EXHIBIT 10.22
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INTERWOVEN, INC.
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
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Page
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1. DEFINITIONS AND CONSTRUCTION................................................ 1
1.1 Definitions............................................................ 1
1.2 Accounting Terms....................................................... 8
2. LOAN AND TERMS OF PAYMENT................................................... 8
2.1 Advances................................................................ 8
2.2 Overadvances............................................................ 10
2.3 Interest Rates, Payments, and Calculations.............................. 10
2.4 Crediting Payments...................................................... 10
2.5 Fees.................................................................... 11
2.6 Additional Costs........................................................ 11
2.7 Term.................................................................... 11
3. CONDITIONS OF LOANS......................................................... 12
3.1 Conditions Precedent to Initial Advance................................. 12
3.2 Conditions Precedent to all Advances.................................... 12
4. CREATION OF SECURITY INTEREST............................................... 13
4.1 Grant of Security Interest.............................................. 13
4.2 Delivery of Additional Documentation Required........................... 13
4.3 Right to Inspect........................................................ 13
5. REPRESENTATIONS AND WARRANTIES.............................................. 13
5.1 Due Organization and Qualification...................................... 13
5.2 Due Authorization; No Conflict.......................................... 13
5.3 No Prior Encumbrances................................................... 13
5.4 Bona Fide Eligible Accounts............................................. 13
5.5 Merchantable Inventory.................................................. 14
5.6 Intellectual Property................................................... 14
5.7 Name; Location of Chief Executive Office................................ 14
5.8 Litigation.............................................................. 14
5.9 No Material Adverse Change in Financial Statements...................... 14
5.10 Solvency............................................................... 14
5.11 Regulatory Compliance.................................................. 14
5.12 Environmental Condition................................................ 15
5.13 Taxes.................................................................. 15
5.14 Subsidiaries........................................................... 15
5.15 Government Consents.................................................... 15
5.16 Full Disclosure........................................................ 15
6. AFFIRMATIVE COVENANTS....................................................... 15
6.1 Good Standing........................................................... 15
6.2 Government Compliance................................................... 16
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TABLE OF CONTENTS
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Page
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6.3 Financial Statements, Reports, Certificates.............................. 16
6.4 Inventory; Returns....................................................... 17
6.5 Taxes.................................................................... 17
6.6 Insurance................................................................ 17
6.7 Principal Depository..................................................... 17
6.8 Quick Ratio.............................................................. 18
6.9 Tangible Net Worth....................................................... 18
6.10 Minimum Liquidity....................................................... 18
6.11 Registration of Intellectual Property Rights............................ 18
6.12 Further Assurances...................................................... 19
7. NEGATIVE COVENANTS........................................................... 19
7.1 Dispositions............................................................. 19
7.2 Change in Business....................................................... 19
7.3 Mergers or Acquisitions.................................................. 19
7.4 Indebtedness............................................................. 19
7.5 Encumbrances............................................................. 19
7.6 Distributions............................................................ 19
7.7 Investments.............................................................. 19
7.8 Transactions with Affiliates............................................. 20
7.9 Intellectual Property Agreements......................................... 20
7.10 Subordinated Debt....................................................... 20
7.11 Inventory............................................................... 20
7.12 Compliance.............................................................. 20
8. EVENTS OF DEFAULT............................................................ 20
8.1 Payment Default.......................................................... 20
8.2 Covenant Default......................................................... 21
8.3 Material Adverse Change.................................................. 21
8.4 Attachment............................................................... 21
8.5 Insolvency............................................................... 21
8.6 Other Agreements......................................................... 21
8.7 Subordinated Debt........................................................ 22
8.8 Judgments................................................................ 22
8.9 Misrepresentations....................................................... 22
9. BANK'S RIGHTS AND REMEDIES................................................... 22
9.1 Rights and Remedies...................................................... 22
9.2 Power of Attorney........................................................ 23
9.3 Accounts Collection...................................................... 23
9.4 Bank Expenses............................................................ 24
9.5 Bank's Liability for Collateral.......................................... 24
9.6 Remedies Cumulative...................................................... 24
9.7 Demand; Protest.......................................................... 24
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TABLE OF CONTENTS
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10. NOTICES...................................................................... 24
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER................................... 25
12. GENERAL PROVISIONS........................................................... 25
12.1 Successors and Assigns.................................................. 25
12.2 Indemnification......................................................... 25
12.3 Time of Essence......................................................... 26
12.4 Severability of Provisions.............................................. 26
12.5 Amendments in Writing, Integration...................................... 26
12.6 Counterparts............................................................ 26
12.7 Survival................................................................ 26
12.8 Confidentiality......................................................... 26
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This LOAN AND SECURITY AGREEMENT is entered into as of October 16, 1997, by
and between SILICON VALLEY BANK ("Bank") and INTERWOVEN, INC. ("Borrower").
