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EXHIBIT 10.3
LOAN AGREEMENT
This Loan Agreement is dated as of June 3, 1997, by and between
Online Resources & Communications Corporation, a Delaware corporation (the
"Company") and Dominion Fund IV, a Delaware Limited Partnership ("Dominion").
Certain other terms used herein are defined in Section 9.
The Company and Dominion hereby agree as follows:
Article 1. Amount and Terms of the Loans.
1.1 Recitals. The Company wishes to borrow up to $2,000,000 on a
purchase money secured basis to be used to purchase or refinance the purchase of
inventory, machinery and equipment (the "Loan"). Dominion is willing to make the
Loan, subject to the terms and conditions hereafter set forth.
1.2 The Loan. Subject to the terms and conditions hereof, and in
reliance upon the representations and warranties contained herein, Dominion will
make the Loan to the Company. $1,500,000 of the Loan will be drawn at the
Closing. The remaining $500,000 principal of the Loan may be drawn on or prior
to June 1, 1998 (the "Conversion Date") in one or more advances (the
"Advances"). On July 1, 1998, the Loan shall convert to a term loan with a
thirty six (36) month maturity. The first Advance may be made five (5) days
after written notice from the Company to Dominion, provided that the Conditions
to Closing specified in Article 4 of this Agreement shall have been fulfilled.
The Company shall provide notice to Dominion of any subsequent Advance at least
five days' prior to the expected date of each such Advance and no subsequent
Advance shall be made unless the Conditions to Making Subsequent Advances
specified in Article 5 shall have been fulfilled. Each Advance shall be in a
minimum amount of $100,000 or the remaining amount of the Equipment Loan, if
less. Dominion shall have no obligation to make Advances at any time while there
exists an Event of Default under this Agreement.
A. The Note. The Loan shall be evidenced by a secured
promissory note of the Company in a principal amount equal to the Loan
and in the form attached hereto as Exhibit 1.3A (the "Note").
B. Interest and Payment Terms. Monthly payments of interest
only at the rate of 9% per annum (.75% per month) of the Loan shall be
payable in arrears on the first day of every month commencing July 1,
1997 and continuing through June 1, 1998. Thereafter the Loan shall be
paid commencing on July 1, 1998 in 36 equal monthly installments of
principal and interest. All amounts due under the Note shall be paid in
full by June 1, 2001.
C. Prepayment. The Company may prepay the Note in whole at any
time or in part from time to time without penalty or premium. Any
optional prepayment of the Note in part shall be in a principal amount
not less than $25,000. Any prepayment of the Note shall be made
together with accrued interest on the amount prepaid to the date of
such prepayment. Any prepayments of the Note shall be applied to
installments of the Note in the inverse order of maturity.
D. Security. (a) The Note and the other obligations of the
Company thereunder shall be secured by and entitled to the benefits of
a first priority security interest in all of the inventory of the
Company (the "Inventory Collateral")
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and the equipment, and machinery (collectively, the "Equipment") which
Equipment is set forth on the Schedule referred to in Article 2 as such
schedule may be amended from time to time (the "Equipment Collateral")
(the Inventory Collateral and Equipment Collateral, together with any
additions thereto or replacements or proceeds thereof being referred to
hereafter collectively as the "Collateral").
(b) All of the agreements and instruments securing
the Note and the Company's related obligations hereunder and thereunder
are sometimes hereinafter referred to collectively as the "Security
Documents" and individually as a "Security Document". The Company
agrees to take such actions as may be necessary from time to time to
cause Dominion to be secured by and entitled to the benefits of the
Security Documents as described in this subsection, including, without
limitation, the obtaining of consents of any third parties. The
Security Documents shall be satisfactory in form to Dominion and its
counsel.
E. Loan Fee. On the due date of the last monthly payment of
the Loan, whether at maturity or by declaration, acceleration or
otherwise, the Company shall pay Dominion a loan fee (the "Equipment
Loan Fee") equal to 10% of the aggregate of the Advances under the
Note.
1.3 Overdue Payments and Default Rate of Interest for the Notes. In the
event that the Company shall fail to make any payment of principal of or
interest on the Note within ten (10) days when due, whether at maturity or at a
date fixed for the payment of any installment or prepayment thereof or by
declaration, acceleration or otherwise, interest on such unpaid principal and
(to the extent permitted by law) on such unpaid interest and additional interest
from the date due until paid in full shall thereafter be payable on demand at a
rate equal to 2% per month, provided that in no event shall the amount
contracted for and agreed to be paid by the Company as interest on the Note
exceed the highest lawful rate permissible under any law applicable hereto.
1.4 Form of Payment. All payments by the Company of principal of or
interest on the Note and of any fee due thereunder shall be made to Dominion at
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such
other address as Dominion shall have furnished to the Company in writing) and
shall be made by check or wire transfer. If any payment of principal of or
interest on the Note shall become due on a day which is not a Banking Day, such
payment may be made on the next succeeding Banking Day and such extension shall
be included in computing interest in connection with such payment.
1.5 Warrant. Concurrently with the execution and delivery of this
Agreement, the Company shall execute and deliver to Dominion a Warrant Purchase
Agreement in the form of Exhibit 1.5A hereto (the "Warrant Purchase Agreement")
and shall issue to Dominion thereunder a Warrant in the form of Exhibit 1.5B
hereto (the "Warrant").
1.6 Closing. The closing (the "Closing") of the transactions
contemplated hereby shall take place at 10:00 a.m. at the offices of ▇▇▇▇▇▇,
Hall & ▇▇▇▇▇▇▇, Exchange Place, Boston, Massachusetts, on June ___, 1997 or on
such other date and time as the parties may agree (the "Closing Date").
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Article 2. Use of Proceeds.
The Company will use the proceeds of the Loan exclusively for the
purchase or reimbursement of the cost of acquiring inventory and equipment.
Dominion has agreed to the Inventory and Equipment Schedule attached hereto as
Exhibit 2. The Company will not directly or indirectly use any part of such
proceeds for any purpose which would violate any provision of any applicable
statute, regulation, order, or restriction.
Article 3. Representations and Warranties.
In order to induce Dominion to enter into this Agreement and to make
the Loan provided for hereunder, the Company makes the following representations
and warranties, which shall survive the execution and delivery hereof and of the
Note and shall be true and correct as set forth below upon the date of the Loan:
3.1 Organization, Standing, etc. of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into this Agreement, the Security Documents,
and all other documents to be executed by it in connection with the transactions
contemplated hereby, to issue the Note and the Warrant and to carry out the
terms hereof and thereof.
3.2 Subsidiaries. The Company has no Subsidiary.
3.3 Qualification. The Company is duly qualified as a foreign
corporation in Virginia. Other than Virginia, the Company is not required to be
qualified or licensed as a foreign corporation in any jurisdiction in which the
failure to become qualified or licensed would have a material adverse effect on
the Company.
3.4 Financial Information; Disclosure, etc. The Company has furnished
Dominion with the financial statements and other reports listed in Schedule 3.4
attached hereto. Such financial statements (including the notes thereto) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and fairly present the financial position and
results of operations of the Persons to which they purport to relate as of the
dates and for the periods indicated. Since the end of the most recent fiscal
period shown in such financial statements, there has not been any material
adverse change in the business, operations, properties or financial position of
the Company (or of the Persons to which such financial statements purport to
relate). The Loan will not render the Company unable to pay its debts as they
become due; the Company is not contemplating either the filing of a petition by
it under any state or federal bankruptcy or insolvency laws or the liquidation
of all or a major portion of its property; and the Company has no knowledge of
any person contemplating the filing of any such petition against it.
