EXHIBIT 10.17
[LETTERHEAD OF PHOENIX LEASING APPEARS HERE]
August 30, 1999
▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chief Financial Officer
▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇:
We are pleased to offer this commitment for a [*] increase to the existing
loan facility. All terms and conditions of the Senior Loan and Security
Agreement ("Loan") remain in effect with the following changes:
Conditions precedent to funding:
. Satisfactory performance to plan "▇▇▇▇.▇▇▇, Inc. Balance Sheet and
Statement of Operations fax dated 7-27-99" at all funding, viable through
12-31-99.
. Proof of closure of $25M equity round to close by 9-30-99.
If you are in agreement with the aforementioned, please have a person authorized
to sign on behalf of your company sign and date this letter as indicated below
and return to me along with a commitment fee replenishment of $3000. Upon
receipt from you of the original of this letter, we shall proceed with your new
equipment financing requirements.
PHOENIX LEASING INCORPORATED ▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:________________________
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Title: Director Business Dev't. Title:_____________________
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Date: August 30, 1999 Date:______________________
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[*] Confidential Treatment Requested
SENIOR LOAN AND SECURITY AGREEMENT NO. L6190
THIS SENIOR LOAN AND SECURITY AGREEMENT NO. L6190 (this "Security Agreement") is
dated as of November 20, 1998 between HOME SHARK, INC., a California
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").
RECITALS
A. Borrower desires to borrow from Lender in one or more borrowings an
amount not to exceed [*] in the aggregate, and Lender desires to loan,
subject to the terms and conditions herein set forth, such amount to Borrower
(each, a "Loan" and collectively, the "Loans"). Such borrowings shall be
evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.
B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles,
including but not limited to servers, personal computers, peripherals,
workstations, office equipment, furniture, phone system and also certain custom
use equipment, installation and delivery costs, purchase tax, toolings, software
and other items generally considered fungible or expendable ("Soft Costs")
whether now owned by Borrower or hereafter acquired, and all substitutions and
replacements of and additions, improvements, accessions and accumulations to
said equipment, machinery and fixtures and other items, together with all rents,
issues, income, profits and proceeds therefrom (collectively, the "Collateral")
which is described on the Note attached hereto or any subsequently-executed
Note entered into by Lender and Borrower and which incorporates this Security
Agreement by reference.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on the
date set forth above and shall continue thereafter and be in effect so long as
and at any time any Note entered into pursuant to this Security Agreement is in
effect. The Term and monthly payment amount payable with respect to each item of
Collateral shall be as set forth in and as stated in the respective Note(s). The
terms of each Note hereto are subject to all conditions and provisions of this
Security Agreement as it may at any time be amended. Each Note shall constitute
a separate and independent Loan and contractual obligation of Borrower and
shall incorporate the terms and conditions of this Security Agreement and any
additional provisions contained in such Note. In the event of a conflict between
the terms and conditions of this Security Agreement and any provisions of such
Note, the provisions of such Note shall prevail with respect to such Note only.
SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note cannot be
canceled or terminated except as expressly provided herein. Borrower agrees that
its obligations to pay all monthly payment amounts and other sums payable
hereunder (and under any Note) and the rights of Lender and any assignee in and
to such amounts and other sums, are absolute and unconditional and are not
subject to any abatement, reduction, setoff, defense, counterclaim or recoupment
due or alleged to be due to, or by reason of, any past, present or future claims
which Borrower may have against Lender, any assignee, the manufacturer or seller
of the Collateral, or against any person for any reason whatsoever.
SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms and
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conditions of this Security Agreement and so long as no Event of Default or
event which with the giving of notice or passage of
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time, or both, could become an Event of Default has occurred, ▇▇▇▇▇▇ hereby
agrees to make one or more senior secured Loans to Borrower, subject to the
following conditions: (i) each Loan shall be evidenced by a Note; (ii) the total
principal amount of the Loans shall not exceed [*] in the aggregate (the
"Commitment") provided that no more than [*] of the amount of the utilized
Commitment may be used to finance Soft Costs; (iii) at the time of each Loan,
no Event of Default or event which with the giving of notice or passage of time,
or both, could become an Event of Default shall have occurred and be continuing,
as reasonably determined by ▇▇▇▇▇▇, and certified by Borrower; (iv) the amount
of each Loan shall be at least [*] except for a final Loan which may be less
than [*]; (v) Lender shall not be obligated to make any Loan after [*];
(vi) for each Loan, Borrower shall present to Lender a list of proposed
Collateral for approval by Lender in its sole discretion; (vii) for each Loan,
Borrower shall have provided Lender with each of the closing documents described
in Exhibit A hereto (which documents shall be in form and substance reasonably
acceptable to Lender); (viii) Borrower is performing according to and not
materially deviating from its business plan referred to as "HOME SHARK, INC.
CASH FORECAST-CONFIDENTIAL", 4 pages, dated April 20, 1998 (the "Business
Plan"), as may be amended from time to time in form and substance acceptable to
Lender. Performance will be measured by prorating quarterly figures to a monthly
basis; (ix) there shall be no material adverse change in Borrower's condition,
financial or otherwise, that would materially impair the ability of Borrower to
meet its payment and other obligations under this Loan (a "Material Adverse
Effect") as reasonably determined by ▇▇▇▇▇▇, and Borrower so certifies, from
(yy) the date of the most recent financial statements delivered by Borrower to
Lender to (zz) the date of the proposed Loan; (x) Borrower shall use the
proceeds of all Loans hereunder to purchase or reimburse the purchase of
Collateral; (xi) at the time of each Loan, ▇▇▇▇▇▇▇▇ has reimbursed Lender for
all UCC filing and search costs, inspection and labeling costs, and appraisal
fees, if any; (xii) all Collateral has been marked and labeled by Lender or
Lender's agent; and (xiii) Lender has received in form and substance acceptable
to Lender: (a) ▇▇▇▇▇▇▇▇'s interim financial statements signed by a financial
officer of ▇▇▇▇▇▇▇▇, (b) prior to the first funding, evidence of ▇▇▇▇▇▇▇▇'s
receipt of $7,500,000 equity by September 4, 1998; (c) prior to the first
funding, evidence of ▇▇▇▇▇▇▇▇'s [*] cash position as of March 31, 1998;
and (d) complete copies of the Borrower's audit reports for its most recent
fiscal year, which shall include at least ▇▇▇▇▇▇▇▇'s balance sheet as of the
close of such year, and ▇▇▇▇▇▇▇▇'s statement of income and retained earnings and
of changes in financial position for such year, prepared on a consolidated basis
and certified by independent public accountants. Such certificate shall not be
qualified or limited because of restricted or limited examination by such
accountant of any material portion of the company's records. Such reports shall
be prepared in accordance with generally accepted accounting principles and
practices consistently applied.
(b) The Notes. Each Loan shall be evidenced by a Note [*].