RECITALS
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Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend such credit to Borrower. This Agreement sets forth the terms
on which Bank will advance credit to Borrower, and Borrower will repay that
credit owing to Bank.
AGREEMENT
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
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1.1 Definitions. As used in this Agreement, the following terms
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shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
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hereto.
"Committed Line" means Five Hundred Thousand Dollars ($500,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Advances made
under this Agreement, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at the end of
a given day.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties
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to Bank set forth in Section 5.4; provided, that standards of eligibility may be
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fixed and revised from time to time by Bank in Bank's reasonable judgment and
upon notification thereof to Borrower in accordance with the provisions hereof.
Unless otherwise agreed to by Bank, Eligible Accounts shall not include the
following:
(a) Accounts that the account debtor has failed to pay within ninety
(90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days of
invoice date;
(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate
of Borrower;
(f) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, except for Eligible
Foreign Accounts, and Accounts arising from products shipped to or services
provided to branches or offices located in the United States of any account
debtor that does not have its principal place of business in the United States;
(g) Accounts with respect to which the account debtor is the United
States or any department, agency, or instrumentality of the United States;
(h) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including Subsidiaries
and Affiliates, whose total obligations to Borrower exceed thirty-five percent
(35%) of all Eligible Accounts, to the extent such obligations exceed the
aforementioned percentage;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines to be
doubtful.
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"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and that are: (1) covered by credit insurance in form and amount, and by
an insurer satisfactory to Bank less the amount of any deductible(s) which may
be or become owing thereon; or (2) supported by one or more letters of credit in
favor of Bank as beneficiary, in an amount and of a tenor, and issued by a
financial institution, acceptable to Bank; or (3) that Bank approves on a case-
by-case basis.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now
or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to ▇▇▇ for and collect such damages for said use or infringement of
the intellectual property rights identified above;
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(e) All licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means June 30, 2001.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
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"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness secured by a Lien described in clause (c) of
Permitted Liens, provided the principal amount of such Indebtedness does not
exceed the lesser of the cost or fair market value of the Equipment financed
with the proceeds of such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(f) Other Indebtedness in an aggregate outstanding amount not
exceeding $100,000.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and
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(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank and other investments in the aggregate
amount not exceeding $100,000.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank's security
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interests, unless required by law;
(c) Liens (i) upon or in any equipment acquired or held by Borrower or
any of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
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acquired and improvements thereon, and the proceeds of such equipment;
(d) Leases or subleases and licenses or sublicenses granted to others
in the ordinary course of Borrower's business not interfering in any material
respect with the business of Borrower and its Subsidiaries taken as a whole, and
any interest or title of a lessor, licensor or under any lease or license
provided that such leases, subleases, licenses and sublicenses do not prohibit
the grant of the security interest granted hereunder; and
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (d) above, provided that any extension, renewal or
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replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall
be determined, Borrower's unrestricted cash and cash-equivalents; net, billed
accounts receivable; and investments with maturities not to exceed 365 days; in
each case determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Financial Officer and the Controller of Borrower.
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"Revolving Maturity Date" means the date immediately preceding the
first anniversary of the date of this Agreement.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof
shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
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to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
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"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Assignor connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically
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defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
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2.1 Advances.
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(a) Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate amount not to exceed
the lesser of the Committed Line or the Borrowing Base. For purposes of this
Agreement, "Borrowing Base" shall mean an amount equal to eighty percent (80%)
of Eligible Accounts. Subject to the terms
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and conditions of this Agreement, amounts borrowed pursuant to this Section 2.1
may be repaid and reborrowed at any time without penalty, in whole or in part,
prior to the Revolving Maturity Date.
(b) Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
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based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank
will credit the amount of Advances made under this Section 2.1 to Borrower's
deposit account.
(c) The Revolving Facility shall terminate on the Revolving Maturity
Date, at which time all Advances under this Section 2.1 shall be immediately due
and payable.
