted
under Section 6.4;
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(b) Indebtedness not to exceed Two Hundred Fifty Thousand Dollars ($250,000)
in aggregate principal amount outstanding at any time secured by purchase money
security interests;
(c) Indebtedness of Borrower under this Agreement or toVenture Lending &
Leasing, Inc.;
(d) Up to $750,000 of Indebtedness, singly or in the aggregate, in connection
with one or more business acquisitions permitted hereunder; and
(e) Any Indebtedness approved by Lender prior to the Closing Date.
6.2 LIENS. Create, incur, assume or permit to exist any Lien, or grant any
other Person a negative pledge, on any of Borrower's property, except Permitted
Liens. Borrower and Lender agree that this covenant is not intended to
constitute a lien, deed of trust, equitable mortgage, or security interest of
any kind on any of Borrower's real property, and this Agreement shall not be
recorded or recordable. Notwithstanding the foregoing, however, violation of
this covenant by Borrower shall constitute an Event of Default.
6.3 DIVIDENDS. Except after a Qualified Public Offering, pay any dividends
or purchase, redeem or otherwise acquire or make any other distribution with
respect to any of Borrower's capital stock, except (a) dividends or other
distributions solely of capital stock of Borrower, and (b) repurchases of stock
from employees upon termination of employment under reverse vesting or similar
repurchase plans and except for dividend rights of Summit Ventures III, L.P.
under that certain Investor Rights Agreement dated as of October 14, 1994.
6.4 CHANGES/MERGERS. Without the prior written consent of Lender (which
consent shall not be unreasonably withheld and shall be deemed given if Lender
shall have failed to notify Borrower of its withholding of consent for 30 or
more days after Borrower's request therefor), liquidate or dissolve, or enter
into any consolidation, merger, partnership, joint
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venture or other combination except for joint ventures, strategic alliances,
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licensing and similar arrangements customary in Borrower's industry for
businesses in the development stage of Borrower and which do not require
Borrower to assume or otherwise become liable for the obligations of any third
party not directly related to or arising out of such arrangement or, without the
prior written consent of Lender, require Borrower to transfer ownership of
assets to such joint venture or other entity; prepay any subordinated debt, debt
for borrowed money, or debt secured by any Permitted Lien, or enter into or
modify any agreement as a result of which the terms of payment of any such debt
are accelerated.
6.5 SALES OF ASSETS. Sell, transfer, lease or otherwise dispose of any of
Borrower's assets except for fair consideration and in the ordinary course of
its business or obsolete or worn assets.
6.6 LOANS/INVESTMENTS. Make or suffer to exist any loans, guaranties,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of Borrower's business;
(b) Investments in domestic certificates of deposit issued by, and other
domestic investments with, financial institutions organized under the laws of
the United States or a state thereof, having One Hundred Million Dollars
($100,000,000) in capital and a rating of at least "investment grade" or "A" by
Xxxxx'x or any successor rating agency;"
(c) Investments in marketable obligations of the United States of America and
in open market commercial paper given the highest credit rating by a national
credit agency and maturing not more than one year from the creation thereof;
(d) Temporary advances to cover incidental expenses to be incurred in the
ordinary course of business;
(e) Loans to a Person or guaranties of Indebtedness of a Person not to exceed
Two Hundred Fifty Thousand Dollars ($250,000) for any one Person and One Million
Dollars ($1,000,000) in aggregate with respect to all Persons, outstanding at
any time.
6.7 TRANSACTIONS WITH RELATED PERSONS. Directly or indirectly enter into any
transaction with or for the benefit of a Related Person on terms more favorable
to the Related Person than would have been obtainable in an "arms' length"
dealing.
6.8 OTHER BUSINESS. Engage in any material line of business other than the
business Borrower conducts as of the Closing Date.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loans shall be suspended. The occurrence of any of the following (each, an
"Event of Default") shall terminate any obligation of Lender to make any
additional Loan and shall, at the option of Lender (1) make all sums of Basic
Interest and principal, all Terminal Payments, and any Obligations and other
amounts owing under any Loan Documents immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor or any other notices or demands, and (2) give Lender the
right to exercise any other right or remedy provided by contract or applicable
law:
(a) Borrower shall fail to pay any principal, interest or Terminal Payment
under this Agreement, or fail to pay any fees or other charges when due under
any Loan Document, and such failure continues for three (3) Business Days or
more after the same first becomes due; or an Event of Default as defined in any
other Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement, certificate
or other document provided, by Borrower under any Loan Document shall prove to
have been false or misleading in any material respect when made or deemed made
herein.
(c) Borrower shall fail to pay its debts generally as they become due or
shall commence any Insolvency Proceeding with respect to itself; an involuntary
Insolvency Proceeding shall be filed against Borrower, or a custodian, receiver,
trustee, assignee for the benefit of creditors, or other similar official, shall
be appointed to take possession, custody or control of the properties of
Borrower, and such involuntary Insolvency Proceeding, petition or appointment is
acquiesced to by Borrower or is not dismissed within sixty (60) days; or the
dissolution or termination of the business of Borrower.
8
(d) Borrower shall be in default beyond any applicable period of grace or
cure under any other agreement involving the borrowing of money, the purchase of
property, the advance of credit or any other monetary liability of any kind to
Lender or to any Person which results in the acceleration of payment of such
obligation in an amount in excess of the Threshold Amount.
(e) Any governmental or regulatory authority shall take any judicial or
administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the reasonable
judgment of Lender, would have a Material Adverse Effect.
(f) Any sale, transfer or other disposition of all or a substantial or
material part of the assets of Borrower, including without limitation to any
trust or similar entity, shall occur.
(g) Any judgment(s) singly or in the aggregate in excess of the Threshold
Amount shall be entered against Borrower which remain unsatisfied, unvacated or
unstayed pending appeal for thirty (30) or more days after entry thereof.
