EVOLVE SOFTWARE, INC.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as of
November 13, 2001 (as amended from time to time, this "LOAN AGREEMENT") between
EVOLVE SOFTWARE, INC., a Delaware corporation (herein called "BORROWER"), and
COMERICA BANK-CALIFORNIA, successor by merger to Imperial Bank (herein called
"BANK"). This Loan Agreement amends, restates and supercedes in its entirety
that certain Loan and Security Agreement dated as of January 31, 2001, entered
into between Borrower and Imperial Bank (the "ORIGINAL LOAN AGREEMENT").
RECITALS
A. Borrower is in violation of the financial covenant for the reporting
period ended September 30, 2001, set forth in (1) Section 6.7(a) of the Original
Loan Agreement that Borrower maintain a Quick Ratio of at least 1.75:1.00 for
each of the calendar months July through September, 2001, (2) Section 6.7(b) of
the Original Loan Agreement that Borrower maintain a Liquidity Ratio of at least
1.75:1.00 for each of the calendar months August through September, 2001 and (3)
Section 6.7(c) of the Original Loan Agreement that Borrower maintain minimum
revenues, for each of the calendar months April through September, 2001, of not
less than 80% of Borrower's projected gross revenue, which violations constitute
an Event of Default under Section 8.2 of the Original Loan Agreement (the
"CURRENT EVENTS OF DEFAULT").
B. Borrower has requested and Bank has agreed to (1) waive the
Current Events of Default, and (2) amend and restate the Original Loan
Agreement, all in accordance with the terms set forth in this Loan Agreement.
AGREEMENT
The parties agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION.
DEFINITIONS. Capitalized terms used in this Agreement without definitions shall
have the meanings set forth on Exhibit A hereto.
ACCOUNTING TERMS. All accounting terms not specifically defined on Exhibit A
shall be construed in accordance with GAAP and all calculations shall be made in
accordance with GAAP. The term "FINANCIAL STATEMENTS" shall include the
accompanying notes and schedules.
SECTION 2. LOAN AND TERMS OF PAYMENT.
CREDIT EXTENSIONS.
(a) Borrower promises to pay to Bank, in lawful money of the
United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower, together with interest on the unpaid
principal amount of such Credit Extensions at rates in accordance with the terms
hereof.
1.
(b) REVOLVING ADVANCES.
(i) INITIAL REVOLVING ADVANCES. Subject to and upon the
terms and conditions of this Loan Agreement, Borrower may request from Bank, at
any time and from time to time from the date hereof through December 31, 2001
("INITIAL REVOLVING MATURITY DATE"), loans (each an "INITIAL REVOLVING ADVANCE";
collectively, the "INITIAL REVOLVING ADVANCES"), subject to Section 2.1(b)(iv),
in an aggregate outstanding amount not to exceed the lesser of (A) the Committed
Revolving Line and (B) the amount of cash collateral deposited by Borrower with
Bank and Custodian to secure such Initial Revolving Advances.
(ii) FINAL REVOLVING ADVANCES. Subject to and upon the terms
and conditions of this Loan Agreement Borrower may request from Bank, from the
Initial Revolving Maturity Date through the Final Revolving Maturity Date, loans
(each a "FINAL REVOLVING ADVANCE"; collectively, with Initial Revolving
Advances, the "REVOLVING ADVANCES"), subject to Section 2.1(b)(iv), in an
aggregate outstanding amount not to exceed the amount resulting from deducting
the amount of Initial Revolving Advances outstanding on such date from the
lesser of (A) the Committed Revolving Line and (B) the Borrowing Base.
Notwithstanding anything in this Loan Agreement to the contrary, Borrower agrees
that no Final Revolving Advance shall be made by Bank if: (1) any Event of
Default has occurred and is continuing at the time Borrower requests a Final
Revolving Advance, or (2) Bank has completed an audit of Borrower's books and
records relating to the Eligible Accounts and Collateral on or before December
15, 2001, the results of which are not satisfactory to Bank as determined in its
sole and absolute discretion ("FINAL REVOLVING REQUIREMENTS").
(iii) LETTERS OF CREDIT. Subject to the availability under
the Committed Revolving Line, and in reliance on the representations and
warranties of Borrower set forth herein, Bank shall issue for the account of
Borrower commercial and/or standby letters of credit (collectively, the "LETTERS
OF CREDIT") as Borrower may request, which request shall be made by delivering
to Bank a duly executed letter of credit application on Bank's standard form (1)
at any time and from time to time from the date hereof through the Business Day
immediately prior to the Initial Revolving Maturity Date, in aggregate amounts
not to exceed the aggregate amounts deposited by Borrower with Bank as cash
collateral for each such Letter of Credit (including all fees charged by Bank
thereon), (2) at any time from the Initial Revolving Maturity Date through the
Business Day immediately prior to the Final Revolving Maturity Date and upon the
satisfaction of the Final Revolving Requirements, in aggregate amounts not to
exceed the Borrowing Base less the aggregate of all Revolving Advances
outstanding. Notwithstanding anything to the contrary in this Loan Agreement,
the outstanding and undrawn amounts under all Letters of Credit at any time
shall not exceed $3,000,000 less the aggregate of all Revolving Advances
outstanding at such time, and shall be deemed to constitute Revolving Advances
for the purpose of calculating availability under the Committed Revolving Line.
