Exhibit 10.1
TIPPINGPOINT TECHNOLOGIES, INC.
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of July 30, 2002, by
and between COMERICA BANK-CALIFORNIA ("Bank") and TIPPINGPOINT TECHNOLOGIES,
INC., a Delaware corporation ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to, or for the benefit of Borrower, and Borrower
will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
or any of its Subsidiaries arising out of the sale or lease of goods (including,
without limitation, the licensing of software and other technology) or the
rendering of services by Borrower or its Subsidiaries, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower or its
Subsidiaries and Borrower's Books relating to any of the foregoing.
"Adjusted Quick Ratio" means, with respect to Borrower and its
Subsidiaries as at any date of determination, the ratio of (a) Borrower's and
its Subsidiaries' Quick Assets plus the Borrowing Base, to (b) Borrower's and
its Subsidiaries' Current Liabilities plus, to the extent not already included
therein, all Indebtedness (including without limitation any Contingent
Obligations) owing from Borrower (or any Subsidiary) to Bank, all as of such
date.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Approved Bank" means any of the following: (a) the Bank (b) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $250,000,000 or (c) any bank whose short-term commercial paper rating
from S&P is at least A-2 or the equivalent thereof or from Xxxxx'x is at least
P-2 or the equivalent thereof.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and
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expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's and its Subsidiaries'
books and records including: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
"Borrowing Base" means an amount equal to eighty percent (80%) of
Eligible Accounts plus seventy percent (70%) of Eligible Foreign Accounts, as
reasonably determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California or the State of Texas are
authorized or required to close.
"Cash Equivalent" means (i) securities issued directly or fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve months from
the date of acquisition ("Government Obligations"), (ii) U.S. dollar denominated
(or foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits and Eurodollar certificates of deposit of an Approved
Bank with maturities of not more than twelve months from the date of
acquisition, (iii) commercial paper and variable or fixed rate notes issued by
any Approved Bank (or by the parent company thereof) or any commercial paper or
variable rate notes issued by, or guaranteed by any domestic corporation rated
A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent
thereof) or better by Moody's and maturing within twelve months of the date of
acquisition, (iv) repurchase agreements with a bank or trust company (including
Bank) or a recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America, (v) obligations of any state of the United States or any
political subdivision thereof rated A-2 (or the equivalent thereof) or better by
S&P or P-2 (or the equivalent thereof) or better by Moody's having maturities of
not more than twelve months from the date of acquisition thereof, (vi) auction
preferred stock rated in the highest short-term credit rating category by S&P or
Moody's (vii) securities issued by any mutual fund subject to regulation under
the Investment Company Act of 1940, which invests substantially all its assets
in cash or other Cash Equivalent, and (viii) money market accounts maintained
with any Approved Bank.
"CDs" means Bank of America Certificate of Deposit #
91000025073885 and XX Xxxxxx Xxxxx Certificates of Deposit #s 099-22880371,
099-22880421 and 099-22880447, which are pledged to secure the Chase Letters of
Credit.
"Change in Control" shall mean a transaction in which any
"person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of a sufficient number of shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors, empowering
such "person" or "group" to elect a majority of the Board of Directors of
Borrower, who did not have such power before such transaction.
"Chase Letters of Credit" means those certain Letters of Credit
#D-211547 and #D-215091 issued by XX Xxxxxx Xxxxx for the account of Borrower
for the benefit of HUB Properties.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed,
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co-made or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards,
or merchant services issued or provided for the account of that Person; and
(iii) all obligations arising under any interest rate, currency or commodity
swap agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designed to protect such Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith; provided, however, that such amount shall not in any event exceed
the maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Equipment Advance, or any
other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's and its Subsidiaries' business that comply with
all of Borrower's and its Subsidiaries' representations and warranties to Bank
set forth in Section 5.4; provided, that standards of eligibility may be fixed
and revised from time to time by Bank in Bank's reasonable judgment and upon
notification thereof to Borrower in accordance with the provisions hereof.
Unless otherwise agreed to by Bank, Eligible Accounts shall not include the
following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, twenty-five
percent (25%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States, except for Accounts of the United States or any
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department, agency, or instrumentality thereof to the extent the payee has
assigned its payment rights to Bank and the assignment has been acknowledged
under the Assignment of Claims Act of 1940 (31 U.S.C. (S) 3727);
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower or for deposits or other property of the account debtor held by
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its reasonable discretion, that there may be a basis for dispute (but only to
the extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business (except to
the extent supported by one or more letters of credit in an amount and of a
tenor, and issued by a financial institution, reasonably acceptable to Bank);
and
(k) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, reasonably acceptable to
Bank, (ii) insured by EXIM Bank, or (iii) that Bank approves on a case-by-case
basis.
