EXHIBIT 10.19
SENIOR LOAN AND SECURITY AGREEMENT NO. 6269
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 6269 (this "Security Agreement") is
dated as of July 30, 1999 between POINTSHARE CORPORATION, a Delaware corporation
("Borrower") and PHOENIX LEASING INCORPORATED, a California corporation
("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings the
Commitment amount as defined in Section 3(a)(ii) below, and Lender desires to
loan, subject to the terms and conditions herein set forth, such amount to
Borrower (each, a "Loan" and collectively, the "Loans"). Such borrowing shall
be evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles and
also certain custom use equipment, installation and delivery costs, purchase
tax, toolings, software and other items generally considered fungible or
expendable ("Soft Costs") whether now owned by Borrower or hereafter acquired,
and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
(collectively, "Equipment") which Equipment is described on the Note attached
hereto or any subsequently-executed Note entered into by Lender and Borrower and
which incorporates this Security Agreement by reference (such financed Equipment
being referred to as, the "Collateral").
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The Term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Term and monthly payment amount payable with respect to each item of
Collateral shall be as set forth in and as stated in the respective Note(s).
The team of each Note hereto are subject to all conditions and provisions of
this Security Agreement as it may at any time be amended. Each Note shall
constitute a separate and independent Loan and contractual obligation of
Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees
that its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such monthly payment amounts and other sums, are absolute and unconditional
and are not subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment due or alleged to be due to, or by reason of, any past, present or
future claims which Borrower may have against Lender, any assignee, the
manufacturer or seller of the Collateral, or against any person for any reason
whatsoever.
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SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
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conditions of this Security Agreement Lender hereby agrees to make one or more
senior secured Loans to Borrower, subject to the following conditions: (i) each
Loan shall be evidenced by a Note; (ii) the total principal amount of the Loam
shall not exceed $2,000,000 in the aggregate (the "Commitment") provided that no
more than 25% of the amount of the utilized Commitment may be used to finance
Soft Costs; (iii) the amount of each Loan shall be at least $25,000 except for a
final Loan which may be less than $25,000; (iv) Lender shall not be obligated to
make any Loan after June 30, 2000; (v) at the time of each Loan, no Event of
Default or event which with the giving of notice or passage of time, or both,
could become an Event of Default shall have occurred, as reasonably determined
by Lender, and certified by Borrower; (vi) at the time of each Loan, Borrower
has reimbursed Leader for all UCC filing and search costs, inspection and
labeling costs, and appraisal fees, if any; (vii) for each Loan, Borrower shall
present to Lender a list of proposed Collateral for approval by Lender in its
sole discrimination; (viii) for each Loan, Borrower shall have provided Lender
with cash of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance reasonably acceptable Lender); (ix)
Borrower is performing substantially in accordance with its business plan
referred to as "Pointshare 4 Year Plan Balance Sheet, Statement of Operations
and Statement of Cash Flows" labeled 5 Year Plan 12-Series C Bal Sht_Bdgt,
IncStmt_Bdgt end CFStmt Bdgt (the "Business Plan") (all quarterly figures will
be prorated to monthly), as may be amended from time to time in form and
substance acceptable to Lender; (x) there shall be no material adverse change in
Borrower's condition. Financial or otherwise, that would materially impair the
ability of Borrower to meet its payment and other obligations under this Loan (a
"Material Adverse Effect") as reasonably determined by Lender, and Borrower so
certifies, from (yy) the date of the rest recent financial statements delivered
by Borrower to Lender to (zz) the date of the proposed Loan; (xi) Borrower shall
use the proceeds of all Loans hereunder to purchase or reimburse the purchase of
Collateral; (xii) all Collateral has been marked and labeled by Lender or
Lender's agent; and (xiii) Lender has received in form and substance acceptable
to Lender: (a) Borrower's interim financial statements signed by a financial
officer of Borrower, (b) prior to any feedings during November 1999,
verification that Borrower's cash position is at least $700,000; and (c)
complete copies of the Borrower's audit reports for its most recent fiscal year,
which shall include at least Borrower's balance sheet as of the close of such
year, and Borrower's statement of income and retained earnings and of changes in
financial position for such year, prepared on a consolidated basis and certified
by independent public accountants. Such certificate shall not be qualified or
limited because of restricted or limited examination by such accountant of any
material portion of the company's records. Such reports shall be prepared in
accordance with generally accepted accounting principles and practices
consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note. Each Note shall
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bear interest and be payable at the times and in the manner provided therein.
