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EXHIBIT 10.32
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is dated as
of December 1, 1997, by and between Venture Lending & Leasing, Inc., a Maryland
corporation ("Lender"), and Digital Generation Systems, Inc., a California
corporation ("Borrower").
Recitals
A. Borrower is currently indebted to Lender pursuant to a Loan
Agreement dated as of January 28, 1997 (the "Loan Agreement"). Capitalized
terms not specifically defined herein shall have the meanings ascribed to them
in the Loan Agreement.
B. Pursuant to the Loan Agreement, Lender committed to make
advances under a term loan facility up to $6,000,000 from time to time through
December 31, 1997. As of the date of this Amendment, advances in the aggregate
principal amount of approximately $5,000,000 have been made under the Loan
Agreement. To secure its borrowings under the Loan Agreement, Borrower
executed a Security Agreement (Equipment) dated as of January 28, 1997,
granting to Lender a security interest in specific items of equipment financed
with the proceeds of the advances.
C. Borrower has requested that Lender extend the availability of
its lending commitment from December 31, 1997 through June 30, 1998. Lender is
willing to so extend its commitment on the terms and conditions set forth in
this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The date in clause (b) of the definition of "Termination Date" is
amended to replace the phrase "December 31, 1997" with "June 30, 1998."
2. The form of Security Agreement (Equipment) attached to the Loan
Agreement as Exhibit "C", and required under Sections 2.10 and 4.1(f) of the
Loan Agreement, is hereby replaced with the form of Amended and Restated
Security Agreement attached to this Amendment as Exhibit C.
3. As conditions to the effectiveness of this Amendment, (a) Borrower
shall have executed and delivered to Lender the Amended and Restated Security
Agreement described in Section 2 above, and an amendment to that certain
warrant issued by Borrower to Lender on or about January 28, 1997, to purchase
112,500 shares of common stock of Borrower, which amendment shall adjust the
Stock Purchase Price (as defined therein) to $4.42 per share, and (b) Lender
shall have entered into an intercreditor agreement with Venture Lending &
Leasing II, Inc. setting forth the relative priorities of their respective
Liens in the Collateral on terms satisfactory to Lender.
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4. Borrower hereby confirms all representations and warranties
contained in the Loan Agreement, and reaffirms all covenants set forth therein.
Borrower certifies that as of the date of this Amendment there exists no Default
or Event of Default.
5. Except as specifically provided in this Amendment, all terms,
provisions and conditions of the Loan Agreement remain in full force and
effect, without waiver or modification. This Amendment and the Loan Agreement
shall be read together as one document.
IN WITNESS WHEREOF, Borrower and Lender have executed this Amendment
as of the date set forth in the preamble.
Digital Generation Systems, Inc.
By: _______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Financial Officer
Venture Lending & Leasing, Inc.
By: _______________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
President
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AMENDED AND RESTATED
SECURITY AGREEMENT
This Amended and Restated Security Agreement is made as of December 1,
1997 by Digital Generation Systems, Inc., a California corporation ("Debtor"),
in favor of Venture Lending & Leasing, Inc., a Maryland corporation ("Lender").
RECITALS
A. Debtor and Lender are parties to a Loan Agreement dated January 28,
1997, pursuant to which Lender committed to make and has made certain term loans
to Debtor (the "Loan Agreement"). Debtor's obligations to Lender are secured
pursuant to a Security Agreement (Equipment) dated January 28, 1997 (the "Prior
Security Agreement"), pursuant to which Debtor has granted to Lender Liens on
equipment financed under the Loan Agreement.
B. Debtor has asked Lender to extend the availability of the unfunded
portion of Lender's commitment, which Lender is willing to do on the terms set
forth in a First Amendment to the Loan Agreement of even date herewith. Debtor
also desires to incur up to an additional $5,500,000 of indebtedness to Venture
Lending & Leasing II, Inc., a Maryland corporation ("VLL II"), to be secured by
a lien on substantially all of Debtor's assets now owned and hereafter acquired.
C. As a condition to the effectiveness of the First Amendment, Debtor
and Lender have agreed that the Prior Security Agreement shall be amended to
expand the scope of collateral covered thereby, pursuant to this complete
amendment and restatement of the Prior Security Agreement.