3.4A Material Contracts. Included in Schedule 3.4A is a
complete and accurate list of all (a) contracts (written or unwritten) with
respect to which the Company has any liability or obligation, contingent or
otherwise, or which may otherwise have any continuing effect after the date of
this Agreement, and which involve in any case more than $50,000 per contract or
per transaction (in the case of contracts covering multiple transactions) or
which place any material limitation on the method of conducting or scope of the
Company's business, (b) contracts with labor unions, (c) plans pursuant to
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which benefits are provided to employees of the Company, (d) contracts with
shareholders, officers or directors of the Company, or the spouses or relatives
thereof, (e) compensation arrangements or other understandings between the
Company and any of its officers or directors pursuant to which compensation is
payable or other benefits are made available by the Company to such person or
funds are or have been loaned or advanced by the Company to such person, (f)
contracts between officers or directors of the Company and any other person or
entity which contracts purport to restrict the business activities of or use of
information by any officer or director of the Company, (g) any other material
contracts, instruments, commitments, plans or arrangements, copies of which
would be required to be filed with the Securities and Exchange Commission as an
exhibit to a registration statement on Form S-1 if the Company were registering
its Common Stock under the 1933 Act, (h) all agreements known to the Company
relating to any securities of the Company or rights in connection therewith,
other than agreements which will be terminated at or prior to the time of the
Closing hereunder, and (i) all other contracts to which the Company is a party
or by which it is bound which are not in the ordinary course of the Company's
business. All the foregoing are herein called "Material Contracts". Such list
includes with respect to each Material Contract the names of the parties, the
date thereof, its title or other general description, and a brief summary of its
contents and the amounts involved in connection therewith, and all amounts owing
to the Company by any officer or director and the repayment terms for such
obligations. Upon request, the Company will furnish to Dominion, at any time
prior to or after the Closing, copies of any Material Contracts not previously
furnished to Dominion and any further information that Dominion may reasonably
request in connection therewith.
The Company, and, to the best of the Company's knowledge, each other
party thereto have in all material respects performed all the obligations
required to be performed by them to date pursuant to a Material Contract (or
each non-performing party has received a valid, enforceable and irrevocable
written waiver with respect to its non-performance), have received no notice of
default and are not in default (with due notice or lapse of time or both) under
any Material Contract. The Company does not have any present expectation or
intention of not fully performing all its obligations under each such Material
Contract, and the Company has no knowledge of any breach or anticipated breach
by the other party to any Material Contract.
3.5 Licenses; Franchises, etc. Schedule 3.5 attached hereto accurately
and completely lists all material authorizations, licenses, permits and
franchises of any public or governmental regulatory body granted or assigned to
the Company and the same constitute the only material authorizations, licenses,
permits and franchises of any public or governmental regulatory body which are
necessary for the conduct of the business of the Company as now conducted and
proposed to be conducted (such authorizations, licenses, permits and franchises,
together with any extensions or renewals thereof, being herein sometimes
referred to collectively as the "Licenses"). All such Licenses are validly
issued and in full force and effect and the Company has fulfilled and performed
all of its material obligations with respect thereto and has full power and
authority to operate thereunder.
3.6 Tax Returns and Payments. The Company has filed all tax returns
required by law to be filed and has paid all taxes, assessments and other
governmental charges levied upon any of its properties, assets or income, other
than those not yet delinquent and those, not substantial in aggregate amount,
being or about to be contested as provided in Section 6.4. The charges, accruals
and reserves on the books of the Company in respect of its taxes are adequate in
the opinion of the Company, and the Company knows of no unpaid assessment for
additional taxes or of any basis therefor.
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3.7 Indebtedness, Liens and Investments, etc. Schedule 3.7 attached
hereto correctly describes, as of the date or dates indicated therein, (a) all
outstanding Indebtedness of the Company in respect of borrowed money, Capital
Leases and the deferred purchase price of property; (b) all existing mortgages,
liens and security interests in respect of any property or assets of the
Company; (c) all outstanding investments, loans and advances of the Company
(other than expense advances to employees in the ordinary course of business);
and, (d) all existing guarantees by the Company.
3.8 Title to Properties; Liens. Except as set forth on Schedule 3.8,
the Company has good and marketable title to all of its properties and assets
reflected in the balance sheet as of December 31, 1996, and none of such
properties or assets is subject to any mortgage, pledge, lien, security
interest, charge or encumbrance except for minor liens and encumbrances which in
the aggregate are not substantial in amount, do not in any case materially
detract from the value of the property subject thereto or materially impair the
operations of the Company and have not arisen otherwise than in the ordinary
course of business. The Company enjoys quiet possession under all leases to
which it is a party as lessee, and all of such leases are valid, subsisting and
in full force and effect. None of such leases contains any provision restricting
the incurrence of indebtedness by the lessee or any unusual or burdensome
provision materially adversely affecting the current and proposed operations of
the Company.
3.9 Litigation, Claims, etc. There is no action, proceeding or
investigation pending or, to the Company's knowledge, threatened (or any basis
therefor known to the Company) which questions the validity of this Agreement,
the Note, the Warrant or the other documents executed in connection herewith, or
any action taken or to be taken pursuant hereto, or which might result, either
in any case or in the aggregate, in any material adverse change in the business
operations, affairs or condition of the Company or any of its properties or in
any material liability on the part of the Company.
3.10 Authorization; Compliance with Other Instruments. The execution,
delivery and performance of this Agreement, the Note, the Warrant and the
Security Documents have been duly authorized by all necessary corporate action
on the part of the Company, will not result in any violation of or be in
conflict with or constitute a default under any term of the charter or by-laws
of the Company, or of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to the Company, or result in
the creation of any mortgage, lien, charge or encumbrance upon any of the
properties or assets of the Company pursuant to any such term. The Company is
not in violation of any term of its Certificate of Incorporation or by-laws, or
of any term of any agreement or instrument to which it is a party, or of any
judgment, decree, order, statute, rule or governmental regulation applicable to
it.
3.11 Governmental Consent. Neither the Company nor, to the Company's
knowledge, any of its shareholders, is required to obtain any order, consent,
approval or authorization of, or required to make any declaration or filing with
any governmental authority in connection with the execution and delivery of this
Agreement and the issuance and delivery of the Note and the Warrant pursuant
hereto (collectively, "Consents").
3.12 Employee Retirement Income Security Act of 1974. The terms used in
this Section 3.12 and in Section 7.9 of this Agreement shall have the meanings
assigned
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thereto in the applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as
amended (the "Code"), and the term "Affiliated Company" shall mean the Company
and all corporations, partnerships, trades or businesses (whether or not
incorporated) which constitute a controlled group of corporations with the
Company, a group of trades or businesses under common control with the Company,
an affiliated service group or other affiliated group, within the meaning of
Section 414(b), Section 414(c), Section 414(m) or Section 414(o), respectively,
of the Code, or Section 4001 of ERISA. Each employee benefit plan sponsored by
an Affiliated Company and each multiemployer plan to which any Affiliated
Company makes contributions, is in material compliance with applicable
provisions of ERISA and the Code. No Affiliated Company has incurred any
material liability to the Pension Benefit Guaranty Corporation ("PBGC") or any
employee benefit plan on account of any failure to meet the contribution
requirements of any such plan, minimum funding requirements or prohibited
transactions under ERISA or the Code, termination of a single employer plan,
partial or complete withdrawal from a multiemployer plan, or the insolvency,
reorganization or termination of any multiemployer plan, and no event has
occurred or condition exists which presents a material risk that any Affiliated
Company will incur any material liability on account of any of the foregoing
circumstances. The consummation of the transactions contemplated by this
Agreement will not result in any prohibited transaction under ERISA or the Code
for which an exemption is not available.