Following payment of the Indebtedness related to each Note, Lender shall return
such Note, marked "cancelled," to Borrower. Borrower has the ability to prepay
all, but not fewer than all, outstanding Notes in whole but not in part. The
prepayment amount shall be the sum of (i) and (ii) below, discounting the
amounts in (ii) at a rate of 6% per annum compounded monthly on the basis of a
360 day year: (i) all remounts which may be then due or accrued to the payment
date for all outstanding Notes; (ii) as of such payment date, an amount equal
to: (A) all remaining monthly payments due under all outstanding Notes, and (B)
12 additional monthly payments for all outstanding Notes, the amounts of which
will be calculated in accordance with Election No. 2 in Section 30. The
prepayment conditions are as follows: (a) Borrower must provide Lender with at
least five (5) days' advance written notice of its intention to prepay; and (b)
the prepayment date must fall on a regular monthly payment date.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral described on the Note attached hereto and
any subsequently executed Note entered into
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by Lender and Borrower and which incorporates this Security Agreement by
reference: (b) This Security Agreement secures (i) the payment of the principal
of and interest on the Notes and all other sums due thereunder and under this
Security Agreement (the "Indebtedness") and (ii) the performance by Borrower of
all of its other covenants now or hereafter existing under the Notes and this
Security Agreement (the "Obligations").
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it has full
authority to execute and deliver this Security Agreement and the Notes and
perform the terms hereof and thereof, and this Security Agreement and the Notes
have been duly authorized, executed and delivered and constitute valid and
binding obligations of Borrower enforceable in accordance with their terms; (c)
the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) to the
best of its knowledge there is no action or proceeding pending or threatened
against Borrower before any court or administrative agency which might have a
Material Adverse Effect on the business, financial condition or operations of
Borrower; (f) at the time any Loan is made hereunder, Borrower owns and will
keep all of the Collateral free and clear of all liens, claims and encumbrances,
and, except for this Security Agreement, there is no deed of trust, mortgage
security agreement or other third party interest against any of the Collateral
other than Permitted Liens (as defined below); (g) at the time any Loan is made
hereunder, Borrower has good and marketable title to the Collateral; (h) at the
time any Loan is made hereunder, all Collateral has been received, installed and
is ready for use and is satisfactory in all respects for the purposes of this
Security Agreement; (i) the Collateral is, and will remain at all times under
applicable law, removable personal property, which is free and clear of any lien
or encumbrance except in favor of Lender other than Permitted Liens (as defined
below), notwithstanding the manner in which the Collateral may be attached to
any real property; (j) all credit and financial information submitted to Lender
herewith or at any other time is and will at the time given be true and correct
in all material respects; and (k) the security interest granted to Lender
hereunder is a first priority security interest, and (l) on or before January 1,
2000, Borrower's computer system shall be Year 2000 performance compliant and
will thus be able to accurately process date data from, into and between the
twentieth and twenty-first centuries including leap year calculations.
"Permitted Liens" shall mean and include: (i) liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith; and (ii) liens of carriers,
warehousemen, mechanics, materialmen, vendors, landlords and other liens arising
by operation of law incurred in the ordinary course of business.
SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be located
at the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent which location shall
in all events be within the United States. All of the records regarding the
Collateral shall be located at 0000 - 000xx Xxxxxx XX, Xxxxx 000, Xxxxxxxx, XX
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98004, or such other location of which Borrower has given notice to Lender in
accordance with this Security Agreement. Lender shall have the right to Inspect
Collateral, including records relating thereto, and Borrower's books and records
at any time (upon reasonable notification) during regular business hours, such
books and records to be maintained in accordance, with generally accepted
accounting principles. Borrower shall be responsible for all labor, material and
freight charges incurred in connection with any removal or relocation of
Collateral which is requested b Borrower and consented to by Lender, as well as
for any charges due to the installation or moving of the Collateral. Payments
under the Notes and under this Security Agreement shall continue during my
period in which the Collateral is in transit during a relocation. During
Borrower's regular business hours and upon at least two days' notice to
Borrower, Lender or its agent shall xxxx and label Collateral, which labels (to
be provided by Lender) shall state that such Collateral is subject to a security
interest of Lender, and Borrower shall keep such labels on the Collateral as so
labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Upon reasonable notice
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Borrower will permit Lender to inspect each item of Collateral and its
maintenance records during Borrower's regular business hours. Borrower will at
its sole expense comply with all applicable laws, rules, regulations,
requirements and orders with respect to the use, maintenance, repair, condition,
storage and operation of each item of Collateral. Any addition or improvement
that is so required or cannot be so removed will immediately become Collateral
of Lender. (b) Service and Repair. Borrower will at its sole expense maintain
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and service and repair any damage to each item of Collateral in a manner
consistent with prudent industry practice and Borrower's own practice so that
such item of Collateral is at all times (i) in the same condition as when
delivered to Borrower, except for ordinary wear and tear, and (ii) in good
operating order for the function intended by its manufacturer's warranties and
recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Unless Lender's gross negligence
or willful misconduct causes the loss, Borrower hereby indemnifies and holds
harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence bring hereinafter called a
"Casualty Occurrence." Notwithstanding any Casualty Occurrence the Loan to which
such casualtied item of Collateral is subject shall continue in full force and
effect without any abatement in the monthly payment due. Borrower shall, at its
election, (a) no later than sixty(60) days after such Casualty Occurrence repair
the Collateral returning it to good operating condition, (b) no later than sixty
(60) days after such Casualty Occurrence replace the Collateral with Collateral
acceptable to Lender in its reasonable discretion, in good condition and repair
taking all steps required by Lender to perfect Lender's first priority security
interest therein, which replacement Collateral shall be subject to the terms of
this Security Agreement, or (c) on the next regular monthly payment date which
falls after such sixty (60) days, or if there is no such payment date, thirty
(30) days after such Casualty Occurrence pay to Lender an amount equal to the
Balance Due (as defined below) for each lost or damaged item of Collateral. The
Balance Due for each such item is the sum of: (i) all amounts for each item
which may be then due or accrued the payment date plus (ii) as of such payment
date, an amount equal to the product of the fraction specified below times the
sum of all remaining payments under the respective Note, including the amount of
any mandatory or optional payment required or permitted to be paid by Borrower
to Lender at the maturity of the Note discounting to present value the amounts
in (ii) at a rate of 6% per annum compounded monthly on the basis of a 360 day
year ("Discount Rate"). The numerator of the fraction shall be the collateral
value (as set forth on the applicable Note) of the item and the denominator
shall be the aggregate collateral value of all items under the Note. Upon the
making of such payments, Lender shall release such item of Collateral from its
lien hereunder.