All Letters of Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's form
application and letter of credit agreement. Borrower will pay any standard
issuance and other fees that Bank notifies Borrower will be charged for issuing
and processing Letters of Credit for Borrower.
(iv) Subject to Sections 2.1(b) and 2.1(b)(ii), amounts
borrowed pursuant to this Section 2.1(b) may be repaid and reborrowed at any
time prior to the earlier to occur of (a) the Final Revolving Maturity Date and
2.
(b) the termination of Bank's obligation to advance money pursuant to Section
11.1(b), at which time all Revolving Advances under this Section 2.1(b) shall be
immediately due and payable. Borrower may prepay any Revolving Advances at any
time, in whole or in part, without penalty or premium. Revolving Advances may
be used for Revolving Advance Permitted Uses only. If the aggregate amount of
the outstanding Revolving Advances (including outstanding and undrawn Letters of
Credit) exceeds the amounts that Borrower is allowed to borrow pursuant to this
Section 2.l(b) at any time, Borrower shall promptly pay to Bank, in cash, the
amount of such excess.
(v) Whenever Borrower desires a Revolving Advance, Borrower
will notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific Standard Time, on the Business Day that the Revolving Advance is to be
made. Each such notification shall be promptly confirmed by a Payment/Advance
Form in substantially the form of Exhibit C. Bank is authorized to make
Revolving Advances under this Loan Agreement, based upon instructions received
from a Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank's discretion such Revolving Advances are necessary to
meet Obligations which have become due and remain unpaid. Bank shall be
entitled to rely on any telephonic notice given by a person who Bank reasonably
believes to be a Responsible Officer or a designee thereof, and Borrower shall
indemnify and hold Bank harmless for any damages or losses suffered by Bank as a
result of such reliance. Bank will credit the amount of Revolving Advances made
under this Section 2.1(b) to Borrower's deposit account maintained with Bank.
(vi) Interest shall accrue from the date of each Revolving
Advance at the rate specified in Section 2.2(a), and shall be payable monthly on
the first day of each month through the Final Revolving Maturity Date.
(c) EXISTING EQUIPMENT ADVANCES. Borrower acknowledges that Bank
has provided equipment loans (each an "EQUIPMENT ADVANCE" and collectively,
"EQUIPMENT ADVANCES") to Borrower pursuant to Borrower's request under the
Original Loan Agreement on the terms and conditions set forth in the Original
Loan Agreement. Borrower hereby acknowledges and agrees that the current
outstanding principal balance of the Equipment Advances made under the Original
Loan Agreement is $4,356,718. Borrower promises to pay to Bank the outstanding
unpaid principal balance (and all accrued unpaid interest thereon) of the
Equipment Advances in equal monthly principal installments of $198,032.66, along
with all accrued interest thereon at the interest rate calculated according to
Section 2.2 hereof. Borrower agrees that no new Equipment Advances shall be
made under this Loan Agreement after the date hereof, and acknowledges and
agrees that Bank shall have no obligation to make any new Equipment Advances.
Borrower shall have the right to prepay at any time all outstanding Equipment
Advances, along with accrued interest thereon, without any premium or penalty.
INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(d) INTEREST RATES.
(i) REVOLVING ADVANCES. Except as set forth in Section
2.2(b), the Revolving Advances shall bear interest, on the outstanding daily
balance thereof, at a rate equal to .75% above the Prime Rate.
3.
(ii) EQUIPMENT ADVANCES. Except as set forth in Section
2.2(b), the Equipment Advances shall bear interest, on the outstanding daily
balance thereof, at a rate equal to (1) prior to Borrower's raising additional
equity after September 26, 2001 from one or more issuances of new securities in
an aggregate amount equal to or greater than $20,000,000, 1.50% above the Prime
Rate, (2) 1.00% above the Prime Rate thereafter.
(e) LATE FEE; DEFAULT RATE. If any payment is not made within ten
days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) 5% of the amount of such unpaid amount or (ii) the
maximum amount permitted to be charged under applicable law. All Obligations
shall bear interest, from and after the occurrence and during the continuance of
an Event of Default, at a rate equal to the lesser of (y) five percentage points
above the interest rate applicable immediately prior to the occurrence of the
Event of Default or (z) the maximum amount permitted to be charged under
applicable law.
(f) PAYMENTS. Bank shall, at its option, charge any interest due
hereunder, all Bank Expenses, and all Periodic Payments against any of
Borrower's deposit accounts or against the Committed Revolving Line, in which
case those amounts shall thereafter accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded by becoming a
part of the Obligations, and such interest shall thereafter accrue interest at
the rate then applicable hereunder.
