EXHIBIT 10.22
SENIOR LOAN AND SECURITY AGREEMENT NO. 6170
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 6170 (this "Security Agreement") is
dated as of August 10, 1998 between GRIC COMMUNICATIONS, INC., a California
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed $2,000,000 in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower
(each, a "Loan" and collectively, the "Loans"). Such borrowings shall be
evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles, and
also certain custom use equipment, installation and delivery costs, purchase
tax, toolings, software and other items generally considered fungible or
expendable ("Soft Costs") whether now owned by Borrower or hereafter acquired,
and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
(collectively, the "Collateral") which is described on the Note attached hereto
or any subsequently-executed Note entered into by Lender and Borrower and which
incorporates this Security Agreement by reference.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on
the date set forth above and shall continue thereafter and be in effect so long
as and at any time any Note entered into pursuant to this Security Agreement is
in effect. The Term and monthly payment amount payable with respect to each
item of Collateral shall be as set forth in and as stated in the respective
Note(s). The terms of each Note hereto are subject to all conditions and
provisions of this Security Agreement as it may at any time be amended. Each
Note shall constitute a separate and independent Loan and contractual obligation
of Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot
be canceled or terminated except as expressly provided herein. Borrower agrees
that its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such rent and other sums, are absolute and unconditional and are not subject
to any abatement, reduction, setoff, defense, counterclaim or recoupment due or
alleged to be due to, or by reason of, any past, present or future claims which
Borrower may have against Lender, any assignee, the manufacturer or seller of
the Collateral, or against any person for any reason whatsoever.
SECTION 3. LENDER COMMITMENT. (a) GENERAL TERMS. Subject to the terms and
conditions of
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this Security Agreement and so long as no Event of Default or event which
with the giving of notice or passage of time, or both, could become an Event
of Default has occurred or is continuing, Lender hereby agrees to make one or
more senior secured Loans to Borrower, subject to the following conditions:
(i) each Loan shall be evidenced by a Note; (ii) the total principal amount
of the Loans shall not exceed $2,000,000 in the aggregate (the "Commitment")
provided that no more than 10% of the amount of the utilized Commitment may
be used to finance Soft Costs; (iii) at the time of each Loan, no Event of
Default or event which with the giving of notice or passage of time, or both,
could become an Event of Default shall have occurred and be continuing, as
reasonably determined by Lender, and certified by Borrower; (iv) the amount
of each Loan shall be at least $20,000 except for a final Loan which may be
less than $20,000; (v) Lender shall not be obligated to make any Loan after
December 31, 1998 provided that the funding period may be extended to April
30, 1999 if Lender has received and approved in its sole discretion
Borrower's monthly 1999 business plan; (vi) for each Loan, Borrower shall
present to Lender a list of proposed Collateral for approval by Lender in its
sole discretion; (vii) for each Loan, Borrower shall have provided Lender
with each of the closing documents not marked by an asterisk described in
Exhibit A hereto (which documents shall be in form and substance reasonably
acceptable to Lender); (viii) Borrower is performing substantially according
to its business plan referred to as "GRIC Communications 1998 Operating Plan,
GRIC Communications 1998 Operating Plan Balance Sheet and GRIC Communications
1998 Operating Plan Cash Flow Statement" dated February 19, 1998, viable
through December 31, 1998 only (the "Business Plan"), as may be amended from
time to time in form and substance acceptable to Lender; (ix) there shall be
no material adverse change in Borrower's condition, financial or otherwise,
that would materially impair the ability of Borrower to meet its payment and
other obligations under this Loan (a "Material Adverse Effect") as reasonably
determined by Lender, and Borrower so certifies, from (yy) the date of the
most recent financial statements delivered by Borrower to Lender to (zz) the
date of the proposed Loan; (x) Borrower shall use the proceeds of all Loans
hereunder to purchase or reimburse the purchase of Collateral; (xi) at the
time of each Loan, Borrower has reimbursed Lender for all UCC filing and
search costs, inspection and labeling costs, if any; (xii) all Collateral has
been marked and labeled by Lender or Lender's agent; (xiii) Borrower has
caused the First Amendment to Third Amended and Restated Registration Rights
Agreement dated as of August 10, 1998 to be executed by the necessary parties
by October 30, 1998; and (xiv) Lender has received in form and substance
acceptable to Lender: (a) Borrower's interim financial statements signed by a
financial officer of Borrower, (b) prior to the first funding, evidence of
Borrower's receipt of $5,500,000 equity by June 1998; (c) prior to the first
funding, evidence of Borrower's $6,100,000 cash position as of March 31,
1998; (d) prior to the first funding evidence of Borrower's receipt and
acceptance of an engagement letter from a reputable investment banker for
proceeding into a private placement of $20,000,000 of Borrower's stock; and
(e) when and as they become available complete copies of the Borrower's audit
reports for its most recent fiscal year, which shall include at least
Borrower's balance sheet as of the close of such year, and Borrower's
statement of income and retained earnings and of changes in financial
position for such year, prepared on a consolidated basis and certified by
independent public accountants. Such certificate shall not be qualified or
limited because of restricted or limited examination by such accountant of
any material portion of the company's records. Such reports shall be
prepared in accordance with generally accepted accounting principles and
practices consistently applied.
