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EXHIBIT 10.9
T B C C
LOAN AND SECURITY AGREEMENT
Borrower: Backweb Technologies Inc.,
a Delaware Corporation
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Date: December 24, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date, between
the above borrower(s) (jointly and severally, the "Borrower"), having its chief
executive office and principal place of business at the address shown above,
and TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation, ("TBCC")
having its principal office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and having an office at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇. The Schedule to this Agreement (the "Schedule") being signed
concurrently is an integral part of this Agreement. (Definitions of certain
terms used in this Agreement are set forth in Section 9 below.) The parties
agree as follows:
1. LOANS.
1.1. Loans. TBCC, subject to the terms and conditions of this Agreement,
agrees to make loans (the "Loans") to Borrower, from time to time during the
period from the date of this Agreement to the Maturity Date set forth in the
Schedule, at Borrower's request, in an aggregate principal amount at any one
time outstanding not to exceed the Credit Limit shown on the Schedule. If at
any time the total outstanding Loans and other monetary Obligations exceed said
limit, Borrower shall repay the excess immediately without demand. Borrower
shall use the proceeds of all Loans solely for lawful general business purposes.
1.2. Due Date. The Loans, all accrued interest and all other monetary
Obligations shall be payable in full on the Maturity Date. Borrower may borrow,
repay and reborrow Loans (other than any Term Loans), in whole or in part, in
accordance with the terms of this Agreement.
1.3. Loan Account. TBCC shall maintain an account on its books in the name
of Borrower (the "Loan Account"). All Loans and advances made by TBCC to
Borrower or for Borrower's account and all other monetary Obligations will be
charged to the Loan Account. All amounts received by TBCC from Borrower or for
Borrower's account will be credited to the Loan Account. TBCC will send
Borrower a monthly statement reflecting the activity in the Loan Account, and
each such monthly statement shall be an account stated between Borrower and
TBCC and shall be final conclusive and binding absent manifest error.
1.4. Collection of Receivables. Borrower shall remit to TBCC all
Collections including all checks, drafts and other documents and instruments
evidencing remittances in payment (collectively referred to as "Items of
Payment") within one Business Day after receipt, in the same form as received,
with any necessary indorsements. For purposes of calculating interest due to
TBCC, credit will be given for Collections and all other proceeds of Collateral
and other payments to TBCC three Business Days after receipt of cleared funds.
For all purposes of this Agreement any cleared funds received by TBCC later
than 10:00 a.m. (California time) on any Business Day shall be deemed to have
been received on the following Business Day and any applicable interest or fee
shall continue to accrue. Borrower's Loan Account will be credited only with
the net amounts actually received in payment of Receivables, and such payments
shall be credited to the Obligations in such order as TBCC shall determine in
its discretion. Pending delivery to TBCC, Borrower will not commingle any Items
of Payment with any of its other funds or property, but will segregate them
from the other assets of Borrower and will hold them in trust and for the
account and as the property of TBCC. Borrower hereby agrees to endorse any
Items of Payment upon the request of TBCC.
1.5. Reserves. TBCC may, from time to time, in its Good Faith business
Judgment: (i) establish and modify reserves against Eligible Receivables and
Eligible Inventory, (ii) modify advance rates with respect to Eligible
Receivables and Eligible Inventory, (iii) modify the standards of eligibility
set forth in the definitions of Eligible Receivables and Eligible Inventory,
and (iv) establish reserves against available Loans.
1.6. Term.
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TBCC LOAN AND SECURITY AGREEMENT
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(a) The term of this Agreement shall be from the date of this Agreement to
the Maturity Date set forth in the Schedule, unless sooner terminated in
accordance with the terms of this Agreement, provided that the Maturity Date
shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless
one party gives written notice to the other, not less than sixty days prior to
the next Maturity Date, that such party elects to terminate this Agreement
effective on the next Maturity Date. On the Maturity Date or on any earlier
termination of this Agreement Borrower shall pay in full all Obligations, and
notwithstanding any termination of this Agreement all of TBCC's security
interests and all of TBCC's other rights and remedies shall continue in full
force and effect until payment and performance in full of all Obligations.
(b) This Agreement may be terminated prior to the Maturity Date as
follows: (i) by Borrower, effective three Business Days after written notice of
termination is given to TBCC; or (ii) by TBCC at any time after the occurrence
* of an Event of Default, without notice, effective immediately. If this
Agreement is terminated by Borrower or by TBCC under this Section 1.6(b).
Borrower shall pay to TBCC a termination fee (the "Termination Fee") in the
amount shown on the Schedule. The Termination Fee shall be due and payable on
the effective date of termination. Notwithstanding the foregoing, Borrower
shall have no right to terminate this Agreement at any time that any principal
of, or interest on any of the Loans or any other monetary Obligations are
outstanding, except upon prepayment of all Obligations and the satisfaction of
all other conditions set forth in the Loan documents.
