Exhibit 10.59
Silicon Valley Bank
Loan and Security Agreement
Borrower: INTERLIANT, INC.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx
and
Borrower: INTERLIANT CONSULTING
AND PROFESSIONAL SERVICES, INC.
00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx
Date: May 14, 2002
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, a California-chartered bank, with its principal place of
business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan
production office located at One Xxxxxx Executive Park, Suite 200, 0000
Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("Silicon") and the borrower
named above (the "Borrower"), with offices located at the above address
("Borrower's Address"). The Schedule and Exhibits to this Agreement (the
"Schedule" and the "Exhibits," respectively) shall for all purposes be deemed to
be part of this Agreement, and the same are integral parts of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 8
below.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in
amounts determined by Silicon in its commercially reasonable discretion, up to
the amounts (the "Credit Limit") shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing, and subject to deduction of any
Reserves for accrued interest and such other Reserves established by Silicon
from time to time pursuant to the terms of this Agreement. Amounts borrowed may
be repaid and reborrowed during the term of this Agreement. Except as otherwise
provided herein, Loans hereunder shall be requested solely by Interliant, Inc.
(the "Lead Borrower"), as agent for each Borrower. Each Borrower hereby
designates the Lead Borrower as the agent of that Borrower. Any Loan which may
be made by Silicon under this Agreement and which is directed to the Lead
Borrower is received by the Lead Borrower in trust for that Borrower who is
intended to receive such Loan. The Lead Borrower shall distribute the proceeds
of any such Loan solely to the Borrowers. Each Borrower shall be directly
indebted to Silicon for each Loan distributed to that Borrower by the Lead
Borrower, together with all accrued interest thereon, as if that amount had been
advanced directly by Silicon to that Borrower (whether or not the subject Loan
was based upon the accounts and/or inventory or other assets of Borrower which
actually received such distribution), in addition to which each Borrower shall
be jointly and severally liable to Silicon for all Obligations under this
Agreement. If, for any reason, and at any time during the term of the within
Agreement, (i) any Borrower, including the Lead Borrower, as agent for each
Borrower, shall be unable to, or prohibited from carrying out the terms and
conditions of this Agreement (as determined by Silicon in Silicon's sole
discretion); or (ii) Silicon deems it inexpedient (in Silicon's sole discretion)
to continue making Loans to or for the account of any particular Borrower, or to
channel the Loans through the Lead Borrower, then Silicon may make Loans
directly to such Borrower as Silicon determines to be expedient, which Loan may
be made without regard to the procedures otherwise included in this Section 1.1.
1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional two percent (2%) per annum.
1.4 Fees. Borrower shall pay Silicon the fees shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 Letters of Credit/ Cash Management Services Sublimit. (a) At the
request of Borrower, Silicon may, in its sole discretion, issue or arrange for
the issuance of letters of credit for the account of Borrower, in each case in
form and substance satisfactory to Silicon in its sole discretion (collectively,
"Letters of Credit"). The aggregate face amount of all outstanding Letters of
Credit from time to time (plus all Silicon exposure under any foreign exchange
contracts entered into by or on behalf of the Borrower) shall not exceed the
amount shown on the Schedule (the "Letter of Credit Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.
(b) Borrower may use up to the amount set forth on the Schedule for
Cash Management Services. Such aggregate amounts utilized under the Cash
Management Services Sublimit shall at all times reduce the amount otherwise
available for Loans hereunder. Any amounts Silicon pays on behalf of Borrower or
any amounts that are not paid by Borrower for any Cash Management Services will
be treated as Loans hereunder and will accrue interest at the interest rate
applicable to Loans.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of
the Obligations when due, and the performance of each of the Borrower's duties
under this Agreement and all documents executed in connection herewith, Borrower
hereby grants to Silicon a continuing security interest in all of Borrower's
interest in the
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following, whether now owned or hereafter acquired, and wherever located: All
Inventory, Equipment, Payment Intangibles, Letter-of-Credit Rights, Supporting
Obligations, Receivables, and General Intangibles, including, without
limitation, all of Borrower's Intellectual Property, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Silicon's possession (including claims and credit balances), and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral"). The security interest
granted herein shall be a first priority security interest in the Collateral.
Silicon may place a "hold" on any Deposit Account pledged as collateral. If
Borrower shall at any time, acquire a commercial tort claim, Borrower shall
promptly notify Silicon in a writing signed by Borrower of the brief details
thereof and grant to Silicon in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance satisfactory to Silicon.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make
Loans, Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is
and will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation, Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names
under which it presently conducts or in the past conducted any material portion
of its business. Borrower shall give Silicon 30 days' prior written notice
before changing its name or doing business under any other name. Borrower has
complied, and will in the future comply, with all laws relating to the conduct
of business under a fictitious business name, except where failure to so comply
will not have a material adverse effect on Borrower.
