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EXHIBIT 10.8
LOAN AND SECURITY AGREEMENT
Dated as of September 21, 1998
between
CoSine Communications, Inc.
a California corporation
as "Borrower",
and
VENTURE LENDING & LEASING II, INC.,
a Maryland corporation
as "Lender"
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LOAN AND SECURITY AGREEMENT
The Borrower and Lender identified on the cover page of this document have
entered or anticipate entering into one or more transactions pursuant to which
Lender agrees to make available to Borrower a loan facility governed by the
terms and conditions set forth in this document and one or more Supplements
executed by Borrower and Lender which incorporate this document by reference.
Each Supplement constitutes a supplement to and forms part of this document, and
will be read and construed as one with this document, so that this document and
the Supplement constitute a single agreement between the parties (collectively
referred to as this "Agreement").
Accordingly, the parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS. The terms defined in Article 10 and in the Supplement will
have the meanings therein specified for purposes of this Agreement.
1.2 INCONSISTENCY. In the event of any inconsistency between the provisions
of any Supplement and this document, the provisions of the Supplement will be
controlling for the purpose of all relevant transactions.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of this Agreement,
Lender agrees to make term loans to Borrower from time to time from the Closing
Date and to, but not including, the Termination Date in an aggregate principal
amount not exceeding the Commitment. The Commitment is not a revolving credit
commitment, and Borrower does not have the right to repay and reborrow
hereunder. Each Loan requested by Borrower to be made on a single Business Day
shall be for a minimum principal amount set forth in the Supplement, except to
the extent the remaining Commitment is a lesser amount.
2.2 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by a
separate Note payable to the order of Lender, in the total principal amount of
the Loan. Principal and interest of each Loan shall be payable at the times and
in the manner set forth in the Note.
2.3 PROCEDURES FOR BORROWING.
(a) Borrower shall give Lender, at least five (5) Business Days' prior
to a proposed Borrowing Date, written notice of any request for borrowing
hereunder (a "Borrowing Request"). Each Borrowing Request shall be in
substantially the form of Exhibit "B" to the Supplement, shall be executed
by a responsible executive or financial officer of Borrower, and shall
state how much is requested, and shall be accompanied by such other
information and documentation as Lender may reasonably request.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing
Date, if Borrower has satisfied the conditions precedent in Article 4,
Lender shall make the Loan available to Borrower in immediately available
funds.
2.4 INTEREST. Basic Interest on the outstanding principal balance of each
Loan shall accrue daily at the Designated Rate from the Borrowing Date until the
Maturity Date.
2.5 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment with respect
to each Loan on the Maturity Date of such Loan.
2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and fees
under this Agreement and any Loan Document, shall be calculated for actual days
elapsed on the basis of a 360-day year, which results in higher interest, charge
or fee payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay Lender interest, charges or fees at a rate in excess of the
highest rate permitted by applicable law from time to time in effect.
2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest or the
Terminal Payment with respect to any Loan shall bear interest from their
respective maturities, whether scheduled or accelerated, at the Designated Rate
for such Loan plus five percent (5.00%) per annum, until paid in full, whether
before or after judgment (the "Default Rate"). Borrower shall pay such interest
on demand.
2.8 LATE CHARGES. If Borrower is late in making any payment of principal or
interest or Terminal Payment under this Agreement by more than fifteen
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(15) days. Borrower agrees to pay a late charge of five percent (5%) of the
installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose of
defraying the expenses incidental to the handling of such delinquent amounts.
Borrower acknowledges that such late charge represents a reasonable sum
considering all of the circumstances existing on the date of this Agreement and
represents a fair and reasonable estimate of the costs that will be sustained by
Lender due to the failure of Borrower to make timely payments. Borrower further
agrees that proof of actual damages would be costly and inconvenient. Such late
charge shall be paid without prejudice to the right of Lender to collect any
other amounts provided to be paid or to declare a default under this Agreement
or any of the other Loan Documents or from exercising any other rights and
remedies of Lender.
2.9 LENDER'S RECORDS. Principal, Basic Interest, Terminal Payments and all
other sums owed under any Loan Document shall be evidenced by entries in records
maintained by Lender for such purpose. Each payment on and any other credits
with respect to principal, Basic Interest, Terminal Payments and all other sums
outstanding under any Loan Document shall be evidenced by entries in such
records. Absent manifest error, Lender's records shall be conclusive evidence
thereof.
2.10 GRANT OF SECURITY INTERESTS. To secure the timely payment and
performance of all of Borrower's Obligations to Lender, Borrower hereby grants
to Lender continuing security interests in all of the Collateral.
Notwithstanding the foregoing, the security interest granted herein shall not
extend to and the term "Collateral" shall not include any property, rights or
licenses to the extent the granting of a security interest therein would be
contrary to applicable law.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that, except as set forth in the
Supplement or any schedule of exceptions executed by the parties, as of the
Closing Date and each Borrowing Date:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to conduct business and is in good standing
in each other jurisdiction in which its business is conducted or its properties
are located, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery
and performance of all Loan Documents executed by Borrower are within Borrower's
powers, have been duly authorized, and are not in conflict with Borrower's
articles or certificate of incorporation or by-laws, or the terms of any charter
or other organizational document of Borrower, as amended from time to time; and
all such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully conduct
the business in which it is engaged, and to any sales, leases or the furnishing
of services by Borrower, including without limitation those requiring consumer
or other disclosures, the noncompliance with which would have a Material Adverse
Effect.
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.
(a) Borrower owns or is licensed or otherwise has the right to use
all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other similar rights that are
reasonably necessary for the operation of its business, without conflict with
the rights of any other Person.
(b) To Borrower's knowledge, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by Borrower infringes upon any rights held by any
other Person.
(c) No claim or litigation regarding any of the foregoing is pending
or, to Borrower's knowledge, threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or proposed which, in either case, could reasonably be expected to
have a Material Adverse Effect.
3.5 NO CONFLICT. To the best of Borrower's knowledge, the execution,
delivery, and performance by Borrower of all Loan Documents are not in conflict
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with any law, rule, regulation, order or directive, or any indenture,
agreement, or undertaking to which Borrower is a party or by which Borrower may
be bound or affected.
3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened against or affecting Borrower or its property which could reasonably
be expected to have a Material Adverse Effect.
3.7 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of the latest date of such financial statements; and,
since that date there has been no Material Adverse Change.
3.8 NO SUBSIDIARIES. Borrower is not a majority owner of or in a control
relationship with any other business entity.
3.9 ENVIRONMENTAL MATTERS. Borrower is in compliance with such
Environmental Laws, except to the extent a failure to be in such compliance
could not reasonably be expected to have a Material Adverse Effect on Borrower's
operations, properties or financial condition.
3.10 NO EVENT OF DEFAULT. No Default or Event of Default has occurred and
is continuing.
3.11 FULL DISCLOSURE. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date) taken as a
whole, contains any untrue statement of a material fact or omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not misleading
as of the time when made or delivered. It is recognized by the Lender that
projections and forecasts provided by or on behalf of the Borrower, although
reflecting the Borrower's good faith projections or forecasts based on methods
and data which the Company believes to be reasonable and accurate, are not to be
viewed as facts and that actual results during the periods covered by and such
projections and forecasts may (and are likely to) differ from the projected or
forecasted results.
3.12 SPECIFIC REPRESENTATIONS REGARDING COLLATERAL.
(a) TITLE. Except for the security interests created by this Agreement and
Permitted Liens, (i) Borrower is and will be the unconditional legal and
beneficial owner of the Collateral, and (ii) the Collateral is genuine and
subject to no Liens, rights or defenses of others. There exist no prior
assignments or encumbrances of record with the U.S. Patent and Trademark Office
affecting any Collateral in favor of any third party other than Lender.
(b) RIGHTS TO PAYMENT. The names of the obligors, amount owing to Borrower,
due dates and all other information with respect to the Rights to Payment are
and will be correctly stated in all material respects in all Records relating to
the Rights to Payment. Borrower further represents and warrants, to its
knowledge, that each Person appearing to be obligated on a Right to Payment has
authority and capacity to contract and is bound as it appears to be.
