Exhibit 10.1
LOAN AND SECURITY AGREEMENT
BY
AND BETWEEN
COMPUTER MOTION, INC.,
as Borrower
AND
INTUITIVE SURGICAL, INC.,
as Lender
DATED AS OF MARCH 7, 2003
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS.................................................................................... 1
1.1 DEFINED TERMS.................................................................................. 1
1.2 OTHER DEFINITIONAL PROVISIONS.................................................................. 6
SECTION 2. AMOUNT OF LOAN................................................................................. 7
2.1 LOAN .......................................................................................... 7
2.2 NOTES ......................................................................................... 7
2.3 MAKING OF LOAN................................................................................. 7
2.4 REPAYMENT OF LOAN.............................................................................. 7
2.5 COLLATERAL..................................................................................... 8
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOAN.......................................................... 8
3.1 INTEREST RATE AND PAYMENTS..................................................................... 8
3.2 PREPAYMENT..................................................................................... 9
SECTION 4. COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................. 9
4.1 EXISTENCE...................................................................................... 9
4.2 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.................................................. 9
4.3 NO LEGAL BAR................................................................................... 9
4.4 SUBSIDIARIES................................................................................... 10
4.5 CAPITALIZATION................................................................................. 10
4.6 MATERIAL ADVERSE FACTS......................................................................... 10
4.7 PURPOSE OF LOAN................................................................................ 10
4.8 LIABILITIES.................................................................................... 10
4.9 TITLE TO PROPERTY AND ASSETS................................................................... 10
4.10 INTELLECTUAL PROPERTY.......................................................................... 11
4.11 ERISA ......................................................................................... 11
4.12 BROKERS........................................................................................ 11
4.13 USE OF CREDIT.................................................................................. 11
4.14 INDEBTEDNESS................................................................................... 11
4.15 LITIGATION..................................................................................... 11
4.16 FINANCIAL CONDITION; UNKNOWN LIABILITIES; WEEKLY PROJECTIONS................................... 12
4.17 TAXES ......................................................................................... 12
4.18 CERTAIN REGULATIONS............................................................................ 12
4.19 ENVIRONMENTAL MATTERS.......................................................................... 12
4.20 ACCOUNTS RECEIVABLE............................................................................ 12
4.21 SEC DOCUMENTS; FINANCIAL STATEMENTS AND NO MATERIAL CHANGES.................................... 13
4.22 LOCATIONS OF COLLATERAL........................................................................ 13
4.23 DISCLOSURE..................................................................................... 14
4.24 CAPACITY TO PROTECT INTERESTS.................................................................. 14
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SECTION 5. CONDITIONS OF LENDING.......................................................................... 14
5.1 LOAN DOCUMENTS................................................................................. 14
5.2 PROCEEDINGS.................................................................................... 14
5.3 INCUMBENCY CERTIFICATES........................................................................ 14
5.4 ORGANIZATIONAL DOCUMENTS....................................................................... 14
5.5 REPRESENTATIONS AND WARRANTIES; NO DEFAULT..................................................... 15
5.6 SECURITY INTEREST.............................................................................. 15
5.7 INTELLECTUAL PROPERTY SECURITY INTEREST........................................................ 15
5.8 LOCK BOX AGREEMENT............................................................................. 15
5.9 DEPOSIT ACCOUNT CONTROL AGREEMENTS............................................................. 15
5.10 MERGER AGREEMENT............................................................................... 15
5.11 EVIDENCE OF INSURANCE.......................................................................... 15
5.12 EXISTING INDEBTEDNESS.......................................................................... 15
5.13 OTHER DOCUMENTS................................................................................ 15
SECTION 6. AFFIRMATIVE COVENANTS.......................................................................... 15
6.1 PAYMENT OF OBLIGATIONS......................................................................... 16
6.2 MAINTENANCE OF BOOKS AND RECORDS............................................................... 16
6.3 CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE; AND COMPLIANCE WITH LAWS........................ 16
6.4 MAINTENANCE OF INSURANCE....................................................................... 16
6.5 TAXES ......................................................................................... 16
6.6 MAINTENANCE OF PROPERTIES...................................................................... 16
6.7 INFORMATION RIGHTS............................................................................. 16
6.8 BOARD OBSERVATION RIGHTS....................................................................... 17
6.9 ACCESS TO PREMISES............................................................................. 17
6.10 LOCK BOX INSTRUCTIONS.......................................................................... 17
6.11 UPDATES TO WEEKLY PROJECTIONS.................................................................. 17
SECTION 7. NEGATIVE COVENANTS............................................................................. 18
7.1 LIMITATION ON INDEBTEDNESS..................................................................... 18
7.2 LIMITATION ON LIENS............................................................................ 18
7.3 LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.................................................... 19
7.4 RESTRICTIONS ON TRANSACTIONS AND FUNDAMENTAL CHANGES........................................... 19
7.5 SALE OF ASSETS; TRANSFER TO SUBSIDIARY......................................................... 19
7.6 REPURCHASE OF SECURITIES....................................................................... 19
7.7 CORPORATE GOVERNANCE........................................................................... 20
7.8 BANK ACCOUNTS.................................................................................. 20
7.9 LIMITATION ON LIABILITIES...................................................................... 20
SECTION 8. EVENTS OF DEFAULT.............................................................................. 20
8.1 EVENT OF DEFAULT............................................................................... 20
8.2 USE OF COLLATERAL.............................................................................. 22
8.3 CREDIT PARTIES TO HOLD IN TRUST................................................................ 22
8.4 COLLECTIONS, ETC............................................................................... 22
8.5 POSSESSION, SALE OF COLLATERAL, ETC............................................................ 22
8.6 APPLICATION OF PROCEEDS ON DEFAULT............................................................. 24
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8.7 POWER OF ATTORNEY.............................................................................. 24
8.8 TERMINATION AND RELEASE........................................................................ 24
8.9 REMEDIES NOT EXCLUSIVE......................................................................... 25
SECTION 9. MISCELLANEOUS.................................................................................. 25
9.1 [INTENTIONALLY DELETED]........................................................................ 25
9.2 INDEMNIFICATION................................................................................ 25
9.3 ENTIRE AGREEMENT; AMENDMENTS................................................................... 25
9.4 WAIVERS........................................................................................ 25
9.5 NOTICES........................................................................................ 26
9.6 SUCCESSORS AND ASSIGNS......................................................................... 26
9.7 INTEREST DEFICIT............................................................................... 26
9.8 CONFIDENTIALITY................................................................................ 27
9.9 PAYMENT OF EXPENSES............................................................................ 27
9.10 CAPTIONS....................................................................................... 28
9.11 COUNTERPARTS................................................................................... 28
9.12 SEVERABILITY; REFORMATION...................................................................... 28
9.13 WAIVER OF JURY TRIAL........................................................................... 28
9.14 GOVERNING LAW.................................................................................. 28
9.15 CONSENT TO JURISDICTION/SERVICE OF PROCESS..................................................... 28
SCHEDULES
Schedule 4.1 State of Incorporation; Principal Place of Business/Chief Executive Office
Schedule 4.4 Subsidiaries
Schedule 4.5 Capitalization
Schedule 4.10 Intellectual Property
Schedule 4.15 Litigation
Schedule 4.16(a) Financial Statements
Schedule 4.16(b) Liabilities
Schedule 4.16(c) Weekly Projections
Schedule 4.22 Locations of Collateral
Schedule 7.1(b) Limitation on Indebtedness
Schedule 7.2(f) Limitation on Liens
Schedule 7.8 Bank Accounts
EXHIBITS
Exhibit A Description of Collateral
Exhibit B Form of Intellectual Property Security Agreement
Exhibit C Form of Note
Exhibit D Form of Notice of Borrowing
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EXECUTION VERSION
LOAN AND SECURITY AGREEMENT, dated as of March 7, 2003, by and between
Computer Motion, Inc., a Delaware corporation (the "Borrower") and Intuitive
Surgical, Inc., a Delaware corporation (the "Lender").
WHEREAS, the Borrower has requested a short-term secured bridge loan
from the Lender in an aggregate principal amount not to exceed $7,300,000; and
WHEREAS, the Lender is willing to make such loan to the Borrower upon
the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Affiliate" shall mean any other Person controlling or
controlled by or under common control with such specified Person.
"Agreement" shall mean this Loan and Security Agreement, as
amended, supplemented, waived or otherwise modified from time to time
pursuant to the terms hereof.
"Borrower" shall have the meaning set forth in the preamble
hereto.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which commercial banks in California are authorized or
required by law to close.
"Closing Date" shall mean the date on which all the conditions
precedent set forth in Section 5 shall be satisfied or waived pursuant
to the terms hereof. The original Closing Date shall occur on such date
prior to termination of the Merger Agreement as the Borrower and the
Lender agree, failing which this Agreement shall be of no further force
or effect.
"Collateral" shall have the meaning set forth in Exhibit A
hereto.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement,
instrument, document or other undertaking to which such Person is a
party or by which it or any of its property is bound.
"Control" (including, with correlative meaning, the terms
"controlling", "controlled by," "under common control with" and similar
phrases) shall mean with respect to any Person, the possession,
directly or indirectly, of the power to direct, or cause the direction
of, the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Default" shall mean any event, act or condition which with or
without notice or lapse of time, or both, could constitute an Event of
Default.
"Default Interest" shall have the meaning set forth in Section
3.1.
"Deposit Account Control Agreements" shall mean deposit
account control agreements on commercially reasonable terms and
conditions in which all of the Borrower's accounts with any financial
institution shall be subject to Lender's right upon the occurrence and
during the continuance of an Event of Default to restrict the use of
such accounts and to turn over the proceeds from such accounts to
Lender, in form and substance reasonably satisfactory to the Lender;
provided that the Borrower shall be required to enter into a Deposit
Account Control Agreement with respect to accounts maintained at
Xxxxxxx Xxxxx Xxxxxx but such agreement shall not be implemented unless
and until there has occurred an Event of Default.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor or similar statute and the rules and
regulations of the SEC promulgated thereunder as in effect from time to
time.
"Event of Default" shall mean the occurrence of any of the
events specified in Section 8.
"Existing Indebtedness" shall mean that Indebtedness owing by
the Borrower to Agility Capital, LLC, pursuant to that certain Loan and
Security Agreement dated as of February 13, 2003 (as amended, restated
or modified from time to time).
"GAAP" shall mean the generally accepted accounting principles
in the United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any Person
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Indebtedness" shall mean (without double counting), at any
time and with respect to any Person, (i) indebtedness of such Person
for borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred purchase price of property or services
purchased (other than amounts constituting trade payables arising in
the ordinary course of business); (ii) obligations of such Person in
respect of letters of credit, acceptance facilities, or drafts or
similar
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instruments issued or accepted by banks and other financial
institutions for the account of such Person; (iii) obligations of such
Person under capital leases and any financing lease involving
substantially the same economic effect; (iv) deferred payment
obligations of such Person resulting from the adjudication or
settlement of any litigation or claim to the extent not already
reflected as a current liability on the balance sheet of such Person;
(v) trade debt not incurred in the ordinary course of business or trade
debt in excess of $250,000 as to any single creditor or in excess of
$250,000 in the aggregate; or (vi) indebtedness of others of the type
described in clauses (i) through (v) which such Person has (a) directly
or indirectly assumed or guaranteed in connection with a guaranty, or
(b) secured by a Lien on any of the assets of such Person whether or
not such Person has assumed or guaranteed such indebtedness.