3.3 Place of Business; Location of Collateral. The address set forth in
the heading to this Agreement is Lead Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Silicon at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, changing its state of formation or moving any of the
Collateral to a location other than Borrower's Address or one of the locations
set forth on the Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Silicon now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims
of others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any
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real property lease pursuant to which the lessor may obtain any rights in any of
the Collateral and no such lease now prohibits, restrains, impairs or will
prohibit, restrain or impair Borrower's right to remove any Collateral from the
leased premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by
Silicon, use its best efforts to cause such third party to execute and deliver
to Silicon, in form acceptable to Silicon, such waivers and subordinations as
Silicon shall specify, so as to ensure that Silicon's rights in the Collateral
are, and will continue to be, superior to the rights of any such third party.
Borrower will keep in full force and effect, and will comply with all the terms
of, any lease of real property where any of the Collateral now or in the future
may be located, except where failure to so comply will not have a material
adverse effect on Borrower.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial
statements now or in the future delivered to Silicon have been, and will be,
prepared in conformity with generally accepted accounting principles and now and
in the future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted. Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
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investigation in the future threatened or instituted by or against Borrower
involving any single claim of $50,000 or more, or involving $100,000 or more in
the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely
for working capital purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 Representations Relating to Receivables. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance.
Borrower represents and warrants to Silicon as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall
deliver to Silicon transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on Silicon's
standard forms; provided, however, that Borrower's failure to execute and
deliver the same shall not affect or limit Silicon's security interest and other
rights in all of Borrower's Receivables, nor shall Silicon's failure to advance
or lend against a specific Receivable affect or limit Silicon's security
interest and other rights therein. In the event Borrower has elected to be on
"non-borrowing reporting status" (see Section 6.1 of the Schedule), Borrower
shall furnish Silicon with a Loan request at least thirty (30) days prior to the
requested funding date. Otherwise, Loan requests received after 12:00 Noon will
not be considered by Silicon until the next Business Day. Together with each
such schedule and assignment, or later if requested by Silicon, Borrower shall
furnish Silicon with copies (or, at Silicon's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
in such form and at such intervals as Silicon shall request. In addition,
Borrower shall deliver to Silicon the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which shall
be with recourse. Borrower shall also provide Silicon with copies of all credit
memos within two days after the date issued.
4.4 Collection of Receivables. Borrower shall cause the Account Debtors
to remit all Receivables to Silicon and Silicon shall hold all payments on, and
proceeds of, Receivables in a lockbox account, or such other "blocked account"
as Silicon may specify, pursuant to a blocked account agreement in such form as
Silicon may specify. All such payments on, and proceeds of, Receivables shall be
applied to the Obligations in such order as Silicon shall determine. Silicon or
its designee may, at any time, notify Account Debtors that the Receivables have
been assigned to Silicon.
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4.5. Remittance of Proceeds. All proceeds arising from the disposition
of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to remit
to Silicon the proceeds of the sale of (i) worn out or obsolete equipment
disposed of by Borrower in good faith in an arm's length transaction for an
aggregate purchase price of $25,000 or less (for all such transactions in any
fiscal year); or (ii) to the extent otherwise permitted by Silicon hereunder,
any other disposition of Collateral in good faith in an arm's length
transaction. Borrower agrees that it will not commingle proceeds of Collateral
with any of Borrower's other funds or property, but will hold such proceeds
separate and apart from such other funds and property and in an express trust
for Silicon. Nothing in this Section 4.5 limits the restrictions on disposition
of Collateral set forth elsewhere in this Agreement.
4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
4.7 Returns. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to Silicon). In the event any attempted
return occurs after the occurrence of any Event of Default, Borrower shall (i)
hold the returned Inventory in trust for Silicon, (ii) segregate all returned
Inventory from all of Borrower's other property, (iii) conspicuously label the
returned Inventory as Silicon's property, and (iv) immediately notify Silicon of
the return of any Inventory, specifying the reason for such return, the location
and condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 Verification. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose.
4.9 No Liability. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied
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Silicon Valley Bank Loan and Security Agreement
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that such insurance is, at all times, in full force and effect. All such
insurance policies shall name Silicon as an additional loss payee, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to
Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall apply
such proceeds in reduction of the Obligations as Silicon shall determine in its
sole discretion, except that, provided no Default or Event of Default has
occurred and is continuing, Silicon shall release to Borrower insurance proceeds
with respect to Equipment totaling less than $100,000, which shall be utilized
by Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Silicon may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Silicon copies of all
reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.