(g) COMPUTATION. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
CREDITING PAYMENTS. Prior to the occurrence of an Event of Default, Bank shall
credit a wire transfer of funds, check or other item of payment to such deposit
account or Obligation as Borrower specifies. After the occurrence of an Event
of Default, the receipt by Bank of any wire transfer of funds, check, or other
item of payment shall be immediately applied to conditionally reduce the
Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained in this Loan Agreement, any wire transfer or
payment received by Bank after 12:00 noon Pacific Standard Time shall be deemed
to have been received by Bank as of the opening of business on the immediately
following Business Day. Whenever any payment to Bank under the Loan Documents
would otherwise be due (except by reason of acceleration) on a date that is not
a Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
4.
SECTION 3. COMERICA BANK-CALIFORNIA, SUCCESSOR BY MERGER TO IMPERIAL BANK.
Each Loan Document is hereby amended so that all references to Bank therein
shall be references to Comerica Bank-California, successor by merger to Imperial
Bank.
SECTION 4. LIMITED WAIVER.
Bank hereby waives the Current Events of Default. The waiver set forth in
this Section 4 shall be limited precisely as written and shall not be deemed to
(i) be a waiver of or an amendment to any term or condition of the Loan
Agreement or any other Loan Document, (ii) prejudice any right or remedy which
any party may now have or may have in the future under or in connection with the
Loan Agreement or any other Loan Document, or (iii) be a consent to any future
waiver or amendment.
SECTION 5. CONDITIONS PRECEDENT.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS LOAN AGREEMENT. The legal
effectiveness of this Loan Agreement is subject to the satisfaction of all of
the following conditions precedent:
(a) EXECUTED LOAN AGREEMENT. Bank shall have received this Loan
Agreement duly executed and delivered by Borrower and the same shall have become
effective.
(b) OFFICER'S CERTIFICATE. Bank shall have received a duly
executed officer's certificate of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Loan Agreement.
(c) CONTROL AGREEMENTS. Bank shall have received (1) a Control
Agreement, duly executed by Borrower and Custodian in favor of Bank in order to
perfect Bank's security interest in securities and cash deposited by Borrower in
the securities account number xxxxxxxxx and any other account set up by Borrower
with Custodian ("CUSTODIAN ACCOUNT"), and the same shall have become effective,
and (2) a Control Agreement, duly executed by Borrower and Monarch Funds, LLC, a
Delaware business trust ("MONARCH") in favor of Bank in order to perfect Bank's
security interest in securities and cash deposited by Borrower in the securities
account number xxxxxxxxx and any other account set up by Borrower with Monarch
("MONARCH ACCOUNT"; collectively with Custodian Account, the "ACCOUNTS"), and
the same shall have become effective.
(d) CERTIFICATE OF DEPOSIT. Borrower shall have transferred funds
in cash or immediately available funds in an amount equal to $2,901,127 to be
placed in a certificate of deposit ("CERTIFICATE OF DEPOSIT"), under the
exclusive dominion and control of Bank, as security for the full, complete and
final payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of Borrower's obligations to repay the Revolving
Advances.
(e) LOAN FEE. Bank shall have received from Borrower a loan fee
in the amount of Seven Thousand Five Hundred Dollars ($7,500).
(f) TERM SHEET. Bank shall have received copies of definitive term
sheets for equity investments in the stock of Borrower signed by Warburg Pincus
on terms and conditions acceptable to Bank in its sole and absolute condition.
5.
(g) FINANCIAL CONDITION. There shall have occurred no material
adverse change in the financial condition or prospects of Borrower as shown on
the most recent financial statements submitted to Bank or disclosed to Bank,
respectively, and relied upon by Bank in entering into this Loan Agreement.
(h) NO DEFAULT. No Event of Default has occurred that remains
uncured and is continuing or will result from the consummation of the
transactions contemplated by this Loan Agreement.
(i) BANK EXPENSES. Bank shall have received reimbursement from
Borrower of its costs and expenses incurred (including, without limitation, its
reasonable attorneys' fees and expenses) in connection with this Loan Agreement
and the transactions contemplated hereby.
(j) UCC STATEMENTS. Bank shall have received from Borrower (1)
duly executed financing statements (Forms UCC-1) as Bank deems necessary or
appropriate, and (2) copies of duly filed UCC termination statements as Bank
deems necessary or appropriate.
(k) AUDIT. Bank, at Bank's option, shall have performed an audit
of the Collateral, the results of which shall be satisfactory to Bank, such
audit to be completed, if at all, within ten days after the date hereof.
CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The obligation of Bank to make
each Credit Extension, including each Initial Revolving Advance, is further
subject to the following conditions:
(l) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1; and
(m) the representations and warranties contained in Section 7
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall
be deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
5.2.
SECTION 6. EFFECTIVENESS OF SECURITY INTEREST.
