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TBCC
LOAN AND SECURITY AGREEMENT
BORROWER: TECHWAVE INC.,
A WASHINGTON CORPORATION
ADDRESS: 000 XXXXX XXXXXX XXXXX,
XXXXX 000 XXXXX
XXXXXXX, XX 00000
DATE: MARCH 4, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower (the "Borrower"), having its chief executive office and
principal place of business at the address shown above, and TRANSAMERICA
BUSINESS CREDIT CORPORATION, a Delaware corporation ("TBCC"), having its
principal office at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx
00000 and having an office at 00000 Xxxxxxx Xxxx., Xxxxx 0000, Xxxxxxx Xxxx,
Xxxxxxxxxx 00000. The Schedule to this Agreement (the "Schedule") being
signed concurrently is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 9 below.) The
parties agree as follows:
1. LOANS.
1.1 LOANS. TBCC, subject to the terms and conditions of this
Agreement, agrees to make loans (the "Loans") to Borrower, from time to time
during the period from the date of this Agreement to the Maturity Date set
forth in the Schedule, at Borrower's request, in an aggregate principal amount
at any one time outstanding not to exceed the Credit Limit shown on the
Schedule. If at any time the total outstanding Loans and other monetary
Obligations exceed said limit, Borrower shall repay the excess immediately
without demand. Borrower shall use the proceeds of all Loans solely for
lawful general business purposes.
1.2 DUE DATE. The Loans, all accrued interest and all other monetary
Obligations shall be payable in full on the Maturity Date. Borrower may
borrow, repay and reborrow Loans (other than any Term Loans), in whole or in
part, in accordance with the terms of this Agreement.
1.3 LOAN ACCOUNT. TBCC shall maintain an account on its books in the
name of Borrower (the "Loan Account"). All Loans and advances made by TBCC to
Borrower or for Borrower's account and all other monetary Obligations will be
charged to the Loan Account. All amounts received by TBCC from Borrower or
for Borrower's account will be credited to the Loan Account. TBCC will send
Borrower a monthly statement reflecting the activity in the Loan Account, and
each such monthly statement shall be an account stated between Borrower and
TBCC and shall be final conclusive and binding absent manifest error.
1.4 COLLECTION OF RECEIVABLES. Borrower shall remit to TBCC all
Collections including all checks, drafts and other documents and instruments
evidencing remittances in payment (collectively referred to as "Items of
Payment") within one Business Day after receipt, in the same form as received,
with any necessary endorsements. For purposes of calculating interest due to
TBCC, credit will be given for Collections and all other proceeds of
Collateral and other payments to TBCC three Business Days after receipt of
cleared funds. For all purposes of this Agreement any cleared funds received
by TBCC later than 10:00 a.m. (California time) on any Business Day shall be
deemed to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue. Borrower's Loan Account will be
credited only with the net amounts actually received in payment of
Receivables, and such payments shall be credited to the Obligations in such
order as TBCC shall determine in its discretion. Pending delivery to TBCC,
Borrower will not commingle any Items of Payment with any of its other funds
or property, but will segregate them from the other assets of Borrower and
will hold them in trust and for the account and as the property of TBCC.
Borrower hereby agrees to endorse any Items of Payment upon the request of
TBCC.
1.5 RESERVES. TBCC may, from time to time, in its Good Faith business
judgment: (i) establish and modify reserves against Eligible Receivables and
Eligible Inventory, (ii) modify advance rates with respect to Eligible
Receivables and Eligible Investory,* (iii) modify the standards of eligiblity
set forth in the definitions of Eligible Receivables and Eligible Inventory.
*AND
1.6 TERM.
(a) The term of this Agreement shall be from the date of this
Agreement to the Maturity Date set forth in the
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Schedule, unless sooner terminated in accordance with the terms of this
Agreement, provided that the Maturity Date shall automatically be extended,
and this Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one party gives written notice to
the other, not less than sixty days prior to the next Maturity Date, that
such party elects to terminate this Agreement effective on the next Maturity
Date. On the Maturity Date or on any earlier termination of this Agreement
Borrower shall pay in full all Obligations, and notwithstanding any
termination of this Agreement all of TBCC's security interests and all of
TBCC's other rights and remedies shall continue in full force and effect
until payment and performance in full of all Obligations.
(b) This Agreement may be terminated prior to the Maturity Date as
follows: (i) by Borrower, effective three business days after written notice
of termination is given to TBCC; or (ii) by TBCC at any time after the
occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by TBCC under this Section
1.6(b), Borrower shall pay to TBCC a termination fee (the "Termination Fee")
in the amount shown on the Schedule. The Termination Fee shall be due and
payable on the effective date of termination. Notwithstanding the foregoing,
Borrower shall have no right to terminate this Agreement at any time that any
principal of, or interest on any of the Loans or any other monetary
Obligations are outstanding, except upon prepayment of all Obligations and
the satisfaction of all other conditions set forth in the Loan Documents.
1.7 PAYMENT PROCEDURES. Borrower hereby authorizes TBCC to charge the
Loan Account with the amount of all interest, fees, expenses and other
payments to be made hereunder and under the other Loan Documents. TBCC may,
but shall not be obligated to, discharge Borrower's payment obligations
hereunder by so charging the Loan Account. Whenever any payment to be made
hereunder is due on a day that is not a Business Day, the payment may be made
on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest due.
1.8 CONDITIONS TO INITIAL LOAN. The obligation of TBCC to make the
initial Loan is subject to the satisfaction of the following conditions prior
to or concurrent with such initial Loan, and Borrower shall cause all such
conditions to be satisfied by the Closing Deadline set forth in the Schedule:
(a) Except for the filing of termination statements under the
Uniform Commercial Code by the existing lender to Borrower whose loans are
being repaid with the Loan proceeds and the documents and actions relating to
the Liens of TBCC created hereunder, as provided for in Section 1.8(c) below,
no consent or authorization of, filing with or other act by or in respect of
any Governmental Authority or any other Person is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement, or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby or the continuing operations of the Borrower
following the consummation of such transactions.
(b) TBCC and its counsel shall have performed (i) a review
satisfactory to TBCC of all of the Material Contracts and other assets of the
Borrower, the financial condition of the Borrower, including all of its tax,
litigation, environmental and other potential contingent liabilities, and the
corporate and capital structure of the Borrower and (ii) a pre-closing audit
and collateral review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of
the initial Loan or as of an earlier date acceptable to TBCC, in form and
substance satisfactory to TBCC and its counsel: (i) a Blocked Account
Agreement, duly executed by the Borrower and its bank on TBCC's standard
form; (ii) acknowledgment copies of Uniform Commercial Code financing
statements (naming TBCC as secured party and the Borrower as debtor), duly
filed in all jurisdictions that TBCC deems necessary or desirable to perfect
and protect the Liens created hereunder, and evidence that all other filings,
registrations and recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be necessary to
create, in favor of TBCC, a perfected first priority Lien on the Collateral;
(iii) the opinion of counsel for the Borrower covering such matters incident
to the transactions contemplated by this Agreement as TBCC may specify in its
discretion; (iv) certified copies of all policies of insurance required by
this Agreement and the other Loan Documents, together with loss payee
endorsements for all such policies naming TBCC as lender loss payee and an
additional insured; (v) copies of the Borrower's articles or certificate of
incorporation, certified as true, correct and complete by the secretary of
state of Borrower's state of incorporation within 45 days of the date hereof;
(vi) copies of the bylaws of the Borrower and a copy of the resolutions of
the Board of Directors of the Borrower authorizing the execution, delivery
and performance of this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, attached to which is a
certificate of the Secretary or an Assistant Secretary of the Borrower
certifying (A) that such copies of the bylaws and resolutions are true,
complete and accurate copies thereof, have not been amended or modified since
the date of such certificate and are in full force and effect and (B) the
incumbency, names and true signatures of the officers of the Borrower; (vii)
a good standing certificate from the Secretary of State of Borrower's state
of incorporation and each state in which the Borrower is qualified as a
foreign corporation, each dated within ten days of the date hereof; (viii)
the additional documents and agreements, if any, listed in the Schedule; and
(ix) such other agreements and instruments as TBCC deems necessary in its
sole and absolute discretion in connection with the transactions contemplated
hereby.
1.9 CONDITIONS TO LENDING. The obligation of TBCC to make any Loan is
subject to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower after
due inquiry, threatened litigation, proceeding, inquiry or other action
relating to this Agreement, or any other Loan Document, which could be
expected to have a Material Adverse Effect in the judgment of TBCC;
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(b) Borrower shall be in compliance with all Requirements of Law and
Material Contracts, other than such noncompliance that could not have a
Material Adverse Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and
shall constitute first priority Liens, except for Permitted Liens;
(d) All representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date
of such Loan as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have been
true and correct as of such earlier date;
(e) No Default or Event of Default shall have occurred and be
continuing or would result from the making of the requested Loan as of the
date of such request; and
(f) No Material Adverse Effect shall have occurred.
2. INTEREST AND FEES.
2.1 INTEREST. Borrower shall pay TBCC interest on all outstanding Loans
and other monetary Obligations, at the interest rate set forth in the
Schedule. Interest shall be payable monthly in arrears on the first Business
Day of each months, and on the Maturity Date. Following the occurrence and
during the continuance of any Event of Default, the interest rate applicable
to each Loan shall be increased to the extent provided for in the Note
evidencing such Loan, and the interest rate applicable to all other
Obligations shall be increased by two percent per annum.
2.2 FEES. Borrower shall pay TBCC the fees set forth in the Schedule.
2.3 CALCULATIONS. All interest and fees under this Agreement shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period for which such interest or fees are payable.
2.4 TAXES. Any and all payments by Borrower under this Agreement or any
other Loan Document shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
3.1 GRANT OF SECURITY INTEREST. To secure the payment and performance
when due of all of the Obligations, Borrower hereby grants to TBCC a security
interest in all of its present and future Receivables, Investment Property,
Inventory, Equipment, Other Property, and other Collateral, wherever located*.
* NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 3.1, SUCH GRANT OF
A SECURITY INTEREST SHALL NOT EXTEND TO, AND THE TERM "COLLATERAL" SHALL NOT
INCLUDE, (i) ANY GENERAL INTANGIBLES OF THE BORROWER (WHETHER OWNED OR HELD AS
LICENSEE OR LESSEE, OR OTHERWISE), TO THE EXTENT THAT (A) SUCH GENERAL
INTANGIBLES ARE NOT ASSIGNABLE OR CAPABLE OF BEING ENCUMBERED AS A MATTER OF
LAW OR UNDER THE TERMS OF THE LICENSE, LEASE OR OTHER AGREEMENT APPLICABLE
THERETO (BUT SOLELY TO THE EXTENT THAT ANY SUCH RESTRICTION SHALL BE
ENFORCEABLE UNDER APPLICABLE LAW), WITHOUT THE CONSENT OF THE LICENSOR OR
LESSOR THEREOF OR OTHER APPLICABLE PARTY THERETO AND (B) SUCH CONSENT HAS NOT
BEEN OBTAINED, (ii) ANY OF BORROWER'S EQUIPMENT AND SOFTWARE INCLUDED AS
COLLATERAL FROM TIME TO TIME UNDER ANY LOAN AGREEMENT OR OTHER FINANCING
AGREEMENT UNDER WHICH THE ACQUISITION OF SUCH EQUIPMENT WAS FINANCED (THE
"EQUIPMENT LOAN DOCUMENTS"); PROVIDED, HOWEVER, THAT THE FOREGOING GRANT OF
SECURITY INTEREST SHALL EXTEND TO, AND THE TERM "COLLATERAL" SHALL INCLUDE,
(1) ANY GENERAL INTANGIBLE WHICH IS A RECEIVABLE OR A PROCEED OF, OR OTHERWISE
RELATED TO THE ENFORCEMENT OR COLLECTION OF, ANY RECEIVABLE, OR GOODS WHICH
ARE THE SUBJECT OF ANY RECEIVABLE, (2) ANY AND ALL PROCEEDS OF ANY GENERAL
INTANGIBLES AND OTHER PROPERTY WHICH ARE OTHERWISE EXCLUDED TO THE EXTENT THAT
THE ASSIGNMENT OR ENCUMBRANCE OF SUCH PROCEEDS IS NOT SO RESTRICTED, AND (3)
UPON THE TERMINATION OF ANY EQUIPMENT LOAN DOCUMENT, OR UPON OBTAINING THE
CONSENT OF ANY SUCH LICENSOR, LESSOR OR OTHER APPLICABLE PARTY'S CONSENT WITH
RESPECT TO ANY SUCH OTHERWISE EXCLUDED GENERAL INTANGIBLES OR PROPERTY, SUCH
GENERAL INTANGIBLES AS WELL AS ANY AND ALL PROCEEDS THEREOF AND OTHER SUCH
PROPERTY THAT MIGHT HAVE THERETOFORE HAVE BEEN EXCLUDED FROM SUCH GRANT OF A
SECURITY INTEREST AND THE TERM "COLLATERAL".
3.2 OTHER LIENS; LOCATION OF COLLATERAL. Borrower represents, warrants
and covenants that all of the Collateral is, and will at all times continue to
be, free and clear of all Liens, other than Permitted Liens and Liens in favor
of TBCC. All collateral* is maintained at the locations shown on the
Schedule**.
*(OTHER THAN COLLATERAL THAT IS MOBILE IN NATURE)
**, AND IN THE EVENT OF ANY RELOCATION OF ANY COLLATERAL, BORROWER AGREES TO
GIVE TBCC 30 DAYS' NOTICE OF SUCH RELOCATION
3.3 RECEIVABLES.
(a) SCHEDULES AND OTHER ACTIONS. As often as requested by TBCC,
Borrower shall execute and deliver to TBCC written schedules of Receivables
and Eligible Receivables (but the failure to execute or deliver any schedule
shall not affect or limit TBCC's security interest in all Receivables). On
TBCC's request, Borrower shall also furnish to TBCC copies of invoices to
customers and shipping and delivery receipts. Borrower shall deliver to TBCC
the originals of all letters of credit, notes, and instruments in its favor
and such endorsements or assignments as TBCC may reasonably request and, upon
the request of TBCC, Borrower shall deliver to TBCC all certificated
securities with respect to any Investment Property, with all necessary
endorsements, and obtain such account control agreements with securities
intermediaries
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and take such other action with respect to any Investment Property, as TBCC
shall request, in form and substance satisfactory to TBCC. Upon request of
TBCC Borrower additionally shall obtain consents from any letter of credit
issuers with respect to the assignment to TBCC of any letter of credit
proceeds.
(b) RECORDS, COLLECTIONS. Borrower shall report all customer
credits to TBCC, on the regular reports to TBCC in the form from time to time
specified by TBCC. Borrower shall notify TBCC of all returns and recoveries
of merchandise and of all claims asserted with respect to merchandise, on its
regular reports to TBCC. Borrower shall not settle or adjust any dispute or
claim, or grant any discount, credit or allowance or accept any return of
merchandise, except in the ordinary course of its business, without TBCC's
prior written consent.
(c) REPRESENTATIONS. Borrower represents and warrants to TBCC that
each Receivable with respect to which Loans are requested by Borrower shall,
on the date each Loan is requested and made, represent an undisputed, bona
fide, existing, unconditional obligation of the account debtor created by the
sale, delivery, and acceptance of goods, the licensing of software or the
rendition of services, in the ordinary course of Borrower's business, and meet
the Minimum Eligibility Requirements set forth in Section 9.1(n) below.
3.4 INVENTORY. Borrower shall maintain full, accurate and complete
records respecting the Inventory describing the kind, type and quantity of the
Inventory and Borrower's cost therefor, withdrawals therefrom and additions
thereto, including a perpetual inventory for work in process and finished
goods.
3.5 EQUIPMENT. Borrower shall at all times keep correct and accurate
records itemizing and describing the location, kind, type, age and condition
of the Equipment, Borrower's cost therefor and accumulated depreciation
thereof and retirements, sales, or other dispositions thereof. Borrower shall
keep all of its Equipment in a satisfactory state of repair and satisfactory
operating condition in accordance with industry standards, ordinary wear and
tear excepted. No Equipment shall be annexed or affixed to or become part of
any realty, unless the owner of the realty has executed and delivered a
Landlord Waiver in such form as TBCC shall specify. Where Borrower is
permitted to dispose of any Equipment under this Agreement or by any consent
thereto hereafter given by TBCC, Borrower shall do so at arm's length, in good
faith and by obtaining the maximum amount of recovery practicable therefor
and without impairing the operating integrity or value of the remaining
Equipment.
3.6 INVESTMENT PROPERTY. Borrower shall have the right to retain all
Investment Property payments and distributions, unless and until a Default or
an Event of Default has occurred. If a Default or an Event of Default
exists, Borrower shall hold all payments on, and proceeds of, and
distributions with respect to, Investment property in trust for TBCC, and
Borrower shall deliver all such payments, proceeds and distributions to TBCC,
immediately upon receipt, in their original form, duly endorsed, to be
applied to the Obligations in such order as TBCC shall determine. Upon the
request of TBCC, any such distributions and payments with respect to any
Investment Property held in any securities account shall be held and retained
in such securities account as part of the Collateral.
3.7 FURTHER ASSURANCES. Borrower will perform any and all steps that
TBCC may reasonably request to perfect TBCC's security interests in the
Collateral, including, without limitation, executing and filing financing and
continuation statements in form and substance satisfactory to TBCC. TBCC is
hereby authorized by Borrower to sign Borrower's name or file any financing
statements or similar documents or instruments covering the Collateral
whether or not Borrower's signature appears thereon. Borrower agrees, from
time to time, at TBCC's request, to file notices of Liens, financing
statements, similar documents or instruments, and amendments, renewals and
continuations thereof, and cooperate with TBCC, in connection with the
continued perfection and protection of the Collateral. If any Collateral is
in the possession or control of any Person other than a public warehouseman
where the warehouse receipt is in the name of or held by TBCC, Borrower shall
notify such Person of TBCC's security interest therein and, upon request,
instruct such Person or Persons to hold all such Collateral for the account
of TBCC and subject to TBCC's instructions. If so requested by TBCC,
Borrower will deliver to TBCC warehouse receipts covering any Collateral
located in warehouses showing TBCC as the beneficiary thereof and will also
cause the warehouseman to execute and deliver such agreements as TBCC may
request relating to waivers of liens by such warehouseman and the release of
the Inventory to TBCC on its demand. Borrower shall defend the Collateral
against all claims and demands of all Persons.
3.8 POWER OF ATTORNEY. Borrower hereby appoints and constitutes TBCC as
Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing
thereon, (ii) upon the occurrence and during the continuance of an Event of
Default, to convey any item of Collateral to any purchaser thereof, (iii) to
give or sign Borrower's name to any notices or statements necessary or
desirable to create or continue the Lien on any Collateral granted hereunder,
(iv) to execute and deliver to any securities intermediary or other Person any
entitlement order, account control agreement or other notice, document or
instrument with respect to any Investment Property, and (v) to make any
payment or take any act necessary or desirable to protect or preserve any
Collateral. TBCC's authority hereunder shall include, without limitation, the
authority to execute and give receipt for any certificate of ownership of any
document, transfer title to any item of Collateral and take any other actions
arising from or incident to the powers granted to TBCC under this Agreement.
This power of attorney is coupled with an interest and is irrevocable.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and
warrants as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State set forth above, (ii) has the corporate power and authority
to own its properties and assets and to transact the businesses in which it is
engaged and (iii) is duly qualified, authorized to do business and in good
standing in each jurisdiction
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where it is engaged in business, except to the extent that the failure to do
so qualify or be in good standing would not have a Material Adverse Effect.
4.2 LOCATIONS OF OFFICERS, RECORDS AND COLLATERAL. The address of the
principal place of business and chief executive office of Borrower is, and the
books and records of Borrower and all of its chattel paper and records
relating to Collateral are maintained exclusively in the possession of
Borrower at, the address of Borrower specified in the heading of this
Agreement. Borrower has places of business, and Collateral is located, only
at such address and at the addresses set forth in the Schedule and at any
additional locations reported to TBCC as provided in Section 5.8(c) as to
which TBCC has taken all necessary action to perfect and protect its security
interests in the Collateral at any such locations.
4.3 AUTHORITY. Borrower has the requisite corporate power and authority
to execute, deliver and perform its obligations under each of the Loan
Documents. All corporate action necessary for the execution, delivery and
performance by Borrower of the Loan Documents has been taken.
4.4 ENFORCEABILITY. This Agreement is, and, when executed and
delivered, each other Loan Document will be, the legal, valid and binding
obligation of Borrower enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principles of equity.
4.5 NO CONFLICT. The execution, delivery and performance of each Loan
Document by Borrower does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract and
will not result in the imposition of any Liens other than in favor of TBCC.
4.6 CONSENTS AND FILINGS. No consent, authorization or approval of, or
filing with or other act by, any shareholders of Borrower or any Governmental
Authority or other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement or any
other Loan Document, the consummation of the transactions contemplated hereby
or thereby or the continuing operations of Borrower following such
consummation, except (i) those that have been obtained or made, (ii) the
filing of financing statements under the Uniform Commercial Code and (iii) any
necessary filings with U.S. Copyright Office and the U.S. Patent and Trademark
Office.
4.7 SOLVENCY. Borrower is Solvent and will be Solvent upon the
completion of all transactions contemplated to occur on or before the date of
this Agreement (including, without limitation, the Loans to be made on the
date of this Agreement).
4.8 FINANCIAL DATA. Borrower has provided to TBCC complete and
accurate Financial Statements, which have been prepared in accordance with
GAAP consistently applied throughout the periods involved and fairly present
the financial position and results of operations of Borrower for each of the
periods covered, subject, in the case of any quarterly financial statements,
to normal year-end adjustments and the absence of notes. Borrower has no
Contingent Obligation or liability for taxes, unrealized losses, unusual
forward or long-term commitments or long-term leases, which is not reflected
in such Financial Statements or the footnotes thereto. Since the last date
covered by such Financial Statements, there has been no sale, transfer or
other disposition by Borrower of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
financial condition of Borrower at said date. Since said date, (i) there has
been no change, occurrence, development or event which has had or could
reasonably be expected to have a Material Adverse Effect and (ii) none of the
capital stock of borrower has been redeemed, retired, purchased or otherwise
acquired for value by Borrower.