(b) THE NOTES. Each Loan shall be evidenced by a Note. Each Note shall
bear interest and be payable at the times and in the manner provided therein.
Following payment of the Indebtedness related to each Note, Lender shall return
such Note, marked "cancelled," to Borrower. Borrower has the ability to prepay
all outstanding Notes in whole but not in part only in the event that Lender
declines to consent to Borrower's merger into, consolidation with or conveyance
or transfer of its properties substantially as
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an entirety to any other person or entity. The prepayment amount shall be
the sum of (i) and (ii) below, discounting the amounts in (ii) at a rate of
6% per annum compounded monthly on the basis of a 360 day year: (i) all
amounts which may be then due or accrued to the payment date for all
outstanding Notes; (ii) as of such payment date, an amount equal to: (A) all
remaining monthly payments due under all outstanding Notes, and (B) 12
additional monthly payments for all outstanding Notes, the amounts of which
will be calculated in accordance with Election No. 2 in Section 30. The
prepayment conditions are as follows: (a) Borrower must provide Lender with
at least five (5) days' advance written notice of its intention to early
terminate; and (b) the early termination payment date must fall on a regular
monthly payment date.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i)
the payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it has full
authority to execute and deliver this Security Agreement and the Notes and
perform the terms hereof and thereof, and this Security Agreement and the Notes
have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) there is
no action or proceeding pending or threatened against Borrower before any court
or administrative agency which might have a Material Adverse Effect on the
business, financial condition or operations of Borrower; (f) at the time any
Loan is made hereunder, Borrower owns and will keep all of the Collateral free
and clear of all liens, claims and encumbrances, and, except for this Security
Agreement, there is no deed of trust, mortgage, security agreement or other
third party interest against any of the Collateral; (g) at the time any Loan is
made hereunder, Borrower has good and marketable title to the Collateral; (h) at
the time any Loan is made hereunder, all Collateral has been received, instaled
and is ready for use and is satisfactory in all respects for the purposes of
this Security Agreement; (i) the Collateral is, and will remain at all times
under applicable law, removable personal property, which is free and clear of
any lien or encumbrance except in favor of Lender, notwithstanding the manner in
which the Collateral may be attached to any real property; (j) all credit and
financial information submitted to Lender herewith or at any other time is and
will at the time given be true and correct in all material respects; and (k) the
security interest granted to Lender hereunder is a first priority security
interest.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
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SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be
located at the address (the "Collateral Location") shown on Exhibit A to each
Note and shall not be moved without Lender's prior written consent which
location shall in all events be within the United States. All of the records
regarding the Collateral shall be located at 0000 XxXxxxxx Xxxx., Xxxxxxxx, XX
00000, or such other location of which Borrower has given notice to Lender in
accordance with this Security Agreement. Lender shall have the right to inspect
Collateral, including records relating thereto, and Borrower's books and records
at any time (upon reasonable notification) during regular business hours, such
books and records to be maintained in accordance with generally accepted
accounting principles. Borrower shall be responsible for all labor, material
and freight charges incurred in connection with any removal or relocation of
Collateral which is requested by Borrower and consented to by Lender, as well as
for any charges due to the installation or moving of the Collateral. Payments
under the Notes and under this Security Agreement shall continue during any
period in which the Collateral is in transit during a relocation. During
Borrower's regular business hours and upon at least two days' notice to
Borrower, Lender or its agent shall xxxx and label Collateral, which labels (to
be provided by Lender) shall state that such Collateral is subject to a security
interest of Lender, and Borrower shall keep such labels on the Collateral as so
labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) GENERAL. Borrower will reasonably
permit Lender to inspect each item of Collateral and its maintenance records
during Borrower's regular business hours. Borrower will at its sole expense
comply with all applicable laws, rules, regulations, requirements and orders
with respect to the use, maintenance, repair, condition, storage and operation
of each item of Collateral. Any addition or improvement that is so required or
cannot be so removed will immediately become Collateral of Lender. (b) SERVICE
AND REPAIR. Borrower will at its sole expense maintain and service and repair
any damage to each item of Collateral in a manner consistent with prudent