"Intellectual Property" shall have the meaning set forth in
Section 4.10.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement by and between the Lender and
the Borrower, in substantially the form attached hereto as Exhibit B.
"Interest Rate" shall have the meaning set forth in Section
3.1.
"Interest Deficit" shall have the meaning set forth in Section
9.7.
"Lender" shall have the meaning set forth in the preamble
hereto.
"Lien" shall mean any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, encroachment, lien
(statutory or otherwise), claim, option, reservation, priority,
preferential arrangement, easement or other encumbrance of any kind.
"Loan" or "Loans" shall have the meaning set forth in Section
2.1.
"Loan Availability" shall mean $7,300,000.
"Loan Documents" shall mean this Agreement, the Note, the
Intellectual Property Security Agreement, the Deposit Account Control
Agreement and any and all other agreements, certificates, instruments
or documents made, given or delivered in connection with the
consummation of any transaction contemplated by a Loan Document (other
than the Merger Documents).
"Lock Box Account" shall mean any checking or other demand
depository account maintained by the Borrower into which the contents
of any other checking, demand or other depository account of the
Borrower is transferred pursuant to the applicable Lock Box Agreement.
"Lock Box Agreements" shall mean each of the Lock Box
Agreements on commercially reasonable terms and conditions, by and
among the Lender, the Borrower and the applicable financial institution
that recognizes the Lender's
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security interest in the contents of the checking, demand or other
depository account which is the subject of such agreement and provides
that such contents shall be transferred only to the applicable Lock Box
Account or as otherwise instructed by Lender.
"Material Adverse Change" shall mean an event, act, condition
or change which had, has or could reasonably be expected to have a
material adverse effect on (a) the business, operations, results of
operations, properties, assets, condition (financial or otherwise) of
the Borrower, (b) the Borrower's ability to perform the Secured
Obligations or (c) any right or remedy of the Lender under any Loan
Document.
"Maturity Date" shall mean the earlier of (i) 120 days
following termination of the Merger Agreement and (ii) the occurrence
of a Prohibited Transaction.
"Merger Agreement" shall mean that certain Agreement and Plan
of Merger by and among Intuitive Surgical, Inc., Iron Acquisition
Corporation and Computer Motion, Inc., dated as of March 7, 2003.
"Merger Default" shall mean a default under Section 7.1.7 of
the Merger Agreement.
"Merger Documents" shall mean the Merger Agreement and all
agreements, certificates, instruments or documents made, given or
delivered specifically in connection with the Merger Agreement.
"Note" shall have the meaning set forth in Section 2.2.
"Notice of Borrowing" shall have the meaning given in Section
2.1.
"Person" shall mean an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"Proceeds" shall mean whatever is received when Collateral or
Proceeds are sold, exchanged, collected or otherwise disposed of, both
cash and non-cash, including the proceeds of insurance payable by
reason of loss of or damage to Collateral or Proceeds and any license
fees, royalties and other similar items received in connection with
Collateral.
"Prohibited Transaction" shall mean (i) the sale, lease,
license, exchange, transfer or similar transaction involving all or
substantially all of the assets of the Borrower (other than pursuant to
the Merger Agreement), other than inventory in the ordinary course of
business, in one or more transactions after the Closing Date; (ii) the
closing date of a recapitalization, reorganization, merger,
consolidation or other transaction or transactions (whether by sale,
gift or other
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transfer or disposition) other than pursuant to the Merger Agreement,
which transaction or transactions result in the transfer of control of
the Borrower excluding any securities under any option plan of the
Borrower (which plan, type of securities and amount of securities are
approved by Lender in writing) which have not been granted, or which
have been granted but have not yet vested, in each case on or prior to
the date in question) on a fully-diluted basis; or (iii) any action
(voluntary or involuntary) to liquidate, dissolve and/or wind down the
business of the Borrower.
"Requirement of Law" shall mean as to any Person, the articles
or certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, statute, treaty,
ordinance, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Secured Obligations" shall mean all money, debts, obligations
and liabilities which now are or have been or at any time hereafter may
be or become due, owing or incurred by the Borrower to the Lender,
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with any Loan Document or any transaction
contemplated by any Loan Document, whether on account of principal,
interest (including, without limitation, interest accruing after the
Maturity Date on the Note and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in
such proceeding), royalties, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise, excluding, however, any
obligations or liability arising under the Merger Documents.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor or similar statute and the rules and
regulations of the SEC promulgated thereunder as in effect from time to
time.
"Subordinated Debt" shall mean unsecured Indebtedness
subordinated to the Loan on terms and conditions satisfactory to
lender, evidenced by a subordination agreement in form and substance
satisfactory to lender which by its terms does not permit the payment
of all or any portion of any principal, interest or any other amounts
until the indefeasible payment in full of all Secured Obligations.
"Subsidiary" shall have the meaning set forth in Section 4.4.
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"Tax Return" shall mean any return, declaration, report, claim
for refund, information return or statement, estimated return or
statement or other document (including, without limitation, any related
or supporting estimates, elections, schedules, statements or
information) filed or required to be filed in connection with the
determination, assessment or collection of any Tax or the
administration of any laws, statutes, treaties, regulations or
administrative requirements relating to any Tax.
"Tax" or "Taxes" shall mean (i) any and all taxes (whether
federal, state and local, domestic or foreign) including, without
limitation, income, gross receipts, profits, property, sales, use,
capital stock, net worth, occupation, value added, ad valorem,
transfer, franchise, recapture, excise, windfall, withholding, payroll,
social security, workers' compensation, unemployment compensation or
employment taxes, tariffs, imposts, duties, levies, fees or
governmental charges of any nature whatsoever, together with any
interest, penalties or additions to tax imposed with respect to any of
the foregoing, and (ii) any obligations under any agreements or
arrangements with respect to any tax or taxes described in clause (i)
above.
"UCC" shall mean the Uniform Commercial Code of the State of
California as in effect on the date hereof and as amended from time to
time hereafter or, when used in relation to a specific filing or
termination, the Uniform Commercial Code of the State wherein such
filing or termination statement is made.
"Weekly Projections" shall have the meaning set forth in
Section 4.16.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in the Note or any
agreement, instrument, certificate or other document made, given or delivered
pursuant hereto.
(b) Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the part includes the whole, the terms "include"
and "including" are not limiting, and the term "or" has the inclusive meaning
represented by the phrase "and/or."
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Exhibit and Schedule references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
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(e) Any reference in this Agreement to any of the Loan
Documents includes any and all alterations, amendments, extensions,
modifications, renewals, restatements, or supplements thereto or thereof, as
applicable.
(f) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against the Lender or the Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by the Borrower, the Lender, and their respective
counsel, and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of the Lender and the Borrower.
SECTION 2. AMOUNT OF LOAN
2.1 Loan. Subject to the terms and conditions hereof, the Lender agrees
to make Loans to the Borrower in an aggregate principal amount which shall not
exceed the Loan Availability. Such Loans shall be made as follows: (i) upon
delivery to the Lender of a Notice of Borrowing/Letter of Direction in
substantially the form attached hereto as Exhibit D (a "Notice of Borrowing") no
less than three (3) Business Days prior thereto, on the Closing Date in an
aggregate amount of up to $2,300,000, the proceeds of which will be used
exclusively to pay off the Existing Indebtedness, and (ii) in an aggregate
amount of up to $5,000,000 as such Loans may be required in accordance with the
Weekly Projections, as the same may be amended in accordance with Section 6.11
hereof, the proceeds of which Loans will be used exclusively for working capital
and other general corporate purposes of the Borrower. Amounts borrowed and
repaid hereunder may not be re-borrowed. As used herein, the term "Loan" and
"Loans" shall mean the advances made by the Lender in accordance with this
Section 2.1.
2.2 Notes. In order to evidence the Loan, the Borrower will execute and
deliver to the Lender on the initial Closing Date a secured promissory note
substantially in the form of Exhibit C attached hereto, payable to the order of
the Lender and in a principal amount equal to $7,300,000. The Note: (a) shall be
dated the Closing Date; (b) shall be payable as provided in Section 2.4; (c)
shall provide for the payment of interest in accordance with Section 3.1; and
(d) shall be subject to mandatory prepayment in accordance with Section 3.2(b).
2.3 Making of Loan. The Lender shall have no obligation to make the
Loans hereunder unless the Lender, in its sole discretion, determines that the
Loan Documents are in full force and effect, and the Borrower is in full
compliance with all the terms of this Agreement, the Note, the Intellectual
Property Security Agreement and the other Loan Documents, and that no Default or
Event of Default not waived in writing by the Lender exists or will result from
the making of any such Loan..
2.4 Repayment of Loan.
(a) Except as set forth below, the aggregate amount of the
Loan shall be payable, together with all accrued and unpaid interest thereon and
all other Secured Obligations, on the Maturity Date.
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(b) The Borrower shall not be obligated to make any principal
or interest payments on the Loan other than upon the Maturity Date or as
otherwise required pursuant to the provisions of Section 3.1 or 3.2(b).
2.5 Collateral.
(a) Security Interest. This Agreement constitutes a "security
agreement" within the meaning of the UCC. In order to secure payment and
performance of all present and future Secured Obligations, the Borrower hereby
grants, assigns, transfers, pledges, and sets over to the Lender a
first-priority security interest in and Lien on all of the Collateral (subject
to Liens expressly permitted under Section 7.2(a) hereof and those other Liens
set forth in Section 7.2 required as a matter of law to have priority over the
Secured Obligations; provided that, with respect to such other security
interests and other Liens, such security interests and Liens shall not be with
respect to claimed amounts in excess of $100,000 in the aggregate.
(b) Further Assurances. The Borrower agrees that at any time
and from time to time, at its expense, the Borrower will promptly execute and
deliver all further agreements, certificates, instruments and documents
(including, without limitation, financing statements and continuation
statements), and take all further action that the Lender may reasonably request
(including obtaining any control agreements or bailee acknowledgments required
by Lender), in order to perfect and protect the security interests granted or
purported to be granted hereby and to enable the Lender to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. The Borrower
agrees that it will not take any action intended or reasonably likely to
negatively impact or question the security interest granted herein. Without
limiting any rights of the Lender under the UCC, the Borrower authorizes the
Lender to file, without the Borrower's signature, UCC financing statements
disclosing the Lender's Liens hereunder with any filing office deemed
appropriate by the Lender, including without limitation designating the
Collateral as "all present and future assets" of the Borrower.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO LOAN
3.1 Interest Rate and Payments. The outstanding principal of
the Loan shall accrue interest from the date such Loan is disbursed pursuant to
the terms hereunder until and including the date paid in full at a rate per
annum (computed on the basis of a 360-day year of twelve 30-day months,
provided, however, that per diem interest shall be calculated on the basis of
the actual number of days elapsed over a year of 365 days) of eight percent (8%)
per annum (the "Interest Rate"). Except as provided in the following sentence,
interest on the Loan shall not be due and payable until the Maturity Date or
such earlier date upon which the Loan shall be due and payable in accordance
with the terms hereof, in each case with interest to accrue and be due and
payable through and including the applicable date of payment. Without
duplication of any interest payable under this Section 3.1, the Borrower hereby
unconditionally promises to pay to the Lender interest on any Secured
Obligations payable by the Borrower under any Loan Document that shall not be
paid in full when due (whether at stated maturity, by acceleration or
otherwise), for the period from and including the due date of such payment to
and including the date the same is paid in full, at a rate per annum equal to
the Interest Rate plus 400 basis points (the "Default Interest"), which Default
Interest shall be payable from time to time on demand of the Lender.
