EXECUTION COPY
LOAN AND SECURITY AGREEMENT
NO. V07106
This Loan and Security Agreement (this "Loan Agreement"), made as of March 23,
2007 by and between BlueCrest Capital Finance, L.P. ("Lender"), a Delaware
limited partnership with its principal place of business at 000 Xxxx Xxxxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, and SWMX, Inc., a Delaware
corporation, and SoftWave Media Exchange, Inc., a Delaware corporation (jointly
and severally, "Borrower"), each having its principal place of business at Xxx
Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx, 00000.
In consideration of the promises set forth herein, Lender and Borrower agree
upon the following terms and conditions:
1. GENERAL DEFINITIONS
The following words, terms and /or phrases shall have the meanings set forth
thereafter and such meanings shall be applicable to the singular and plural form
thereof giving effect to the numerical difference:
A. "Account" means any "account," as such term is defined in the UCC, now
owned or hereafter acquired by Borrower or in which Borrower now holds or
hereafter acquires any interest and, in any event, shall include all accounts
receivable, book debts, rights to payment, and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to Borrower
(including under any trade name, style or division thereof), whether or not
arising out of goods or software sold or licensed or services rendered by
Borrower or from any other transaction (including any such obligation that may
be characterized as an account or contract right under the UCC), and all of
Borrower's rights in, to and under all purchase orders or receipts now owned or
hereafter acquired by it for goods or services, and all of Borrower's rights to
any goods represented by any of the foregoing (including unpaid seller's rights
of rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), and all monies due or to become due
to Borrower under all purchase orders and contracts for the sale of goods or the
performance of services or both by Borrower or in connection with any other
transaction (whether or not yet earned by performance on the part of Borrower),
now in existence or hereafter occurring, including the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
B. "Account Debtor" means any Person obligated on an Account.
C. "Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or otherwise.
D. "Approved Foreign Account Debtors" means the collective reference to
those Persons identified on Schedule 1 hereto, as such Schedule may be revised
by Borrower and Lender in writing from time to time; provided that Lender may,
after consultation with Borrower, disqualify one or more Persons as Approved
Foreign Account Debtors in its reasonable discretion.
E. "Borrower's Liabilities" means all obligations and liabilities of
Borrower to Lender (including without limitation all debts, claims, and
indebtedness) whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under this Loan Agreement and/or any promissory note or other
instrument issued pursuant hereto or the "Other Agreements" (hereinafter
defined), or by oral agreement or operation of law or otherwise.
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F. "Borrowing Base" means, at any time, (a) 80% of Borrower's Eligible
Accounts at such time, minus (b) any Reserves established by Lender. Lender may,
in its sole discretion, reduce the advance rate set forth above, adjust Reserves
or reduce one or more of the other elements used in computing the Borrowing Base
after consultation with Borrower, with any such changes to be effective three
(3) Business Days after delivery of notice thereof to Borrower.
G. "Borrowing Base Certificate" means a certificate, signed and certified
as accurate and complete by the Chief Financial Officer of Borrower, in
substantially the form of Exhibit C or another form which is acceptable to
Lender in its sole discretion.
H. "Business Day" means a day of the year on which banks are not required
or authorized to close in New York City or Chicago, Illinois.
I. "Cash" means all cash, money (as such term is defined in the UCC),
currency, and liquid funds, wherever held, in which Borrower now or hereafter
acquires any right, title, or interest.
J. "Change of Control" means, at any time, (i) the current shareholders of
Borrower shall cease to beneficially own and control, directly or indirectly on
a fully diluted basis, a majority of the economic and voting interests in the
capital stock or other ownership interests of Borrower or (ii) any Person or
group other than the current shareholders of Borrower shall have the right to
elect a majority of the seats on Borrower's board of directors; in EACH case
with respect to the foregoing clauses (i) and (ii), other than as a result of
Borrower's issuance of capital stock for cash to venture capital firms and
strategic investors if Borrower provides Lender with the names of such investors
at least ten (10) Business Days prior to such issuance.
K. "Charges" means all national, federal, state, county, city, municipal
and/or other governmental taxes, levies, assessments, charges, liens, claims or
encumbrances upon and/or relating to the Collateral, Borrower's Liabilities,
Borrower's business, Borrower's ownership and/or use of any of its assets,
and/or Borrower's income and/or gross receipts.
L. "Chattel Paper" means any "chattel paper," as such term is defined in
the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest.
M. "Cleanup" means all actions required to: (1) clean up, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment; (2) prevent
the release of Hazardous Materials so that they do not migrate, endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care; or (4) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of Hazardous
Materials in the indoor or outdoor environment.
N. "Collateral" has the meaning set forth in Section 5.1 hereof.
O. "Copyright License" means any written agreement granting any right to
use any Copyright or Copyright registration, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest
P. "Copyrights" means all of the following property, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest: (i) all copyrights, whether registered or unregistered,
held pursuant to the laws of the United States, any State thereof or of any
other country; (ii) all registrations, applications and recordings in the United
States Copyright Office or in any similar office or agency of the United States,
of any State thereof or of any other country; (iii) all continuations, renewals
or extensions thereof; and (iv) all registrations to be issued under any pending
applications.
Q. "Default" means any condition or event that, after notice or lapse of
time or both, would constitute an Event of Default.
R. "Deposit Accounts" means any "deposit accounts," as such term is
defined in the UCC, and in any event includes any checking account, savings
account, or certificate of deposit now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.
S. "Documents" means any "documents," as such term is defined in the UCC,
now owned or hereafter acquired by Borrower or in which Borrower now holds or
hereafter acquires any interest.
T. "Eligible Accounts" means, at any time, the Accounts of Borrower
arising in the ordinary course of business with respect to goods or software
sold or licensed or services rendered by Borrower, including without limitation,
monthly subscription license payments, perpetual license payments, professional
services xxxxxxxx and support and training xxxxxxxx which Lender determines in
its sole discretion are eligible as the basis for the extension of Revolving
Advances, hereunder. Without limiting Lender's discretion provided herein,
Eligible Accounts shall not include any Account:
(a) which is not subject to a first priority perfected security
interest in favor of Lender;
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(b) which is owed by an Account Debtor which (i) does not maintain
its chief executive office in the United States or (ii) is not organized
under applicable law of the United States or any state of the United
States; provided, however, that any Accounts owed by an Account Debtor
located outside of the United States shall constitute an Eligible Account
to the extent that (W) such Account Debtor is an Approved Foreign Account
Debtor and is not located in a jurisdiction for which support is excluded
on the Country Limitation Schedule published each quarter by the
Export-Import Bank of the United States at
XXXX://XXX.XXXX.XXX/XXXXX/XXXXXXX/XXXXXXX_XXXXXX.XXXX, (x) such Account is
billed by Borrower from its offices within the United States, (y) such
Account is payable only in US Dollars, and .
(c) which is unpaid more than one hundred twenty (120) days after
the date of the original invoice therefor;
(d) which is owed by an Account Debtor for which more than 30% of
the aggregate balance on the Accounts owed by such Account Debtor and its
Affiliates are ineligible pursuant to clause (c) above;
(e) which is owed by an Account Debtor to the extent the aggregate
amount of Accounts owed by such Account Debtor and its Affiliates to
Borrower exceeds 30% (or such other percentage as Borrower and Lender may
agree from time to time) of the aggregate Accounts;
(f) with respect to which any covenant, representation, or warranty
contained in this Loan Agreement or in any Other Agreement has been
breached or is not true;
(g) which (i) is not evidenced by an invoice or other documentation
satisfactory to Lender which has been sent to the Account Debtor, (ii)
represents a progress billing (other than for that portion of services
which have been fully performed by Borrower on behalf of the Account
Debtor and for which an invoice has been delivered to customer in the
ordinary course of Borrower's business, but which represent only a portion
of services to be performed under an agreement with such Account Debtor),
(iii) represents obligations that do not arise from final sales or which
are otherwise contingent upon Borrower's completion of any further
performance, (iv) represents a sale on a xxxx-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment, cash-on-delivery or any
other repurchase or return basis, or (iv) relates to payments of interest;
(h) for which the goods giving rise to such Account have not been
shipped to the Account Debtor or for which the services giving rise to
such Account have not been performed by Borrower or if such Account was
invoiced more than once;
(i) with respect to which any check or other instrument of payment
has been returned uncollected for any reason;
(j) which is owed by an Account Debtor which has (i) applied for,
suffered, or consented to the appointment of any receiver, custodian,
trustee, or liquidator of its assets, (ii) had possession of all or a
material part of its property taken by any receiver, custodian, trustee or
liquidator, (iii) filed, or had filed against it, any request or petition
for liquidation, reorganization, arrangement, adjustment of debts,
adjudication as bankrupt, winding-up, or voluntary or involuntary case
under any state or federal bankruptcy laws, (iv) admitted in writing its
inability, or is generally unable to, pay its debts as they become due,
(v) become insolvent; (vi) ceased operation of its business or (vii) sold
all or substantially all of its assets;
(k) which, if owed by any Account Debtor which is a distributor, is
payable by any Person other than such Account Debtor;
(l) which is owed in any currency other than U.S. dollars;
(n) which is owed by a Government Account Debtor, other than an
Account owed by a Government Account Debtor with respect to which Borrower
has fully complied with the Assignment of Claims Act, 31 U.S.C. ss.3727,
41 U.S.C. ss.15 to the satisfaction of Lender in its reasonable
discretion;
(o) which is owed by any Affiliate, employee, officer, director,
agent or stockholder (other than a stockholder which Borrower and Lender
reasonably agree constitutes a strategic investor and is listed on the
Schedule of Exceptions, as such may be amended from time to time) of
Borrower or any of its Affiliates;
(p) which, for any Account Debtor, exceeds a credit limit reasonably
determined by Lender, to the extent of such excess;
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(q) which is owed by an Account Debtor or any Affiliate of such
Account Debtor to which Borrower is indebted, but only to the extent of
such indebtedness or is subject to any security, deposit, progress
payment, retainage or other similar advance made by or for the benefit of
an Account Debtor, in each case to the extent thereof;
(r) which is subject to any counterclaim, deduction, defense, setoff
or dispute;
(s) which is evidenced by any promissory note, chattel paper or
instrument;
(t) which is owed by an Account Debtor located in any jurisdiction
which requires filing of a "Notice of Business Activities Report" or other
similar report in order to permit Borrower to seek judicial enforcement in
such jurisdiction of payment of such Account, unless Borrower has filed
such report or qualified to do business in such jurisdiction;
(u) with respect to which Borrower has made any agreement with the
Account Debtor for any reduction thereof, other than discounts and
adjustments given in the ordinary course of business, or any Account which
was partially paid and Borrower created a new receivable for the unpaid
portion of such Account;
(v) which does not comply in all material respects with the
requirements of all applicable laws and regulations, whether Federal,
state or local, including without limitation the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System;
(w) which is for goods that have been sold under a purchase order or
pursuant to the terms of a contract or other agreement or understanding
(written or oral) that indicates or purports that any Person other than
Borrower has or has had an ownership interest in such goods, or which
indicates any party other than Borrower as payee or remittance party;
(x) which was created on cash on delivery terms; or
(y) which Lender determines may not be paid by reason of the Account
Debtor's inability to pay or which Lender otherwise determines is
unacceptable for any reason whatsoever in its reasonable discretion.