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Each Note shall bear interest and be payable at the times and in the manner
provided therein. Following payment of the Indebtedness related to each Note,
Lender shall promptly return such Note, marked "canceled," to Borrower.
SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i) the
payment of the principal of and interest on the Notes and all other sums due
thereunder and under this Security Agreement (the "Indebtedness") and (ii) the
performance by Borrower of all of its other covenants now or hereafter existing
under the Notes, this Security Agreement and any other obligation owed by
Borrower to Lender (the "Obligations").
SECTION 5. ▇▇▇▇▇▇▇▇'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants that (a) it is in good standing under the laws of the state of its
formation, duly qualified to do business and will remain duly qualified during
the term of each Loan in each state where necessary to carry on its present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note, except where failure to
be so qualified would not have a Material Adverse Effect; (b) it
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has full authority to execute and deliver this Security Agreement and the Notes
and perform the terms hereof and thereof, and this Security Agreement and the
Notes have been duly authorized, executed and delivered and constitute valid
and binding obligations of Borrower enforceable in accordance with their terms;
(c) the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of ▇▇▇▇▇▇▇▇'s shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) there is
no action or proceeding pending or threatened against Borrower before any court
or administrative agency which might have a Material Adverse Effect on the
business, financial condition or operations of Borrower; (f) at the time any
Loan is made hereunder, ▇▇▇▇▇▇▇▇ owns and will keep all of the Collateral free
and clear of all liens, claims and encumbrances, and, except for this Security
Agreement, there is no deed of trust, mortgage, security agreement or other
third party interest against any of the Collateral; (g) at the time any Loan is
made hereunder, Borrower has good and marketable title to the Collateral; (h) at
the time any Loan is made hereunder, all Collateral has been received, installed
and is ready for use and is satisfactory in all respects for the purposes of
this Security Agreement; (i) the Collateral is, and will remain at all times
under applicable law, removable personal property, which is free and clear of
any lien or encumbrance except in favor of Lender, notwithstanding the manner in
which the Collateral may be attached to any real property; (j) all credit and
financial information submitted to Lender herewith or at any other time is and
will at the time given be true and correct in all material respects; and (k) the
security interest granted to ▇▇▇▇▇▇ hereunder is a first priority security
interest, and (l) on or before January 1, 2000, ▇▇▇▇▇▇▇▇'s computer system shall
be Year 2000 performance compliant and will thus be able to accurately process
date data from, into and between the twentieth and twenty-first centuries
including leap year calculations.
SECTION 6. METHOD AND PLACE OF PAYMENT. ▇▇▇▇▇▇▇▇ shall pay to Lender, at such
address as Lender specifies in writing, all amounts payable to it under this
Security Agreement and the Notes.
SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be located
at the address (the "Collateral Location") shown on Exhibit A to each Note and
shall not be moved without Lender's prior written consent which location shall
in all events be within the United States. All of the records regarding the
Collateral shall be located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
or such other location of which Borrower has given notice to Lender in
accordance with this Security Agreement. Lender shall have the right to inspect
Collateral, including records relating thereto, and ▇▇▇▇▇▇▇▇'s books and records
at any time (upon reasonable notification) during regular business hours, such
books and records to be maintained in accordance with generally accepted
accounting principles. Borrower shall be responsible for all labor, material and
freight charges incurred in connection with any removal or relocation of
Collateral which is requested by Borrower and consented to by ▇▇▇▇▇▇, as well as
for any charges due to the installation or moving of the Collateral. Payments
under the Notes and under this Security Agreement shall continue during any
period in which the Collateral is in transit during a relocation. During
Borrower's regular business hours and upon at least two days' notice to
Borrower, Lender or its agent shall mark and label Collateral, which labels (to
be provided by Lender) shall state that such Collateral is subject to a security
interest of Lender, and Borrower shall keep such labels on the Collateral as so
labeled.
SECTION 8. COLLATERAL MAINTENANCE. (a) General. Borrower will reasonably permit
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Lender to inspect each item of Collateral and its maintenance records during
Borrower's regular business hours upon reasonable notice. Borrower will at its
sole expense comply with all applicable laws, rules, regulations, requirements
and orders with respect to the use, maintenance, repair, condition, storage and
operation of each item of Collateral. Any addition or improvement that is so
required or cannot be so removed will immediately become Collateral of Lender.
(b) Service and Repair. With respect to the Collateral, Borrower will at its
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sole expense
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maintain and service and repair any damage to each item of Collateral in a
manner consistent with prudent industry practice and Borrower's own practice so
that such item of Collateral is at all times (i) in the same condition as when
delivered to Borrower, except for ordinary wear and tear, and (ii) in good
operating order for the function intended by its manufacturer's warranties and
recommendations.
SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise. Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages, and expenses relating to or resulting from any loss, damage or
destruction of the Collateral, any such occurrence being hereinafter called a
"Casualty Occurrence." No later than the first payment date following such
Casualty Occurrence, or, if there is no such payment date, no later than thirty
(30) days after such Casualty Occurrence, Borrower shall, at its election,
either: (a) repair the Collateral returning it to good operating condition, or
(b) replace the Collateral with Collateral acceptable to Lender in its
reasonable discretion, in good condition and repair taking all steps required by
Lender to perfect Lender's first priority security interest therein, which
replacement Collateral shall be subject to the terms of this Security Agreement,
or (c) on the first day payment is due on any Note following the Casualty
Occurrence, or if there is no such payment date, thirty (30) days after such
Casualty Occurrence, pay to Lender an amount equal to the Balance Due (as
defined below) for each lost or damaged item of Collateral. The Balance Due for
each such item is the sum of: (i) all amounts for each item which may be then
due or accrued to the payment date, plus (ii) as of such payment date, an amount
equal to the product of the fraction specified below times the sum of all
remaining payments under the respective Note, including the amount of any
mandatory payment required to be paid by Borrower to Lender at the maturity of
the Note. The numerator of the fraction shall be the collateral value (as set
forth on the applicable Note) of the item and the denominator shall be the
aggregate collateral value of all items under the Note. Upon the making of such
payments, Lender shall release such item of Collateral from its lien hereunder.
SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral insured
against all risks of physical loss for at least the replacement value of the
Collateral (including, in the case of Collateral which is vehicles,
comprehensive and collision coverage) and in no event for less than the amount
payable following a Casualty Occurrence (as provided in Section 9). Such
insurance shall provide for a loss payable endorsement to Lender and/or any
assignee of Lender. Borrower shall maintain commercial general liability
insurance, including products liability and completed operations coverage, with
respect to loss or damage for personal injury, death or property damage in an
amount not less than $2,000,000 in the aggregate, (and in the case of Collateral
which is vehicles, in an amount not less than $1,000,000 covering bodily injury
and property damage in a combined single limit) naming Lender and/or Lender's
assignee as additional insured. Such insurance shall contain insurer's agreement
to give thirty (30) days' advance written notice to Lender before cancellation
or material change of any policy of insurance. Borrower will provide Lender and
any assignee of Lender with a certificate of insurance from the insurer
evidencing ▇▇▇▇▇▇'s or such assignee's interest in the policy of insurance. Such
insurance shall cover any Casualty Occurrence to any unit of Collateral.