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3.2 Prepayment.
(a) Optional. The Borrower shall be permitted to prepay the
Loan, or any portion thereof, at any time without penalty or premium; in each
case all payments shall be applied first against any Secured Obligation (other
than interest and principal), then against accrued and unpaid interest through
and including the date of payment and then against principal.
(b) Mandatory. Upon the Maturity Date all Secured Obligations
shall immediately become due and payable.
SECTION 4. COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS
The Borrower represents, warrants and covenants, as of the Closing
Date, that:
4.1 Existence. The Borrower (a) is duly organized and validly existing
under the laws of the State of Delaware, (b) is duly qualified to do business
and is in good standing in all other jurisdictions in which the nature of its
business or the ownership or leasing of its properties makes such authorization
or qualification necessary except for such jurisdictions where the failure to be
so authorized or qualified could not result in a Material Adverse Change and (c)
has the power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee or lessor and to conduct
the business in which it is presently engaged and presently proposes to engage.
The Borrower's place of incorporation and principal place of business/chief
executive office are set forth on Schedule 4.1.
4.2 Power; Authorization; Enforceable Obligations. The Borrower has the
power and authority, and the legal right, to make, execute, deliver and perform
the Loan Documents, borrow the Loan hereunder, and to consummate the
transactions contemplated hereby and thereby and the Borrower has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents, the borrowing of the Loan on the terms and conditions of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby. No consent or authorization of, filing with, notice to or other similar
act by or in respect of, any Governmental Authority or any other Person is
required to be obtained or made by or on behalf of the Borrower in connection
with the execution, delivery, performance, validity or enforceability of the
Loan Documents to which it is a party, the borrowing of the Loan hereunder, or
the consummation of the transactions contemplated hereby and thereby. Each of
the Loan Documents has been duly executed and delivered by the Borrower. Each of
the Loan Documents constitutes a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its respective
terms.
4.3 No Legal Bar. The execution, delivery and performance of the Loan
Documents by the Borrower, the borrowing of the Loan hereunder, and the use of
the proceeds thereof (a) will not violate any Requirement of Law, which
violation could result in a Material Adverse Change, or Contractual Obligation
of the Borrower and (b) will not result in, or require, the creation or
imposition of any Lien (other than Liens in favor of the Lender) on any of its
properties, assets or revenues pursuant to any such Requirement of Law, which
violation could result in a Material Adverse Change or the default or breach of
any Contractual Obligation.
9
4.4 Subsidiaries. Except as set forth on Schedule 4.4 hereto, the
Borrower has no, and never has had any, Subsidiaries. For purposes hereof,
"Subsidiary" shall mean, for any Person, any corporation, partnership, limited
liability company or other entity of which at least a majority of the securities
or other ownership interests having by their terms ordinary voting power (or
otherwise) to elect a majority of the board of directors or other Persons
performing similar functions of such corporation, partnership, limited liability
company or other entity (irrespective of whether or not at the time securities
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency) are at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person.
4.5 Capitalization. The authorized capital stock of the Borrower is as
set forth on Schedule 4.5 hereto: All such issued and outstanding shares and
warrants have been duly authorized and validly issued, are fully paid and
nonassessable and were issued in compliance with all applicable state and
federal laws concerning issuance of securities. Other than as set forth on
Schedule 4.5(a) hereto, there are no other rights, plans, options, warrants,
agreements or other rights of any Person to purchase or acquire from the
Borrower or any owner of any such item any shares of its capital stock. The
Borrower has no obligation to repurchase, redeem or otherwise acquire any
security or other right of the Borrower.
4.6 Material Adverse Facts. The Borrower has no knowledge of any fact
that could materially adversely affect the ability of the Borrower to perform
its obligations under this Agreement, the Note or the other Loan Documents or
which could result in a Material Adverse Change.
4.7 Purpose of Loan. The proceeds of the Loans shall be used by the
Borrower to refinance the Existing Indebtedness and for working capital and
other general corporate purposes.
4.8 Liabilities. Other than with respect to the Loan and Indebtedness
expressly permitted under Section 7.1 and described in Schedule 7.1(b) hereto,
the Borrower does not have any Indebtedness in excess of $250,000 in the
aggregate that the Borrower has directly or indirectly created, incurred,
assumed, or guaranteed, or with respect to which the Borrower has otherwise
become directly or indirectly liable. Schedule 7.1(b) sets forth a true,
complete and correct description of all Indebtedness of the Borrower on the
Closing Date.
4.9 Title to Property and Assets. The Borrower has good and marketable
title to, or a valid leasehold in, all of the Borrower's tangible and intangible
properties and assets (including, without limitation, Intellectual Property), in
each case free and clear of all Liens other than (a) Liens for taxes not yet due
or other statutory liens relating to obligations to any Governmental Authority
which are not yet due, (b) statutory Liens arising in the ordinary course of
business, in each case, which do not interfere with the use of the properties
and assets to which they relate for the purposes for which those properties and
assets were acquired and (c) Liens in favor of the Lender and other Liens
expressly permitted under Section 7.2 hereof. Schedule 7.2(f) sets forth a true,
complete and correct description of all Liens on the Borrower or its properties
or assets on the Closing Date.
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4.10 Intellectual Property. The Borrower possesses all licenses,
permits, franchises, authorizations, patents, copyrights, trademarks, trade
secrets and trade names and any other tangible, intangible or intellectual
property rights, or rights thereto, required to conduct its business as
presently conducted and as presently proposed to be conducted, without any known
conflict with the rights of others, excluding any and all patent and other
Intellectual Property rights owned or controlled by the Lender. A true, correct
and complete list of the Borrower's licenses, permits, franchises,
authorizations, patents, copyrights, trademarks, trade secrets, trade names,
inventions, discoveries, designs, patentable technology and art, methodologies,
trade secrets, know how, service marks, Internet domain names and any other
tangible, intangible or intellectual property rights (the "Intellectual
Property") is attached as Schedule 4.10 hereto. No claim of infringement has
been made or threatened in writing or otherwise with respect to any such
Intellectual Property, excluding current discussions and pending lawsuits as to
such matters with the Lender. Except as set forth on Schedule 4.15, the Borrower
has not directly or indirectly created, incurred, assumed or permitted to exist
any Lien on any such Intellectual Property, other than Liens granted to the
Lender to secure the Secured Obligations and liens expressly permitted under
Section 7.2 hereof.
4.11 ERISA. No employee benefit plan established or maintained by the
Borrower or its Subsidiaries or to which the Borrower or any Subsidiary has made
contributions or is liable is subject to Part 3 of Subtitle B of Title 1 of the
Employee Retirement Income Security Act of 1974, as amended, or Section 412 of
the Internal Revenue Code of 1954, as amended.
4.12 Brokers. No broker or finder has acted for the Borrower in
connection with the Loan Documents or the transactions contemplated hereby or
thereby, and no broker finder or other Person is entitled to any brokerage or
finder's fees or other commission or payment in respect of such transaction
based in any way on agreements, arrangements or understandings made by or on
behalf of the Borrower.
4.13 Use of Credit. No part of the proceeds from the Loan extended
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any "margin stock" within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Borrower in a violation of Regulation X of said Board (12 CFR 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). The assets of the Borrower do not include any margin stock, and
the Borrower does not have any present intention of acquiring any margin stock.
4.14 Indebtedness. The Note will be the senior obligation of the
Borrower, and will be secured by first priority liens on all of the Collateral
subject to Liens expressly permitted under Section 7.2(a) hereof and those other
Liens set forth in Section 7.2 required as a matter of law to have priority over
the Secured Obligations; provided that, with respect to such other security
interests and other Liens, such security interests and Liens shall not be with
respect to claimed amounts in excess of $250,000 in the aggregate.
4.15 Litigation. Except as set forth on Schedule 4.15 hereto, there are
no (i) actions, suits or legal, equitable, arbitrative or administrative
proceedings pending, or, to the best knowledge of the Borrower after reasonable
review and due inquiry, threatened against the
11
Borrower or any of its properties or assets or (ii) judgments, injunctions,
writs, rulings or orders by any Governmental Authority against the Borrower or
applicable to any of its properties or assets.
4.16 Financial Condition; Unknown Liabilities; Weekly Projections. The
Borrower has previously furnished to the Lender the unaudited income statement,
balance sheet and cash flow statements of the Borrower as of December 31, 2002,
and the unaudited income statement and balance sheet of the Borrower as of
January 31, 2003, each of which are attached hereto as Schedule 4.16(a). There
are no liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent or otherwise) matured or unmatured of the Borrower, except
as provided for in the unaudited balance sheets referred to above or as set
forth on Schedule 4.16(b), as of the Closing Date. Since January 1, 2003, there
has been no Material Adverse Change as to the Borrower. The Borrower has
previously furnished to the Lender the projected cash flow for the Borrower, set
forth on a weekly basis, for the period through August 23, 2003 (the "Weekly
Projections"), which Weekly Projections are in form and substance satisfactory
to the Lender and are attached hereto as Schedule 4.16(c).
4.17 Taxes. The Borrower has filed all federal, state and local,
domestic or foreign Tax Returns and all other Tax Returns that are required to
be filed by it and it has paid all Taxes due pursuant to such returns or
pursuant to any deficiency, notice of proposed assessment, audit, assessment or
other similar notice received by it in writing other than those being contested
in good faith in appropriate proceedings and for which reserves have been
established in the financial statements described in Section 4.16. There are no
audits, assessments or claim for assessments, and no basis upon which such a
claim can be made to the best knowledge of the Borrower after reasonable review
and due inquiry. The charges, accrual and reserves on its books and records in
respect of Taxes are adequate. The Borrower has not given or been requested to
give a waiver of the statute of limitations relating to the payment of Federal
or other taxes or the audit of any tax period.
4.18 Certain Regulations. The Borrower is not (a) an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940; (b) a "holding company," or an
"affiliate" of a "holding company" or a "Subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935;
or (c) to the knowledge of the Borrower, subject to any other Requirement of Law
restricting its ability to incur debt or to grant Liens.
4.19 Environmental Matters. The Borrower has obtained all approvals
required by any Governmental Authority to carry on its business as presently
being conducted or as presently proposed to be conducted. Each of such approvals
is in full force and effect and the Borrower is in compliance in all respects
with the terms and conditions of such approvals, and is also in compliance in
all respects with all other provisions of any applicable environmental law, rule
or regulation.