Borrower hereby covenants for the benefit of Bank that the security
interest granted to Bank pursuant to the Original Loan Agreement continues to be
valid and enforceable and that Bank has and will continue to have a security
interest in all presently existing and hereafter acquired or arising Collateral
to secure prompt repayment of any and all Obligations and to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently-existing
Collateral, and will constitute a valid, first priority security interest in
6.
later-acquired Collateral. Notwithstanding any termination, Bank's Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding. Borrower further covenants for the benefit of Bank that Bank
shall continue to have the rights provided Bank pursuant to Section 4 of the
Original Loan Agreement, including, without limitation the right, upon
reasonable prior notice, from time to time during Borrower's usual business
hours but no more than once a year (unless an Event of Default has occurred and
is continuing), to inspect Borrower's Books and to make copies thereof and to
check, test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, condition of, or any other matter relating to, the
Collateral.
Additionally, Borrower hereby grants to Bank a security interest in (a) the
Certificate of Deposit, b) the Accounts, and (c) the proceeds, increase and
products of each of the Certificate of Deposit and the Accounts, all accessions
thereto, and all property which Borrower may receive on account of each of the
Certificate of Deposit and the Accounts, as additional security.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary is a
corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.
DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and performance of the
Loan Documents are within Borrower's powers, have been duly authorized, and are
not in conflict with nor constitute a breach of any provision contained in
Borrower's Certificate of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement by which Borrower is bound.
Borrower is not in default under any agreement by which it is bound, which
default could have a Material Adverse Effect.
COLLATERAL. Borrower has good title to the Collateral, free and clear of Liens,
except for Permitted Liens. The Eligible Accounts are bona fide existing
obligations. The property giving rise to such Eligible Accounts has been
delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. Borrower has not received
notice of an actual or imminent Insolvency Proceeding of any account debtor
whose accounts are included in any Borrowing Base Certificate as an Eligible
Account. All Inventory is in all material respects of good and marketable
quality, free from all material defects, except for Inventory for which adequate
reserves have been made.
INTELLECTUAL PROPERTY COLLATERAL. Borrower is the sole owner of the
Intellectual Property Collateral, except for Licenses granted by Borrower to its
customers in the ordinary course of business. Each of the Copyrights,
Trademarks and Patents is, to Borrower's knowledge, valid and enforceable, and
no part of the Intellectual Property Collateral has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property Collateral violates the rights of any third party
except to the extent such claim could not reasonably be expected to cause a
7.
Material Adverse Effect. Except as set forth in the Schedule, Borrower's rights
as a licensee and reseller of intellectual property do not give rise to more
than 5% of its gross revenue in any given month, including, without limitation,
revenue derived from the sale, licensing, rendering or disposition of any
product or service.
NAME; LOCATION OF CHIEF EXECUTIVE OFFICE AND COLLATERAL. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 12 hereof. The Collateral is
presently located at the addresses set forth on the Schedule.
LITIGATION. Except as set forth in the Schedule, there are no actions or
proceedings pending by or against Borrower or any Subsidiary before any court or
administrative agency in which a likely adverse decision could reasonably be
expected to have a Material Adverse Effect, or a material adverse effect on
Borrower's interest or Bank's security interest in the Collateral.
NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated financial
statements related to Borrower and any Subsidiary that are delivered by Borrower
to Bank fairly present in all material respects Borrower's consolidated
financial condition as of the date thereof and Borrower's consolidated results
of operations for the period then ended. There has not been a material adverse
change in the consolidated financial condition of Borrower since the date of the
most recent of such financial statements submitted to Bank.
SOLVENCY, PAYMENT OF DEBTS. Borrower is able to pay its debts (including trade
debts) as they mature; the fair saleable value of Borrower's Assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities less
its deferred maintenance and royalties and other revenue derived from Licenses;
and Borrower is not left with unreasonably small capital after the transactions
contemplated by this Loan Agreement.
COMPLIANCE WITH LAWS AND REGULATIONS. Borrower and each Subsidiary have met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal Reserve
System). Borrower has complied in all material respects with all the provisions
of the Federal Fair Labor Standards Act. Borrower is in compliance with all
environmental laws, regulations and ordinances except where the failure to
comply is not reasonably likely to have a Material Adverse Effect. Borrower has
not violated any statutes, laws, ordinances or rules applicable to it, violation
of which could have a Material Adverse Effect. Borrower and each Subsidiary
have filed or caused to be filed all tax returns required to be filed, and have
paid, or have made adequate provision for the payment of, all taxes reflected
therein except those being contested in good faith with adequate reserves under
GAAP.
8.
SUBSIDIARIES. Borrower does not own any stock, partnership interest or other
equity securities of any Person, except for Permitted Investments.
GOVERNMENT CONSENTS. Borrower and each Subsidiary have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all governmental authorities that are necessary for the
continued operation of Borrower's business as currently conducted, except where
the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.
INBOUND LICENSES. Except as disclosed on the Schedule, Borrower is not a party
to, nor is bound by, any License or other agreement that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower's interest in
such License or agreement or any other property.
NEW EQUITY. Borrower closed a sale of preferred stock with investors on October
9, 2001, and received in excess of $10,000,000 in proceeds therefrom.
FULL DISCLOSURE. No representation, warranty or other statement made by
Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading, it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ from
the projected or forecasted results.
SECTION 8. AFFIRMATIVE COVENANTS.