Notwithstanding anything in Section 9 or this Section 10 to the contrary, this
Security Agreement and ▇▇▇▇▇▇▇▇'s obligations hereunder shall remain in full
force and effect with respect to any unit of Collateral which is not subject to
a Casualty Occurrence. If Borrower fails to provide or maintain insurance as
required herein, Lender shall have the right, but shall not be obligated, to
obtain such insurance. In that event, Borrower shall pay to Lender the cost
thereof.
Any item or items that are subject to a Casualty Occurrence as contemplated in
Section 9 hereof and for which Borrower receives and retains insurance proceeds
for the full replacement value, shall no longer be subject to the terms of this
Agreement.
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SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion of the
Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all governmental taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good faith so long as no payment default by Borrower has occurred and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations relating to its business and the Collateral where a failure to
comply would have a Material Adverse Effect; (c) take no action to adversely
affect ▇▇▇▇▇▇'s security interest in the Collateral as a first and prior
perfected security interest; (d) furnish Lender with its annual audited
financial statements within one hundred twenty (120) days following the end of
Borrower's fiscal year, unaudited quarterly financial statements within forty-
five (45) days after the end of each fiscal quarter, and within thirty (30) days
of the end of each month a financial statement for that month prepared by
▇▇▇▇▇▇▇▇, and including an income statement and balance sheet, all of which
shall be certified by an officer of Borrower as true and correct and shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and such other information as Lender may reasonably
request; and (e) promptly (but in no event more than five (5) days after the
occurrence of such event) notify Lender of any change in Borrower's condition
during the commitment period which constitutes a Material Adverse Effect, and of
the occurrence of any Event of Default.
SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys' fees and expenses), imposed upon or incurred by or asserted against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating to or caused by any portion of the Collateral, or its purchase,
acceptance, possession, use, maintenance or transportation, including without
limitation, consequential or special damages of any kind, any failure on the
part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on ▇▇▇▇▇▇'s gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon ▇▇▇▇▇▇'s
request, will, at ▇▇▇▇▇▇▇▇'s expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel reasonably
acceptable by ▇▇▇▇▇▇. Borrower's obligations under this Section 12 shall survive
the payment in full of all the Indebtedness and the performance of all
Obligations with respect to acts or events occurring or alleged to have occurred
prior to the payment in full of all the Indebtedness and the performance of all
Obligations.
SECTION 13. TAXES. ▇▇▇▇▇▇▇▇ agrees to reimburse Lender (or pay directly if
instructed by ▇▇▇▇▇▇) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including, but not limited to,
license, documentation, recording and registration fees), and all sales, use,
gross receipts, personal property, occupational, value added or other taxes,
levies, imposts, duties, assessments, charges, or withholdings of any nature
whatsoever, together with any penalties, fines, additions to tax, or interest
thereon (the foregoing collectively "Impositions"), except same as may be
attributable to ▇▇▇▇▇▇'s income, arising at any time prior to or during the term
of any Notes or of this Security Agreement, or upon termination or early
termination of this Security Agreement and levied or imposed upon Lender
directly or otherwise by any Federal, state or local government in the United
States or by any foreign country or foreign or international taxing authority
upon or with respect to (a) the Collateral, (b) the exportation, importation,
registration, purchase, ownership, delivery, leasing, financing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (c) the rentals, receipts, or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings, (d) any payment pursuant to this Security Agreement or the Notes,
or (e) this Security Agreement, the Notes or any transaction or any part hereof
or thereof.
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SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness and
performance of all of the Obligations, ▇▇▇▇▇▇ shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of ▇▇▇▇▇▇'s lien relating to the Collateral.
SECTION 15. ASSIGNMENT. WITHOUT ▇▇▇▇▇▇'S PRIOR WRITTEN CONSENT WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a) ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY AGREEMENT,
ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (b) LEASE OR LEND COLLATERAL
OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S EMPLOYEES,
CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY OR TRANSFER
ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR ENTITY
EXCEPT TO A SUCCESSOR IN INTEREST TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS OF
BORROWER; PROVIDED, HOWEVER, THAT, THE FINANCIAL CONDITION OF SUCH SUCCESSOR IS
GREATER THAN OR EQUAL TO BORROWER AS DETERMINED IN GOOD FAITH BY ▇▇▇▇▇▇ AND THE
SUCCESSOR'S BUSINESS AND ITS MAJOR INVESTORS ARE REASONABLY ACCEPTABLE TO
LENDER. LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS
SECURITY INTEREST IN ANY OR ALL COLLATERAL OR ANY OR ALL OF THE ABOVE, IN
WHOLE OR IN PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO
BORROWER. If ▇▇▇▇▇▇▇▇ is given notice of such assignment it agrees to
acknowledge receipt thereof in writing and ▇▇▇▇▇▇▇▇ shall execute such
additional documentation as ▇▇▇▇▇▇'s assignee and/or secured party shall
reasonably require at ▇▇▇▇▇▇'s expense. Each such assignee and/or secured party
shall have all of the rights, but (except as provided in this Section 15) none
of the obligations, of Lender under this Security Agreement, unless such
assignee or secured party expressly agrees to assume such obligations in
writing. Borrower shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Borrower may have against Lender.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lender, or its assignees, secured parties, or their
agents or assigns, shall not interfere with Borrower's right to quietly enjoy
use of Collateral subject to the terms and conditions of this Security
Agreement. Subject to the foregoing, the Notes and this Security Agreement shall
inure to the benefit of, and are binding upon, the successors and assignees of
the parties hereto. Borrower and ▇▇▇▇▇▇ each acknowledge that any such
assignment by ▇▇▇▇▇▇ will not change Borrower's duties or obligations under this
Security Agreement and the Notes or increase any burden or risk on Borrower.
SECTION 16. DEFAULT. (a) Events of Default. Any of the following events or
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conditions shall constitute an "Event of Default" hereunder: (1) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (l0th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes shall prove to have been incorrect in any
material respect when made or given; (iv) Borrower's failure to comply with or
perform any material term, covenant or condition of this Security Agreement or
any Note or under any other agreement between Borrower and Lender or under any
lease or mortgage of real property covering the location of the Collateral if
such failure to comply or perform is not cured by Borrower within thirty (30)
days after Borrower knows of the noncompliance or nonperformance or notice from
Lender or such longer period that Borrower is diligently attempting to effect
such cure; (v) seizure of any of the Collateral under legal process; (vi) the
filing by or against Borrower of a petition for reorganization or liquidation
under the Bankruptcy Code or any amendment thereto or under any other insolvency
law providing for the relief of debtors; (vii) the voluntary or involuntary
making of an assignment of a substantial portion of its assets by ▇▇▇▇▇▇▇▇ for
the benefit of its creditors, the appointment of a receiver or trustee for
Borrower for any of Borrower's assets, the institution by or against Borrower of
any formal or informal proceeding for dissolution, liquidation, settlement
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of claims against or winding up of the affairs of ▇▇▇▇▇▇▇▇ provided that in the
case of all such involuntary proceedings, same are not dismissed within ninety
(90) days after commencement; or (viii) the making by Borrower of a transfer of
all or a material portion of Borrower's assets or inventory not in the ordinary
course of business.