* AND DURING THE CONTINUANCE
1.7. Payment Procedures. Borrower hereby authorizes TBCC to charge the
Loan Account with the amount of all interest, fees, expenses and other payments
to be made hereunder and under the other Loan Documents. TBCC may, but shall not
be obligated to, discharge Borrower's payment obligations hereunder by so
charging the Loan Account. Whenever any payment to be made hereunder is due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due.
1.8. Conditions to Initial Loan. The obligation to TBCC to make the
initial Loan is subject to the satisfaction of the following conditions prior
to or concurrent with such initial Loan, and Borrower shall cause all such
conditions to be satisfied by the Closing Deadline set forth in the Schedule:
(a) Except for the filing of termination statements under the Code by the
existing lender to Borrower whose loans are being repaid with the Loan
proceeds, no consent or authorization of, filing with or other act by or in
respect of any Governmental Authority or any other Person is required in
connection, with the execution, delivery, performance, validity or
enforceability of this Agreement, or the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or the
continuing operations of the Borrower following the consummation of such
transactions.
(b) TBCC and its counsel shall have performed (i) a review satisfactory to
TBCC of all of the Material Contracts and other assets of the Borrower, the
financial condition of the Borrower, including all of its tax, litigation,
environmental and other potential contingent liabilities, and the corporate and
capital structure of the Borrower and (ii) a pre-closing audit and collateral
review, in each case with results satisfactory to TBCC.
(c) TBCC shall have received the following, each dated the date of the
initial Loan or as of an earlier date acceptable to TBCC, in form and substance
satisfactory to TBCC and its counsel; (i) a Depository Account Agreement (as
TBCC shall designate), duly executed by the Borrower and its bank on TBCC's
standard form; (ii) acknowledgement copies of Uniform Commercial Code financing
statements (naming TBCC as secured party and the Borrower as debtor), duly filed
in all jurisdictions that TBCC deems necessary or desirable to perfect and
protect the Lines created hereunder, and evidence that all other filings,
registrations and recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be necessary to
create, in favor of TBCC, a perfected first priority Line on the Collateral;
(iii) the opinion of counsel for the Borrower covering such matters incident to
the transactions contemplated by this Agreement as TBCC may specify in its
discretion; (iv) * all policies of insurance required by this Agreement and the
other Loan Documents, together with loss payee endorsements for all such
policies naming TBCC as lender loss payee and an additional insured; (v) copies
of the Borrower's articles or certificate of incorporation, certified as true,
correct and complete by the secretary of state of Borrower's state of
incorporation within 45 days of the date hereof; (vi) copies of the bylaws of
the Borrower and a copy of the resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this Agreement,
the other Loan Documents, and the transactions contemplated hereby and thereby,
attached to which is a certificate of the Secretary or an Assistant Secretary of
the Borrower certifying (A) that such copies of the bylaws and resolutions are
true, complete and accurate copies thereof, have not been amended or modified
since the date of such certificate and are in full force and effect and (B) the
incumbency, names and true signatures of the officers of the Borrower**; (vii)
a good standing certificate from the Secretary of State of Borrower's state of
incorporation and each state in which the Borrower is qualified as a foreign
corporation, each dated within ten days of the date hereof; (viii) the
additional documents and agreements, if any, listed in the Schedule; and (ix)
such other agreements and instruments as TBCC deems necessary in its sole and
absolute discretion in connection with the transactions contemplated hereby.
* AN INSURANCE CERTIFICATE WITH RESPECT TO (AND, ON TBCC'S REQUEST, COPIES
OF)
** AUTHORIZED TO EXECUTE THE LOAN DOCUMENTS ON BEHALF OF THE BORROWER
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1.9. Conditions to Lending. The obligation of TBCC to make any Loan is
subject to the satisfaction of the following conditions precedent:
(a) There shall be no pending or, to the knowledge of Borrower
threatened litigation, proceeding, inquiry or other action relating to this
Agreement, or any other Loan Document, or which could be expected to have a
Material Adverse Effect in the judgment of TBCC;
(b) Borrower shall be in compliance with all Requirements of Law and
Material Contracts, other than such noncompliance that could not have a
Material Adverse Effect;
(c) The Liens in favor of TBCC shall have been duly perfected and
shall constitute first priority Liens, except for Permitted Liens;
(d) All representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date of
such Loan as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have been
true and correct as of such earlier date;
(e) No Default or Event of Default shall have occurred and be
continuing or would result from the making of the requested Loan as of the date
of such requests; and
(f) No Material Adverse Effect shall have occurred.
2. INTEREST AND FEES.
2.1. Interest. Borrower shall pay TBCC interest on all outstanding Loans
and other monetary Obligations, at the interest rate set forth in the Schedule.
Interest shall be payable monthly in arrears on the first Business Day of each
month, and on the Maturity Date. Following the occurrence and during the
continuance of any Event of Default, the interest rate applicable to all
Obligations shall be increased by two percent per month.
2.2. Fees. Borrower shall pay TBCC the fees set forth in the Schedule.
2.3. Calculations. All interest and fees under this Agreement shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in the period of which such interest or fees are payable.