3.13 Capitalization; Ownership of Company. As of the date hereof, the
authorized capital stock of the Company consists of 30,000,000 shares of Common
Stock, of which 10,726,372 shares are issued and outstanding, 1,000,000 shares
of Series A Convertible Preferred Stock of which 795,000 shares are issued and
outstanding, 100,000 shares of Series B Convertible Preferred Stock of which
10,050 shares are issued and outstanding, and 237,000 shares of Series C
Convertible Preferred Stock of which none are issued as of the date hereof. All
of said outstanding shares are validly issued, fully paid and nonassessable and,
to the knowledge of the Company, are owned by such shareholders, free of any
assignment, pledge, lien, security interest, charge, option or other encumbrance
except those existing under applicable state and federal securities laws and in
the case of the Series C Convertible Preferred Stock being issued those being
created under a Stockholders Agreement to which holders of shares of such shares
will be made subject. Except as otherwise set forth in Schedule 3.13, the
Company is not obligated in any manner to issue any additional shares of its
capital stock.
3.14 Environmental Matters. Neither the Company nor, to the Company's
knowledge (after due inquiry), any prior user or owner of the real estate on
which the Company's business is conducted (the "Property"), or any third party,
has ever caused or permitted any Hazardous Material to be disposed of on or
under the Property, and the Property has never been used (either by the Company
or, to the Company's knowledge (after due inquiry) by any prior user or owner of
the Property, or any third party as (i) a disposal site or permanent storage
site for any Hazardous Material or (ii) a temporary storage site for any
Hazardous Material. To the best of the Company's knowledge, all areas of the
property where any disposal or release of Hazardous Materials has occurred have
been remediated in accordance with applicable legal requirements. The Company
has been issued and is in compliance with all material permits, certificates,
licenses, approvals and other authorizations relating to environmental matters
and necessary for its business, and has filed all notifications and reports
relating to chemical substances, air emissions, underground storage tanks,
effluent discharges and Hazardous Material waste storage, treatment and disposal
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required in connection with the operation of its business, the failure to have
or comply with which would, individually or in the aggregate, have a material
adverse effect on the Company. All Hazardous Materials used or generated by the
Company have been generated, accumulated, stored, transported, treated, recycled
and disposed of in compliance with all applicable laws and regulations, the
violation of which has any reasonable likelihood of having a material adverse
effect on the Company. The Company has no liabilities with respect to Hazardous
Materials, and to the knowledge of the Company (after due inquiry), no facts or
circumstances exist which could give rise to liabilities with respect to
Hazardous Materials, which could have any reasonable likelihood of having a
material adverse effect on the Company.
3.15 Intellectual Property. The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, tradenames, copyrights,
trade secrets, licenses, information and proprietary rights and processes (the
"Intellectual Property") necessary for its business as conducted and proposed to
be conducted without any known conflict with, or infringement of the rights of
others and each such legal right is listed on Schedule 3.15. The Company has not
received any communications alleging that it has violated or, by conducting
business as proposed, would violate the Intellectual Property rights of any
other person or entity. Except as disclosed in Schedule 3.15, the Company has
not licensed or granted rights to others in any of its Intellectual Property.
3.16 Insurance. All of the properties and operations of the Company are
adequately insured, by financially sound and reputable insurers against loss or
damage of the kinds and in the amounts customarily insured against by companies
of established reputation engaged in the Company's business or similar
businesses, and the Company carries with such insurers in customary amounts such
other insurance as is usually carried by companies of established reputation
engaged in the same or similar businesses.
3.17 Compliance with Law. The Company has complied in all material
respects with all rules, regulations, statutes, decrees and orders applicable to
its business.
3.18 Regulations U and X. No part of the proceeds of the Loan will be
used to purchase or carry, or to reduce, retire or refinance any credit incurred
to purchase or carry, any margin stock (within the meaning of Regulations U and
X of the Board of Governors of the Federal Reserve System or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
3.19 Investment Company. The Company is not subject to regulation under
the Investment Company Act of 1940, as amended.
3.20 U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States real property holding corporation" as defined in
Section 897(c) of the Code and Section 1.897-2(b) of the regulations promulgated
by the Internal Revenue Service, and the Company has filed with the Internal
Revenue Service all statements, if any, with its United States income tax
returns which are required under Section 1.897-2(h) of such regulations.
3.21 Full Disclosure. Neither this Agreement nor any financial
statements, reports or other documents or certificates furnished to Dominion by
the Company in connection with the transactions contemplated hereby contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements herein or therein contained not misleading.
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3.22 No Material Adverse Change Since March 31, 1997, there has been no
material adverse change in the condition (financial or otherwise), properties,
business operations or prospects of the Company nor any change in the assets,
liabilities or financial condition of the Company from that reflected in the
balance sheet as of March 31, 1997, except for changes in the ordinary course of
business which in the aggregate have not been materially adverse.
Article 4. Conditions to Closing.
The obligation of Dominion to make the initial advance under the Loan
is subject to the following conditions:
4.1 The Note. By the Closing Date, Dominion shall have received the
Note, duly completed, executed and delivered, as provided in Article 1.
4.2 Opinions and Certificates. On and as of the Closing Date, Dominion
shall have received:
(a) The favorable opinion of Michaels, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.,
counsel for the Company, dated as of such date and in form and substance
satisfactory to Dominion and its counsel;
(b) A certificate, dated as of the Closing Date, signed by the
Company's Secretary, in the form attached hereto as Exhibit 4.2(b);
(c) A certificate, dated as of the Closing Date, signed by a
principal officer of the Company, in the form attached hereto as Exhibit 4.2(c)
certifying that the conditions specified in this Article 4 have been fulfilled;
and
(d) All other information and documents which Dominion or its
counsel may reasonably have requested in connection with the transactions
contemplated by this Agreement, such information and documents where appropriate
to be certified by the proper Company officers or governmental authorities.
4.3 No Default; Representations and Warranties, etc. On the Closing
Date: (a) the representations and warranties of the Company contained in Article
3 of this Agreement shall be true on and as of such date as if they had been
made on such date; (b) the Company shall be in compliance in all material
respects with all of the terms and provisions set forth herein on its part to be
observed or performed on or prior to such date; (c) after giving effect to the
Loan, no Event of Default specified in Article 8 hereof, nor any event which
with the giving of notice or expiration of any applicable grace period or both
would constitute such an Event of Default, shall have occurred and be
continuing; (d) all of the conditions to closing set forth in this Article 4
have been satisfied; and (e) since the date of this Agreement, there shall have
been no material adverse change in the assets or liabilities or in the financial
or other condition of the Company.
4.4 Security Documents. On the Closing Date, Dominion shall have
received the Security Documents, together with any other documents reasonably
required or contemplated by the terms thereof.
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4.5 Payment of Counsel Fees and Other Expenses. On the Closing Date,
the Company shall have paid the fees and disbursements of Dominion's counsel
relating to this Agreement invoiced to the Closing Date, including an estimate
of those which are reasonably expected to be incurred post-Closing, and shall
have paid any other expenses incurred by Dominion relating to the transactions
contemplated hereby (including consulting fees, accounting fees and travel
expenses) invoiced by Dominion to the Company prior to the Closing.
4.6 Inventory and Equipment Schedules. As of the Closing Date, the
Company shall have furnished to Dominion in writing a schedule of the inventory,
machinery and equipment to be financed by the draw at Closing, and Dominion
shall have approved such Schedule in writing.