(c) LOCATION OF COLLATERAL. Borrower's chief executive office, Inventory,
Records, Equipment, and any other offices or places of business are located at
the address(es) shown on the Supplement.
(d) BUSINESS NAMES. Other than its full corporate name, Borrower has not
conducted business using any trade names or fictitious business names except as
shown on the Supplement.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Article
4.2, subject to the fulfillment of the following conditions and to the receipt
by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
(a) RESOLUTIONS. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) INCUMBENCY AND SIGNATURES. A certificate of the secretary of Borrower
certifying the names of the officer or officers of Borrower authorized to sign
the Loan Documents, together with a sample of the true signature of each such
officer.
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(c) LEGAL OPINION. The opinion of legal counsel for Borrower as to such
matters as Lender may reasonably request, including the matters covered by
Sections 3.1, 3.2, 3.5 and 3.6 hereof.
(d) ARTICLES AND BY-LAWS. Certified copies of the Articles or Certificate
of Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) THIS AGREEMENT. A counterpart of this Agreement and an initial
Supplement, with all schedules completed and attached thereto, and disclosing
such information as is acceptable to Lender.
(f) FINANCING STATEMENTS. Filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination statements, with
respect to the Collateral as Lender shall request.
(g) PATENT AND TRADEMARK ASSIGNMENTS. If required by the Supplement,
patent and trademark collateral assignments executed by Borrower.
(h) LIEN SEARCHES. Uniform Commercial Code lien, judgment, bankruptcy and
tax lien searches of Borrower from such jurisdictions or offices as Lender may
reasonably request, all as of a date reasonably satisfactory to Lender and its
counsel.
(i) GOOD STANDING CERTIFICATE. A Certificate of status or good standing of
Borrower as of a date acceptable to Lender from the jurisdiction of Borrower's
organization and any foreign jurisdictions where Borrower is or should be
qualified to do business.
(j) WARRANT. A warrant issued by Borrower to Lender exercisable for such
number, type and class of shares of Borrower's capital stock, and for an
initial exercise price as is specified in the Supplement.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its initial
Loan and each subsequent Loan is subject to the following further conditions
precedent that:
(a) NO DEFAULT. No Default or Event of Default has occurred and is
continuing or will result from the making of any such Loan, and the
representations and warranties of Borrower contained in Article 3 of this
Agreement are true and correct as of the Borrowing Date of such Loan.
(b) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of the most recent financial statements submitted to
Lender.
(c) BORROWING REQUEST. Borrower shall have delivered to Lender a Borrowing
Request for such Loan.
(d) NOTE. Borrower shall have delivered an executed Note evidencing such
Loan, in form and substance satisfactory to Lender.
(e) SUPPLEMENTAL LIEN FILINGS. Borrower shall have executed and delivered
such amendments or supplements to this Agreement and such financing statements
as Lender may reasonably request in connection with the proposed Loan, in order
to create or perfect or to maintain the perfection of Lender's Liens on the
Collateral.
(f) VCOC LIMITATION. Lender shall not be obligated to make any Loan under
its Commitment if at the time of or after giving effect to the proposed Loan
Lender would no longer qualify as: (A) a "venture capital operating company"
under U.S. Department of Labor Regulations Section 25103-101(d), Title 29 of
the Code of Federal Regulations, as amended; and (B) a "business development
company" under the provisions of federal Investment Company Act of 1940, as
amended; and (C) a "regulated investment company" under the provisions of the
Internal Revenue Code of 1986, as amended.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all
obligations to Lender, Borrower will:
5.1 NOTICE TO LENDER. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding affecting
Borrower where the amount claimed against Borrower is at the Threshold Amount
or more, or where the granting of relief requested could have a Material
Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority.
(c) The occurrence of any Default or any Event of Default.
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(d) Any change in the location of any of Borrower's places of business or
Collateral at least thirty (30) days in advance of such change, or of the
establishment of any new, or the discontinuance of any existing, place of
business.
(e) Any dispute or default by Borrower or any other party under any joint
venture, partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement which
could reasonably be expected to have a Material Adverse Effect.
(f) Any other manner which has resulted or might reasonably result in a
Material Adverse Change.
5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to be delivered
to Lender, in form and detail satisfactory to Lender the following financial
information, which Borrower warrants shall be accurate and complete in all
material respects:
(a) MONTHLY FINANCIAL STATEMENTS. As soon as available but no later than
thirty (30) days after the end of each month, Borrower's balance sheet as of
the end of such period, and Borrower's income statement for such period and for
that portion of Borrower's financial reporting year ending with such period,
prepared and attested by a responsible financial officer of Borrower as being
complete and correct in all material respects and fairly presenting Borrower's
financial condition and the results of Borrower's operations. After a Qualified
Public Offering, the foregoing interim financial statements shall be delivered
no later than 45 days after each fiscal quarter and for the quarter-annual
fiscal period then ended.
(b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no later than
ninety (90) days after and as of the end of each financial reporting year, a
complete copy of Borrower's audit report, which shall include balance sheet,
income statement, statement of changes in equity and statement of cash flows
for such year, prepared and certified by an independent certified public
accountant selected by Borrower and satisfactory to Lender (the "Accountant").
The Accountant's certification shall not be qualified or limited due to a
restricted or limited examination by the Accountant of any material portion of
Borrower's records or otherwise.
(c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of each set
of financial statements referred to in paragraphs (a) and (b) above, a
certificate of the chief financial officer of Borrower substantially in the
form of Exhibit "C" to the Supplement (i) setting forth in reasonable detail
any calculations required to establish whether Borrower is in compliance with
any financial covenants or tests set forth in the Supplement, and (ii) stating
whether any Default or Event of Default exists on the date of such certificate,
and if so, setting forth the details thereof and the action which Borrower is
taking or proposes to take with respect thereto.
(d) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES. Promptly after sending,
issuing, making available, or filing, copies of all statements released to any
news media for publication, all material reports, proxy statements, and
financial statements that Borrower sends or makes available to its
stockholders, and, not later than five (5) days after actual filing or the date
such filing was first due, all material registration statements and reports that
Borrower files or is required to file with the Securities and Exchange
Commission, or any other governmental or regulatory authority.
(e) OTHER INFORMATION. Such other statements, lists of property and
accounts, budgets, forecasts, reports, or other information as Lender may from
time to time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a "venture
capital operating company" to participate in, and influence the conduct of
management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. Section 25103-101(d), and:
(a) Permit Lender to make available to Borrower, at no cost to Borrower,
"significant managerial assistance", as defined in Section 2(a)(47) of the
Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors,
employees or affiliates, (ii) Borrower's allowing Lender to provide
recommendations of prospective candidates for election to Borrower's Board of
Directors, or (iii) Lender, at Borrower's request, seeking the services of
third-party consultants to aid Borrower with respect to its management and
operations;
(b) Permit Lender to make available consulting and advisory services to
officers of Borrower regarding Borrower's equipment acquisition and financing
plans, and such other matters affecting the business, financial condition and
prospects of Borrower as Lender shall reasonably deem relevant; and
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(c) If Lender reasonably believes that financial or other developments
affecting Borrower have impaired or are likely to impair Borrower's ability to
perform its obligations under this Agreement, permit Lender reasonable access
to Borrower's management and/or Board of Directors and opportunity to present
Lender's views with respect to such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form of
business, and all rights and privileges necessary or desirable in the normal
course of its business; and keep all Borrower's property in good working order
and condition, ordinary wear and tear excepted.
5.5 INSURANCE. Obtain and keep in force insurance in such amounts and
types as is usual in the type of business conducted by Borrower. Such insurance
policies must be in form and substance satisfactory to Lender, and shall list
Lender as an additional insured or loss payee, as applicable, on endorsement(s)
in form reasonably acceptable to Lender. Borrower shall furnish to Lender such
endorsements, and upon Lender's request, copies of any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and records, and
prepare all financial statements in accordance with GAAP (except as otherwise
noted therein or for the absence of footnotes and subject to normal year-end
adjustments with respect to unaudited financial statements), and in compliance
with the regulations of any governmental or regulatory authority having
jurisdiction over Borrower or Borrower's business; and permit employees or
agents of Lender at such reasonable times and upon such reasonable notice as
Lender may request, at Lender's expense, to inspect Borrower's properties, and
to examine, and make copies and memoranda of Borrower's books, accounts and
records.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party, except where the failure to so comply would not have a Material Adverse
Effect.