4.9 ACCURACY AND COMPLETENESS OF INFORMATION. All data, reports and
information previously, now or hereafter furnished by or on behalf of
Borrower to TBCC or the Auditors are or will be true and accurate in all
material respects on the date as of which such data, reports and information
are dated or certified, and not incomplete by omitting to state any material
fact necessary to make such data, reports and information not materially
misleading at such time. There are no facts now known to Borrower which
individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect and which have not been disclosed in writing to TBCC.
4.10 NO JOINT VENTURES, PARTNERSHIPS OR SUBSIDIARIES. *Borrower is not
engaged in any joint venture or partnership with any other Person. *Borrower
has no** Subsidiaries.
*AS OF THE DATE HEREOF,
**MATERIAL
4.11 CORPORATE AND TRADE NAME. During the past five years, Borrower has
not been known by or used any other corporate, trade or fictitious name except
for its name as set forth on the signature page of this Agreement and the
other names specified in the Schedule.
4.12 NO ACTUAL OR PENDING MATERIAL MODIFICATION OF BUSINESS. There
exists no actual or, to the best of Borrower's knowledge after due inquiry,
threatened termination, cancellation or limitation of, or any modification or
change in the business relationship of Borrower with any customer or group of
customers whose purchases individually or in the aggregate are material to the
operation of Borrower's business or with any material supplier.
4.13 NO BROKER'S OR FINDER'S FEES. No broker or finder brought about
this Agreement or the Loans. No broker's or finder's fees or commissions
will be payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14 TAXES AND TAX RETURNS. Borrower has properly completed and timely
filed all income tax returns it is required to file. The information filed is
complete and accurate in all material respects. All deductions taken in such
income tax returns are appropriate and in accordance with
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applicable laws and regulations, except deductions that may have been
disallowed but are being challenged in good faith and for which adequate
reserves have been made in accordance with GAAP. All taxes, assessments,
fees and other governmental charges for periods beginning prior to the date
of this Agreement have been timely paid (or, if not yet due, adequate
reserves therefor have been established in accordance with GAAP) and Borrower
has no liability for taxes in excess of the amounts so paid or reserves so
established. No deficiencies for taxes have been claimed, proposed or
assessed by any taxing or other Governmental Authority against Borrower and
no notice of any tax Lien has been filed. There are no pending or threatened
audits, investigations or claims for or relating to any liability for taxes
and there are no matters under discussion with any Governmental Authority
which could result in an additional liability for taxes. No extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to Borrower. Borrower is not
a party to and does not have any obligations under any written tax sharing
agreement or agreement regarding payments in lieu of taxes.
4.15 NO JUDGMENTS OR LITIGATION. Except as set forth in the Schedule,
no judgments, orders, writs or decrees are outstanding against Borrower, nor
is there now pending or, to the knowledge of Borrower after due inquiry,
threatened litigation, contested claim, investigation, arbitration, or
governmental proceeding by or against Borrower that (i) could individually or
in the aggregate be likely in the reasonable business judgment of TBCC to have
a Material Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of this Agreement, any other Loan Document or the consummation
of the transactions contemplated hereby or thereby.
4.16 INVESTMENTS; CONTRACTS. Borrower (i) has not committed to make any
Investment; (ii) is not a party to any indenture, agreement, contract,
instrument or lease or subject to any charter, by-law or other corporate
restriction or any injunction, order, restriction or decree, which would
materially and adversely affect its business, operations, assets or financial
condition; (iii) is not a party to any "take or pay" contract as to which it
is the purchaser; or (iv) has no material contingent or long-term liability,
including management contracts (excluding employment contracts of full-time
individual officers or employees), which could have a Material Adverse Effect.
4.17 NO DEFAULTS; LEGAL COMPLIANCE. Borrower is not in default under any
term of any Material Contract or in violation of any Requirement of Law, nor
is Borrower subject to any investigation with respect to a claimed violation
of any Requirement of Law.
4.18 RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All Collateral is owned or
leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to
the Loan Documents constitute valid, enforceable and perfected first-priority
Liens on the Collateral, except for Permitted Liens.
4.19 INTELLECTUAL PROPERTY. Set forth in the written Representations and
Warranties of Borrower previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, servicemarks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted. To the best of its knowledge
after due inquiry, Borrower has not infringed any patent, trademark,
service-xxxx, tradename, copyright, license or other right owned by any other
Person by the sale or use of any product, process, method, substance, part or
other material presently contemplated to be sold or used, where such sale or
use would reasonably be expected to have a Material Adverse Effect and no
claim or litigation is pending, or to the best of Borrower's knowledge,
threatened against or affecting Borrower that contests its right to sell or
use any such product, process, method, substance, part or other material.
4.20 LABOR MATTERS. There are no existing or threatened strikes,
lockouts or other disputes relating to any collective bargaining or similar
agreement to which Borrower is a party which would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.
4.21 LICENSES AND PERMITS. Borrower has obtained and holds in full force
and effect, all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary or advisable for the operation of its business
as presently conducted and as proposed to be conducted, except where the
failure to posses any of the foregoing (individually or in the aggregate)
would not have a Material Adverse Effect.
4.22 GOVERNMENT REGULATION. Borrower is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its
ability to consummate the transactions contemplated by this Agreement and the
other Loan Documents.
4.23 BUSINESS AND PROPERTIES. The business of Borrower is not affected
by any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy
or other casualty (whether or not covered by insurance) that could reasonably
be expected to have a Material Adverse Effect.
4.24 AFFILIATE TRANSACTIONS. Borrower is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except (i) in the ordinary course of an pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair and
reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
4.25 SURVIVAL OF REPRESENTATIONS. All representations made by Borrower
in this Agreement and in any other Loan Document executed and delivered by it
in connection herewith shall survive the execution and delivery hereof
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and thereof and the closing of the transactions contemplated hereby and
thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER. Until termination of this
Agreement and payment and satisfaction of all Obligations:
5.1 CORPORATE EXISTENCE. Borrower shall (i) maintain its corporate
existence, (ii) maintain in full force and effect all material licenses,
bonds, franchises, leases, trademarks, qualifications and authorizations to do
business, and all material patents, contracts and other rights necessary to
advisable to the profitable conduct of its business, and (iii) continue in,
and limit its operations to, the same lines of business as presently
conducted by it.
5.2 MAINTENANCE OF PROPERTY. Borrower shall keep all property useful
and necessary to its business in good working order and condition (ordinary
wear and tear expected) in accordance with its past operating practices.
5.3 AFFILIATE TRANSACTIONS. Borrower shall conduct transactions with
any if its Affiliates on an arm's-length basis or other basis no less
favorable to Borrower and which are approved by the board of directors of
Borrower.
5.4 TAXES. Borrower shall pay when due (i) all tax assessments, and
other governmental charges and levies imposed against it or any of its
property and (ii) all lawful claims that, if unpaid, might by law become a
Lien upon its property; PROVIDED, HOWEVER, that, unless such tax assessment,
charge, levy or claim has become a Lien on any of the property of Borrower,
it need not be paid if it is being contested in good faith, by appropriate
proceedings diligently conducted and an adequate reserve or other appropriate
provision shall have been made therefor as required in accordance with GAAP.
5.5 REQUIREMENTS OF LAW. Borrower shall comply with all Requirements
of Law applicable to it, including, without limitation, all applicable
Federal , State, local or foreign laws and regulations, including, without
limitation, those relating to environmental matters, employee matters, the
Employee Retirement Income Security Act of 1974, and the collection, payment
and deposit of employees' income, unemployment and social security taxes,
PROVIDED that Borrower shall not be deemed in violation hereof if Borrower's
failure to comply with any of the foregoing would not require more than
$50,000 to cure the same.
5.6 INSURANCE. Borrower shall maintain public liability insurance,
business interruption insurance, third party property damage insurance and
replacement value insurance on its assets (including the Collateral) under
such policies of insurance, with such insurance companies, in such amounts
and covering such risks as are at all times satisfactory to TBCC in its
commercially reasonable judgment, all of which policies covering the
Collateral shall name TBCC as an additional insured and lender loss payee in
case of loss, and contain other provisions as TBCC may reasonably require to
protect TBCC's interest in the Collateral and any payments to be made under
such policies.
5.7 BOOKS AND RECORDS; INSPECTIONS. Borrower shall (i) maintain books
and records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and (ii)
provide TBCC and its agents access to the premises of Borrower at any time
and from time to time, during normal business hours and upon reasonable
notice under the circumstances, and at any time on and after the occurrence
of a Default or Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Borrower's expense)
any and all records pertaining thereto, and (C) discussing the affairs,
finances and business of Borrower with any officer, employee or director of
Borrower or with the Auditors. Borrower shall reimburse TBCC for the
reasonble travel and related expenses of TBCC's employees or, at TBCC's
option, of such outside accountants or examiners as may be retained by TBCC
to verify or inspect Collateral, records or documents of Borrower on a
regular basis or for a special inspection if BCC deems the same appropriate.
If TBCC's own employees are used, Borrower shall also pay therefor $600 per
person per day (or such other amount as shall represent TBCC's then current
standard charge for the same), or, if outside examiners or accountants are
used, Borrower shall also pay TBCC such sum as TBCC may be obligated to pay
as fees therefor.
5.8 NOTIFICATION REQUIREMENTS. Borrower shall give TBCC the following
notices and other documents:
(a) NOTICE OF DEFAULTS. Borrower shall give TBCC written notice of
any Default or Event of Default within two Business Days after becoming aware
of the same.
(b) PROCEEDINGS OR ADVERSE CHANGES. Borrower shall give TBCC
written notice of any of the following, promptly, and in any event within
five Business Days after Borrower becomes aware of any of the following: (i)
any proceeding being instituted or threatened by or against it in any
federal, state, local or foreign court or before any commission or other
regulatory body involving a sum, together with the sum involved in all other
similar proceedings, in excess of $50,000* in the aggregate, (ii) any order,
judgement or decree being entered against Borrower or any of its properties
or assets involving a sum, together with the sum of all other orders,
judgments or decrees, in excess of $50,000 in the aggregate, and (iii) any
actual or prospective change, development or event which has had or
reasonably be expected to have a Material Adverse Effect.
*250,000
(c) CHANGE OF NAME OR CHIEF EXECUTIVE OFFICE; OPENING ADDITIONAL
PLACES OF BUSINESS. Borrower shall give TBCC at least 30* days prior written
notice of any change of Borrower's corporate name or its chief executive
office or of the opening of any additional place of business.
*10
(d) CASUALTY LOSS. Borrower shall (i) provide written notice to
TBCC, within ten Business Days, of any material damage to, the destruction of
or any other material loss to any asset or property owned or used by Borrower
other than any such asset or property with a net book value (individually or
in the aggregate) less than $10,000 or any condemnation, confiscation or
other taking, in whole or in part, or any event that otherwise diminishes so
as to render impracticable or unreasonable the use of such asset prop-
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TBCC LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
erty owned or used by Borrower together with the amount of the damage,
destruction, loss or diminution in value and (ii) diligently file and prosecute
its claim or claims for any award or payment in connection with any of the
foregoing.
(e) INTELLECTUAL PROPERTY. Borrower shall promptly give TBCC written
notice of any copyright registration made by it, any rights Borrower may obtain
to any copyrightable works, new trademarks or any new patentable inventions, and
of any renewal or extension of any trademark registration, or if it shall
otherwise become entitled to the benefit of any patent or patent application or
trademark or trademark application.
(f) DEPOSIT ACCOUNTS AND SECURITY ACCOUNTS. Borrower shall promptly
give TBCC written notice of the opening of any new bank account or other deposit
account, and any new securities account.