(h) Any Person or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission) of forty percent (40%) or more of the outstanding shares of
voting stock of Borrower.
(i) Borrower shall fail to perform or observe any covenant contained in
Article 6 of this Agreement.
(j) Borrower shall fail to perform or observe any covenant contained in this
Agreement or any other Loan Document (other than a covenant which is dealt with
specifically elsewhere in this Article 7) and the breach of such covenant is not
cured within 30 days after the sooner to occur of Borrower's receipt of notice
of such breach from Lender or the date on which such breach first becomes known
to any officer of Borrower; provided, however that if such breach is not capable
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of being cured within such 30-day period and Borrower timely notifies Lender of
such fact and Borrower diligently pursues such cure, then the cure period shall
be extended to the date requested in Borrower's notice but in no event more than
90 days from the initial breach; provided, further, that such additional 60-day
-------- -------
opportunity to cure shall not apply in the case of any failure to perform or
observe any covenant which has been the subject of a prior failure within the
preceding 180 days or which is a willful and knowing breach by Borrower.
7.2 REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of
an Event of Default, Lender shall be entitled to, at its option, exercise any or
all of the rights and remedies available to a secured party under the Uniform
Commercial Code or any other applicable law, and exercise any or all of its
rights and remedies provided for in this Agreement and in any other Loan
Document. The obligations of Borrower under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Obligations is rescinded or must otherwise be returned by Lender upon, on
account of, or in connection with, the insolvency, bankruptcy or reorganization
of Borrower or otherwise, all as though such payment had not been made.
7.3 SALE OF COLLATERAL. Upon the occurrence and during the continuance of an
Event of Default, Lender may sell all or any part of the Collateral, at public
or private sales, to itself, a wholesaler, retailer or investor, for cash, upon
credit or for future delivery, and at such price or prices as could reasonably
be deemed commercially reasonable under the circumstances. To the extent
permitted by law, Borrower hereby specifically waives all rights of redemption
and any rights of stay or appraisal which it has or may have under any
applicable law in effect from time to time. Any such public or private sales
shall be held at such times and at such place(s) as Lender may determine. In
case of the sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by Lender until the selling
price is paid by the purchaser, but Lender shall not incur any liability in case
of the failure of such purchaser to pay for the Collateral and, in case of any
such failure, such Collateral may be resold. Lender may, instead of exercising
its power of sale, proceed to enforce its security interest in the Collateral by
seeking a judgment or decree of a court of competent jurisdiction. Without
limiting the generality of the foregoing, if an Event of Default is in effect,
(1) Subject to the rights of any third parties, Lender may license, or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any Patents or Trademarks included in the Collateral
throughout the world for such term or terms, on such conditions and in such
manner as Lender shall in its sole discretion determine;
9
(2) Lender may (without assuming any obligations or liability thereunder), at
any time and from time to time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Borrower
in, to and under any Patent Licenses or Trademark Licenses and take or refrain
from taking any action under any thereof, and Borrower hereby releases Lender
from, and agrees to hold Lender free and harmless from and against any claims
arising out of, any lawful action so taken or omitted to be taken with respect
thereto other than claims arising out of Lender's gross negligence or willful
misconduct; and
(3) Upon request by Lender, Borrower will execute and deliver to Lender a
power of attorney, in form and substance reasonably satisfactory to Lender for
the implementation of any lease, assignment, license, sublicense, grant of
option, sale or other disposition of a Patent or Trademark. In the event of any
such disposition pursuant to this clause 3, Borrower shall supply its know-how
--------
and expertise relating to the products or services made or rendered in
connection with Patents, the manufacture and sale of the products bearing
Trademarks, and its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to Lender.
7.4 BORROWER'S OBLIGATIONS UPON DEFAULT. Upon the request of Lender after
the occurrence and during the continuance of an Event of Default, Borrower will:
(A) Assemble and make available to Lender the Collateral at such place(s) as
Lender shall reasonably designate, segregating all Collateral so that each item
is capable of identification; and
(B) Subject to the rights of any lessor, permit Lender, by Lender's officers,
employees, agents and representatives, to enter any premises where any
Collateral is located, to take possession of the Collateral, to complete the
processing, manufacture or repair of any Collateral, and to remove the
Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of Lender for rent or other compensation for the use of
Borrower's premises.
ARTICLE 8 - SPECIAL COLLATERAL PROVISIONS
8.1 COMPROMISE AND COLLECTION. Borrower and Lender recognize that setoffs,
counterclaims, defenses and other claims may be asserted by obligors with
respect to certain of the Rights to Payment; that certain of the Rights to
Payment may be or become uncollectible in whole or in part; and that the expense
and probability of success of litigating a disputed Right to Payment may exceed
the amount that reasonably may be expected to be recovered with respect to such
Right to Payment. Borrower hereby authorizes Lender, after and during the
continuance of an Event of Default, to compromise with the obligor, accept in
full payment of any Right to Payment such amount as Lender shall negotiate with
the obligor, or abandon any Right to Payment. Any such action by Lender shall
be considered commercially reasonable so long as Lender acts in good faith based
on information known to it at the time it takes any such action.
8.2 PERFORMANCE OF BORROWER'S OBLIGATIONS. Upon the occurrence and during the
continuance of an Event of Default, without having any obligation to do so, upon
reasonable prior notice to Borrower, Lender may perform or pay any obligation
which Borrower has agreed to perform or pay under this Agreement, including,
without limitation, the payment or discharge of taxes or Liens levied or placed
on or threatened against the Collateral. In so performing or paying, Lender
shall determine the action to be taken and the amount necessary to discharge
such obligations. Borrower shall reimburse Lender on demand for any amounts
paid by Lender pursuant to this Section, which amounts shall constitute
Obligations secured by the Collateral and shall bear interest.