5.4 Access to Collateral, Books and Records. At reasonable times, and
on one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records, all at Borrower's premises wherever the same is located. Silicon shall
take reasonable steps to keep confidential all information obtained in any such
inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Borrower's expense and the charge therefor shall be $750 per person per
day (or such higher amount as shall represent Silicon's then current standard
charge for the same), plus reasonable out of pocket expenses, provided that,
prior to the occurrence of an Event of Default, such inspections at Borrower's
expense shall be limited to four (4) in any twelve month period. Borrower will
not enter into any agreement with any accounting firm, service bureau or third
party to store Borrower's books or records at any location other than Borrower's
Address, without first obtaining Silicon's written consent, which may be
conditioned upon such accounting firm, service bureau or other third party
agreeing to give Silicon the same rights with respect to access to books and
records and related rights as Silicon has under this Loan Agreement. Borrower
waives the benefit of any accountant-client privilege or other evidentiary
privilege precluding or limiting the disclosure, divulgence or delivery of any
of its books and records (except that Borrower does not waive any
attorney-client privilege).
5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, which shall not be
unreasonably withheld, delayed or conditioned, do any of the following: (i)
merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets or any transfers of any money or
other assets to any subsidiary of Borrower other than loans of up to $500,000 in
the aggregate outstanding at any one time to any subsidiaries of the Borrower;
(viii) incur any debts outside the ordinary course of business; (ix) guarantee
or otherwise become liable with respect to the obligations of another party or
entity; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make
any change in Borrower's capital structure which would have a material adverse
effect on Borrower or on the prospect of repayment of the Obligations, except as
previously disclosed to Silicon; or (xiii) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section 5.5 are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 Litigation Cooperation. Should any third-party suit or proceeding
be instituted by or against Silicon with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Silicon,
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Silicon Valley Bank Loan and Security Agreement
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make available Borrower and its officers, employees and agents and Borrower's
books and records, to the extent that Silicon may deem them reasonably necessary
in order to prosecute or defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date may be extended upon written agreement of the parties hereto.
6.2 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and written
termination of this Agreement by Silicon, Silicon shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation which
failure is not cured within 2 Business Days of written notice from Silicon to
Borrower of such failure; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to comply with any of the financial covenants set forth in the Schedule or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured; or (e) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within 10 Business Days after receipt by
Borrower of written notice of such failure; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured, bonded or stayed by an
order from a court of competent jurisdiction within 10 days after the occurrence
of the same, or immediately upon the service of process upon Silicon seeking to
attach by trustee, mesne or other process, any of Borrower's funds on deposit
with, or assets of the Borrower in the possession of, Silicon; or (g) any
default or event of default occurs under any obligation secured by a Permitted
Lien, which is not cured within any applicable cure period or waived in writing
by the holder of the Permitted Lien; or (h) Borrower breaches any material
contract or obligation, which has or may reasonably be expected to have a
material adverse effect on Borrower's business or financial condition; or (i)
Dissolution, termina-
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Silicon Valley Bank Loan and Security Agreement
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tion of existence, insolvency or business failure of Borrower; or appointment of
a receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 30 days
after the date commenced; or (k) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (m) Borrower
defaults under any agreement evidencing any indebtedness to any third party
which has or may reasonably be expected to have a material adverse effect on
Borrower's business or financial condition; or (n) Borrower makes any payment on
account of any indebtedness or obligation which has been subordinated to the
Obligations other than as permitted in the applicable subordination agreement or
pursuant to the terms of any subordinated note, or (i) if any Person who has
subordinated such indebtedness or obligations terminates or in any way attempts
to limit the subordination terms, (ii) such Person and the Borrower amend the
subordination agreement, subordinated note or related documents in a manner
which may have a material adverse effect on Silicon's rights thereunder without
Silicon's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned, or (iii) the Borrower fails to promptly notify
Silicon of any default (beyond any applicable notice, grace or cure period)
under any third party indebtedness with an outstanding balance in excess of
$200,000, including without limitation, any such subordinated indebtedness; or
(o) there shall be a change in the record or beneficial ownership of an
aggregate of more than 20% of the outstanding shares of stock of Borrower, in
one or more transactions, compared to the ownership of outstanding shares of
stock of Borrower in effect on the date hereof, without the prior written
consent of Silicon, which consent shall not be unreasonably withheld, delayed or
conditioned; or (p) Borrower shall generally not pay its debts as they become
due, or Borrower shall conceal, remove or transfer any part of its property,
with intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (q) there shall be (i) a material
impairment in the perfection or priority of Silicon's security interest in the
Collateral or in the value of such Collateral which is not cured within 10
Business Days after receipt by Borrower of written notice of such impairment;
(ii) a material adverse change in the business, operations or condition
(financial or otherwise) of the Borrower; (iii) a material impairment of the
prospect of repayment of any portion of the Obligations; or (iv) Silicon
determines, based upon information available to it and in its reasonable
judgment, that there is reasonable likelihood that Borrower shall fail to comply
with one or more of the financial covenants in Section 5.1 during the next
succeeding financial reporting period; or (r) Silicon, acting in good faith and
in a commercially reasonable manner, deems itself insecure because of the
occurrence of an event prior to the effective date hereof of which Silicon had
no knowledge on the effective date or because of the occurrence of an event on
or subsequent to the effective date; or (s) Borrower shall breach any material
term of the IP Security Agreement or the Warrant granted by the Borrower to
Silicon after all applicable grace, notice and cure periods set forth in the IP
Security Agreement or the Warrant.