5.9 QUALIFY TO TRANSACT BUSINESS. Borrower shall qualify to transact
business as a foreign corporation in each jurisdiction where the nature or
extent of its business or the ownership of its property requires it to be so
qualified or authorized and where failure to qualify or be authorized would have
a Material Adverse Effect.
5.10 FINANCIAL REPORTING. Borrower shall timely deliver to TBCC the
following financial information: the information set forth in the Schedule,
and, when requested by TBCC in its good-faith judgment, any further information
respecting Borrower or any Collateral. Borrower authorizes TBCC to communicate
directly with its officers, employees and Auditors and to examine and make
abstracts from its books and records. Borrower authorizes its Auditors to
disclose to TBCC any and all financial statements, work papers and other
information of any kind that they may have with respect to Borrower and its
business and financial and other affairs. Borrower shall deliver a letter
addressed to the Auditors requesting them to comply with the provisions of this
paragraph when requested by TBCC.
5.11 PAYMENT OF LIABILITIES. Borrower shall pay and discharge, in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of Borrower in
accordance with GAAP.
5.12 PATENTS, TRADEMARKS, ETC. Borrower shall do and cause to be done all
things necessary to preserve, maintain and keep in full force and effect all of
its registrations of trademarks, service marks and other marks, trade names and
other trade rights, patents, copyrights and other intellectual property in
accordance with prudent business practices.
5.13 PROCEEDS OF COLLATERAL. Without limiting any of the other terms of
this Agreement, and without implying any consent to any sale or other transfer
of Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC.
5.14 SOLVENCY. Borrower shall be Solvent at all times.
6. NEGATIVE COVENANTS. Until termination of this Agreement and payment and
satisfaction of all Obligations:
6.1 CONTINGENT OBLIGATIONS. Borrower will not, directly or indirectly,
incur, assume, or suffer to exist any Contingent Obligation, excluding
indemnities given in connection with this Agreement or the other Loan Documents
in favor of TBCC or in connection with the sale of Inventory or other asset
dispositions permitted hereunder.
6.2 CORPORATE CHANGES. Borrower will not, directly or indirectly, merge
or consolidate with any Person, or liquidate or dissolve (or suffer any
liquidation or dissolution)*.
* WITHOUT THE PRIOR WRITTEN CONSENT OF TBCC, WHICH CONSENT WILL NOT BE
UNREASONABLY WITHHELD, PROVIDED THAT (IS SUCH CONSENT IS GRANTED) PRIOR TO OR
SIMULTANEOUSLY WITH ANY SUCH TRANSACTION TBCC HAS TAKEN ALL NECESSARY STEPS TO
PROTECT AND CONTINUE PERFECTED ITS FIRST PRIORITY SECURITY INTEREST IN THE
COLLATERAL (SUBJECT ONLY TO PERMITTED LIENS)
6.3 CHANGE IN NATURE OF BUSINESS. Borrower will not at any time make any
material change in the lines of its business as carried on at the date of this
Agreement or enter into any new line of business*.
*; PROVIDED THAT BORROWER MAY ENTER BUSINESSES REASONABLY RELATED OR INCIDENTAL
TO ITS CURRENT LINES OF BUSINESS
6.4 SALES OF ASSETS. Borrower will not, directly or indirectly, in any
fiscal year, sell, transfer or otherwise dispose of any assets, or grant any
option or other right to purchase or otherwise acquire any assets other than (i)
Equipment with an aggregate value of less than $______* the proceeds of which
shall be paid to TBCC and applied to the Obligations, (ii) sales of Inventory in
the ordinary course of business and (iii) licenses or sublicenses on a
non-exclusive basis of intellectual property in the ordinary course of
Borrower's business.
*50,000
6.5 CANCELLATION OF DEBT. Borrower will not cancel any claim or debt owed
to it, except in the ordinary course of business.
6.6 LOANS TO OTHER PERSONS. Borrower will not at any time make loans or
advance any credit (except to trade debtors* in the ordinary course of business)
to any Person in excess of $______* in the aggregate at any time for all such
loans.
*OR CUSTOMERS
**250,000
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6.7 LIENS. Borrower will not, directly or indirectly, at any time create,
incur, assume or suffer to exist any Lien on or with respect to any of the
Collateral, other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.
6.8 DIVIDENDS, STOCK REDEMPTIONS. Borrower will not, directly or
indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or rights
to purchase any such capital stock, whether now or hereafter outstanding
("Stock"), or make any payment on account of or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Borrower, except for dividends paid solely in stock of the
Borrower*.
*AND REPURCHASES OF STOCK OWNED BY EMPLOYEES, OFFICERS AND DIRECTORS OF BORROWER
PURSUANT TO THE TERMS OF EMPLOYMENT AGREEMENTS OR ANY STOCK-RELATED AGREEMENTS
OR PLANS, PROVIDED THAT NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER
IMMEDIATELY PRIOR TO OR AFTER GIVING EFFECT TO SUCH REPURCHASE, AND PROVIDED
FURTHER THAT THE TOTAL AMOUNT PAID IN CONNECTION THEREWITH BY BORROWER SHALL NOT
EXCEED $100,000 IN ANY CONSECUTIVE 12-MONTH PERIOD
6.9 INVESTMENTS IN OTHER PERSONS. Borrower will not, directly or
indirectly, at any time make or hold any Investment in any Person (whether in
cash, securities or other property of any kind) other than Investments in Cash
Equivalents*.
* OTHER THAN (i) INVESTMENTS IN SHORT-TERM, INVESTMENT GRADE READILY MARKETABLE
SECURITIES MADE IN ACCORDANCE WITH BORROWER'S CASH MANAGEMENT INVESTMENT POLICY
APPROVED BY ITS BOARD OF DIRECTORS, AND (ii) PERMITTED INVESTMENTS. AS USED
HEREIN, "PERMITTED INVESTMENT" MEANS ANY INVESTMENT IN, OR OTHER ACQUISITION OF
STOCK, SECURITIES OR ASSETS OF, ANY PERSON, PROVIDED THAT (i) IMMEDIATELY AFTER
GIVING EFFECT THERETO, NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING OR WOULD RESULT THEREFROM, (ii) THE AMOUNT OF SUCH TRANSACTION,
TOGETHER WILL SUCH OTHER TRANSACTIONS CONSUMMATED AT ANY TIME AFTER THE DATE
HEREOF, SHALL NOT EXCEED $500,000 IN THE AGGREGATE, (iii) PRIOR TO OR
SIMULTANEOUSLY WITH THE CLOSING OF SUCH TRANSACTION, TBCC SHALL HAVE TAKEN ALL
NECESSARY ACTION IN ORDER TO PROTECT AND CONTINUE PERFECTED ITS SECURITY
INTEREST HEREUNDER AFTER GIVING EFFECT TO THE TRANSACTION, AND (iv) TBCC AND
BORROWER SHALL HAVE EXECUTED ANY NECESSARY OR APPROPRIATE AMENDMENTS TO THE LOAN
DOCUMENTS, AS TBCC SHALL REASONABLY REQUEST, IN CONNECTION WITH OR ARISING FROM
SUCH TRANSACTION.
6.10 PARTNERSHIPS; SUBSIDIARIES; JOINT VENTURES; MANAGEMENT CONTRACTS.
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's business) permitting third party management
rights with respect to Borrower's business*.
*OTHER THAN PERMITTED INVESTMENTS
6.11 FISCAL YEAR. Borrower will not change its fiscal year.
6.12 ACCOUNTING CHANGES. Borrower will not at any time make or permit any
* change in accounting policies or reporting practices, except as required by
GAAP.
*MATERIAL
6.13 BROKER'S OR FINDER'S FEES. Borrower will not pay or incur any
broker's or finder's fees in connection with this Agreement or the transactions
contemplated hereby.
6.14 UNUSUAL TERMS OF SALE. Borrower will not sell goods or products on
extended terms, consignment terms, on a progress billing or xxxx and hold basis,
or on any other unusual terms*.
*IF SUCH TRANSACTION COULD HAVE A MATERIAL ADVERSE EFFECT
6.15 AMENDMENTS OF MATERIAL CONTRACTS. Borrower will not amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could have a Material Adverse Effect.
6.16 SALE AND LEASEBACK OBLIGATIONS. Borrower will not at any time create,
incur or assume any obligations as lessee for the rental of real or personal
property in connection with any sale and leaseback transaction.
6.17 ACQUISITION OF STOCK OR ASSETS. Borrower will not acquire or commit
or agree to acquire all or any stock, securities or assets of any other Person
other than Inventory and Equipment acquired in the ordinary course of business*.
*OTHER THAN PERMITTED INVESTMENTS
7. EVENTS OF DEFAULT.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) Borrower shall fail to pay any principal, interest, fees,
expenses or other Obligations when payable, whether at stated maturity, by
acceleration, or otherwise; or
(b) Borrower shall default in the performance or observance of any
agreement, covenant, condition, provision or term contained in Section 1.1,
1.2,. 1.4, 3.3, 5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this
Agreement, or Borrower shall fail to perform any nonmonetary Obligation which by
its nature cannot be cured; or
(c) Borrower shall default in the performance or observance of any
other agreement, covenant, condition,
-9-
provision or term of this Agreement (other than those referred to in Section
7.1(a) above or Section 7.1(b) above) or any other Loan Document, and such
failure continues uncured by a period of _____* Business Days after the date it
occurs; or
*TEN
(d) Borrower or any Guarantor shall dissolve, wind up or otherwise
cease to conduct its business; or
(e) Borrower or any Guarantor shall become the subject of (i) an
Insolvency Event except as set forth in clause (e) of the definition of
Insolvency Event or (ii) an Insolvency Event as set forth in clause (e) of the
definition of Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower
or any Guarantor to TBCC, under this Agreement or otherwise, shall be incorrect
or misleading in any material respect when made or deemed made; or
(g) A change in the ownership or control of more than __%* of the
voting stock of the Borrower compared to such ownership on the date of this
Agreement**:
*33
**OTHER THAN IN CONNECTION WITH AN INITIAL PUBLIC OFFERING OF BORROWER'S
EQUITY SECURITIES
(h) any judgment or order for the payment of money shall be rendered
against Borrower and shall not be stayed, vacated, bonded or discharged within
thirty days; or
(i) any defined "Event of Default" shall occur under any other Loan
Document; or Borrower or any Guarantor shall deny or disaffirm its obligations
under any of the Loan Documents or any Liens granted in connection therewith or
shall otherwise challenge any of its obligations under any of the Loan
Documents; or any Liens granted in any of the Collateral shall be determined to
be void, voidable or invalid, are subordinated or are not given the priority
contemplated by this Agreement; or
(j) any Loan Document shall for any reason cease to create a valid
and perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or
(k) the Auditors for Borrower shall deliver a Qualified opinion on
any Financial Statement; or
(l) Borrower or any Guarantor (i) shall fail to pay any Indebtedness
owing to TBCC under any other agreement with TBCC or note or instrument in favor
of TBCC, when due (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise), or (ii) shall otherwise be in breach of or
default in any of its obligations under any such agreement, note or instrument
with respect to any such Indebtedness; or
(m) Borrower or any Guarantor (i) shall fail to pay any Indebtedness
in excess of $_____* owing to any Person other than TBCC or any interest or
premium thereon, when due (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise), or (ii) shall otherwise be in
breach or default in any of its obligations under any agreement with respect to
any such Indebtedness, if the effect of such breach, default or failure to pay
is to cause such Indebtedness to become due or redeemed or permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to declare such Indebtedness due or require such Indebtedness to be
redeemed prior to its stated maturity; or
*$150,000
(n) the occurrence of any event or condition that, in TBCC's
judgment, could reasonably be expected to have a Material Adverse Effect.