D. Debtor acknowledges that Lender and VII II are entering into a
separate Intercreditor Agreement pursuant to which Lender and VLL II will agree,
as between themselves, that Lender's Liens on items of equipment financed by it
under the Loan Agreement will be senior in priority to the Liens of VLL II in
such items of Equipment Collateral, and that the Liens of VLL II in all other
Collateral securing its loans to Debtor will be senior in priority to the Liens
of Lender in such other Collateral.
II. - DEFINITIONS
The following definitions shall be applicable to both the singular and plural
forms of the defined terms:
"ACCOUNT" means a right to payment for goods sold or leased by
Debtor or for services rendered by Debtor, which right is not evidenced by an
instrument or chattel paper, whether or not earned by performance.
"AGREEMENT" means this Amended and Restated Security Agreement,
as it may be amended from time to time.
"COLLATERAL" means all Debtor's Accounts, Deposit Accounts,
Equipment, Fixtures, General Intangibles, Goods, Inventory, Rights to Payment,
and securities now owned or hereafter acquired, wherever located, and whether
held by Debtor or any third party, and all royalties, proceeds and products
thereof, including all insurance and condemnation proceeds ("Proceeds"), and all
monies now or at any time hereafter in the possession or under the control of
Lender or a bailee or affiliate of Lender, including any cash collateral in any
cash collateral or other account, and all Records. Notwithstanding the
foregoing, "Collateral" shall not include (i) any equipment, property or assets
of the Debtor leased from or financed by a third party to the extent the
contracts evidencing such lease or financing prohibit the granting by Debtor of
any other security interest therein, (ii) any rights of Debtor under any license
or contract if and to the extent that the granting of a security interest
therein in favor of Lender would violate the terms of such license or contract,
or (iii) any other rights or property the assignment of which for security
purposes is prohibited by law.
EXHIBIT C
TO LOAN AGREEMENT
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"DEPOSIT ACCOUNTS" means all Debtor's demand, time, savings,
passbook or similar accounts maintained with a financial institution or credit
union.
"EQUIPMENT" means all of Debtor's equipment now owned or
hereafter acquired, including but not limited to machinery, machine parts,
furniture, furnishings and all tangible personal property used in the business
of Debtor and all such property which is or is to become fixtures on real
property, and all improvements, replacements, accessions and additions thereto,
wherever located, and all proceeds thereof arising from the sale, lease, rental
or other use or disposition of any such property, including all rights to
payment with respect to insurance or condemnation, returned premiums, or any
cause of action relating to any of the foregoing.
"EVENT OF DEFAULT" means an event described in Article 6.
"FIXTURES" means all items of personal property of Debtor that
are so related to the real property upon which they are located that an interest
in them arises under real property law, and improvements, replacements, parts,
accessions and additions thereto, and substitutions therefor.
"GENERAL INTANGIBLES" means all personal property of Debtor,
other than Goods, not otherwise defined as Collateral, including without
limitation all interests or claims in insurance policies; literary property;
tradenames, tradename rights; Trademarks, Trademark rights, copyrights, Patents,
and all applications therefor; licenses, permits, franchises and like privileges
or rights issued by any governmental or regulatory authority; income tax
refunds; customer lists; claims and causes of action (whether in contract, tort
or otherwise), judgments and all guaranty claims, leasehold interests in
personal property, security interests or other security held by or guaranteed to
the Debtor to secure the payment by an account debtor of any of the Accounts.
"GOODS" means all money and other personal property of Debtor,
other than General Intangibles, not otherwise defined as Collateral.
"INDEBTEDNESS" means all debts, obligations and liabilities of
Debtor to Lender currently existing or now or hereafter made, incurred or
created under, pursuant to or in connection with the Loan Agreement, whether
voluntary or involuntary and however arising or evidenced, whether direct or
acquired by Lender by assignment or succession, whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, and
whether Debtor may be liable individually or jointly, or whether recovery upon
such debt may be or become barred by any statute of limitations or otherwise
unenforceable; and all renewals, extensions and modifications thereof; and all
attorneys' fees and costs incurred by Lender in connection with the collection
and enforcement thereof as provided for in any Loan Document.
"INVENTORY" means all Debtor's raw materials, advertising,
packaging and shipping materials, work in process, finished goods and goods held
for sale or lease or furnished under contracts of service, and all returned and
repossessed goods, and all goods covered by documents of title, including
warehouse receipts, bills of lading and all other documents of every type
covering all or any part of the Collateral.