4.7 Stock Purchase Agreement. As of the Closing Date, the Company,
Dominion and the parties named therein shall have executed and delivered a Stock
Purchase Agreement in the form of Exhibit 4.7 (the "Stock Purchase Agreement")
and the other documents and agreements contemplated thereby, and a certificate
representing all Shares purchased by Dominion thereunder shall be duly issued
and delivered to Dominion.
4.8 Filing of Financing Statements. As of the Closing Date, financing
statements in appropriate form shall have been filed with the State Corporation
Commission for the Commonwealth of Virginia and in all other places required by
law to perfect Dominion's security interest in all of the Equipment Collateral
financed by the first Advance.
4.9 Certificate of Insurance. As of the Closing Date, the Company shall
have furnished to Dominion a Certificate of Insurance naming Dominion as a loss
payee with regard to the Collateral.
4.10 Warrant. The Company shall have execute the Warrant Purchase
Agreement to Dominion and pursuant thereto shall have issued the Warrant to
Dominion.
4.11 Landlord's Consent and Waiver. As of the Closing Date, Dominion
shall have received a signed and executed Landlord's consent and waiver in form
satisfactory to Dominion for all locations at which the Collateral is located.
4.12 Lien Search Results. The Company shall have furnished Dominion
with evidence reasonably satisfactory to Dominion that Dominion has a first
priority security interest in the Collateral.
Article 5. Conditions to Making Subsequent Advances.
5.1 Certificates. On and as of the date of each subsequent Advance,
Dominion shall have received a certificate, dated as such date, signed by a
principal officer of the Company, in the form attached hereto as Exhibit 5.1
certifying, as of the date of the certificate, that (a) the representations and
warranties of the Company contained in Article 3 of this Agreement shall be true
in all material respects on and as of such date as if they had been made on such
date; (b) the Company shall be in compliance in all material respects with all
of the terms and provisions set forth herein on its part to be observed or
performed on or prior to such date; (c) after giving effect to the Advance, no
Event of Default specified in Article 8 hereof, nor any event which with the
giving of notice or expiration of any applicable grace period or both would
constitute such an Event of Default, shall have occurred and be continuing; and
(d) since the date of the
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last such certificate given to the Lender pursuant to Article 4 or Article 5,
there shall have been no material adverse change in the assets or liabilities or
in the financial or other condition of the Company (other than as the result of
the draw down of the Equipment Loan).
5.2 Inventory and Equipment Schedule. The Company shall have furnished
to Dominion in writing a schedule of the inventory, machinery and equipment to
be financed by such subsequent Advance, and Dominion shall have approved such
schedule in writing.
5.3 Filing of Financing Statements. Financing statements in appropriate
form shall have been filed with the State Corporation Commission of the
Commonwealth of Virginia and in all other places required by law to perfect
Dominion's purchase money security interest in the Collateral being financed by
such subsequent Advance.
5.4 Landlord's Consent and Waiver. The Company shall have furnished to
Dominion an executed Landlord's Waiver and Consent in form and substance
satisfactory to Dominion for each location where Collateral financed by such
subsequent Advance is located.
5.5 Expiration Date. The date of any subsequent Advance shall be prior
to the Conversion Date.
Article 6. Affirmative Covenants.
Until the principal of and interest on the Note and all fees due
hereunder shall have been paid in full, the Company agrees that the following
covenants shall remain in full force and effect, which covenants shall be
applicable to the Company and each of its Subsidiaries, if any.
6.1 Financial Statements, etc. The Company will furnish or cause to be
furnished to Dominion:
(a) As soon as available and in any event within 120 days
after the end of each fiscal year of the Company, (i) the consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the end
of such year, and (ii) the related consolidated and consolidating statements of
income and surplus and cash flows for such year, setting forth (except for the
initial financial statement of the Company delivered pursuant to this Section
6.1(a)) in comparative form with respect to such consolidated financial
statements figures for the previous fiscal year, all in reasonable detail,
together with the opinion thereon of independent public accountants selected by
the Company and satisfactory to Dominion, which opinion shall be in a form
generally recognized as unqualified and shall state that such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of the preceding fiscal year
(except for changes, if any, which shall be specified and approved in such
opinion) and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards related to reporting, provided that such accountants'
certification may be limited to the consolidated financial statements in which
case the consolidating financial statements shall be signed by a principal
officer of the Company;
(b) Within 30 days after the end of each month, a statement of
operations for such month in form and substance satisfactory to Dominion;
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(c) As soon as available and in any event within 45 days after
the end of each quarterly accounting periods in each fiscal year of the Company,
an analysis and report on the financial and operating results of each fiscal
quarter, in form and substance satisfactory to Dominion;
(d) Not later than 30 days prior to the beginning of each
fiscal year of the Company, a copy of the Company's annual budget (the
"Budget"), including balance sheets, cash flow and income and loss projections,
a consolidated capital and operating expense budget and a business plan for the
Company, each itemized in reasonable detail and prepared on a monthly basis, and
promptly after preparation, any revisions to the foregoing;
(e) Promptly upon receipt thereof (and in no event more than
five (5) business days after receipt thereof), copies of all final audit
reports, "management letters", so called, and other communications and reports
submitted to the Company by independent certified public accountants in
connection with each interim or special audit of the books of the Company made
by such accountants;
(f) Promptly upon their becoming available (and in no event
later than they are first sent to security holders, any securities exchange, or
the Securities and Exchange Commission), copies of all financial statements,
reports, notices and proxy statements sent by the Company to its security
holders and all annual, periodic or special reports or registration statements
filed by the Company with the Securities and Exchange Commission;
(g) Prompt notice of any action, suit, proceeding or
investigation at law or in equity or by or before any governmental
instrumentality or agency which, if adversely determined, would materially
impair the right of the Company or any subsidiary to carry on its business as
then conducted or would have a material adverse effect on the business,
operations or financial condition of the Company or any Subsidiary;
(h) [Intentionally Omitted]
(i) Together with the financial statements delivered pursuant
to subparagraphs (a) and (c) above, a compliance certificate substantially in
the form of Exhibit 6.1 attached hereto signed by a principal officer of the
Company;
(j) Any information generally furnished by the Company to its
stockholders, including without limitation all information pertaining to
financial, marketing, business development or regulatory issues generally
furnished by the Company to its stockholders or to any class of its
stockholders; and,
(k) Forthwith upon any officer of the Company obtaining
knowledge of any condition or event which constitutes an Event of Default or
which, after notice or lapse of time or both, would constitute an Event of
Default, a certificate signed by such officer specifying in reasonable detail
the nature and period of existence thereof and what action the Company has taken
or proposes to take with respect thereto.
The Company will also furnish or cause to be furnished to Dominion such
other information regarding the business, affairs and condition of the Company
as Dominion may from time to time reasonably request. The Company will permit
Dominion to inspect the books and any of the properties or assets of the Company
and its Subsidiaries at
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such reasonable times as Dominion may from time to time request. Dominion agrees
not to disclose any confidential information received from the Company (except
to its partners and to its professional advisors) and to use the same care with
such information as it affords to its own confidential information.