7.2 Remedies. Upon the occurrence of any Event of Default, and at any
time thereafter during the continuance of any Event of Default, Silicon, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (a)
Cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other document or agreement; (b) Accelerate and declare all or
any part of the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any Obligation; (c) Take possession of any or all of
the Collateral wherever it may be found, and for that purpose Borrower hereby
authorizes Silicon without judicial process, but provided it is done in a
peaceable manner, to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge
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Silicon Valley Bank Loan and Security Agreement
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for so long as Silicon deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; provided,
however, that should Silicon seek to take possession of any of the Collateral by
Court process, Borrower hereby irrevocably waives: (i) any bond and any surety
or security relating thereto required by any statute, court rule or otherwise as
an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's premises, vehicles, hoists,
lifts, cranes, equipment and all other property without charge; (f) Sell, lease
or otherwise dispose of any of the Collateral, in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. Silicon shall have the right to conduct such disposition on
Borrower's premises without charge, for such time or times as Silicon deems
reasonable, or on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition. Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse
or sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables and the like for less than face value;
(h) Offset against any sums in any of Borrower's general, special or other
Deposit Accounts with Silicon; and (i) Demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
any of Silicon's rights and remedies, from and after the occurrence of any Event
of Default, the interest rate applicable to the Obligations shall be increased
by an additional four percent (4%) per annum.
7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 Power of Attorney. Upon the occurrence and during the continuation
of any Event of Default, without limiting Silicon's other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's reasonable
expense, to do any or all of the following, in Borrower's name or otherwise, but
Silicon agrees to exercise the following powers in a commercially reasonable
manner: (a) Execute on behalf of Borrower any documents that Silicon may,
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Silicon Valley Bank Loan and Security Agreement
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in its sole discretion, deem advisable in order to perfect and maintain
Silicon's security interest in the Collateral, or in order to exercise a right
of Borrower or Silicon, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future agreements;
(b) Execute on behalf of Borrower any document exercising, transferring or
assigning any option to purchase, sell or otherwise dispose of or to lease (as
lessor or lessee) any real or personal property which is part of Silicon's
Collateral or in which Silicon has an interest; (c) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any Notice of Lien, claim of mechanic's, materialman's or other lien, or
assignment or satisfaction of mechanic's, materialman's or other lien; (d) Take
control in any manner of any cash or non-cash items of payment or proceeds of
Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into Silicon's possession; (e)
Endorse all checks and other forms of remittances received by Silicon; (f) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (g) Grant
extensions of time to pay, compromise claims and settle Receivables and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall Silicon's rights under the foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.
7.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Massachusetts Uniform Commercial Code and
under all other applicable laws, and under any other instrument or agreement now
or in the future entered into between Silicon and Borrower, and all of such
rights and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Silicon of one or more of its rights or remedies shall not be deemed
an election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS.
As used in this Agreement, the following terms have the following
meanings:
"Account Debtor" means the obligor on a Receivable.
--------------
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Silicon Valley Bank Loan and Security Agreement
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"Affiliate" means, with respect to any Person, a relative, partner,
---------
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
------------
["Cash Management Services" means Silicon's cash management services,
------------------------
direct deposit of payroll, business credit card, and check cashing services as
may be further identified in the various cash management services agreements
related to such Cash Management Services.]
"Code" means the Uniform Commercial Code as adopted and in effect in
----
the Commonwealth of Massachusetts from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
----------
"Default" means any event which with notice or passage of time or both,
-------
would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9-102 of the
---------------
Code.