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2 REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, TBCC shall have all rights and remedies under applicable law and the
Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except
with respect to any Event of Default with respect to Borrower set forth in
Section 7.1(e), in which case all Obligations shall automatically become
immediately due and payable) without presentment, demand, protest or any other
action or obligation of TBCC;
(b) Cease making any Loans or other extensions of credit to Borrower
of any kind;
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue
credits, or bring suit on the Receivables and other Collateral (in the name of
Borrower or TBCC) and otherwise administer and collect the Receivables and other
Collateral;
(e) Collect, receive, dispose of and realize upon any Investment
Property, including withdrawal of any and all funds from any securities
accounts;
(f) Sell, assign and deliver the Receivables and other Collateral,
with or without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law; and
(g) Foreclose on the security interests created pursuant to the Loan
Documents by any available procedure, take possession of any or all of the
Collateral, with or without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same.
(h) TBCC may bid or become a purchaser at any sale, free from any
right of redemption, which right is expressly waived by Borrower, if permitted
under applicable law. If notice of intended disposition of any Collateral is
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required by law, it is agreed that ten days' notice shall constitute reasonable
notification. Borrower will assemble the Collateral and make it available at
such locations as TBCC may specify, whether at the premises of Borrower or
elsewhere, and will make available to TBCC the premises and facilities of
Borrower for the purpose of TBCC's taking possession of or removing the
Collateral or putting the Collateral in salable form.
(i) Borrower recognizes that TBCC may be unable to make a public sale
of any or all of the Investment Property, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
7.3 RECEIVABLES. Upon the occurrence and during the continuance of an
Event of Default, or at any time that TBCC believes in good faith that fraud has
occurred or that Borrower has failed to deliver the proceeds of Receivables or
other Collateral to TBCC as required by this Agreement or any other Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable, and (ii) notify
account debtors on the Receivables and other Collateral that the Receivables and
Collateral have been assigned to TBCC, and that payments in respect thereof
shall be made directly to TBCC. If an Event of Default has occurred and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that Borrower has failed to deliver the proceeds of Receivables or other
Collateral to TBCC as required by this Agreement or any other Loan Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate, as its attorney-in-fact, at Borrower's sole cost and expense, to
exercise, all of the following powers, which are coupled with an interest and
are irrevocable, until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; (B) to receive,
open and dispose of all mail addressed to Borrower and to notify postal
authorities to change the address for delivery thereof to such address as TBCC
may designate; and (C) to take or bring, in the name of TBCC or Borrower, all
steps, actions, suits or proceedings deemed by TBCC necessary or desirable to
enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
7.4 RIGHT OF SETOFF. In addition to all rights of offset that TBCC may
have under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have the right to appropriate and apply to
the payment of the Obligations of Borrower all deposits and other obligations
then or thereafter owing by TBCC to or for the credit or the account of
Borrower. In the event that TBCC exercises any of its rights under this
Section, TBCC shall provide notice to Borrower of such exercise, provided that
the failure to give such notice shall not affect the validity of the exercise of
such rights.
7.5 LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL PROPERTY. After
the occurrence and during the continuance of an Event of Default, unless
expressly prohibited by any licensor thereof, TBCC is hereby granted a license
to use all computer software programs, data bases, processes, trademarks,
tradenames and materials used by Borrower in connection with its businesses or
in connection with the Collateral
7.6 NO MARSHALLING; DEFICIENCIES; REMEDIES CUMULATIVE. The net cash
proceeds resulting from TBCC's exercise of any of its rights with respect to
Collateral, including any and all Collections (after deducting all of TBCC's
reasonable expenses related thereto), shall be applied by TBCC to such of the
Obligations in such order as TBCC shall elect in its sole and absolute
discretion, whether due or to become due. Borrower shall remain liable to TBCC
for any deficiencies and TBCC shall remit to Borrower or its successor or
assign, any surplus resulting therefrom. The remedies specified in this
Agreement are cumulative, may be exercised in such order and with respect to
such Collateral as TBCC may deem desirable and are not intended to be exclusive,
and the full or partial exercise of any of them shall not preclude the full or
partial exercise of any other available remedy under this Agreement, under any
other Loan Document, at equity or at law.
7.7 WAIVERS. Borrower hereby waives any bonds, security or sureties
required by any statute, rule or any other law as an incident to any taking of
possession by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document including the taking of possession of
any Collateral or the giving of notice to any account debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in the Agreement and the other
Loan Documents have been negotiated by the parties and Borrower acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.
7.8 RIGHT TO MAKE PAYMENTS. In the event that Borrower shall fail to
purchase or maintain insurance required hereunder, or to pay any tax,
assessment, government charge or levy, except as the same may be otherwise
permitted hereunder, or in the event that any Lien prohibited hereby shall not
be paid in full or discharged, or in the event that Borrower shall fail to
perform or comply with any other covenant, promise or obligation to TBCC
hereunder or under any other Loan Document, TBCC may (but shall not be required
to) perform, pay, satisfy, discharge or bond the same for the account of
Borrower, and all amounts so paid by TBCC shall be treated as a Loan hereunder
to Borrower and shall constitute part of the Obligations.
8. ASSIGNMENTS AND PARTICIPATIONS.
8.1 ASSIGNMENTS. Borrower shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a
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portion of its rights and obligations under this Agreement and the other Loan
Documents.
8.2 PARTICIPATIONS. TBCC may sell participations in or to all or a
portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of the Loans); provided, however, that
TBCC's obligations under this Agreement shall remain unchanged.
8.3 DISCLOSURE. TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower.
9. DEFINITIONS.
9.1 GENERAL DEFINITIONS. As used herein, the following terms shall have
the meanings herein specified (to be equally applicable to both the singular
and plural forms of the terms defined):
(a) "AFFILIATE" means as to any Person, any other Person who
directly or indirectly controls, is under common control with, is controlled
by or is a director or officer of such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and "under
common control with") means possession, directly or indirectly, of the power
to direct or cause the direction of management or policies (whether through
ownership of voting securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event, any Person who owns
directly or indirectly twenty percent (20%) or more of the securities having
ordinary voting power for the election of the members of the board of
directors or other governing body of a corporation or twenty percent (20%) or
more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
control such corporation, partnership or other Person.
(b) "AGREEMENT" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) "AUDITORS" means a nationally recognized firm of independent
public accountants selected by Borrower and reasonably satisfactory to TBCC.
(d) "BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as that title may be amended from time to time, or any
successor statute.
(e) "BORROWING" means a borrowing of Loans.
(f) "BUSINESS DAY" means any day other than a Saturday, Sunday or
any other day on which commercial banks in Chicago, Illinois are required or
permitted by law to close.
(g) "CASH EQUIVALENTS" means (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of not
more than one year from the date acquired; (ii) certificates of deposit with
maturities of not more than one year from the date acquired, issued by any
U.S. federal or state chartered commercial bank of recognized standing
which has capital and unimpaired surplus in excess of $100,000,000;
(iii) investments in money market funds registered under the Investment
Company Act of 1940; and (iv) other instruments, commercial paper or
investments acceptable to TBCC in its sole discretion.
(h) "COLLATERAL" means Receivables, Investment Property, Inventory,
Equipment, and Other Property, and all additions and accessions thereto and
substitutions and replacements therefor and improvements thereon, and all
proceeds (whether cash or other property) and products thereof, including,
without limitation, all proceeds of insurance covering the same and all tort
claims in connection therewith, and all records, files, computer programs and
files, data and writings relating to the foregoing, and all equipment
containing the foregoing.
(i) "COLLECTIONS" means all cash, funds, checks, notes,
instruments, any other form of remittance tendered by account debtors in
respect of payment of Receivables and any other payments received by Borrower
with respect to any other Collateral.
(j) "COMPLIANCE CERTIFICATE" means a certificate as to compliance
with the Obligations, on TBCC's standard form (in effect from time to time).
(k) "CONTINGENT OBLIGATION" means any direct, indirect, contingent
or non-contingent guaranty or obligation for the Indebtedness of another
Person, except endorsements in the ordinary course of business.
(l) "DEFAULT" means any of the events specified in Section 7.1,
whether or not any of the requirements for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
(m) "ELIGIBLE INVENTORY" means Inventory of Borrower which TBCC in
its sole discretion deems eligible for borrowing, based on such
considerations as TBCC in its sole discretion may deem appropriate from time
to time and less any such reserves as TBCC, in its sole discretion, may
require. Without limiting the fact that the determination of which Inventory
is eligible for borrowing is a matter of TBCC's sole discretion, the
following are the minimum requirements for Inventory to be Eligible
Inventory; (i) the Inventory must consist of finished goods, in good, new and
salable condition which is not perishable, not obsolete or unmerchantable,
and is not comprised of raw materials, work in process, packaging materials
or supplies; (iii) the Inventory must meet all applicable governmental
standards; (iv) the Inventory must have been manufactured in compliance with
the Fair Labor Standards Act; (v) the Inventory must conform in all respects
to the warranties and representations set forth in this Agreement; (vi) the
Inventory must at all times be subject to TBCC's duly perfected, first
priority security interest; and (vii) the Inventory must be in Borrower's
exclusive possession, separately identifiable from goods of others, and
situated at Borrower's chief executive office or at one of the other Borrower
locations set forth on the Schedule. The value of Eligible Inventory shall be
computed at the lower of cost (computed on a "first in, first out" basis) or
wholesale market value.
(n) "ELIGIBLE RECEIVABLES" means and includes only those
Receivables which TBCC in its sole discretion deems eligible for borrowing,
based on such considerations
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as TBCC in its sole discretion may deem appropriate from time to time and
less any such reserves as TBCC, in its sole discretion, may require. Without
limiting the fact that the determination of which Receivables are eligible
for borrowing is a matter of TBCC's sole 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), (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 TBCC, 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 TBCC'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 or Canada
(unless pre-approved by TBCC in its discretion in writing, or backed by a
letter of credit satisfactory to TBCC, or FCIA insured satisfactory to TBCC),
(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, (x) the Receivable must not violate any representation or warranty
set forth in this Agreement, and (xi) the Receivable must not be one in which
TBCC does not have a first-priority, valid, perfected Lien. Without limiting
the generality of the foregoing, Borrower must be in compliance with all
requirements of the Loan Documents regarding registration with the U.S.
Copyright Office of any copyrightable software in order for any Receivable
arising from any licensing of such software to constitute an Eligible
Receivable hereunder. Receivables owing from one account debtor will not be
deemed Eligible Receivables to the extent they exceed 50% of the total
eligible 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. TBCC may, from time
to time, in its sole discretion, revise the Minimum Eligibility Requirements,
upon written notice to the Borrower.