6.2 Legal Existence; Compliance with Laws, etc. The Company will, and
will cause each Subsidiary to: maintain its corporate existence and business;
maintain all properties which are reasonably necessary for the conduct of such
business, now or hereafter owned, in good repair, working order and condition;
take all actions necessary to maintain and keep in full force and effect its
rights and franchises; and comply in all material respects with all applicable
statutes, rules, regulations and orders of, and all applicable restrictions
imposed by, all governmental authorities in respect of the conduct of its
business and the ownership of its properties; provided that neither the Company
nor any Subsidiary shall be required by reason of this subsection to comply
therewith at any time while the Company or such Subsidiary shall be contesting
its obligations to do so in good faith by appropriate proceedings promptly
initiated and diligently conducted, and if it shall have set aside on its books
such reserves, if any, with respect thereto as are required by generally
accepted accounting principles and deemed adequate by the Company and its
independent public accountants. Neither the Company nor any Subsidiary will,
without the prior written consent of Dominion, engage in any business other than
the business in which the Company is currently engaged and other activities
reasonably related thereto.
6.3 Insurance. The Company will maintain or cause to be maintained on
all insurable properties now or hereafter owned by the Company or any Subsidiary
insurance against loss or damage by fire or other casualty to the extent
customary with respect to like properties of companies conducting similar
businesses, and will maintain or cause to be maintained public liability and
workmen's compensation insurance insuring the Company to the extent customary
with respect to companies conducting similar businesses. Upon request, the
Company will furnish to Dominion satisfactory evidence of the insurance
described in the preceding sentence. All such policies (or certificates) shall
be delivered to Dominion upon request. Each insurance policy pertaining to any
of the Collateral shall: (i) name Dominion as an insured so far as its interests
shall appear; (ii) provide that no action of the Company, any Subsidiary or any
tenant or subtenant shall void such policy as to Dominion; and (iii) provide
that Dominion shall be notified of any proposed cancellation of such policy at
least thirty (30) days in advance of such proposed cancellation. All such
policies (or certificates) shall be delivered to Dominion upon request. In the
event of a casualty loss, the Company may apply the proceeds of any insurance to
the restoration or replacement of the property or asset which was the subject of
such loss, provided that the Company shall have demonstrated to the reasonable
satisfaction of Dominion that such property or asset will be restored to
substantially its previous condition or will be replaced by a substantially
identical property or asset.
6.4 Payment of Taxes. The Company will, and will cause each Subsidiary
to, pay and discharge promptly as they become due and payable all taxes,
assessments and other governmental charges or levies imposed upon it or its
income or upon any of its properties or assets, or upon any part thereof, as
well as all lawful claims of any kind (including claims for labor, materials and
supplies) which, if unpaid, might by law become a lien or a charge upon its
property; provided that neither the Company nor any Subsidiary shall be required
to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and if the
Company shall have set aside on its books such reserves, if any, with respect
thereto as are
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required by generally accepted accounting principles and deemed appropriate by
the Company and its independent public accountants.
Upon the request of Dominion, the Company will furnish to Dominion
satisfactory proof of the payment or deposit of payroll and withholding taxes
required by applicable federal, state and local law. Such proof shall be
furnished within ten days after written demand by Dominion.
6.5 Payment of Other Indebtedness, etc. Except as to matters being
contested in good faith and by appropriate proceedings, the Company will, and
will cause each Subsidiary to, pay promptly when due all other Indebtedness and
obligations incident to the conduct of its business.
6.6 Further Assurances. From time to time hereafter, the Company will
execute and deliver, or will cause to be executed and delivered, such additional
instruments, certificates or documents, and will take all such actions, as
Dominion may reasonably request, for the purposes of implementing or
effectuating the provisions of this Agreement, the Note and the Security
Documents. Upon the exercise by Dominion of any power, right, privilege or
remedy pursuant to this Agreement which requires any consent, approval,
registration, qualification or authorization of any governmental authority or
instrumentality, the Company will execute and deliver, or will cause the
execution and delivery of, all applications, certifications, instruments and
other documents and papers that Dominion may be required to obtain for such
governmental consent, approval, registration, qualification or authorization.
6.7 Visitation Rights. [Intentionally Omitted]
6.8 Rights of First Offer. So long as the Loan shall be outstanding,
the Company shall first offer by written notice to Dominion, before obtaining
any debt financing from any other party (exclusive of revolving lines of credit
from a bank or similar financial institution (a "Revolver"), the right to
provide to the Company the full amount of any debt financing (whether or not
having an equity feature) required by the Company (the "Right of First Offer").
The Company shall promptly notify Dominion in writing of its plans to obtain any
such debt financing, including in such notice a description of the proposed debt
financing. Within ten (10) days after receipt of the Company's written notice,
Dominion shall notify the Company whether it wishes to satisfy the Company's
debt financing requirements and if so, the terms and conditions under which it
proposes to satisfy such requirements. If Dominion elects not to exercise the
Right of First Offer or fails to respond within such 10-day period, or if the
Company rejects in good faith Dominion's offer, the Company shall be free to
obtain such debt financing from another source upon such terms as the Company
may accept, provided that such debt financing does not result in a default or an
Event of Default under this Agreement. The rejection by Dominion of a proposed
debt financing shall not affect adversely Dominion's Right of First Offer with
respect to future such debt financings.
6.9 Net Worth. The sum of the Company's assets (including the value of
intangible assets) will at all times exceed the sum of the Company's
liabilities.
6.10 Employee Nondisclosure and Development Agreements. The Company
shall use its best efforts to obtain an Employee Nondisclosure Agreement, in
form satisfactory to Dominion, from all future officers and key employees of the
Company, upon their employment by the Company.
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6.11 Indemnification. So long as a representative of the Dominion
serves on the Board of Directors of the Company, the Company shall use its best
efforts to maintain at all times provisions in its By-laws and/or Certificate of
Incorporation indemnifying all directors against liability and absolving all
directors from liability to the Company and its stockholders to the maximum
extent permitted under the laws of the State of Delaware.
6.12 Replenishment of Collateral. In the event the Inventory Collateral
is sold and not replenished, the Company will grant to Dominion a security
interest in additional collateral equal or greater in value than the Inventory
Collateral so sold to the extent necessary to secure the then outstanding
balance on the Note.
Article 7. Negative Covenants.
Until the principal of and interest on the Notes and all fees due
hereunder shall have been paid in full, the Company, without the prior written
consent of Dominion, agrees that:
7.1 Indebtedness. Neither the Company nor any Subsidiary will create,
incur, assume or become or remain liable in respect of any Indebtedness, except:
(a) Indebtedness to Dominion;
(b) Revolvers;
(c) Current liabilities of the Company (other than for borrowed money)
incurred in the ordinary course of its business and in accordance with customary
trade practices;
(d) Existing Indebtedness, if any, of the Company referred to in
Schedule 3.7 attached hereto, in not more than the respective unpaid principal
amounts thereof specified in such Schedule;
(e) Indebtedness subordinated to Dominion on terms satisfactory to
Dominion in its sole discretion;
(f) Indebtedness of the Company in respect of guarantees to the extent
permitted under Section 7.3;
(g) Indebtedness in respect of Capital Leases permitted by Section 7.4;
and
(h) Indebtedness which Dominion elected not to extend under Section
6.8; provided, no security interest for any such Indebtedness will extend to any
of the Collateral;
In no event, however, will the total Indebtedness referenced in (b) and
(h), above, exceed $10,000,000.