5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's material obligations
when due; pay all material taxes and other governmental or regulatory
assessments before delinquency or before any penalty attaches thereto, except
as may be contested in good faith by the appropriate procedures and for which
Borrower shall maintain appropriate reserves; and timely file all required
material tax returns.
5.9 SPECIAL COLLATERAL COVENANTS.
(a) MAINTENANCE OF COLLATERAL; INSPECTION. Do all things reasonably
necessary to maintain, preserve, protect and keep all Collateral in good
working order and salable condition, ordinary wear and tear excepted, deal with
the Collateral in all ways as are considered good practice by owners of like
property, and use the Collateral lawfully and, to the extent applicable, only
as permitted by Borrower's insurance policies. Maintain, or cause to be
maintained, Records, which are complete and accurate in all material respects
relating to the Collateral. Upon reasonable prior notice at reasonable times
during normal business hours, Borrower hereby authorizes Lender's officers,
employees, representatives and agents to inspect the Collateral and to discuss
the Collateral and the Records relating thereto with Borrower's officers and
employees, and, in the case of any Right to Payment, with any Person which is
or may be obligated thereon.
(b) FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to Lender
all financing statements, notices and other documents (including, without
limitation, any filings with the United States Patent and Trademark Office)
from time to time reasonably requested by any Lender to maintain a first
perfected security interest in the Collateral in favor of Lender; perform such
other acts, and execute and deliver to Lender such additional conveyances,
assignments, agreements and instruments, as Lender may at any time request in
connection with the administration and enforcement of this Agreement or
Lender's rights, powers and remedies hereunder.
(c) LIENS. Not create, incur, assume or permit to exist any Lien or grant
any other Person a negative pledge on any Collateral, except Permitted Liens.
(d) DOCUMENTS OF TITLE. Not sign or authorize the signing of any financing
statement or other document naming Borrower as debtor or obligor, or
acquiesce or cooperate in the issuance of any xxxx of lading, warehouse receipt
or other document or instrument of title with respect to any Collateral, except
those negotiated to Lender, or those naming Lender as secured party.
(e) DISPOSITION OF COLLATERAL. Not sell, transfer, lease or otherwise
dispose of any Equipment; or dispose of any other Collateral except for fair
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consideration and in the ordinary course of its business.
(f) CHANGE IN LOCATION OR NAME. Without at least 30 days prior written
notice to Lender: (a) not relocate any Collateral or Records, its chief
executive office, or establish a place of business at a location other than as
specified in the Supplement; and (b) not change its name, mailing address,
location of Collateral, or its legal structure.
(g) AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. Obtain and maintain such
acknowledgements, consents, waivers and agreements from the owner, lienholder,
mortgagee and landlord with respect to any real property on which Equipment is
located as Lender may require, all in form and substance satisfactory to Lender.
(h) CERTAIN AGREEMENTS ON RIGHTS TO PAYMENT. Other than in the ordinary
course of business, not make any material discount, credit, rebate or other
reduction in the original amount owing on a Right to Payment or accept in
satisfaction of a Right to Payment less than the original amount thereof.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all
obligations to Lender, Borrower will not (without Lender's prior written
consent):
6.1 INDEBTEDNESS. Be indebted for borrowed money, the deferred purchase
price of property, or leases which would be capitalized in accordance with
GAAP; or become liable as a surety, guarantor, accommodation party or otherwise
for or upon the obligation of any other Person, except:
(a) Indebtedness incurred for the acquisition of supplies or inventory on
normal trade credit; and other indebtedness incurred pursuant to one or more
transactions permitted under Section 6.4;
(b) Indebtedness not to exceed One Hundred Thousand Dollars ($100,000) in
aggregate principal amount outstanding at any time secured by security interests
covered by clause (c) of the definition of Permitted Lien;
(c) Indebtedness of Borrower under this Agreement; and
(d) Any Indebtedness approved by Lender prior to the Closing Date.
6.2 LIENS. Create, incur, assume or permit to exist any Lien, or grant
any other Person a negative pledge, on any of Borrower's property, except
Permitted Liens. Borrower and Lender agree that this covenant is not intended
to constitute a lien, deed of trust, equitable mortgage, or security interest
of any kind on any of Borrower's real property, and this Agreement shall not be
recorded or recordable. Notwithstanding the foregoing, however, violation of
this covenant by Borrower shall constitute an Event of Default.
6.3 DIVIDENDS. Except after a Qualified Public Offering, pay any
dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except (a)
dividends or other distributions solely of capital stock of Borrower, (b)
repurchases of capital stock from directors, officers, employees and/or
consultants upon exercise of Borrower's right of repurchase upon termination of
employment or services under reverse vesting or similar repurchase plans, (c)
conversion by Borrower of any of its convertible securities into other
securities pursuant to the terms of such convertible securities or otherwise in
exchange therefor, and (d) capital stock repurchased with the proceeds of the
issuance of other capital stock of the Borrower.
6.4 CHANGES/MERGERS. Liquidate or dissolve, or enter into any
consolidation, merger, where Borrower is the surviving entity and which would
not reasonably be expected to increase the credit risk of Borrower to Lender.
6.5 SALES OF ASSETS. Sell, transfer, lease or otherwise dispose of any
of Borrower's assets except for fair consideration and in the ordinary course of
its business.
6.6 LOANS/INVESTMENTS. Make or suffer to exist any loans, guaranties,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of Borrower's business;
(b) Investments in domestic certificates of deposit issued by, and other
domestic investments with, financial institutions organized under the laws of
the United States or a state thereof, having One Hundred Million Dollars
($100,000,000) in capital and a rating of at least "investment grade" or "A" by
Xxxxx'x or any successor rating agency;"
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(c) Investments in marketable obligations of the United States of America
and in open market commercial paper given the highest credit rating by a
national credit agency and maturing not more than one year from the creation
thereof; and
(d) Temporary advances to cover incidental expenses to be incurred in the
ordinary course of business.
(e) loans, guaranties, advances or investments in subsidiaries of Borrower;
(f) (1) travel advances and employee relocation loans and other employee
loans and advances in the ordinary course of business and (2) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower pursuant to employee stock purchase plans or agreements approved by
Borrower's Board of Directors;
(g) investments consisting of endorsements of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business;
(h) any investment permitted by Borrower's investment policy, as amended
from time to time, provided such investment policy (and any amendments thereto)
has been previously approved by Lender.
(i) investments permitted by Article 6.4;
(j) investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with customers or suppliers
arising in the ordinary course of business;
(k) investments consisting of notes receivable of, or prepaid royalties
and other credit extensions to, customers and suppliers, in the ordinary course
of business;
(l) hedge investments arising under currency agreements or interest rate
agreements entered into in the ordinary course of business;
(m) investments in joint ventures or strategic partnerships in the
ordinary course of business;
(n) deposit accounts of Borrower; and
(o) other investments not otherwise permitted in the Article 6.5 in an
aggregate principal amount not to exceed $250,000 at any one time.
6.7 TRANSACTIONS WITH RELATED PERSONS. Directly or indirectly enter into
any transaction with or for the benefit of a Related Person on terms more
favorable to the Related Person than would have been obtainable in an "arms'
length" dealing.