industry practice and Borrower's own practice so that such item of Collateral is
at all times (i) in the same condition as when delivered to Borrower, except for
ordinary wear and tear, and (ii) in good operating order for the function
intended by its manufacturer's warranties and recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." No later than the first payment date following such
Casualty Occurrence, or, if there is no such payment date, no later than thirty
(30) days after such Casualty Occurrence, Borrower shall, at its election,
either: (a) repair the Collateral returning it to good operating condition, or
(b) replace the Collateral with Collateral acceptable to Lender in its
reasonable discretion, in good condition and repair taking all steps required by
Lender to perfect Lender's first priority security interest therein, which
replacement Collateral shall be subject to the terms of this Security Agreement,
or (c) on the first day payment is due on any Note following the Casualty
Occurrence, or if there is no such payment date, thirty (30) days after such
Casualty Occurrence, pay to Lender an amount equal to the Balance Due (as
defined below) for each lost or damaged item of Collateral. The Balance Due for
each such item is the sum of: (i) all amounts for each item which may be then
due or accrued to the payment date, plus (ii) as of such payment date, an amount
equal to the product of the fraction specified below times the sum of all
remaining payments under the respective Note, including the amount of any
mandatory or optional payment required or permitted to be paid by Borrower to
Lender at the maturity of the Note. The numerator of the fraction shall be the
collateral value (as set forth on the applicable Note) of the item and the
denominator shall be the aggregate collateral value of all items under the Note.
Upon the making of such payments, Lender shall release such item of Collateral
from its lien hereunder.
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SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value of
the Collateral (including, in the case of Collateral which is vehicles,
comprehensive and collision coverage) and in no event for less than the amount
payable following a Casualty Occurrence (as provided in Section 9). Such
insurance shall provide for a loss payable endorsement to Lender and/or any
assignee of Lender. Borrower shall maintain commercial general liability
insurance, including products liability and completed operations coverage, with
respect to loss or damage for personal injury, death or property damage in an
amount not less than $2,000,000 in the aggregate, (and in the case of Collateral
which is vehicles, in an amount not less than $1,000,000 covering bodily injury
and property damage in a combined single limit) naming Lender and/or Lender's
assignee as additional insured. Such insurance shall contain insurer's
agreement to give thirty (30) days' advance written notice to Lender before
cancellation or material change of any policy of insurance. Borrower will
provide Lender and any assignee of Lender with a certificate of insurance from
the insurer evidencing Lender's or such assignee's interest in the policy of
insurance. Such insurance shall cover any Casualty Occurrence to any unit of
Collateral. Notwithstanding anything in Section 9 or this Section 10 to the
contrary, this Security Agreement and Borrower's obligations hereunder shall
remain in full force and effect with respect to any unit of Collateral which is
not subject to a Casualty Occurrence. If Borrower fails to provide or maintain
insurance as required herein, Lender shall have the right, but shall not be
obligated, to obtain such insurance. In that event, Borrower shall pay to
Lender the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules
and regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual audited
financial statements within ninety (90) days following the end of Borrower's
fiscal year, unaudited quarterly financial statements within forty-five (45)
days after the end of each fiscal quarter, and within thirty (30) days of the
end of each month a financial statement for that month prepared by Borrower, and
including an income statement and balance sheet, all of which shall be certified
by an officer of Borrower as true and correct and shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and such other information as Lender may reasonably request; and (e) promptly
(but in no event more than five (5) days after the occurrence of such event)
notify Lender of any change in Borrower's condition during the commitment period
which constitutes a Material Adverse Effect, and of the occurrence of any Event
of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort
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and excluding only those based on Lender's gross negligence or willful
misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon Lender's
request, will, at Borrower's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel
designated and approved by Lender. Borrower's obligations under this Section
12 shall survive the payment in full of all the Indebtedness and the
performance of all Obligations with respect to acts or events occurring or
alleged to have occurred prior to the payment in full of all the Indebtedness
and the performance of all Obligations.