(b) Remedies. If any Event of Default has occurred, Lender may in its sole
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discretion exercise one or more of the following remedies with respect to any or
all of the Collateral: (i) declare due any or all of the aggregate sum of all
remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all damages and expenses incurred by Lender by reason of an Event of
Default; (iii) except as provided by law, without court order or prior demand,
enter upon the premises where the Collateral is located and take immediate
possession of and remove it without liability of Lender to Borrower or any other
person or entity; (iv) terminate this Security Agreement and sell the Collateral
at public or private sale, or otherwise dispose of, hold, use or lease any or
all of the Collateral in a commercially reasonable manner; or (v) exercise any
other right or remedy available to it under applicable law. If Lender has
declared due any or all of the Remaining Payments, Borrower will pay immediately
to Lender, without duplication, (A) the Remaining Payments, (B) all amounts
which may be then due or accrued, and (C) all other amounts due under this
Security Agreement and under the Notes (Lender's Return, as referred to below,
means the amounts described in clauses (A), (B) and (C) above). The net proceeds
of any sale or lease of such Collateral will be credited against ▇▇▇▇▇▇'s
Return. The net proceeds of a sale of the Collateral pursuant to this Section
16(b) is defined as the sales price of the Collateral less selling expenses,
including, without limitation, costs of remarketing the Collateral and all
refurbishing costs and commissions paid with respect to such remarketing. The
net proceeds of a lease of the Collateral pursuant to this Section 16(b) is
defined as the amount equal to the monthly payments due under such lease
(discounted at 6% per annum compounded monthly on the basis of a 360 day year
(the "Discount Rate") plus the residual value of the Collateral at the end of
the basic term of such lease, as reasonably determined by ▇▇▇▇▇▇, and discounted
at the Discount Rate.
▇▇▇▇▇▇▇▇ agrees to pay all reasonable out-of-pocket costs of Lender incurred in
enforcement, and related exercise of remedies, of this Security Agreement, the
Notes or any instrument or agreement required under this Security Agreement,
including, but not limited to reasonable attorneys' fees and litigation expenses
and fees of collection agencies ("Remedy Expenses"). Following an Event of
Default and at ▇▇▇▇▇▇'s request, Borrower shall assemble the Collateral and make
it available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral until
▇▇▇▇▇▇'s return under any and all Notes is paid in full.
Declaration that any or all amounts under this Security Agreement and/or the
Notes are immediately due and payable and ▇▇▇▇▇▇'s taking possession of any or
all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.
(c) Application of Proceeds. The proceeds of any sale of all or any part of
-----------------------
the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:
First, to the payment of reasonable costs and expenses of suit or
-----
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all reasonable expenses, liabilities and advances incurred
or made pursuant
7
to this Security Agreement or any Note by Lender in connection with foreclosure,
suit, sale or enforcement of this Security Agreement or the Notes, and taxes,
assessments or liens superior to ▇▇▇▇▇▇'s security interest granted by this
Security Agreement;
Second, to pay Lender an amount equal to ▇▇▇▇▇▇'s Return, to the
------
extent not previously paid by Borrower; and
Third, to the payment of any surplus to Borrower or to whomever may
-----
lawfully be entitled to receive it.
(d) Effect of Delay; ▇▇▇▇▇▇; Foreclosure on Collateral. No delay or
--------------------------------------------------
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any subsequent Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional security, collateral or guaranty for the payment or discharge of
the Indebtedness and performance of the Obligations shall in no way operate to
prejudice, waive or affect the security interest created by this Security
Agreement or any rights, powers or remedies exercised hereunder or thereunder.
Lender shall not be required first to foreclose on the Collateral prior to
bringing an action against Borrower for sums owed to Lender under this Security
Agreement or under any Note.
SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of 8% of any
payment owed Lender by Borrower which is not paid when due (taking into account
applicable grace periods), for every month such payment is not paid when due,
but in no event an amount greater than the highest rate permitted by applicable
law. If such amounts have not been received by Lender at Lender's place of
business or by ▇▇▇▇▇▇'s designated agent by the date such amounts are due under
this Security Agreement or the Notes, Lender shall bill Borrower for such
charges. ▇▇▇▇▇▇▇▇ acknowledges that invoices for amounts due hereunder or under
the Notes are sent by ▇▇▇▇▇▇ for ▇▇▇▇▇▇▇▇'s convenience only. ▇▇▇▇▇▇▇▇'s
non-receipt of an invoice will not relieve Borrower of its obligation to make
payments hereunder or under the Notes.
SECTION 18. PAYMENTS BY LENDER. If Borrower shall fail to make any payment or
perform any act required hereunder (including, but not limited to, maintenance
of any insurance required by Section 10), then Lender may, but shall not be
required to, after such notice to Borrower as is reasonable under the
circumstances, make such payment or perform such act with the same effect as if
made or performed by Borrower. Borrower will upon demand reimburse Lender for
all sums paid and all reasonable costs and expenses incurred in connection with
the performance of any such act.
SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints ▇▇▇▇▇▇ (and each of
Lender's officers, employees or agents designated by ▇▇▇▇▇▇) with full power of
substitution by ▇▇▇▇▇▇, as ▇▇▇▇▇▇▇▇'s attorney, with power to execute and
deliver on ▇▇▇▇▇▇▇▇'s behalf, financing statements and other documents necessary
to perfect and/or give notice of ▇▇▇▇▇▇'s security interest in any of the
Collateral. Notwithstanding the above, Borrower will, upon ▇▇▇▇▇▇'s request,
execute all financing statements pursuant to the Uniform Commercial Code and all
such other documents reasonably requested by ▇▇▇▇▇▇ to perfect ▇▇▇▇▇▇'s security
interests hereunder. ▇▇▇▇▇▇▇▇ authorizes Lender to file financing statements
signed only by ▇▇▇▇▇▇ (where such authorization is permitted by law) at all
places where ▇▇▇▇▇▇ deems necessary.
SECTION 20. NATURE OF TRANSACTION. ▇▇▇▇▇▇ makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
8
SECTION 21. SUSPENSION OF ▇▇▇▇▇▇'S OBLIGATIONS. The obligations of Lender
hereunder will be suspended to the extent that Lender is hindered or prevented
from complying therewith because of labor disturbances, including but not
limited to strikes and lockouts, acts of God, fires, floods, storms, accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree, law or governmental regulations or interference, failure of the
manufacturer to deliver any item of Collateral or any cause whatsoever not
within the sole and exclusive control of Lender.