7.2 Mortgages, Liens, etc. Neither the Company nor any Subsidiary will,
directly or indirectly, create, incur, assume or suffer to exist, any mortgage,
lien, charge or encumbrance on, or security interest in, or pledge of, or
conditional sale or other title retention agreement (including any Capital
Lease) with respect to, any property or asset now owned or hereafter acquired by
the Company, except:
(a) Any lien securing Revolvers;
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(b) Any lien securing Indebtedness to Dominion;
(c) Liens for taxes not yet delinquent or being contested in good faith
as provided in Section 6.4; liens in connection with workmen's compensation,
unemployment insurance or other social security obligations; liens securing the
performance of bids, tenders, contracts, surety and appeal bonds, liens to
secure progress or partial payments and other liens of like nature arising in
the ordinary course of business; mechanics', workmen's, materialmen's or other
like liens arising in the ordinary course of business in respect of obligations
which are not yet due or which are being contested in good faith; and other
liens or encumbrances incidental to the conduct of the business of the Company
or to the ownership of its properties or assets, which were not incurred in
connection with the borrowing of money or the obtaining of credit and which do
not materially detract from the value of the properties or assets of the Company
or materially affect the use thereof in the operation of its business;
(d) Capital Leases permitted by Section 7.4; and
(e) Any lien securing Indebtedness which Dominion elected not to
extend; provided, however, that no lien or security interest securing any such
Indebtedness will extend to any of the Collateral.
Upon the Company's request, Dominion promptly agrees to release its
security interest to any asset of the Company encumbered by any lien described
in Section 7.2(e) above if such lien does not exceed 100% of the purchase price
of the asset and is given at the time of the acquisition of the asset.
7.3 Loans, Guarantees and Investments. Neither the Company nor any
Subsidiary will make or permit to remain outstanding any loan or advance to, or
guarantee or endorse (except as a result of endorsing negotiable instruments for
deposit or collection in the ordinary course of business) or otherwise assume or
remain liable with respect to any obligation of, or make or own any investment
in, or acquire (except in the ordinary course of business) the properties or
assets of, any Person, except:
(a) Extensions of credit by the Company in the ordinary course of
business in accordance with customary trade practices;
(b) The presently outstanding investments, loans and advances, if any,
and the presently existing guarantees, if any, referred to in Schedule 3.7
attached hereto;
(c) Marketable direct obligations of the United States of America or
any department or agency thereof maturing not more than one year from the date
of issuance thereof;
(d) Certificates of deposit, repurchase agreements, money market
deposits or other similar types of investments maturing not more than one year
from the date of acquisition thereof and evidencing direct obligations of any
bank within the United States of America having capital surplus and undivided
profits in excess of $50,000,000; and
(e) Capital Expenditures to the extent permitted by Section 7.6.
7.4 Leases. Neither the Company nor any Subsidiary will enter into any
Capital Lease or operating lease which relates to any of the Equipment
Collateral.
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7.5 Restricted Payments. The Company will not, directly or indirectly,
declare, order, pay or make any Restricted Payment or set aside any sum or
property therefor without the prior consent of Dominion, except that the Company
may redeem capital stock from employees upon the termination of employment
pursuant to stock restriction agreements approved by the Company's Board of
Directors or in accordance with its Certificate of Incorporation.
7.6 Capital Expenditures. Neither the Company nor any Subsidiary will
make any Capital Expenditure (including any payments under Capital Leases)
during any fiscal year in excess of $2,000,000.
7.7 Mergers and Consolidations. Neither the Company nor any Subsidiary
will enter into any merger or consolidation without the prior written consent of
Dominion which will not be unreasonably withheld.
7.8 Sale of Assets. Neither the Company nor any Subsidiary will sell,
lease or otherwise dispose of all or any substantial part of its properties or
assets without the prior written consent of Dominion.
7.9 Compliance with ERISA. The Company will make, and will cause all
Affiliated Companies to make, all payments or contributions to employee benefit
plans required under the terms thereof and in accordance with applicable minimum
funding requirements of ERISA and the Code and applicable collective bargaining
agreements. The Company will cause all employee benefit plans sponsored by any
Affiliated Company to be maintained in material compliance with ERISA and the
Code. The Company will not engage, and will not permit or suffer any Affiliated
Company or any Person entitled to indemnification or reimbursement from the
Company or any Affiliated Company to engage, in any prohibited transaction for
which an exemption is not available. No Affiliated Company will terminate, or
permit the PBGC to terminate, any employee benefit plan or withdraw from any
multiemployer plan, in any manner which could result in material liability of
any Affiliated Company.
7.10 Transactions with Affiliates. Neither the Company nor any
Subsidiary will, directly or indirectly, enter into any lease or other
transaction with any shareholder of the Company or with any Affiliate of the
Company or such shareholder, on terms that are less favorable to the Company or
such Subsidiary than those which might be obtained at the time from Persons who
are not such a shareholder or Affiliate.
7.11 Environmental Liabilities. Neither the Company nor any Subsidiary
will violate any requirement of law, rule or regulation regarding Hazardous
Materials, the failure to comply with which would individually, or in the
aggregate, have a material adverse effect on the Company or such Subsidiary;
and, without limiting the foregoing, neither the Company nor any Subsidiary will
dispose of any Hazardous Material into or onto, or (except in accordance with
applicable law) from, any real property owned, leased or operated by the Company
or such Subsidiary or in which the Company or such Subsidiary holds, directly or
indirectly, any legal or beneficial interest or estate, nor allow any lien
imposed pursuant to any law, regulation or order relating to Hazardous Materials
or the disposal thereof to be imposed or to remain on such real property, except
for liens being contested in good faith by appropriate proceedings and for which
adequate reserves have been established and are being maintained on the books of
the Company.
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7.12 Prepayment of Indebtedness. Neither the Company nor any Subsidiary
will prepay any Indebtedness except for Indebtedness owed to Dominion and
Indebtedness represented by Revolvers and paid and reborrowed in the ordinary
course of business.
7.13 Set-off. The Company will not exercise any right of set-off with
respect to any indebtedness owed by the Company to Dominion.
Article 8. Defaults; Remedies.
8.1 Events of Default; Acceleration. If any of the following events
(each an "Event of Default") shall occur:
(a) The Company shall default in the payment of principal of or
interest on the Note after the same becomes due and payable, whether on demand,
at maturity or at a date fixed for the payment of any installment or prepayment
thereof or otherwise; or
(b) The Company shall default in the payment of any other fee due
hereunder, including but not limited to the Equipment Loan Fee, within 30 days
after the same becomes due and payable, whether on demand, at maturity or at a
date fixed for the payment of any installment or prepayment thereof or
otherwise; or
(c) The Company shall default in the performance of or compliance with
any term contained in Articles 6 or 7 and, as to any terms capable of being
cured, fail to cure the same within thirty (30) days after receipt of written
notice notifying the Company of such default; or
(d) The Company shall default in the performance of or compliance with
any term contained in this Agreement other than those specifically referred to
in this Article 8 and such default shall not have been remedied within 30 days
after written notice thereof shall have been given to the Company by Dominion;
or
(e) The Company shall default in the performance of or compliance with
any term contained in the Security Documents or in the performance of or
compliance with any term contained in any other written agreement with Dominion,
and such default shall continue for more than the period of grace, if any,
specified therein and shall not have been waived pursuant thereto; or
(f) Any representation or warranty made by the Company herein or
pursuant hereto shall prove to have been false or incorrect in any material
respect when made; or
(g) The holder of any Indebtedness in respect of borrowed money, any
Capital Lease or the deferred purchase price of property, in any case
aggregating $500,000 or more, shall have accelerated the maturity thereof as a
result of any default thereunder; or
(h) The Company shall discontinue its business or shall make an
assignment for the benefit of creditors, or shall fail generally to pay its
debts as such debts become due, or shall apply for or consent to the appointment
of or taking possession by a trustee, receiver or liquidator (or other similar
official) of the Company or any substantial part of the property of the Company,
or shall commence a case or have an order for relief entered against it under
the federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or if
the Company shall take any action to dissolve or liquidate the Company; or
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(i) If, within 30 days after the commencement against the Company of a
case under the federal bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
such case shall have been consented to or shall not have been dismissed or all
orders or proceedings thereunder affecting the operations or the business of the
Company stayed, or if the stay of any such order or proceeding shall thereafter
be set aside, or if within 30 days after the entry of a decree appointing a
trustee, receiver or liquidator (or other similar official) of the Company or
any substantial part of the property of the Company, such appointment shall not
have been vacated; or
(j) A final judgment which, with other outstanding final judgments
against the Company, exceeds an aggregate of $500,000 shall be rendered against
the Company and if, within 60 days after entry thereof, such judgment shall not
have been discharged or execution thereof stayed pending appeal, or if, within
60 days after the expiration of any such stay, such judgment shall not have been
discharged, or if any such judgment shall not be discharged forthwith upon the
commencement of proceedings to foreclose any lien, attachment or charge which
may attach as security therefor and before any of the property or assets of the
Company shall have been seized in satisfaction thereof;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, Dominion may by written notice to the Company, declare
the principal of and accrued interest in respect of each of the Note to be
forthwith due and payable, whereupon the principal of and accrued interest in
respect of the Note shall become forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company.