2.1.1 Equipment Advance.
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(a) At any time from July 1, 1997 through June 30, 1998 (the
"Equipment Availability Date"), Borrower may from time to time (but not more
than once per month) request advances (each an "Equipment Advance" and,
collectively, the "Equipment Advances") from Bank in an aggregate principal
amount of up to Three Hundred Thousand Dollars ($300,000). The Equipment
Advances shall be used to purchase Equipment approved from time to time by Bank
and shall not exceed one hundred percent (100%) of the cost of such Equipment,
excluding installation expense, freight discounts, warranty charges and taxes.
(b) Interest shall accrue from the date of each Equipment Advance at
the rate specified in Section 2.3(a), and shall be payable monthly on the last
Business Day of each month for each month through the Equipment Availability
Date. The Equipment Advance or Equipment Advances that are outstanding on the
Equipment Availability Date will be payable in thirty-six (36) equal monthly
installments of principal, plus accrued interest, beginning on July 31, 1998,
and continuing through the Maturity Date, on which date the entire principal
amount and all accrued but unpaid interest shall be due and payable. The
principal and all accrued but unpaid interest of any Equipment Advances may be
repaid at any time without penalty, in whole or in part, prior to the Maturity
Date.
(c) When Borrower desires to obtain an Equipment Advance, Borrower
shall notify Bank (which notice shall be irrevocable) by facsimile transmission
received no later than 3:00 p.m. California time one (1) Business Day before the
day on which the Equipment Advance is to be made. Such notice shall be in
substantially the form of Exhibit B. The notice shall be signed by a
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Responsible Officer and include a copy of the invoice for the Equipment to be
financed.
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2.2 Overadvances. If, at any time or for any reason prior to the
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Equity Event, the outstanding Obligations under this Agreement exceed the lesser
of (i) the Committed Line or (ii) the Borrowing Base, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
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(a) Interest Rate. Except as set forth in Section 2.3(b), any
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Advances shall bear interest, on the average Daily Balance, at a rate equal to
one quarter of one (0.25) percentage point above the Prime Rate, and all
Equipment Advances shall bear interest at a rate equal to one half (0.5)
percentage point above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after
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the date of the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest on account of the Revolving Facility shall be
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due and payable on the fifteenth calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and
all Periodic Payments against any of Borrower's deposit accounts or against the
Committed Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
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time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. Bank shall notify Borrower of
the change in the ordinary course of Borrower's business. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
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Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension, provided however, that no late
fee shall accrue because the relevant date is not a Business Day.
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2.5 Fees. Borrower shall pay to Bank the following:
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(a) Facility Fee. There shall be no Facility Fee.
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(b) Financial Examination and Appraisal Fees. Bank's customary fees
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and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents (not to exceed $1,500); and
(c) Bank Expenses. Upon the date hereof, all Bank Expenses incurred
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through the Closing Date, including reasonable attorneys' fees and expenses in
excess of $1000 (not to exceed $2,000 paid by Borrower), and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
----------------
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error. Bank agrees that it will allocate all
such increased costs among its customers similarly affected in good faith and in
a manner consistent with Bank's customary practice.
2.7 Term. This Agreement shall become effective on the Closing
----
Date, and subject to Section 12.7, shall continue in full force and effect for a
term ending on the Maturity Date. Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Advances under this Agreement
during the continuance of an Event of Default. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as
11
any Obligations are outstanding. Provided no Obligations are outstanding,
Borrower shall have the right to terminate this Agreement upon written notice to
Bank. Upon any termination, Bank's Lien on the Collateral shall terminate
provided no Obligations are outstanding and Bank shall cooperate with Borrower
to make such filings (e.g., financing statements and termination of the
Intellectual Property Security Agreement) as Borrower may reasonably request to
evidence such termination.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of
---------------------------------------
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) an intellectual property security agreement;
(d) an audit of Borrower's Accounts;
(e) financing statement (Form UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(h) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank
------------------------------------
to make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
12
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to
--------------------------
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
---------------------------------------------
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
----------------
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
-----------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
----------------------------------
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent.
Borrower is not in default under any agreement to which it is a party or by
which it is bound, which default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
---------------------
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are
-----------------------------
bona fide existing obligations. The property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional
13
acceptance by the account debtor. Borrower has not received notice of actual or
imminent Insolvency Proceeding of any account debtor that is included in any
Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
----------------------
respects of good and marketable quality, free from all material defects, normal
wear and tear excepted.