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SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value of
the Collateral and in no event for less than the amount payable following a
Casualty Occurrence (as provided in Section 9). Such insurance shall provide for
a loss payable endorsement to Lender and/or any assignee of Lender. If there is
no Event of Default, any insurance proceeds received by Lender shall be released
by Lender for application to the costs incurred by Borrower to repair the
Collateral. Borrower shall maintain commercial general liability insurance,
including products liability and completed operations coverage, with respect to
loss or damage for personal injury, death or property damage in an amount not
less than $2,000,000 in the aggregate, naming Lender and/or Lender's assignee as
additional insured. Such insurance shall contain insurer's agreement to give
thirty (30) days' advance written notice to Lender before cancellation or
material change of any policy of insurance. Borrower will provide Lender and any
assignee of Lender with a certificate of insurance from the insurer evidencing
Lender's or such assignee's interest in the policy of insurance. Such insurance
shall cover any Casualty Occurrence to any unit of Collateral. Notwithstanding
anything in Section 9 or this Section 10 to the contrary, this Security
Agreement and Borrower's obligations hereunder shall remain in full force and
effect with respect to any unit of Collateral which is not subject to a Casualty
Occurrence. If Borrower fails to provide or maintain insurance as required
herein, Lender shall have the right, but shall not be obligated, to obtain such
insurance. In that event, Borrower shall pay to Lender the cost thereof.
SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect Lender's security interest in the Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual audited
financial statements within ninety (90) days following the end of Borrower's
fiscal year, unaudited quarterly financial statements within forty-five (45)
days after the end of each fiscal quarter, and within thirty (30) days of the
end of each mouth a financial statement for that month prepared by Borrower, and
including an income statement and balance sheet all of which shall be certified
by an officer of Borrower as true and correct and shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and such other information as Lender may reasonably request; and (e) promptly
(but in no event more than ten (10) days after the occurrence of such event),
notify Lender of any change in Borrower's condition during the commitment period
which constitutes a Material Adverse Effect, and of the occurrence of any Event
of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon
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Lender's request, will, at Borrower's expense, resist and defend such action,
suit or proceeding or cause the same to be resisted and defended by counsel
designated and approved by lender. Borrower's obligations under this Section 12
shall survive the payment in full of all the Indebtedness and the performance of
all Obligations with respect to acts or events occurring or alleged to have
occurred prior to the payment in full of all the Indebtedness and the
performance of all Obligations.
SECTION 13. TAXES. Borrower shall not be liable to Lender for any loss of
Lender's anticipated tax benefits. Borrower agrees to reimburse Lender (or pay
directly if instructed by Lender) and any assignee of Lender for, and to
indemnify and hold Lender and any assignee harmless from, all fees (including,
but not limited to, license, documentation, recording and registration and all
sales, use, gross receipts, personal property, occupational, value added or
other taxes, levies, imposts, duties, assessments, charges, or withholdings of
any nature whatsoever, together with any penalties, fines, additions to tax, or
interest thereon (the foregoing collectively "Impositions"), except same as may
be attributable to Lender's income, arising at any time prior to or during the
term of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement the Notes or any transaction or any part hereof
or thereof.
SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, Lenders shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT LENDERS PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY.
LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS SECURITY
INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE OR IN
PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO BORROWER. If
Borrower is given notice of such assignment it agrees to acknowledge receipt
thereof in writing and Borrower shall execute such additional documentation as
Lender's assignee and/or secured party shall reasonably require at Lender's
expense. Each such assignee and/or secured party shall have all of the rights,
but (except as provided in this Section 15) none of the obligations, of Lender
under this Security Agreement unless such assignee or secured party expressly
agrees to assume such obligations in writing. Borrower shall not assert against
any assignee and/or secured party any defense, counterclaim or offset that
Borrower may have against Lender. Notwithstanding any such assignment, and
providing no Event of Default has occurred and is continuing, Lender, or its
assignees, secured parties, or their agents or assigns, shall not interfere with
Borrower's right to quietly enjoy use of Collateral subject to the term and
conditions of this Security Agreement. Subject to the foregoing, the Notes and
this Security Agreement shall inure to the benefit of, and are binding upon, the