4.20 Accounts Receivable. The accounts receivable set forth in the
unaudited balance sheet delivered to the Lender pursuant to Section 4.16(a), net
of applicable reserves set forth in such unaudited balance sheet, are
collectible in the amounts shown therein. All such accounts receivable represent
legal, valid and binding obligations arising from bona fide business
12
transactions in the ordinary course of business consistent with past practices
of the Borrower. There is no contest, claim, counterclaim, defense, contra
account or other right of set-off with respect to such accounts receivable,
other than returns in the ordinary course consistent with the past practices of
the Borrower.
4.21 SEC Documents; Financial Statements and No Material Changes.
Borrower has made available to Lender through the SEC's XXXXX database ("XXXXX")
a true, complete and correct copy of each publicly available statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Borrower since December 31, 2001, and, prior to the
Closing Date, Borrower will have made available to Lender true, complete and
correct copies of any additional publicly available documents filed with the SEC
by Borrower after the date hereof but prior to the Closing Date (collectively,
the "Borrower SEC Documents"). All documents required to be filed as exhibits to
the Borrower SEC Documents have been so filed, and all Borrower Material
Contracts (as defined below) so filed as exhibits are in full force and effect
as of the date hereof, except those that have expired in accordance with their
terms and those that failure to be in full force and effect would not have a
Material Adverse Change. As used in this Agreement, "Borrower Material
Contracts" means all contracts required to be filed as exhibits to the Borrower
SEC Documents pursuant to Item 601 of Regulation S-K. As of their respective
filing dates, the Borrower SEC Documents complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, and none
of the Borrower SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein, in light of
the circumstance under which they were made or necessary to make the statements
made therein not misleading, except to the extent corrected by a subsequently
filed Borrower SEC Document. The consolidated financial statements of Borrower,
including the notes thereto, included in the Borrower SEC Documents (the
"Borrower SEC Financial Statements") fairly present (or will fairly present) the
consolidated financial condition and the related consolidated statements of
operations, of stockholder's equity, and of cash flows of Borrower at the dates
and during the periods indicated therein in accordance with GAAP (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments),
complied (or will comply) as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates, and have been prepared (or
will be prepared) in accordance with generally accepted accounting principles
applied on a basis consistent throughout the periods indicated and consistent
with each other (except as may be expressly indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Forms 10-Q,
as permitted by Form 10-Q of the SEC).
4.22 Locations of Collateral. The only locations of Collateral are set
forth on Schedule 4.22, attached hereto, and such schedule correctly identifies
any of such locations which are not owned by the Borrower and sets forth the
owners and/or operators thereof. The Borrower shall not move the Collateral to
any other location (other than to transfer such Collateral in the ordinary
course of business); provided that the Borrower may open a new location at which
Collateral will be located within the continental United States so long as the
Borrower (i) gives the Lender thirty (30) days prior written notice of the
intended opening of any such new location and (ii) executes and delivers, or
causes to be executed and delivered, to the Lender such
13
agreements, documents, and instruments as the Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such new
location.
4.23 Disclosure. No representation or warranty by the Borrower in this
Agreement or any of the other Loan Documents contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they are made, not misleading.
If, prior to the Closing Date, the Borrower becomes aware of any fact or
circumstance that could change a representation or warranty of the Borrower in
this Agreement, then the Borrower shall immediately give notice of such fact or
circumstance to the Lender.
4.24 Capacity to Protect Interests. The Borrower has been represented
by outside counsel in connection with the transactions contemplated under the
Loan Documents and the negotiation of the same, and each of the Borrower and
such counsel has the "capacity to protect [the Borrower's] own interests in
connection" herewith within the meaning of California Corporations Code Section
25118.
SECTION 5. CONDITIONS OF LENDING
The obligation of the Lender to make the Loan hereunder is subject to
the following conditions precedent:
5.1 Loan Documents. Lender shall have received (a) this Agreement, (b)
the Note, (c) the Intellectual Property Security Agreement, (d) the Lock Box
Agreement, (e) the Deposit Account Control Agreements and (f) each of the other
Loan Documents to which the Borrower is a party, in each case executed and
delivered by duly authorized officers of the Borrower, together with completed
schedules thereto as of the Closing Date, all in form and substance satisfactory
to the Lender.
5.2 Proceedings. The Lender shall have received a copy of the
resolutions, in form and substance reasonably satisfactory to it, of the board
of directors of the Borrower authorizing (i) the execution, delivery and
performance of this Agreement and the other Loan Documents, (ii) the Loan
contemplated hereunder, (iii) the execution, delivery and performance of the
Merger Agreement and the transactions contemplated thereunder and (iv) the other
transactions contemplated hereby and thereby, certified by the Secretary or an
Assistant Secretary of the Borrower as of the Closing Date, which certificate
shall be in form and substance reasonably satisfactory to the Lender and shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded and are in full force and effect.
5.3 Incumbency Certificates. The Lender shall have received a
certificate of the Borrower, dated the Closing Date, as to the incumbency and
signature of the officers of the Borrower executing any Loan Document,
reasonably satisfactory in form and substance to the Lender, executed by the
Secretary or any Assistant Secretary of the Borrower.
5.4 Organizational Documents. The Lender shall have received copies of
the articles of incorporation and bylaws of the Borrower, certified as of the
Closing Date as true, complete and correct copies thereof by the Secretary or an
Assistant Secretary of the Borrower.
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5.5 Representations and Warranties; No Default. Each of the
representations and warranties made by the Borrower pursuant to this Agreement
or any other Loan Document (or in any amendment, modification or supplement
hereto or thereto) and each of the representations and warranties contained in
any certificate or statement furnished at any time by or on behalf of the
Borrower pursuant to this Agreement or any other Loan Document or certificate or
other document delivered herewith or therewith, shall, except to the extent that
they relate to a particular date, be true, complete and correct in all respects
on and as of the date it was made and on and as of such date as if made on and
as of such date. The Borrower shall have complied with each and every covenant
and agreement contained herein, no Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Loan, and
no Material Adverse Change shall have occurred. The Borrower shall have
delivered a certificate of the Chief Executive Officer or President of the
Borrower, dated as of the applicable Closing Date hereunder, to the foregoing
effect.
5.6 Security Interest. The Lender shall have received evidence
satisfactory to it of a valid and perfected first priority Lien and security
interest in the Collateral and no other Liens on the Collateral exist, except as
expressly permitted hereunder.
5.7 Intellectual Property Security Interest. The Lender shall have
received evidence satisfactory to it of a valid and perfected first priority
Lien and security interest in the Intellectual Property.
5.8 Lock Box Agreement. The Lender shall have received satisfactory
evidence that the Lock Box Agreement is in full force and effect.
5.9 Deposit Account Control Agreements. The Lender shall have received
satisfactory evidence that each Deposit Account Control Agreement is in full
force and effect.
5.10 Merger Agreement. The Lender shall have received satisfactory
evidence that the Merger Agreement is in full force and effect.
5.11 Evidence of Insurance. The Lender shall have received evidence of
insurance and loss payee/additional insured endorsements required hereunder and
under the other Loan Documents, in form and substance satisfactory to the
Lender, and certificates of insurance policies and/or endorsements naming the
Lender as loss payee/additional insured.
5.12 Existing Indebtedness. After giving effect to the Loans on the
Closing Date, the Existing Indebtedness shall have been paid in full and the
Liens securing the same released of record (or the Lender shall have received
such releases of such Liens or assurances with respect thereto, all in form and
substance satisfactory to the Lender).
5.13 Other Documents. The Lender shall have received, in form and
substance satisfactory to Lender, such releases, terminations and other
documents as the Lender may reasonably request.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, from and after the original Closing
Date and through the indefeasible payment in full of the Loan and the Secured
Obligations then due and owing to the Lender hereunder, the Borrower shall:
15
6.1 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings diligently
conducted and which are reserved against on the Borrower's books and records.
6.2 Maintenance of Books and Records. The Borrower shall keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP, which books and records
shall be maintained at the address set forth on Schedule 4.1 hereto.
6.3 Conduct of Business; Maintenance of Existence; and Compliance with
Laws. Continue to engage in business of the same general type as conducted by
the Borrower on the Closing Date, and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of the business of the Borrower. The Borrower shall do or cause to be done all
things necessary to ensure compliance by the Borrower in all material respects
with all Requirements of Law and all applicable restrictions imposed by any
Governmental Authority.
6.4 Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies of similar size engaged in similar
businesses and owning similar properties and assets in the same general areas in
which the Borrower operates and reasonably acceptable to the Lender, including,
without limitation, primary, all risk, physical damage, property damage, and
bodily injury with appropriate loss payee and additional insured endorsements in
favor of the Lender.
6.5 Taxes. Timely pay all Taxes except Taxes being contested in good
faith by appropriate proceedings (which shall be reserved against on the
Borrower's books and records); provided that it shall pay any contested Taxes
upon commencement of proceedings to foreclose upon any property or assets of the
Borrower to pay such Taxes.
6.6 Maintenance of Properties. Maintain, preserve, protect and keep its
properties in good repair, working order and condition (ordinary wear and tear
excepted), and make reasonable, necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times consistent with past practices of the Borrower.
6.7 Information Rights. The Borrower shall deliver the following to the
Lender:
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each calendar year, (i) consolidated income statement
and statement of cash flows for such year and a balance sheet as of the end of
such year, prepared in accordance with GAAP, and audited and certified by
independent public accountants of nationally recognized standing selected by the
Borrower and reasonably acceptable to the Lender and (ii) annual sales forecasts
16
and budgets for the then next two years, in each case in form and substance
reasonably satisfactory to the Lender;
(b) as soon as practicable, (i) but in any event within thirty
(30) days after the end of each calendar month an unaudited income statement and
statement of cash flows for such month and an unaudited balance sheet as of the
end of such month, (ii) but in any event within thirty (30) days after the end
of each calendar month, monthly sales forecasts, and (iii) but in any event
within thirty (30) days, monthly, quarterly and annual budgets (including
variance reports) in form and substance reasonably satisfactory to the Lender;
and
(c) as soon as reasonably practicable after requested by
Lender, such other reports as Lender may reasonably request in connection with
the Borrower, including without limitation the information referenced at Section
6.11.
6.8 Board Observation Rights. Following termination of the Merger
Agreement and until such time as all Secured Obligations are indefeasibly repaid
in full, the Lender shall have the right to have a representative attend all
meetings of the Borrower's Board of Directors or any such committee thereof, in
a nonvoting, observer capacity, the cost of which attendance shall be paid by
the Borrower, including travel and related costs and expenses. The Borrower
shall provide the Lender notice of such meetings at the same time and in the
same manner as such notice is provided to the Board of Directors and the
Borrower shall provide the Lender copies of all minutes, consents, and other
materials the Borrower provides to its directors in conjunction with said
meetings.