5.6 Intellectual Property. Borrower is the sole owner of the
---------------------
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business or except as
permitted under this Agreement. Each of the Patents is valid and enforceable,
and no part of the Intellectual Property Collateral has been judged invalid or
unenforceable, in whole or in part, and as of the date hereof, Borrower has no
knowledge that nor has it received any communication that a claim has been made
that any part of the Intellectual Property Collateral violates the rights of any
third party.
5.7 Name; Location of Chief Executive Office. Except as disclosed
----------------------------------------
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are
----------
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.9 No Material Adverse Change in Financial Statements.
--------------------------------------------------
All consolidated historical financial statements related to Borrower and any
Subsidiary that have been delivered by Borrower to Bank fairly present in all
material respects Borrower's consolidated financial condition as of the date
thereof and Borrower's consolidated results of operations for the period then
ended. There has not been a material adverse change in the consolidated
financial condition of Borrower since the date of the most recent of such
financial statements submitted to Bank.
5.10 Solvency. The fair saleable value of Borrower's assets
--------
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary has
---------------------
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T
14
and U of the Board of Governors of the Federal Reserve System). Borrower has
complied with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or rules applicable to
it, violation of which could have a Material Adverse Effect.
5.12 Environmental Condition. None of Borrower's or any
-----------------------
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary has filed or caused to
-----
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments and has no Subsidiaries.
5.15 Government Consents. Borrower and each Subsidiary has
-------------------
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted, except to the extent that any failure to do so would not have a
Material Adverse Effect.
5.16 Full Disclosure. No representation, warranty or other
---------------
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain
15
qualification in each jurisdiction in which the failure to so qualify could have
a Material Adverse Effect. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, to the extent consistent with prudent management of
Borrower's business, in force all licenses, approvals and agreements, the loss
of which could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause
---------------------
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and
shall cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days upon becoming available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending against Borrower or any Subsidiary that could result in damages
or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000) or more; (e) prompt notice of any material change in the composition
of the Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of the Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement between
Borrower and Bank or knowledge of an event that materially affects the value of
the Intellectual Property Collateral; and (f) such budgets, sales projections,
operating plans or other financial information as Bank may reasonably request
from time to time.
Within twenty (20) days after the last day of each month in which an
Advance is outstanding, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
-------
C hereto, together with aged listings of accounts receivable and accounts
-
payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
16
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
------------------
and marketable condition, free from all material defects, subject to normal wear
and tear. Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist at the time of the execution and delivery
of this Agreement. Borrower shall promptly notify Bank of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than Fifty Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
-----
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon
Bank's request, Borrower shall deliver to Bank certified copies of such policies
of insurance and evidence of the payments of all premiums therefor. All
proceeds payable under any such policy shall, at the option of Bank, be payable
to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank, and shall maintain a minimum
balance in Bank's operating and money market accounts of fifty one percent (51%)
of all cash balances on Borrower's financial statements. Such minimum balance
shall be tested on the basis of a month to date average balance. Borrower will
pay Bank an amount each month equal the amount, if any, that such minimum
balance falls short of 51 percent, times a per annum rate equal to the Prime
Rate plus 2 Percent.
17
6.8 Quick Ratio. Borrower shall maintain, at all times, a ratio of
-----------
Quick Assets to Current Liabilities, excluding deferred revenue, of at least
2.00 to 1.00.
6.9 Tangible Net Worth. Borrower shall maintain, at all times, a
------------------
Tangible Net Worth of not less than Eight Hundred Thousand Dollars ($800,000).
6.10 Minimum Liquidity. Borrower shall maintain, at all times, the
-----------------
sum of (i) unrestricted cash and cash equivalents plus (ii) amounts available to
----
be drawn but not drawn on the Committed Line, of at least two (2.00) times the
outstanding amount of Equipment Advances.