SECTION 13. TAXES. Borrower agrees to reimburse Lender (or pay directly if
instructed by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to Lender's income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement, the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY.
LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY
INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN
PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If
Borrower is given notice of such assignment it agrees to acknowledge receipt
thereof in writing and Borrower shall execute such additional documentation as
Lender's assignee and/or secured party shall reasonably require at Lender's
expense. Each such assignee and/or secured party shall have all of the rights,
but (except as provided in this Section 15) none of the obligations, of Lender
under this Security Agreement, unless such assignee or secured party expressly
agrees to assume such obligations in writing. Borrower shall not assert against
any assignee and/or secured party any defense, counterclaim or offset that
Borrower may have against Lender. Notwithstanding any such assignment, and
providing no Event of Default has occurred and is continuing, Lender, or its
assignees, secured parties, or their agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the terms and
conditions of
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this Security Agreement. Subject to the foregoing, the Notes and this
Security Agreement shall inure to the benefit of, and are binding upon, the
successors and assignees of the parties hereto. Borrower acknowledges that
any such assignment by Lender will not change Borrower's duties or
obligations under this Security Agreement and the Notes or increase any
burden or risk on Borrower.
SECTION 16. DEFAULT. (a) EVENTS OF DEFAULT. Any of the following events or
conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes shall prove to have been incorrect in any
material respect when made or given; (iv) Borrower's failure to comply with or
perform any material term, covenant or condition of this Security Agreement or
any Note or under any other agreement between Borrower and Lender or under any
lease or mortgage of real property covering the location of the Collateral if
such failure to comply or perform is not cured by Borrower within thirty (30)
days after Borrower knows of the noncompliance or nonperformance or notice from
Lender or such longer period that Borrower is diligently attempting to effect
such cure; (v) seizure of any of the Collateral under legal process; (vi) the
filing by or against Borrower or any guarantor under any guaranty executed in
connection with this Security Agreement ("Guarantor") of a petition for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors; (vii) the
voluntary or involuntary making of an assignment of a substantial portion of its
assets by Borrower or by any Guarantor for the benefit of its creditors, the
appointment of a receiver or trustee for Borrower or any Guarantor or for any of
Borrower's or Guarantor's assets, the institution by or against Borrower or any
Guarantor of any formal or informal proceeding for dissolution, liquidation,
settlement of claims against or winding up of the affairs of Borrower or any
Guarantor provided that in the case of all such involuntary proceedings, same
are not dismissed within sixty (60) days after commencement; (viii) the making
by Borrower or by any Guarantor of a transfer of all or a material portion of
Borrower's or Guarantor's assets or inventory not in the ordinary course of
business; or (ix) any default or breach by any Guarantor of any of the terms of
its guaranty to Lender in connection with this Security Agreement.