"Eligible Receivables" means Receivables arising in the ordinary course
--------------------
of Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
-------
Eligibility Requirements") are the minimum requirements for a Receivable to be
------------------------
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
xxxxxxxx, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional,
except as may otherwise be acceptable to Silicon in its discretion), (iv) the
Receivable must not be owing from an Account Debtor with whom the Borrower has
any dispute (whether or not relating to the particular Receivable), (v) the
Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable
must not be owing from an Account Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to
Silicon, or which, fails or goes out of a material portion of its business,
(vii) the Receivable must not be owing from the United States or any department,
agency or instrumentality thereof (unless there has been compliance, to
Silicon's satisfaction, with the United States Assignment of Claims Act), (viii)
the Receivable must not be owing from an Account Debtor located outside the
United States (unless pre-approved by Silicon in its discretion in writing, or
backed by a letter of credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), and (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
Receivables outstanding. In addition, if more than 50% of the Receivables owing
from an Account Debtor are outstanding more than 90 days from their invoice date
(without regard to unapplied credits) or are otherwise not eligible Receivables,
then all Receivables owing from that Account Debtor will be deemed ineligible
for borrowing. Silicon may, from time to time, in its discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower.
"Equipment" means all of Borrower's present and hereafter acquired
---------
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations and owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
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Silicon Valley Bank Loan and Security Agreement
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"Event of Default" means any of the events set forth in Section 7.1 of
----------------
this Agreement.
"General Intangibles" means all general intangibles of Borrower,
-------------------
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, rights to payment for credit extended,
amounts due to Borrower, credit memoranda in favor of Borrower, warranty claims,
causes of action, corporate or other business records, deposits, Deposit
Accounts, inventions, designs, drawings, blueprints, patents, patent
applications, trademarks and the goodwill of the business symbolized thereby,
names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired
---------
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including without
limitation all raw materials, work in process, finished goods and goods in
transit), and all materials and supplies of every kind, nature and description
which are or might be used or consumed in Borrower's business or used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, merchandise or other personal property, and all
warehouse receipts, documents of title and other documents representing any of
the foregoing.
"Letter-of-Credit Rights" means all letter-of-credit rights including,
-----------------------
without limitation, "letter-of-credit rights" as defined in the Code and also
any right to payment or performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or
performance.
"Obligations" means all present and future Loans, advances, debts,
-----------
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, including, without limitation, the
Borrower's obligations pursuant to the IP Security Agreement and the Warrant,
whether arising from an extension of credit, opening of a letter of credit,
banker's acceptance, foreign exchange contracts, loan, Cash Management Services,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
Silicon in Borrower's debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney's fees, expert witness fees, audit fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
minimum interest charges and any other sums chargeable to Borrower under this
Agreement or under any other present or future instrument or agreement between
Borrower and Silicon.
"Payment Intangibles" means all payment intangibles including, without
-------------------
limitation, "payment intangibles" as defined in the Code and also any general
intangible under which the Account Debtor's primary obligation is a monetary
obligation.
"Permitted Liens" means the following: (i) purchase money security
---------------
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension,
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Silicon Valley Bank Loan and Security Agreement
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renewal or replacement lien is limited to the property encumbered by the
existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; and (viii)Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods. Silicon will have the right to require, as a condition
to its consent under subsection (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on Silicon's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate security interest shall also constitute an Event of
Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
-----------
accounts (whether or not earned by performance), accounts receivable,
health-care insurance receivables, rights to payment, letters of credit,
contract rights, chattel paper, instruments, securities, securities accounts,
investment property, documents and all other forms of obligations at any time
owing to Borrower, all guaranties and other security therefor, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as
--------
Silicon may from time to time establish and revise in good faith reducing the
amount of Loans, Letters of Credit and other financial accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
in the Schedule: (a) to reflect events, conditions, contingencies or risks
which, as determined by Silicon in good faith, do or may affect (i) the
Collateral or any other property which is security for the Obligations or its
value (including without limitation any increase in delinquencies of
Receivables), (ii) the assets, business or prospects of Borrower or any
Guarantor, or (iii) the security interests and other rights of Silicon in the
Collateral (including the enforceability, perfection and priority thereof); or
(b) to reflect Silicon's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any guarantor to
Silicon is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Silicon determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
"Supporting Obligations" means all supporting obligations including,
----------------------
without limitation, "supporting obligations" as defined in the Code and also any
letter-of-credit right or secondary obligation which supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument, or investment property.