"Equipment" means all Borrower's and its Subsidiaries' rights,
title and interest in all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments.
"Equipment Advance" has the meaning set forth in Section 2.1(b).
"Equipment Line" means a credit extension of up to Two Million
Five Hundred Thousand Dollars ($2,500,000).
"Equipment Maturity Date" means January 30, 2006.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"Excluded Assets" means the CDs, until such time as the Letters
of Credit terminate and the CDs finally mature.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
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"Intellectual Property Collateral" means all of Borrower's and
its Subsidiaries' right, title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all Borrower's and its Subsidiaries' right,
title and interest in all present and future inventory, including merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process
and finished products intended for sale or lease or to be furnished under a
contract of service, of every kind and description now or at any time hereafter
owned by or in the custody or possession, actual or constructive, of Borrower or
any of its Subsidiaries, including such inventory as is temporarily out of its
custody or possession or in transit and including any returns upon any accounts
or other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title representing any
of the above, and Borrower's Books relating to any of the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents or (iii) the value or priority of Bank's security interests in the
Collateral.
"Negotiable Collateral" means: (a) all present and future letters
of credit of which Borrower or any of its Subsidiaries is a beneficiary; (b) all
notes, drafts, instruments, securities, documents of title, and chattel paper
payable to Borrower or any of its Subsidiaries or otherwise evidencing
Borrower's or any of its
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Subsidiaries title to, or ownership of, real or personal property; and (c)
Borrower's Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower or its Subsidiaries pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower or its Subsidiaries may now or hereafter become obligated
to pay to Bank pursuant to the terms and provisions of any instrument, or
agreement now or hereafter in existence between Borrower and Bank.
"Permitted Acquisition" means an acquisition by the Borrower or
any of its Subsidiaries which (a) is an acquisition of a Person or assets of a
Person in a line of business permitted by Section 7.2 hereof, (b) for which the
consideration paid (i) consists solely of the capital stock of the Borrower or
(ii) is any combination of the capital stock of Borrower, cash, Permitted
Indebtedness and Investments by Borrower or any of its Subsidiaries in other
Persons, (c) is approved by the Board of Directors or the requisite shareholders
of the Person being acquired or Person transferring the assets being acquired
and (d) if the Borrower or any of its Subsidiaries acquires the capital stock of
a Person, at least 51% of all issued and outstanding capital stock of such
Person is acquired; provided, however, that no default or Event of Default shall
have occurred or be continuing prior to, or a would result after giving effect
to, any such Permitted Acquisition.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower or its Subsidiaries in favor of
Bank arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule, together with renewals and extensions thereof and any Indebtedness
incurred to refinance or replace such scheduled Indebtedness, in each case to
the extent the principal amount of such scheduled Indebtedness is not increased
in connection with such renewal, extension, refinancing or replacement;
(c) Indebtedness secured by a lien described in clause (c) of
the defined term "Permitted Liens," provided (i) such Indebtedness does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Indebtedness and (ii) such Indebtedness does not exceed $2,600,000 in
the aggregate principal amount at any given time;
(d) Indebtedness of the Subsidiaries of Borrower to the Borrower
or to other Subsidiaries of Borrower or of Borrower to any of its Subsidiaries;
(e) additional Indebtedness of the Borrower and its Subsidiaries
not to exceed $250,000 in the aggregate amount outstanding at any time during
the term hereof; and
(f) Subordinated Debt.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) Investments in cash and Cash Equivalents;
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(c) Investments made or incurred in connection with, or as a
result of, a Permitted Acquisition;
(d) Investments of any Subsidiary of the Borrower in the
Borrower, investments of any Subsidiary of the Borrower in any other Subsidiary
of the Borrower or investments by the Borrower in any of its Subsidiaries;
(e) Investments consisting of deposits to secure bids, tenders,
utilities, vendors, leases, license, statutory obligations, surety and appeal
bonds and other deposits of like nature, each arising in the ordinary course of
business; and
(f) Such Investments as may be approved by Borrower's board of
directors from time to time.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(c) Liens (i) upon or in any equipment which was not financed by
Bank acquired or held by Borrower or any of its Subsidiaries to secure the
purchase price of such equipment or indebtedness incurred solely for the purpose
of financing the acquisition of such equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of
such equipment;
(d) Liens incurred in connection with a Permitted Acquisition;
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (d) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
(f) carriers' warehousemen's, mechanics', materialmen's,
landlord's, and repairmen's Liens arising in the ordinary course of business;
(g) Liens securing judgments but only to the extent not
constituting an Event of Default under Section 8.8 of this Agreement;
(h) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(i) deposits or pledges to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(j) restrictions on assignment, resale or further distribution
and other similar encumbrances incurred in the ordinary course of business and
restrictions on the use of licensed intellectual property of minor imperfections
in title thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the intellectual property
subject thereto or interfere with the ordinary conduct of the business of
Borrower or any of its Subsidiaries;
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(k) Liens upon real property heretofore leased or leased after
the date hereof (under operating or capital leases) in the ordinary course of
business by Borrower or any of its Subsidiaries in favor of the lessor created
at the inception of the lease transaction, securing obligations of Borrower or
the applicable Subsidiary under or in respect of such lease and extending to or
covering only the property subject to such lease and improvements thereof,
provided such Liens do not extend to any Collateral;
(l) protective filings with respect to personal property leased
by, or consigned to, Borrower or any Subsidiary; and
(m) Liens securing other Indebtedness permitted to be incurred
pursuant to this Agreement.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the sum of the unrestricted cash and Cash Equivalents, and
Permitted Investments with maturities not to exceed twelve months from the date
of determination, of Borrower and its Subsidiaries determined in each case in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer, the General Counsel
and the Controller of Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1(a) hereof.