In the event that an Account which was previously an Eligible Account ceases to
be an Eligible Account hereunder, Borrower shall notify Lender thereof on and at
the time of submission to Lender of the next Borrowing Base Certificate. In
determining the amount of an Eligible Account, the face amount of an Account
shall be reduced by, without duplication, to the extent not reflected in such
face amount, (i) the amount of all accrued and actual discounts, claims, credits
or credits pending or of which the Account Debtor is permitted to avail itself
under the credit terms provided to such Account Debtor, promotional program
allowances, price adjustments, finance charges or other allowances (including
any amount that Borrower may be obligated to rebate to an Account Debtor
pursuant to the terms of any agreement or understanding (written or oral)) and
(ii) the aggregate amount of all cash received in respect of such Account but
not yet applied by Borrower to reduce the amount of such Account. Standards of
eligibility may be made more or less restrictive from time to time solely by
Lender in its sole discretion after consultation with Borrower, with any such
changes to be effective three (3) days after delivery of notice thereof to
Borrower.
U. "Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any Person alleging potential
liability (including, without limitation, an obligation to conduct a Cleanup or
potential liability for investigatory costs, Cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (a) the presence or
release of any Hazardous Materials at any location, whether or not owned, leased
or operated by Borrower or any of its Subsidiaries, or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
V. "Environmental Laws" means all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment, including, without limitation, laws relating to releases or
threatened releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, release,
disposal, transport or handling of Hazardous Materials, laws and regulations
with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials and laws relating to the management
or use of natural resources.
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W. "Equipment" means any "equipment", as such term is defined in the UCC,
and in any event shall include but not be limited to computers and peripherals,
laboratory equipment, manufacturing equipment, networking equipment, switching
and backbone equipment, servers and routers and other hardware including disk
drives and laser printers, office furniture, fixtures and office equipment, test
and other equipment, and software, and all accessions, additions, attachments,
accessories and improvements thereof and all replacements and/or substitutions
therefore and all proceeds and products thereof.
X. "Event of Default" has the meaning set forth in Section 8.1 hereof.
Y. "Financials" means those financial statements described in Section 7.3
hereof.
Z. "Fixtures" means any "fixtures," as such term is defined in the UCC,
together with all right, title and interest of Borrower in and to all
extensions, improvements, betterments, accessions, renewals, substitutes, and
replacements of, and all additions and appurtenances to any of the foregoing
property, and all conversions of the security constituted thereby, immediately
upon any acquisition or release thereof or any such conversion, as the case may
be, now owned or hereafter acquired by Borrower or in which Borrower now holds
or hereafter acquires any interest.
AA. "GAAP" means generally accepted accounting principles in the United
States, in effect from time to time, consistently applied.
BB. "General Intangibles" means any "general intangibles," as such term is
defined in the UCC, and, in any event, shall include all right, title and
interest which Borrower may now or hereafter have in or under any rights to
payment; payment intangibles; software; proprietary or confidential information;
business records and materials; customer lists; interests in partnerships, joint
ventures, business associations, corporations, and limited liability companies;
permits; claims in or under insurance policies (including unearned premiums and
retrospective premium adjustments); and rights to receive tax refunds and other
payments and rights of indemnification now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
CC. "Goods" means any "goods," as such term is defined in the UCC, now
owned or hereafter acquired by Borrower or in which Borrower now holds or
hereafter acquires any interest.
DD. "Government Account Debtor" means the collective reference to an
Account Debtor which is the government of the United States, or any department,
agency, public corporation or instrumentality thereof.
EE. "Hazardous Materials" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined as such
by, or regulated as such under, any Environmental Law.
FF. "Instruments" means any "instrument," as such term is defined in the
UCC, now owned or hereafter acquired by Borrower or in which Borrower now holds
or hereafter acquires any interest.
GG. "Intellectual Property" means all Copyrights; Trademarks; Patents; and
Licenses; and applications therefor and reissues, extensions, or renewals
thereof; and goodwill associated with any of the foregoing; together with rights
to xxx for past, present and future infringement of Intellectual Property and
the goodwill associated therewith.
HH. "Inventory" means any "inventory," as such term is defined in the UCC,
now owned or hereafter acquired by Borrower or in which Borrower now holds or
hereafter acquires any interest, and, in any event, shall include all Goods and
personal property that are held by or on behalf of Borrower for sale or lease or
are furnished or are to be furnished under a contract of service, or that
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in Borrower's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all finished goods, whether or
not the same is in transit or in the constructive, actual or exclusive
possession of Borrower or is held by others for Borrower's account, including
all property covered by purchase orders and contracts with suppliers and all
Goods billed and held by suppliers and all such property that may be in the
possession or custody of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other Persons.
II. "Investment Property" means all "investment property," as such term is
defined in the UCC, and in any event includes any certificated security,
uncertificated security, money market funds, bonds, mutual funds, and U.S.
Treasury bills or notes, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
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JJ. "Letter of Credit Rights" means any "letter of credit rights," as such
term is defined in the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest, including any right
to payment or performance under any letter of credit.
KK. "License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
LL. "Loan" has the meaning set forth in Section 2.2 hereof.
MM. "Material Adverse Effect" means a material adverse effect upon (i) the
business operations, properties, assets, results of operations or condition
(financial or otherwise) of Borrower, (ii) the prospect of repayment of any
portion of Borrower's Liabilities, (iii) the validity, perfection, value or
priority of Lender's security interest in the Collateral, (iv) the
enforceability of any material provision of this Loan Agreement or any Other
Agreement, or (v) the ability of Lender to enforce its rights and remedies under
this Loan Agreement or any Other Agreement.
NN. "Material Investor" means any individual, venture capital, private
equity or institutional investor listed on Schedule of Exceptions hereto, as may
be amended from time to time, now or hereafter holding or having the ability to
control 15% or more of the voting securities of Borrower.
OO. "Material Investor Event" means that any Material Investor shall sell,
transfer or otherwise assign the majority of its interest in Borrower to another
investor, and such replacement investor is not (i) if a venture capital, private
equity or institutional investor, an existing or new investor which is a venture
capital, private equity or institutional investor having similar or larger
assets under management or (ii) if an individual, a natural person who is an
accredited investor having comparable expertise and professional experience;
PROVIDED, HOWEVER, that the death or disability of, or the transfer to a family
member or a controlled family trust by, an individual investor listed on
Schedule of Exceptions or the dissolution and liquidation of a venture capital,
private equity or institutional investor listed on Schedule of Exceptions, shall
not be considered a Material Investor Event.
PP. "Other Agreements" means all agreements, instruments and documents,
including, without limitation, the Warrants, any notes, guaranties, letters of
credit, mortgages, deeds of trust, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases, warrants, account
pledge and control agreements, fee arrangements, financing statements and all
other written matter heretofore, now and/or from time to time hereafter executed
by and/or on behalf and/or for the benefit of Borrower and delivered to Lender.
QQ. "Patent License" means any written agreement granting any right with
respect to any invention on which a Patent is in existence or a Patent
application is pending, in which agreement Borrower now holds or hereafter
acquires any interest.
RR. "Patents" means all of the following property, now owned or hereafter
acquired by Borrower: (a) all letters patent of, or rights corresponding
thereto, in the United States or in any other country, all registrations and
recordings thereof, and all applications for letters patent of, or rights
corresponding thereto, in the United States or any other country, including
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; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all xxxxx patents, divisionals,
and patents of addition; and (d) all patents to be issued under any such
applications.
SS. "Permitted Debt" means (i) Borrower's indebtedness to Lender under
this Loan Agreement or any of the Other Agreements; or (ii) indebtedness to
trade creditors incurred in the ordinary course of business on ordinary trade
terms and accrued expenses incurred in the ordinary course of business; or (iii)
debt of the Company existing on the date hereof, as listed in the Schedule of
Exceptions attached hereto.
TT. "Permitted Liens" means all (i) Charges for amounts not yet
delinquent or being contested in good faith by appropriate proceedings and for
which adequate reserves have been made in accordance with GAAP; (ii) statutory
liens of landlords, carriers, warehousemen, mechanics and materialmen incurred
in the ordinary course of business for sums not yet delinquent or that are being
contested in good faith by appropriate proceedings being diligently conducted
and for which Borrower maintains adequate reserves in accordance with GAAP;
(iii) liens arising from judgments, decrees or attachments in circumstances
which do not constitute an Event of Default hereunder; (iv) the following
deposits, to the extent made in the ordinary course of business: 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
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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; (v) banker's liens,
rights of setoff and similar liens arising by operation of law on deposits made
in the ordinary course of business, provided such liens do not arise in respect
of borrowed money; and (vi) liens on Equipment purchased or financed through
third parties, provided that any such lien is limited to the Equipment so
financed and the proceeds thereof.
UU. "Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise, including
without limitation, any instrumentality, division, agency, body or department
thereof).
VV. "Prime Rate" means the rate of interest published daily in The Wall
Street Journal in the "Money Rates" (or successor) column as the "Prime Rate,"
as in effect from time to time. If a range of rates is so published, the Prime
Rate shall mean the highest of such rates.
WW. "Proceeds" means "proceeds," as such term is defined in the UCC
XX. "Receivables" means (i) all of Borrower's Accounts, Instruments,
Documents, Chattel Paper, Supporting Obligations, letters of credit, proceeds of
any letter of credit, and Letter of Credit Rights, and (ii) all customer lists,
software, and business records related thereto.
YY. "Reserves" means any and all reserves which Lender deems necessary, in
its sole discretion, to maintain (including, without limitation, reserves for
accrued and unpaid interest on Borrower Liability, reserves for rent at
locations leased by Borrower and for consignee's, warehousemen's and bailee's
charges, reserves for dilution of Accounts, reserves for direct and contingent
obligations owed to third parties, reserves for uninsured, underinsured,
un-indemnified or under-indemnified liabilities or potential liabilities with
respect to any litigation and reserves for taxes, fees, assessments, and other
governmental charges) with respect to Borrower or the Collateral.
ZZ. "Revolving Advance" has the meaning set forth in Section 2.1(b)
hereof.
AAA. "Revolving Commitment" means the commitment, if any, of Lender to
make Revolving Advances hereunder, subject to the terms hereof, as such
commitment may be reduced from time to time pursuant to Section 4.3 or Section
8.2, and as such commitment may be increased from time to time pursuant to the
terms of this definition. The Revolving Commitment shall be the sum of (i) Six
Million Dollars ($6,000,000.00) plus (ii) the Term Loan Rollover Amount for each
Term Loan Rollover Date that has occurred since the date of this Loan Agreement.
BBB. "Revolving Loan" means, at any time, all Revolving Advances
outstanding at such time.
CCC. "Revolving Loan Termination Date" means the earliest of (a) Xxxxx 00,
0000, (x) the date of termination of the Revolving Commitments pursuant to
Section 4.3 hereof and (c) the date on which Borrower Liabilities become due and
payable pursuant to Section 8.2 hereof; provided, however, that Lender in its
sole discretion may extend such Revolving Loan Termination Date for such
additional period as may be agreed by Borrower and Lender upon written request
of Borrower which shall be delivered not less than sixty (60) days prior to the
then existing Revolving Loan Termination Date.