(o) "EQUIPMENT" means all machinery, equipment, furniture,
fixtures, conveyors, tools, materials, storage and handling equipment,
hydraulic presses, cutting equipment, computer equipment and hardware,
including central processing units, terminals, drives, memory units,
printers, keyboards, screens, peripherals and input or output devices, molds,
dies, stamps, vehicles, and other equipment of every kind and nature and
wherever situated now or hereafter owned by Borrower or in which Borrower may
have any interest as lessee or otherwise (to the extent of such interest),
together with all additions and accessions thereto, all replacements and all
accessories and parts therefor, all manuals, blueprints, know-how, warranties
and records in connection therewith, all rights against suppliers,
warrantors, manufacturers, sellers or others in connection therewith, and
together with all substitutes for any of the foregoing.
(p) "EVENT OF DEFAULT" means the occurrence of any of the events
specified in Section 7.1.
(q) "FINANCIAL STATEMENTS" means the balance sheets, profit and
loss statements, statements of cash flow, and statements of changes in
intercompany accounts, if any, for the period specified, prepared in
accordance with GAAP and consistent with prior practices.
(r) "GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are
applicable to the circumstances as of the date of determination. Whenever any
accounting term is used herein which is not otherwise defined, it shall be
interpreted in accordance with GAAP.
(s) "GOOD FAITH" means "good faith" as defined in the Uniform
Commercial Code, from time to time in effect in the State of Illinois.
(t) "GOVERNING DOCUMENTS" means the articles or certificate of
incorporation and by-laws of Borrower.
(u) "GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions
thereof or pertaining thereto.
(v) "GUARANTOR" means any present or future guarantor of any or all
of the Obligations.
(w) "INDEBTEDNESS" means, with respect to any Person, as of the
date of determination any indebtedness, liability or obligation of such
Person (including without limitation obligations under capital leases and
Contingent Obligations).
(x) "INSOLVENCY EVENT" means, with respect to any Person, the
occurrence of any of the following: (a) such Person shall be adjudicated
insolvent or bankrupt, or shall generally fail to pay or admit in writing its
inability to pay its debts as they become due, (b) such Person shall seek
dissolution or reorganization or the appointment of a receiver, trustee,
custodian or liquidator for it or a substantial portion of its property,
assets or business or to effect a plan or other arrangement with its
creditors, (c) such Person shall make a general assignment for the benefit of
its creditors, or consent to or acquiesce in the appointment of a receiver,
trustee,custodian or liquidator for a substantial portion of its property,
assets or business, (d) such Person shall file a voluntary petition under any
bankruptcy, insolvency or similar law or take any corporate or similar act in
furtherance thereof, or (e) such Person, or a substantial portion of its
property, assets or business shall become the subject of an involuntary
proceeding or petition for its dis-
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solution, reorganization, and such proceeding is not dismissed or stayed
within sixty days, or the appointment of a receiver, trustee, custodian or
liquidator, and such receiver is not dismissed within sixty days.
(y) "INVENTORY" means all present and future goods intended for
sale, lease or other disposition by Borrower including, without limitation,
all raw materials, work in process, finished goods and other retail
inventory, goods in the possession of outside processors or other third
parties, goods consigned to Borrower to the extent of its interest therein as
consignee, materials and supplies of any kind, nature or description which
are or might be used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of any such goods, and all documents of
title or documents representing the same.
(z) "INVESTMENT" in any Person means, as of the date of
determination thereof, any payment or contribution, or commitment to make a
payment or contribution, by any Person including, without limitation,
property contributed or committed to be contributed by any Person, on its
account for or in connection with its acquisition of any stock, bonds, notes,
debentures, partnership or other ownership interest or any other security of
the Person in whom such Investment is made or any evidence of indebtedness by
reason of a loan, advance, extension of credit, guaranty or other similar
obligation for any debt, liability or indebtedness of such Person in whom the
Investment is made.
(aa) "INVESTMENT PROPERTY" means any and all investment property of
Borrower, including all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or
otherwise, wherever located, and whether now existing or hereafter acquired
or arising.
(bb) "LIEN" means any lien, claim, charge, pledge, security
interest, assignment, hypothecation, deed of trust, mortgage, lease,
conditional sale, retention of title or other preferential arrangement having
substantially the same economic effect as any of the foregoing, whether
voluntary or imposed by law.
(cc) "LOAN ACCOUNT" has the meaning specified in Section 1.3.
(dd) "LOAN DOCUMENTS" means this Agreement and all present and
future documents and instruments delivered or to be delivered by Borrower or
any of its Affiliates or any Guarantor under, in connection with or relating
to this Agreement, as each of the same may be amended, supplemented or
otherwise modified from time to time.
(ee) "LOANS" means the loans and financial accommodations made by
TBCC hereunder.
(ff) "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect
on the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (ii) the
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a part or of TBCC to enforce the Obligations or
realize upon the Collateral or (iii) a material adverse effect on the value
of the Collateral or the amount which TBCC would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of the Collateral.
(gg) "MATERIAL CONTRACT" means any contract or other arrangement to
which Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material
Adverse Effect.
(hh) "OBLIGATIONS" means and includes all loans (including the
Loans), advances, debts, liabilities, obligations, covenants and duties owing
by Borrower to TBCC of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under,
out of, or in connection with, this Agreement, any other Loan Document or any
other agreement executed in connection herewith or therewith or otherwise,
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening, guaranteeing or confirming of a letter of
credit, loan, guaranty, indemnification or in any other manner, whether
direct or indirect (including those acquired by assignment, purchase,
discount or otherwise), whether absolute or contingent, due or to become due,
now due or hereafter arising and however acquired. The term includes, without
limitation, all interest (including interest accruing on or after an
Insolvency Event, whether or not an allowed claim), charges, expenses,
commitment, facility, closing and collateral management fees, letter of
credit fees, reasonable attorneys' fees, and any other sum properly
chargeable to Borrower under this Agreement, the other Loan Documents or any
other agreement executed in connection herewith or therewith or otherwise.
(ii) "OTHER PROPERTY" means all present and future: instruments,
documents, documents of title, securities, bonds, notes, promissory notes,
drafts, acceptances, letters of credit and rights to receive proceeds of
letters of credit, deposit accounts, chattel paper, certificates, insurance
policies, insurance proceeds, leases, computer tapes, causes of action,
judgments, claims against third parties, leasehold rights in any personal
property, books, ledgers, files and records, general intangibles (including
without limitation, all contract rights, tax refunds, rights to receive tax
refunds, patents, patent applications, copyrights (registered and
unregistered), royalties, licenses, permits, franchise rights,
authorizations, customer lists, rights of indemnification, contribution and
subrogation, computer programs, discs and software, trade secrets, computer
service contracts, trademarks, trade names, service marks and names, logos,
goodwill, deposits, choses in action, designs, blueprints, plans, know-how,
telephone numbers and rights thereto, credits, reserves, and all forms of
obligations whatsoever now or hereafter owing to Borrower), all property at
any time in the possession or under the control of TBCC, and all security
given by Borrower to TBCC pursuant to any other Loan Document or agreement.
(iii) "PERMITTED LIENS" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords,
carriers, warehousemen,
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mechanics, laborers, materialmen and other like Persons arising by operation
of law in the ordinary course of business for sums which are not yet due and
payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables, Investment Property, Inventory or Other
Property), (iii) zoning restrictions, easements, encroachments, licenses,
restrictions or covenants on the use of the Property which do not materially
impair either the use of the Property in the operation of the business of
Borrower or the value of the Property, (iv) rights of general application
reserved to or vested in any municipality or other governmental, statutory or
public authority to control or regulate property, or to use property in a
manner which does not materially impair the use of the property for the
purposes for which it is held by Borrower, (v) state and municipal Liens for
personal property taxes which are not yet due and payable, (vi) Purchase
Money Liens*.
* (vi) LIENS GRANTED TO LESSORS UNDER OPERATING LEASES OR CAPITAL LEASES
(PROVIDED THAT SUCH LIENS SHALL ATTACH ONLY TO THE ASSET PURCHASED OR
ACQUIRED (AND THE PROCEEDS THEREOF) AND SHALL ONLY SECURE THE PURCHASE PRICE
OF THE ASSET); AND (vii) LIENS ON SPECIFIC TANGIBLE ASSETS DIRECTLY OR
INDIRECTLY ACQUIRED BY BORROWER AFTER THE DATE OF THIS AGREEMENT; PROVIDED,
HOWEVER, THAT (A) SUCH LIENS EXISTED AT THE TIME OF ACQUISITION AND WERE NOT
CREATED IN ANTICIPATION THEREOF, (B) ANY SUCH LIEN DOES NOT BY ITS TERMS
COVER ANY ASSETS AFTER THE TIME OF SUCH ACQUISITION WHICH WERE NOT COVERED
IMMEDIATELY PRIOR THERETO, AND (C) ANY SUCH LIEN DOES NOT BY ITS TERMS SECURE
ANY INDEBTEDNESS OTHER THAN INDEBTEDNESS EXISTING IMMEDIATELY PRIOR TO THE
TIME OF THE ACQUISITION
(kk) "PERSON" means any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust, unincorporated
organization, joint stock company, association, corporation, institution,
entity, party or government (including any division, agency or department
thereof) or any other legal entity, whether acting in an individual,
fiduciary or other capacity, and, as applicable, the successors, heirs and
assigns of each.
(ll) "PLAN" means any employee benefit plan, program or arrangement
maintained or contributed to by Borrower or with respect to which it may
incur liability.
(mm) "PURCHASE MONEY LIEN" means a Lien on any item of Equipment
created substantially simultaneously with * the acquisition of such Equipment
for the purpose of financing such acquisition, provided that such Lien shall
attach only to the Equipment acquired.
* OR WITHIN 30 DAYS AFTER
(nn) "QUALIFICATION" or "QUALIFIED" means, with respect to any
report of Auditors covering Financial Statements, a material qualification to
such report (i) resulting from a limitation on the scope of examination of
such Financial Statements or the underlying data, (ii) as to the capability
of Borrower to continue operations as a going concern or (iii) which could be
eliminated by changes in Financial Statements or notes thereto covered by
such report (such as by the creation of or increase in a reserve or a
decrease in the carrying value of assets) and which if so eliminated by the
making of any such change and after giving effect thereto would result in a
Default or an Event of Default.
(oo) "RECEIVABLES" means all present and future accounts and
accounts receivable, together with all security therefor and guaranties
thereof and all rights and remedies relating thereto, including any right of
stoppage in transit.
(pp) "REQUIREMENT OF LAW" means (a) the Governing Documents, (b)
any law, treaty, rule, regulation, order or determination of an arbitrator,
court or other Governmental Authority or (c) any franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way,
right or approval binding on Borrower or any of its property.
(qq) "SCHEDULE" means the Schedule to this Agreement being signed
concurrently by Borrower and TBCC, as amended from time to time.
(rr) "SOLVENT" means when used with respect to any Person that as
of the date as to which such Person's solvency is to be measured: (a) the
fair salable value of its assets is in excess of the total amount of its
liabilities (including contingent liabilities as valued in accordance with
applicable law) as they become absolute and matured; (b) it has sufficient
capital to conduct its business; and (c) it is able to meet its debts as they
mature.
(ss) "SUBSIDIARY" means, as to any Person, a corporation or other
entity in which that Person directly or indirectly owns or controls shares
of stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or appoint other managers of such
corporation or other entity.