"Revolving Line" means a credit extension of up to Five Million
Dollars ($5,000,000).
"Revolving Maturity Date" means July 30, 2004.
"Schedule" means the schedule of exceptions attached hereto and
as may be supplemented from time to time by Borrower.
"Subordinated Debt" means any debt incurred by Borrower or its
Subsidiaries that is subordinated to the debt owing by Borrower and its
Subsidiaries to Bank on terms reasonably acceptable to Bank (and identified as
being such by Borrower and Bank).
"Subsidiary" means any corporation, company or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock or
other units of ownership which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through one or more other Subsidiaries.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
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2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in lawful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to Borrower hereunder at the times and otherwise
in accordance with the terms and provisions of this Agreement. Borrower shall
also pay interest on the unpaid principal amount of such Credit Extensions at
rates in accordance with the terms hereof.
(a) Revolving Advances.
(i) Subject to and upon the terms and conditions of this
Agreement, from and after an audit of the Collateral with results reasonably
satisfactory to Bank, Borrower may request Advances in an aggregate outstanding
amount not to exceed the lesser of (i) the Revolving Line or (ii) the Borrowing
Base. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1(a) may be repaid and reborrowed at any time prior
to the Revolving Maturity Date, at which time all Advances under this Section
2.1(a) shall be immediately due and payable. Borrower may prepay any Advances
without penalty or premium.
(ii) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's reasonable discretion such Advances are necessary to meet Obligations
which have become due and remain unpaid. Bank shall be entitled to rely on any
telephonic notice given by a person who Bank reasonably believes to be a
Responsible Officer or a designee thereof, and Borrower shall indemnify and hold
Bank harmless for any actual damages or loss suffered by Bank as a result of
such reliance. Bank will credit the amount of Advances made under this Section
2.1(a) to Borrower's designated deposit account.
(b) Equipment Advances.
(i) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through July 30, 2003, Bank agrees
to make advances (each an "Equipment Advance" and, collectively, the "Equipment
Advances") to Borrower in an aggregate amount not to exceed the Equipment Line.
Each Equipment Advance shall not exceed ninety percent (90%) of the invoice
amount of equipment and software approved by Bank from time to time (which
Borrower shall, in any case, have purchased within 120 days of the date of the
corresponding Equipment Advance), excluding taxes, shipping, warranty charges,
freight discounts and installation expense. Equipment Advances for software
shall not exceed $250,000 in the aggregate of all Equipment Advances.
Notwithstanding the foregoing, subject to and upon the terms and conditions of
this Agreement, and subject to the limitation above on software, Bank agrees to
make a single Equipment Advance on or about the Closing Date (the "Closing Date
Equipment Advance"), which shall not exceed $300,000 for equipment and software
approved by Bank (which Borrower shall have purchased more than 120 days from
the date of the Closing Date Equipment Advance, but after January 1, 2002).
(ii) Interest shall accrue from the date of each Equipment
Advance at the rate specified in Section 2.3, and shall be payable monthly on
the last day of each month so long as any Equipment Advances are outstanding.