Borrower covenants that, until payment in full of all outstanding
Obligations, and for so long as Bank may have any commitment to make a Credit
Extension hereunder, Borrower shall do all of the following:
GOOD STANDING AND GOVERNMENT COMPLIANCE. Borrower shall maintain its and each
of its Subsidiaries' corporate existence in its jurisdiction of incorporation
and maintain qualification in each jurisdiction in which the failure to so
qualify could have a Material Adverse Effect. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, and shall maintain,
and shall cause each of its Subsidiaries to maintain, in force all licenses,
approvals and agreements, the loss of which or failure to comply with which
could have a Material Adverse Effect, or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver to Bank:
(a) as soon as available, but in any event within 20 Business Days after the end
of each calendar month, a company-prepared consolidated balance sheet and income
statement covering Borrower's consolidated operations during such period, in a
form acceptable to Bank and certified by a Responsible Officer; (b) as soon as
available, but in any event within 95 days after the end of Borrower's fiscal
9.
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an opinion which is
unqualified or otherwise consented to in writing by Bank on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) promptly upon receipt of notice thereof, a report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of $250,000 or
more; (d) such budgets, sales projections, operating plans or other financial
information generally prepared by Borrower in the ordinary course of business as
Bank may reasonably request from time to time; and (e) within 30 days of the
last day of each fiscal quarter, a report signed by Borrower, in form reasonably
acceptable to Bank, listing any applications or registrations that Borrower has
made or filed in respect of any Patents, Copyrights or Trademarks and the status
of any outstanding applications or registrations, as well as any material change
in Borrower's Intellectual Property Collateral, including, but not limited to,
any subsequent ownership right of Borrower in or to any Trademark, Patent or
Copyright not specified in Exhibits A, B, and C of the Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this Loan
Agreement. Borrower shall deliver to Bank on or before December 15, 2001, a
copy of Borrower's pro forma financial statements for the calendar year ending
December 31, 2002, in form and substance satisfactory to Bank in its sole and
absolute discretion.
(a) Within 10 Business Days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit D hereto, together with
aged listings of accounts receivable and accounts payable.
(b) Within 20 Business Days after the last day of each month,
Borrower shall deliver to Bank, with the monthly financial statements, a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit E hereto.
(c) Bank shall have a right from time to time hereafter to audit
Borrower's Accounts and appraise Collateral at Borrower's expense, provided that
such audits will be conducted no more often than two times in any 12 month
period unless an Event of Default has occurred and is continuing.
Notwithstanding anything to the contrary herein, if there is no continuing Event
of Default at the time Bank verifies Accounts, Bank shall not identify itself as
Bank to the Account debtors.
INVENTORY; RETURNS. Borrower does not currently maintain Inventory of any
significant magnitude, however, Borrower shall keep the Inventory it has in good
and marketable condition, free from all material defects except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist on the
Closing Date. Borrower shall promptly notify Bank of all returns and recoveries
of Inventory and of all disputes and claims involving Inventory with an amount
of more than $100,000.
TAXES. Borrower shall make, and cause each Subsidiary to make, due and timely
payment or deposit of all material federal, state, and local taxes, assessments,
or contributions required of it by law, including, but not limited to, those
laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will
10.
execute and deliver to Bank, on demand, proof satisfactory to Bank indicating
that Borrower or a Subsidiary has made such payments or deposits and any
appropriate certificates attesting to the payment or deposit thereof; provided
that Borrower or a Subsidiary need not make any payment if the amount or
validity of such payment is contested in good faith by appropriate proceedings
and is reserved against (to the extent required by GAAP) by Borrower.
INSURANCE.
(d) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
liability and other insurance in amounts and of a type that are customary to
businesses similar to Borrower's.
(e) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and all liability insurance policies shall show Bank as an additional
insured and specify that the insurer must give at least 20 days notice to Bank
before canceling its policy for any reason. Upon Bank's request, Borrower shall
deliver to Bank certified copies of the policies of insurance and evidence of
all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, all proceeds payable under any such policy shall, at Bank's
option, be payable to Bank to be applied on account of the Obligations.
PRIMARY DEPOSITORY. Borrower shall maintain its primary depositary account and
banking relationship with Bank.
FINANCIAL COVENANTS. Borrower shall:
(f) BANK LIQUIDITY RATIO. Maintain at all times a Bank
Liquidity Ratio of 1.50:1.00 from the date hereof until December 31, 2002 and
1.25:1.00 thereafter. As used herein, "BANK LIQUIDITY RATIO" on any given date
shall be defined as (a) the sum of cash deposited by Borrower with Bank plus
cash deposited by Borrower with Custodian to (b) the sum of the aggregate amount
of outstanding Revolving Advances and Equipment Advances not otherwise
cash-collateralized as of such date.
(g) COMPANY LIQUIDITY RATIO. Beginning from the month ending
December 31, 2001, and calculated on a monthly basis thereafter, maintain the
greater of either (1) a ratio of (a) the sum of (i) cash deposited by Borrower
with Bank plus cash deposited by Borrower with Custodian plus the Certificate of
Deposit (collectively, "UNRESTRICTED CASH") plus (ii) the amount available as of
the date of determination under the Committed Revolving Line, to (b) the sum of
11.