8.3 POWER OF ATTORNEY. For the purpose of protecting and preserving the
Collateral and Lender's rights under this Agreement, Borrower hereby irrevocably
appoints Lender, with full power of substitution, as its attorney-in-fact with
full power and authority, after the occurrence and during the continuance of an
Event of Default, to do any act which Borrower is obligated to do hereunder; to
exercise such rights with respect to the Collateral as Borrower might exercise;
to use such Inventory, Equipment, Fixtures or other property as Borrower might
use; to enter Borrower's premises; to give notice of Lender's security interest
in, and to collect the Collateral; and to execute and file in Borrower's name
any financing statements, amendments and
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continuation statements necessary or desirable to perfect or continue the
perfection of Lender's security interests in the Collateral. Borrower hereby
ratifies all that Lender shall lawfully do or cause to be done by virtue of this
appointment.
8.4 AUTHORIZATION FOR LENDER TO TAKE CERTAIN ACTION. The power of attorney
created in Section 8.3 is a power coupled with an interest and shall be
irrevocable. The powers conferred on Lender hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Lender to
exercise such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and in no event
shall Lender or any of its directors, officers, employees, agents or
representatives be responsible to Borrower for any act or failure to act, except
for gross negligence or willful misconduct. After the occurrence and during the
continuance of an Event of Default, Lender may exercise this power of attorney
without notice to or assent of Borrower, in the name of Borrower, or in Lender's
own name, from time to time in Lender's sole discretion and at Borrower's
expense. To further carry out the terms of this Agreement, after the occurrence
and during the continuance of an Event of Default, Lender may:
(A) Execute any statements or documents or take possession of, and endorse and
collect and receive delivery or payment of, any checks, drafts, notes,
acceptances or other instruments and documents constituting Collateral, or
constituting the payment of amounts due and to become due or any performance to
be rendered with respect to the Collateral.
(B) Sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts; drafts, certificates and statements under any
commercial or standby letter of credit relating to Collateral; assignments,
verifications and notices in connection with Accounts; or any other documents
relating to the Collateral, including without limitation the Records.
(C) Use or operate Collateral or any other property of Borrower for the
purpose of preserving or liquidating Collateral.
(D) File any claim or take any other action or proceeding in any court of law
or equity or as otherwise deemed appropriate by Lender for the purpose of
collecting any and all monies due or securing any performance to be rendered
with respect to the Collateral.
(E) Commence, prosecute or defend any suits, actions or proceedings or as
otherwise deemed appropriate by Lender for the purpose of protecting or
collecting the Collateral. In furtherance of this right, upon the occurrence
and during the continuance of an Event of Default, Lender may apply for the
appointment of a receiver or similar official to operate Borrower's business.
(F) Prepare, adjust, execute, deliver and receive payment under insurance
claims, and collect and receive payment of and endorse any instrument in payment
of loss or returned premiums or any other insurance refund or return, and apply
such amounts at Lender's sole discretion, toward repayment of the Obligations or
replacement of the Collateral.
8.5 APPLICATION OF PROCEEDS. Any Proceeds and other monies or property
received by Lender pursuant to the terms of this Agreement or any Loan Document
may be applied by Lender first to the payment of expenses of collection,
including without limitation reasonable attorneys' fees, and then to the payment
of the Obligations in such order of application as Lender may elect.
8.6 DEFICIENCY. If the Proceeds of any disposition of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all the Obligations, plus all other sums required to be expended or
distributed by Lender, then Borrower shall be liable for any such deficiency.
8.7 LENDER TRANSFER. Upon the transfer of all or any part of the
Obligations, Lender may transfer all or part of the Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender shall
retain all rights and powers hereby given.
8.8 LENDER'S DUTIES.
(A) Lender shall use reasonable care in the custody and preservation of any
Collateral in its possession. Without limitation on other conduct which may be
considered the exercise of reasonable care, Lender shall be deemed to have
exercised reasonable
11
care in the custody and preservation of such Collateral if such Collateral is
accorded treatment substantially equal to that which Lender accords its own
property, it being understood that Lender shall not have any responsibility for
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, declining value, tenders or other matters relative to any
Collateral, regardless of whether Lender has or is deemed to have knowledge of
such matters; or taking any necessary steps to preserve any rights against any
Person with respect to any Collateral. Under no circumstances shall Lender be
responsible for any injury or loss to the Collateral, or any part thereof,
arising from any cause beyond the reasonable control of Lender.
(B) Lender may at any time deliver the Collateral or any part thereof to
Borrower and the receipt of Borrower shall be a complete and full acquittance
for the Collateral so delivered, and Lender shall thereafter be discharged from
any liability or responsibility therefor.
(C) Neither Lender, nor any of its directors, officers, employees, agents,
attorneys or any other person affiliated with or representing Lender shall be
liable for any claims, demands, losses or damages, of any kind whatsoever, made,
claimed, incurred or suffered by Borrower or any other party through the
ordinary negligence of Lender, or any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Lender.
8.9 TERMINATION OF SECURITY INTERESTS. Upon the payment in full of the
Obligations and if Lender has no further obligations under its Commitment, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Borrower. Upon any such termination, the Lender
shall, at Borrower's expense, execute and deliver to Borrower such documents as
Borrower shall reasonably request to evidence such termination.
ARTICLE 9 - GENERAL PROVISIONS
9.1 NOTICES. Any notice given by any party under any Loan Document shall be
in writing and personally delivered, sent by overnight courier, or United States
mail, postage prepaid, or sent by facsimile, or other authenticated message,
charges prepaid, to the other party's or parties' addresses shown on the
Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written
notice of such change to each other party. Notice given by hand delivery shall
be deemed received on the date delivered; if sent by overnight courier, on the
next business day after delivery to the courier service; if by first class mail,
on the third business day after deposit in the U.S. Mail; and if by facsimile,
on the date of transmission.
9.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer Borrower's rights or
obligations under any Loan Document without Lender's prior written consent.
Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
obligations under the Loan Documents. In connection with any of the foregoing,
Lender may disclose all documents and information which Lender now or hereafter
may have relating to the Loans, Borrower, or its business; provided that any
person who receives such information shall have agreed in writing in advance to
maintain the confidentiality of such information on terms reasonably acceptable
to Borrower.
9.3 NO WAIVER. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan Document.
No failure or delay on the part of Lender in exercising any power, right, or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right, or privilege shall preclude
any further exercise thereof or the exercise of any other power, right or
privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
9.4 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
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9.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document executed by
Borrower which is prohibited or unenforceable in any jurisdiction, shall be so
only as to such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of any such Loan Document
shall remain valid and enforceable.
9.6 ACCOUNTING TERMS. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined and
prepared in accordance with GAAP.
9.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend and
indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys' fees and costs) and other amounts
incurred by Lender and each such Agent, arising from (i) the matters
contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; PROVIDED, HOWEVER, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This indemnification shall survive the payment and satisfaction of all of
Borrower's Obligations to Lender.
9.8 REIMBURSEMENT. Borrower shall reimburse Lender for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation and negotiation of the Loan Documents, (b) the amendment and
enforcement of the Loan Documents, including without limitation during any
workout, attempted workout, and/or in connection with the rendering of legal
advice as to Lender's rights, remedies and obligations under the Loan Documents,
(c) collecting any sum which becomes due Lender under any Loan Document, (d) any
proceeding for declaratory relief, any counterclaim to any proceeding, or any
appeal, or (e) the protection, preservation or enforcement of any rights of
Lender. For the purposes of this section, attorneys' fees shall include,
without limitation, fees incurred in connection with the following: (1)
contempt proceedings; (2) discovery; (3) any motion, proceeding or other
activity of any kind in connection with an Insolvency Proceeding; (4)
garnishment, levy, and debtor and third party examinations; and (5)
postjudgment motions and proceedings of any kind, including without limitation
any activity taken to collect or enforce any judgment. All of the foregoing
costs and expenses shall be payable upon demand by Lender, and if not paid
within forty-five (45) days of presentation of invoices shall bear interest at
the highest applicable Default Rate.
9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number
of counterparts which, when taken together, shall constitute but one agreement.
9.10 ENTIRE AGREEMENT. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
9.11 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. BORROWER AND LENDER EACH
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WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE
MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
9.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
ARTICLE 10 - DEFINITIONS
The definitions appearing in this Agreement or any Supplement shall be
applicable to both the singular and plural forms of the defined terms:
"ACCOUNT DEBTOR" means the Person obligated upon an Account.
"ACCOUNTS" means (i) all rights to the payment of money now owned or hereafter
acquired by Borrower, whether due or to become due and whether or not earned by
performance, including but not limited to, accounts, chattel paper, instruments,
and general intangibles; and (ii) for purposes of this Agreement amounts to
become payable by existing subscribers to Borrower's database services with
respect to subscriptions which are eligible or scheduled for renewal within
ninety (90) days after any date of determination of Eligible Accounts.
"AFFILIATE" means any Person which directly or indirectly controls, is
controlled by, or is under common control with Borrower. "Control," "controlled
by" and "under common control with" mean direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise); provided,
that control shall be conclusively presumed when any Person or affiliated group
directly or indirectly owns five percent (5%) or more of the securities having
ordinary voting power for the election of directors of a corporation.
"AGREEMENT" means this Loan and Security Agreement and each Supplement thereto,
as each may be amended or supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
(S)101, et seq.), as amended.
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"BASIC INTEREST" means the fixed rate of interest payable on the outstanding
balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds of a Loan are
disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in substantially the
form of Exhibit "B" to the Supplement, requesting the funding of one or more
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Loans on a particular Borrowing Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City or San Francisco are authorized or required by
law to close.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" means all Debtor's Accounts, Deposit Accounts, Equipment, Fixtures,
General Intangibles, Goods, Inventory, Rights to Payment, and securities now
owned or hereafter acquired, wherever located, and whether held by Debtor or any
third party, and all royalties, proceeds and products thereof, including all
insurance and condemnation proceeds ("Proceeds"), and all Records.
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"COMMITMENT" means the obligation of Lender to make Loans to Borrower up to the
aggregate principal amount set forth in the Supplement.
"DEFAULT" means an event which with the giving of notice, passage of time, or
both would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.7.
"DEPOSIT ACCOUNTS" means all Borrower's demand, time, savings, passbook or
similar accounts maintained with a financial institution or credit union.
"DESIGNATED RATE" means the rate of interest per annum described in the
Supplement as being applicable to an outstanding Loan from time to time.
"ELIGIBLE ACCOUNT" shall mean an Account:
(A) Arising from the sale or lease of goods, or the licensing of data, or the
performance of services by Borrower in the ordinary course of Borrower's
business;
(B) Against which is asserted no defense, counterclaim, discount, or setoff;
(C) That is an accurate statement of the indebtedness incurred by the Account
Debtor;
(D) Owned by Borrower free and clear of all liens, rights, claims, and
interests of others except security interests in favor of Lender;
(E) That does not arise from a sale or lease to or performance of services for
an individual or entity employed by or having common ownership with
Borrower;
F) That is not in default. An Account shall be deemed in default upon the
occurrence of any of the following:
(I) The Account is not paid or payable within a ninety (90)-day period
starting from the original invoice date;
(II) The Account Debtor suspends business, becomes insolvent, or fails to
pay its debts generally as they come due; or
(III) Any petition is filed by or against the Account Debtor under the
Bankruptcy Reform Act, Title 11 of the United States Code or under any
other law relating to bankruptcy, insolvency, reorganization or other
relief for debtors.