DDD. "Securities Account" means any "securities account" as such term is
defined in the UCC, and in any event includes any account to which a FINANCIAL
ASSET is or may be credited in accordance with an agreement under which the
person maintaining the account undertakes to treat the person for whom the
account is maintained as entitled to exercise the rights that comprise the
financial asset.
EEE. "Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
FFF. "Supporting Obligations" means any "supporting obligations," as such
term is defined in the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
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GGG. "Term Loan" has the meaning set forth in Section 2.1(a) hereof.
HHH. "Term Loan Rollover Amount" means, with respect to any Term Loan
Rollover Date, the principal amount of the Term Loan actually repaid during the
immediately preceding six month period.
III. "Term Loan Rollover Date" means each October 1 and April 1 occurring
prior to the Revolving Loan Termination Date, commencing October 1, 2007.
JJJ. "Terminal Payment" shall mean any payment requirement designated as a
Terminal Payment on the note WITH RESPECT TO THE TERM LOAN, such payment to be
an amount which is five percent (5.0%) of the original principal amount of the
Term LOAN.
KKK. "Trademark License" means any written agreement granting any right to
use any Trademark or Trademark registration, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
LLL. "Trademarks" means all of the following property, now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest: (a) all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, and
designs of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and any applications in connection
therewith, including 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 (b) all reissues, extensions or renewals thereof.
MMM. "UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Illinois, provided that if by reason of mandatory
provisions of law, the perfection, the effect of perfection or non-perfection or
the priority of the security interest granted hereunder in any Collateral (as
hereinafter defined) or the availability of any remedy hereunder is governed by
the Uniform Commercial Code as in effect on or after the date hereof in other
jurisdiction(s), then "UCC" means the Uniform Commercial Code as in effect on or
after the date hereof in such other jurisdiction(s) for the purposes of the
provisions hereof relating to such perfection, effect of perfection or
non-perfection, or priority or availability of such remedy.
NNN. "Warrant" has the meaning set forth in Section 2.5(b) hereof.
2. THE LOANS
2.1 (a) TERM LOAN. On the terms and subject to the conditions contained in
this Loan Agreement, including those listed in Section 2.5 hereof, Lender shall
loan to Borrower, on the date hereof, a term loan (the "Term Loan") in the
principal amount of up to Three Million Dollars ($3,000,000.00), as provided on
a funding request submitted to Lender in form and substance reasonably
acceptable to the Lender, the proceeds of which are to be used for working
capital. This is not a revolving line of credit and Borrower may not repay and
re-borrow the amounts advanced under this Section 2.1(a). The Term Loan shall be
repaid in forty (40) monthly scheduled installments as follows: (i) commencing
on the first Business Day of first month after the date of the Term Loan, three
(3) months of interest only (paid in arrears); (ii) commencing on the first
Business Day of the fourth month after the date of the Term Loan, twelve (12)
equal monthly payments, each consisting of 1.6667% of the original principal
amount of the Term Loan, plus interest thereon (paid in arrears); then (iii)
commencing on the first Business Day of the sixteenth month after the date of
the Term Loan, twenty four (24) equal monthly payments, each consisting of
3.3333% of the original principal amount of the Term Loan, plus interest thereon
(paid in arrears); and finally (iv) on the first Business Day of the fortieth
month after the date of the Term Loan, the Terminal Payment. All such payments
are to be made on the first Business Day of relevant month.
(b) REVOLVING LOAN. On the terms and subject to the conditions contained
in this Loan Agreement, Lender agrees to make revolving advances to Borrower
(each, a "Revolving Advance") from time to time on any Business Day during the
period from the date hereof until the Revolving Loan Termination Date in an
aggregate principal amount at any time outstanding for all such Revolving
Advances not to exceed the lesser of (x) the Revolving Commitment at such time
and (y) the Borrowing Base at such time. Each borrowing of a Revolving Advance
shall be made on notice (substantially in the form of Exhibit B hereto) given by
Borrower to Lender not later than 9:00 a.m. (prevailing Chicago time) not less
than five (5) Business Days prior to the date of such proposed borrowing. Each
borrowing of a Revolving Advance shall be in an aggregate amount of not less
than $250,000. Borrower may not borrow more than two (2) Revolving Advances in
any calendar month. Subject to the terms and conditions contained in this Loan
Agreement, the Revolving Loan repaid may be reborrowed by Borrower under this
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Section 2.1(b). Borrower shall repay the entire unpaid principal amount of the
Revolving Loan in full on the Revolving Loan Termination Date.
2.2 EVIDENCE AND NATURE OF LOANS. The Term Loan and each Revolving Advance to be
made by Lender to Borrower pursuant to this Loan Agreement (each, a "Loan") will
be evidenced by one or more promissory notes (in form and substance satisfactory
to Lender) to be executed and delivered by Borrower to Lender before or
concurrently with Lender's disbursement of such Loan to or for the account of
Borrower. All of Borrower's Liabilities (including all Loans under this Loan
Agreement) shall be secured by Lender's security interest in the Collateral and
by all other security interests, liens, claims and encumbrances now and/or from
time to time hereafter granted by Borrower to Lender, whether hereunder or under
the Other Agreements.
2.3 USE OF PROCEEDS. Borrower warrants and represents to Lender that Borrower
shall use the proceeds of each Loan made by Lender to Borrower pursuant to this
Loan Agreement and any advances made pursuant to the Other Agreements solely for
legal and proper corporate purposes (duly authorized by its Board of Directors)
and consistent with all applicable laws and statutes.
2.4 DIRECTION TO REMIT. Borrower hereby authorizes and directs Lender to
disburse, for and on behalf of Borrower and for Borrower's account, the proceeds
of the Loan made by Lender to Borrower pursuant to this Loan Agreement to such
Person or Persons as an officer or director of Borrower shall direct, whether in
writing or orally.
2.5 CONDITIONS PRECEDENT. (a) The following conditions precedent must be met
before each Loan is made hereunder: (i) No event, condition or change that has
had, or could reasonably be expected to have, a Material Adverse Effect shall
have occurred since the date of this Loan Agreement, (ii) The representations
and warranties contained in this Loan Agreement and in the Other Agreements
shall be true and correct on and as of the date of such Loan, (iii) As of the
date of such Loan, no event shall have occurred and be continuing or would
result from such Loan or the application of the proceeds thereof that would
constitute an Event of Default or a Default, (iv) As a condition to each
Revolving Advance, a Borrowing Base Certificate and supporting information in
connection therewith, together with any additional reports with respect to the
Borrowing Base as Lender may reasonably request, and (iv) Such other conditions
precedent as Lender may reasonably impose upon Borrower from time to time.
(b) In addition, the following conditions precedent must be met before the
initial Loan is made hereunder: (i) Payment of all fees required under this Loan
Agreement or the Other Agreements; (ii) Receipt by Lender of satisfactory
release documents from any and all conflicting secured creditors (other than
holders of Permitted Liens), (iii) Receipt by Lender of appropriate filings and
other means of perfecting its security interest in the Collateral, including but
not limited to specific assignments of Collateral consisting of instruments or
evidenced by titles, (iv) Lender shall have received copies of the certificates
and evidences of insurance contemplated under Section 5.6 hereof and the
Financials described in Section 7.3, (v) Receipt by Lender of adequate proof of
free and clear ownership of the Collateral, including but not limited to paid in
full invoices and cancelled checks or other means of payment for said invoices;
(vi) Execution by Borrower and applicable financial institution(s) of any
required account control agreements for the benefit of Lender, (vii) Delivery by
Borrower of a satisfactory executed Borrowing Base Certificate as of a recent
date, (viii) Delivery by Borrower of a satisfactory landlord waiver duly
executed and delivered by Borrower's Irvington, New York landlord, (ix) Receipt
by Lender of a Warrant to purchase 850,340 shares of the Common Stock of SWMX,
Inc. at a purchase price of $0.8820 per share, as such may be amended, in form
and substance satisfactory to Lender (the "Warrant"), (x) Delivery by Borrower
of a legal opinion of counsel to Borrower relating to this Loan Agreement and
the Other Agreements in form and substance satisfactory to Lender; and (xi)
Delivery by Borrower of an agreement whereby Xxxxxxxxxxx & Co. Inc. has been
retained for an exclusive mandate to raise new equity for SWMX, Inc. on or
before July 1, 2007, in an expected amount of not less than $30,000,000,
together with Xxxxxxxxxxx'x target list of investors for such equity, each in
form and substance satisfactory to Lender.
2.6 PAYMENTS AND TAXES. Any and all payments made by Borrower under this Loan
Agreement or any Other Agreement shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
governmental authority (including any interest, additions to tax or penalties
applicable thereto) other than any taxes imposed on or measured by Lender's
overall net income and franchise taxes imposed on it (in lieu of net income
taxes), by a jurisdiction (or any political subdivision thereof) as a result of
Lender being organized or resident, conducting business (other than a business
deemed to arise from Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, or otherwise with respect
to, this Loan Agreement or any Other Agreement) or having its principal office
in such jurisdiction ("INDEMNIFIED TAXES"). If any Indemnified Taxes shall be
required by law to be withheld or deducted from or in respect of any sum payable
under this Loan Agreement or any Other Agreement to Lender (w) an additional
amount shall be payable as may be necessary so that, after making all required
withholdings or deductions (including withholdings or deductions applicable to
9
additional sums payable under this Section) Lender receives an amount equal to
the sum it would have received had no such withholdings or deductions been made,
(x) Borrower shall make such withholdings or deductions, (y) Borrower shall pay
the full amount withheld or deducted to the relevant taxing authority or other
authority in accordance with applicable law and (z) Borrower shall deliver to
Lender evidence of such payment. Borrower's obligation hereunder shall survive
the termination of this Loan Agreement.
3. INTEREST, FEES AND REPAYMENT
3.1 INTEREST. Each Revolving Advance made pursuant to this Loan Agreement shall
bear interest payable monthly in arrears on the first Business Day of each month
calculated on the basis of a 360 day year and actual days elapsed at a rate
equal to the Prime Rate plus 1.65% per annum. The Term Loan shall bear interest
payable monthly in arrears on the first Business Day of each month, calculated
on a 360 day year comprised of twelve (12) thirty day months at a per annum rate
equal to the Loan Interest Rate specified in the related note, which rate shall
be the sum of (i) 600 basis points plus (ii) the greater of (a) 4.84% or (b) the
yield on Three-Year U.S. Treasury Notes on the date of such Loan, as reported in
the Federal Reserve Statistical Release H-15 or in such other publication as
Lender may reasonably select. In no event shall interest accrue or be payable in
connection with any Loan in an amount in excess of that permitted under
applicable law. If the note(s) so provide, the interest thereunder may be
precomputed for the period ending when payments thereunder are due and on the
assumption that all payments will be made on their respective due dates.