SECTION 22. ▇▇▇▇▇▇'S EXPENSE. Borrower shall pay Lender all reasonable costs and
expenses including reasonable attorney's fees and the fees of collection
agencies, incurred by Lender in connection with any bankruptcy or post-judgment
proceeding, whether or not suit is filed and, in each and every action, suit or
proceeding, including any and all appeals and petitions therefrom.
SECTION 23. ALTERATIONS; ATTACHMENTS. Other than in conformity with the
manufacturer's warranty and/or other functional improvements no alterations or
attachments shall be made to the Collateral without Lender's prior written
consent, which shall not be given for changes that will affect the reliability
and utility of the Collateral or which cannot be removed without damage to the
Collateral, or which in any way affect the value of the Collateral for purposes
of resale or lease. All attachments and improvements to the Collateral shall be
deemed to be "Collateral" for purposes of the Security Agreement, and a first
priority security interest therein shall immediately vest in Lessor.
SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security Agreement will
be marked "Original" and all other counterparts will be duplicates. To the
extent, if any, that this Security Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in the Security Agreement may be created in
any documents other than the "Original." (b) There shall be only one original of
each Note and it shall be marked "Original," and all other counterparts will be
duplicates. To the extent, if any, that any Notes to this Security Agreement
constitutes chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction) no security interest in any
Notes(s) may be created in any documents other than the "Original."
SECTION 25. COMMITMENT FEE. ▇▇▇▇▇▇▇▇ has paid to Lender a commitment fee
("Fee") of [*]. The Fee shall be applied by ▇▇▇▇▇▇ first to reimburse Lender
for all out-of-pocket UCC and other search costs, inspections and labeling costs
and appraisal fees, if any, incurred by ▇▇▇▇▇▇, and then proportionally to the
first monthly payment for each Note hereunder in the proportion that the
Collateral value for such Note bears to Lender's entire commitment. However, the
portion of the Fee which is not applied to such monthly payments shall be
non-refundable except if Lender defaults in its obligation to fund Loans
pursuant to Section 3.
SECTION 26. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service (including overnight service)
and shall be directed, as the case may be, to Lender at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Asset Management and to Borrower at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer.
SECTION 27. MISCELLANEOUS. (a) Borrower shall provide Lender with such corporate
resolutions, financial statements and other documents as Lender shall reasonably
request from time to time. (b) ▇▇▇▇▇▇▇▇ represents that the Collateral hereunder
is used solely for business purposes. (c) Time is of the essence with respect to
this Security Agreement. (d) ▇▇▇▇▇▇▇▇ acknowledges that ▇▇▇▇▇▇▇▇ has read this
Security Agreement and the Notes, understands them and agrees to be bound by
their terms and further agrees that this Security Agreement and the Notes
constitute the entire agreement between ▇▇▇▇▇▇ and Borrower with respect to the
subject matter hereof and supersede all previous agreements, promises, or
representations. (e) This Security Agreement
[*] Confidential Treatment Requested
9
and the Notes may not be changed, altered or modified except by an instrument
signed by an officer or authorized representative of Lender and ▇▇▇▇▇▇▇▇. (f)
Any failure of Lender to require strict performance by Borrower or any waiver by
Lender of any provision herein or in a Note shall not be construed as a consent
or waiver of any other breach of the same or any other provision (g) If any
provision of this Security Agreement or any Note is held invalid, such
invalidity shall not affect any other provisions hereof or thereof. (h) The
obligations of Borrower to pay the Indebtedness and perform the Obligations
shall survive the expiration or earlier termination of this Security Agreement
and each Note until all Obligations of Borrower to Lender have been met and all
liabilities of Borrower to Lender and any assignee have been paid in full (1)
Borrower will notify Lender at least 30 days before changing its name, principal
place of business or chief executive office. (j) Borrower will, at its expense,
promptly execute and deliver to Lender such documents and assurances (including
financing statements) and take such further action as Lender may reasonably
request in order to carry out the intent of this Security Agreement and ▇▇▇▇▇▇'s
rights and remedies.
SECTION 28. JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement and
the Notes shall be deemed to have been negotiated, entered into and performed in
the State of California and it is understood and agreed that the validity of
this Security Agreement and of any of the terms and provisions, of the Security
Agreement and Notes, as well as the rights and duties of Lender and Borrower,
shall be construed pursuant to and in accordance with the laws of the State of
California, without giving effect to conflicts of law principles. It is agreed
that exclusive jurisdiction and venue for any legal action between the parties
arising out of or relating to this Security Agreement and each Note shall be in
the Superior Court for Marin County, California, or, in cases where federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California situated in San Francisco. BORROWER AND LENDER
EACH, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY
JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT, ANY
NOTE, ANY SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION
HEREWITH.
SECTION 29. ADDITIONAL INTEREST COMPENSATION: (a) General. Borrower shall be
-------
required to choose a final payment or Note extension election ("Additional
Interest Compensation") at the expiration of the first Note's term. Borrower
shall provide written notice of its election to Lender at least 90 days prior to
the end of the term of the first Note. That choice shall be an election of
▇▇▇▇▇▇▇▇'s additional interest compensation election for all, but not less than
all, of the Collateral under all Notes under the Security Agreement.
In the event Borrower does not provide 90 days' prior written notice of its
election, Borrower shall be deemed to have elected Election No.2.
(b) End of Loan Position Elections. As Additional Interest Compensation.
------------------------------
Borrower shall be required to:
Election No. 1: Make a final payment equal to 15% of the Note's original
--------------
principal amount.
10
Election No.2: Extend the Note's term for an additional 12 months ("Extended
Term") for a monthly rate of 1.5% of the Note's original principal amount.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ have caused this Security Agreement to
be executed as of the date and year first above written.
PHOENIX LEASING INCORPORATED HOME SHARK, INC.
By:______________________________ By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
Name:____________________________ Name (Print): ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------
Title:___________________________ Title: CFO
---------------------------
HEADQUARTERS LOCATION:
----------------------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ of San Francisco
EXHIBITS AND SCHEDULES:
----------------------
Exhibit A -- Closing Memorandum
11
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT NO. L6190
DATED NOVEMBER 20, 1998
CLOSING MEMORANDUM
------------------
1* ▇▇▇▇ executed Senior Loan and Security Agreement.
2. ▇▇▇▇ executed Senior Security Promissory Note with Exhibit A Collateral
description attached.
3. Insurance certificates reflecting coverage required under Section 10 of
the Senior Loan and Security Agreement.
4.* Resolutions of ▇▇▇▇▇▇▇▇'s board of directors.