(G) That is not the obligation of an Account Debtor that is the federal
government, any state or political subdivision thereof, unless Borrower has
complied in form and substance satisfactory to Lender with the Assignment
of Claims Act(s) or any successor thereof in effect from time to time, or
other applicable law(s) or regulation(s);
(H) That is not the obligation of an Account Debtor located in a foreign
country, unless Lender consents in writing and the Account is insured by
the Foreign Credit Insurance Association or covered by a letter of credit
issued or confirmed by a bank located in the United States of America
acceptable to Lender, each such insurance policy or letter of credit being
in form and substance satisfactory to Lender; and
(I) That is otherwise acceptable to Lender.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, or safety matters.
"EQUIPMENT" means all of Borrower's equipment now owned or hereafter acquired,
including but not limited to machinery, machine parts, furniture, furnishings
and all tangible personal property used in the business of Borrower and all such
property which is or is to become fixtures on real property, and all
improvements, replacements, accessions and additions thereto, wherever located,
and all proceeds thereof arising from the sale, lease, rental or other use or
disposition of any such property, including all rights to payment with respect
to insurance or condemnation, returned premiums, or any cause of action relating
to any of the foregoing.
"EVENT OF DEFAULT" means any event described in Section 7.1.
15
"FIXTURES" means all items of personal property of Borrower that are so related
to the real property upon which they are located that an interest in them arises
under real property law, and improvements, replacements, parts, accessions and
additions thereto, and substitutions therefor.
"GAAP" means generally accepted accounting principles and practices consistent
with those principles and practices promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of Certified
Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
"GENERAL INTANGIBLES" means all personal property of Borrower, other than Goods,
not otherwise defined as Collateral, including without limitation all interests
or claims in insurance policies; literary property; trade names, trade name
rights; Trademarks, Trademark rights, copyrights, Patents, and all applications
therefor; licenses, permits, franchises and like privileges or rights issued by
any governmental or regulatory authority; income tax refunds; customer lists;
claims and causes of action (whether in contract, tort or otherwise), judgments
and all guaranty claims, leasehold interests in personal property, security
interests or other security held by or guaranteed to the Borrower to secure the
payment by an account debtor of any of the Accounts.
"GOODS" means all money and other personal property of Borrower, other than
General Intangibles, not otherwise defined as Collateral.
"INDEBTEDNESS" of any Person means at any date, without duplication and without
regard to whether matured or unmatured, absolute or contingent: (i) all
Obligations of such Person for borrowed money; (ii) all Obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person to purchase, redeem, exchange, convert or
otherwise acquire for cash on a present or deferred basis any capital stock of
such Person or any warrants, rights or options to acquire such capital stock,
now or hereafter outstanding, except to the extent that such obligations remain
performable solely at the option of such Person; (viii) all obligations to
repurchase assets previously sold (including any obligation to repurchase any
accounts or chattel paper under any factoring, receivables purchase, or similar
arrangement); (ix) obligations of such Person under interest rate swap, cap,
collar or similar hedging arrangements; and (x) all obligations of others of any
type described in clause (i) through clause (ix) above guaranteed by such
Person.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors, undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"INVENTORY" means all Borrower's raw materials, advertising, packaging and
shipping materials, work in process, finished goods and goods held for sale or
lease or furnished under contracts of service, and all returned and repossessed
goods, and all goods covered by documents of title, including warehouse
receipts, bills of lading and all other documents of every type covering all or
any part of the Collateral.
"LIEN" means any voluntary or involuntary security interest, mortgage, pledge,
claim, charge, encumbrance, title retention agreement, or third party interest,
covering all or any part of the property of Borrower or any other Person.
"LOAN" means any Term Loan or Equipment Loan.
"LOAN DOCUMENTS" means, individually and collectively, this Loan and Security
Agreement, the Supplement, each Note, and any other security or pledge
agreement(s), any Warrants issued by Borrower in connection with this Agreement,
and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the
16
extensions of credit which are the subject of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a material
adverse change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of Borrower; (b) a material
impairment of the ability of Borrower to perform under any Loan Document; or (c)
a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of (i) its maturity by
reason of acceleration, or (ii) its stated maturity date; and is the date on
which payment of all outstanding principal, accrued interest, and the Terminal
Payment with respect to such Loan is due.
"NOTE" means a promissory note substantially in the form attached to the
Supplement as Exhibit "A", executed by Borrower evidencing each Loan.
-----------
"OBLIGATIONS" means all debts, obligations and liabilities of Borrower to Lender
currently existing or now or hereafter made, incurred or created under, pursuant
to or in connection with this Agreement, whether voluntary or involuntary and
however arising or evidenced, whether direct or acquired by Lender by assignment
or succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly, or whether recovery upon such debt may be or become
barred by any statute of limitations or otherwise unenforceable; and all
renewals, extensions and modifications thereof; and all attorneys' fees and
costs incurred by Lender in connection with the collection and enforcement
thereof as provided for in any Loan Document.
"PATENT LICENSE" means any written agreement now or hereafter in existence
granting to Borrower any right to make, use, sell or practice any invention on
which a Patent is in existence.
"PATENTS" means all of the following: (i) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including, without limitation, registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any state thereof or any other country or any political
subdivision thereof, and (ii) all reissues, divisions, continuations,
continuations-in-part, renewals or extensions thereof.
"PATENT COLLATERAL ASSIGNMENT" means any Patent Collateral Assignment executed
and delivered by Borrower in favor of Lender, as the same may be amended from
time to time.
"PERMITTED LIEN" means
(A) Involuntary Liens which, in the aggregate, would not have a Material
Adverse Effect and which in any event would not the Threshold Amount;
(B) Liens for current taxes or other governmental or regulatory assessments
which are not delinquent, or which are contested in good faith by the
appropriate procedures and for which appropriate reserves are maintained;
(C) security interests on any property held or acquired by Borrower in the
ordinary course of business securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property;
provided, that such Lien attaches solely to the property acquired with such
--------
Indebtedness and that the principal amount of such Indebtedness does not exceed
one hundred percent (100%) of the cost of such property; and further provided,
------- --------
that such property is not equipment with respect to which a Loan has been made
hereunder.