9.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to TBCC on or
before the date of this Agreement. All accounting determinations for purposes
of determining compliance with this Agreement shall be made in accordance
with GAAP as in effect on the date of this Agreement and applied on a basis
consistent in all material respects with the audited Financial Statements
delivered to TBCC on or before the date of this Agreement. The Financial
Statements required to be delivered hereunder, and all financial records,
shall be maintained in accordance with GAAP. If GAAP shall change from the
basis used in preparing the audited Financial Statements delivered to TBCC on
or before the date of this Agreement, the Compliance Certificates required to
be delivered pursuant to this Agreement shall include calculations setting
forth the adjustments necessary to demonstrate how Borrower is in compliance
with the Financial Covenants (if any) based upon GAAP as in effect on the
date of this Agreement.
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9.3 OTHER TERMS; HEADINGS; CONSTRUCTION. Unless otherwise defined
herein, terms used herein that are defined the Uniform Commercial Code, from
time to time in effect in the State of Illinois, shall have the meanings set
forth therein. Each of the words "hereof," "herein," and "hereunder" refer to
this Agreement as a whole. The term "including", whenever used in this
Agreement, shall mean "including (but not limited to)". An Event of Default
shall "continue" or be "continuing" unless and until such Event of Default
has been waived or cured within the grace period specified therefor under
Section 7.1. References to Articles, Sections, Annexes, Schedules, and
Exhibits are internal references to this Agreement, and to its attachments,
unless otherwise specified. The headings and any Table of Contents are for
convenience only and shall not affect the meaning or construction of any
provision of this Agreement. 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 TBCC or
Borrower under any rule of construction or otherwise.
10. GENERAL PROVISIONS.
10.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2 SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER AND
TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND
THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT
TBCC SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY
SELECTED BY TBCC IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY TBCC. THE BORROWER WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH TBCC HAS
COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
10.3 SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, 0000 XXXXXX XXXXXX, XXXXXXXXXX, XXXXXXXX 00000, AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF
SUCH PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED
BY MAIL TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY
SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
10.4 LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE
BORROWER (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES
SUFFERED BY THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT,
OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH. UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON
TBCC THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL
FUTURE CLAIMS AGAINST TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES.
10.5 DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission of TBCC
to exercise any right or remedy hereunder shall impair any such right or
operate as a waiver thereof. No single or partial exercise by TBCC of any
right or remedy shall preclude any other or further exercise thereof; or
preclude any other right or remedy.
10.6 NOTICES. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, by overnight delivery service,
with all charges prepaid, or by telecopier followed by a hard copy sent by
regular mail, to the parties at their addresses set forth in the heading to
this Agreement. All such notices and correspondence shall be deemed given
(i) if sent by certified or registered mail, three Business Days after being
postmarked, (ii) if sent by overnight delivery service, when received at the
above stated addresses or when delivery is refused and (iii) if sent by
telecopier transmission, when receipt of such transmission is acknowledged.
Borrower's and TBCC's telecopier numbers for the purpose of notice hereunder
are set forth in the Schedule; each party's number may be changed by written
notice to the other party.
10.7 INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF COLLECTION. Borrower
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated,
to defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors, officers, agents, employees,
advisors, shareholders, attorneys and Affiliates (each, an "INDEMNIFIED
PARTY")
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TBCC LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
from and against any and all losses, claims, damages, liabilities,
deficiencies, obligations, fines, penalties, actions (whether threatened or
existing), judgments, suits (whether threatened or existing) or expenses
(including, without limitation, reasonable fees and disbursements of counsel,
experts, consultants and other professionals) incurred by any of them
(collectively, "CLAIMS") (except, in the case of each Indemnified Party, to
the extent that any Claim is determined in a final and non-appealable
judgment by a court of competent jurisdiction to have directly resulted from
such Indemnified Party's gross negligence or willful misconduct) arising out
of or by reason of (i) any litigation, investigation, claim or proceeding
which arises out of or is related to (A) Borrower, or this Agreement, any
other Loan Document or the transactions contemplated hereby or thereby, (B)
any actual or proposed use by Borrower of the proceeds of the Loans, or (C)
TBCC's entering into this Agreement or any other Loan Document or any other
agreements and documents relating hereto, including, without limitation,
amounts paid in settlement, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding, (ii) any remedial or other action taken
by Borrower in connection with compliance by Borrower, or any of its
properties, with any federal, state or local environmental laws, rules or
regulations, and (iii) any pending, threatened or actual action, claim,
proceeding or suit by any shareholder or director of Borrower or any actual
or purported violation of the Borrower's charter, by-laws or any other
agreement or instrument to which Borrower is a party or by which any of its
properties is bound. In addition and without limiting the generality of the
foregoing, Borrower shall, upon demand, pay to TBCC all reasonable costs and
expenses incurred by TBCC (including the reasonable fees and disbursements of
counsel and other professionals) in connection with the preparation,
execution, delivery, administration, modification and amendment of the Loan
Documents, and pay to TBCC all reasonable costs and expenses (including the
reasonable fees and disbursements of counsel and other professionals) paid or
incurred by TBCC in order to enforce or defend any of its rights under or in
respect of this Agreement, any other Loan Document or any other document or
instrument now or hereafter executed and delivered in connection herewith,
collect the Obligations or otherwise administer this Agreement, foreclose or
otherwise realize upon the Collateral or any part thereof, prosecute actions
against, or defend actions by, account debtors; commerce, 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 TBCC's security
interest in, the Collateral; and otherwise represent TBCC in any litigation
relating to Borrower. Without limiting the generality of the foregoing,
Borrower shall pay TBCC a fee with respect to each wire transfer in the
amount of $15 plus all bank charges and a fee of $15 for all returned checks
plus all bank charges. If either TBCC or Borrower files any lawsuit against
the other predicated on a breach of this Agreement, the prevailing party in
such action 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. If and to the extent that the Obligations of
Borrower hereunder are unenforceable for any reason, Borrower hereby agrees
to make the maximum contribution to the payment and satisfaction of the
Obligations which is permissible under applicable law. Borrower's
obligations under Section 2.4 and this Section shall survive any termination
of this Agreement and the other Loan Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any of the
other Obligations.
10.8 AMENDMENTS AND WAIVERS. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and signed by Borrower and TBCC and then any such
amendment or waiver shall be effective only to the extent set forth therein.
The failure of TBCC 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 TBCC shall not waive or diminish any
right of TBCC 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 nor not similar. None of the provisions of
this Agreement or any other agreement now or in the future executed by
Borrower and delivered to TBCC shall be deemed to have been waived by any act
or knowledge of TBCC or its agents or employees, but only by a specific
written waiver signed by an authorized officer of TBCC and delivered to
Borrower.
10.9 COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement and any waiver or
amendment hereto may be executed in counterparts and by the parties hereto
in separate counterparts, each of which when so executed and delivered shall
be an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any
notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same
force and effect as if the same was a fully executed and delivered original
manual counterpart.
10.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality or enforceability
of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
10.11 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.
10.12 MAXIMUM RATE. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the
other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to TBCC for the use,
forbearance, or detention of the money loaned to Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious
interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Obligations,
under the laws of the State of Illinois (or the laws of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and
which allow a higher maximum non-usurious interest rate than under the laws
of the State of Illinois (or such other jurisdiction), in any case after
taking into account, to the extent permitted by applicable law, any and all
relevant payments or charges under this Agreement and the other Loan
Documents, executed in connection herewith, and any available exemptions,
exceptions and exclusions (the "Highest Lawful Rate"). If due to any
circumstance whatsoever, fulfillment of any provisions of this Agreement or
any of the other Loan Documents at the time performance of such provision
shall be due shall exceed the Highest Lawful Rate, then, automatically, the
obligation to be fulfilled shall be modified or reduced to the extent
necessary to limit such interest to the Highest Lawful Rate, and if from any
such circumstance TBCC should ever receive anything of value deemed interest
by applicable law which would exceed the Highest Lawful Rate, such excessive
interest shall be applied to the reduction of the principal amount then
outstanding hereunder or on account of any other then outstanding Obligations
and not to the payment of interest, or if such excessive interest exceeds the
principal unpaid balance then outstanding hereunder and such other then
outstanding Obligations, such excess shall be refunded to Borrower. All sums
paid or agreed to be paid to TBCC for the use,
-17-
forbearance, or detention of the Obligations and other indebtedness of
Borrower to TBCC shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of of such
indebtedness, until payment in full thereof, so that the actual rate of
interest on account of all such indebtedness does not exceed the Highest
Lawful Rate throughout the entire term of such indebtedness. The terms and
provisions of this Section shall control every other provision of this
Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement and the
other Loan Documents constitute the entire agreement between the parties,
supersede any prior written and verbal agreements between them, and shall
bind and benefit the parties and their respective successors and permitted
assigns. THERE ARE NO ORAL UNDERSTANDINGS, ORAL REPRESENTATIONS OR ORAL
AGREEMENTS BETWEEN THE PARTIES, WHICH ARE NOT SET SET FORTH IN THIS AGREEMENT
OR IN OTHER WRITTEN AGREEMENTS SIGNED BY THE PARTIES IN CONNECTION HEREWITH.
10.14 MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER 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: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER: OR (iii) ANY
CONDUCT, ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
TBCC OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
BORROWER:
TECHWAVE INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Title: Executive Vice President
---------------------------------
TBCC:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ X. X. Xxxxx
------------------------------------
Title: Vice President
---------------------------------
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-------------------------------------------------------------------------------
TBCC
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: TECHWAVE IN.,
A WASHINGTON CORPORATION
ADDRESS: 000 XXXXX XXXXXX XXXXX,
XXXXX 000 XXXXX
XXXXXXX, XX 00000
DATE: MARCH 4, 1999
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION ("TBCC") and the above borrower
("Borrower") of even date.
1. CREDIT LIMIT (Section 1.1): An amount not to exceed the lesser of (1) or
(2) below:
(1) $6,000,000 at any one time outstanding; or
(2) an amount equal to
(i) the lesser of (A) 85% of the amount
of Borrower's Eligible Receivables
(as defined in Section 9.1(n) above)
and (B) $2,500,000, plus
(ii) the principal balance of the term
loan in the original principal
amount of $3,500,00 made by TBCC to
Borrower (the "Term Loan") and
evidenced by the Term Note (the
"Term Note") dated March 4, 1999, in
the original principal amount of
$3,500,000, made by Borrower to the
order of TBCC.
The Term Loan will be repayable on the terms
set forth in the Term Note.
(2) INTEREST (Section 2.1): 1. The following shall apply to the Loans
constituting the revolving credit facility
(I.E., all Loans other than the Term Loan)
(the "Revolving Loans"):
The interest rate in effect throughout each
calendar month during the term of this
Agreement shall be the highest "Base
Rate" in effect during such month, plus 2%
per annum, and provided that the interest
rate in effect in each month shall not be
less than 9% per annum, and provided that the
interest charged for each quarterly period
set forth below in respect of the Revolving
Loans shall be the minimum amount set forth
below, regardless of the amount of the
Obligations outstanding:
Quarterly Period Minimum Interest
---------------- ----------------
Closing -
May 31, 1999 $0
June 1, 1999 -
August 31, 1999 $15,000
Each quarterly period
thereafter $22,500
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TBCC NOTICE OF SECURITY INTEREST
-------------------------------------------------------------------------------
beginning September 1, 1999
Interest shall be calculated on the basis of
a 360-day year for the actual number of days
elapsed. "Base Rate" shall mean the higher
of (a) the highest prime, base or equivalent
rate of interest announced from time to time
by Citibank, N.A., First National Bank of
Chicago and Bank of America National Trust
and Savings Association (which may not be
the lowest rate of interest charged by such
bank) and (b) the published annualized rate
for 90-day dealer commercial paper which
appears in the "Money Rates" of the THE WALL
STREET JOURNAL.