"LIEN" means any voluntary or involuntary security interest,
mortgage, pledge, claim, charge, encumbrance, title retention agreement, or
third party interest covering all or any part of the property of Debtor or any
other Person.
"LOAN AGREEMENT" means that certain Loan Agreement between Debtor
and Lender dated January 28, 1997, as amended from time to time.
"LOAN DOCUMENTS" means this Agreement, the Loan Agreement, any
evidence of Indebtedness, any guaranty, security or pledge agreement, or deed of
trust delivered in connection with any Indebtedness, and all other contracts,
instruments, addenda and documents executed in connection therewith.
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"PATENT LICENSE" means any written agreement now or hereafter in
existence granting to Debtor any right to make, use, sell or practice any
invention on which a Patent is in existence.
"PATENTS" means all of the following: (i) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state thereof or any other country or
any political subdivision thereof, and (ii) all reissues, divisions,
continuations, continuations-in-part, renewals or extensions thereof.
"PERMITTED LIENS" is defined in the Loan Agreement, and includes
without limiting the provisions of the Loan Agreement, (i) Liens in favor of VLL
II, and (ii) Liens on assets of Debtor's wholly-owned subsidiary, MediaTech,
Inc., in favor of Republic Acceptance Corporation or any successor commercial or
institutional lender to secure a working capital credit facility to MediaTech.
"PERSON" means any individual or entity.
"RECORDS" means all Debtor's computer programs, software,
hardware, source codes and data processing information, all written documents,
books, invoices, ledger sheets, financial information and statements, and all
other writings concerning Debtor's business.
"RIGHTS TO PAYMENT" means all Debtor's accounts, instruments,
contract rights, documents, chattel paper and all other rights to payment,
including, without limitation, the Accounts, all negotiable certificates of
deposit and all rights to payment under any Patent License, any Trademark
License, or any commercial or standby letter of credit.
"TRADEMARK LICENSE" means any written agreement now or hereafter
in existence granting to Debtor any right to use any Trademark.
"TRADEMARKS" means all of the following: (i) all trademarks,
trade names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or will appear,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision thereof, and
(ii) all reissues, divisions, continuations, continuations-in-part, renewals or
extensions thereof.
"UNIFORM COMMERCIAL CODE" means the California Uniform Commercial
Code, as amended from time to time.
Terms not specifically defined in this Agreement have the meanings ascribed
thereto in the Loan Agreement and the Uniform Commercial Code.
III. - GRANT OF SECURITY INTEREST
To secure the timely payment of the Indebtedness and performance of all
obligations of Debtor to Lender, Debtor grants to Lender security interests in
the Collateral.
IV. - REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants that, at all times during the term of this
Agreement:
A. GOVERNMENTAL ACTIONS. Debtor has obtained all consents and actions
of, and has performed all filings with, any governmental or regulatory authority
that
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are required to authorize the execution, delivery or performance of this
Agreement or the granting or perfecting of Lender's security interest in the
Collateral.
B. TITLE. Except for the security interests created by this Agreement,
and Permitted Liens, (i) Debtor is and will be the unconditional legal and
beneficial owner of the Collateral, and (ii) the Collateral is genuine and
subject to no Liens, rights or defenses of others. There exist no prior
assignments or encumbrances of record with the U.S. Patent and Trademark Office
affecting any Collateral in favor of any third party other than Lender.
C. RIGHTS TO PAYMENT. The names of the obligors, amount owing to Debtor,
due dates and all other information with respect to the Rights to Payment are
and will be correctly stated in all material respects in all Records relating to
the Rights to Payment. Debtor further represents and warrants, to its knowledge,
that each Person appearing to be obligated on a Right to Payment has authority
and capacity to contract and is bound as it appears to be.
D. CHIEF EXECUTIVE OFFICE. Debtor's chief executive office is located
at:
Address City County State Zip
------- ---- ------ ----- ---
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
E. INVENTORY LOCATION. Other than as set forth in Section 3.4, Inventory
is located at:
Address City County State Zip
------- ---- ------ ----- ---
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇. ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ (MediaTech
West)
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ (PDR)
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ (MediaTech
East)
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ (MediaTech
Central)
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Suite 124
F. RECORDS LOCATION. Other than as set forth in Section 3.4, Records are
maintained at:
Address City County State Zip
------- ---- ------ ----- ---
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ (PDR)
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ (MediaTech
Central)
G. EQUIPMENT OR FIXTURES LOCATION. Other than as set forth in Section
3.4, Equipment or Fixtures are located at:
Address City County State Zip
------- ---- ------ ----- ---
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H. OTHER PLACES OF BUSINESS. In addition to the locations set forth in
Sections 3.4 through 3.7, Debtor maintains the following place(s) of business:
Address City County State Zip
------- ---- ------ ----- ---
I. BUSINESS NAMES. Debtor has conducted business in the following names
other than the name stated in the preamble to this Agreement:
MediaTech, Inc.