6.11 Registration of Intellectual Property Rights.
--------------------------------------------
(a) Borrower shall register or cause to be registered (to the extent
not already registered) with the United States Patent and Trademark Office or
the United States Copyright Office, as applicable, those intellectual property
rights listed on Exhibits A, B and C to the Intellectual Property Security
Agreement delivered to Bank by Borrower in connection with this Agreement within
thirty (30) days of the date of this Agreement and in form and substance
reasonably acceptable to Borrower's legal counsel. Borrower shall register or
cause to be registered with the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, those additional intellectual
property rights developed or acquired by Borrower from time to time in
connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or additions to the
intellectual property rights listed on such Exhibits A, B and C and in form and
substance reasonably acceptable to Borrower's legal counsel, unless Borrower, in
the exercise of its prudent business judgment, deems such registration not to
have any significant commercial value, provided that Borrower shall in all cases
register in accordance with this Section 6.11 the copyright of the source code
of any software, the licensing of which generates 5 percent or more of
Borrower's gross revenue in any calendar month.
(b) Borrower shall execute and deliver such additional instruments and
documents from time to time as Bank shall reasonably request to perfect Bank's
security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Bank in writing of material infringements detected and (iii) not
allow any Trademarks, Patents or Copyrights to be abandoned, forfeited or
dedicated to the public without the written consent of Bank, which shall not be
unreasonably withheld.
(d) Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.11 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.
18
6.12 Further Assurances. At any time and from time to time
------------------
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
------------
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of
------------------
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a change in more than thirty percent (30%) of
Borrower's ownership provided that nothing in this Section 7.2 shall prohibit
Borrower from completing a public offering of its Common Stock pursuant to a
Registration Statement filed with the Securities and Exchange Commission.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
-----------------------
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable
------------
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
------------
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
-------------
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except Borrower may at any time when an Event of Default
is not continuing, repurchase from an officer, director or employee shares of
equity securities of Borrower held by them upon such person's termination of
employment or rendering of service to Borrower.
7.7 Investments. Directly or indirectly acquire or own, or make
-----------
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
19
7.8 Transactions with Affiliates. Directly or indirectly enter
----------------------------
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Intellectual Property Agreements. Permit the inclusion in any
--------------------------------
material contract to which it becomes a party of any provisions that could or
might in any way prevent the creation of a security interest in Borrower's
rights and interests in any property included within the definition of the
Intellectual Property Collateral acquired under such contracts, except to the
extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgement.
7.10 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 Inventory. Store the Inventory with a bailee, warehouseman,
---------
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply in a
material respect with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of,
---------------
or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice for such other Obligations;
20
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Advances will be required to be made during such
cure period);
8.3 Material Adverse Change. If there occurs a Material Adverse
-----------------------
Change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to
----------------
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
21
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
---------
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of twenty (20) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
------------------
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably considers
advisable;
(d) Make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrower agrees
to assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to enter the
premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such premises
and to occupy the same, without charge, in order to exercise any of Bank's
rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to or
for the credit or the account of Borrower held by Bank;
22
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely pursuant to
the provisions of this Section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this Section 9.1, Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Bank determines is
commercially reasonable, and apply any proceeds to the Obligations in whatever
manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
-----------------
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
▇▇▇▇ of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) to dispose of the
Collateral; and (g) to file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Borrower where permitted by law; provided
Bank may exercise such power of attorney to sign the name of Borrower on any of
the documents described in Section 4.2 regardless of whether an Event of Default
has occurred. The appointment of Bank as Borrower's attorney in fact, and each
and every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.
23
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or
deposited by Bank shall constitute Bank Expenses, shall be immediately due and
payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
-------------------------------
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
24
If to Borrower: Interwoven, Inc.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice delivered or sent to Borrower shall be effective notwithstanding
a failure to deliver or send a copy of such notice to Borrower's counsel or any
other person. The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure
----------------------
to the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-------- --------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and
25
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses in any way suffered, incurred, or paid by Bank as a result of or in any
way arising out of, following, or consequential to transactions between Bank and
Borrower whether under the Loan Documents, or otherwise (including without
limitation reasonable attorneys fees and expenses), except for losses caused by
Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance
---------------
of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made
--------
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information
---------------
Bank and all employees and agents of Bank, including but not limited to
accountants, shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information
that either: (a) is in the public domain or in the knowledge or possession of
Bank when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a
third party, provided Bank does not have actual knowledge that such third party
is prohibited from disclosing such information.
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INTERWOVEN, INC.