6.8 OTHER BUSINESS. Engage in any material line of business other than the
business Borrower conducts as of the Closing Date.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following (each, an
"Event of Default") shall terminate any obligation of Lender to make any
additional Loan; and shall, at the option of Lender (1) make all sums of Basic
Interest and principal, all Terminal Payments, and any Obligations and other
amounts owing under any Loan Documents immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor or any other notices or demands, and (2) give Lender the
right to exercise any other right or remedy provided by contract or applicable
law:
(a) Borrower shall fail to pay any principal, interest or Terminal Payment
under this Agreement, or fail to pay any fees or other charges when due under
any Loan Document, and such failure continues for five(5) Business Days or more
after the same first becomes due; or an Event of Default as defined in any
other Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower under any Loan Document
shall prove to have been false or misleading in any material respect when made
or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they become due or
shall commence any Insolvency Proceeding with respect to itself; an involuntary
Insolvency Proceeding shall be filed against Borrower, or a custodian,
receiver, trustee, assignee for the benefit of creditors, or other similar
official, shall be appointed to take possession, custody or control of the
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properties of Borrower, and such involuntary Insolvency Proceeding, petition or
appointment is acquiesced to by Borrower, or is not dismissed within sixty (60)
days; or the dissolution or termination of the business of the Borrower.
(d) Borrower shall be in default beyond any applicable period of grace or
cure under any other agreement involving the borrowing of money, the purchase
of property, the advance of credit or any other monetary liability of any kind
to Lender or to any Person which results in the acceleration of payment of such
obligation in an amount in excess of the Threshold Amount.
(e) Any governmental or regulatory authority shall take any judicial or
administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the reasonable
judgment of Lender, might have a Material Adverse Effect.
(f) Any sale, transfer or other disposition of all or substantially all of
the assets of Borrower, including without limitation to any trust or similar
entity, shall occur.
(g) Any judgement(s) singly or in the aggregate in excess of the Threshold
Amount shall be entered against Borrower which remain unsatisfied, unvacated or
unstayed pending appeal for ten (10) or more days after entry thereof.
(h) Intentionally Omitted.
(i) Borrower shall fail to perform or observe any covenant contained in
Article 6 of this Agreement.
(j) Borrower shall fail to perform or observe any covenant contained in
this Agreement or any other Loan Document (other than a covenant which is dealt
with specifically elsewhere in this Article 7) and the breach of such covenant
is not cured within 30 days after the sooner to occur of Borrower's receipt of
notice of such breach from Lender or the date on which such breach first
becomes known to any officer of Borrower; provided, however, that if such
breach is not capable of being cured within such 30-day period and Borrower
timely notifies Lender of such fact and Borrower diligently pursues such cure,
then the cure period shall be extended to the date requested in Borrower's
notice but in no event more than 90 days from the initial breach; provided,
further, that such additional 60-day opportunity to cure shall not apply in the
case of any failure to perform or observe any covenant which has been the
subject of a prior failure within the preceding 180 days or which is a willful
and knowing breach by Borrower.
7.2 REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of
an Event of Default, Lender shall be entitled to, at its option, exercise any
or all of the rights and remedies available to a secured party under the
Uniform Commercial Code or any other applicable law, and exercise any or all of
its rights and remedies provided for in this Agreement and in any other Loan
Document. The obligations of Borrower under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Obligations is rescinded or must otherwise be returned by Lender upon, on
account of, or in connection with, the insolvency, bankruptcy or reorganization
of Borrower or otherwise, all as though such payment had not been made.
7.3 SALE OF COLLATERAL. Upon the occurrence and during the continuance of an
Event of Default, Lender may sell all or any part of the Collateral, at public
or private sales, to itself, a wholesaler, retailer or investor, for cash, upon
credit or for future delivery, and at such price or prices as Lender may deem
commercially reasonable. To the extent permitted by law, Borrower hereby
specifically waives all rights of redemption and any rights of stay or appraisal
which it has or may have under any applicable law in effect from time to time.
Any such public or private sales shall be held at such times and at such
place(s) as Lender may determine. In case of the sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by Lender until the selling price is paid by the purchaser, but Lender
shall not incur any liability in case of the failure of such purchaser to pay
for the Collateral and, in case of any such failure, such Collateral may be
resold. Lender, may, instead of exercising its power of sale, proceed to enforce
its security interest in the Collateral by seeking a judgment or decree of a
court of competent jurisdiction. Without limiting the generality of the
foregoing, if an Event of Default is in effect.
(1) Subject to the rights of any third parties, Lender may license, or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any Patents or Trademarks included in the Collateral
throughout the world for such term or terms, on such conditions and in such
manner as Lender shall in its sole discretion determine.
(2) Lender may (without assuming any obligations or liability thereunder),
at any time and from time to time, enforce (and shall have the
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exclusive right to enforce) against any licensee or sublicensee all rights and
remedies of Borrower in, to and under any Patent Licenses or Trademark Licenses
and take or refrain from taking any action under any thereof, and Borrower
hereby releases Lender from, and agrees to hold Lender free and harmless from
and against any claims arising out of, any lawful action so taken or omitted to
be taken with respect thereto other than claims arising out of Lender's gross
negligence or willful misconduct; and
(3) Upon request by Lender, Borrower will execute and deliver to Lender a
power of attorney, in form and substance reasonably satisfactory to Lender for
the implementation of any lease, assignment, license, sublicense, grant of
option, sale or other disposition of a Patent or Trademark. In the event of any
such disposition pursuant to this clause 3, Borrower shall supply its know-how
and expertise relating to the products or services made or rendered in
connection with Patents, the manufacture and sale of the products bearing
Trademarks, and its customer lists and other records relating to such Patents
or Trademarks and to the distribution of said products, to Lender.
7.4 BORROWER'S OBLIGATIONS UPON DEFAULT. Upon the request of Lender after
the occurrence and during the continuance of an Event of Default, Borrower will:
(a) Assemble and make available to Lender the Collateral at such place(s)
as Lender shall reasonably designate, segregating all Collateral so that each
item is capable of identification; and
(b) Subject to the rights of any lessor, permit Lender, by Lender's
officers, employees, agents and representatives, to enter any premises where
any Collateral is located, to take possession of the Collateral, to complete
the processing, manufacture or repair of any Collateral, and to remove the
Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of Lender for rent or other compensation for the use of
Borrower's premises.
ARTICLE 8 - SPECIAL COLLATERAL PROVISIONS
8.1 COMPROMISE AND COLLECTION. Borrower and Lender recognize that
setoffs, counterclaims, defenses and other claims may be asserted by obligors
with respect to certain of the Rights to Payment, that certain of the Rights to
Payment may be or become uncollectible in whole or in part; and that the
expense and probability of success of litigating a disputed Right to Payment
may exceed the amount that reasonably may be expected to be recovered with
respect to such Right to Payment. Borrower hereby authorizes Lender, after and
during the continuance of an Event of Default, to compromise with the obligor,
accept in full payment of any Right to Payment such amount as Lender shall
negotiate with the obligor, or abandon any Right to Payment. Any such action by
Lender shall be considered commercially reasonable so long as Lender acts in
good faith based on information known to it at the time it takes any such
action.
8.2 PERFORMANCE OF BORROWER'S OBLIGATIONS. Without having any obligation
to do so, upon reasonable prior notice to Borrower, Lender may perform or pay
any obligation which Borrower has agreed to perform or pay under this
Agreement, including, without limitation, the payment or discharge of taxes or
Liens levied or placed on or threatened against the Collateral. In so
performing or paying, Lender shall determine the action to be taken and the
amount necessary to discharge such obligations. Borrower shall reimburse Lender
on demand for any amounts paid by Lender pursuant to this Section, which
amounts shall constitute Obligations secured by the Collateral and shall bear
interest from the date of demand at the Default Rate.
8.3 POWER OF ATTORNEY. For the purpose of protecting and preserving the
Collateral and Lender's rights under this Agreement, Borrower hereby irrevocably
appoints Lender, with full power of substitution, as its attorney-in-fact with
full power and authority, after the occurrence and during the continuance of an
Event of Default, to do any act which Borrower is obligated to do hereunder; to
exercise such rights with respect to the Collateral as Borrower might exercise;
to use such Inventory, Equipment, Fixtures or other property as Borrower might
use; to enter Borrower's premises; to give notice of Lender's security interest
in, and to collect the Collateral; and to execute and file in Borrower's name
any financing statements, amendments and continuation statements necessary or
desirable to perfect or continue the perfection of Lender's security interests
in the Collateral. Borrower hereby ratifies all
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that Lender shall lawfully do or cause to be done by virtue of this appointment.