8.2 Remedies on Default, etc. In case any one or more Events of Default
shall occur and be continuing, Dominion may proceed to protect and enforce its
rights by any action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in the
Note or a Security Document, or for an injunction against a violation of any of
the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law. In case of a default in the payment of any
principal of or interest on the Note or in the payment of any fee due hereunder,
the Company will pay to Dominion such further amount as shall be sufficient to
cover the cost and expense of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements. No course of dealing and
no delay on the part of Dominion in exercising any right shall operate as a
waiver thereof or otherwise prejudice Dominion's rights. No right conferred
hereby or by the Note or the Security Documents upon Dominion shall be exclusive
of any other right referred to herein or therein or now or hereafter available
at law, in equity, by statute or otherwise.
Article 9. Definitions.
As used herein the following terms have the following respective
meanings:
Affiliate: as applied to any Person, any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such Person.
Affiliated Company: the meaning specified in Section 3.12.
Banking Day: any day, excluding Saturday and Sunday and
excluding any other day which shall be in San Francisco, California, a legal
holiday or a day on which banking institutions are authorized by law to close.
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Capital Expenditure: any payment made directly or indirectly
for the purpose of acquiring or constructing fixed assets, real property or
equipment which in accordance with generally accepted accounting principles
would be added as a debit to the fixed asset account of the Person making such
expenditure, including, without limitation, amounts paid or payable under any
conditional sale or other title retention agreement or under any lease or other
periodic payment arrangement which is of such a nature that payment obligations
of the lessee or obligor thereunder would be required by generally accepted
accounting principles to be capitalized and shown as liabilities on the balance
sheet of such lessee or obligor.
Capital Lease: any lease of property (real, personal or mixed)
which, in accordance with generally accepted accounting principles, should be
capitalized on the lessee's balance sheet or for which the amount of the asset
and liability thereunder as if so capitalized should be disclosed in a note to
such balance sheet.
Closing Date: the meaning specified in Section 1.6.
Code: the meaning specified in Section 3.12.
Company: the meaning specified at the beginning of this
Agreement.
Consents: the meaning specified in Section 3.11.
Dominion: the meaning specified at the beginning of this
Agreement.
Equipment Loan Fee: The meaning specified in Section 1.3(D).
ERISA: the meaning specified in Section 3.12.
Event of Default: the meaning specified in Article 8.
Hazardous Material: (a) any asbestos or insulation or other
material composed of or containing asbestos and (b) any petroleum product and
any hazardous, toxic or dangerous waste, substance or material defined as such
in (or for purposes of) the Comprehensive Environmental Response, Compensation
and Liability Act, any so-called "Superfund" or "Superlien" law, or any other
applicable federal, state, local or other statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
Indebtedness: as applied to any Person, (i) all items (except
items of capital or surplus or of retained earnings) which in accordance with
generally accepted accounting principles would be included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
as of the date of which Indebtedness is to be determined, including any Capital
Lease, (ii) all indebtedness secured by any mortgage, pledge, lien or
conditional sale or other title retention agreement to which any property or
asset owned or held by such Person is subject, whether or not the indebtedness
secured thereby shall have been assumed, and (iii) all indebtedness of others
which such Person has directly or indirectly guaranteed, endorsed (otherwise
than for collection or deposit in the ordinary course of business), discounted
or sold with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, or in respect of which such Person has agreed
to supply or advance funds (whether by way of loan, stock purchase, capital
contributions or otherwise) or otherwise to become directly or indirectly
liable.
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Intellectual Property: the meaning specified in Section 3.15.
Licenses: the meaning specified in Section 3.5.
Loans: the meaning specified in Section 1.1.
Material Contracts: the meaning specified in Section 3.4.
Note: the meaning specified in Section 1.3(A).
Operating Lease: any Lease other than a Capital Lease.
PBGC: the meaning specified in Section 3.12.
Person: a corporation, an association, a partnership, a joint
venture, an organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
Restricted Payment: (a) any dividend or other distribution,
direct or indirect, on or on account of any shares of any class of stock of the
Company now or hereafter outstanding, (b) any redemption, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of the
Company now or hereafter outstanding or of any warrants or rights to purchase
any such stock (including without limitation the repurchase of any such stock or
warrant or any refund of the purchase price thereof in connection with the
exercise by the holder thereof of any right of rescission or similar remedies
with respect thereto).
Revolver: the meaning specified in Section 6.8.
Security Documents: the meaning specified in Section 1.3(C).
Stock Purchase Agreement: The Stock Purchase Agreement among
the Company, Dominion and certain of the Company's shareholders dated as of May
28, 1997, as amended from time to time.
Subsidiary: any corporation, partnership, limited liability
company or other entity of which more than 50% of the outstanding voting
interests (other than director's qualifying interests) is at the time owned by
the Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries.
Article 10. Setoffs, etc.
If the Company becomes insolvent, howsoever evidenced, or any Event of
Default occurs, any Indebtedness from Dominion to the Company or any Subsidiary
may, without regard to the value of the Collateral, be offset and applied toward
the payment of any Indebtedness from the Company to Dominion, whether or not
such Indebtedness, or any part thereof shall then be due.
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Article 11. Expenses; Indemnification.
(a) Whether or not the transactions contemplated hereby shall be
consummated, the Company agrees (i) to pay all reasonable expenses, including
reasonable fees and disbursements of counsel for Dominion, which Dominion has
incurred or may hereafter incur in connection with the preparation of this
Agreement, the Note, the Security Documents, the Warrant, the Warrant Purchase
Agreement and all other documents related hereto (including any amendment,
consent or waiver hereafter requested by the Company hereunder or thereunder)
and the transactions contemplated hereby or the enforcement of the rights of
Dominion hereunder or under the Note, the Warrant, the Warrant Purchase
Agreement or the Security Documents in the event of a default hereunder or
thereunder and (ii) to pay all taxes and fees (including interest and
penalties), including, without limitation, all recording and filing fees,
transfer and documentary stamp and similar taxes, which may be payable in
respect of the execution and delivery of this Agreement, the Note, the Warrant,
the Warrant Purchase Agreement, the Security Documents and all other documents
related hereto (including any amendment, consent or waiver hereafter requested
by the Company hereunder or thereunder) and to indemnify Dominion and hold
Dominion harmless against any loss or liability resulting from non-payment or
delay in payment of any such tax.