6.9 Access to Premises. Subject to the provisions of the
Confidentiality Agreement between the Borrower and the Lender dated February 27,
2003, and Section 5.6 of the Merger Agreement, from time to time as requested by
the Lender, (a) the Lender or its designee shall have complete access to all of
the Borrower's premises and personnel during normal business hours and after
reasonable prior notice to, or at any time and without notice to the Borrower if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, and (b) the Borrower shall promptly furnish to the Lender such
copies of such books and records or extracts therefrom as the Lender may
request, and (c) the Lender or the Lender's designee may use during normal
business hours such of the Borrower's equipment, supplies and premises as may be
reasonably necessary for the foregoing and, if an Event of Default exists or has
occurred and is continuing, for the collection of accounts receivable and
realization of other Collateral.
6.10 Lock Box Instructions. Upon the occurrence of an Event of Default,
permit Lender, in Lender's sole discretion, to instruct each of the Borrower's
customers and any other Persons with amounts owing to the Borrower to send all
future payments to a designated Lock Box Account pursuant to instructions
determined by the Lender in its sole discretion.
6.11 Updates to Weekly Projections. The Borrower shall consult with the
Lender on a weekly basis with respect to the reconciliation of actual cash flow
to that set forth in the Weekly Projections for the applicable period(s), and
the Borrower shall provide the Lender with the updated Weekly Projections, which
updates shall be consistent with the categories and details set forth in the
Weekly Projections attached at Schedule 4.16(b) hereto, and which updates, for
17
purposes of making Loans pursuant to Section 2.1 hereof, shall in each instance
be acceptable to the Lender in its sole and absolute discretion.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, from and after the original Closing
Date and thereafter until payment in full of all Secured Obligations, the
Borrower shall not, without the Lender's prior written consent:
7.1 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement; and
(b) other Indebtedness (including accrued interest thereon)
outstanding on the original Closing Date and listed on Schedule 7.1(b) (none of
which is secured).
7.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Liens on any properties or assets of the Borrower other than:
(a) Liens incurred in connection with Indebtedness permitted
to be incurred or permitted to exist pursuant to Section 7.1(a);
(b) deposits under worker's compensation, unemployment
insurance and Social Security laws or to secure statutory obligations or surety
or appeal bonds or performance or other similar bonds in the ordinary course of
business consistent with past practice;
(c) Liens for taxes, assessments or other governmental charges
or levies due and payable, the validity or amount of which is currently being
contested in good faith by appropriate proceedings and which have been reserved
for on the Borrower's books and records;
(d) Except as set forth on Schedule 4.15, Liens arising out of
attachments, judgments or awards as to which an appeal or other appropriate
proceedings for contest or review are promptly commenced (and as to which
foreclosure and other enforcement proceedings shall not have been commenced
(unless fully bonded or otherwise effectively stayed)) and as to which reserves
have been established, provided that the assets or property subject to such lien
do not have a value in the aggregate greater than $50,000;
(e) [intentionally deleted];
(f) Liens existing on the Closing Date and described on
Schedule 7.2(f); or
(g) Easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property not constituting, or not possible of
resulting in, a Material Adverse Change.
18
7.3 Limitations on Transactions with Affiliates. Make any payment to or
investment in, or enter into any transaction with, any Affiliate, including,
without limitation, the purchase, sale or exchange of property or assets or the
rendering of any service, except transactions entered into with Affiliates (a)
in the ordinary course of business consistent with past practice, (b) on terms
and conditions substantially similar to those that the Borrower would have
received in an "arm's length" transaction with an independent third party and
(c) related to the Borrower's principal activities; provided, however, that no
payments shall be made (i) to pay any deferred compensation to any officer,
director, employee, insider or Affiliate, or (ii) to reduce, retire or otherwise
repay any note, Indebtedness or other debt or obligation of any officer,
director, employee, insider or Affiliate (including, without limitation, any
Subordinated Debt), or (iii) to reduce any single account payable of the
Borrower by more than $50,000 or more than $150,000 in the aggregate without, in
each case, the prior written approval of the Lender.
7.4 Restrictions on Transactions and Fundamental Changes. Alter the
Borrower's capital or legal structure, or change its name, jurisdiction of
formation or principal place of business/chief executive office, or enter into
any transaction of merger, recapitalization, restructuring, consolidation or
similar transaction, or liquidate, wind-up or dissolve the Borrower (or suffer
any liquidation or dissolution), or convey, sell, lease, sub-lease, license,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of the Borrower's business, property or assets,
whether now owned or hereafter acquired, or enter into any management contract
permitting third-party management rights with respect to the Borrower's
business, or declare or pay any dividends or make any other distribution to its
shareholders, or make any investments, or make any loans, advances or other
extensions of credit to any Person; provided, that (i) the Borrower may declare
and make any dividend payment or other distribution payable in its equity
securities; (ii) the Borrower may make travel advances in the ordinary course of
business consistent with past practice in an aggregate amount of up to $25,000
per month, with an aggregate amount per employee of up to $5,000 per month and
(iii) the Borrower may consummate the transactions contemplated under the Merger
Agreement in accordance with the terms thereof.
7.5 Sale of Assets; Transfer to Subsidiary. Sell, lease, sub-lease,
license, transfer or otherwise dispose of any of the Borrower's interest in its
respective properties or assets, whether real, personal or mixed, or tangible or
intangible, other than inventory in the ordinary course of business consistent
with past practice. Borrower shall not sell, lease, sublease, license, transfer
or otherwise dispose of any properties or assets to any subsidiary.
7.6 Repurchase of Securities. Repurchase, redeem or otherwise acquire
or retire any of the Borrower's securities or obligation evidencing the right of
any holder thereof to purchase any of the Borrower's securities without the
prior written consent of the Lender, other than (a) under the terms and
conditions of stock option, stock purchase, profit sharing or similar plans
approved by the Borrower's Board of Directors or (b) pursuant to the Merger
Agreement in accordance with the terms thereof; provided that with respect to
transactions under (a) only: (i) the shares of common stock or other securities
of the Borrower issued or issuable pursuant thereto do not constitute in the
aggregate more than ten percent (10%) of the Borrower's total outstanding
capital stock on a fully diluted basis; (ii) in no event shall the Borrower
repurchase, redeem or otherwise acquire or retire shares that constitute in the
aggregate more than (A) ten percent (10%) of the Borrower's total outstanding
capital stock on a fully diluted basis or (B) more than
19
two percent (2%) of the Borrower's total outstanding capital stock on a fully
diluted basis from any Person or their respective Affiliates (the securities of
which Affiliates shall be deemed aggregated with such Person for such purpose);
and (iii) any repurchase, redemption or other acquisition or retirement by the
Borrower of securities acquired by an employee pursuant to any such plan shall
be at a price not greater than the actual, cash price that such employee paid to
acquire such securities.
7.7 Corporate Governance. Enter into one or more mortgage, indenture,
agreement, contract, commitment, lease, plan, or other instrument, document or
understanding, oral or written, with any Person in which (i) the Borrower is
obligated to pay in excess of $100,000 in the aggregate within 12 months of the
date hereof without obtaining the approval of the Board of Directors of the
Borrower, and (ii) the Lender does not have a first-priority security interest
as to payment or liquidation or otherwise.
7.8 Bank Accounts. Attached hereto as Schedule 7.8 is a list of all of
the Borrower's present accounts at any bank or other financial institution,
which list includes (i) the name and address of the applicable bank or financial
institution, (ii) the account number and (iii) a contact person at such bank or
financial institution responsible for the operation of such account
(collectively, the "Bank Accounts"). The Borrower shall not establish any
accounts other than the Bank Accounts, except upon not less than fifteen (15)
days' prior written notice to Lender and delivery to Lender of an appropriate
deposit account control agreement in form and substance satisfactory to the
Lender. The Borrower shall not maintain or permit to exist any deposits or other
funds of whatever nature outside of Montecito Bank & Trust in excess of the
amounts and in the Bank Accounts set forth on Schedule 7.8.
7.9 Limitation on Liabilities. The Borrower shall not incur liabilities
owing to any Person (other than in the ordinary course of business) and its
Affiliates in excess of $100,000 in the aggregate without the prior approval of
the Lender, which approval may be given or withheld in the Lender's sole
discretion.
SECTION 8. EVENTS OF DEFAULT
8.1 Event of Default. If any of the following events shall occur and be
continuing:
(a) the Borrower shall fail to pay any principal of or any
interest on the Loan or any other amount payable hereunder when due in
accordance with the terms hereof, or shall fail to make a mandatory prepayment
as and when required under Section 3.2(b) hereof; or
(b) the Borrower shall default in the observance or
performance of any covenant, agreement or other obligation contained in this
Agreement or any other Loan Document, and such default continues for five (5)
Business Days from the Borrower's knowledge thereof; or
(c) default shall be made with respect to any payment of any
Indebtedness of the Borrower in excess of $250,000 when due or the performance
of any covenant, agreement or other obligation incurred in connection with any
such Indebtedness, if the effect of such default is to permit the acceleration
of the maturity of such Indebtedness and such default shall not be remedied,
cured, waived or consented to by the holder of such Indebtedness within the
applicable
20
grace period, or any other circumstance arise (other than the mere passage of
time) by reason of which the Borrower is required to repurchase or offer to
holders of Indebtedness of any such Person, the opportunity to have purchased,
any such Indebtedness; or
(d) (i) the Borrower shall commence any case, proceeding or
other action (A) under any existing or future law or statute of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or the
Borrower shall make a general assignment for the benefit of its creditors; (ii)
there shall be commenced against the Borrower any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged, unstayed or unbonded for a period of 30 days;
(iii) there shall be commenced against the Borrower any case, proceeding or
other action seeking issuance of a warrant or writ of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of an order for such relief which shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from the
entry thereof; (iv) the Borrower shall take any corporate action in furtherance
of, or indicating its consent to, approval of or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower shall be
generally unable to, or shall admit its general inability to, pay its debts as
they become due; or
(e) final judgment for the payment of money shall be rendered
by a court of competent jurisdiction against the Borrower and the Borrower shall
not discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof within ten (10) calendar days from
the date of entry thereof and within a period of thirty (30) days, or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal, and such judgment together with all other such judgments of the Borrower
shall exceed in the aggregate $250,000; or
(f) any representation or warranty made by the Borrower in
this Agreement, or any other Loan Document shall be false or incorrect in any
material respect on any date on which such representation or warranty was made;
or
(g) any Loan Document shall cease for any reason to be in full
force and effect (other than pursuant to the express terms hereof or thereof),
the Loan Documents shall, for any reason, not give or shall cease to give the
Lender a perfected Lien in all of the Collateral with the priority contemplated
by such Loan Documents and subject to no other Liens (except to the extent
expressly permitted herein or therein) other than by actions of the Lender, or
the Borrower shall so assert; or
(h) any Material Adverse Change shall have occurred; or
(i) a Prohibited Transaction shall have occurred.
21
then, and in each such event, (A) if such event is an Event of Default specified
in clauses (i) or (ii) of paragraph (d) above with respect to the Borrower
automatically the Loan hereunder (with accrued interest thereon) and all other
Secured Obligations shall immediately become due and payable, and (B) if such
event is any other Event of Default (except as otherwise provided in the
definition of "Maturity Date," in which case no notice of acceleration shall be
required), the Lender may, by notice to the Borrower, declare the Loan hereunder
(with accrued but unpaid interest thereon including such interest accruing at
the Default Rate) and all other Secured Obligations to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
8.2 Use of Collateral. So long as no Event of Default shall have
occurred and be continuing, and subject to the various provisions of this
Agreement and the other Loan Documents, the Borrower may use the Collateral in
any lawful manner except as otherwise prohibited hereunder or thereunder.