The Closing Date Equipment Advance shall be payable in thirty (30) equal monthly
installments of principal, plus all accrued interest, beginning on the last day
of the first full month following the Closing Date, and continuing on the same
day of each month thereafter until paid in full. Any Equipment Advances
(excluding the Closing Date Equipment Advance) that are outstanding on January
30, 2003 shall be payable in thirty (30) equal monthly installments of
principal, plus all accrued interest, beginning on February 28, 2003, and
continuing on the same day of each month thereafter until paid in full. Any
Equipment Advances that are outstanding on July 30, 2003 (excluding the Closing
Date Equipment Advance and any Equipment Advances which were outstanding on
January 30, 2003) shall be payable in thirty (30) equal monthly installments of
principal, plus all accrued interest, beginning on August 30, 2003, and
continuing on the same day of each month thereafter through
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the Equipment Maturity Date, at which time all amounts owing under this Section
2.1(b) and any other amounts owing under this Agreement shall be immediately due
and payable. Equipment Advances, once repaid, may not be reborrowed. Borrower
may prepay any Equipment Advances without penalty or premium.
(iii) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time three (3)
Business Days before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice for any Equipment to be financed.
2.2 Overadvances. If the aggregate amount of the outstanding Advances
exceeds the lesser of the Revolving Line or the Borrowing Base at any time,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates. Except as set forth in Section 2.3(b), the
Advances and the Equipment Advances shall bear interest, on the outstanding
Daily Balance thereof, at a rate equal to three quarter of one percent (0.75%)
above the Prime Rate.
(b) Late Fee; Default Rate. If any payment is not made within
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to three (3) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
last calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder. All payments shall be free and
clear of any taxes, withholdings, duties, impositions or other charges, to the
end that Bank will receive the entire amount of any Obligations payable
hereunder, regardless of source of payment.
(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
10
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, the remaining $10,000 of
the agreed $20,000 Facility Fee, which shall be nonrefundable; and
(b) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses (not to exceed $10,000) and, after the Closing Date, all Bank Expenses,
including reasonable attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
the Obligations, Bank shall notify Borrower thereof. To the extent a written
request for reimbursement is submitted to Borrower in writing within ninety (90)
days of the Bank's incurrence of such increase in cost, reduction in income or
additional expense, Borrower agrees to pay to Bank the amount of such increase
in cost, reduction in income or additional expense as and when such cost,
reduction or expense is incurred or determined, upon presentation by Bank of a
statement of the amount and setting forth Bank's calculation thereof, all in
reasonable detail, which statement shall be deemed true and correct absent
manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance reasonably
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a financing statement (Form UCC-1);
(d) an intellectual property security agreement;
11
(e) securities and/or deposit account control agreements with
respect to all such accounts maintained outside Bank, except the Excluded
Assets, and except as otherwise provided under Section 6.7 hereof;
(f) agreement to provide insurance;
(g) payment of the fees and Bank Expenses then due as, and to
the extent, specified in Section 2.5 hereof; and
(h) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, (a) as of the Closing Date, such security interest constitutes a
valid, first priority security interest in the presently existing Collateral;
and (b) except as expressly permitted in this Agreement, such security interest
will constitute a valid, first priority security interest in Collateral acquired
after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form reasonably satisfactory to Bank, to perfect and
continue the perfection of Bank's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents. Borrower further agrees to (a) file UCC Financing Statements with
respect to all inventory consigned by Borrower within the United States, in the
time, manner and place(s) set forth in Revised Article 9 of the Uniform
Commercial Code, and (b) execute and cause each consignee to execute and deliver
to Bank bailment agreements, in form and content reasonably satisfactory to
Bank, with respect to all inventory consigned by Borrower outside the United
States (within 30 days of any such consignment); to the extent the aggregate
book value of such consigned inventory (in (a) and (b), above) equals or exceeds
$500,000.
4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior written notice, from time
to time during Borrower's usual business hours to audit Borrower's Accounts,
inspect (and copy) Borrower's Books, verify Borrower's financial condition and
appraise or inspect the Collateral (including Intellectual Property Collateral)
at Borrower's expense, provided that such audits will be conducted no more often
than every six (6) months (unless an Event of Default has occurred and is
continuing).
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5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is a corporation, limited liability company, partnership or other Person duly
existing under the laws of its state of formation and qualified and licensed to
do business in any state in which the conduct of its business or its ownership
of property requires that it be so qualified, except to the extent the failure
to be so qualified or licensed could not reasonably be expected to result in a
Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's certificate of incorporation or bylaws. The
execution, delivery and performance of the Loan Documents will not constitute an
event of default under any agreement to which Borrower is a party or by which
Borrower is bound, except such agreements and/or events of default as could not
reasonably be expected to result in a Material Adverse Effect. Borrower is not
in default under any material agreement to which it is a party or by which it is
bound, except such agreements and/or defaults as could not reasonably be
expected to result in a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and marketable title to
its property, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The property and services giving rise to such Eligible
Accounts have been delivered or rendered to the account debtor or to the account
debtor's agent for immediate and unconditional acceptance by the account debtor.