Starcom Television
PDR Productions, Inc.
V. - AFFIRMATIVE COVENANTS
During the term of this Agreement and until payment of all the Indebtedness and
performance of all obligations to Lender, Debtor will:
A. DELIVERY OF CERTAIN ITEMS. Deliver to Lender promptly (a) upon
Lender's request, duplicate invoices with respect to each Account bearing such
language of assignment as Lender shall reasonably specify; (b) the originals of
all commercial and standby letters of credit, instruments, documents and chattel
paper constituting Collateral, endorsed and assigned as Lender shall reasonably
specify; (c) after an Event of Default, all Proceeds; (d) upon Lender's request,
returned property resulting from, or payment equal to any allowance or credit
on, Rights to Payment; (e) such specific acknowledgments, assignments or other
agreements as Lender may reasonably request relating to the Collateral; and (f)
such Records and other reports in such form and detail and at such times as
Lender may reasonably require relating to the Collateral, including without
limitation reports of acquisition, and disposition, agings, and collection of
any Collateral. If any of the Rights to Payment become evidenced by an
instrument, Debtor will notify Lender thereof and, upon request by Lender
promptly deliver such instrument to Lender appropriately endorsed to the order
of Lender as further security for the satisfaction in full of the Indebtedness.
B. MAINTENANCE OF COLLATERAL; INSPECTION. Do all things reasonably
necessary to maintain, preserve, protect and keep all Collateral in good working
order and salable condition, ordinary wear and tear excepted, deal with the
Collateral in all ways as are considered good practice by owners of like
property, and use the Collateral lawfully and, to the extent applicable, only as
permitted by Debtor's insurance policies. Upon reasonable prior notice at
reasonable times during normal business hours, Debtor hereby authorizes Lender's
officers, employees, representatives and agents to inspect the Collateral and to
discuss the Collateral and the Records relating thereto with Debtor's officers
and employees, and, in the case of any Right to Payment, with any Person which
is or may be obligated thereon.
C. MAINTENANCE OF RECORDS; INSPECTION. Maintain, or cause to be
maintained, complete and accurate Records relating to the Collateral. Upon
reasonable prior notice at reasonable times during normal business hours,
Lender, its officers, employees, agents and representatives shall have the
right, from time to time, to examine the Records and to make copies or extracts
therefrom.
D. DEBTOR'S DUTY TO GIVE NOTICE. Give prompt notice to Lender of: (a)
except as permitted in Section 5.5, any material discount, credit, rebate or
other reduction in the amount owing on a material Right to Payment; (b) any
threatened or asserted dispute, setoff, claim, counterclaim or defense with
respect to a Right to Payment; (c) any material decrease in the value of any
Collateral and the amount of such decrease (other than depreciation calculated
in the ordinary course of business under applicable tax laws and regulations and
in accordance with generally accepted accounting principles); (d) any litigation
or administrative or regulatory proceeding which may have a material adverse
effect on Debtor or its business; (e) to the extent Debtor has actual knowledge
thereof, any change in the ownership of any property on
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which Debtor's chief executive office is located; and (f) the occurrence of any
Default or Event of Default or of any other development, financial or otherwise,
which might materially adversely affect the Collateral or Debtor's ability to
pay the Indebtedness or perform its obligations to Lender.
E. FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to
Lender, and file or record at Debtor's expense, all financing statements,
notices and other documents (including, without limitation, any filings with the
United States Patent and Trademark Office) from time to time reasonably
requested by any Lender to maintain a first perfected security interest in the
Collateral in favor of Lender, all in form and substance satisfactory to Lender;
perform such other acts, and execute and deliver to Lender such additional
conveyances, assignments, agreements and instruments, as Lender may at any time
request in connection with the administration and enforcement of this Agreement
or Lender's rights, powers and remedies hereunder.