(D) Liens in favor of Lender or Venture Lending & Leasing, Inc.;
(E) bankers' liens, rights of setoff and similar Liens incurred on deposits
made in the ordinary course of business;
(F) materialmen's, mechanics', repairmen's, employees' or other like Liens
arising in the ordinary course of business and which are not delinquent for more
than 45 days or are being contested in good faith by appropriate proceedings;
(G) any judgment, attachment or similar Lien, unless the judgment it secures
has not been discharged or execution thereof effectively stayed and bonded
against pending appeal within 30 days of the entry thereof;
(H) licenses or sublicenses of Patents, Patent Licenses, Trademarks or
Trademark Licenses
17
permitted under the Trademark Collateral Assignment or the Patent Collateral
Assignment; and.
(I) Liens which have been approved by Lender in writing prior to the Closing
Date.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly underwritten public
offering of Borrower's common stock with aggregate proceeds of not less than
$10,000,000 (prior to underwriting expenses and commissions).
"RECORDS" means all Borrower's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Borrower's business.
"RELATED PERSON" means any Affiliate of Borrower, or any officer, employee,
director or equity security holder of Borrower or any Affiliate.
"RIGHTS TO PAYMENT" means all Borrower's accounts, instruments, contract rights,
documents, chattel paper and all other rights to payment, including, without
limitation, the Accounts, all negotiable certificates of deposit and all rights
to payment under any Patent License, any Trademark License, or any commercial or
standby letter of credit.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount payable on the
Maturity Date of such Loan in an amount equal to that percentage of the original
principal amount of such Loan specified in the Supplement.
"TERMINATION DATE" has the meaning specified in the Supplement.
"THRESHOLD AMOUNT" has the meaning specified in the Supplement.
"TRADEMARK LICENSE" means any written agreement now or hereafter in existence
granting to Borrower any right to use any Trademark.
"TRADEMARKS" means all of the following: (i) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or will appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, and (ii) all reissues, divisions,
continuations, continuations-in-part, renewals or extensions thereof.
"TRADEMARK COLLATERAL ASSIGNMENT" means any Trademark Collateral Assignment
executed and delivered by Borrower in favor of Lender, as the same may be
amended from time to time.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
18
SUPPLEMENT
TO THE
LOAN AND SECURITY AGREEMENT
DATED AS OF FEBRUARY 12, 1999
BETWEEN
XXXXX.XXX, INC. ("BORROWER")
AND
VENTURE LENDING & LEASING II, INC. ("LENDER")
--------------------------------------------------------------------------------
This is a Supplement identified in the document entitled Loan and
Security Agreement dated as of February 12, 1999 between Borrower and Lender.
All capitalized terms used in this Supplement and not otherwise defined in this
Supplement have the meanings ascribed to them in Section 10 of the Loan and
Security Agreement, which is incorporated in its entirety into this Supplement.
In the event of any inconsistency between the provisions of that document and
this Supplement, this Supplement is controlling. Execution of this Supplement by
the Lender and Borrower shall constitute execution of the Loan and Security
Agreement.
In addition to the provisions of the Loan and Security Agreement, the
parties agree as follows:
1) - ADDITIONAL DEFINITIONS:
-------------------------
"BORROWING BASE" means, with respect to any Term Loan as of date of
determination, an amount at all times equal the lesser of (a) $1,800,000 minus
any Equipment Loans funded hereunder; or (b) eighty percent (80%) of Borrower's
Eligible Accounts.
"COLLATERAL COVERAGE RATIO" means, as of any date of determination,
the ratio of (i) Borrower's total Obligations to Lender then outstanding, to
(ii) the sum of (a) 80% of Eligible Accounts.
"COMMITMENT": Lender commits to make Term Loans or Equipment Loans to
---------- ---------------
Borrower up to the aggregate, original principal amount of One Million Eight
Hundred Thousand Dollars ($1,800,000.00). Subject to the limitations set forth
in this Supplement and the Loan and Security Agreement, a Loan may be advanced
as an Equipment Loan, the proceeds of which shall be used to finance Borrower's
acquisition or carrying of computer, research and development and general
purpose office equipment; up to fifty percent (50%) of the original principal
amount of Equipment Loans advanced may be used to finance software or for tenant
improvements at premises leased by Borrower. A Loan may also be advanced as a
Term Loan, the proceeds of which shall be used by Borrower for general working
capital purposes. Except to the extent the remaining Commitment is a lesser
amount, each Equipment Loan requested by Borrower to be made on a single
Business Day shall be for a minimum principal amount of $100,000, and each Term
Loan requested by Borrower to be made on a single Business Day shall be for a
minimum principal amount of $100,000 or a multiple thereof.
"DESIGNATED RATE": The Designated Rate is Eight and 75/100 percent
(8.75%) per annum.
"TERMINAL PAYMENT": Each Terminal Payment shall be an amount equal to
Fifteen percent (15%) of the original principal amount of the associated Loan.
"TERMINATION DATE": The Termination Date is the earlier of (a) the
date Lender may terminate making Loans or extending other credit pursuant to the
rights of Lender under Article 7 of the Agreement, or (b) March 31, 2000.
"THRESHOLD AMOUNT": One Hundred Thousand Dollars ($100,000.00).
Page 1
2) - ADDITIONAL TERMS AND CONDITIONS:
----------------------------------
A. ISSUANCE OF WARRANT TO LENDER. As additional consideration for the
making of the Loans under the Agreement, upon the making of, and as a condition
to, the initial Loan, Lender shall be entitled to receive a warrant to purchase
a number of shares of Class B common stock of Borrower ("Warrant Shares") with
an aggregate initial exercise price of $225,000.00 and a per share exercise
price that is halfway between the last ($1.8031) and the next round of equity
financing. If there is no new equity financing done within the next 18 months of
the date of the Loan agreement then the warrant exercise price will equal $2.70.