8.3 Credit Parties to Hold in Trust. Upon the occurrence and during the
continuance of an Event of Default, the Borrower will, upon receipt by it of any
revenue, income, profits or other sums in which a security interest is granted
hereunder, payable pursuant to any agreement or otherwise, or of any check,
draft, note, trade acceptance or other instrument evidencing an obligation to
pay any such sum, hold the sum or instrument in trust for the Lender, segregate
such sum or instrument from their own assets and forthwith, without any notice,
demand or other action whatsoever (all notices, demands, or other actions on the
part of the Lender being expressly waived), endorse, transfer and deliver any
such sums or instruments or both, to the Lender to be applied to the repayment
of the Loan in accordance with the provisions of this Agreement.
8.4 Collections, etc. Upon the occurrence and during the continuance of
an Event of Default, the Lender may, in its sole discretion, xxx for, collect or
receive any money or property at any time payable or receivable on account of or
in exchange for, or make any commercially reasonable compromise or settlement
deemed desirable with respect to, any of the Collateral, but shall be under no
obligation so to do, or the Lender may extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, or release, any of
the Collateral, without thereby incurring responsibility to, or discharging or
otherwise affecting any liability of the Borrower. The Lender will not be
required to take any steps to preserve any rights against prior parties to the
Collateral. If the Borrower fails to make any payment or take any action
required hereunder, the Lender may make such payments and take all such actions
as the Lender reasonably deems necessary to protect the Lender's security
interests in the Collateral and/or the value thereof, and the Lender is hereby
authorized (without limiting the general nature of the authority hereinabove
conferred) to pay, purchase, contest and/or compromise any Liens that in the
judgment of the Lender appear to be equal to, prior to or superior to the
security interests of the Lender in the Collateral (other than those permitted
hereunder) and any Liens not expressly permitted by this Agreement.
8.5 Possession, Sale of Collateral, etc. Upon the occurrence and during
the continuance of an Event of Default, the Lender may enter upon the premises
of the Borrower or wherever the Collateral may be, and take possession of the
Collateral, and may demand and receive such possession from any Person who has
possession thereof, and the Lender may take such measures
22
as it deems necessary or proper for the care or protection thereof, including
the right to remove all or any portion of the Collateral, and with or without
taking such possession may sell or cause to be sold, whenever the Lender shall
decide, in one or more sales or parcels, at such prices as the Lender may deem
appropriate, and for cash or on credit or for future delivery, without
assumption of any credit risk, all or any portion of the Collateral, at any
broker's board or at public or private sale, without demand of performance but
within 10 days' written notice to the Borrower of the time and place of any such
public sale or sales (which notice the Borrower hereby agrees is reasonable) and
with such other notices as may be required by applicable law and cannot be
waived, and the Lender shall have no liability should the proceeds resulting
from a private sale be less than the proceeds realizable from a public sale, and
the Lender or any other Person may be the purchaser of all or any portion of the
Collateral so sold and thereafter hold the same absolutely, free (to the fullest
extent permitted by applicable law) from any claim or right of whatever kind,
including any equity of redemption, of the Borrower, any such demand, notice,
claim, right or equity being hereby expressly waived and released by the
Borrower. At any sale or sales made pursuant to this Section 8, the Lender may
bid for or purchase, free (to the fullest extent permitted by applicable law)
from any claim or right of whatever kind, including any equity of redemption,
without demand therefore or notice to the Borrower, any such demand, notice,
claim, right or equity being hereby expressly waived and released, any part of
or all of the Collateral offered for sale, and may make any payment on account
thereof by using any claim for moneys then due and payable to the Lender by the
Borrower hereunder as a credit against the purchase price. The Lender shall in
any such sale make no representations or warranties with respect to the
Collateral or any part thereof, and the Lender shall not be chargeable with any
of the obligations or liabilities of the Borrower. The Borrower hereby agrees
(i) that it will indemnify and hold the Lender harmless from and against any and
all claims with respect to the Collateral asserted before the taking of actual
possession or control of the relevant Collateral by the Lender pursuant to this
Section 8, or arising out of any act of, or omission to act on the part of, any
Person prior to such taking of actual possession or control by the Lender
(whether asserted before or after such taking of possession or control), or
arising out of any act on the part of the Borrower or its Affiliates or agents
before or after the commencement of such actual possession or control by the
Lender, but excluding therefrom all claims with respect to the Collateral
resulting from the gross negligence or willful misconduct of the Lender; and
(ii) the Lender shall not have liability or obligation to the Borrower arising
out of any such claim except for acts of gross negligence or willful misconduct
of the Lender. Subject only to the lawful rights of third parties, any Person
that has possession of any of the Collateral is hereby constituted and appointed
by the Borrower as pledgeholder for the Lender and, upon the occurrence of an
Event of Default, each such pledgeholder is hereby authorized (to the fullest
extent permitted by applicable law) to sell all or any portion of the Collateral
upon the order and direction of the Lender, and the Borrower hereby waives any
and all claims, for damages or otherwise, for any action taken by such
pledgeholder in accordance with the terms of the UCC not otherwise waived
hereunder. In any action hereunder, the Lender shall be entitled, if permitted
by applicable law, to the appointment of a receiver without notice, to take
possession of all or any portion of the Collateral and to exercise such powers
as the court shall confer upon the receiver. Notwithstanding the foregoing, upon
the occurrence of an Event of Default, and during the continuation of such Event
of Default, the Lender shall be entitled to apply, without prior notice to the
Borrower, any cash or cash items constituting Collateral in the possession of
the Lender to payment of the Secured Obligations.
23
8.6 Application of Proceeds on Default. Upon the occurrence and during
the continuance of an Event of Default, the balances in any account of the
Borrower which constitutes part of the Collateral, all other income on the
Collateral, and all proceeds from any sale of the Collateral pursuant hereto
shall be applied first toward payment of the costs and expenses paid or incurred
by the Lender in enforcing this Agreement, in realizing on or protecting any
Collateral and in enforcing or collecting any Secured Obligations, including,
without limitation, court costs and the attorney's fees and expenses incurred by
the Lender, then to satisfy or provide cash Collateral for all obligations
relating to Secured Obligations, and then the indefeasible payment in full of
the Secured Obligations in accordance with this Agreement. Any amounts remaining
after such indefeasible payment in full shall be remitted to the Borrower or as
a court of competent jurisdiction may otherwise direct.
8.7 Power of Attorney. Upon the occurrence and during the continuance
of an Event of Default which is not waived in writing by the Lender, (a) the
Borrower does hereby irrevocably make, constitute and appoint the Lender or any
of its officers or designees the Borrower's true and lawful attorney-in-fact
with full power in the name of the Lender or such other Person to receive, open
and dispose of all mail addressed to the Borrower, and to endorse any notes,
checks, drafts, money orders or other evidences of payment relating to the
Collateral that may come into the possession of the Lender with full power and
right to cause the mail of such Persons to be transferred to the Lender's own
offices or otherwise, and to do any and all other acts necessary or proper to
carry out the intent of this Agreement and the grant of the security interests
hereunder and under the Loan Documents, and the Borrower hereby ratifies and
confirms all that the Lender or its substitutes shall properly do by virtue
hereof; (b) the Borrower does hereby further irrevocably make, constitute and
appoint the Lender or any of its officers or designees its true and lawful
attorney-in-fact in the name of the Lender or the Borrower (i) to enforce all of
the Borrower's rights under and pursuant to all agreements with respect to the
Collateral, all for the sole benefit of the Lender and to enter into such other
agreements (as may be lawful and without breach of contract) as may be
necessary, desirable or appropriate in the judgment of the Lender to complete
the production, distribution or exploitation of any Collateral, (ii) to enter
into and perform such agreements as may be necessary, desirable or appropriate
in the judgment of the Lender in order to carry out the terms, covenants and
conditions of the Loan Documents that are required to be observed or performed
by the Borrower, (iii) to execute such other and further mortgages, pledges and
assignments of the Collateral, and related instruments or agreements, as the
Lender may reasonably require for the purpose of perfecting, protecting,
maintaining or enforcing the security interests granted to the Lender hereunder,
and under the other Loan Documents, and (iv) to do any and all other things
necessary, desirable or appropriate in the judgment of the Lender to carry out
the intention of this Agreement and the grant of the security interests
hereunder and under the other Loan Documents. The Borrower hereby ratifies and
confirms in advance all that the Lender as such attorney-in-fact or its
substitutes shall properly do by virtue of this power of attorney.
8.8 Termination and Release. The security interests granted under this
Agreement shall terminate when all the Secured Obligations have been
indefeasibly paid in full and performed and the commitments pursuant to this
Agreement shall have terminated. Upon request by the Borrower (and at the sole
expense of the Borrower) after such termination, the Lender will take all
reasonable action and do all things reasonably necessary, including executing
UCC
24
termination statements, termination letters to account debtors and copyright and
trademark releases, to terminate the security interest granted to it hereunder.
8.9 Remedies Not Exclusive. The remedies conferred upon or reserved to
the Lender in this Section 8 are intended to be in addition to, and not in
limitation of, any other remedy or remedies available to the Lender. Without
limiting the generality of the foregoing, the Lender shall have all rights and
remedies of a secured creditor under Article 9 of the UCC and other applicable
law.
SECTION 9. MISCELLANEOUS
9.1 [intentionally deleted]
9.2 Indemnification. The Borrower agrees to indemnify, defend and hold
harmless the Lender and each of its successors, assigns, heirs, Subsidiaries,
Affiliates and all of the officers, directors, employees, partners, members,
representatives, advisors and agents (including, without limitation, attorneys
and accountants) of each of the aforementioned Persons, and each of them, from
and against any and all losses, claims, damages, liabilities, expenses, demands,
causes of action, suits, debts, obligations, rights, promises, acts, agreements
and damages of any kind or nature whatsoever, whether at law or in equity,
whether known or unknown, foreseen or unforeseen, heretofore or hereafter
arising out of, relating to, connected with or incidental to the failure of any
representation or warranty made by the Borrower in this Agreement, the other
Loan Documents or in any other documents or agreements contemplated hereby or
thereby or the failure of the Borrower to comply with the covenants, agreements
or other obligations contained in this Agreement or the other Loan Documents
(but excluding (i) any such losses, claims, damages, liabilities, expenses,
demands, causes of action, suits, debts, obligations, rights, promises, acts,
agreements and damages of the Lender to the extent incurred solely by reason of
the gross negligence or willful misconduct of the Lender or (ii) litigation
solely between the Borrower, on the one hand, and the Lender, on the other hand,
in connection with this Agreement or the other Loan Documents or relating to the
transactions contemplated hereby or thereby if, after final non-appealable
judgment, the Lender is not the prevailing party in such litigation). The
agreements in this Section 9.2 shall survive the execution and delivery of this
Agreement and the other Loan Documents and the consummation of the transactions
contemplated hereby or thereby.