Payments due under any note and not made by their scheduled due date for a
period in excess of five (5) days thereafter shall be overdue and shall be
subject to a service charge in an amount equal to two percent (2%) of the
delinquent amount, but not more than the maximum rate permitted by law,
whichever is less. In addition, and notwithstanding the forgoing, during the
continuance of an Event of Default all outstanding Borrower Liabilities in
respect of the Loans shall bear interest (payable on demand) at a rate that is
two percent (2%) per annum in excess of the rate of interest applicable to such
Loans and other Borrower Liabilities from time to time.
3.2 FEES.
(a) COMMITMENT FEE. Borrower agrees to pay to Lender a commitment fee (the
"Commitment Fee") equal to 1.75% per annum on the total amount of the Revolving
Commitment, payable quarterly in advance, commencing on the date hereof. In the
event of an increase in the amount of the Revolving Commitment, such commitment
fee will be pro-rated in arrears for any such incremental increase during the
prior quarter, and thereafter Borrower shall pay an amount equal to 1.75% per
annum, payable quarterly in advance, on such incremental increase in such
Revolving Commitment.
(b) DUE DILIGENCE FEE. Borrower agrees to pay to Lender a fee of $50,000
to cover due diligence and other costs and expenses incurred in connection with
the Loan, of which Lender acknowledges receipt of $10,000. Borrower agrees that
the remaining $40,000 of such fee shall be funded out of the proceeds of the
Term Loan on the date hereof.
(c) AUDIT FEES. Borrower agrees to pay to Lender its reasonable expenses
incurred in connection with a semi-annual audit of Borrower, in an amount of up
to $5,000 per each such semi-annual period, payable in accordance with Section
9.5 below, until the Borrower Liabilities are paid in full, such auditor to be
selected by Lender in its sole discretion. Such semi-annual audit fee shall be
payable on the date hereof and each 6 months hereafter.
(d) FEES EARNED. All fees payable hereunder shall be earned when due and
payable hereunder, and shall not be refundable in whole or in part.
3.3 REPAYMENT. Borrower's Liabilities under this Loan Agreement are absolute
and unconditional. Any and all costs, fees and expenses payable pursuant to this
Loan Agreement or any of the Other Agreements shall be payable by Borrower to
Lender or to such other person or persons designated by Lender, on demand. All
payments to Lender shall be payable by 2:00 p.m. (prevailing Chicago time) at
Lender's principal place of business specified at the beginning of this Loan
Agreement or at such other place or places as Lender may designate in writing to
Borrower. All payments to Persons other than Lender shall be payable at such
place or places as Lender may designate in writing to Borrower.
3.4 APPLICATION OF PAYMENTS. Provided that an "Event of Default" (hereinafter
defined) does not exist, the application of payments received by Lender pursuant
to this Loan Agreement shall be applied first to any and all late charges, fees
and expenses then due and payable; second to interest then due and payable
hereunder; third to the principal of the Term Loan then due and payable, fourth
to the principal of the Revolving Advances then outstanding, fifth to the
remaining principal of the Term Loan then outstanding (together with any
prepayment premiums thereon) and finally, to any other Borrower Liabilities then
outstanding. Any prepayment of the outstanding principal of Term Loan shall be
10
deemed to satisfy future monthly payments of principal required under Section
2.1(a) hereto (in the reverse order of maturity) to the extent such amount is
sufficient to satisfy such obligation. From and after an Event of Default,
Lender shall have the continuing and exclusive right to apply any and all such
payments received by Lender to any portion of Borrower's Liabilities, including
to any of Borrower's Liabilities arising under any of the Other Agreements.
Solely for the purpose of computing interest earned by Lender, payments received
by Lender shall be applied as aforesaid on the Business Day following receipt by
Lender. Checks or other items of payment received after 2:00 p.m. prevailing
Chicago, Illinois time shall be deemed received the following Business Day.
3.5 ACCURACY OF STATEMENTS Each statement of account by Lender delivered to
Borrower relating to Borrower's Liabilities shall be presumed correct and
accurate and shall constitute an account stated between Borrower and Lender
unless thereafter waived in writing by Lender, in Lender's discretion. Any
objection to the statement that Borrower may have must be delivered to Lender,
by registered or certified mail, within forty-five (45) days after Borrower's
receipt of said statement.
4. TERM AND PREPAYMENT
4.1 TERM. This Loan Agreement shall be in effect until the indefeasible
payment in full to Lender of all of Borrower's Liabilities. Except as provided
below, Borrower has no right to prepay Borrower's Liabilities under this Loan
Agreement and the Other Agreements.
4.2 MANDATORY PREPAYMENT OF REVOLVING LOAN. In the event the aggregate
outstanding principal amount of the Revolving Advances at any time exceeds the
lesser of (A) the Revolving Commitment or (B) the Borrowing Base, Borrower shall
promptly, but not later than three (3)Business Days, prepay the Revolving Loan
in an amount equal to such excess.
4.3 VOLUNTARY PREPAYMENT AND COMMITMENT REDUCTION. (a) Borrower may upon at
least ten (10) Business Days' written notice to Lender, prepay without premium
or penalty the outstanding principal amount of any or all of the Revolving Loan,
in whole or in part at any time; PROVIDED, that each partial prepayment shall be
an aggregate principal amount not less than $200,000. Upon the giving of such
notice of prepayment, the principal amount of Revolving Loan specified to be
prepaid shall become due and payable on the date specified for such prepayment.
(b) Borrower may, upon at least thirty (30) days' written notice to
Lender, terminate in whole or reduce in part the unused portion of the Revolving
Commitment; provided, however, that (i) each partial reduction shall be in an
aggregate amount of not less than $500,000 and (ii) Borrower shall not reduce
the Revolving Commitment if, after giving effect to any concurrent prepayment of
the Revolving Loan in accordance with Section 4.3(a), the aggregate unpaid
principal amount of the Revolving Advances would exceed the lesser of the total
Revolving Commitment and the Borrowing Base.
(c) Borrower may, upon at least thirty (30) days prior written notice to
Lender (stating the proposed date of prepayment, which date shall then be the
due date for such Loan), prepay the outstanding principal amount of the Term
Loan then outstanding in whole, but not in part by paying to Lender, immediately
available funds, an amount equal to the sum of (i) the outstanding principal
amount of the Term Loan then outstanding, (ii) all accrued and unpaid interest,
fees and expenses on the Term Loan through the date of prepayment, and (iii) in
the event that such prepayment is made on or prior to the maturity date of the
Term Loan, a prepayment premium equal to 2% of the principal amount being
prepaid, and (iv) the Terminal Payment.
5. COLLATERAL AND SECURITY
5.1 GRANT OF SECURITY INTEREST. To further secure to Lender the prompt full
and faithful payment and performance of Borrower's Liabilities and the prompt,
full and complete performance by Borrower of each of its covenants and duties
under this Loan Agreement and the Other Agreements, Borrower grants to Lender, a
valid, first priority continuing security interest in and lien upon all of the
following (except as to assets or property with Permitted Liens, upon which a
lien which may be other than a first priority lien is granted), whether now
owned or hereafter acquired and wherever located:
(i) All Receivables;
(ii) All Equipment (subject to Permitted Liens);
(iii) All Fixtures;
(iv) All General Intangibles;
(v) All Inventory;
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(vi) All Investment Property;
(vii) All Deposit Accounts and Securities Accounts;
(viii) All Cash;
(ix) All Documents;
(x) All Proceeds from the sale, transfer or other disposition of
Intellectual Property;
(xi) All other Goods and tangible and intangible personal property of
Borrower other than Intellectual Property, whether now or hereafter
owned or existing, leased, consigned by or to, or acquired by,
Borrower and wherever located, and
(xii) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of each of the foregoing and all
attachments, accessories, accessions, replacements, substitutions,
additions or improvements to any of the foregoing, wherever located
and all products and proceeds of the foregoing including without
limitation proceeds of insurance policies insuring the foregoing and
all books and records with respect thereto;
(all of the foregoing personal property is hereinafter sometimes individually
and sometimes collectively referred to as "Collateral"). Notwithstanding
anything herein contained or construed to the contrary, Borrower is not granting
to Lender, and Lender is not receiving from Borrower, any grant of a security
interest in (i) any of the outstanding capital stock or other equity interests
of any directly owned Subsidiary of Borrower organized under the laws of any
jurisdiction other than the United States, any State thereof or the District of
Columbia in excess of 65% of the voting power of all classes of such capital
stock or other equity interests of such Subsidiary entitled to vote or (ii) any
of Borrower's now owned or hereafter acquired Intellectual Property (other than
a security interest in the Proceeds from the sale, transfer or other disposition
of Intellectual Property); PROVIDED, HOWEVER, that software, firmware and
operating systems that cannot be removed from the Collateral without rendering
the Collateral inoperable shall be deemed to be part of the "Collateral" unless
such construction is prohibited by or inconsistent with any relevant license or
other agreement respecting such software, firmware or operating system. Borrower
shall make appropriate entries upon its financial statements and its books and
records disclosing Lender's security interest in the Collateral.
Borrower hereby further agrees that Borrower shall not hereafter grant a
security interest in or pledge of its Intellectual Property to any other party;
PROVIDED, HOWEVER, that Borrower may continue to enter into non-exclusive
licenses and similar arrangements with respect to such Intellectual Property in
the ordinary course of Borrower's business as long as (i) Borrower does not
encumber for the benefit of a third party other than Lender any Proceeds or
licensing or other fees payable to Borrower under any such license or
arrangement, and (ii) no such license or arrangement shall prohibit or restrict
Borrower from disposing of any Intellectual Property that is the subject of any
such license or arrangement.
5.2 FURTHER ASSURANCES. Borrower shall execute and/or deliver to Lender, at
any time and from time to time hereafter at the request of Lender, all
agreements, instruments, UCC financing statements (or other required perfection
instruments), documents and other written matter (hereinafter individually
and/or collectively, referred to as "Additional Documentation") that Lender
reasonably may request, in a form and substance reasonably acceptable to Lender,
to perfect and maintain Lender's perfected security interest in the Collateral
and to consummate the transactions contemplated in or by this Loan Agreement and
the Other Agreements. Borrower, irrevocably, (a) hereby makes, constitutes and
appoints Lender (and all Persons designated by Lender for that purpose) as
Borrower's true and lawful attorney (and agent-in-fact) to sign the name of
Borrower on the Additional Documentation and to deliver the Additional
Documentation to such Persons as Lender, in its sole and absolute discretion,
may elect, (b) authorizes completion and filing of any such Additional
Documentation by Lender or its agents, whether paper or electronic, (c) hereby
ratifies and confirms the completion and filing of Additional Documentation by
Lender or its agent, paper or electronic, occurring prior to the date hereof,
and (d) declares that Borrower has the present intention to authenticate and
process any such Additional Documentation, whether paper or electronic, and
whether or not completed and filed by Lender or its agents before or after the
date hereof.
5.3 INSPECTION OF COLLATERAL. Lender (by any of its officers, employees and/or
agents) shall have the right, at any time or times during Borrower's usual
business hours, to inspect the Collateral and all related records (and the
premises upon which it is located) and to verify the amount and condition of or
any other and all financial records and matters whether or not relating to the
Collateral. During the continuance of an Event of Default, all costs, fees and
expenses incurred by Lender, or for which Lender has become obligated, in
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connection with such inspection and/or verification shall be payable by Borrower
to Lender. Borrower agrees to use its best efforts to cause its employees and
agents to cooperate with Lender in all inspections.