(x) Borrower's total Indebtedness to Bank plus (y) all other secured
Indebtedness of Borrower, of at least 1.75:1.00, or (2) Unrestricted Cash of at
least $14,000,000 until December 31, 2001, and at least $8,000,000 thereafter.
(h) MAXIMUM LEVERAGE RATIO. Beginning from the month ending
December 31, 2001, and calculated on a monthly basis thereafter, maintain, a
Leverage Ratio not to exceed 2.25:1.00. As used herein, "LEVERAGE RATIO" shall
be defined as total liabilities of Borrower less deferred revenue divided by
Tangible Net Worth. As used herein, "TANGIBLE NET WORTH" shall be defined as
the sum of all of Borrower's assets, excluding any value for goodwill,
Trademarks, Patents, Copyrights, organization expense and other similar
intangible items, less all Borrower's liabilities, plus Subordinated Debt.
REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(i) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable: (i) those intellectual property rights listed on Exhibits A, B and
C to any intellectual property security agreements delivered to Bank by Borrower
pursuant to Section 8.8(b), (ii) all registrable intellectual property rights
Borrower has developed as of the date of this Loan Agreement but heretofore
failed to register, within 30 days of the date of this Loan Agreement, and (iii)
those additional intellectual property rights developed or acquired by Borrower
from time to time in connection with any product, prior to the sale or licensing
of such product to any third party, and prior to Borrower's use of such product
(including without limitation major revisions or additions which significantly
improve the functionality of the intellectual property rights listed on such
Exhibits A, B and C). Borrower shall give Bank notice of all such applications
or registrations.
(j) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
Additionally, Borrower shall deliver to Bank on a semi-annual basis, executed
originals of Bank's standard form of Intellectual Property Security Agreement
with appropriate insertions, schedules and other information, including, without
limitation, all titles, names or marks together with all relevant registration
and/or application numbers and registration and/or filing dates, sufficient for
Bank to file a security interest in all the Intellectual Property Collateral of
Borrower in which Bank does not already have a perfected security interest.
(k) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights material to
Borrower's ongoing operations to be abandoned, forfeited or dedicated to the
public without the written consent of Bank, which shall not be unreasonably
withheld.
(l) Bank may audit Borrower's Intellectual Property
Collateral to confirm compliance with this Section 8.8, provided such audit may
not occur more often than two times in any twelve-month period, unless an Event
of Default has occurred and is continuing. Bank shall have the right, but not
12.
the obligation, to take, at Borrower's sole expense, any actions that Borrower
is required under this Section 8.8 to take but which Borrower fails to take,
after 15 days' written notice to Borrower. Borrower shall reimburse and
indemnify Bank for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this Section 8.8.
CONSENT OF INBOUND LICENSORS. Prior to entering into or becoming bound by any
License or agreement that is reasonably likely to have a material impact on
Borrower's business or financial condition, Borrower shall: (i) provide written
notice to Bank of the material terms of such License or agreement with a
description of its likely impact on Borrower's business or financial condition;
and (ii) take such steps as Bank requests to obtain the consent of, or waiver
by, any person whose consent or waiver is necessary for Borrower's interest in
such Licenses or contract rights to be deemed Collateral and for Bank to have a
security interest in it that might otherwise be restricted by the terms of the
applicable License or agreement, whether now existing or entered into in the
future.
FURTHER ASSURANCES. At any time and from time to time Borrower shall execute
and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Loan Agreement.
SECTION 9. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following without Bank's prior written consent:
DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, to "TRANSFER"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than Permitted Transfers.
CHANGE IN BUSINESS; CHANGE IN CONTROL OR EXECUTIVE OFFICE. Engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than or reasonably related or incidental to the businesses currently engaged in
by Borrower. Borrower will not have a Change in Control and will not, without
30 days prior written notification to Bank, relocate its chief executive office.
MERGERS OR ACQUISITIONS. Other than in the normal and ordinary course of
Borrower's business, merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with or into any other Person (other than mergers or
consolidations of a Subsidiary into another Subsidiary or into Borrower), or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property of another Person except where, upon the prior
written consent of Bank, which consent shall not be unreasonably withheld (i)
the Borrower or Subsidiary, as applicable, is the surviving entity after such
merger or acquisition and (ii) no Event of Default has occurred, is continuing
or would exist after giving effect to the transactions.
INDEBTEDNESS. Create, incur, assume or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.
13.
ENCUMBRANCES. Create, incur, assume or allow any Lien with respect to any of
its property, or assign or otherwise convey any right to receive income,
including the sale of any Accounts, or permit any of its Subsidiaries so to do,
except for Permitted Liens, or covenant to any other Person that Borrower in the
future will refrain from creating, incurring, assuming or allowing any Lien with
respect to any of Borrower's property.