Other Terms. All accounting terms used in this Agreement, unless
-----------
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations three Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
14
Silicon Valley Bank Loan and Security Agreement
--------------------------------------------------------------------------------
9.2 Application of Payments. All payments with respect to the
Obligations may be applied, and in Silicon's sole discretion reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its sole discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or overnight courier service or by regular first-class mail, or
certified mail return receipt requested, addressed to Silicon or Borrower at the
addresses shown in the heading to this Agreement, or at any other address
designated in writing by one party to the other party. Notices to Silicon shall
be directed to the Commercial Finance Division, to the attention of the Division
Manager or the Division Credit Manager. Notices to Borrower shall be directed to
the address of Lead Borrower shown in the heading to this Agreement to the
attention of General Counsel. All notices shall be deemed to have been given
upon delivery in the case of notices personally delivered, or at the expiration
of one Business Day following delivery to the private delivery service, or the
next Business Day following delivery to the overnight courier service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 Waivers. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims, demands,
15
Silicon Valley Bank Loan and Security Agreement
--------------------------------------------------------------------------------
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Borrower or any other party through the ordinary negligence of Silicon, or
any of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon, but nothing herein shall relieve
Silicon from liability for its own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Xxxxxx & Xxxxxxxxxx,
LLP, but Borrower acknowledges and agrees that Xxxxxx & Xxxxxxxxxx, LLP is
representing only Silicon and not Borrower in connection with this Agreement. If
either Silicon or Borrower files any lawsuit against the other predicated on a
breach of this Agreement, Silicon, if the prevailing party, shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
-------
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Section 9.12 shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, which consent shall not
be unreasonably withheld, delayed or conditioned, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.
9.14 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.
9.15 Limitation of Actions. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Silicon, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after Borrower becomes aware of the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter.
16
Silicon Valley Bank Loan and Security Agreement
--------------------------------------------------------------------------------
Borrower agrees that such one-year period is a reasonable and sufficient time
for Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of Silicon in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other present or future
agreement.
9.16 Right of Set-Off. Borrower and any guarantor hereby grant to
Silicon a lien, security interest, and right of setoff as security for all
Obligations to Silicon, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping, or control of Silicon or any entity under the
control of Silicon Valley Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Silicon may set off the same or any part thereof and apply the same
to any liability or obligation of Borrower and any guarantor then due and
regardless of the adequacy of any other collateral securing the loan. ANY AND
ALL RIGHTS TO REQUIRE SILICON TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS, OR OTHER PROPERTY OF THE BORROWER
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVED.
9.17 Section Headings; Construction. Section headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
section, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.18 Governing Law; Jurisdiction; Venue. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and
Borrower shall be governed by the laws of the Commonwealth of Massachusetts. As
a material part of the consideration to Silicon to enter into this Agreement,
Borrower (i) agrees that all actions and proceedings relating directly or
indirectly to this Agreement shall, at Silicon's option, be litigated in state
or federal courts located within Massachusetts; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding, provided, however, that if for any reason Silicon cannot
avail itself of such courts in the Commonwealth of Massachusetts, Borrower
accepts jurisdiction of the courts and venue in Santa Clara, California.
9.19 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.20 Confidentiality. In handling any confidential information, Silicon
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Silicon's
subsidiaries or affiliates in connection with their present or prospective
business relations with Borrower; (ii) to prospective transferees or purchasers
of any interest in the Loans; (iii) as required by law, regulation, subpoena, or
other order; (iv) as required in connection with Silicon's examination or audit;
and (v) as Silicon considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Silicon's possession when disclosed to
Silicon, or becomes part of the public domain after disclosure to Silicon
(through no act or omission of Silicon); or (b) is disclosed to Silicon by a
third party, which third party is not under any non-disclosure obligation.
17
Silicon Valley Bank Loan and Security Agreement
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
Borrower:
INTERLIANT, INC.
By /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx, Chief Financial Officer
By /s/ Xxxxx X. Xxxxx
----------------------------------------------
Xxxxx X. Xxxxx, Secretary
INTERLIANT CONSULTING
AND PROFESSIONAL SERVICES, INC.
By /s/ Xxxxx X. Xxxxx
----------------------------------------------
Xxxxx X. Xxxxx, Vice President
By /s/ Xxxxx X. Xxxxx
----------------------------------------------
Xxxxx X. Xxxxx, Clerk
Silicon:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ Xxxx X. Xxxx
----------------------------------------------
Title Vice President
-------------------------------------------
18
Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: INTERLIANT, INC.
Address: 0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx
and
Borrower: INTERLIANT CONSULTING
AND PROFESSIONAL SERVICES, INC.
Address: 00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx
Date: May 14, 2002
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date. Each reference to the
Borrower in this Agreement shall, individually and collectively, jointly and
severally, mean and refer to Interliant, Inc. and Interliant Consulting and
Professional Services, Inc.
================================================================================
1. Credit Limit
(Section 1.1): An amount not to exceed the lesser of (A) or (B), below:
=======================================================================
(A)
==============================================================
(i) $7,500,000 at any one time outstanding (the "Maximum
Credit Limit"); minus
-----
================================================================================
==============================================================
(ii) the aggregate amounts then undrawn on all outstanding
letters of credit, foreign exchange contracts, or any other
accommodations issued or incurred, or caused to be issued or
incurred by Silicon for the account and/or benefit of the
Borrower.