The warrant issued under this Agreement shall be in substantially the form
attached hereto as Exhibit "D"; shall be transferable by Lender, subject to
-----------
compliance with applicable securities laws; shall expire not earlier than seven
years from the date of issue and shall include piggy-back registration rights,
"net issuance" provisions, and anti-dilution protections reasonably satisfactory
to Lender and its counsel.
B. LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Notwithstanding
anything to the contrary in Section 9.8 of the Loan and Security Agreement,
Borrower's obligation to reimburse Lender its attorneys' fees and costs of
documenting this transaction shall not exceed $2,000.00 .
C. LIMITATION ON EQUIPMENT LOANS. Each Loan shall be in an amount not to
exceed one hundred percent (100%) of the amount paid or payable by Borrower to a
non-affiliated manufacturer, vendor or dealer for an item of equipment as shown
on an invoice therefor (excluding any commissions and any portion of the payment
which relates to the servicing of the equipment and sales taxes payable by
Borrower upon acquisition, and delivery charges). Lender has the right to
approve individual items of Equipment for funding.
D. BROKER FEE. Borrower authorizes and directs Lender, and Lender
agrees, to remit directly to Xx. Xxxx Xxxx on each Borrowing Date two percent
(2%) of the proceeds of each Loan, as a broker's fee for the Facilities.
E. PREPAYMENT OF LOANS
(A) MANDATORY PREPAYMENTS OF TERM LOAN. Borrower agrees that if the
aggregate outstanding principal balance of all Term Loans then outstanding on
any date exceeds the Borrowing Base on such date, then Borrower if requested by
Lender will immediately prepay Term Loans in an amount equal to the excess.
(B) MANDATORY PREPAYMENTS OF EQUIPMENT LOANS. Borrower shall be
required to prepay any Equipment Loan from the net proceeds of any insurance or
condemnation awards paid in respect of the items of equipment financed with the
proceeds of such Loan; provided, that such prepayment shall not be required, so
--------
long as no Event of Default otherwise exists, (i) if Borrower uses such net
proceeds to purchase replacements of equipment lost through casualty or
condemnation and such replacement equipment is subject to no Liens other than
Lender's, or (ii) with respect to losses of equipment which in aggregate during
any consecutive twelve-month period has a fair market value or book value,
whichever is more, of $75,000 or less.
(C) PREPAYMENTS GENERALLY. No Loan may be voluntarily prepaid except
as provided in this subsection (c). Borrower may prepay any Loan, in whole or
in part in minimum payments of $50,000 at any time after the first anniversary
of the Borrowing Date for such Loan; provided that any prepayment, whether
--------
voluntary or involuntary as a result of acceleration or otherwise, must be
accompanied by payment of: (i) a premium equal to 2.00% of the amount of
principal so prepaid if such prepayment is made during the 12-month period
between the first and second anniversaries, or a 1.00% premium if such
prepayment is made during the 12-month period between the second and third
anniversaries (there being no premium or penalty payable after the third
anniversary of the Borrowing Date of such Loan); (ii) accrued Basic Interest to
the date of such prepayment; and (iii) all the Terminal Payment on the Loan so
prepaid (or a ratable portion of such Terminal Payment, if less than all of the
Page 2
Loan is prepaid). Unless otherwise agreed by Lender, any partial prepayment of a
Loan shall be applied in inverse order of maturity to the most remote principal
installment then unpaid on such Loan. No premium or penalty shall be required in
the case of a prepayment of all Loans following Lender's refusal to fund any
portion of the Commitment pursuant to Section 4.2(b) or Section 4.2(f).
F. COMMITMENT FEE. In consideration of Lender's commitments hereunder,
--------------
Borrower shall pay Lender a fee (the "Commitment Fee") in the amount of $12,000.
Lender acknowledges prior receipt of the Commitment Fee.
G. REDUCTION OF WARRANT AND FEE If Lender has not made Loans in the
----------------------------
aggregate principal amount equal to the aggregate Commitment by March 31, 2000,
solely as a result of either the limitation on Lender under Section 4.2(b) or
Lender's determination that the condition precedent in Section 4.2(f) has not
been satisfied, then the maximum number of shares issuable under the Warrant
shall be reduced proportionately based on the ratio of the aggregate principal
amount of Loans actually funded over the aggregate Commitment; and Lender shall
refund to Borrower a proportionate amount of the Commitment Fee.
H. Fundings above $800,000 from this facility will be subject to
Borrower's raising an additional $2,000,000 of equity financing from a venture
capital firm acceptable to Lender or sign a Letter of Intent to do an IPO or a
Mezzanine financing with Venture Capitalist or an Investment Banker acceptable
to Lender.
3) - ADDITIONAL REPRESENTATIONS:
-----------------------------
Borrower represents and warrants that as of the Closing Date:
Its chief executive office is located at: 0000 Xxxxxxx Xxxxxx Xx.
Xxx Xxxxx, XX 00000-0000
Its Inventory is located at: same
Its Equipment is located at: same
Its Records are located at: same
In addition to its chief executive office, Borrower maintains offices
or operates its business at the following locations:
Other than its full corporate name, Debtor has conducted business using
the following trade names or fictitious business names:
Comps Infosystems, Inc.
4) - ADDITIONAL LOAN DOCUMENTS:
----------------------------
Form of Note Exhibit "A"
Form of Borrowing Request Exhibit "B"
Form of Compliance Certificate Exhibit "C"
Patent Collateral Assignment Exhibit "D"
Trademark Collateral Assignment Exhibit "E"
Form of Warrant Exhibit "F"
Page 3
IN WITNESS WHEREOF, the parties have executed this Supplement as of the
date first above written.
BORROWER: LENDER:
XXXXX.XXX, INC. VENTURE LENDING & LEASING II INC.