Borrower has not received written notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
of good and marketable quality, free from all material defects, except for
Inventory for which adequate reserves have been made.
5.6 Intellectual Property Collateral. Except as set forth on the
Schedule, Borrower is the sole owner of the Intellectual Property Collateral,
except for non-exclusive licenses granted by Borrower in the ordinary course of
business. Except as could not reasonably be expected to result in a Material
Adverse Effect: (a) each of the Patents is valid and enforceable, (b) no part of
the Intellectual Property Collateral has been judged invalid or unenforceable,
in whole or in part, and (c) no claim has been made that any part of the
Intellectual Property Collateral violates the rights of any third party. Except
as set forth in the Schedule, Borrower's rights as a licensee of intellectual
property do not give rise to more than ten percent (10%) of its gross revenue in
any given month, including without limitation revenue derived from the sale,
licensing, rendering or disposition of any product or service. Except as set
forth in the Schedule and except for customary restrictions on assignment
contained in licenses, Borrower is not a party to, or bound by, any agreement
that restricts the grant by Borrower of a security interest in Borrower's rights
under such agreement.
5.7 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof. Except as set forth in
the Schedule, all Borrower's Inventory and Equipment is located only at the
location set forth in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect.
5.9 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that Bank has received from Borrower fairly present in all material
respects Borrower's financial condition as of the date thereof and Borrower's
13
consolidated and consolidating results of operations for the period then ended.
There has not been a change in the consolidated or the consolidating financial
condition of Borrower or its Subsidiaries since the date of the most recent
financial statements submitted to Bank which could reasonably be expected to
result in a Material Adverse Effect (other than the failure of Borrower or its
Subsidiaries to meet financial projections delivered to Bank pursuant to Section
6.3(e) hereof).
5.10 Solvency, Payment of Debts. Borrower and its Subsidiaries are
solvent and able to pay their debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary have met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA, and no event has occurred resulting from Borrower's failure to
comply with ERISA that could result in Borrower's incurring any material
liability. Borrower is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940. Borrower is not engaged principally, or as one of the important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not violated
any statutes, laws, ordinances or rules applicable to it, violation of which
could reasonably be expected to have a Material Adverse Effect.
5.12 Environmental Condition. Except as disclosed in the Schedule,
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary have filed or caused to be
filed all tax returns required to be filed, and have paid (to the extent not
being contested in good faith by appropriate proceedings and reserved for in
accordance with GAAP), or have made adequate provision for the payment of, all
taxes reflected therein.
5.14 Subsidiaries. Except as otherwise permitted or contemplated by
this Agreement (including Permitted Investments), Borrower does not own any
stock, partnership interest or other equity securities of any Person.
5.15 Government Consents. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could reasonably be expected to have a Material Adverse
Effect.
5.16 Accounts. Except for Permitted Investments (including those
certificates of deposit specified on the Schedule attached hereto), none of
Borrower's nor any of its Subsidiary's property is deposited with, or otherwise
in the custody of any Person other than Bank and its Affiliates. Except for
Investments set forth on the Schedule and renewals thereof, Borrower agrees to
maintain all cash and Cash Equivalents of Borrower with Bank or its Affiliates
from and after the sixtieth day following the Closing Date.
5.17 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to
14
state a material fact necessary in order to make the statements contained in
such certificates or statements not materially misleading.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' existence and good standing in its jurisdiction of formation and
maintain qualification in each jurisdiction in which it is required under
applicable law, except to the extent the failure to maintain such qualification
could not reasonably be expected to result in a Material Adverse Effect.
Borrower shall maintain, and shall cause each of its Subsidiaries to maintain,
in force all licenses, approvals and agreements, the loss of which could
reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could reasonably be expected to have a Material Adverse Effect.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver the following to Bank: (a) as soon as available, but in any event within
fifty (50) days after the end of each fiscal quarter (until such time as
Borrower's Adjusted Quick Ratio is less than or equal to 2.50:1.00, at which
time the delivery time shall be within thirty (30) days after the end of each
calendar month), a company prepared consolidated balance sheet, income, and cash
flow statement covering Borrower's consolidated operations during such period,
prepared in accordance with GAAP, consistently applied, in a form reasonably
acceptable to Bank and certified by a Responsible Officer; (b) as soon as
available, but in any event within ninety-five (95) days after the end of
Borrower's fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) if applicable, copies
of all statements, reports and notices sent or made available generally by
Borrower to its security holders or to any holders of Subordinated Debt and all
reports on Forms 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
reasonably be expected to result in damages or costs to Borrower or any
Subsidiary of Two Hundred Fifty Thousand Dollars ($250,000) or more; (e) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time and generally prepared by Borrower
in the ordinary course of business, including but not limited to annual
financial projections (including balance sheet and income statement for each
fiscal year), no later than January 31 immediately preceding the fiscal year for
which the projections are being provided; and (f) within forty-five (45) days of
the last day of each fiscal quarter, a report signed by Borrower, in form
reasonably acceptable to Bank, listing any applications or registrations that
Borrower has made or filed in respect of any Patents, Copyrights or Trademarks
and the status of any outstanding applications or registrations, as well as any
material change in Borrower's intellectual property, including but not limited
to any subsequent ownership right of Borrower in or to any Trademark, Patent or
Copyright not specified in Exhibits A, B, and C of the Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this
Agreement.