================================================================================
(B)
==============================================================
(i) 80% of the amount of the Borrower's Eligible Receivables
(as defined in Section 8 above) (the "Receivables Loans");
minus
-----
================================================================================
==============================================================
(ii) the aggregate amounts then undrawn on all outstanding
letters of credit, foreign exchange contracts, or any other
accommodations issued or incurred, or caused to be issued or
incurred by Silicon for the account and/or benefit of the
Borrower.
================================================================================
Letter of Credit/Foreign Exchange Contract/ Cash Management Services
Sublimit
(Section 1.5): $2,500,000
1
Silicon Valley Bank Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
================================================================================
2. Interest.
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to time, plus 2%
per annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. "Prime Rate" means the greater of (i) the rate
announced from time to time by Silicon as its "prime rate;" it is a base rate
upon which other rates charged by Silicon are based, and it is not necessarily
the best rate available at Silicon, or (ii) 4.75%. The interest rate applicable
to the Obligations shall change on each date there is a change in the Prime
Rate.
Minimum Monthly
Interest (Section 1.2): Not applicable.
================================================================================
3. Fees (Section 1.4):
Loan Fee: $75,000.00 payable concurrently herewith.
Collateral Handling Fee: $2,000.00 ($750.00 when not borrowing and
Borrower has advised Silicon that it has elected to be on "non-borrowing
reporting status" pursuant to Section 6.1, below) per month, payable in arrears.
Unused Line Fee: In the event, in any calendar month (or portion
thereof at the beginning and end of the term hereof), the average daily
principal balance of the Loans outstanding during the month is less than the
amount of the Maximum Credit Limit, Borrower shall pay Silicon an unused line
fee in an amount equal to .50% per annum on the difference between the amount of
the Maximum Credit Limit and the average daily principal balance of the Loans
outstanding during the month, which unused line fee shall be computed and paid
monthly, in arrears, on the first day of the following month.
Cancellation Fee: If the Obligations are voluntarily or involuntarily
(in the event of bankruptcy) prepaid or if this Agreement is otherwise
terminated prior to its maturity, the Borrower shall pay to Silicon a
termination fee in the amount equal to 1% of the Maximum Credit Limit, provided
that no such termination fee shall be charged if the credit facility hereunder
is replaced or transferred to another division of Silicon. The termination fee
shall be due and payable upon prepayment by the Borrower in the case of
voluntary prepayments or upon demand by Silicon in the event of involuntary
prepayment, and if not paid immediately shall bear interest at a rate equal to
the highest rate applicable to any of the Obligations.
================================================================================
4. Maturity Date
(Section 6.1): 364 days from the date of this Agreement.
================================================================================
5. Financial Covenants
(Section 5.1): Borrower shall comply with each of the following
covenant(s). Compliance shall be determined as of the end of each month, except
as otherwise specifically provided below:
a. Minimum Tangible Net Worth:
2
Silicon Valley Bank Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
================================================================================
Borrower, on a consolidated basis, shall maintain a Tangible Net Worth
of not less than the sum of (i) plus (ii) below:
=======================================================================
(i) (a) ($21,000,000), from the date of this Agreement through
June 30, 2002;
=======================================================================
(b) ($22,500,000), from July 1, 2002 through February 28,
2003; and
(c) ($21,000,000), from March 1, 2003 and thereafter.
================================================================================
=======================================================================
(ii) 75% of all consideration received after the date hereof from
proceeds from the issuance of any equity securities of the Borrower
and/or subordinated debt incurred by the Borrower.
================================================================================
In no event shall the amount of this Minimum Tangible Net Worth covenant be
decreased.
b. Minimum Cash or Excess Availability:
=======================================================================
The Borrower shall at all times maintain $1,500,000 in (i) unrestricted
cash deposits maintained at Silicon, and/or (ii) excess "availability"
under this Agreement (net of Loans, Letters of Credit or other
indebtedness under this Agreement), as determined by Silicon based upon
the Credit Limit restrictions set forth in Section 1 above).
================================================================================
Definitions. For purposes of the foregoing financial covenants,
the following term shall have the following meaning:
"Liabilities" shall have the meaning ascribed thereto by
generally accepted accounting principles.
"Tangible Net Worth" shall mean the excess of total assets
over total liabilities, determined in accordance with generally accepted
accounting principles, with the following adjustments:
(A) there shall be excluded from assets: (i) notes, accounts
receivable and other obligations owing to the Borrower from its officers or
other Affiliates, and (ii) all assets which would be classified as intangible
assets under generally accepted accounting principles, including without
limitation goodwill, licenses, patents, trademarks, trade names, copyrights,
capitalized software and organizational costs, licenses and franchises
(B) there shall be excluded from liabilities: all indebtedness
which is subordinated to the Obligations under a subordination agreement in form
specified by Silicon or by language in the instrument evidencing the
indebtedness which is acceptable to Silicon in its discretion including, without
limitation, convertible debt previously disclosed to Silicon.