By:
---------------------------
Title:
------------------------
SILICON VALLEY BANK
By:
---------------------------
Title:
------------------------
27
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 25, 1998, by
and between Interwoven, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated October 16, 1997, as may be
amended from time to time, (the "Loan Agreement"). The Loan Agreement provided
for, among other things, a Committed Line in the original principal amount of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "Revolving
Facility") and a facility available for Equipment Advances in the amount of
Three Hundred Thousand and 00/100 Dollars ($300,000.00) (the "Equipment Line").
Defined terms used but not otherwise defined herein shall have the same meanings
as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as described in the Loan Agreement and as described in
that certain Intellectual Property Security Agreement, dated October 16, 1997,
by and between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement
---------------------------------
1. The following defined terms are hereby incorporated in to Section
1.1 entitled "Definitions" or amended to read as follows:
"Cash Management Facility" has the meaning set forth in Section
2.1.3.
"Cash Management Facility Maturity Date" means June 24, 1999.
"Committed Line" means One Million and 00/100 Dollars
($1,000,000.00).
"Maturity Date" means June 24, 2002.
"Revolving Maturity Date" means June 24,1999.
"Permitted Investment"
(c) investments in connection with the exchange of 2,000,000.00
shares of Borrower's common stock.
2. Section 2.1.2 entitled "Cash Management Sublimit" is hereby
deleted.
3. The first sentence of Section 2.1 (a) entitled "Advances" is
hereby amended to read as follows:
Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate amount
not to exceed (a) the lesser of the Committed Line or the
Borrowing Base.
4. Section 2.1.1 entitled "Equipment Advances" is hereby amended to
read as follows:
At any time from the date hereof through June 24, 1999, (the
"Equipment Availability Date"), Borrower may from time to time
request advances (each an "Equipment Advance" and collectively
the "Equipment Advances") from Bank in an aggregate principal
amount of up to Five Hundred Thousand and 00/100 Dollars
($500,000.00), less any Equipment Advances. The Equipment
Advances shall be used to purchase Equipment approved from time
to time by Bank and shall not exceed one hundred percent (100%)
of the cost of such Equipment, excluding installation expense,
freight discounts, warranty charges and taxes. Leasehold
improvements and soft costs may, however, comprise up to fifty
percent (50%) of each Equipment Advance.
Interest shall accrue from the date of each Equipment Advance at
the rate specified in Section 2.3(a), and shall be payable
monthly on the 24th Business day of each month through the
Equipment Availability Date. The Equipment Advance or Equipment
Advances outstanding on the Equipment Availability Date will be
payable in thirty-six (36) equal monthly installments of
principal, plus accrued interest, beginning July 24, 1999, and
continuing through the Maturity Date, on which date the entire
principal amount and all accrued but unpaid interest shall be due
and payable. The principal and all accrued but unpaid interest
of any Equipment Advances may be repaid at any time without
penalty, in whole or in part, prior to the Maturity Date.
5. The following Section 2.1.3 entitled "Cash Management Facility"
is hereby incorporated to read as follows:
Borrower may use up to $100,000 for Bank's Cash Management
Services, which may include merchant services, direct deposit of
payroll, business credit card, and check cashing services
identified in the Cash Management Services Agreement (the "Cash
Management Services") All amounts Bank pays for Cash Management
Services will be treated as an advance under the Cash Management
Facility. The Cash Management Facility terminates on the Cash
Management Maturity Date, at which time all advances under this
Section 2.1.3 shall be immediately due and payable.
6. Section 2.2 entitled "Overadvances" is hereby amended to read as
follows:
If, at any time for any reason the outstanding Obligations owed
by Borrower to Bank pursuant to Section 2.1 of this Agreement is
greater than the lesser of (i) the Committed Line, or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash,
the amount of such excess.
7. Section 2.3 entitled "Interest Rates, Payments and Calculations"
is hereby amended to read as follows:
Except as set forth in Section 2.3(b), any Advances shall bear
interest on the average Daily Balance, at a rate equal to the
Prime Rate, and all Equipment Advances shall bear interest at a
rate equal to one quarter of one percentage point, (0.250) above
the Prime Rate.
8. Section 6.8 entitled "Quick Ratio" is hereby amended to read as
follows:
Borrower shall maintain, on a monthly basis, a ratio of Quick
Assets to Current Liabilities, excluding deferred revenue, of at
least 1.50 to 1.00.
9. Section 6.9 entitled "Tangible Net Worth" is hereby amended to
read as follows:
Borrower shall maintain on a monthly basis, a Tangible Net Worth
of not less than One Million and 00/100 Dollars ($1,000,000.00).