VI. - NEGATIVE COVENANTS
During the term of this Agreement and until payment of all the Indebtedness and
performance of all obligations to Lender, Debtor will not:
A. LIENS. Create, incur, assume or permit to exist any Lien on any
Collateral, except Permitted Liens.
B. DOCUMENTS OF TITLE. Sign or authorize the signing of any financing
statement or other document naming Debtor as debtor or obligor, or acquiesce or
cooperate in the issuance of any ▇▇▇▇ of lading, warehouse receipt or other
document or instrument of title with respect to any Collateral, except those
negotiated to Lender, or those naming Lender as secured party.
C. DISPOSITION OF COLLATERAL. Sell, transfer, lease or otherwise dispose
of any Collateral except for fair consideration or in the ordinary course of its
business.
D. CHANGE IN LOCATION OR NAME. Fail to give written notice to Lender
within 30 days after the occurrence of any: (a) change in the location of any
Collateral or Records, its chief executive office, or a place of business other
than as specified in Article 3; or (b) change its name, mailing address,
location of Collateral, or its legal structure.
E. CERTAIN AGREEMENTS ON RIGHTS TO PAYMENT. Other than in the ordinary
course of business, make or arrange to make any material discount, credit,
rebate or other reduction in the original amount owing on a Right to Payment or
accept in satisfaction of a Right to Payment less than the original amount
thereof, except as disclosed to Lender in writing from time to time.
VII. - EVENTS OF DEFAULT
A. EVENT OF DEFAULT. The occurrence of any "Event of Default" as defined
in the Loan Agreement, failure by Debtor to perform any of its duties or
obligations under this Agreement, or breach by Debtor of any of its
representations hereunder shall constitute an Event of Default hereunder.
B. ACCELERATION AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Lender shall be entitled to, at its option,
(a) declare all or any part of the Indebtedness immediately due and payable; (b)
exercise any or all of the rights and remedies available to a secured party
under the Uniform Commercial Code or any other applicable law; and (c) exercise
any or all of its rights and remedies provided for in this Agreement and in any
other Loan Document. The obligations of Debtor under this Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any Indebtedness is rescinded or must otherwise be returned by
Lender upon, on account of, or in connection with, the insolvency, bankruptcy or
reorganization of Debtor or otherwise, all as though such payment had not been
made.
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C. SALE OF COLLATERAL. Upon the occurrence and during the continuance of
an Event of Default, Lender may sell all or any part of the Collateral, at
public or private sales, to itself, a wholesaler, retailer or investor, for
cash, upon credit or for future delivery, and at such price or prices as Lender
may deem commercially reasonable. To the extent permitted by law, Debtor hereby
specifically waives all rights of redemption and any rights of stay or appraisal
which it has or may have under any applicable law in effect from time to time.
Any such public or private sales shall be held at such times and at such
place(s) as Lender may determine. In case of the sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by Lender until the selling price is paid by the purchaser, but Lender
shall not incur any liability in case of the failure of such purchaser to pay
for the Collateral and, in case of any such failure, such Collateral may be
resold. Lender may, instead of exercising its power of sale, proceed to enforce
its security interest in the Collateral by seeking a judgment or decree of a
court of competent jurisdiction. Without limiting the generality of the
foregoing, if an Event of Default is in effect,
(1) Subject to the rights of any third parties,
Lender may license, or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any
Patents or Trademarks included in the Collateral throughout the world
for such term or terms, on such conditions and in such manner as Lender
shall in its sole discretion determine;
(2) Lender may (without assuming any obligations or
liability thereunder), at any time and from time to time, enforce (and
shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of Debtor in, to and under any
Patent Licenses or Trademark Licenses and take or refrain from taking
any action under any thereof, and Debtor hereby releases Lender from,
and agrees to hold Lender free and harmless from and against any claims
arising out of, any lawful action so taken or omitted to be taken with
respect thereto other than claims arising out of Lender's gross
negligence or willful misconduct; and
(3) upon request by Lender, Debtor will execute and
deliver to Lender a power of attorney, in form and substance reasonably
satisfactory to Lender for the implementation of any lease, assignment,
license, sublicense, grant of option, sale or other disposition of a
Patent or Trademark. In the event of any such disposition pursuant to
this clause 3, Debtor shall supply its know-how and expertise relating
to the products or services made or rendered in connection with
Patents, the manufacture and sale of the products bearing Trademarks,
and its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to Lender.