9.3 Entire Agreement; Amendments. This Agreement and the other Loan
Documents constitute the entire agreement between the Lender and the Borrower
pertaining to the subject matter contained herein and therein. Neither this
Agreement nor any other Loan Document, nor any terms hereof or thereof, may be
amended, supplemented or modified, nor may the obligations of the parties hereto
or thereto be waived, except pursuant to a writing signed by both the Lender and
the Borrower.
9.4 Waivers. The Lender shall not be deemed, by any act or omission, to
have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by the Lender and then only to the extent specifically set
forth in such writing. A waiver with reference to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event. No delay or omission of the Lender to exercise any right,
whether before or
25
after a default hereunder, shall impair any such right or shall be construed to
be a waiver of any right or default, and the acceptance at any time by the
Lender of any past-due amount shall not be deemed to be a waiver of the right to
require prompt payment when due of any other amounts then or thereafter due and
payable.
9.5 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of a telecopy notice,
when received (provided an original copy of such notice is mailed, postage
pre-paid within the next business day after such notice is sent by telecopy),
or, in the case of delivery by a nationally recognized overnight courier, when
received, addressed as follows, or to such other address as may be hereafter
notified by the respective parties hereto:
The Borrower: Computer Motion, Inc.
000-X Xxxxxxx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Chief Executive Officer
Fax: 000-000-0000
with a copy to: Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx, Esq.
Fax: 000-000-0000
The Lender: Intuitive Surgical, Inc.
000 Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Chief Executive Officer
Fax: 000-000-0000
with a copy to: Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
9.6 Successors and Assigns. The Borrower may not assign its rights or
obligations under this Agreement or the Note without the written consent of the
Lender. This Agreement shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and permitted assigns.
9.7 Interest Deficit. If the provisions of this Agreement or the Note
would at any time require payment by the Borrower to the Lender of any amount of
interest in excess of the maximum amount then permitted by applicable law, the
interest payments to the Lender shall be
26
reduced but only to the extent necessary so that the Lender shall not receive
interest in excess of such maximum amount. If, as a result of the foregoing, the
Lender shall receive interest payments under the Note in an amount less than the
amount otherwise provided hereunder, such deficit (hereinafter called the
"Interest Deficit") will, to the fullest extent permitted by applicable law,
cumulate and will be carried forward (without interest) until the payment in
full of the Note or such earlier time as it may be paid. Interest otherwise
payable to the Lender for any subsequent period shall be increased by the
maximum amount of the Interest Deficit that may be so added without causing the
Lender to receive interest in excess of the maximum amount then permitted by the
law applicable thereto. The amount of any Interest Deficit shall be treated as a
prepayment penalty and shall, to the fullest extent permitted by applicable law,
be paid in full at the time of any prepayment by the Borrower to the Lender. The
amount of any Interest Deficit at the time of any complete payment of the Loan
(if any) (other than an optional prepayment thereof) shall, except to the full
extent then permitted to be paid under applicable law, be canceled and not paid.
9.8 Confidentiality. In handling any confidential information of the
Borrower, the Lender shall exercise the same degree of care that it exercises
with respect to its own proprietary information of the same types to maintain
the confidentiality of any non-public information thereby received or received
pursuant to this Agreement, except that disclosure of such information may be
made (i) to the Subsidiaries or Affiliates of the Lender in connection with
their present or prospective business relations with the Borrower, (ii) to
prospective transferees or purchasers of any interest in the Loan, provided that
they have entered into a comparable confidentiality agreement in favor of the
Borrower and have delivered a copy to the Borrower, (iii) under any Requirement
of Law, (iv) as may be required in connection with the examination, audit or
similar investigation of the Lender, (v) in connection with the Merger Agreement
and (vi) as the Lender may deem appropriate in connection with the exercise of
any remedies hereunder. Confidential information hereunder shall not include
information that either (a) is in the public domain or in the knowledge or
possession of the Lender when disclosed to the Lender by the Borrower, or
becomes part of the public domain after disclosure to the Lender through no
fault of the Lender; or (b) is disclosed to the Lender by a third party,
provided the Lender does not have actual knowledge that such third party is
prohibited from disclosing such information.
9.9 Payment of Expenses. Without duplication of amounts payable under
Section 7.2.2 of the Merger Agreement, the Borrower agrees to pay or reimburse
the Lender upon the termination of the Merger Agreement for all of the Lender's
out-of-pocket costs and expenses incurred in connection with its due diligence
with respect to the Loan, the preparation, execution, delivery and performance
of this Agreement and the other Loan Documents, the consummation of the
transactions contemplated hereby and thereby and the enforcement of its rights
hereunder or thereunder, including, without limitation, the reasonable fees and
disbursements of the Lender's outside counsel; provided that notwithstanding
Section 7.2.2. of the Merger Agreement, the Borrower agrees to reimburse the
Lender for all such costs and expenses (including without limitation the
reasonable fees and disbursements of the Lender's outside counsel) incurred by
the Lender in connection with the Loan Documents following termination of the
Merger Agreement, including without limitation in connection with the
enforcement of the Lender's rights hereunder and under the other Loan Documents.
27
9.10 Captions. The captions of the Sections of this Agreement have been
inserted for convenience only and shall have no substantive effect.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts (including by telecopy), each of which when so executed shall be
deemed to be an original and all of which counterparts together shall constitute
one and the same instrument.
9.12 Severability; Reformation. In case any provision of this Agreement
shall be held to be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement and the future application of such provision shall
not in any way be affected or impaired thereby.
9.13 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE BORROWER AND THE LENDER HEREBY WAIVES,
AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER LOAN DOCUMENT OR THE SUBJECT
MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH OF THE BORROWER AND THE LENDER
ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTY HERETO THAT THE
PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH
OTHER PARTY HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION 9.13 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE COMPANY AND THE LENDER TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
9.14 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PROVISIONS.
9.15 CONSENT TO JURISDICTION/SERVICE OF PROCESS. EACH OF THE BORROWER
AND THE LENDER IRREVOCABLY CONSENT AND SUBMIT TO THE NON-EXCLUSIVE JURISDICTION
OF THE COURTS OF SANTA XXXXX COUNTY, CALIFORNIA, AND THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, WHICHEVER THE LENDER MAY ELECT,
AND WAIVE ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO
ANY ACTION INSTITUTED THEREIN ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS WHETHER IN CONTRACT, TORT, EQUITY
28
OR OTHERWISE, AND AGREE THAT ANY DISPUTE WITH RESPECT TO ANY SUCH MATTERS SHALL
BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE (EXCEPT THAT THE LENDER SHALL HAVE
THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE LENDER DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE ITS
RIGHTS AGAINST THE BORROWER OR ITS PROPERTY). THE BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL (RETURN RECEIPT REQUESTED)
DIRECTED TO ITS ADDRESS SET FORTH HEREIN AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE
U.S. MAILS, OR, AT THE LENDER'S OPTION, BY SERVICE UPON THE BORROWER IN ANY
OTHER MANNER PROVIDED UNDER THE RULES OF ANY SUCH COURTS.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
29
IN WITNESS WHEREOF, the parties hereto have caused this Loan and
Security Agreement to be duly executed and delivered on their behalf as of the
date first above written.
COMPUTER MOTION, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
INTUITIVE SURGICAL, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------
Name: Xxxxxx X. Xxxxx
Title: President & Chief Executive
Officer
EXHIBIT A
COLLATERAL OF BORROWER
The Collateral shall consist of all right, title and interest of Borrower in and
to the following, in each case whether now owned or hereafter arising or
acquired by Borrower:
(a) All present and future accounts, general intangibles and other
rights of Borrower to the payment of money no matter how evidenced, all
chattel paper, instruments and other writings evidencing any such
right, and all goods repossessed or returned in connection therewith;
(b) All inventory of Borrower, now owned or hereafter acquired, and all
raw materials, work in process, materials used or consumed in
Borrower's business and finished goods, together with all additions and
accessions thereto and replacements therefor, and products thereof;
(c) All equipment of Borrower, now owned or hereafter acquired,
including, without limitation, all vehicles (including motor vehicles
and trailers) machinery, tools, dies, blueprints, catalogues, computer
hardware and software, furniture, furnishings and fixtures and all
attachments, accessories, replacements, substitutions, additions, and
improvements to any of the foregoing;
(d) All documents, letters of credit and rights to proceeds of letters
of credit, instruments and investment property of Borrower, now owned
or hereafter acquired, and all new, substituted and additional
documents, securities and instruments issued with respect thereto, all
voting or other rights now or hereafter exercisable and all cash and
noncash dividends, interest and other property now or hereafter
receivable with respect to any of the foregoing, whether such
certificates, documents and instruments are in the possession of
Borrower or a financial intermediary on behalf of Borrower;
(e) All patents and patent applications of Borrower and all rights
corresponding thereto throughout the world, and all unpatented or
unpatentable developments and inventions and all license fees,
royalties and other similar items received in connection therewith;
(f) All trademarks, service marks and logos of Borrower, and all United
States, state and/or foreign applications for registration thereof, all
trade names, trade styles, designs, and the like, all elements of
package or trade dress of goods, the goodwill of Borrower's business
connected with the use of, and symbolized by any of the above, and all
property of Borrower necessary to produce any products sold under any
of the above;
(g) All copyrights and copyrighted works in which Borrower has any
right, title, or interest throughout the world, all derivative works
thereof, all copyright registrations and all applications therefor, and
United States and/or foreign applications for registration and
registrations thereof, and all accounts, accounts receivable and
contracts receivable generated by such copyrights;
A-1
(h) All computer software programs developed or to be developed by
Borrower or in which Borrower asserts or could assert a proprietary
interest; all personal property, including but not limited to source
codes, object codes or similar information, which is necessary to the
practical utilization of such programs; and all tangible property of
Borrower embodying or incorporating any such programs;
(i) All trade secrets, proprietary information, customer lists,
instructional materials, working drawings, manufacturing techniques,
process technology documentation, and product formulations of Borrower
and all property and assets of Borrower, whether tangible or
intangible, which are or a person may deem to be intellectual property
of Borrower;
(j) All rights under any agreement granting any right to use any
patent, trademark, copyright, computer software program or any other
property or right to property specified in paragraphs (e), (f), (g),
(h) or (i) above, whether Borrower is the grantor or the grantee under
such agreement;
(k) All commercial tort claims, including without limitation those
identified at Schedule I hereto;
(l) All rights to damages or profits due or accrued arising out of
past, present or future infringement of the Collateral or injury to
Borrower's good will connected with the use of the Collateral and the
right to xxx therefor;
(m) All renewals, modifications, amendments, re-issues, divisions,
continuations in whole or part, and extensions of any Collateral;
(n) All right, title and interest of Borrower in, to and under each
contract entered into or to be entered into by Borrower, together with
any purchase orders or other supplements thereto, as any such contract
may be modified, amended or restated from time to time, and all right,
title and interest of Borrower in and to all moneys and claims for
moneys due or to become due to Borrower under or arising out of any
such contract;
(o) All now existing and hereafter acquired books and records relating
to the foregoing Collateral and all equipment containing such books and
records; and
(p) All Proceeds of the foregoing Collateral; and
(q) Any and all claims, rights and interests in any of the foregoing of
the above and all substitutions for, additions and accessions to and
proceeds thereof.