5.4 CONTROLLED ACCOUNTS; PROCEEDS OF COLLATERAL. (a) Borrower shall deliver,
or cause to be delivered to Lender an account control agreement in form and
substance satisfactory to Lender and duly authorized, executed and delivered by
Borrower and each bank or financial institution where Borrower maintains a
deposit or securities account (each a "Controlled Account"); .
(b) All proceeds arising from the disposition of any Collateral by
Borrower shall be deposited in a Controlled Account within one Business Day
after receipt by Borrower. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Loan Agreement.
5.5 THIRD PARTY CLAIMS. Lender, upon notice to Borrower, without waiving or
releasing any obligation, liability or duty of Borrower under this Loan
Agreement or the Other Agreements or any Event of Default, may (but shall be
under no obligation to) at any time or times hereafter, pay, acquire and/or
accept an assignment of any security interest, lien, encumbrance or claim
asserted (OTHER THAN PERMITTED LIENS) by any Person against the Collateral. All
sums paid by Lender in respect thereof and all reasonable costs, fees and
expenses, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto incurred by Lender on account thereof shall be payable
by Borrower to Lender.
5.6 INSURANCE. Borrower shall at all times throughout the term of this Loan
Agreement and any extension hereof procure and maintain at its own expense the
following minimum insurance coverages which shall be provided by insurance
carriers with an AM Best rating of A, Class X or as otherwise acceptable to
Lender and with such deductibles and exclusions as approved by Lender: (1) All
risk property damage insurance covering the Collateral which shall include but
not be limited to fire and extended coverage and where applicable mechanical
breakdown and electrical malfunction, and which shall be written in amount not
less than the greater of (x) the outstanding loan balance or (y) the current
replacement cost; and, (2) Commercial general liability insurance which may
include excess liability insurance written on occurrence basis with a limit of
not less than $2,000,000; and, (3) Workers' compensation insurance in accordance
with statutory limits and employers' liability coverage which may include excess
liability in an amount not less than $500,000.
Any insurance carried and maintained in accordance with this Loan Agreement by
Borrower shall be endorsed to provide that: (i) Lender shall be additional
insured and loss payee with respect to the property insurance described in
subsection (1) of the prior paragraph (and such insurance shall provide that the
interest of Lender shall not be invalidated by any act or neglect of Lender,
Borrower or other person), and Lender shall be an additional insured with
respect to the liability insurance described in subsection (2) of the prior
paragraph; and (ii) The insurers thereunder waive all rights of subrogation
against Lender, any right of setoff and counterclaim and any other right to
deduction due to outstanding premiums, whether by attachment or otherwise; and
(iii) Such insurance shall be primary without right of contribution of any other
insurance carried by or on behalf of Lender; and (iv) Inasmuch as such policies
are written to cover more than one insured, all terms, conditions, insuring
agreements and endorsements (other than the limits of liability) shall operate
in the same manner as if there were a separate policy covering each insured;
and, (v) If such insurance is canceled for any reason whatsoever, including
nonpayment of premium, or any substantial change is made in the coverage that
affects the interests of Lender, such cancellation or change shall not be
effective as to Lender until thirty (30) days after receipt by Lender of written
notice sent by registered mail from such insurer of such cancellation or change;
providing, however, that such thirty (30) day period shall be reduced to ten
(10) days in the case where cancellation results from the nonpayment of
premiums. Borrower, irrevocably, appoints Lender as Borrower's true and lawful
attorney (and agent-in fact) for the purpose of making, settling and adjusting
claims under such policies, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies and for
making all determinations and decisions with respect to such policies, and such
appointment will be immediately effective upon the occurrence of an Event of
Default hereunder.
On or before the initial funding by Lender hereunder, and at each policy
anniversary date, Borrower shall arrange to furnish Lender with appropriate
Certificates of Insurance. Such Certificates of Insurance shall be executed by
each insurer or by an authorized representative of each insurer, and shall
identify insurers, the type of insurance, the insurance limits and the policy
term and shall specifically list the special endorsements (i) through (v) above.
In case of the failure to procure or maintain such insurance, Lender shall have
the right, but not the obligation, to obtain such insurance and any premium paid
13
by Lender shall be immediately due and payable by Borrower to Lender. The
maintenance of any policy or policies of insurance pursuant to this Section
shall not limit any obligation or liability of Borrower pursuant to any other
Sections or provisions of this Loan Agreement.
5.7 CHARGES ON COLLATERAL. Borrower shall not permit any Charges (other than
Permitted Liens) to arise, or to remain, and Borrower shall pay promptly when
due, and discharge, such Charges. In the event Borrower, at any time or times
hereafter, shall fail to pay such Charges when due or to obtain such discharges,
Borrower shall so advise Lender thereof in writing. Lender may, without waiving
or releasing any obligation or liability of Borrower hereunder or Event of
Default, in its sole and absolute discretion, at any time or times thereafter,
make such payment, or any part thereof, or obtain such discharge and take any
other action with respect thereto which Lender deems advisable. All sums so paid
by Lender and any expenses, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable by Borrower to
Lender upon demand.
5.8 UCC FILING AUTHORIZATION. Borrower hereby authorizes Lender and its
counsel and other representatives to file, at any time on or after the date
hereof, Uniform Commercial Code financing statements and continuation
statements, and amendments to financing statements, in any jurisdictions and
with any filing offices as Lender may determine, in its sole discretion, are
necessary or advisable to perfect the security interests granted to Lender
hereunder and under the Other Agreements. Such financing statements may describe
the Collateral in the same manner as described herein or therein or may contain
an indication or description of Collateral that describes such property in any
other manner as Lender may determine is necessary or advisable to ensure the
perfection of the security interest in the Collateral.
5.9 ACCOUNTS. So long as no Event of Default has occurred and is continuing,
subject to Section 7.4 hereof, Borrower may settle, adjust or compromise any
claim, offset, counterclaim or dispute with any Account Debtor. At any time that
an Event of Default has occurred and is continuing, Lender may, at its option,
notify Borrower that Lender intends to have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with Account
Debtors or grant any credits, discounts or allowances and on and after such
notice from Lender to Borrower, Lender shall have such exclusive right.
6. WARRANTIES AND REPRESENTATIONS
6.1 BORROWER REPRESENTATIONS. Each Borrower warrants and represents to
Lender, as of the date hereof and as of the date of any Loan made
hereunder, and agrees and covenants to Lender that:
(a) Borrower is and at all times hereafter shall be (i) a Person having that
legal name and organizational structure as set forth above, duly organized
and existing and in good standing under the laws of the state of its
organization as set forth above and (ii) qualified or licensed to do
business in all other states in which the laws require Borrower to be so
qualified and/or licensed;
(b) Borrower is duly authorized and empowered to enter into, execute, deliver
and perform this Loan Agreement and the Other Agreements and the execution,
delivery and/or performance by Borrower of this Loan Agreement and the Other
Agreements, and the use by Borrower of the proceeds of the Loans hereunder,
shall not, by the lapse of time, the giving of notice or otherwise, conflict
with or constitute a violation of any applicable law (including, without
limitation, Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation thereof) or a breach of any
provision contained in Borrower's organizational documents or contained in
any agreement, instrument or document to which Borrower is now or hereafter
a party or by which it is or may become bound or give rise to or result in
any default thereunder;
(c) This Loan Agreement is (and when executed or delivered, each Other Agreement
will be) the legally valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by equitable
principles (whether enforcement is sought in equity or at law).
(d) Except as disclosed to Lender in writing prior to the date hereof, there are
no actions or proceedings which are pending, or to its knowledge threatened,
against Borrower. Borrower is not in breach of or a party to any contract or
agreement or subject to any charge, restriction, judgment, decree or order
which has or could reasonably be expected to have a Material Adverse Effect,
nor is Borrower in default with respect to any indenture, security
agreement, mortgage, deed or other similar agreement relating to the
borrowing of monies to which it is a party or by which it is bound;
(e) Borrower has and is in good standing with respect to all licenses, patents,
copyrights, trademarks, trade names, governmental permits, certificates,
consents and franchises necessary to continue to conduct its business as
previously conducted by it and to own or lease and operate its properties as
now owned or leased by it;
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(f) The financial statements delivered by Borrower to Lender prior to the date
hereof and the Financials delivered by Borrower to Lender pursuant to
Section 7.3 hereof fairly and accurately present the assets, liabilities and
financial conditions and results of operations of Borrower as of the dates
and for the periods stated therein and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and no
event, condition or change that has had, or could reasonably be expected to
have, a Material Adverse Effect has occurred since the date of this Loan
Agreement;
(g) Except as disclosed in the Schedule of Exceptions, as to the Accounts and
other Collateral, (i) Borrower has and at all times hereafter shall have
good, indefeasible and merchantable title to and ownership of the Collateral
and the Accounts described and/or listed on any certificate or schedule
relating to the Accounts delivered to Lender, free and clear of all liens,
claims, security interests and encumbrances except those of Lender and
Permitted Liens; (ii) the Collateral shall be kept and/or maintained solely
at the addresses identified in writing to Lender; (iii) Borrower,
immediately on demand by Lender, shall deliver to Lender any and all
evidence of ownership of, including without limitation, vendor invoices and
proofs of payment thereof, certificates of title to and applications for
title to, any Collateral; (iv) Borrower shall keep and maintain the
Collateral in good operating condition and repair and shall make all
necessary replacements thereof and renewals thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved;
and (v) Borrower shall not permit any such items to become a fixture to real
estate or accession to other personal property.
(h) As to Lender's security interest, (i) Lender's security interest in the
Collateral is now and at all times hereafter shall be perfected and have a
first priority (subject to Permitted Liens); (ii) the offices and/or
locations where Borrower keeps the Collateral and Borrower's books and
records concerning the Collateral are at the locations identified to Lender
in writing and Borrower shall not remove such books and records and/or the
Collateral therefrom to any other location unless Borrower gives Lender
written notice thereof at least thirty (30) days prior thereto and the same
is within the contiguous forty-eight (48) states of the United States of
America; and (iii) the addresses identified to Lender in writing as
Borrower's chief executive office and principal place(s) of business are
Borrower's sole offices and place(s) of business, and Borrower, by written
notice delivered to Lender at least thirty (30) days prior thereto, shall
advise Lender of any change thereto.
(i) Borrower is not an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company Act
of 1940.
(j) All income and other tax returns and reports required to be filed by
Borrower have been timely filed, and all taxes shown on such tax returns to
be due and payable and all other assessments, fees and governmental charges
upon Borrower and its properties, assets, income, businesses and franchises
have been paid when due and payable.
(k) As of the date hereof and of each Loan (i) the sum of Borrower's debt
(including contingent liabilities) does not exceed the present fair saleable
value of Borrower's present assets; (ii) in Borrower's reasonable belief,
Borrower's capital is (A) currently not unreasonably small in relation to
its business as it now exists and (B) assuming the success of the new equity
financing (in an amount of not less than $30,000,0000) contemplated by
Borrower, not unreasonably small in relation to its business as is
contemplated at such time; and (iii) Borrower has not incurred and does not
intend to incur, or believe that it will incur, debts beyond its ability to
pay such debts as they become due.