(b) REMEDIES. If any Event of Default has occurred, Lender may in its
sole discretion exercise one or more of the following remedies with respect to
any or all of the Collateral: (i) declare due any or all of the aggregate sum
of all remaining payments under the Notes, including the amount of any mandatory
or optional payment required or permitted to be paid by Borrower to Lender at
the maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate
court action or actions either at law or in equity to enforce Borrower's
performance of the applicable covenants of the Notes and this Security Agreement
or to recover all damages and expenses incurred by Lender by reason of an Event
of Default; (iii) except as provided by law, without court order or prior
demand, enter upon the premises where the Collateral is located and take
immediate possession of and remove it without liability of Lender to Borrower or
any other person or entity; (iv) terminate this Security Agreement and sell the
Collateral at public or private sale, or otherwise dispose of, hold, use or
lease any or all of the Collateral in a commercially reasonable manner; or (v)
exercise any other right or remedy available to it under applicable law. If
Lender has declared due any or all of the Remaining Payments, Borrower will pay
immediately to Lender, without duplication, (A) the Remaining Payments, (B) all
amounts which may be then due or accrued, and (C) all other amounts due under
this Security Agreement and under the Notes (Lender's Return, as referred to
below, means the amounts described in clauses (A), (B) and (C) above). The net
proceeds of any sale or lease of such Collateral will be credited against
Lender's Return. The net
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proceeds of a sale of the Collateral pursuant to this Section 16(b) is
defined as the sales price of the Collateral less selling expenses,
including, without limitation, costs of remarketing the Collateral with
respect to such remarketing. The net proceeds of a lease of the Collateral
pursuant to this Section 16(b) is defied as the amount equal to the monthly
payments due under such lease (discounted at 6% per annum compounded monthly
on the basis of a 360 day year (the "Discount Rate") plus the residual value
of the Collateral at the end of the basic term of such lease, as reasonably
determined by Lender, and discounted at the Discount Rate.
Borrower agrees to pay all reasonable out-of-pocket costs of Lender incurred in
enforcement of this Security Agreement, the Notes or any instrument or agreement
required under this Security Agreement, including, but not limited to reasonable
attorneys' fees and litigation expenses and fees of collection agencies ("Remedy
Expenses"). At Lender's request, Borrower shall assemble the Collateral and
make it available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
In addition to the foregoing remedies, if an Event of Default hereunder shall
have occurred and be continuing, Lender shall have the right to cause its
representative or representatives to attend any meeting of Borrower's Board of
Directors or any committee thereof. In such case, Borrower shall provide Lender
with the same notice of any such Board or committee meeting that is given to the
members of Borrower's Board or committee thereof.
(c) APPLICATION OF PROCEEDS. The proceeds of any sale of all or any
part of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
FIRST, to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;
SECOND, to the payment of all other amounts not described in item
THIRD below due under this Security Agreement and all Notes;
THIRD, to pay Lender an amount equal to Lender's Return, to the
extent not previously paid by Borrower; and
FOURTH, to the payment of any surplus to Borrower or to whomever
may lawfully be entitled to receive it.
(d) EFFECT OF DELAY; WAIVER; FORECLOSURE ON COLLATERAL. No delay or
omission of Lender, in
8
exercising any right or power arising from any Event of Default shall prevent
Lender from exercising that right or power if the Event of Default continues.