A-2
EXHIBIT B
FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT
INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement") is entered
into as of _________, 2003 by and between INTUITIVE SURGICAL, INC. ("Lender")
and COMPUTER MOTION, INC., a Delaware corporation ("Grantor").
RECITALS
A. Lender has agreed to make certain advances of money and to extend
certain financial accommodations to Grantor (the "Loans") in the amounts and
manner set forth in that certain Loan and Security Agreement dated as of March
7, 2003, by and between Lender and Grantor (as the same may be amended, modified
or supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Lender is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Lender a security interest in all of its Copyrights, Trademarks and
Patents to secure the obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Lender a security interest in all of Grantor's right, title and interest,
whether presently existing or hereafter acquired, in, to and under all of the
Collateral, including, without limitation, all of its Copyrights, Trademarks and
Patents.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and intending to be legally bound, as collateral
security for the prompt and complete payment when due of its obligations under
the Loan Agreement and the other Loan Documents, Grantor hereby represents,
warrants, covenants and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Documents and under all other
agreements now existing or hereafter arising between Grantor and Lender, Grantor
assigns to Lender for security purposes, and grants and pledges to Lender, a
security interest in all of Grantor's right, title and interest in, to and under
its Intellectual Property Collateral (including, without limitation, those
Copyrights, Patents and Trademarks listed on Schedules A, B and C hereto),
together with the goodwill of the businesses associated with the Trademarks, and
including, without limitation, all proceeds thereof (such as, by way of example
but not by way of limitation, license royalties and proceeds of infringement
suits), the right to xxx for past, present and future infringements, all rights
corresponding thereto throughout the world and all re-issues, re-examinations,
divisions continuations, renewals, termination rights, extensions and
continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Lender under the Loan Agreement. The rights and remedies of
Lender with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the
B-1
other Loan Documents, and those which are now or hereafter available to Lender
as a matter of law or equity. Each right, power and remedy of Lender provided
for herein or in the Loan Agreement or any of the Loan Documents, or now or
hereafter existing at law or in equity shall be cumulative and concurrent and
shall be in a addition to every right, power or remedy provided for herein and
the exercise by Lender of any one or more of the rights, powers or remedies
provided for in this Agreement, the Loan Agreement or any of the other Loan
Documents, or now or hereafter existing at law or in equity, shall not preclude
the simultaneous or later exercise by any person or entity, including Lender, of
any or all other rights, powers or remedies.
Grantor represents and warrants that Exhibits A, B, and C attached
hereto set forth any and all intellectual property rights in connection to which
Grantor has registered or filed an application with either the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable.
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of which
counterparts together shall constitute one and the same instrument.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PROVISIONS, EXCEPT TO THE EXTENT GOVERNED BY FEDERAL LAW, IN
WHICH CASE FEDERAL LAW SHALL APPLY.
This Agreement may not be amended, supplemented or modified, nor may
the obligations of the parties hereto be waived, except pursuant to a writing
signed by both Lender and Grantor.
Grantor may not assign its rights or obligations under this Agreement
or otherwise encumber or hypothecate its Intellectual Property Collateral
without the consent of Lender. This Agreement shall be binding upon and inure to
the benefit of Lender and Grantor and their respective successors and permitted
assigns.
[Signatures on Next Page]
B-2
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
GRANTOR:
COMPUTER MOTION, INC.
Address of Grantor:
000-X Xxxxxxx Xxxxx By:
------------------------
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000 Name:
Attn: Xxxxxx X. Xxxxxx, Title:
Chief Executive Officer
LENDER:
INTUITIVE SURGICAL, INC.
Address of Lender:
By:
------------------------
000 Xxxxx Xxxx Name:
Xxxxxxxxx, Xxxxxxxxxx 00000 Title:
Attn: Xxxxxx X. Xxxxx, Chief Executive
Officer
B-3
STATE OF [_______________]. )
) SS
COUNTY OF _____________________ )
On the ____ day of _____________ , 2003, before me, ____________________ , a
notary public, personally appeared __________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon which the person(s) acted, executed
this instrument.
WITNESS my hand and official seal.
________________________________
Notary Public
My commission expires:
B-4
STATE OF [_______________] )
) SS
COUNTY OF _____________________ )
On the ____ day of _____________ , 2003, before me, ____________________ , a
notary public, personally appeared __________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon which the person(s) acted, executed
this instrument.
WITNESS my hand and official seal.
_______________________________
Notary Public
My commission expires:
B-5
EXHIBIT A
Registered Copyrights
[Grantor to provide]
B-6
EXHIBIT B
Patents
[Grantor to provide]
B-7
EXHIBIT C
Trademarks
[Grantor to provide]
B-8
EXHIBIT C
FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR WITH THE SECURITIES COMMISSION OF ANY APPLICABLE STATE UNDER SUCH STATE'S
SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SUCH SECURITIES ACT AND THE APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
$7,300,000 __________, 2003
Computer Motion, Inc., a Delaware corporation ("Borrower"),
for value received, hereby promises to pay to the order of Intuitive
Surgical, Inc. (the "Lender"), the aggregate principal amount of Seven
Million Three Hundred Thousand Dollars ($7,300,000), or the aggregate
outstanding principal amount of all Loans made by the Lender to
Borrower pursuant to the Loan and Security Agreement (as defined
below), whichever is less (the "Principal Amount"), together with
accrued and unpaid interest on the Principal Amount, on Maturity Date,
in such coin or currency of the United States of America as at the time
of payment shall be legal tender therein for the payment of public and
private debts. Capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in that certain Loan and
Security Agreement dated as of March 7, 2003, between Borrower and the
Lender (as amended from time to time, the "Loan Agreement").
This Note shall accrue interest at a fixed rate per annum of
eight percent (8%) (the "Interest Rate") with respect to the
outstanding unpaid Principal Amount plus any accrued but unpaid
interest thereon and on any other Secured Obligations compounding
annually (the "Interest") until and including the date the Principal
Amount, such interest and the other Secured Obligations are paid in
full. Such Interest shall, except as provided in the last sentence of
this paragraph, be due and payable, together with all outstanding
Principal Amount, on the Maturity Date (or such earlier date as
required under the Loan Agreement), in each case with interest to
accrue and be due and payable through and including the applicable
payment date. Interest shall be calculated on the basis of a 360-day
year of twelve 30-day months, provided, however, that per diem interest
shall be calculated on the basis of the actual number of days elapsed
over a year of 365 days. The Secured Obligations under this Note are
secured by the Collateral of Borrower pursuant to the Loan and Security
Agreement. Without duplication of any interest payable hereunder,
Borrower hereby unconditionally promises to pay to the Lender interest
on any principal, interest and any other Secured Obligations payable by
Borrower under this Loan that shall not be paid in full when due
(whether at the Maturity Date, by acceleration or otherwise), for the
period from and including the due date of such payment to and including
the date the same is paid in full, at a rate per annum equal to the
Interest Rate plus 400 basis points, which interest shall be payable
from time to time on demand of the Lender.
C-1
Borrower hereby waives presentment, demand, protest, notice of
dishonor, diligence and all other notices, any release or discharge
arising from any extension of time, discharge of a prior party, release
of any or all of any security given from time to time for this Note, or
other cause of release or discharge other than actual payment in full
hereof.
The Lender may, but is not obligated to, enter the amount of
each Loan and the amount of each payment or prepayment of principal or
interest thereon on the appropriate spaces on the last page of this
Note; provided, however, that the failure of the Lender to set forth
such Loan, principal payments, interest payments or other information
shall not in any manner affect the obligations of Borrower to repay
such Loan or any Secured Obligations.
The Lender shall not be deemed, by any act or omission, to
have waived any of its rights or remedies hereunder unless such waiver
is in writing and signed by the Lender and then only to the extent
specifically set forth in such writing. A waiver with reference to one
event shall not be construed as continuing or as a bar to or waiver of
any right or remedy as to a subsequent event. No delay or omission of
the Lender to exercise any right, whether before or after a default
hereunder, shall impair any such right or shall be construed to be a
waiver of any right or default, and the acceptance at any time by the
Lender of any past-due amount shall not be deemed to be a waiver of the
right to require prompt payment when due of any other amounts then or
thereafter due and payable.
Time is of the essence hereof. Upon any default hereunder, the
Lender may exercise all rights and remedies provided for herein and by
law or equity, including, without limitation, the right to immediate
payment in full of this Note.
The remedies of the Lender as provided herein or in law or in
equity, or any one or more of them, shall be cumulative and concurrent,
and may be pursued singularly, successively or together at Lender's
sole discretion, and may be exercised as often as occasion therefor
shall occur.
It is expressly agreed that if this Note is referred to an
attorney or if suit is brought to collect or interpret this Note or any
part hereof or to enforce or protect any rights conferred upon the
Lender by this Note or any other Document, then Borrower promises and
agrees to pay all costs, including, without limitation, attorneys'
fees, incurred by the Lender.
This Note and the rights and obligations of the parties
hereunder shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of California without
giving effect to any conflict of law provisions.
This is the Note referred to in the Loan Agreement and is
subject to and entitled to the benefits of said agreement, including,
without limitation, acceleration and the right in certain circumstances
to require that this Note be prepaid prior to the Maturity Date.
C-2
IN WITNESS WHEREOF, Borrower has duly executed and delivered this Note
as of the date first written above.
COMPUTER MOTION, INC.
By: ______________________________
Name:
Title:
C-3
LAST PAGE OF NOTE
Payments
Amount Unpaid Principal Name of Person Making
Date of Loan Principal Interest Balance of Note Notation
---- ------- --------- -------- --------------- --------
C-4
EXHIBIT D
FORM OF NOTICE OF BORROWING
[Date]
Intuitive Surgical, Inc.
000 Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Chief Executive Officer
Ladies and Gentlemen:
The undersigned, Computer Motion, Inc., refers to that certain Loan and Security
Agreement dated as of March 7, 2003 (as amended, supplemented or otherwise
modified from time to time, the "Loan Agreement"; capitalized terms used and not
otherwise defined herein shall have the meanings given in the Loan Agreement),
between the undersigned, as Borrower, and Intuitive Surgical, Inc., as Lender,
and hereby gives you notice, irrevocably, pursuant to Section 2.1(i) of the Loan
Agreement that the undersigned hereby requests that the Lender make a Loan in
the amount of [up to $2,300,000] (the "Proposed Borrowing"), on _________, 2003,
which is a Business Day.
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:
(a) the representations and warranties contained in each Loan
Document are correct on and as of the date of the Proposed Borrowing, before and
after giving effect to the Proposed Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date; and
(b) no event has occurred and is continuing, or would result
from such Proposed Borrowing or from the application of the proceeds therefrom,
that constitutes a Default.
The undersigned hereby directs and authorizes you to disburse the entire
proceeds of the Proposed Borrowing as follows:
[Payment information for Agility Capital, LLC]
COMPUTER MOTION, INC.
By ________________________________
Name:
Title:
D-1