2
10. Section 6.10 entitled "Minimum Liquidity" is hereby amended to
read as follows:
Borrower shall maintain on a monthly basis, cash plus eighty
percent (80%) of Eligible Accounts minus outstanding Advances
under the Committed Line divided by outstanding Equipment
Advances of at least 1.50 to 1.00.
11. Section 10 entitled "Notices" is hereby amended in part to
correct the Borrower's address to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
12. The second paragraph of the Section 6.3 entitled "Financial
Statements, reports, Certificates" is hereby amended in part to
read as follows:
Borrower shall deliver to Bank, within thirty (30) days after the
last day of each month, a Borrowing base Certificate together
with an aged listings of accounts receivable and accounts
payable.
B. Waiver of Covenant Default(s).
-----------------------------
Bank hereby waives Borrowers existing default under the Loan Agreement
by virtue of Borrower's failure to comply with the Quick Ratio and
Tangible Net Worth covenants as of the months ended February 28, 1998
and March 31, 1998. Bank's waiver of Borrowers compliance of these
covenants shall apply only to the foregoing periods. Accordingly, for
the month ended April 30, 1998, Borrower shall be in compliance with
these covenants, as amended herein.
Bank's agreement to waive the above-described default (i) in no way
shall be deemed an agreement by the Bank to waive Borrower's
compliance with the above-described covenants as of all other dates
and (2) shall not limit or impair the Bank's right to demand strict
performance of these covenants as of all other dates and (3) shall not
limit or impair the Bank's right to demand strict performance of all
other covenants as of any date.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fee in the amount of (i)
-------------------
one eighth of one percent (1/8%) for the Equipment Line or (ii) one quarter of
one percent (1/4%), per annum of the unused portion of the Equipment Line,
quarterly in arrears, (the "Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrowers representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.
3
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
----------
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
INTERWOVEN, INC. SILICON VALLEY BANK
By: By:
------------------------- ----------------------------
Name: Name:
----------------------- --------------------------
Title: Title:
---------------------- -------------------------
4
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of September 2, 1998,
by and between Interwoven, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. RESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated October 16, 1997, as may be
amended from time to time, (the "Loan Agreement'). The Loan Agreement provided
for, among other things, a Committed Line in the original principal amount of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "Revolving
Facility") and a facility available for Equipment Advances in the amount of
Three Hundred Thousand and 00/100 Dollars ($300,000.00) (the "Equipment Line").
The Loan Agreement has been amended pursuant to, among other documents, a Loan
Modification Agreement, dated June 25, 1998, pursuant to which, among other
things, the Committed Line was increased to One Million and 00/100 Dollars
($1,000,000.00). Defined terms used but not otherwise defined herein shall have
the same meanings as in the Loan Agreement.
Hereinafter, ail indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as described in the Loan Agreement and as described in
that certain Intellectual Property Security Agreement, dated October 16, 1997,
by and between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement
---------------------------------
1. The second paragraph of the Section 6.3 entitled "Financial
Statements, reports, Certificates" is hereby amended in part to
read as follows:
Borrower shall deliver to Bank, at such time as (i) there are
outstanding Advances or (ii) Borrower's unrestricted cash is
insufficient to fully support the Liquidity covenant as described
in Section 6,10, within thirty (30) days after the last day of
each month, a Borrowing base Certificate together with an aged
listings of accounts receivable and accounts payable.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
------------------
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrowers representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be
released by virtue of this Loan Modification Agreement. The terms of this
paragraph apply not only to this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
INTERWOVEN, INC. SILICON VALLEY BANK
By: By:
------------------------- ----------------------------
Name: Name:
----------------------- --------------------------
Title: Title:
---------------------- -------------------------
2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 26, 1998, by
and between Interwoven, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
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owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated October 16, 1997, as may be
amended from time to time, (the "Loan Agreement'). The Loan Agreement provided
for, among other things, a Committed Line in the original principal amount of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "Revolving
Facility") and a facility available for Equipment Advances in the amount of
Three Hundred Thousand and 00/100 Dollars ($300,000.00) (the "Committed
Equipment Line"). The Loan Agreement has been amended pursuant to, among other
documents, a Loan Modification Agreement, dated June 25, 1998, pursuant to
which, among other things, the Committed Line was increased to One Million and
00/100 Dollars ($1,000,000.00), the Committed Equipment Line was increased to
Five Hundred Thousand Dollars ($500,000) and a Cash Management Facility in the
original principal amount of One Hundred Thousand Dollars ($100,000) was
incorporated. Defined terms used but not otherwise defined herein shall have
the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
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secured by the Collateral as described in the Loan Agreement and as described in
that certain Intellectual Property Security Agreement, dated October 16, 1997,
by and between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
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A. Modification(s) to Loan Agreement
---------------------------------
1. The following defined term is hereby added to Section 1.1
entitled "Definitions" to read as follows:
"Committed Equipment Line" means an extension of credit up to One
Million Five Hundred Thousand Dollars ($1,500,000), however,
capped at Five Hundred Thousand Dollars ($500,000) until such
time as Borrower has met the Condition Precedent to Committed
Equipment Line Increase, as described herein.