D. DEBTOR'S OBLIGATIONS UPON DEFAULT. Upon the request of Lender after
the occurrence and during the continuance of an Event of Default, Debtor will:
1. Assemble and make available to Lender the
Collateral at such place(s) as Lender shall reasonably designate,
segregating all Collateral so that each item is capable of
identification; and
2. Subject to the rights of any lessor, permit
Lender, by Lender's officers, employees, agents and representatives, to
enter any premises where any Collateral is located, to take possession
of the Collateral, to complete the processing, manufacture or repair of
any Collateral, and to remove the Collateral, or to conduct any public
or private sale of the Collateral, all without any liability of Lender
for rent or other compensation for the use of Debtor's premises.
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VIII. - SPECIAL COLLATERAL PROVISIONS
A. COMPROMISE AND COLLECTION. Debtor and Lender recognize that setoffs,
counterclaims, defenses and other claims may be asserted by obligors with
respect to certain of the Rights to Payment; that certain of the Rights to
Payment may be or become uncollectible in whole or in part; and that the expense
and probability of success of litigating a disputed Right to Payment may exceed
the amount that reasonably may be expected to be recovered with respect to such
Right to Payment. Debtor hereby authorizes Lender, after and during the
continuance of an Event of Default, to compromise with the obligor, accept in
full payment of any Right to Payment such amount as Lender shall negotiate with
the obligor, or abandon any Right to Payment. Any such action by Lender shall be
considered commercially reasonable so long as Lender acts in good faith based on
information known to it at the time it takes any such action.
B. PERFORMANCE OF DEBTOR'S OBLIGATIONS. Without having any obligation to
do so, upon reasonable prior notice to Debtor, Lender may perform or pay any
obligation which Debtor has agreed to perform or pay under this Agreement,
including, without limitation, the payment or discharge of taxes or Liens levied
or placed on or threatened against the Collateral. In so performing or paying,
Lender shall determine the action to be taken and the amount necessary to
discharge such obligations. Debtor shall reimburse Lender on demand for any
amounts paid by Lender pursuant to this Section, which amounts shall constitute
Indebtedness secured by the Collateral and shall bear interest from the date of
demand at the rate applicable to overdue payments under the Loan Agreement.
C. POWER OF ATTORNEY. For the purpose of protecting and preserving the
Collateral and Lender's rights under this Agreement, Debtor hereby irrevocably
appoints Lender, with full power of substitution, as its attorney-in-fact with
full power and authority, after the occurrence and during the continuance of an
Event of Default, to do any act which Debtor is obligated to do hereunder; to
exercise such rights with respect to the Collateral as Debtor might exercise; to
use such Inventory, Equipment, Fixtures or other property as Debtor might use;
to enter Debtor's premises; to give notice of Lender's security interest in, and
to collect the Collateral; and to execute and file in Debtor's name any
financing statements, amendments and continuation statements necessary or
desirable to perfect or continue the perfection of Lender's security interests
in the Collateral. Debtor hereby ratifies all that Lender shall lawfully do or
cause to be done by virtue of this appointment.
D. AUTHORIZATION FOR LENDER TO TAKE CERTAIN ACTION. The power of
attorney created in Section 7.3 is a power coupled with an interest and shall be
irrevocable. The powers conferred on Lender hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Lender to
exercise such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and in no event
shall Lender or any of its directors, officers, employees, agents or
representatives be responsible to Debtor for any act or failure to act, except
for gross negligence or willful misconduct. After the occurrence and during the
continuance of an Event of Default, Lender may exercise this power of attorney
without notice to or assent of Debtor, in the name of Debtor, or in Lender's own
name, from time to time in Lender's sole discretion and at Debtor's expense. To
further carry out the terms of this Agreement, after the occurrence and during
the continuance of an Event of Default, Lender may:
1. Execute any statements or documents or take
possession of, and endorse and collect and receive delivery or payment
of, any checks, drafts, notes, acceptances or other instruments and
documents constituting Collateral, or constituting the payment of
amounts due and to become due or any performance to be rendered with
respect to the Collateral.
2. Sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts; drafts,
certificates and statements under any commercial or standby letter of
credit relating to Collateral; assignments, verifications and notices
in connection with Accounts; or any other documents relating to the
Collateral, including without limitation the Records.