successors and assignee; of the parties hereto. Borrower
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acknowledges that any such assignment by Lender will not change Borrower's
duties or obligations under this Security Agreement and the Notes or increase
any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
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conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes, excluding the Warrant shall prove to have
been incorrect in any material respect when made or given; (iv) Borrower's
failure to comply with or perform any material term, covenant or condition of
this Security Agreement or any Note, or comply with Section 16 of the Warrant,
or under any lease or mortgage of real property covering the location of the
Collateral if such failure to comply or perform is not cured by Borrower within
thirty (30) days after Borrower knows of the noncompliance or nonperformance or
notice from Lender or such longer period that Borrower is diligently attempting
to effect such cure; (v) seizure of any of the Collateral under legal process;
(vi) the filing by or against Borrower or any guarantor under any guaranty
executed in connection with this Security Agreement ("Guarantor") of a petition
for reorganization or liquidation under the Bankruptcy Code or any amendment
thereto or under any other insolvency law providing for the relief of debtors;
(vii) the voluntary or involuntary making of an assignment of a substantial
portion of its assets by Borrower or by any Guarantor for the benefit of its
creditors, the appointment of a receiver or trustee for Borrower or any
Guarantor or for any of Borrower's or Guarantor's assets the institution by or
against Borrower or any Guarantor of any formal or informal proceeding for
dissolution, liquidation, settlement of claims against or winding up of the
affairs of Borrower or any Guarantor provided that in the case of all such
involuntary proceedings, same are not dismissed within sixty (60) days after
commencement; (viii) the making by Borrower or by any Guarantor of a transfer of
all or a material portion of Borrowers or Guarantor's assets or inventory not in
the ordinary course of business; or (ix) any default or breach by any Guarantor
of any of the terms of its guaranty to Lender in connection with this Security
Agreement.
(b) Remedies. If any Event of Default has occurred, Lender may in its sole
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discretion exercise one or more of the following remedies with respect to any or
all of the Collateral: (i) declare due any or all of the aggregate sum of all
remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all reasonable damages and expenses incurred by Lender by reason of an
Event of Default; (iii) except as provided by law, without court order or prior
demand, enter upon the premises where the Collateral is located and take
immediate possession of and remove it without liability of Lender to Borrower or
any other person or entity; (iv) terminate this Security Agreement and sell the
Collateral at public or private sale or otherwise dispose of, hold, use or lease
any or all of the Collateral in a commercially reasonable manner; or (v)
exercise any other right or remedy available to it under applicable law. If
Lender has declared due any or all of the Remaining Payments, Borrower will pay
immediately to Lender, without duplication, (A) the Remaining Payments
discounted to present value at the Discount Rate, (B) all amounts which may be
then due or accrued, and (C) all other amounts due under this Security Agreement
and under the Notes (Lender's Return, as referred to below, means the mounts
described in clause (A), (B) and (C) above). The net proceeds of any sale or
lease of such Collateral will be credited against Lender's Return. The net
proceeds of a sale of the Collateral pursuant to this Section 16(b) is defined
as the sales price of the Collateral loss reasonable selling expenses,
including, without limitation, reasonable costs of remarketing the Collateral
and all reasonable
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refurbishing costs and commissions paid with respect to such remarketing. The
net proceeds of a lease of the Collateral pursuant to this Section 16(b) is
defined as the amount equal to the monthly payments due under such lease
(discounted to present value at the Discount Rate) plus the residual value of
the Collateral at the end of the basic term of such lease, as reasonably
determined by Lender, and discounted at the Discount Rate.
At Lender's request, Borrower shall assemble the Collateral and make it
available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and Lender's taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part
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of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
reasonable refurbishing costs, reasonable costs of remarketing and commissions
related to remarketing, all Remedy Expenses, all expenses, liabilities and
advances incurred or made pursuant to this Security Agreement or any Note by
Lender in connection with foreclosure, suit, sale or enforcement of this
Security Agreement or the Notes, and taxes, assessments or liens superior to
Lender's security interest granted by this Security Agreement;
Second, to the payment, of all other amounts not described in
item Third below due under this Security Agreement and all Notes;
Third, to pay Lender an amount equal to Lender's Return, to the
extent not previously paid by Borrower; and
Fourth, to the payment of any surplus to Borrower or to whomever
may lawfully be entitled to receive it.