(b) The Company will indemnify Dominion, its directors, officers,
employees and each other Person, if any, who controls Dominion, and will hold
Dominion and such other Persons harmless from and against any and all claims,
damages, losses, liabilities, judgments and expenses (including without
limitation all reasonable fees and expenses of counsel and all expenses of
litigation or preparation therefor) which Dominion or such other Persons may
incur or which may be asserted against Dominion or such other Persons in
connection with or arising out of any investigation, litigation or proceeding
involving the Company or any shareholder or any Affiliate of the Company or any
such shareholder (including compliance with or contesting of any subpoenas or
other process issued against Dominion, or any director, officer or employee of
Dominion, or any Person, if any, who controls Dominion in any proceeding
involving the Company or any shareholder or any Affiliate of the Company or any
such shareholder), whether or not Dominion is party thereto, other than claims,
damages, losses, liabilities or judgments with respect to any matter as to which
Dominion or such other Person seeking indemnity shall have been finally
adjudicated to have acted with willful misconduct or gross negligence. Promptly
upon receipt by any indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the Company hereunder, notify the Company in writing of the
commencement thereof.
Article 12. Waivers.
Dominion's failure to insist upon the strict performance of any term,
condition or other provision of this Agreement, the Note, the Warrant, the
Warrant Purchase Agreement or the Security Documents or to exercise any right or
remedy hereunder or thereunder shall not constitute a waiver by Dominion of any
such term, condition or other provision or default or Event of Default in
connection therewith; and any waiver of any such term, condition or other
provision or of any such default or Event of Default shall not affect or alter
this Agreement, the Note, the Warrant, the Warrant Purchase Agreement or the
Security Documents and each and every term, condition and other provision of
this Agreement, the Note, the Warrant, the Warrant Purchase Agreement and the
Security Documents shall, in such event, continue in full force and effect and
shall be operative with respect to any other then existing or subsequent default
or Event of Default in connection therewith.
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Article 13. Miscellaneous.
13.1 Notices, etc. All notices and other communications hereunder shall
be in writing and shall be delivered by facsimile where confirmation or receipt
by the receiving party's receiver can be documented, or personally delivered by
hand or by reputable overnight courier or mailed by first class certified or
registered mail, postage prepaid, as follows:
(a) If to Dominion:
Dominion Fund IV, a Delaware Limited
Partnership
c/o Dominion Ventures, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇, Hall & ▇▇▇▇▇▇▇
Exchange Place
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) If to the Company:
Online Resources & Communications Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Michaels, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address or addresses as the party to whom such notice is
directed may have designated in writing to the other party hereto. A notice
shall be deemed to have been given upon receipt by the party to whom such notice
is directed, or, if receipt is refused, on the day on which delivery was
attempted.
13.2 Calculations, etc. Calculations hereunder shall be made and
financial data required hereby shall be prepared, both as to classification of
items and as to amounts, in accordance with generally accepted accounting
principles and practices which principles and practices shall be consistently
applied and in conformity with those used in the preparation of the financial
statements referred to herein.
13.3 Survival of Agreements, etc. This Agreement shall inure to the
benefit of Dominion and its successors and assigns including any subsequent
holder or holders of the Note, as the case may be, and the term "Dominion" shall
include any such holder or
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holders whenever the context permits. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the making of the Loan hereunder.
13.4 Counterparts, etc. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same instrument.
13.5 Entire Agreement, etc. This Agreement, together with the
agreements referred to herein, constitutes the entire contract between the
parties hereto and shall supersede and take the place of any other instrument
purporting to be an agreement of the parties hereto relating to the transactions
contemplated hereby. This Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom any waiver, change,
modification or discharge is sought.
13.6 Governing Law; Jurisdiction; Waiver of Jury Trial. Each of this
Agreement, the Note and the Security Documents including the validity thereof
and the rights and obligations of the parties hereunder and thereunder, shall be
construed in accordance with and governed by the laws of The Commonwealth of
Massachusetts (without regard to its choice of law provisions). The Company, to
the extent that it may lawfully do so, hereby consents to service of process,
and to be sued, in The Commonwealth of Massachusetts and consents to the
jurisdiction of the courts of The Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts, as well as to the
jurisdiction of all courts to which an appeal may be taken from such courts, for
the purpose of any suit, action or other proceeding arising out of any of its
obligations hereunder or under the Note, the Warrant, the Warrant Purchase
Agreement or the Security Documents or with respect to the transactions
contemplated hereby or thereby, and expressly waives any and all objections it
may have as to venue in any such courts. The Company further agrees that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address provided in Section 13.1 or
as otherwise provided under the laws of The Commonwealth of Massachusetts. The
Company irrevocably waives all right to a trial by jury in any proceeding
hereafter instituted by or against the Company in respect of this Agreement, the
Note, the Security Documents or any other documents executed in connection
herewith or therewith.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
a sealed instrument as of the date first above written.
ONLINE RESOURCES & COMMUNICATIONS
CORPORATION
By: [sig]
---------------------------------
Chief Executive Officer
DOMINION FUND IV, A DELAWARE
LIMITED PARTNERSHIP
By Dominion Management IV, L.L.C.
its General Partner
By: [sig]
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇
Member
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ONLINE RESOURCES & COMMUNICATIONS CORPORATION
Senior Secured Equipment Note
$2,000,000 June 3,1997
Online Resources & Communications Corporation, a Delaware corporation
(the "Company"), for value received, hereby promises to pay to Dominion Fund IV,
a Delaware Limited Partnership ("Dominion"), or order, in accordance with the
schedule described below, Two Million Dollars ($2,000,000) or such much thereof
which is advanced from time to time hereunder, with interest on the unpaid
principal amount hereof at a rate per month equal to 9% per annum.
The principal and interest on this Note shall be payable as follows:
Monthly payments of interest only at the rate of 9% (.75% per month) shall be
payable in arrears on the first day of each month commencing July 1, 1997 and
continuing through June 1, 1998. Thereafter, this Note shall be paid commencing
on July 1, 1998 in 36 equal monthly installments of principal and interest. All
principal and interest due under this Note shall be paid in full by June 1,
2001.
In the event the Company shall fail to make any payment of principal of
or interest on this Note when due, whether at maturity or at a date fixed for
the payment of any installment or prepayment thereof or by declaration,
acceleration or otherwise, the Company shall pay to the holder of this Note on
demand by such holder, interest on such unpaid principal and (to the extent
permitted by law) on such unpaid interest and additional interest from the date
due until paid in full at a rate equal to 2% per month; provided, that in no
event shall the amount contracted for and agreed to be paid by the Company as
interest on this Note exceed the highest lawful rate permissible under any law
applicable hereto.
This Note evidences the Loan under, and is subject to the provisions
of, a certain Loan Agreement dated as of May 28, 1997 (as amended from time to
time, the "Loan Agreement") by and between the Company and Dominion. The holder
of this Note is entitled to the benefits of the Loan Agreement and to the
benefits of the Security Documents referred to therein. Neither this reference
to such Loan Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the Company to pay the principal of and
interest on this Note as provided herein. All payments of principal of and
interest on this Note shall be payable in immediately available funds at the
address of Dominion set forth in the Loan Agreement.
This Note may be prepaid at any time subject to the conditions set
forth in the Loan Agreement. In the event that the Company prepays all or any
portion of this Note, each prepayment of principal shall be accompanied by all
accrued but unpaid interest on the amount prepaid.
The maker and all endorsers of this Note hereby waive presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance or enforcement of this Note.
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This Note is governed by the laws of The Commonwealth of Massachusetts
without reference to its choice of law provisions and is executed as a sealed
instrument as of the date first above written.
ONLINE RESOURCES & COMMUNICATIONS CORPORATION
By: [sig]
-----------------------------------------
President or CEO