No waiver of an Event of Default, whether full or partial, by Lender or such
holder shall be taken to extend to any subsequent Event of Default, or to
impair the rights of Lender in respect of any damages suffered as a result of
the Event of Default. The giving, taking or enforcement of any other or
additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate
to prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies exercised hereunder or
thereunder. Lender shall not be required first to foreclose on the Collateral
prior to bringing an action against Borrower for sums owed to Lender under
this Security Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 10% of
any payment owed Lender by Borrower which is not paid when due (taking into
account applicable grace periods), for every month such payment is not paid when
due, but in no event an amount greater than the highest rate permitted by
applicable law. If such amounts have not been received by Lender at Lender's
place of business or by Lender's designated agent by the date such amounts are
due under this Security Agreement or the Notes, Lender shall xxxx Borrower for
such charges. Borrower acknowledges that invoices for amounts due hereunder or
under the Notes are sent by Lender for Borrower's convenience only. Borrower's
non-receipt of an invoice will not relieve Borrower of its obligation to make
payments hereunder or under the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each of
Lender's officers, employees or agents designated by Lender) with full power of
substitution by Lender, as Borrower's attorney, with power to execute and
deliver on Borrower's behalf, financing statements and other documents necessary
to perfect and/or give notice of Lender's security interest in any of the
Collateral. Notwithstanding the above, Borrower will, upon Lender's request,
execute all financing statements pursuant to the Uniform Commercial Code and all
such other documents reasonably requested by Lender to perfect Lender's security
interests hereunder. Borrower authorizes Lender to file financing statements
signed only by Lender (where such authorization is permitted by law) at all
places where Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Lender makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
9
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs
and expenses including reasonable attorney's fees and the fees of collection
agencies, incurred by Lender (a) in enforcing any of the terms, conditions or
provisions hereof and related to the exercise of its remedies, and (b) in
connection with any bankruptcy or post-judgment proceeding, whether or not suit
is filed and, in each and every action, suit or proceeding, including any and
all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent, which shall not
be given for changes that will affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or which
in any way affect the value of the Collateral for purposes of resale or lease.
All attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lessor.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement
will be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original
of each Note and it shall be marked "Original," and all other counterparts will
be duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
SECTION 25. STOCK WARRANT. Borrower agrees that it will issue to Lender upon
execution of this Security Agreement a Warrant in the form of the Warrant
Agreement attached hereto as Exhibit B. Borrower and Lender agree that the
value of the Warrant hereunder is nominal.
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee
("Fee") of $20,000. The Fee shall be applied by Lender first to reimburse
Lender for all out-of-pocket UCC and other search costs, inspections and
labeling costs and appraisal fees, if any, incurred by Lender, and then
proportionally to the first monthly payment for each Note hereunder in the
proportion that the Collateral value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligation to fund Loans pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at 0000 Xxxxxx Xxxxxxxxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000, Attention: Asset Management and to Borrower at
0000 XxXxxxxx Xxxx., Xxxxxxxx, XX 00000, Attention: Xxxx Xxxxx, V.P. Finance.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such
corporate resolutions, financial statements and other documents as Lender shall
reasonably request from time to time. (b) Borrower represents that the
Collateral hereunder is used solely for business purposes. (c) Time is of the
essence with respect to this Security Agreement. (d) Borrower acknowledges that
Borrower has read this Security Agreement and the Notes, understands them and
agrees to be bound by their terms and further agrees that this Security
Agreement and the Notes constitute the entire agreement between Lender and
Borrower with respect to the subject matter hereof and supersede all previous
agreements, promises, or representations. (e) This Security Agreement and the
Notes may not be
10
changed, altered or modified except by an instrument signed by an officer or
authorized representative of Lender and Borrower. (f) Any failure of Lender
to require strict performance by Borrower or any waiver by Lender of any
provision herein or in a Note shall not be construed as a consent or waiver
of any other breach of the same or any other provision. (g) If any provision
of this Security Agreement or any Note is held invalid, such invalidity shall
not affect any other provisions hereof or thereof. (h) The obligations of
Borrower to pay the Indebtedness and perform the Obligations shall survive
the expiration or earlier termination of this Security Agreement and each
Note until all Obligations of Borrower to Lender have been met and all
liabilities of Borrower to Lender and any assignee have been paid in full.
(i) Borrower will notify Lender at least 30 days before changing its name,
principal place of business or chief executive office. (j) Borrower will, at
its expense, promptly execute and deliver to Lender such documents and
assurances (including financing statements) and take such further action as
Lender may reasonably request in order to carry out the intent of this
Security Agreement and Lender's rights and remedies.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed in
the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with the laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement and each Note shall be in
the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco. BORROWER, TO THE
EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
SECTION 30. ADDITIONAL INTEREST COMPENSATION: (a) GENERAL. Borrower shall be
required to choose a final payment or Note extension election ("Additional
Interest Compensation") at the expiration of the first Note's term. Borrower
shall provide written notice of its election to Lender at least 60 days prior to
the end of the term of the first Note. That choice shall be an election of
Borrower's additional interest compensation election for all, but not less than
all, of the Collateral under all Notes under the Security Agreement.