(d) Effect of Delay; Waiver; Foreclosure on Collateral. No delay or
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omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any
other or additional security, collateral or guaranty for the payment or
discharge of the Indebtedness and performance of the Obligations shall in no way
operate to prejudice, waive or affect the security interest created by this
Security Agreement or any rights, powers or remedies exercised hereunder or
thereunder. Lender shall not require first to foreclose on the Collateral prior
to bringing an action against Borrower for sums owed to Lender under this
Security Agreement or under any Note.
8
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 8% of any
payment owed Lender by Borrower which is not paid when due (taking into account
applicable grace periods), for every month such payment is not paid when due. If
such amounts have not been received by Lender at Lenders place of business or by
Lender's designated agent by the date such amounts are due under this Security
Agreement or the Notes, Lender shall xxxx Borrower for such charges. Borrower
acknowledges that invoices for amounts due hereunder or under the Notes are sent
by Lender for Borrower's convenience only. Borrower's non-receipt of an invoice
will not relieve Borrower of its obligation to make payments hereunder or under
the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each of
Lender's officers, employees, or agents designated by Lender) with full power of
substitution by Lender, as Borrower's attorney, with power to execute and
deliver on Borrower's behalf, financing statements and other documents necessary
to perfect and/or give notice of Lender's security intent in any of the
Collateral. Notwithstanding the above, Borrower will, upon Lender's request,
execute all financing statements pursuant to the Uniform Commercial Code and all
such other documents reasonably requested by Lender to perfect Lender's security
interests hereunder. Borrower authorizes Lender to file financing statements
signed only by Lender (where such authorization is permitted by law) at all
places where Lender deems necessary.
SECTION 20. NATURE OF TRANSACTION. Neither Lender nor Borrower makes any
representation whatsoever, express or implied, concerning the legal character of
the transaction evidenced hereby, for tax or any other purpose.
SECTION 21. SUSPENSION OF LENDER'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. LENDER'S EXPENSE. Borrower shall pay Lender all reasonable costs
and expenses including reasonable attorney's fees, litigation expends and the
fees of collection agencies, incurred by Lender (a) in enforcing any of the
terms, conditions or provisions hereof and related to the exercise of its
remedies ("Remedy Expenses"), and (b) in connection with any bankruptcy or post-
judgement proceeding, whether or not suit is filed and, in each and every
action, suit or proceeding, including any and all appeals and petitions
therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be
made to the Collateral without Lender's prior written consent which shall not be
given for changes that will adversely affect the reliability and utility of the
Collateral or which cannot be removed without damage to the Collateral, or
which in any way decrease the value of the Collateral for purposes of resale or
lease.
9
All attachments and improvements to the Collateral shall be deemed to be
"Collateral" for purposes of the Security Agreement, and a first priority
security interest therein shall immediately vest in Lender.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicate. To the
extent if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security Interest in the Security Agreement may be created in
any documents other than the "Original" (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Note(s) may be created in any documents other than the "Original."
SECTION 25. STOCK WARRANT. Borrower agrees that it will issue to Lender upon
execution of this Security Agreement a Warrant in the form of the Warrant
Agreement attached hereto as Exhibit B. Borrower and Lender agree that the value
of the Warrant hereunder is ten dollars ($10.00).
SECTION 26. COMMITMENT FEE. Borrower has paid to Lender a commitment fee
("Fee") of $20,000. The Fee shall be applied by Lender first to reimburse
Lender for all out-of-pocket UCC and other search costs, inspections and
labeling costs and appraisal fees, if any, incurred by Lender, and then
proportionally to the first monthly payment for each Note hereunder in the
proportion that the Collateral value for such Note bears to Lender's entire
commitment. However, the portion of the Fee which is not applied to such
monthly payments shall be non-refundable except if Lender defaults in its
obligation to fund Loans pursuant to Section 3.