(l) No information furnished to Lender by or on behalf of Borrower for use in
connection with the transactions contemplated hereby contains or will
contain, any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. Any projections contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made. There are no facts known to Borrower that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(m) Borrower has provided to Lender on or prior to the date hereof a schedule
that correctly identifies the ownership interest (including all options,
warrants and other rights to acquire capital stock) of Borrower and each of
its Subsidiaries as of the date hereof.
(n) (i) Borrower (A) has been and is in compliance in all material respects with
all applicable Environmental Laws; (B) has not received any communication,
whether from a governmental authority or otherwise, alleging that Borrower
is not in such compliance, and there are no past or present actions,
activities, circumstances conditions, events or incidents that may prevent
or interfere with such compliance in the future; (ii) there is no
Environmental Claim pending or, to the best knowledge of Borrower,
15
threatened against Borrower or against any Person whose liability for any
Environmental Claim Borrower has or may have retained or assumed either
contractually or by operation of law; and (iii) there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, threatened release or presence
of any Hazardous Material, which could reasonably be expected to form the
basis of any Environmental Claim against Borrower or, to the best knowledge
of Borrower, against any Person whose liability for any Environmental Claim
Borrower has or may have retained or assumed either contractually or by
operation of law.
(o) (i) Borrower is an "operating company" within the meaning of the regulations
of the United States Department of Labor included within 29 CFR Section
2510.3-101 (the "DOL Regulations") or is in compliance with such other
exception as may be available under such regulations to prevent the assets
of Borrower from being treated as the assets of any employee benefit plan
for purposes of the DOL Regulations and (ii) neither Borrower nor any
subsidiary of Borrower maintains or is obligated to make contributions to
any employee benefit plan that is subject to Title IV of the Employee
Retirement Income Security Act of 1974, as amended from time to time, and
any successor statute ("ERISA").
7. AFFIRMATIVE AND NEGATIVE COVENANTS
7.1 AFFIRMATIVE COVENANTS. Borrower covenants with Lender that Borrower shall,
and shall cause each of its Subsidiaries to: (a) preserve and keep in full force
and effect its existence and all rights and franchises, licenses and permits
material to its business, (b) pay all income and other taxes and assessments
imposed upon it or any of its properties or assets or in respect of any of its
income, businesses or franchises before any penalty or fine accrues thereon, (c)
comply in all material respects with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority, (d) keep adequate
books of record and account, in which complete entries shall be made of all
financial transactions and the assets and of its business, (e) on or prior to
March 30, 2007, deliver to Lender duly executed landlord or collateral access
agreements, in form and substance satisfactory to Lender, for all premises
(including offices and co-location facilities) at which any Collateral is
located (other than Borrower's offices in Irvington, New York for which a
landlord agreement was delivered to Lender on or prior to the date hereof), and
(f) promptly take any and all necessary Cleanup action on, under or affecting
any property owned, leased or operated by Borrower in accordance with all laws
and the policies, orders and directives of all federal, state and local
governmental authorities, and conduct and complete such Cleanup action in
material compliance with all applicable Environmental Laws.
7.2 NEGATIVE COVENANTS Borrower covenants with Lender that Borrower shall not,
and shall not permit any of its Subsidiaries to: (a) grant a security interest
in, assign, sell or transfer any of the Collateral or any of its Intellectual
Property to any person or permit, grant, or suffer or permit a lien, claim or
encumbrance upon any of the Collateral or Intellectual Property, except for (i)
Permitted Liens, or (ii) the sale of Inventory and obsolete or unneeded
Equipment in the ordinary course of business, and upon Lender's prior written
consent; (b) permit or suffer any Charges to attach to or affect any of the
Collateral (except Permitted Liens); (c) permit or suffer any receiver, trustee
or assignee for the benefit of creditors to be appointed to take possession of
any of the Collateral; (d) merge or consolidate with or acquire any Person
except in a transaction in which Borrower is the surviving Person or, if
Borrower is not the surviving Person, such transaction does not result in a
Change of Control; (e) incur or permit or suffer to exist any indebtedness for
borrowed money or for the deferred purchase price for property or services
(other than Permitted Debt); (f) voluntarily prepay any indebtedness prior to
its scheduled maturity other than pursuant to the terms hereof; (g) make or pay
(i) any dividend or other distribution, direct or indirect, on account of any
shares of any class of stock of Borrower or (ii) any redemption, retirement or
similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock of Borrower or any outstanding warrants,
options or other rights to acquire such shares; (h) enter into any transaction
with any Affiliate or any transaction (including, without limitation, any sale
of assets) not in the ordinary course of its business; (i) make any change in
any of its business objectives, purposes and operations, which has, or could
reasonably be expected to have, a Material Adverse Effect; (j) without thirty
(30) days' prior written notice to Lender, make any change in its legal name or
state of formation or organization, (k) adopt or otherwise become obligated to
contribute to any employee benefit plan that is subject to Title IV of ERISA;
(l) take any action or fail to take an action if, as a result of such action or
inaction, Borrower would fail to qualify as an "operating company" within the
meaning of the DOL Regulations or otherwise comply with such other exception as
may be available under such regulations to prevent the assets of Borrower from
being treated as the assets of any employee benefit plan for purposes of the DOL
Regulations or (m) guarantee the indebtedness or other obligations of any
subsidiary, affiliate or distributor of Borrower.
7.3 COVENANTS REGARDING FINANCIAL STATEMENTS. Borrower shall cause to be
furnished to Lender, (i) the unqualified, audited fiscal year end financial
16
statements of Borrower (which shall not contain any "going concern" exception
(other than such qualification if based upon historical losses, the amount of
cash shown on the financial statements of Borrower and the need to raise
additional financing) or any exception relating to scope of review) no later
than 180 days after the related fiscal year end, (ii) no later than 30 days
after the related month end, the internally prepared monthly financial
statements of Borrower, certified by Borrower's chief financial officer, each
containing consolidated and consolidating profit and loss statements for the
month then ended and for Borrower's fiscal year to date, consolidated and
consolidating balance sheets as at the last day of such month and a consolidated
statement of cash flows for the month then ended and for Borrower's fiscal year
to date, (iii) summary monthly bank statements, no later than 30 days after the
related month end, reflecting month-end cash balances, (iv) a monthly Compliance
and Disclosure Certificate, substantially in the form of Exhibit A attached
hereto and made a part hereof, (v) promptly upon Borrower's Board of Directors
approval thereof, copies of Borrower's annual operating plan and any revisions
thereto and (vi) such other financial and business information of Borrower as
Lender may reasonably require, including such other financial and operating
performance data as is provided to its outside investors or commercial lenders
and, if applicable, required to be provided to shareholders by the Securities
and Exchange Commission. Each financial statement to be furnished to Lender must
be prepared in accordance with generally accepted accounting principles,
consistently applied. Borrower also agrees to promptly provide to Lender notice
of, and such other data and information (financial and otherwise) at any time
and from time to time relating to, any legal actions or proceedings pending, or
to its knowledge, threatened against Borrower or the occurrence of any event or
change that has, or could reasonably be expected to have, a Material Adverse
Effect. Financial statements may be delivered via electronic mail to Lender.
7.4 COVENANTS RELATING TO ACCOUNTS. (a) As soon as available but in any event
within fifteen (15) days of the end of each calendar month and at such other
times as may be requested by Lender as of the period then ended, Borrower shall
deliver to Lender (i) a Borrowing Base Certificate and supporting information in
connection therewith, together with any additional reports with respect to the
Borrowing Base as Lender may reasonably request, (ii) a detailed aging of
Borrower's Accounts (A) including all invoices aged by invoice date and due date
(with an explanation of the terms offered) and (B) reconciled to the Borrowing
Base Certificate delivered as of such date prepared in a manner reasonably
acceptable to Lender, together with a summary specifying the name, address, and
balance due for each Account Debtor; (iii) a worksheet of calculations prepared
by Borrower to determine Eligible Accounts detailing the Accounts excluded from
Eligible Accounts and the reason for such exclusion; and (iv) a reconciliation
of Borrower's Accounts between the amounts shown in Borrower's general ledger
and financial statements and the reports delivered pursuant to clauses (i) and
(ii) above.
(b) Borrower may not grant any credit, discount, allowance or extension,
or enter into any agreement for any of the foregoing, except for credits,
discounts, allowances or extensions made or given in the ordinary course of
Borrower's business in accordance with Borrower's historic credit and collection
practices and policies without the prior consent of Lender.
(c) Lender shall have the right at any time or times, in Lender's name or
in the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Accounts, by mail, telephone, facsimile transmission or
otherwise.
7.5 INDEMNIFICATION AND LIABILITY. Borrower hereby agrees to indemnify Lender
and hold Lender harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties,
reasonable costs and expenses (including reasonable attorneys' fees), of every
nature, character and description, which Lender may sustain or incur based upon
or arising out of the Collateral, any of Borrower's Liabilities, any
relationship or agreement between Lender and Borrower, or any other matter,
cause or thing whatsoever occurred, done, omitted or suffered to be done by
Lender relating to Borrower or Borrower's Liabilities (except any such actual
damage amounts sustained or incurred by Borrower as the result of the gross
negligence or willful misconduct of Lender). Should any third-party suit or
proceeding be instituted by or against Lender with respect to any Collateral or
relating to Borrower, Borrower shall, without expense to Lender, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Lender may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding. Borrower's obligation
hereunder shall survive termination of this Loan Agreement.