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3. Use or operate Collateral or any other property of
Debtor for the purpose of preserving or liquidating Collateral.
4. File any claim or take any other action or
proceeding in any court of law or equity or as otherwise deemed
appropriate by Lender for the purpose of collecting any and all monies
due or securing any performance to be rendered with respect to the
Collateral.
5. Commence, prosecute or defend any suits, actions
or proceedings or as otherwise deemed appropriate by Lender for the
purpose of protecting or collecting the Collateral. In furtherance of
this right, upon the occurrence and during the continuance of an Event
of Default, Lender may apply for the appointment of a receiver or
similar official to operate Debtor's business.
6. Prepare, adjust, execute, deliver and receive
payment under insurance claims, and collect and receive payment of and
endorse any instrument in payment of loss or returned premiums or any
other insurance refund or return, and apply such amounts at Lender's
sole discretion, toward repayment of the Indebtedness or replacement of
the Collateral.
E. APPLICATION OF PROCEEDS. Any Proceeds and other monies or property
received by Lender pursuant to the terms of this Agreement or any Loan Document
may be applied by Lender first to the payment of expenses of collection,
including without limitation reasonable attorneys' fees, and then to the payment
of the Indebtedness in such order of application as Lender may elect.
F. DEFICIENCY. If the Proceeds of any disposition of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all the Indebtedness, plus all other sums required to be expended or
distributed by Lender, then Debtor shall be liable for any such deficiency.
G. LENDER TRANSFER. Upon the transfer of all or any part of the
Indebtedness, Lender may transfer all or part of the Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender shall
retain all rights and powers hereby given.
H. LENDER'S DUTIES.
1. Lender shall use reasonable care in the custody
and preservation of any Collateral in its possession. Without
limitation on other conduct which may be considered the exercise of
reasonable care, Lender shall be deemed to have exercised reasonable
care in the custody and preservation of such Collateral if such
Collateral is accorded treatment substantially equal to that which
Lender accords its own property, it being understood that Lender shall
not have any responsibility for ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, declining value,
tenders or other matters relative to any Collateral, regardless of
whether Lender has or is deemed to have knowledge of such matters; or
taking any necessary steps to preserve any rights against any Person
with respect to any Collateral. Under no circumstances shall Lender be
responsible for any injury or loss to the Collateral, or any part
thereof, arising from any cause beyond the reasonable control of
Lender.
2. Lender may at any time deliver the Collateral or
any part thereof to Debtor and the receipt of Debtor shall be a
complete and full acquittance for the Collateral so delivered, and
Lender shall thereafter be discharged from any liability or
responsibility therefor.
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3. Neither Lender, nor any of its directors,
officers, employees, agents, attorneys or any other person affiliated
with or representing Lender shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by Debtor or any other party through the ordinary negligence
of Lender, or any of its directors, officers, employees, agents,
attorneys or any other person affiliated with or representing Lender.
IX. - GENERAL PROVISIONS
A. NOTICES. Any notice given by any party under this Agreement shall be
given in the manner prescribed in the Loan Agreement.
B. BINDING EFFECT. This Agreement shall be binding upon Debtor, its
permitted successors, representatives and assigns, and shall inure to the
benefit of Lender and its successors and assigns.
C. RIGHTS CUMULATIVE. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
D. UNENFORCEABLE PROVISIONS. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be so only as to such
jurisdiction and only to the extent of such prohibition or unenforceability, but
all the remaining provisions of this Agreement shall remain valid and
enforceable.
E. GOVERNING LAW. Except as may be otherwise provided by the Uniform
Commercial Code, this Agreement shall be governed by and construed in accordance
with the laws of the State of California.
F. TERMINATION. Subject to Section 6.2 of this Agreement, upon the
payment in full of the Indebtedness and if Lender has no further obligations
under its Commitment, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to Debtor. Upon any such termination,
the Lender shall, at Debtor's expense, execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.
G. ENTIRE AGREEMENT. This Agreement is intended by Debtor and Lender as
the final expression of Debtor's obligations to Lender in connection with the
Collateral and supersedes all prior understandings or agreements concerning the
subject matter hereof. This Agreement may be amended only by a
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writing signed by Debtor and accepted by Lender in writing.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated Security
Agreement as of the date set forth in the preamble.
DIGITAL GENERATION SYSTEMS, INC.
By: ___________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
VENTURE LENDING & LEASING, INC.
By: ___________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
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