DISTRIBUTIONS. Pay any dividends or make any other distribution or payment on
account of or in redemption, retirement or purchase of any capital stock, except
that Borrower may repurchase the stock of former employees, consultants and
independent contractors pursuant to stock repurchase agreements as long as (a)
the market value of such stock is greater than the repurchase price, and (b) an
Event of Default does not exist prior to such repurchase or would not exist
after giving effect to such repurchase.
INVESTMENTS. Other than in the normal and ordinary course of Borrower's
business, directly or indirectly acquire or own, or make any Investment in or to
any Person, or permit any of its Subsidiaries so to do, other than Permitted
Investments.
TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower except (a)
transactions that are in the ordinary course of Borrower's business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person, and (b) as
set forth in paragraph (e) of the definition of "Permitted Indebtedness."
SUBORDINATED DEBT. Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank's prior written
consent, which consent shall not be unreasonably withheld.
INVENTORY AND EQUIPMENT. Store the Inventory or the Equipment with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment only at the
locations set forth on the Schedule and such other locations of which Borrower
gives Bank prior written notice and as to which Borrower signs and files a
financing statement where needed to perfect Bank's security interest.
COMPLIANCE. Become or be controlled by an "INVESTMENT COMPANY," within the
meaning of the Investment Company Act of 1940, or become principally engaged in,
or undertake as one of its important activities, the business of extending
credit for the purpose of purchasing or carrying margin stock, or use the
proceeds of any Credit Extension for such purpose. Fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair
Labor Standards Act or violate any law or regulation, which violation could
reasonably be expected to have a Material Adverse Effect, or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing.
14.
SECTION 10. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Loan Agreement:
PAYMENT DEFAULT. If Borrower fails to pay any of the Obligations and such
failure continues for 3 Business Days or more after the due date, provided that
within such 3 Business Day cure period, the failure to pay shall not be deemed
an Event of Default, but no Credit Extensions will be made;
COVENANT DEFAULT. If Borrower fails to perform any obligation under Article 7
or violates any of the covenants contained in Article 8 of this Loan Agreement,
or fails or neglects to perform or observe any other material term, provision,
condition, covenant contained in this Loan Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition or covenant
that can be cured, has failed to cure such default within ten days after
Borrower receives notice thereof or any officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten day period or cannot after diligent attempts by Borrower be cured
within such ten day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed 30 days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default but no Credit Extensions will be made;
MATERIAL ADVERSE CHANGE. If there occurs a material adverse change in
Borrower's business or financial condition taken as a whole, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Bank's security
interests in the Collateral;
ATTACHMENT. If any material portion of Borrower's assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any trustee, receiver or person acting in a similar capacity and
such attachment, seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within ten days, or if Borrower is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs, or if a judgment or other claim becomes a
lien or encumbrance upon any material portion of Borrower's assets, or if a
notice of lien, levy, or assessment is filed of record with respect to any of
Borrower's assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten days after Borrower receives notice
thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no Credit Extensions
will be required to be made during such cure period);
INSOLVENCY. If Borrower becomes insolvent, or if an Insolvency Proceeding is
commenced by Borrower, or if an Insolvency Proceeding is commenced against
15.
Borrower and is not dismissed or stayed within 30 days (provided that no Credit
Extensions will be made prior to the dismissal of such Insolvency Proceeding);
OTHER AGREEMENTS. If there is a default in any agreement to which Borrower is a
party with a third party or parties resulting in a right by such third party or
parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of $250,000 or that could have a Material
Adverse Effect; provided, however, that the Event of Default under this Section
10.6 caused by the occurrence of a default under another agreement described in
this Section 10.6 shall be cured for purposes of this Loan Agreement upon the
receipt of proof by Bank of the cure or waiver of the default under such other
agreement;
SUBORDINATED DEBT. If Borrower makes any payment on account of Subordinated
Debt, except to the extent the payment is allowed under any subordination
agreement entered into with Bank;
JUDGMENTS. If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least $250,000 shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of 10 Business
Days (provided that no Credit Extensions will be made prior to the satisfaction
or stay of the judgment); or
MISREPRESENTATIONS. If any material misrepresentation or material misstatement
exists now or hereafter in any warranty or representation set forth herein or in
any certificate delivered to Bank by any Responsible Officer pursuant to this
Loan Agreement or to induce Bank to enter into this Loan Agreement or any other
Loan Document.
SECTION 11. BANK'S RIGHTS AND REMEDIES.
RIGHTS AND REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, Bank may, at its election, without notice of its election and
without demand (except that Bank shall provide Borrower a notice of the
occurrence of an Event of Default prior to enforcing its rights against any
deposit, securities or other account including, but not limited to, the amounts
on deposit in the Certificate of Deposit and the amounts deposited by Borrower
with Monarch Securities and Comerica Securities, Inc.), do any one or more of
the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Loan
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 10.5, all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Loan Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letters of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit;
16.
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 11.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 11.1,
Borrower's rights under all licenses and all franchise agreements shall inure to
Bank's benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(i) Bank may credit bid and purchase at any public sale; and
(j) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.
POWER OF ATTORNEY. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
17.