8.4 AUTHORIZATION FOR LENDER TO TAKE CERTAIN ACTION. The power of attorney
created in Section 8.3 is a power coupled with an interest and shall be
irrevocable. The powers conferred on Lender hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Lender to
exercise such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and in no event
shall Lender or any of its directors, officers, employees, agents or
representatives be responsible to Borrower for any act or failure to act, except
for gross negligence or willful misconduct. After the occurrence and during the
continuance of an Event of Default, Lender may exercise this power of attorney
without notice to or assent of Borrower, in the name of Borrower, or in Lender's
own name, from time to time in Lender's sole discretion and at Borrower's
expense. To further carry out the terms of this Agreement, after the occurrence
and during the continuance of an Event of Default, Lender may:
(a) Execute any statements or documents or take possession of, and
endorse and collect and receive delivery or payment of, any checks, drafts,
notes, acceptances or other instruments and documents constituting Collateral,
or constituting the payment of amounts due and to become due or any performance
to be rendered with respect to the Collateral.
(b) Sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts; drafts, certificates and statements
under any commercial or standby letter of credit relating to Collateral;
assignments, verifications and notices in connection with Accounts; or any other
documents relating to the Collateral, including without limitation the Records.
(c) Use or operate Collateral or any other property of Borrower for
the purpose of preserving or liquidating Collateral.
(d) File any claim or take any other action or proceeding in any
court of law or equity or as otherwise deemed appropriate by Lender for the
purpose of collecting any and all monies due or securing any performance to be
rendered with respect to the Collateral.
(e) Commence, prosecute or defend any suits, actions or proceedings
or as otherwise deemed appropriate by Lender for the purpose of protecting or
collecting the Collateral. In furtherance of this right, upon the occurrence
and during the continuance of an Event of Default, Lender may apply for the
appointment of a receiver or similar official to operate Borrower's business.
(f) Prepare, adjust, execute, deliver and receive payment under
insurance claims, and collect and receive payment of and endorse any instrument
in payment of loss or returned premiums or any other insurance refund or
return, and apply such amounts at Lender's sole discretion, toward repayment of
the Obligations or replacement of the Collateral.
8.5 APPLICATION OF PROCEEDS. Any Proceeds and other monies or property
received by Lender pursuant to the terms of this Agreement or any Loan Document
may be applied by Lender first to the payment of expenses of collection,
including without limitation reasonable attorneys' fees, and then to the
payment of the Obligations in such order of application as Lender may elect.
8.6 DEFICIENCY. If the Proceeds of any disposition of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all the Obligations, plus all other sums required to be expended or
distributed by Lender, then Borrower shall be liable for any such deficiency.
8.7 LENDER TRANSFER. Upon the transfer of all or any part of the
Obligations, Lender may transfer all or part of the Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender
shall retain all rights and powers hereby given.
8.8 LENDER'S DUTIES. Lender shall use reasonable care in the custody and
preservation of any Collateral in its possession. Without limitation on other
conduct which may be considered the exercise of reasonable care. Lender shall
be deemed to have exercised reasonable care in the custody and preservation of
such Collateral if such Collateral is accorded treatment substantially equal to
that which Lender accords its own property. It being understood that Lender
shall not have any responsibility for ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, declining value, tenders
or other matters relative to any Collateral, regardless of whether Lender has
or is deemed to have knowledge of such matters; or taking any necessary
13
steps to preserve any rights against any Person with respect to any Collateral.
Under no circumstances shall Lender be responsible for any injury or loss to
the Collateral, or any part thereof, arising from any cause beyond the
reasonable control of Lender.
8.9 TERMINATION OF SECURITY INTERESTS. Upon the payment in full of the
Obligations and if Lender has no further obligations under its Commitment, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Borrower. Upon any such termination, the Lender
shall, at Borrower's expense, execute and deliver to Borrower such documents as
Borrower shall reasonably request to evidence such termination.
ARTICLE 9 - GENERAL PROVISIONS
9.1 NOTICES. Any notice given by any party under any Loan Document shall
be in writing and personally delivered, sent by overnight courier, or United
States mail, postage prepaid, or sent by facsimile or other authenticated
message, charges prepaid, to the other party's or parties' addresses shown on
the Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written
notice of such change to each other party. Notice given by hand delivery shall
be deemed received on the date delivered; if sent by overnight courier, on the
next business day after delivery to the courier service; if by first class
mail, on the third business day after deposit in the U.S. Mail; and if by
facsimile, on the date of transmission.
9.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure
to the benefit of Borrower and Lender and their respective successors and
assigns; provided, however, that Borrower may not assign or transfer Borrower's
rights or obligations under any Loan Document without Lender's prior written
consent. Lender reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Lender's rights
and obligations under the Loan Documents. In connection with any of the
foregoing, Lender may disclose all documents and information which Lender now
or hereafter may have relating to the Loans, Borrower, or its business;
provided that any person who receives such information shall have agreed in
writing in advance to maintain the confidentiality of such information on terms
reasonably acceptable to Borrower.
9.3 NO WAIVER. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power,
right, or privilege under any Loan Document shall operate as a waiver thereof,
and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right
or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
9.4 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
9.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document
executed by Borrower which is prohibited or unenforceable in any jurisdiction,
shall be so only as to such jurisdiction and only to the extent of such
prohibition or unenforceability, but all the remaining provisions of any such
Loan Document shall remain valid and enforceable.
9.6 ACCOUNTING TERMS. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined
and prepared in accordance with GAAP.
9.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend
and indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys' fees and costs) and other amounts
incurred by Lender and each such Agent, arising from (i) the matters
contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; provided, however, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This
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indemnification shall survive the payment and satisfaction of all of Borrower's
Obligations to Lender.
9.8 REIMBURSEMENT. In any action or proceeding between Borrower and
Lender arising out of the Loan Documents, the prevailing party will be entitled
to recover its reasonable attorneys' fees and other costs and expenses
incurred, in addition to any other relief to which it may be entitled.
9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts which, when taken together, shall constitute but one
agreement.
9.10 ENTIRE AGREEMENT. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
9.11 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY CALIFORNIA LAW.
9.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING. THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
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9.13 CONFIDENTIAL INFORMATION. Lender agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
information relating to Borrower which have been identified as "confidential" by
Borrower, and neither Lender nor any of its Affiliates shall use any such
information for any purpose or in any manner other than pursuant to the terms
contemplated by this Loan Agreement; except to the extent such information (i)
was or becomes generally available to the public other than as a result of a
disclosure by Lender, or (ii) was or becomes available on a non-confidential
basis from a source other than Borrower, provided that such source is not bound
by a confidentiality agreement with Borrower known to Lender; provided further,
however that any Lender may disclose such information (A) at the request or
pursuant to any requirement of any governmental authority to which Lender is
subject or in connection with an examination of such Lender by any such
authority, (B) pursuant to subpoena or other court process, (C) when required to
do so in accordance with the provisions of any applicable law, (D) to Lender's
independent auditors and other professional advisors, and (E) to any person or
entity and in any proceeding necessary in Lender's judgment to protect such
Lender's interests in connection with any claim or dispute involving Lender (F)
when approved in writing by Borrower. Notwithstanding the foregoing, Borrower
authorizes Lender to disclose to any participant or assignee (each, a
"Transferee"), to any prospective Transferee and to any Affiliate, such
financial and other information in Lender's possession concerning Borrower which
has been delivered to Lender pursuant to this Loan Agreement, provided that,
unless otherwise agreed by Borrower, the Transferee agrees in writing to such
Lender to keep such information confidential to the same extent required of
Lender hereunder.
ARTICLE 10 - DEFINITIONS
The definitions appearing in this Agreement or any Supplement shall be
applicable to both the singular and plural forms of the defined terms:
"ACCOUNT" means a right to payment for goods sold or leased by Borrower or for
services rendered by Borrower, which right is not evidenced by an instrument or
chattel paper, whether or not earned by performance.