5. Real Property Waiver.**
6. UCC-1 Financing Statements with respect to the Collateral.
7. Opinion of ▇▇▇▇▇▇▇▇'s counsel.
8. UCC search (Lender will obtain).
9. Certificate of Chief Financial Officer stating that (i) there are no liens,
charges, security interest or other encumbrances that may affect Lender's
right, title and interest in the Collateral and there are no UCC-l
financing statements filed or in the process of being filed against any of
the Collateral, (ii) Borrower is performing according to ▇▇▇▇▇▇▇▇'s
business plan, (iii) no change which is a Material Adverse Effect has
occurred in the financial condition of Borrower, (iv) no default has
occurred, and (v) the representations and warranties in Section 5 of the
Senior Loan and Security Agreement are true and correct as if made on the
date of the Loan.
10.* Certificate from the Secretary of State of ▇▇▇▇▇▇▇▇'s state of
incorporation, and from the state in which ▇▇▇▇▇▇▇▇'s chief executive
office is located, if different, stating the Borrower is in good standing
or is authorized to transact business, as the case may be, dated not more
than thirty days prior to the first Loan (Lender will obtain).
11.* Borrower's Business Plan.
12. ▇▇▇▇▇▇▇▇'s most recent financial statements.
13. List of proposed Collateral.
14. Purchase documentation verifying Borrower's ownership of equipment.
15. See Section 3 of the Senior Loan and Security Agreement for additional
conditions to closing.
16. Intercreditor Agreement, if applicable.
* First Loan only.
** Required if any Equipment is a fixture, i.e., attached to real property,
or located in certain states.
CORPORATE RESOLUTION TO BORROW
RESOLVED: That this corporation, HOME SHARK, INC., borrow funds from PHOENIX
LEASING INCORPORATED, a California corporation, ("Lender") and grant as
collateral for such borrowings such items of personal property and fixtures, and
upon such terms and conditions, as the officer or officers hereinafter
authorized, in their discretion, may deem necessary or advisable provided,
--------
however, that the aggregate principal amount of borrowings hereunder shall not
-------
exceed the sum of [*].
RESOLVED FURTHER: That:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ CFO /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
(Print or type name) (Title of Corporate Officer) (Specimen signature)
or
(Print or type name) (Title of Corporate Officer) (specimen signature)
of this corporation (this officer or officers authorized to act pursuant hereto
being hereinafter designated as "authorized officers"), are individually
authorized, directed and empowered, in the name of this corporation, to execute
and deliver to Lender, and ▇▇▇▇▇▇ is requested to accept, any notes, security
agreements, and other documents or agreements that may be required by Lender in
connection with such borrowings.
RESOLVED FURTHER: That the authorized officers are individually authorized,
directed and empowered, in the name of this corporation, to do or cause to be
done all such further acts and things as they shall deem necessary, advisable,
convenient, or proper in connection with the execution and delivery of any such
notes, security agreements, and other documents or agreements and in connection
with or incidental to the carrying of the same into effect, including without
limitation, the execution, acknowledgment, and delivery of all instruments and
documents which may reasonably be required by Lender under or in connection with
any such borrowing.
RESOLVED FURTHER: That Lender is authorized to act upon these resolutions until
written notice of their revocation is delivered to Lender, and that the
authority hereby granted shall apply with equal force and effect to the
successors in office of the officers herein named.
I, ▇▇▇▇▇▇ ▇▇▇▇, President and CEO of HOME SHARK, INC., a corporation
incorporated under the laws of the State of California, do hereby certify
that the foregoing is a full, true and correct copy of resolutions of the
Board of Directors of the said corporation, duly and regularly passed or
adopted by the Board of Directors of said corporation as required by law and
by the by-laws of the said corporation on the 19th day of August, 1998.
I further certify that said resolutions are still in full force and effect and
have not been amended or revoked and that the specimen signatures appearing
above are the signatures of the officers authorized to sign for this corporation
by virtue of the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such President and CEO, and
affixed the corporate seal of the said corporation, this _______ day of
__________, 19__.
AFFIX CORPORATE ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ HERE ----------------------------
PRESIDENT AND CEO OF HOME SHARK, INC.
[PERSON WHO SIGNS HERE MUST BE DIFFERENT FROM
PERSON(S) WHO SIGNED ABOVE.]
[*] Confidential Treatment Requested
AMENDMENT NO. 1 TO SENIOR LOAN AND SECURITY AGREEMENT NO. L6190
THIS AMENDMENT NO. 1 TO SENIOR LOAN AND SECURITY AGREEMENT NO. L6190
("Amendment") is dated as of February 16, 1999, by and between HOME SHARK, INC.
("Borrower") and PHOENIX LEASING INCORPORATED ("Lender").
RECITALS
WHEREAS, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ entered into that certain Senior Loan and Security
Agreement No. L6190, dated as of November 20, 1998 (the "Security Agreement"),
pursuant to which Borrower is financing equipment with an aggregate purchase
price of [*], (the "Initial Commitment");
WHEREAS, ▇▇▇▇▇▇▇▇ has requested that Lender increase the dollar limit on the
aggregate purchase price of equipment which Lender is willing to finance for
Borrower under the Security Agreement by an additional [*], (such
increase hereinafter referred to as the "Additional Commitment");
WHEREAS, ▇▇▇▇▇▇ is willing to provide the Additional Commitment, on the terms
set forth herein and ▇▇▇▇▇▇▇▇ is willing to agree to such terms; and
WHEREAS, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ now desire to amend the Security Agreement to
provide for the Additional Commitment, and as otherwise provided in this
Amendment;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are defined
-----------
in the Security Agreement shall have the same meaning where used herein. Upon
execution of this Amendment, (i) the term "Security Agreement" shall be deemed
to include this Amendment, (ii) the term "Collateral" shall be deemed to include
the "Additional Commitment Collateral," (iii) the term "Note(s)" shall be
deemed to include any "Additional Commitment Note(s)," and (iv) the term "Loan"
shall be deemed to include "Additional Commitment Loan," as these terms are
defined herein.