Within twenty (25) days after the last day of each month from and after
Advances become available to Borrower pursuant to Section 2.1(a), Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable, and a report, by location, of
consigned inventory having an aggregate book value equal to or greater than
$500,000.
Borrower shall deliver to Bank with the quarterly (or monthly, as
appropriate) financial statements a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit D hereto.
15
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower as reasonably
established from time to time. Borrower shall promptly notify Bank of all
returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than Five Hundred Thousand Dollars
($500,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, promptly following Bank's request, appropriate
certificates attesting to the payment or deposit thereof; and Borrower will
make, and will cause each Subsidiary to make, timely payment or deposit of all
material tax payments and withholding taxes required of it by applicable laws,
including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Bank with proof reasonably satisfactory to Bank indicating that Borrower
or a Subsidiary has made such payments or deposits; provided that Borrower or a
Subsidiary need not make any payment if the amount or validity of such payment
is contested in good faith by appropriate proceedings and is reserved against
(to the extent required by GAAP) by Borrower or the applicable Subsidiary.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's business, ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form reasonably satisfactory to Bank, showing Bank as an
additional loss payee thereof, and all liability insurance policies shall show
the Bank as an additional insured and shall specify that the insurer must give
at least thirty (30) days' notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies of
such policies of insurance or certificates evidencing the same, together with
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations if an Event of Default shall be continuing as of
the date of receipt thereof.
6.7 Accounts. From and after the date that is sixty (60) days
following the Closing Date, Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, substantially all its deposits of cash and Cash
Equivalents with Bank and/or Comerica Securities, Inc.; provided however, that
the Excluded Assets shall be moved and thereafter maintained with Bank and/or
Comerica Securities, Inc. within thirty (30) days of the termination of the
Chase Letters of Credit and maturity of the CDs.
6.8 Adjusted Quick Ratio. Borrower shall maintain, as of the last day
of each calendar quarter, an Adjusted Quick Ratio of at least 1.50 to 1.00.
Notwithstanding the foregoing, when the Adjusted Quick Ratio is less than
2.50:1.00, the Adjusted Quick Ratio shall be measured monthly.
6.9
(a) Cash Burn. Borrower shall maintain, as of the last day of
each calendar quarter, and on a rolling two-quarter basis, a Cash Burn not to
exceed the amounts set forth in the respective columns for the referenced
periods set forth in Exhibit E hereto. As used herein, "Cash Burn" means prior
period unrestricted cash and Cash Equivalents minus current period unrestricted
cash and Cash Equivalents, plus, provided no Event of Default has occurred or is
continuing, any new debt or equity financing during the period.
16
(b) Addition and Modification of Financial Covenants. Borrower
and Lender agree that on each anniversary of the date hereof, commencing June
30, 2003, unless an Event of Default occurs before that date, Bank has the right
in its reasonable discretion to modify, amend and/or restate the financial
covenants set out at Section 6.8 and Section 6.9(a), above. Each party hereto
agrees to negotiate such modifications, amendments and/or restatements in good
faith, commencing no later than March 1, 2003 (and each March 1 thereafter) and
concluding no later than May 31, 2003 (and each May 31 thereafter). Such
negotiations shall be based upon the financial projections and other information
provided by Borrower pursuant to Section 6.3(e) hereof or otherwise obtained by
or made available to Bank, and Borrower agrees to provide Bank such information
as may be reasonably requested by Bank to facilitate such negotiations. All
modifications and amendments shall be in writing and signed by Lender and
Borrower and otherwise in accordance with Section 12.5 below.