"AFFILIATE" means any Person which directly or indirectly controls, is
controlled by, or is under common control with Borrower. "Control," "controlled
by" and "under common control with" mean direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise); provided,
that control shall be conclusively presumed when any Person or affiliated group
directly or indirectly owns fifty percent (50%) or more of the securities having
ordinary voting power for the election of directors of a corporation.
"AGREEMENT" means this Loan and Security Agreement and each Supplement thereto,
as each may be amended or supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
Section 101. et seq.), as amended
"BASIC INTEREST" means the fixed rate of interest payable on the outstanding
balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds of a Loan are
disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in substantially the
form of Exhibit "B" to the Supplement, requesting the funding of one or more
Loans on a particular Borrowing Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City or San Francisco are authorized or required by
law to close.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" means all Borrower's Accounts, Deposit Accounts, Equipment,
Fixtures, General Intangibles, Goods, Inventory, Rights to Payment, and
securities now owned or hereafter acquired or arising, wherever located, and
whether held by Borrower or any third party, and all royalties, proceeds and
products thereof, including all insurance and condemnation proceeds
("Proceeds"), and all monies now or at any time hereafter in the possession or
under the control of Lender or a bailee or affiliate of Lender, including any
cash collateral in any cash collateral or other account, and all Records.
"COMMITMENT" means the obligation of Lender to make Loans to Borrower up to the
aggregate principal amount set forth in the Supplement.
"DEFAULT" means an event which with the giving of notice, passage of time, or
both would constitute an Event of Default.
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"DEFAULT RATE" is defined in Section 2.7.
"DEPOSIT ACCOUNTS" means all Borrower's demand, time, savings, passbook or
similar accounts maintained with a financial institution or credit union.
"DESIGNATED RATE" means the rate of interest per annum described in the
Supplement as being applicable to an outstanding Loan from time to time.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, or safety matters.
"EQUIPMENT" means all of Borrower's equipment now owned or hereafter acquired,
including but not limited to machinery, machine parts, furniture, furnishings
and all tangible personal property used in the business of Borrower and all
such property which is or is to become fixtures on real property, and all
improvements, replacements, accessions and additions thereto, wherever located,
and all proceeds thereof arising from the sale, lease, rental or other use or
disposition of any such property, including all rights to payment with respect
to insurance or condemnation, returned premiums, or any cause of action
relating to any of the foregoing.
"EVENT OF DEFAULT" means any event described in Section 7.1.
"FIXTURES" means all items of personal property of Borrower that are so related
to the real property upon which they are located that an interest in them
arises under real property law, and improvements, replacements, parts,
accessions and additions thereto, and substitutions therefor.
"GAAP" means generally accepted accounting principles and practices consistent
with those principles and practices promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of Certified
Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
"GENERAL INTANGIBLES" means all personal property of Borrower, other than
Goods, not otherwise defined as Collateral, including without limitation all
interests or claims in insurance policies; literary property; trade names,
trade name rights; Trademarks, Trademark rights, copyrights, Patents, and all
applications therefor; licenses, permits, franchises and like privileges or
rights issued by any governmental or regulatory authority; income tax refunds;
customer lists; claims and causes of action (whether in contract, tort or
otherwise), judgments and all guaranty claims, leasehold interests in personal
property, security interests or other security held by or guaranteed to the
Borrower to secure the payment by an account debtor of any of the Accounts.
"GOODS" means all money and other personal property of Borrower, other than
General Intangibles, not otherwise defined as Collateral.
"INDEBTEDNESS" of any Person means at any date, without duplication and without
regard to whether matured or unmatured, absolute or contingent: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations to repurchase assets previously sold (including any obligation
to repurchase any accounts or chattel paper under any factoring, receivables
purchase, or similar arrangement); (viii) obligations of such Person under
interest rate swap, cap, collar or similar hedging arrangements; and (ix) all
obligations of others of any type described in clause (i) through clause (viii)
above guaranteed by such Person.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
17
"INVENTORY" means all Borrower's raw materials, advertising, packaging and
shipping materials, work in process, finished goods and goods held for sale or
lease or furnished under contracts of service, and all returned and repossessed
goods, and all goods covered by documents of title, including warehouse
receipts, bills of lading and all other documents of every type covering all or
any part of the Collateral.
"LIEN" means any voluntary or involuntary security interest, mortgage, pledge,
claim, charge, encumbrance, title retention agreement, or third party interest,
covering all or any part of the property of Borrower or any other Person.
"LOAN" means an extension of credit by Lender under Section 2 of this Agreement.
"LOAN DOCUMENTS" means, individually and collectively, this Loan and
Security Agreement, each Supplement, each Note, and any other security or pledge
agreement(s), any Warrants issued by Borrower in connection with this Agreement,
and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the extensions of credit which are the
subject of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a material
adverse change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of Borrower; (b) a material
impairment of the ability of Borrower to perform under any Loan Document; or
(c) a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of (i) its maturity
by reason of acceleration, or (ii) its stated maturity date; and is the date
on which payment of all outstanding principal, accrued interest, and the
Terminal Payment with respect to such Loan is due.
"NOTE" means a promissory note substantially in the form attached to the
Supplement as Exhibit "A", executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all debts, obligations and liabilities of Borrower to Lender
currently existing or now or hereafter made, incurred or created under,
pursuant to or in connection with this Agreement, whether voluntary or
involuntary and however arising or evidenced, whether direct or acquired by
Lender by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrower may be liable individually or jointly, or whether recovery upon such
debt may be or become barred by any statute of limitations or otherwise
unenforceable; and all renewals, extensions and modifications thereof; and all
attorneys' fees and costs incurred by Lender in connection with the collection
and enforcement thereof as provided for in any Loan Document.
"PATENT LICENSE" means any written agreement now or hereafter in existence
granting to Borrower any right to make, use, sell or practice any invention on
which a Patent is in existence.
"PATENTS" means all of the following: (i) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including without limitation, registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any state thereof or any other country or any political
subdivision thereof, and (ii) all reissues, divisions, continuations,
continuations-in-part, renewals or extensions thereof.
"GRANT OF SECURITY INTEREST IN PATENTS" means any Patent Collateral Assignment
executed and delivered by Borrower in favor of Lender, as the same may be
amended from time to time.
"PERMITTED LIEN" means
(a) Involuntary Liens which, in the aggregate, would not have a Material
Adverse Effect and which in any event would not exceed the Threshold Amount;
(b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested in good faith by
the appropriate procedures and for which appropriate reserves are maintained;
(c) security interests on any property held or acquired by Borrower in the
ordinary course of business securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property;
provided, that such Lien attaches solely to the property acquired with such
Indebtedness and that the principal amount of such Indebtedness does not exceed
one hundred percent (100%) of the cost of such property; and further provided,
that such property is not equipment with respect to which a Loan has been made
hereunder.
18
(d) Liens in favor of Lender,
(e) bankers' liens, rights of setoff and similar Liens incurred on
deposits made in the ordinary course of business;
(f) materialmen's, mechanics', repairmen's, employees' or other like Liens
arising in the ordinary course of business and which are not delinquent for more
than 45 days or are being contested in good faith by appropriate proceedings;
(g) any judgment, attachment or similar Lien, unless the judgment it
secures has not been discharged or execution thereof effectively stayed and
bonded against pending appeal within 30 days of the entry thereof;
(h) licenses or sublicenses of Patents, Patent Licenses, Trademarks or
Trademark Licenses permitted under the Trademark Collateral Assignment or the
Patent Collateral Assignment;
(i) Liens which have been approved by Lender in writing prior to the
Closing Date;
(j) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business not interfering in any material respect
with the business of Borrower, and any interest or title of a lessor, licensor
or under any lease or license;
(k) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payments of customs duties in connection with the importation
of goods;
(l) Deposits under worker's compensation, unemployment insurance, social
security and other similar laws, or to secure the performance of bids, tenders
or contracts (other than for the repayment of borrowed money) or to secure
indemnity, performance or other similar bonds for the performance of bids,
tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly underwritten public
offering of Borrower's common stock with aggregate proceeds of not less than
$20,000,000 (prior to underwriting expenses and commissions).
"RECORDS" means all Borrower's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Borrower's business.