In the event Borrower does not provide 60 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 2.
(b) END OF LOAN POSITION ELECTIONS. As Additional Interest Compensation,
Borrower shall be required to:
ELECTION NO. 1: Make a final payment equal to 15% of the Note's original
principal amount.
ELECTION NO. 2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly rate of 1.5% of the Note's original principal amount.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
11
PHOENIX LEASING INCORPORATED GRIC COMMUNICATIONS, INC.
By: By:
--------------------------- ---------------------------
Name: Name (Print):
------------------------- -----------------
Title: Title:
------------------------ -----------------------
HEADQUARTERS LOCATION:
0000 XxXxxxxx Xxxx.
Xxxxxxxx, XX 00000
County of Santa Xxxxx
EXHIBITS AND SCHEDULES:
Exhibit A -- Closing Memorandum
Exhibit B -- Stock Warrant
12
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT NO. 6170
DATED August 10, 1998
CLOSING MEMORANDUM
1* Duly executed Senior Loan and Security Agreement.
2. Duly executed Senior Security Promissory Note with Exhibit A Collateral
description attached.
3. Insurance certificates reflecting coverage required under Section 10 of
the Senior Loan and Security Agreement (required for subsequent fundings
only if there is a need for change in coverage).
4.* Resolutions of Borrower's board of directors.
5. Real Property Waiver.**
6. UCC-1 Financing Statements with respect to the Collateral.
7.* Stock warrant.
8. UCC search (Lender will obtain).
9. Certificate of Chief Financial Officer stating that (i) there are no
liens, charges, security interests or other encumbrances that may affect
Lender's right, title and interest in the Collateral and there are no
UCC-1 financing statements filed or in the process of being filed against
any of the Collateral, (ii) Borrower is performing according to
Borrower's business plan, (iii) no change which is a Material Adverse
Effect has occurred in the financial condition of Borrower, (iv) no
default has occurred, and (v) the representations and warranties in
Section 5 of the Senior Loan and Security Agreement are true and correct
as if made on the date of the Loan.
10.* Certificate from the Secretary of State of Borrower's state of
incorporation, and from the state in which Borrower's chief executive
office is located, if different, stating the Borrower is in good standing
or is authorized to transact business, as the case may be, dated not more
than thirty days prior to the first Loan (Lender will obtain).
11.* Borrower's Business Plan.
12. Borrower's most recent financial statements.
13. List of proposed Collateral.
14. Purchase documentation verifying Borrower's ownership of equipment.
15. See Section 3 of the Senior Loan and Security Agreement for additional
conditions to closing.
16. Intercreditor Agreement, if applicable.
* First Loan only.
** Required if any Equipment is a fixture, i.e., attached to real property,
or located in certain states.
EXHIBIT B TO
SENIOR LOAN AND SECURITY AGREEMENT NO. 6170
FORM OF STOCK WARRANT
NOTE NO._______________
TO SENIOR LOAN AND SECURITY AGREEMENT
NO. 6170
BETWEEN GRIC COMMUNICATIONS, INC.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER
SENIOR SECURED PROMISSORY NOTE
$_____________________ _________________, 199___
FOR VALUE RECEIVED, the undersigned, GRIC COMMUNICATIONS, INC., a California
corporation ("Borrower"), hereby promises to pay to the order of PHOENIX
LEASING INCORPORATED, or its assigns (the "Lender") the principal sum of
_____________________________________________________, together with interest
thereon until the principal is fully repaid. Principal and interest shall be
payable in consecutive monthly installments, each of which shall be equal to
the percentage specified below of the principal sum and in the amounts each
month specified below.
Month Payment Amount Percentage
----- -------------- ----------
___ ____________ _____
___ ____________ _____
The first and last payments shall be due on the first day of the month
immediately following the date of this Note (unless the date of this Note is the
first day of the month in which case such payments are due on that day), and
each succeeding payment shall be made on the first day of each succeeding month.