8. DEFAULT
8.1 EVENTS OF DEFAULT. The occurrence of any one of the following events shall
constitute a default ("Event of Default") by Borrower under this Loan Agreement:
(a) if Borrower fails to pay any principal of any Loans when due and payable or
fails to pay any other Borrower's Liabilities within five (5) days after the
same are due and payable; (b) if any representation, warranty, financial
statement, statement, report or certificate made, deemed made or delivered by
Borrower, or any of its officers, to Lender is not true and correct when made,
17
deemed made or delivered; (c) if Borrower fails or neglects to perform, keep or
observe any term, provision, condition or covenant contained in this Loan
Agreement or in the Other Agreements, which is required to be performed, kept or
observed by Borrower, other than the payment of Borrower's Liabilities, and, in
the case of any covenant contained in Section 7.1 hereof, the same is not cured
within fifteen (15) days; (d) if any of the Collateral or any other of
Borrower's other material assets are attached, seized, subjected to a writ or
distress warrant, or are levied upon, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors; (e)
[Reserved.]; (f) if a petition under any section or chapter of the Bankruptcy
Code or any similar law or regulation shall be filed by or against Borrower or
if Borrower shall make an assignment for the benefit of its creditors or if any
case or proceeding is filed by Borrower for its dissolution or liquidation, and
in the case of a petition filed against the Borrower, such action or proceeding
is not being dismissed within 45 days of its commencement; (g) if Borrower is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business affairs; (h) if an application is made by
Borrower or any Person for the appointment of a receiver, trustee or custodian
for the Collateral or any other of Borrower's assets, and in the an application
by any other Person other than the Borrower, such application is not being
dismissed within 30 days of its commencement; (i) if a notice of lien or Charges
are filed of record with respect to any of the Collateral by any Person; (j) if
any Change of Control shall occur; (k) if any money judgment, writ or warrant of
attachment or similar process (if not adequately covered by insurance as to
which a solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Borrower or any of its Subsidiaries or any of
their respective assets, and such money judgment, writ or warrant of attachment
or similar process is not dismissed within 15 days of its grant; (l) this Loan
Agreement or any Other Agreement shall for any reason fail or cease to be valid
and binding on, or enforceable against, Borrower or any other party thereto or
Borrower shall so assert; (m) this Loan Agreement or any Other Agreement shall
for any reason cease to be in full force and effect or cease to create a valid
and enforceable lien and security interest on any Collateral purported to be
covered thereby or any such lien and security interest shall fail or cease to be
a perfected and first priority lien and security interest (subject to Permitted
Liens); (n) if Borrower is in default (i) in the payment of any of Borrower's
debt to Lender under any Other Agreement; or (ii) in the payment of any debt to
any Person other than Lender in excess of $50,000 or, in the case of clause (i)
or (ii), any other event shall occur or condition shall exist under any
agreement or instrument relating to any such debt and such default, condition or
event gives the holders of such debt (or any agent or trustee on their behalf)
the then current right to accelerate such indebtedness, (o) Borrower fails to
raise net proceeds of $10,000,000 in new equity, on commercially reasonable
terms and conditions , on or before July 1, 2007; (p) Borrower changes the
nature of its business such that it ceases to generate a majority of its revenue
from the business of providing an electronic exchange or forum for selling and
purchasing advertising media; (q) if two or more of Borrower's senior management
cease to be employed by Borrower in any 90 day period and each departed
executive is not replaced within 90 days of such executive's departure with an
executive having comparable experience (in the reasonable discretion of
Borrower's Board of Directors); provided that a senior management change shall
not be deemed to have occurred if the title and/or responsibilities of such
senior executive changes, if such executive continues to provide substantial and
regular services to Borrower; (r) a Material Investor Event occurs; (s) Borrower
becomes engaged in litigation or regulatory proceedings which has had or would
likely have a Material Adverse Effect; or (t) a Material Adverse Effect upon the
Intellectual Property of Borrower occurs. Borrower shall provide written notice
of any events or circumstances which would give rise to an Event of Default
under this Section 8.1 promptly (but in no event more than one (1) Business Day)
after becoming aware of such events or circumstances. Failure of Borrower to
give such notice promptly shall constitute an Event of Default hereunder.
8.2 LENDER'S RIGHTS AND REMEDIES. Upon an Event of Default under Section
8.1(f), without notice by Lender to, or demand by Lender of, Borrower, all of
Borrower's Liabilities shall be automatically accelerated and shall be due and
payable forthwith and the Revolving Commitment and any other commitments to
provide any financing hereunder shall automatically terminate, and upon any
other Event of Default, without notice by Lender, to or demand by Lender of,
Borrower, Lender may accelerate all of Borrower's Liabilities and same shall be
due and payable forthwith and/or Lender may terminate the Revolving Commitment
and any other commitments to provide any financing hereunder. Lender may, in its
sole and absolute discretion: (a) exercise any one or more of the rights and
remedies accruing to a Lender under the Uniform Commercial Code or other
applicable law of the relevant state or states or other applicable jurisdiction,
and in equity, and under any other instrument or agreement now or in the future
entered into between Lender and Borrower, including under this Loan Agreement
and the Other Agreements; (b) enter, with or without process of law and without
breach of the peace, any premises where the Collateral or the books and records
of Borrower related thereto is or may be located, and without charge or
liability to Lender therefor seize and remove the Collateral (and copies of
Borrower's books and records relating to the Collateral) from said premises
and/or remain upon said premises and use the same (together with said books and
records) for the purpose of collecting, preparing and disposing of the
Collateral; (c) sell, lease, license or otherwise dispose of the Collateral or
18
any part thereof by one or more contracts at one or more public or private sales
for cash or credit, provided, however, that Borrower shall be credited with the
net proceeds of such sale(s) only when such proceeds are actually received by
Lender; and (d) require Borrower to assemble the Collateral and make it
available to Lender at a place or places to be designated by Lender which is
reasonably convenient to Lender and Borrower.
In addition, at any time an Event of Default has occurred and is continuing,
Lender may, in its discretion, enforce the rights of Borrower against any
Account Debtor, secondary obligor or other obligor in respect of any of the
Accounts. Without limiting the generality of the foregoing, at any time or times
that an Event of Default has occurred and is continuing, Lender may, in its
discretion, at such time or times (1) notify any or all Account Debtors,
secondary obligors or other obligors in respect thereof that the Accounts have
been assigned to Lender and that Lender has a security interest therein and
Lender may direct any or all accounts debtors, secondary obligors and other
obligors to make payment of Accounts directly to Lender, (2) extend the time of
payment of, compromise, settle or adjust for cash, credit, return of merchandise
or otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any secondary obligors or other obligors in respect thereof
without affecting any of Borrower's Liabilities, (3) demand, collect or enforce
payment of any Accounts or such other obligations, but without any duty to do
so, and Lender shall not be liable for any failure to collect or enforce the
payment thereof nor for the negligence of its agents or attorneys with respect
thereto and (4) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default has occurred and is continuing, at Lender's request, all invoices and
statements sent to any Account Debtor shall state that the Accounts and such
other obligations have been assigned to Lender and are payable directly and only
to Lender and Borrower shall deliver to Lender such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Lender may require.
All of Lender's rights and remedies under this Loan Agreement and the Other
Agreements are cumulative and non-exclusive. Exercise or partial exercise by
Lender of one or more of its rights or remedies shall not be deemed an election,
nor bar Lender from subsequent exercise or partial exercise of any other rights
or remedies. Lender agrees to give notice of any sale to Borrower at least ten
(10) days prior to any public sale or at least ten (10) days before the time
after which any private sale may be held. Borrower agrees that Lender may
purchase any such Collateral (including by way of credit bid), and may postpone
or adjourn any such sale from time to time by an announcement at the time and
place of sale or by announcement at the time and place of such postponed or
adjourned sale, without being required to give a new notice of sale. Borrower
agrees that Lender has no obligation to preserve rights against prior parties to
the Collateral.
8.3 POWER OF ATTORNEY. Upon the occurrence of any Event of Default, without
limiting Lender's other rights and remedies, Borrower grants to Lender an
irrevocable power of attorney coupled with an interest (in addition to such
other powers of attorney granted to Lender elsewhere in this Loan Agreement),
authorizing and permitting Lender at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to
execute on behalf of Borrower any Additional Documentation, or such other
instruments or documents as may be reasonably necessary in order to exercise a
right of Borrower or Lender, including but not limited to the execution of any
proof of claim in bankruptcy, any notice of lien, claim of mechanic's or other
lien, or assignment or satisfaction of mechanic's or other lien, or to take
control in any manner of any cash or non-cash proceeds of Collateral and take
any action or pay any sum required of Borrower pursuant to this Loan Agreement
and any Other Agreement. In no event shall Lender's rights under the foregoing
power of attorney or any of Lender's other rights under this Loan Agreement be
deemed to indicate that Lender is in control of the business, management or
properties of Borrower.
9. GENERAL PROVISIONS
9.1 NOTICES. All notices, demands or other communications required or
permitted to be given or delivered under or by reason of the provisions hereof
shall be in writing and shall be deemed to have been given when (i) delivered
personally to the recipient, (ii) sent via facsimile transmission, (iii) the
next Business Day after having been sent to the recipient by reputable overnight
courier service (charges prepaid) or (iv) four Business Days after having been
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
shall be sent to the parties hereunder at their respective addresses and
transmission numbers indicated on the signature page hereof, or to such other
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.
19
9.2 SEVERABILITY. Should any provision of this Loan Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Loan Agreement, which shall continue in full
force and effect.
9.3 INTEGRATION; MODIFICATION. This Loan Agreement, the Other Agreements and
such other written agreements, documents and instruments as may be executed in
connection herewith or pursuant hereto are the final, entire and complete
agreement between Borrower and Lender and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Loan Agreement and the Other Agreements.
There are no oral understandings, representations or agreements between the
parties which are not set forth in this Loan Agreement or the Other Agreements
or in other written instruments, documents or agreements signed by the parties
in connection herewith. If any provision contained in this Loan Agreement is in
conflict with, or inconsistent with, any provision in the Other Agreements, the
provision contained in this Loan Agreement shall govern and control, it being
the intent of the parties, however, that the terms of each of the Loan Agreement
and the Other Agreements shall remain in full force and effect. This Loan
Agreement and the Other Agreements may not be modified, altered or amended
except by an agreement in writing signed by Borrower and Lender.
9.4 TIME OF ESSENCE. Time is of the essence in the performance by Borrower of
each and every obligation under this Loan Agreement.
9.5 ATTORNEYS' FEES AND OTHER COSTS. Borrower shall reimburse Lender for all
reasonable out-of-pocket costs and expenses, including but not limited to
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Lender in connection
with any amendment or waiver to this Loan Agreement or any Other Agreement; the
enforcement of any of its rights hereunder against Borrower or the Collateral,
including in bankruptcy; enforcing Lender's security interest in the Collateral,
and representing Lender in all such matters. Borrower shall also pay Lender's
standard charges for returned checks in effect from time to time. Borrower's
obligation hereunder shall survive termination of this Loan Agreement.
9.6 BENEFIT OF AGREEMENT; ASSIGNMENT. The provisions of this Loan Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
provided, however, that Borrower may not assign or transfer any of its rights
under this Loan Agreement without the prior written consent of Lender, and any
prohibited assignment shall be void. Borrower hereby consents to Lender's sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Loan Agreement, or the Other Agreements, or of any portion
thereof, including without limitation Lender's rights, titles, interests,
remedies, powers and/or duties. Borrower shall establish and maintain a record
of ownership (the "REGISTER") in which it agrees to register by book entry
Lender's and each initial and subsequent assignee's interest in each Loan, and
in the right to receive any payments hereunder and any assignment of any such
interest. Notwithstanding anything to the contrary contained in this Loan
Agreement, the Loans (including the notes in respect of such Loans) are
registered obligations and the right, title, and interest of Lender and its
assignees in and to such Loans shall be transferable upon notation of such
transfer in the Register, pursuant to Borrower's obligation above. In no event
is any note to be considered a bearer instrument or bearer obligation. This
Section shall be construed so that the Loans are at all times maintained in
"registered form" within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2)
of the Internal Revenue Code and any related regulations (or any successor
provisions of the Code or such regulations).
9.7 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim
with, or the release of, any Borrower shall not constitute a compromise with, or
a release of, any other Borrower.
9.8 PARAGRAPH HEADINGS. Paragraph headings are only used in this Loan
Agreement for convenience. The term "including", whenever used in this Loan
Agreement, shall mean "including but not limited to". This Loan Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Loan Agreement shall be construed
strictly against Lender or Borrower under any rule of construction or otherwise.