2. Amendments. The Security Agreement is hereby amended as follows:
----------
(a) Following Section 3, a new Section 3A is added as follows:
3A. LENDER ADDITIONAL COMMITMENT. (a) General Terms. Subject to the
terms and conditions of this Security Agreement and so long as no
Event of Default or event which with the giving of notice or passage
of time, or both, could become an Event of Default has occurred or is
continuing, upon full funding of the Initial Commitment, Lender hereby
agrees to make one or more additional senior secured Loans "Additional
Commitment Loans" to Borrower, subject to the following conditions:
(i) each Additional Commitment Loan shall be evidenced by an
Additional Commitment Note; (ii) the total principal amount of the
Additional Commitment Loans shall not exceed [*] in the aggregate (the
"Additional Commitment"), but in any event the Initial Commitment
together with the Additional Commitment shall not exceed [*]; provided
that no more than [*] of the amount of the utilized Additional
Commitment may be used to finance Soft Costs; (iii) at the time of
each Additional Commitment Loan, no Event of Default or event which
with the giving of notice or passage of time, or both, could become an
Event of Default shall have occurred and be continuing, as reasonably
determined by ▇▇▇▇▇▇, and certified by Borrower; (iv) the amount of
each Additional Commitment Loan shall be at least [*] except for a
final Additional Commitment Loan which may be less than [*]; (v)
Lender shall not be obligated to make any Additional Commitment Loan
[*] Confidential Treatment Requested
1
after [*]; (vi) for each Additional Commitment Loan, Borrower shall
present to Lender a list of proposed Additional Commitment Collateral
for approval by Lender in its sole discretion; (vii) for each
Additional Commitment Loan, Borrower shall have provided Lender with
each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance reasonably acceptable to
Lender); (viii) Borrower is performing according to its business plan
referred to as "October-Based Forecast Draft-Confidential" dated
November 18, 1998 (the "Additional Commitment Business Plan"), as may
be amended from time to time in form and substance acceptable to
Lender. Performance will be measured by prorating quarterly figures to
a monthly basis; (ix) there shall be no material adverse change in
Borrower's condition, financial or otherwise, that would materially
impair the ability of Borrower to meet its payment and other
obligations under this Additional Commitment Loan (a "Material Adverse
Effect") as reasonably determined by ▇▇▇▇▇▇, and Borrower so
certifies, from (yy) the date of the most recent financial statements
delivered by Borrower to Lender to (zz) the date of the proposed
Additional Commitment Loan; (x) prior to payment in full of all
Additional Commitment Notes, Borrower shall not offer any loan secured
by any equipment, furniture or fixtures to any other person or entity
other than Lender, unless Lender declines to finance such transaction
or Borrower and Lender are unable to agree on the terms of such
financing; (xi) Borrower shall use the proceeds of all Additional
Commitment Loans hereunder to purchase or reimburse the purchase of
Additional Commitment Collateral; (xii) at the time of each Additional
Commitment Loan, ▇▇▇▇▇▇▇▇ has reimbursed Lender for all UCC filing and
search costs, inspection and labeling costs, and appraisal fees, if
any; (xiii) all Additional Commitment Collateral has been marked and
labeled by Lender or Lender's agent; and (xiv) Lender has received in
form and substance acceptable to Lender:(a) ▇▇▇▇▇▇▇▇'s interim
financial statements signed by a financial officer of ▇▇▇▇▇▇▇▇, (b)
prior to the funding of the First Additional Commitment Loan, evidence
of ▇▇▇▇▇▇▇▇'s [*] cash position as of December 31, 1998; (c) prior to
any fundings after May 30, 1999, a new 1999 business plan; and (d)
complete copies of the Borrower's audit reports for its most recent
fiscal year, which shall include at least Borrower's balance sheet as
of the close of such year, and ▇▇▇▇▇▇▇▇'s statement of income and
retained earnings and of changes in financial position for such year,
prepared on a consolidated basis and certified by independent public
accountants. Such certificate shall not be qualified or limited
because of restricted or limited examination by such accountant of any
material portion of the company's records. Such reports shall be
prepared in accordance with generally accepted accounting principles
and practices consistently applied.
(b) The Notes. Each Additional Commitment Loan shall be evidenced by
---------
an Additional Commitment Note which may not be prepaid in whole or in
part. Each Additional Commitment Note shall bear interest and be
payable at the times and in the manner provided therein. Following
payment of the Indebtedness related to each Additional Commitment
Note, Lender shall promptly return such Additional Commitment Note,
marked "canceled," to Borrower.
(b) Following Section 25, a new Section 25A is added as follows:
25A. ADDITIONAL COMMITMENT FEE. Borrower has paid to Lender a
commitment fee ("Additional Commitment Fee") of [*] Dollars ([*]) with
respect to the Additional Commitment. The Additional Commitment Fee
shall be applied by ▇▇▇▇▇▇ first to reimburse Lender for all out-of-
pocket UCC search costs, inspections and appraisal fees incurred by
▇▇▇▇▇▇, and then proportionally to the first month's payment under
each Additional Commitment Note, in the proportion that the collateral
value for such Additional Commitment Note bears to the Additional
[*] Confidential Treatment Requested
2
Commitment. However, the portion of the Additional Commitment Fee
which is not applied to such monthly payments shall be non-refundable
except if Lender defaults in its obligation to fund Additional
Commitment Loans pursuant to Section 3A.
3. Representations and Warranties: Borrower hereby reconfirms as of the date
------------------------------
hereof, its representations and warranties set forth in Section 5 of the
Security Agreement.
4. Continued Validity of Security Agreement. Except as amended by this
----------------------------------------
Amendment, the Security Agreement shall continue in full force and effect as
originally constituted and is ratified and affirmed by the parties hereto. Such
Amendment shall not amend or otherwise affect any of the Notes executed and
delivered by ▇▇▇▇▇▇▇▇ prior to the date hereof.
5. Authorization. Each party represents to the other that the individual
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executing this Amendment on its behalf is the duly appointed signatory of such
party to this Amendment and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be binding and deemed
---------------------------
effective when executed by ▇▇▇▇▇▇▇▇ and accepted and executed by ▇▇▇▇▇▇. Upon
such effectiveness this Amendment shall be deemed to have amended the Security
Agreement as provided herein.
7. Captions. Section headings and numbers have been set forth herein for
--------
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. No Novation. This Amendment is not intended to be, and shall not be
-----------
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Security Agreement shall remain in full force and
effect.
9. Severability. Each provision of this Amendment shall be severable from
------------
every other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. The Security Agreement as amended by this Amendment
----------------
constitutes the entire agreement between Borrower and Lender with respect to
the subject matter hereof and supersedes all prior and contemporaneous
negotiations, communications, discussions and agreements concerning such
subject matter. ▇▇▇▇▇▇▇▇ acknowledges and agrees that ▇▇▇▇▇▇ has not made any
representation, warranty or covenant in connection with this Amendment.
11. Conflicts. In the event of any conflict between the terms of this
---------
Amendment and terms of the Security Agreement, the terms of this Amendment
shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
LENDER: BORROWER:
PHOENIX LEASING INCORPORATED HOME SHARK, INC.
By:_________________________ By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------------
Name:_______________________ Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------
Title:______________________ Title: Secretary & CFO
------------------------
3
EXHIBIT A TO
AMENDMENT NO. 1 TO
SENIOR LOAN AND SECURITY AGREEMENT NO. L6190
DATED NOVEMBER 20, 1998
CLOSING MEMORANDUM
1* ▇▇▇▇ executed Amendment No. 1 to Senior Loan and Security Agreement.
2. Duly executed Additional Commitment Senior Secured Promissory Note with
Exhibit A Additional Commitment Collateral description attached.