================================================================================
6. Reporting.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Weekly (monthly, if no amounts are outstanding under this Agreement
and Borrower has advised Silicon in writing that it has elected to be on
"non-borrowing reporting status"), and upon each loan request, borrowing base
certificates and transaction reports.
3
Silicon Valley Bank Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
2. Monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, within fifteen days after the end
of each month.
3. Monthly Receivable agings, aged by invoice date, and receivable
reconciliations, within fifteen days after the end of each month.
4. Monthly unaudited financial statements, as soon as available, and in
any event within thirty days after the end of each month.
5. Monthly Compliance Certificates, within thirty days after the end of
each month, in such form as Silicon shall reasonably specify, signed by the
Chief Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Silicon
shall reasonably request, including, without limitation, a statement that at the
end of such month there were no held checks.
6. Quarterly unaudited financial statements, as soon as available, and
in any event within forty-five days after the end of each fiscal quarter of
Borrower.
7. Annual operating budgets (including income statements, balance
sheets and cash flow statements, by month) for the upcoming fiscal year of
Borrower within thirty days prior to the end of each fiscal year of Borrower.
8. Annual financial statements, as soon as available, and in any event
within 120 days following the end of Borrower's fiscal year, certified by
independent certified public accountants acceptable to Silicon, and, the
Borrower's audited financial statements for fiscal year end 2001 bearing an
unqualified opinion to be delivered to Silicon on or before the date hereof.
9. Such additional reports and information as Silicon may from time to
time specify.
================================================================================
7. Compensation
(Section 5.5): Intentionally omitted.
================================================================================
8. Borrower Information:
Prior Names of
Borrower
(Section 3.2): See Perfection Certificate of even date herewith
Prior Trade
Names of Borrower
(Section 3.2): See Perfection Certificate of even date herewith
Existing Trade
Names of Borrower
(Section 3.2): See Perfection Certificate of even date herewith
4
Silicon Valley Bank Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
Other Locations and
Addresses (Section 3.3): See Perfection Certificate of even date
herewith
Material Adverse
Litigation (Section 3.10): None
================================================================================
9. Other Covenants
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) Banking Relationship. In order for Silicon to properly monitor its
loan arrangement with the Borrower, Borrower shall at all times, from and after
May 28, 2002, maintain its primary banking relationship with Silicon, with all
significant deposits and investment accounts (other than certificates of
deposits supporting third party letters of credit as set forth on EXHIBIT 9-1)
to be maintained at Silicon. Notwithstanding the foregoing, Borrower shall be
permitted to maintain accounts with XX Xxxxxx Xxxxx Bank in amounts not to
exceed $750,000 in the aggregate until July 15, 2002.
(2) Subordination of Inside Debt. All present and future indebtedness
of the Borrower to its officers, directors and shareholders owning at least 5%
of Borrower ("Inside Debt") shall, at all times, be subordinated to the
Obligations pursuant to a subordination agreement on Silicon's standard form or
in accordance with the terms of such debt instrument. Borrower represents and
warrants that there is no Inside Debt presently outstanding, except for
convertible debt instruments previously disclosed to Silicon. Prior to incurring
any Inside Debt in the future, Borrower shall cause the person to whom such
Inside Debt will be owed to execute and deliver to Silicon a subordination
agreement on Silicon's standard form.
(3) Subordination Agreements. Borrower represents and warrants that it
is not previously indebted to any third party for borrowed money other than to
certain third parties disclosed to Silicon as set forth on Schedule 9-3, which
indebtedness shall not be prepaid without prior written consent of Silicon,
which consent shall not be unreasonably withheld, delayed or conditioned. Prior
to incurring any additional indebtedness, Borrower shall cause each creditor to
execute and deliver to Silicon a subordination agreement on Silicon's standard
form subordinating to the Obligations the indebtedness of Borrower to any such
creditor.
(4) Intellectual Property Security Agreement. As a condition precedent
to the effectiveness of this Agreement, Borrower shall have executed and
delivered to Silicon Intellectual Property Security Agreements (the "IP Security
Agreement"), substantially in the form attached hereto as Exhibit B.
Borrower: Silicon:
INTERLIANT, INC. SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ Xxxxxxx X. Xxxxxx By /s/ Xxxx X. Xxxx
-------------------------------------------- -----------------------
Xxxxxxx X. Xxxxxx, Chief Financial Officer Title Vice President
By /s/ Xxxxx X. Xxxxx
---------------------------------------------
Xxxxx X. Xxxxx, Secretary
5
Silicon Valley Bank Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
INTERLIANT CONSULTING
AND PROFESSIONAL SERVICES, INC.
By /s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx, Vice President
By /s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx, Clerk
6