9.9 INTEREST LAWS. Notwithstanding any provision to the contrary contained in
this Loan Agreement or any Other Agreement, Borrower shall not be required to
pay, and Lender shall not be permitted to collect, any amount of interest in
excess of the maximum amount of interest permitted by applicable law ("Excess
Interest"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Loan Agreement or in
any Other Agreement, then in such event: (1) the provisions of this subsection
shall govern and control; (2) Borrower shall not be obligated to pay any Excess
Interest; (3) any Excess Interest that Lender may have received hereunder or
under any Other Agreement shall be, at such Lender's option, (a) applied as a
credit against the outstanding principal balance of Borrower's Liabilities or
accrued and unpaid interest (not to exceed the maximum amount permitted by law),
20
(b) refunded to the payor thereof, or (c) any combination of the foregoing; (4)
the interest rate(s) provided for herein or in any Other Agreement shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Loan Agreement and the Other
Agreements shall be deemed to have been and shall be, reformed and modified to
reflect such reduction; and (5) Borrower shall not have any action against
Lender for any damages arising out of the payment or collection of any Excess
Interest.
9.10 NO IMPLIED WAIVERS. Lender's failure at any time or times hereafter to
exercise any rights or remedies or to require strict performance by Borrower of
any provision of this Loan Agreement shall not waive, affect or diminish any
right of Lender thereafter to demand strict compliance and performance therewith
and all rights and remedies shall continue in full force and effect until all of
Borrower's Liabilities have been fully and indefeasibly paid and performed. Any
suspension or waiver by Lender of an Event of Default by Borrower under this
Loan Agreement or the Other Agreements shall not suspend, waive or affect any
other Event of Default by Borrower under this Loan Agreement or the Other
Agreements, whether the same is prior or subsequent thereto and whether of the
same or of a different type. No waiver by Lender of any Event of Default or of
any of the undertakings, agreements, warranties, covenants and representations
of Borrower contained in this Loan Agreement or the Other Agreements shall be
effective unless specifically waived by an instrument in writing signed by an
officer of Lender.
9.11 ACCEPTANCE BY LENDER. This Loan Agreement shall become effective upon
acceptance by Lender, in writing, at its principal place of business as set
forth above. If so accepted by Lender, this Loan Agreement and the Other
Agreements shall be deemed to have been made at said place of business.
9.12 LAW AND VENUE. THIS LOAN AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF NEW YORK. BORROWER
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF XXXX, STATE OF ILLINOIS. BORROWER WAIVES ANY RIGHT
IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST
BORROWER BY LENDER OR TO ASSERT THAT ANY ACTION INSTITUTED BY LENDER OR BORROWER
IN SUCH COURT IS AN IMPROPER VENUE OR SUCH ACTION SHOULD BE TRANSFERRED TO A
MORE CONVENIENT FORUM.
9.13 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH WAIVE THE RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO, THIS LOAN AGREEMENT WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
9.14 CONFIDENTIALITY. The provisions of this Loan Agreement and the Other
Agreements shall be held in strictest confidence by Borrower and shall not be
publicized or disclosed in any manner whatsoever; PROVIDED, HOWEVER, that
Borrower may disclose this Loan Agreement and the Other Agreements in confidence
to its attorneys, accountants, auditors, insurers, tax preparers, and financial
advisors, and insofar as such disclosure may be necessary to enforce its terms,
or as otherwise required by law, rule or regulations.
SIGNATURE PAGE FOLLOWS:
21
IN WITNESS WHEREOF, this Loan and Security Agreement has been duly executed as
of the day and year first above written.
BORROWER: ACCEPTED BY:
BORROWER: SWMX, INC. LENDER: BLUECREST CAPITAL FINANCE, L.P.
BY: BLUECREST CAPITAL
FINANCE GP, LLC, ITS
GENERAL PARTNER
BY: /s/ Xxxxx Xxxx BY: /s/
NAME: Xxxxx Xxxx NAME:
TITLE: Chief Financial Officer TITLE:
XXXXXXX XXX XXX XXXXXX XXXXXX XXXXXXX FOR 000 XXXX XXXXXXXXXX XXXXXX
NOTICES: XXXXXXXXX, XX 00000 NOTICES: XXXXX 000
XXXXXXX, XX 00000
TELEPHONE: 000-000-0000 ATTENTION: LEGAL DEPARTMENT
FACSIMILE: TELEPHONE 000-000-0000
FACSIMILE: 312-443-0126
WITH A COPY TO:
000 XXXX XXXXXXXXXX
XXXXX 000
XXXXXXX, XX 00000
ATTENTION: XXXX XXXX
TELEPHONE: 000-000-0000
FACSIMILE: 312-443-0126
BORROWER:
BORROWER: SOFTWAVE MEDIA
EXCHANGE, INC.
BY: /s/ Xxxxx Xxxx
NAME: Xxxxx Xxxx
TITLE: Chief Financial Officer
ADDRESS FOR ONE BRIDGE STREET
NOTICES: XXXXXXXXX, XX 00000
TELEPHONE: 000-000-0000
FACSIMILE:
22
Schedule of Exceptions
1. PERMITTED DEBT
a) Purchase Money Security Interest made by IBM Credit LLC evidenced by
UCC Financing Number - 2007 0006279 filed with the State of Delaware.
2. PERMITTED LIENS
a) Purchase Money Security Interest Secured Party - IBM Credit LLC UCC
Financing Number - 2007 0006279 Jurisdiction - State of Delaware
3. LIST OF MATERIAL INVESTORS
Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxx
4. LIST OF STRATEGIC INVESTORS
None
23
EXHIBIT A
OFFICER'S COMPLIANCE AND DISCLOSURE CERTIFICATE
(attachment to monthly financial reports)
Reference is hereby made to certain loan or credit agreements (together
with all instruments, documents and agreements entered into in connection
therewith, the "Loan Documents") by and between BlueCrest Capital Finance, L.P.
("Lender ") and SWMX, Inc. and SoftWave Media Exchange, Inc. (jointly and
severally, "Borrower"). The undersigned, _________________ and _______________
each hereby certifies to Lender that he/she is the duly elected and acting
__________________ of SWMX, Inc. and __________________ of SoftWave Media
Exchange, Inc., respectively, and that:
(i) FINANCIAL STATEMENTS - GENERAL. The attached financial statements
fairly reflect the financial condition of Borrower in all material
respects in accordance with generally accepted accounting principles
applied in a consistent manner, except as disclosed on the attached
SCHEDULE OF FINANCIAL STATEMENT EXCEPTIONS (if none, so state on said
Schedule) and there has been no material adverse change in the assets,
liabilities or financial condition of Borrower since ____________ __,
200_;
(ii) FINANCIAL STATEMENTS - OFF-BALANCE SHEET. All material financial
obligations and contingent obligations of Borrower not otherwise listed
and itemized on the attached financial statements, are disclosed on the
attached SCHEDULE OF FINANCIAL STATEMENT Exceptions, including but not
limited to material off-balance sheet leasing obligations, and
guarantees of financial obligations of Borrower, its affiliates,
subsidiaries, officers and related parties (if none, so state on said
Schedule);
(iii) FINANCIAL STATEMENTS - RELATED PARTY TRANSACTIONS. All material related
party transactions, including but not limited to loans, receivables or
payables due to/from Borrower's officers or employees, affiliates,
subsidiaries, or other related parties, are disclosed on the attached
SCHEDULE OF FINANCIAL STATEMENT EXCEPTIONS (if none, so state on said
Schedule);
(iv) COMPLIANCE WITH APPLICABLE LAW. Except as noted on the attached
SCHEDULE OF COMPLIANCE ISSUES, there are no material events whereby
Borrower or, to the knowledge of Borrower, Borrower's directors,
employees, affiliates, subsidiaries or other related parties are acting
or conducting business contrary to applicable local, state, or national
laws in the country or countries in which said parties are conducting
business;
(v) ABSENCE OF DEFAULT. Except as noted on the attached SCHEDULE OF
COMPLIANCE ISSUES, no Default or Event of Default exists on the date
hereof; and
(vi) LITIGATION. There are no actions, suits or proceedings pending or, to
the knowledge of Borrower and the undersigned, threatened against or
affecting Borrower in any court or before any governmental commission,
board or authority which, if adversely determined, will have a material
adverse effect (separately or in the aggregate) on the ability of
Borrower to perform its obligations under the any of Loan Documents.
Borrower is involved in such litigation and other disputes as are
listed on the attached SCHEDULE OF COMPLIANCE ISSUES (if none, so state
on said Schedule).
The undersigned has executed this certificate as of _______________________,
200_.
Signature: _________________________________________
By (printed name and title): ___________________________
24
SCHEDULE OF FINANCIAL STATEMENT EXCEPTIONS
Category of Disclosure Financial Date Comments (If None, State "None")
---------------------- -------------- --------------------------------
General Exceptions:
Off-Balance Sheet:
Related Party Transactions:
SCHEDULE OF COMPLIANCE ISSUES
Parties Involved Date of Filing/incident Nature of Dispute or Issue (If None, State "none")
---------------- ----------------------- --------------------------
Compliance Issues:
Litigation Issues:
Signatory Initials: ___________________
25
EXHIBIT B
FUNDING REQUEST NO. ___
FOR
LOAN AND SECURITY AGREEMENT NO. V07106
BY AND BETWEEN
BLUECREST CAPITAL FINANCE, L.P., AS LENDER
AND
SWMX, INC. AND SOFTWAVE MEDIA EXCHANGE, INC.,
JOINTLY AND SEVERALLY, AS BORROWER
Borrower hereby requests an advance under the terms of the above described Loan
and Security Agreement (the "Loan Agreement") in the original principal amount
of _____________________ Dollars ($______________________).
Borrower hereby acknowledges and agrees that the representations and warranties
as set forth in the Loan Agreement are as if fully set forth herein, and further
agrees that any and all Conditions Precedent to the making of an advance by the
Lender set forth in the Loan Agreement either have been satisfied or will be
satisfied as a result of the making by Lender of this advance. Borrower
represents and warrants that there has been no material adverse change in the
financial condition, internal organization and/or business prospects of the
Borrower since the later of the date of the Loan Agreement or the date of the
last advance made by the Lender thereunder.
The advance hereby requested hereby shall be secured by the Collateral as
defined in the Loan Agreement, including but not limited to the Equipment
described in the attached Schedule A.
The undersigned certifies that the undersigned is a duly authorized signatory of
the Borrower, and that as such the undersigned is authorized to execute this
request on behalf of the Borrower.
SWMX, INC.
Borrower
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
Date:
---------------------------------
SOFTWAVE MEDIA EXCHANGE, INC.
Jointly and Severally, Borrower
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
Date:
---------------------------------
26
EXHIBIT C
FORM OF BORROWING BASE CERTIFICATE
FOR
LOAN AND SECURITY AGREEMENT NO. V07106
BY AND BETWEEN
BLUECREST CAPITAL FINANCE, L.P., AS LENDER
AND
SWMX, INC. AND SOFTWAVE MEDIA EXCHANGE, INC.,
JOINTLY AND SEVERALLY, AS BORROWER
27
SCHEDULE 1
APPROVED FOREIGN ACCOUNT DEBTORS
28