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (g)
to modify, in its sole discretion, any intellectual property security agreement
entered into between Borrower and Bank without first obtaining Borrower's
approval of or signature to such modification by amending Exhibits A, B, and C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims to
have any right, title or interest; and (h) to transfer the Intellectual Property
Collateral into the name of Bank or a third party to the extent permitted under
the UCC; provided, however, that Bank may file, in its sole discretion, one or
more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Borrower where permitted by law
regardless of whether an Event of Default has occurred. The appointment of Bank
as Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until the earlier of the
cure or waiver of the Event of Default or such time as all of the Obligations
have been fully repaid and performed and Bank's obligation to provide advances
hereunder is terminated.
ACCOUNTS COLLECTION. At any time during the term of this Loan Agreement, Bank
may notify any Person owing funds to Borrower of Bank's security interest in
such funds and verify the amount of such Account. Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
BANK EXPENSES. If Borrower fails to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms
of this Loan Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Revolving Facility as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 8.5 of
this Loan Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Loan Agreement.
BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with reasonable
banking practices and Section 9-207 of the UCC, Bank shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever. All risk of loss, damage or destruction of the Collateral shall be
borne by Borrower, except where such loss, damage or destruction results from
the gross negligence or willful misconduct of Bank or Bank's failure to comply
with Section 9-207 of the UCC.
REMEDIES CUMULATIVE. Bank's rights and remedies under this Loan Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
18.
all other rights and remedies not inconsistent herewith as provided under the
UCC, by law, or in equity. No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on Borrower's
part shall be deemed a continuing waiver. No delay by Bank shall constitute a
waiver, election, or acquiescence by it. No waiver by Bank shall be effective
unless made in a written document signed on behalf of Bank and then shall be
effective only in the specific instance and for the specific purpose for which
it was given.
DEMAND; PROTEST. Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, Instruments, Chattel Paper, and guarantees at any time
held by Bank on which Borrower may in any way be liable.
SECTION 12. NOTICES.
Unless otherwise provided in this Loan Agreement, all notices or demands by
any party relating to this Loan Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Evolve Software, Inc.
0000 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx,
Chief Financial Officer & Vice President of Finance
Fax: (000) 000-0000
If to Bank: Comerica Bank-California
Emerging Growth Division
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to: Comerica Bank-California
000 Xxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
Attn: Corporate Banking Center
Fax: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
19.
SECTION 13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Loan Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
LOAN AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
SECTION 14. GENERAL PROVISIONS.
SUCCESSORS AND ASSIGNS. This Loan Agreement shall bind and inure to the benefit
of the respective successors and permitted assigns of each of the parties;
provided, however, that neither this Loan Agreement nor any rights hereunder may
be assigned by Borrower without Bank's prior written consent, which consent may
be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
INDEMNIFICATION. Borrower shall defend, indemnify and hold harmless Bank and
its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by this Loan Agreement; and (b) all losses or
expenses in any way suffered, incurred, or paid by Bank as a result of or in any
way arising out of, following, or consequential to transactions between Bank and
Borrower whether under this Loan Agreement, or otherwise (including without
limitation reasonable attorneys fees and expenses), except for losses caused by
Bank's gross negligence or willful misconduct. Bank may not enter into any
settlement or other compromise with respect to any claim covered by the
indemnity set forth in this Section 14.2 without giving notice thereof to
Borrower. If Bank or any other indemnified party obtains recovery of any of the
amounts that Borrower has paid to them pursuant to the indemnity set forth in
this Section, then Bank or such other indemnified party, as applicable, shall
promptly pay to Borrower such amounts paid by Borrower.
TIME OF ESSENCE. Time is of the essence for the performance of all obligations
set forth in this Loan Agreement.
SEVERABILITY OF PROVISIONS. Each provision of this Loan Agreement shall be
severable from every other provision of this Loan Agreement for the purpose of
determining the legal enforceability of any specific provision.
20.
AMENDMENTS IN WRITING, INTEGRATION. All amendments to or terminations of this
Loan Agreement must be in writing. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Loan Agreement, if any, are merged into
this Loan Agreement and the Loan Documents.
COUNTERPARTS. This Loan Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Loan Agreement.
SURVIVAL. All covenants, representations and warranties made in this Loan
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
14.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
CONFIDENTIALITY. In handling any confidential information Bank and all
employees and agents of Bank shall exercise the same degree of care that Bank
exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or
received pursuant to this Loan Agreement except that disclosure of such
information may be made (i) to the subsidiaries or affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Loans,
provided that they have entered into a comparable confidentiality agreement in
favor of Borrower and have delivered a copy to Borrower, (iii) as required by
law, regulations, rule or order, subpoena, judicial order or similar order,
provided that Bank shall, if permitted by applicable law, use its best efforts
to notify Borrower in advance of any such disclosure; (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information
that either: (a) is in the public domain or in the knowledge or possession of
Bank when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a
third party, provided Bank does not have actual knowledge that such third party
is prohibited from disclosing such information.
21.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be executed as of the date first above written.
EVOLVE SOFTWARE, INC.
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
COMERICA BANK-CALIFORNIA,
successor by merger to Imperial Bank
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
22.