2. The first sentence of Section 2.1.1 entitled "Equipment Advances"
is hereby amended in its entirety to read as follows:
At any time from the date hereof through June 24, 1999, (the
"Equipment Availability Date"), Borrower may from time to time
request advances (each an "Equipment Advance" and collectively
the "Equipment Advances") from Bank in an aggregate principal
amount not to exceed the Committed Equipment Line, less any
outstanding Equipment Advances.
3. Section 3.3 entitled "Condition Precedent to Committed Equipment
Line Increase" is hereby incorporated into the Loan Agreement to
read as follows:
The obligation of Bank to increase the Committed Equipment Line
is subject to the following condition: the successful closure of
Borrower's Series D Preferred round of financing together with
proceeds from certain principal investors exercising Series C
Preferred Warrant(s) in an aggregate amount not less than Five
Million Dollars ($5,000,000) on or before the Equipment
Availability Date.
4. Section 6.9 entitled "Tangible Net Worth" is hereby amended in
part to provide that upon Borrower complying with Section 3.3
herein, Borrower shall maintain on a monthly basis, a Tangible
Net Worth of not less than One Million Seven Hundred Fifty
Thousand Dollars ($1,750,000).
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
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necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fee in the amount of (i)
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one eighth of one percent (1/8%) for the Committed Equipment Line or (ii) one
quarter of one percent (1/4%), per annum of the unused portion of the Committed
Equipment Line, quarterly in arrears, (the "Non-usage Fee"), plus all out-of-
pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
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below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
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below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
INTERWOVEN, INC. SILICON VALLEY BANK
By: By:
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Name: Name:
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Title: Title:
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2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of December 11, 1998,
by and between Interwoven, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
------------------------------------
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated October 16, 1997, as may be
amended from time to time, (the "Loan Agreement"). The Loan Agreement provided
for, among other things, a Committed Line in the original principal amount of
Five Hundred Thousand and 00/100 Dollars ($500,000) (the "Revolving Facility")
and a facility available for Equipment Advances in the amount of Three Hundred
Thousand and 00/100 Dollars ($300,000) (the "Committed Equipment Line"). The
Loan Agreement has been amended pursuant to, among other documents, a Loan
Modification Agreement, dated June 25, 1998, pursuant to which, among other
things, a Cash Management Facility in the original principal amount of One
Hundred Thousand Dollars ($100,000) was incorporated and a Loan Modification
Agreement dated October 26, 1998, pursuant to which, among other things, the
principal amount of the Committed Equipment Line was increased to One Million
Five Hundred Thousand and 00/100 Dollars ($1,500,000), however capped at Five
Hundred Thousand and 00/100 Dollars ($500,000) until such time Borrower has met
the Condition Precedent to Committed Line Increase, as described therein.
Defined terms used but not otherwise defined herein shall have the same meanings
as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as described in the Loan Agreement and as described in
that certain Intellectual Property Security Agreement, dated October 16, 1997,
by and between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement
---------------------------------
1. Section 6.7 entitled "Principal Depository" is hereby amended in
its entirety to read as follows:
Borrower shall maintain its principal operating accounts with
Bank.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
------------------
necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
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below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker, endorser, or guarantor will be released by virtue of this
Loan Modification Agreement. The terms of this paragraph apply not only to this
Loan Modification Agreement, but also to all subsequent loan modification
agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
INTERWOVEN, INC. SILICON VALLEY BANK
By: By:
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Name: Name:
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Title: Title:
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2