3.* Insurance certificates reflecting additional amount of coverage required
under Section 10 of the Senior Loan and Security Agreement.
4.* Resolutions of ▇▇▇▇▇▇▇▇'s board of directors reflecting new amount of
borrowings.
5. Real Property Waiver.**
6. UCC-1 Financing Statements with respect to the Additional Commitment
Collateral.
7. UCC search (Lender will obtain).
8. Certificate of Chief Financial Officer stating that (i) there are no liens,
charges, security interests or other encumbrances that may affect Lender's
right, title and interest in the Additional Commitment Collateral and
there are no UCC-1 financing statements filed or in the process of being
filed against any of the Additional Commitment Collateral, (ii) Borrower is
performing according to ▇▇▇▇▇▇▇▇'s Additional Commitment Business Plan,
(iii) no change which is a Material Adverse Effect has occurred in the
financial condition of Borrower, (iv) no default has occurred, and (v) the
representations and warranties in Section 5 of the Senior Loan and Security
Agreement are true and correct as if made on the date of the Additional
Commitment Loan.
9.* Certificate from the Secretary of State of ▇▇▇▇▇▇▇▇'s state of
incorporation; and from the state in which ▇▇▇▇▇▇▇▇'s chief executive
office is located, if different, stating the Borrower is in good standing
or is authorized to transact business, as the case may be, dated not more
than thirty days prior to the first Additional Commitment Loan (Lender will
obtain).
10.* ▇▇▇▇▇▇▇▇'s Additional Commitment Business Plan.
11. ▇▇▇▇▇▇▇▇'s most recent financial statements.
12. List of proposed Additional Commitment Collateral.
13. Purchase documentation verifying Borrower's ownership of Additional
Commitment Collateral.
14. See Section 3A of the Senior Loan and Security Agreement for additional
conditions to closing.
15. lntercreditor Agreement, if applicable.
* First Additional Commitment Loan only.
** Required if any Collateral is a fixture, i.e., attached to real property,
or located in certain states.
AMENDMENT NO.2 TO SENIOR LOAN AND SECURITY AGREEMENT NO. L6190
THIS AMENDMENT NO. 2 TO SENIOR LOAN AND SECURITY AGREEMENT ("Amendment No.
2") is entered into effective April 30, 1999, by and between PHOENIX LEASING
INCORPORATED as lender ("Lender") and iOWN, INC. as Borrower ("Borrower").
WHEREAS, ▇▇▇▇▇▇ and HOME SHARK, INC., as Borrower, entered into (i) the Senior
Loan and Security Agreement No. L6190 dated as of November 20, 1998, ("Security
Agreement"), (ii) all Senior Secured Promissory Notes, (the "Note(s)") and (iii)
the other instruments and documents contemplated by the Security Agreement (with
the Security Agreement and the Note(s), the "Loan Documents").
WHEREAS, Borrower has changed its name from HOME SHARK, INC. to iOWN, INC.;
WHEREAS, ▇▇▇▇▇▇ and Borrower now wish to amend each of the Loan Documents to
reflect the Borrower's name change;
NOW, THEREFORE, for valuable consideration, the receipt of which is hereby
acknowledged, each of the Loan Documents in which the Borrower is referred to as
HOME SHARK, INC. is amended to change such reference to read iOWN, INC. All of
the other terms and conditions in each of the Loan Documents are hereby
reaffirmed and ratified.
Borrower will do and perform any act, and will execute, acknowledge, deliver,
file, register, record and deposit (and will file, reregister, rerecord or
redeposit whenever required) all instruments and documents required by law or
reasonably requested by Lender to protect, to ▇▇▇▇▇▇'s satisfaction, ▇▇▇▇▇▇'s
security interest in the Equipment financed pursuant to the Security Agreement.
This Amendment No. 2 shall be governed by California law, without giving effect
to conflicts of law principles.
All defined terms shall have the same meaning as in the Security Agreement
except as specifically provided herein. In all other respects, the Loan
Documents remain unchanged.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 as of the
date above written.
LENDER: BORROWER:
PHOENIX LEASING INCORPORATED iOWN, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------ --------------------------
Name: ▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
---------------------- -----------------------------
Title: AVP Title: CFO
--------------------- ---------------------------
CORPORATE RESOLUTION TO BORROW
RESOLVED: That this corporation, HOME SHARK, INC., borrow funds from PHOENIX
LEASING INCORPORATED, a California corporation, ("Lender") and grant as
collateral for such borrowings such items of personal property and fixtures,
and upon such terms and conditions, as the officer or officers hereinafter
authorized, in their discretion, may deem necessary or advisable; provided,
--------
however, that the aggregate principal amount of borrowings hereunder shall
-------
not exceed the sum [*].
RESOLVED FURTHER: That:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ CFO Secretary /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------- ------------- -------------------
(Print or type name) (Title of Corporate Officer) (specimen signature)
or
_____________________ ___________________________ ________________________
(Print or type name) (Title of Corporate Officer) (specimen signature)
of this corporation (this officer or officers authorized to act pursuant
hereto being hereinafter designated as "authorized officers"), are
individually authorized, directed and empowered, in the name of this
corporation, to execute and deliver to Lender, and ▇▇▇▇▇▇ is requested to
accept, any notes, security agreements, and other documents or agreements
that may be required by Lender in connection with such borrowings.
RESOLVED FURTHER: That the authorized officers are individually authorized,
directed and empowered, in the name of this corporation, to do or cause to be
done all such further acts and things as they shall deem necessary,
advisable, convenient, or proper in connection with the execution and
delivery of any such notes, security agreements, and other documents or
agreements and in connection with or incidental to the carrying of the same
into effect, including without limitation, the execution, acknowledgment, and
delivery of all instruments and documents which may reasonably be required by
Lender under or in connection with any such borrowing.
RESOLVED FURTHER: That Lender is authorized to act upon these resolutions
until written notice of their revocation is delivered to Lender, and that the
authority hereby granted shall apply with equal force and effect to the
successors in office of the officers herein named.
I, ▇▇▇▇▇▇ ▇▇▇▇, President and CEO of HOME SHARK, INC., a corporation
incorporated under the laws of the State of California, do hereby certify
that the foregoing is a full, true and correct copy of resolutions of
the Board of Directors of the said corporation, duly and regularly passed or
adopted by the Board of Directors of the said corporation as required by law
and by the by-laws of the said corporation on the 19 day of August, l998.
I further certify that said resolutions are still in full force and effect
and have not been amended or revoked and that the specimen signatures appearing
above are the signatures of the officers authorized to sign for this corporation
by virtue of the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such secretary, and affixed
the corporate seal of the said corporation, this 12 day of February, 1999.
[SEAL] /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
PRESIDENT AND CEO OF HOME SHARK, INC.
(PERSON WHO SIGNS HERE MUST BE DIFFERENT
FROM PERSON(S) WHO SIGNED ABOVE.)
[*] Confidential Treatment Requested