An interim payment will be due on the same date as the first payment for the
period from the date Lender funds the principal amount of this Note until the
first day of the following month and shall be equal to 1/30 of the monthly loan
payment multiplied by the number of days, if any, between (and including) the
funding date and the first day of the following month.
Borrower's Additional Interest Compensation shall be due on the first day of the
forty-third (43rd) month as provided below: (a) GENERAL. Borrower shall be
required to choose a final payment or Note extension election ("Additional
Interest Compensation") at the expiration of the first Note's term. Borrower
shall provide written notice of its election to Lender at least 90 days prior to
the end of the term of the first Note. That choice shall be an election of
Borrower's additional interest compensation election for all, but not less than
all, of the Collateral under all Notes under the Security Agreement.
In the event Borrower does not provide 60 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 2.
(b) END OF LOAN POSITION ELECTIONS. As Additional Interest Compensation,
Borrower shall be required to:
ELECTION NO. 1: Make a final payment equal to 15% of the Note's original
principal amount.
ELECTION NO. 2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly
rate of 1.5% of the Note's original principal amount.
This Note may not be prepaid in whole or in part.
Borrower shall pay Lender a late charge of 10% of any payment owed Lender by
Borrower which is not paid when due (taking into account applicable grace
periods), for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law.
Payments of principal and interest hereunder shall be made in lawful money of
the United States of America at the offices of Lender at 0000 Xxxxxx Xxxxxxxxx,
Xxx Xxxxxx, Xxxxxxxxxx 00000, or such other place as the Lender shall designate
to the Borrower in writing.
This Note is secured by a Senior Loan and Security Agreement, dated as of August
10, 1998 between Borrower and Lender (the "Security Agreement") and is entitled
to the benefits of the Security Agreement which contains, among other things,
provisions for (i) events of default and the Lender's rights and remedies
following an event of default (which include, but are not limited to,
acceleration of this Note), (ii) Collateral which secures the repayment of this
Note and is more particularly described on Exhibit A, and (iii) other rights and
remedies of Lender.
This Note may be declared due prior to its expressed maturity date only in the
events, on the terms and in the manner provided in the Security Agreement.
This Note shall be construed and enforced in accordance with the laws of the
State of California, excluding principles of conflicts of laws. Borrower agrees
that any action or proceeding arising out of or relating to this Note shall be
in the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco.
The Borrower hereby expressly waives presentment for payment, demand for
payment, notice of dishonor, protest, notice of protest, notice of nonpayment,
and all lack of diligence or delays in collection or enforcement of this Note.
BORROWER:
GRIC COMMUNICATIONS, INC.
By:
-------------------------------------
Name (Print):
----------------------------
Title:
-----------------------------------
OFFICER'S CERTIFICATE
The undersigned, ____________________, hereby certifies that:
(i) I am the __________________ of GRIC COMMUNICATIONS, INC., a California
corporation (the "Borrower");
(ii) as such officer, I am familiar with the terms and conditions of that
certain Senior Loan and Security Agreement (the "Security Agreement")
dated as of August 10, 1998 between Borrower and PHOENIX LEASING
INCORPORATED ("Lender");
(iii) the equipment, machinery, furniture, fixtures and other items on the
attached list are free and clear of any and all liens, charges, security
interests or other encumbrances that may affect Lender's right, title or
interest in and to the equipment and other items, and no UCC-1 financing
statements or other grants of security interests have been or are in the
process of being filed against any of such equipment or other items;
(iv) Borrower's business is substantially performing according to Borrower's
business plan described in Section 3 of the Security Agreement, a true
copy of which business plan has been delivered to Lender;
(v) there has been no material adverse change in the financial condition of
Borrower from the date of its most recent financial statements, true
copies of which have been delivered to Lender;
(vi) as of the date hereof, no Event of Default (as defined in the Security
Agreement) or event which with the giving of notice or passage of time,
or both, could become an Event of Default has occurred and is continuing;
and
(vii) the representations and warranties in Section 5 of the Security Agreement
are true and correct as if made on the date of the Loan.
IN WITNESS WHEREOF, I hereby execute this certificate on this ______ day of
_______________, 19__.
___________________________________