6.10 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable: (i) those intellectual property rights listed on Exhibits A, B and C
to the Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement, within thirty (30) days of the date of this
Agreement, (ii) all registerable intellectual property rights Borrower has
developed as of the date of this Agreement but heretofore failed to register,
and which are deemed material to the Borrower's business, within thirty (30)
days of the date of this Agreement, and (iii) those additional intellectual
property rights developed or acquired by Borrower from time to time in
connection with any product or service, prior to the sale or licensing of such
product or the rendering of such service to any third party, and prior to
Borrower's use of such product (including without limitation major revisions or
additions to the intellectual property rights listed on such Exhibits A, B and
C); in each case to the extent the failure to register such rights could
reasonably be expected to result in a Material Adverse Effect. Borrower shall
give Bank notice of all such applications or registrations.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents and Copyrights to the extent the
failure to maintain the validity and enforceability of such Trademarks, Patents
and Copyrights could reasonably be expected to have a Material Adverse Effect,
(ii) use commercially reasonably efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any material Trademarks,
Patents or Copyrights to be abandoned, forfeited or dedicated to the public
without the written consent of Bank, which shall not be unreasonably withheld.
For purposes of the Loan Documents, the failure to maintain any Trademark,
Patent or Copyright used primarily in connection with the Netpliance iOpener
device or business shall not be deemed material.
(d) Bank shall have the right, but not the obligation, to take,
at Borrower's sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after twenty (20) days' notice
to Borrower. Borrower shall reimburse and indemnify Bank for all reasonable
costs and reasonable expenses incurred in the reasonable exercise of its rights
under this Section.
6.11 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
6.12 Creation of Subsidiaries. In the event Borrower or any Subsidiary
creates or acquires any Subsidiary, Borrower and such Subsidiary shall promptly
notify Bank of the creation of such new Subsidiary and take all such action as
may be reasonably required by Bank to cause such Subsidiary to guarantee the
Obligations of Borrower under the Loan Documents and grant a continuing pledge
and security interest in and to the collateral of such Subsidiary (substantially
as described on Exhibit A hereto), and Borrower shall grant and pledge to Bank a
perfected security interest in the stock, units or other evidence of ownership
of such Subsidiary.
17
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (a) Transfers of
Inventory in the ordinary course of business; (b) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (c) Transfers of worn-out or
obsolete Equipment which was not financed by Bank; (d) sales of Borrower's
capital stock from time to time; (e) assets used primarily in connection with
the Netpliance i-opener device and business no longer used by Borrower; (f)
sales of Permitted Investments, (g) sales, contributions or transfers of assets
between and among Borrower and its Subsidiaries and (h) other dispositions of
assets not to exceed $250,000 in any fiscal year.
7.2 Change in Business; Change in Control or Executive Office. Engage
in any business, or permit any of its Subsidiaries to engage in any business,
other than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto (or incidental thereto); or cease to
conduct business in the manner conducted by Borrower as of the Closing Date; or
suffer or permit a Change in Control; or without thirty (30) days prior written
notification to Bank, relocate its chief executive office or state of
incorporation or change its legal name; or without Bank's prior written consent,
change the date on which its fiscal year ends.
7.3 Mergers or Acquisitions. Other than in connection with a
Permitted Acquisition: (a) merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization; or (b) acquire, or permit any of its Subsidiaries to acquire, all
or substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens. Agree with any Person other
than Bank not to grant a security interest in, or otherwise encumber, any of its
property, or permit any Subsidiary to do so (other than in connection with
Permitted Liens).
7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, or permit any of its Subsidiaries to do so, except that Borrower may (a)
repurchase the stock of former employees pursuant to stock repurchase
agreements, and (b) pay non-cash dividends or make other non-cash distributions
or payments not otherwise prohibited hereby, in each case provided that an Event
of Default does not exist prior to such repurchase or payment or would not exist
after giving effect to such repurchase or payment. Notwithstanding the
foregoing, Borrower may issue and sell its capital stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments; or, except as expressly permitted under this
Agreement, maintain or invest any of its cash or Cash Equivalents (other than
the Excluded Assets) with a Person other than Bank or permit any of its
Subsidiaries to do so unless such Person has entered into an account control
agreement with Bank in form and substance satisfactory to Bank; suffer or permit
any Subsidiary to be a party to, or be bound by, an agreement that restricts
such Subsidiary from paying dividends or otherwise distributing property to
Borrower.
7.8 Transactions with Affiliates. Except as set forth in the
Schedule, directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are
18
in the ordinary course of Borrower's business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Equipment. Store any Equipment with a value in excess of $150,000
with a bailee, warehouseman, or other third party unless the third party has
been notified of Bank's security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Equipment for Bank's benefit or (b) is in pledge possession of the warehouse
receipt, where negotiable, covering such Equipment. Store or maintain any
Equipment at a location other than the location set forth in Section 10 of this
Agreement.