"RELATED PERSON" means any Affiliate of Borrower of any officer, employee,
director or equity security holder of Borrower or any Affiliate.
"RIGHTS TO PAYMENT" means all Borrower's accounts, instruments, contract
rights, documents, chattel paper and all other rights to payment, including,
without limitation, the Accounts, all negotiable certificates of deposit and
all rights to payment under any Patent License, any Trademark License, or any
commercial or standby letter of credit.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount payable on the
Maturity Date of such Loan in an amount equal to that percentage of the
original principal amount of such Loan specified in the Supplement.
"TERMINATION DATE" has the meaning specified in the Supplement.
"THRESHOLD AMOUNT" has the meaning specified in the Supplement.
"TRADEMARK LICENSE" means any written agreement now or hereafter in existence
granting to Borrower any right to use any Trademark.
"TRADEMARKS" means all of the following: (i) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or will appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, and (ii) all reissues, divisions,
continuations, continuations-in-part, renewals or extensions thereof.
19
"GRANT OF SECURITY INTEREST IN TRADEMARK" means any Trademark Collateral
Assignment executed and delivered by Borrower in favor of Lender, as the same
may be amended from time to time.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
20
SUPPLEMENT
TO THE
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 21, 1998
BETWEEN
COSINE COMMUNICATIONS, INC. ("BORROWER")
AND
VENTURE LENDING & LEASING II, INC. ("LENDER")
--------------------------------------------------------------------------------
This is a Supplement identified in the document entitled Loan and Security
Agreement dated as of September 21, 1998 between Borrower and Lender. All
capitalized terms used in this Supplement and not otherwise defined in this
Supplement have the meanings ascribed to them in Section 10 of the Loan and
Security Agreement, which is incorporated in its entirety into this Supplement.
In the event of any inconsistency between the provisions of that document and
this Supplement, this Supplement is controlling. Execution of this Supplement
by the Lender and Borrower shall constitute execution of the Loan and Security
Agreement.
In addition to the provisions of the Loan and Security Agreement, the
parties agree as follows:
PART 1 - ADDITIONAL DEFINITIONS:
"COMMITMENT": Lender commits to make Loans to Borrower (either as
Equipment Loans or Term Loans) up to the aggregate, original principal amount
of Two Million Dollars ($2,000,000.00). Subject to the limitations set forth in
this Supplement and the Loan and Security Agreement, a Loan may be advanced as
an Equipment Loan, the proceeds of which shall be used to finance Borrower's
acquisition or carrying of computer, research and development and general
purpose office equipment, and software imbedded in or necessary to the use or
operation of such equipment, or for tenant improvements at premises leased by
Borrower. A Loan may also be advanced as a Term Loan, the proceeds of which
shall be used by Borrower for general working capital purposes. Except to the
extent the remaining Commitment is a lesser amount, each Equipment Loan
requested by Borrower to be made on a single Business Day shall be for a minimum
principal amount of $50,000, and each Term Loan requested by Borrower to be
made on a single Business Day shall be for a minimum principal amount of
$250,000 or a multiple thereof.
"DESIGNATED RATE": The Designated Rate is fixed rate of interest per annum
of (i) seven and one-half percent (7.50%) for each Equipment Loan, and (ii)
seven and three-eighths percent (7.375%) for each Term Loan.
"EQUIPMENT LOAN" means any Loan requested by Borrower and funded by Lender
to finance Borrower's acquisition or carrying of specific items of Equipment,
software or tenant improvements.
"TERM LOAN" means any Loan requested by Borrower and funded by Lender for
general working capital purposes of Borrower, and not to finance the
acquisition or carrying of specific items of Equipment, software or tenant
improvements.
"TERMINAL PAYMENT": Each Terminal Payment shall be an amount equal to (i)
ten percent (10%) of the original principal amount of the associated Equipment
Loan, or (ii) seven and one-half percent (7.50%) of the original principal
amount of the associated Term Loan.
"TERMINATION DATE": The Termination Date is the earlier of (a) the date
Lender may terminate making Loans or extending other credit pursuant to the
rights of Lender under Article 7 of the Agreement, or (b) June 30, 1999.
"THRESHOLD AMOUNT": One Hundred Thousand Dollars ($100,000.00).
21
PART 2 - ADDITIONAL COVENANTS AND CONDITIONS:
ISSUANCE OF WARRANT TO LENDER. As additional consideration for the
making of the Loans under the Loan and Security Agreement, upon the making of,
and as a condition to, the initial Loan, Lender shall be entitled to receive a
warrant to purchase a number of shares of Series B Preferred Stock of Borrower
("Warrant Shares") with an aggregate initial exercise price of $50,000
determined on the basis of the per share price of such preferred stock in the
next round of equity financing after the Closing Date; provided that if no such
equity financing has occurred by June 30, 1999, then the initial per share
exercise price shall be $8.00 (pre 4 for 1 split). The warrant shall vest for
additional shares with a value equal to 5% of any fundings under the Equipment
facility in excess of $1,000,000 and 10% of any fundings under the Working
Capital facility. The warrant issued under this Agreement shall be substantially
the form attached hereto as Exhibit "C"; shall be transferable by Lender,
subject to compliance with applicable securities laws; shall expire on June 30,
2006; and shall include piggy-back registration rights, "net issuance"
provisions, and anti-dilution protections reasonably satisfactory to Lender and
its counsel.
COMPLETION OF DUE DILIGENCE; DISPOSITION OF COMMITMENT FEE. As an
additional condition precedent under Section 4.1 of the Loan and Security
Agreement, Lender shall have completed to its satisfaction its due diligence
review of Borrower's business and financial condition and prospects, and
Lender's credit committee shall have approved the Commitment. If this condition
is not satisfied, Lender shall refund to Borrower the $10,000 commitment fee
previously paid to Lender. Lender agrees that with respect to each Loan
advanced, on the Borrowing Date applicable to such Loan, Lender shall credit
against the payments due from Borrower on such date in respect of such Loan an
amount equal to the product of $10,000 and a fraction the numerator of which is
the principal amount of such Loan and the denominator of which is $1,000,000,
until the aggregate amount of such credits equals but does not exceed $10,000.
CONDITION TO ADVANCES OF TERM LOANS. The funding of any Term Loan
shall be at the sole and absolute discretion of Lender based on Lender's
assessment at the time of (i) Borrower's ratio of assets to liabilities and
such other financial ratios as Lender determines appropriate, or (ii) the
amount of equity capital raised by or committed to Borrower or the status of
any corporate partnering arrangements or strategic alliances with third parties.
LIMITATION ON EQUIPMENT LOANS. Each Equipment Loan shall be in an
amount not to exceed one hundred percent (100%) of the amount paid or payable
by Borrower to a non-affiliated manufacturer, vendor or dealer for an item of
equipment as shown on an invoice therefor (excluding any commissions and any
portion of the payment which relates to the servicing of the equipment and
sales tax payable by Borrower upon acquisition, and delivery charges);
provided, however, that with respect to any item of Equipment which has either
been owned by Borrower or in service for more than six (6) months as of the
proposed Borrowing Date of the associated Equipment Loan. Lender shall not
advance against such Equipment more than 100% of its book value. Lender
reserves the right to approve each item of Equipment, Software and any tenant
improvements proposed by Borrower to be financed with proceeds of an Equipment
Loan.
AGREEMENT TO SUBORDINATE LIENS. Lender acknowledges that Borrower is
currently indebted to Silicon Valley Bank, and that such indebtedness is secured
by Lien in favor of Silicon Valley Bank on certain assets of Borrower which
constitute Collateral. It is understood and agreed that the lien of Lender in
all items of Equipment financed with the proceeds of Equipment Loans will be a
first priority, perfected Lien, and that such items of Equipment shall be
subject to no other Liens other than Permitted Liens. Lender agrees that its
Lien on any other items of Collateral in which Silicon Valley Bank has a Lien to
secure indebtedness under it's $1.0 million 90 day bridge facility expiring
XX/XX/1998 will be subordinate in priority of perfection to the Lien of Silicon
Valley Bank. It is further understood and agreed that the lien of Silicon Valley
Bank in all items of Equipment financed with the proceeds of $1.2 million
equipment financing will be a first priority, perfected Lien on the items
financed by that facility. Borrower will cooperate with Lender in obtaining
releases of any Liens of Silicon Valley Bank or third parties against Equipment
proposed to be financed with the proceeds of an Equipment Loan.
LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Borrower shall
reimburse Lender for all costs and expenses, including without limitation
reasonable attorney's fees and disbursements expended or incurred by Lender in
connection with (a) the preparation and negotiation of the Loan Documents,
limited to $3,000 which will be deducted from the first funding, (b) the
amendment and enforcement of the Loan Documents, including without
2
22
limitation during any workout, attempted workout, and/or in connection with the
rendering of legal advice as to Lender's rights, remedies and obligations under
the Loan Documents, (c) collecting any sum which becomes due Lender under any
Loan Document.
PART 3 - ADDITIONAL REPRESENTATIONS:
Borrower represents and warrants that as of the Closing Date and each
Borrowing Date:
- Its chief executive office is located at: 0000 Xxxxx Xxxxxx,
Xxxxxxx, XX 00000
- Its Equipment is located at: 0000 Xxxxx Xxxxxx, Xxxxxxx, XX, and
- 0000 Xxxxxx Xxxxxxx, Xxxxxxx Xxxx, XX.
- Its Records are located at: 0000 Xxxxxx Xxxxxxx, Xxxxxxx Xxxx, XX.
- In addition to its chief executive office, Borrower maintains
offices or operates its business at the following locations:
- Other than its full corporate name, Debtor has conducted business
using the following trade names or fictitious business names:
PART 4 - ADDITIONAL LOAN DOCUMENTS:
Form of Note Exhibit "A"
Form of Borrowing Request Exhibit "B"
Form of Compliance Certificate Exhibit "C"
Form of Grant of Security Interest in Patents Exhibit "D"
Form of Grant of Security Interest in Trademark Exhibit "E"
Form of Warrant Exhibit "F"
3
23
IN WITNESS WHEREOF, the parties have executed this Supplement as of the
date first above written.
BORROWER:
COSINE COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: CFO
Address for Notices: Attn: Chief Financial Officer
0000 Xxxxxx Xxxxxxx
Xxxxxxx Xxxx, XX 00000
Fax # (000) 000-0000
LENDER:
VENTURE LENDING & LEASING II, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
Name: Xxxxxxxx X. Xxxxxxxxx
Title: President
Address for Notices: Attn: Chief Financial Officer
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Fax # (000) 000-0000
4
24
EXHIBIT "A"
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
[EQUIPMENT LOAN] [TERM LOAN]
$ ________________ _______________, 000__
Xxx Xxxx, Xxxxxxxxxx
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING II, INC., a Maryland corporation ("Lender"), at its office at
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxxxxxxxxx 00000, or at such
other place as Lender may designate in writing, in lawful money of the United
States of America, the principal sum of __________________________ Dollars
($_______), with Basic Interest thereon from the date hereof until maturity,
whether scheduled or accelerated, at a fixed rate per annum of _______________
percent (____%) [7.50% FOR EQUIPMENT LOAN, OR 7.375% FOR TERM LOAN], and a
Terminal Payment in the sum of [10% OF FACE AMOUNT OF EQUIPMENT LOAN, OR 7.50%
IF A TERM LOAN] Dollars ($__________) payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan and Security Agreement dated as of September ___, 1998,
between Borrower and Lender. Each capitalized term not otherwise defined herein
shall have the meaning set forth in the Loan Agreement. The Loan Agreement
contains provisions for the acceleration of the maturity of this Note upon the
happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for
the period from the Borrowing Date through [THE LAST DAY OF THE SAME MONTH];
and (ii) a first (1st) amortization installment of principal and Basic Interest
in the amount of _______________, in advance for the month of [FIRST FULL MONTH
AFTER BORROWING DATE] and (iii) a [42ND IF AN EQUIPMENT LOAN, OR 30TH IF A TERM
LOAN] amortization installment of principal and Basic Interest in the amount of
$____________, in advance for the month of [DATE OF LAST REGULAR AMORTIZATION
PAYMENT].
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in [39 OR 27, AS
APPROPRIATE] equal consecutive installments of _______________________ Dollars
($__________) each, with a [40TH OR 28TH, AS APPROPRIATE] installment equal to
the entire unpaid principal balance and accrued Basic Interest on _____________,
200__. The Terminal Payment amount shall be payable on [ONE MONTH LATER], 200__.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest
on demand.
25
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
If Borrower is late in making any payment under this Note by more than
five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of
the installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose
of defraying the expenses incidental to the handling of such delinquent
amounts. Borrower acknowledges that such late charge represents a reasonable sum
considering all of the circumstances existing on the date of this Note and
represents a fair and reasonable estimate of the costs that will be sustained
by Lender due to the failure of Borrower to make timely payments. Borrower
further agrees that proof of actual damages would be costly and inconvenient.
Such late charge shall be paid without prejudice to the right of Lender to
collect any other amounts provided to paid or to declare a default under this
Note or any of the other Loan Documents or from exercising any other rights and
remedies of Lender.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
CoSINE COMMUNICATIONS, INC.
By:____________________________
Name:__________________________
Its:___________________________
26
EXHIBIT "B"
FORM OF BORROWING REQUEST
[Date]
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: [Borrower]
Gentlemen:
Reference is made to the Loan and Security Agreement dated as of
September , 1998 (as amended from time to time, the "Loan Agreement", the
capitalized terms used herein as defined therein), between Venture Lending &
Leasing II, Inc. ("VLLI") and CoSine Communications, Inc. (the "Company").
The undersigned is the ______________________ of the Company, and
hereby requests on behalf of the Company a Loan under the Loan Agreement, and
in that connection certifies as follows:
1. The type of the proposed Loan is [an Equipment Loan] [a Term
Loan]. The amount of the proposed Loan is _______________ and __/100 Dollars
($__________). The Borrowing Date of the proposed Loan is ____________, 199_.
[2. The proceeds of the proposed Equipment Loan shall be used by the
Company to acquire new [and to finance used] items of Equipment [and software
and/or tenant improvements] described more particularly on Schedule I hereto,
and on invoices and other documentation furnished to you with this Borrowing
Request. As of the date hereof, the items of Equipment proposed to be financed
with proceeds of the Equipment Loan are not subject to any third party Lien,
and Lender shall have a first priority security interest in such Equipment as
required under the Loan Agreement.]
3. As of this date, no Default or Event of Default has occurred and
is continuing, or will result from the making of the proposed Loan, the
representations and warranties of the Company contained in Article 3 of the
Loan Agreement are true and correct, and the conditions precedent described in
Article 4 of the Loan Agreement have been met.
4. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
[5. Any other applicable representations or conditions]
The Company shall notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very truly yours,
_____________________________________
Name: _______________________________
Title:_______________________________
27
EXHIBIT C
COMPLIANCE CERTIFICATE
Venture Lending & Leasing II, Inc.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: ____________
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
_______________ (as the same have been and may be amended from time to time, the
"Loan Agreement", the capitalized terms used herein as defined therein), between
Venture Lending & Leasing II, Inc., on one hand and _______________ (the
"Company") on the other.
The undersigned authorized representative of the Company hereby certifies
that in accordance with the terms and conditions of the Loan Agreement, the
Company is in complete compliance for the period ending _______________ of all
required conditions and terms except as noted below. Attached herewith are the
required documents supporting the above certification. The representative
further certifies that these are prepared in accordance with Generally Accepted
Accounting Principles and are consistent from one period to the next except as
explained below.
Indicate compliance status by circling Yes/No under "Complies"
REPORTING REQUIREMENT REQUIRED COMPLIES
Interim Financial Statements Monthly within 45 days YES/NO
Audited Financial Statements FYE within 90 days YES/NO
FINANCIAL COVENANTS REQUIRED COMPLIES
REQUIRED EXPLANATIONS:
_______________________________________________________________________________
_______________________________________________________________________________
Very Truly Yours,
By:__________________________
Name:________________________
Its:_________________________