2. Interest on the Term Loans shall accrue at
the interest rate set forth in the Term Note.
3. FEES (Section 2.2) Loan Fee: $77,500, payable concurrently
herewith.
Termination Fee: See Section 4 below.
Payment Fee: Upon any optional prepayment of
the Term Loan, simultaneously with the
prepayment Borrower shall pay a prepayment
fee equal to (i) 10% of the principal amount
prepaid, if such prepayment occurs at any
time on or before November 30, 1999; (ii) 7%
of the principal amount prepaid, if such
prepayment occurs at any time on or before
July 31, 2000; or (ii) 3% of the principal
amount prepaid, if such prepayment occurs at
any time on or after August 1, 2000.
4. MATURITY DATE (Section 1.6): (a) TERM OF REVOLVING LOAN FACILITY. The
period during which Revolving Loans will be
made (the "Revolving Loan Period") shall be
from the date of this Agreement to MARCH 31,
2000 (the "Revolving Loan Maturity Date"),
unless sooner terminated in accordance with
the terms of this Agreement, provided
that the Revolving Loan Maturity Date shall
automatically be extended for successive
additional terms of one year each, unless one
party gives written notice to the other, not
less than sixty days prior to the next
Revolving Loan Maturity Date, that such party
elects to terminate the Revolving Loan
Period effective on the next Revolving Loan
Maturity Date. On the Revolving Loan
Maturity Date on any earlier termination of
this Agreement, no further Revolving Loans
will be made, and Borrower shall pay in full
all outstanding Revolving Loans.
(b) EARLY TERMINATION OF REVOLVING LOAN
FACILITY AT BORROWER'S OPTION. The Revolving
Loan Period may be terminated prior to the
Revolving Loan Maturity Date by Borrower,
effective three Business Days after written
notice of termination is given by Borrower to
TBCC.
(c) TERM OF AGREEMENT. The term of this
Agreement shall be from the date of this
Agreement to the later of the following (the
"Maturity Date"): (i) the termination of the
Revolving Loan Period, or (ii) the date the
last installment of principal on the Term Loan
is due. On the Maturity Date or on any
earlier termination of this Agreement
Borrower shall pay in full all Obligations,
and notwithstanding any termination of this
Agreement all of TBCC's security interests and
all of TBCC's other rights and remedies shall
continue in full force and effect until
payment and performance in full of all
Obligations (other than the Surviving
Indemnities, as defined below).
(d) EARLY TERMINATION OF AGREEMENT. This
Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower,
effective three Business Days after written
notice of termination is give to TBCC; or
(ii) by TBCC at any time after the occurrence
of an Event of Default
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TBCC NOTICE OF SECURITY INTEREST
-------------------------------------------------------------------------------
without notice, effective immediately.
(e) TERMINATION FEE. If the Revolving Loan
Period is terminated by Borrower under
Section 4(b) above, or if this Agreement is
terminated by Borrower or by TBCC under
Section 4(d) above, then Borrower shall pay
to TBCC a termination fee (the "Termination
Fee") in an amount equal to $7,500 multiplied
by each month (or portion thereof) from the
effective date of termination to the next
Revolving Loan Maturity Date, which
Termination Fee shall be payable on the date
of termination.
(f) PAYMENT OF OBLIGATIONS. Notwithstanding
anything here to the contrary, Borrower shall
have no right to terminate this Agreement at
any time that any principal of, or interest on
any of the Loans or any other monetary
Obligations are outstanding, except upon
prepayment of all Obligations and the
satisfaction of all other conditions set
forth in the Loan Documents.
(g) SURVIVING INDEMNITIES. As used in this
Agreement, the term "Surviving Indemnities"
means any Obligations in the nature of an
indemnity or hold harmless by Borrower in
favor of TBCC arising under or pursuant to
this Agreement or any of other Loan
Documents, which by its terms survives the
latest of (the "Cut-Off Date"): (i) the
termination of this Agreement, and (ii) the
payment of all principal, interest,
prepayment penalties, fees and all other
Obligations (not in the nature of an
indemnity or hold harmless) due at the time
of such payment under this Agreement and the
Loan Documents; provided that there shall be
excluded from such indemnity or hold harmless
Obligations all amounts that are due and
payable thereunder upon the Cut-Off Date.
5. REPORTING (Section 5.10): Borrower shall provide TBCC with the
following reports:
(a) MONTHLY FINANCIAL STATEMENTS. Monthly
unaudited financial statements, as soon as
available, and in any event within 30 days
after the end of each month.
(b) MONTHLY RECEIVABLE AGINGS. Monthly
Receivable agings, aged by invoice date,
within 20 days after the end of each month.
(c) MONTHLY PAYABLE AGINGS. Monthly accounts
payable agings, aged by invoice date, and
outstanding or held check registers within 20
days after the end of each month.
(d) MONTHLY INVENTORY REPORTS. Monthly
perpetual inventory reports for the Inventory
valued on a first-in, first-out basis at the
lower of cost or market (in accordance with
generally accepted accounting principles)
or such other inventory reports as are
reasonably requested by TBCC, all within
30 days after the end of each month.
(e) QUARTERLY FINANCIAL STATEMENTS.
Quarterly unaudited financial statements, as
soon as available, and in any event within
45 days after the end of each fiscal quarter
of Borrower.
(f) ANNUAL FINANCIAL STATEMENTS. As soon
as available, but not later than 90 days
after the end of the Borrower's fiscal year,
(A) Borrower's annual audited Financial
Statements; (B) a comparison in reasonable
detail to the prior year's audited Financial
Statements; (C) the Auditors' opinion without
Qualification, a "Management Letter" and a
statement indicating that the Auditors have
not obtained knowledge
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TBCC NOTICE OF SECURITY INTEREST
-------------------------------------------------------------------------------
of the existence of any Default or Event of
Default during their audit; (D) a narrative
discussion of Borrower's financial condition
and results of operations and the liquidity
and capital resources for such fiscal year.
6. BORROWER INFORMATION: (a) Prior Names of Borrower (Section 4.11):
See Representations and Warranties
information supplied by Borrower dated
February 28, 1999.
(b) Prior Trade Names of Borrower (Section
4.11): See Representations and Warranties
information supplied by Borrower dated
February 28, 1999.
(c) Existing Trade Names of Borrowers
(Section 4.11): See Representations and
Warranties information supplied by Borrower
dated February 28, 1999.
(d) Other Places of Business and Locations of
Collateral (Section 4.2). See Representations
and Warranties information supplied by
Borrower dated February 28, 1999.
(e) Litigation, etc. (Section 4.15): None.
7. FACSIMILE NUMBERS: Borrower: 000-000-0000
TBCC: 000-000-0000
8. CLOSING DEADLINE
(Section 1.8): March 12, 1999
9. ADDITIONAL CLOSING
CONDITIONS (Section 1.8): The following additional agreements, in form
and substance satisfactory to TBCC and its
counsel, shall be executed and delivered by
Borrower as conditions precedent to closing:
(a) Warrant;
(b) Streamlined Facility Agreement;
(c) Term Note; and
(d) Patent and Trademark Security Agreement.
10. ADDITIONAL PROVISIONS: 1. WARRANT. Concurrently herewith, the
Borrower shall provide TBCC with seven-year
warrants to purchase 72,000 shares of common
stock of the Borrower, on the terms to be
set forth in a Stock Subscription Warrant
(the "Warrant"), in form and substance
satisfactory to TBCC, at an exercise price
equal to $6.25/share. Said warrants shall
be deemed fully earned on the date of
issuance thereof, shall be in addition to all
interest and other fees, and shall be
non-refundable.
2. ACQUISITION OF SUBSIDIARIES. If Borrower
proposes to incorporate, create or acquire
any additional subsidiary in connection
with any Permitted Investment, Borrower
shall promptly notify TBCC thereof. After
the incorporation, creation or acquisition of
any such subsidiary (subject to obtaining any
necessary TBCC consent), within five Business
Days following receipt by Borrower from TBCC
of a security agreement, in form and
substance satisfactory to TBCC, and a
guaranty of the Obligations in form and
substance satisfactory to TBCC, Borrower
shall cause such subsidiary to execute and
deliver such guaranty and security agreement
to TBCC. TBCC may elect in its sole
discretion to waive any such requirement in
the case of non-U.S. subsidiary and any
subsidiary that will remain a dormant or
shell subsidiary. (B) Within five Business
Days after receipt from TBCC, Borrower shall
deliver to TBCC
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TBCC NOTICE OF SECURITY INTEREST
-------------------------------------------------------------------------------
all original share certificates evidencing
the Borrower's equity ownership interest in
such subsidiary, together with blank stock
powers, and cause such subsidiary to have
executed and filed any UCC-1 financing
statements furnished by TBCC in each
jurisdiction in which such filing is
necessary to perfect the security interest of
TBCC in the Collateral of such subsidiary and
in which TBCC requests that such filing be
made. (C) Additionally, Borrower and such
subsidiary shall have executed and delivered
to TBCC such other items as reasonably
requested by TBCC in connection with the
foregoing, including resolutions, incumbency
and officers' certificates, opinions of
counsel, search reports and other
certificates and documents.
3. LANDLORD AGREEMENTS. Not later than
April 5, 1999, Borrower shall furnish to
TBCC, in form and substance satisfactory
to TBCC and its counsel, fully executed
Landlord Agreements with respect to its
leased facilities at 000 Xxxxx Xxxxxx,
Xxxxxxx, XX, 00 Xxxxxxx Xxxx, Xxxxxxxxx, XX,
and 000 Xxxxxx Xxxxxx, Xxxx Xxxxxx, XX.
4. ACCOUNT CONTROL AGREEMENTS. Not later
than April 5, 1999, Borrower shall furnish to
TBCC, in form and substance satisfactory to
TBCC and its counsel, fully executed Account
Control Agreements with respect to its
security accounts maintained at Xxxxx Xxxxxxx
and Xxxxx Xxxxxx.
5. SUBORDINATION AGREEMENTS. Not later
than April 5, 1999, Borrower shall furnish
to TBCC, in form and substance satisfactory
to TBCC and its counsel, fully executed Sub-
ordination Agreements from Xxxxxxx X. Xxxxxx.
6. DELIVERY OF CERTAIN PLEDGED COLLATERAL.
Not later than March 19, 1999, Borrower shall
deliver to TBCC the original share
certificates Borrower owns with respect to
DiscoverWare, Inc., FreeShop, Inc., and
TruCost, Inc., together with blank stock
powers with respect thereto, and the original
promissory note Borrower holds from Virtual
Spin, Inc., together with a blank endorsement
(allonge) with respect thereto.
7. REGISTRATION RIGHTS. Not later than
April 5, 1999, Borrower shall furnish to
TBCC, in form and substance satisfactory to
TBCC and its counsel, evidence that TBCC has
been made a party to that certain Second
Amended and Restated Registration Rights
Agreement among the Borrower and others.
Borrower: TBCC:
TECHWAVE INC. TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Xxxx Xxxxxx By: /s/ X. X. Xxxxx
---------------------------------- ----------------------------------
Title: Executive Vice President Title: Vice President
------------------------------- -------------------------------
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