7.11 Compliance. Become an "investment company" or be controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
7.12 Negative Pledge Agreements. Except with respect to the Excluded
Assets, permit the inclusion in any contract to which it or a Subsidiary becomes
a party of any provisions that could restrict or invalidate the creation of a
security interest in any of Borrower's or such Subsidiary's property.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can, in Bank's reasonable
discretion, be cured, has failed to cure such default within thirty (30) days
after Borrower receives notice thereof or any Responsible Officer of Borrower
becomes aware thereof; provided, however, that if the default cannot by its
nature be cured within the thirty (30) day period or cannot after diligent
attempts by Borrower be cured within such thirty (30) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall have
an additional reasonable period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to have cured such default shall not be deemed an Event of Default
(provided that no Credit Extensions will be required to be made during such cure
period);
8.3 Material Adverse Effect. If there occurs any circumstance or
circumstances that could have a Material Adverse Effect;
8.4 Attachment. If any portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien
19
or encumbrance upon any material portion of Borrower's assets, or if a notice of
lien, levy, or assessment is filed of record with respect to any of Borrower's
assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid or released within thirty (30) days after
Borrower receives notice thereof, provided that none of the foregoing shall
constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default or other failure to
perform in any agreement to which Borrower is a party or by which it is bound
resulting in a right by a third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000); or which could have a Material
Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5, all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
20
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Dispose of the Collateral by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Bank determines is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (g)
to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral; and (h) to
transfer the Intellectual Property Collateral into the name of Bank or a third
party to the extent permitted under the California Uniform Commercial Code;
provided Bank may exercise such power of attorney to sign the name of Borrower
on any of the documents described in Section 4.2 regardless of whether an Event
of Default has occurred, including without limitation to modify, in its sole
discretion, any intellectual property security agreement entered into between
Borrower and Bank without first obtaining Borrower's approval of or signature to
such modification by amending Exhibits A, B, and C, thereof, as appropriate, to
include reference to any right, title or interest in any Copyrights, Patents or
Trademarks acquired by Borrower after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Borrower no longer has or claims to have any right, title or
interest. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide Credit Extensions hereunder is terminated.
9.3 Accounts Collection. At any time during the term of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable written notice to Borrower: (a) make payment of the same or any
part thereof;
21
(b) set up such reserves under a loan facility in Section 2.1 as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.6 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: TIPPINGPOINT TECHNOLOGIES, INC.
0000 X Xxxxx Xxxxxxx xx Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Attn: Chief Financial Officer / General Counsel
FAX: (000) 000-0000
If to Bank: Comerica Bank-California
000 X. Xxxxx Xxxxx Xx.
Xxx Xxxx, XX 00000
Attn: Corporate Banking Center
with a copy to: Comerica Bank-California
0000 Xxxxxxx xx Xxxxx Xxxxxxx, Xxx. 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
22
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. Neither this Agreement nor
the Loan Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions to Borrower. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 12.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
TIPPINGPOINT TECHNOLOGIES, INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------
Title: Acting CFO, Vice President and General Counsel
COMERICA BANK-CALIFORNIA
By: /s/ XXXX XXXXXXX
-------------------------------
Title: Vice Xxxxxxxxx
00
XXXXXX XXXXXXXXXXXX TECHNOLOGIES, INC.
SECURED PARTY: COMERICA BANK-CALIFORNIA
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to all of Borrower's right, title
and interest in and to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the forgoing, or any parts thereof
or any underlying or component elements of any of the forgoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to xxx in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and
the goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the obligation)
of Secured Party to xxx in its own name and/or in the name of the Debtor for
past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to xxx in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
Notwithstanding the foregoing, the Collateral shall not include Bank
of America CD #91000025073885, or XX Xxxxxx Chase CD #s099-22880371,
099-22880421 and 099-22880447 (collectively, the "CDs"), which secure those
certain Letters of Credit #s D-211547 and D-215091 (collectively, the "Letters
of Credit"), until such time as the Letters of Credit terminate and the CDs
finally mature, at which time the CDs shall constitute Collateral.
List of Omitted Exhibits and Schedules
The following exhibits, schedules and other similar attachments to the Loan
Agreement have been omitted and will be furnished supplementally to the
Commission upon request:
Exhibit/Schedule Description
Exhibit B Loan Payment/Advance Telephone Request Form
Exhibit C Borrowing Base Certificate
Exhibit D Compliance Certificate
Exhibit E Cash Burn Covenant
Schedule of Exceptions
Secretary's Certificate
Form of Disbursement Instructions for Revolver
Form of Disbursement Instructions for Term Loan
Agreement to Provide Insurance
Collateral Description Attachment to UCC-1 Financing Statement