SECTION 27. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be to Lender 0000 Xxxxxx Xxxxxxxxx, Xxx
Xxxxxx, Xxxxxxxxxx 00000, Attention: Asset Management and to Borrower at 0000-
000/xx/ Xxxxxx XX, Xxxxx 000, Xxxxxxxx, XX 00000, Attention: Xxxxxxxxxxx X.
Xxxxxxx, Vice President, or at such other address as the parties; may notify one
another of in writing from time to time.
SECTION 28. MISCELLANEOUS. (a) Borrower shall provide Lender with such
corporate resolutions, financial statements and other documents as Lender shall
reasonably request from time to time. (b) Borrower represents that the
Collateral hereunder is used solely for business purposes. (c) Time is of the
essence with respect to this Security Agreement (d) Borrower acknowledges that
Borrower has read this Security Agreement and the Notes, understands them and
agrees to be bound by their terms and further agrees that this Security
Agreement and the Notes constitute the entire agreement between Lender and
Borrower, with respect to the subject matter hereof and supersede all previous
agreements, promises, or representations. (e) This Security Agreement and the
Notes may not be changed, altered or modified except by an instrument signed by
an officer or authorized representative of Lender and Borrower. (iv) Any
failure of Lender or Borrower to require strict performance by Borrower or
Lender, as the case may be, or any waiver by Lender or Borrower of any provision
herein or in a Note shall not be construed as a consent or waiver of any other
breach of the same or any other provision by Lender or Borrower, as the case may
be. (g) If any provision of this Security Agreement or any Note is held invalid,
such invalidity shall not affect any other provisions hereof or thereof. (h) The
obligations of Borrower to pay the Indebtedness and perform the Obligations
shall survive the expiration or earlier termination of this Security Agreement
and each Note until all Obligations of Borrower to Lender have been met and all
liabilities of Borrower to Lender and any assignee have been paid in full.
10
(i) Borrower will notify Lender at least 30 days before changing its name,
principal place of business or chief executive office. (j) Borrower will, at its
expense, promptly execute and deliver to Lender such documents and assurances
(including financing statements) and take such further action as Lender may
reasonably request in order to carry out the intent of this Security Agreement
and Lender's rights and remedies.
SECTION 29. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
each Note shall be deemed to have been made under and shall be governed by the
laws of the State of California in all respects, including maters of
construction, validity and performance. At Lender's sole discretion, option and
election, jurisdiction and venue for my legal action between the panics arising
out of or relating to this Security Agreement or any Note shall be in the
Superior Court of Marin County, California, or, in cases where federal diversity
jurisdiction is available, in the United States District Court for the Northern
District of California located in San Francisco, California. BORROWER AND
LENDER, TO THE EXTENT EACH MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL
BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY
NOTE, ANY SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION
HEREWITH.
SECTION 30. END OF LOAN POSITION. (a) General. Borrower shall be required to
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choose a final payment or Note extension election ("End of Loan Position") at
the expiation of the first Note's term. Borrower shall provide written notice,
of its election to Lender at least 60 days prior to the end of the term of the
first Note. That choice shall be an election of Borrower's End of Loan Position
election for all but not less than all, of the Collateral under all Notes under
the Security Agreement.
In the event Borrower does not provide 60 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No. 2.
(b) End of Loan Position Elections. As its End of Loan Position, Borrower
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shall be required to:
Election No. 1: Make a final payment equal to 10.85% of the Note's original
--------------
principal amount.
Election No. 2: Extend the Note's term for an additional 12 months ("Extended
--------------
Term") for a monthly rate of 1.67% of the Note's original principal amount.
IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED POINTSHARE CORPORATION
By: /s/ E XXXXXX By: /s/ Xxxxxxxxxxx X. Xxxxxxx
------------------------- --------------------------------
Name: E XXXXXX Name: Xxxxxxxxxxx X. Xxxxxxx
----------------------- -------------------------------
Title: AVP Title: VP Finance, Secretary
---------------------- ------------------------------
HEADQUARTERS LOCATION:
0000 - 000xx Xxxxxx XX, Xxxxx 000
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