By: /s/ C A CRANE By: /s/ XXXXXXXX X. XXXXXXXXX
------------------------- -----------------------------
Name: C A Crane Name: Xxxxxxxx X. Xxxxxxxxx
----------------------- ---------------------------
Title: President and CEO Title: President
---------------------- --------------------------
Address for Notices: Attn: Chief Financial Officer Attn: Chief Financial Officer
0000 Xxxxxxx Xxxxxx Xx. 0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000 Xxx Xxxx, XX, 00000
Fax # (000) 000-0000 Fax # (000)000-0000
Page 4
EXHIBIT "A"
-----------
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$____________________, _____________________, 000___
Xxx Xxxx, Xxxxxxxxxx
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000, or at such other
place as Lender may designate in writing, in lawful money of the United States
of America, the principal sum of _____________________________________ Dollars
($__________), with Basic Interest thereon from the date hereof until maturity,
whether scheduled or accelerated, at a fixed rate per annum of ____________
percent (___%), and with a Terminal Payment in the sum of __________[15% of face
------------
amount]__________ Dollars ($__________) payable on the Maturity Date.
-------
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan Agreement dated as of February __, 1999, between Borrower
and Lender. Each capitalized term not otherwise defined herein shall have the
meaning set forth in the Loan Agreement. The Loan Agreement contains provisions
for the acceleration of the maturity of this Note upon the happening of certain
stated events.
Principal of and interest on this Note shall be payable as follows: (Actual
Notes will be for either a Term Loan or an Equipment Loan)
TERM LOANS
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for the
period from the Borrowing Date through ___[THE LAST DAY OF THE SAME MONTH]___;
--------------------------------
(ii) a first (1st) amortization installment of principal and Basic Interest in
the amount of $_________________, in advance for the month of [ first full month
-----------------
after Borrowing Date ]; and (iii) a 36th amortization installment of principal
---------------------- ----
and Basic Interest in the amount of $_________________ in advance for the month
of [36th full month after the Borrowing Date].
----------------------------------------
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in thirty-three (33)
-----------------
equal consecutive installments of ________________________________________
Dollars ($__________) each, with a 34th installment equal to the entire unpaid
----
principal balance and accrued Basic Interest on _______________, 20__. The
Terminal Payment amount shall be payable on [first day of 36th full month after
----------------------------------
Borrowing Date].
--------------
EQUIPMENT LOANS
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for the
period from the Borrowing Date through ___[THE LAST DAY OF THE SAME MONTH]___;
--------------------------------
(ii) a first (1st) amortization installment of principal and Basic Interest in
the amount of $_________________, in advance for the month of [ first full month
-----------------
after Borrowing Date ]; and (iii) a 48th amortization installment of principal
---------------------- ----
and Basic Interest in the amount of $_________________ in advance for the month
of [48th full month after the Borrowing Date].
----------------------------------------
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in forty-five (45)
---------------
equal consecutive installments of ________________________________________
Dollars ($__________) each, with a 46th installment equal to the entire unpaid
----
principal balance and accrued Basic Interest on _______________, 20__. The
Terminal Payment amount shall be payable on [first day of 48th full month after
----------------------------------
Borrowing Date].
--------------
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
XXXXX.XXX, INC.
By:________________________________
Name: _____________________________
Its:_______________________________
EXHIBIT B
BORROWING REQUEST
________________, ____
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: XXXXX.XXX, INC.
Gentlemen:
Reference is made to the Loan and Security Agreement dated as of
February 12, 1999 (as the same have been and may be amended from time to time,
the "Loan Agreement", the capitalized terms used herein as defined therein),
between Venture Lending & Leasing II, Inc. on one hand and XXXXX.XXX, INC. (the
"Company") on the other.
The undersigned is an Officer of the Company, authorized to borrow
under The Loan Agreement, and hereby requests Loan under the Loan Agreement, and
in that connection certifies as follows:
1. The aggregate amount of the proposed Loan is $____________. The
Business Day of the proposed Loan is _____ , 1997.
2. Type of Loan requested is ________________________________.
3. As of this date, no Default or Event of Default has occurred and
is continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in the Loan Agreement
are true and correct in all material respects.
4. No Material Adverse Change has occurred since the date of the
most recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the
Loan if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
By:________________________________
Name: _____________________________
Its:_______________________________
EXHIBIT C
COMPLIANCE CERTIFICATE
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: XXXXX.XXX, INC.
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of February
12, 1999 (as the same have been and may be amended from time to time, the "Loan
Agreement", the capitalized terms used herein as defined therein), between
Venture Lending & Leasing II, Inc. on one hand and XXXXX.XXX, INC. (the
"Company") on the other.
The undersigned authorized representative of the Company hereby certifies that
in accordance with the terms and conditions of the Loan Agreement, the Company
is in complete compliance for the period ending ___________ with all required
conditions and terms except as noted below. Attached herewith are the required
documents supporting the above certification. The representative further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles and are consistent from one period to the next except as
explained below.
Indicate compliance status by circling Yes/No under "Complies"
REPORTING REQUIREMENT REQUIRED COMPLIES
--------------------- -------- --------
Interim Financial Statements Monthly within 45 days YES / NO
Audited Financial Statements FYE within 120 days YES / NO
FINANCIAL COVENANTS REQUIRED COMPLIES
------------------- -------- --------
Collateral Coverage 80% of Eligible Accounts Receivable YES / NO
REQUIRED EXPLANATIONS:
---------------------
________________________________________________________________________________
________________________________________________________________________________
Very Truly Yours,
By: ______________________________
Name: ____________________________
Its:______________________________
EXHIBIT D
See Exhibit 10.47 to Registration Statement on Form S-1
EXHIBIT E
See Exhibit 10.48 to Registration Statement on Form S-1
EXHIBIT F
See Exhibit 10.49 to Registration Statement on Form S-1