2.4. Taxes. Any and all payments by Borrower under this Agreement or any
other Loan Document shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or
withholdings and penalties, interest and all other liabilities with respect
thereto, excluding in the case of TBCC, taxes imposed on its net income and
franchise taxes imposed on it by the jurisdiction under the laws of which TBCC
is organized or any political subdivision thereof.
3. SECURITY.
3.1. Grant of Security Interest. To secure the payment and performance
when due of all of the Obligations. Borrower hereby grants to TBCC a security
interest in all of its present and future Receivables. Investment Property,
Inventory, Equipment, Other Property and other Collateral wherever located.*
* NOTWITHSTANDING THE FOREGOING, THE SECURITY INTEREST GRANTED HEREIN SHALL
NOT EXTEND TO AND THE TERM "COLLATERAL" SHALL NOT INCLUDE ANY LICENSES UNDER
WHICH BORROWER IS A LICENSEE, TO THE EXTENT THE GRANTING OF A SECURITY INTEREST
THEREIN IS PROHIBITED BY OR WOULD CONSTITUTE A DEFAULT UNDER SUCH LICENSE (BUT
ONLY TO THE EXTENT SUCH PROHIBITION IS ENFORCEABLE UNDER APPLICABLE LAW).
3.2. Other Liens; Location of Collateral. Borrower represents, warrants
and covenants that all of the Collateral is, and will at all times continue to
be, free and clear of all Liens, other than Permitted Liens and Liens in favor
of TBCC. All Collateral is and will continue to be maintained at the locations
shown on the Schedule*.
*OR ANY OTHER LOCATION WITHIN THE UNITED STATES PREVIOUSLY DISCLOSED TO
TBCC IN CONFORMITY WITH THE NOTICE REQUIREMENTS OF SECTION 5.8(c).
3.3. Receivables.
(a) Schedules and Other Actions. As often as requested by TBCC,
Borrower shall execute and deliver to TBCC written schedules of Receivables and
Eligible Receivables (but the failure to execute or deliver any schedule shall
not affect or limit TBCC's security interest in all Receivables). On TBCC's
request, Borrower shall also furnish to TBCC copies of invoices to customers
and shipping and delivery receipts. Borrower shall deliver to TBCC the
originals of all letters of credit, notes, and instruments in its favor and
such endorsements or assignments as TBCC may reasonably request and, upon the
request of TBCC, Borrower shall deliver to TBCC all certificated securities
with respect to any Investment Property; with all necessary indorsements, and
obtain such account control agreements with securities intermediaries and take
such other action with respect to any Investment Property, as TBCC shall
request, in form and substance satisfactory to TBCC. Upon request of TBCC
Borrower additionally shall obtain consents from any letter of credit issuers
with respect to the assignment of TBCC of any letter of credit proceeds.
(b) Records, Collections. Borrower shall report all customer credits
to TBCC, on the regular reports to TBCC in the form from time to time specified
by TBCC. Borrower shall notify TBCC of all returns and recoveries of
merchandise and of all claims asserted with respect to merchandise, on its
regular reports to TBCC. Borrower shall not settle or adjust any dispute or
claim, or grant any discount, credit or allowance or accept any return of
merchandise, except in the ordinary course of its business, without TBCC's prior
written consent.
(c) Representations. Borrower represents and warrants to TBCC that
each Receivable with respect to which Loans are requested by Borrower shall, on
the date each Loan is
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requested and made, represent an undisputed, bona fide, existing, unconditional
obligation of the account debtor created by the sale, delivery, and acceptance
of goods, the licensing of software or the rendition of services, in the
ordinary course of Borrower's business, and meet the Minimum Eligibility
Requirements set forth in Section 9.1(a) below.
3.4. Inventory. Borrower shall maintain full, accurate and complete
records respecting the Inventory describing the kind, type and quantity of the
Inventory and Borrower's cost therefor, withdrawals therefrom and additions
thereto, including a perpetual inventory for work in process and finished goods.
3.5. Equipment. Borrower shall at all times keep correct and accurate
records itemizing and describing the location, kind, type, age and condition of
the Equipment, Borrower's cost therefor and accumulated depreciation thereof and
retirements, sales, or other dispositions thereof. Borrower shall keep all of
its Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, ordinary wear and tear
excepted. No Equipment shall be annexed or affixed to or become part of any
realty, unless the owner of the realty has executed and delivered a Landlord
Waiver in such form as TBCC shall specify. Where Borrower is permitted to
dispose of any Equipment under this Agreement or by any consent thereto
hereafter given by TBCC. Borrower shall do so at arm's length, in good faith and
by obtaining the maximum amount of recovery practicable therefor and without
impairing the operating integrity or value of the remaining Equipment.
3.6. Investment Property. Borrower shall have the right to retain all
Investment Property payments and distributions, unless and until a Default or an
Event of Default has occurred. If a Default or an Event of Default exists,
Borrower shall hold all payments on, and process of, and distributions with
respect to, Investment Property in trust for TBCC, and Borrower shall deliver
all such payments, proceeds and distributions to TBCC, immediately upon receipt,
in their original form, duly endorsed, to be applied to the Obligations in such
order as TBCC shall determine. Upon the request of TBCC, any such distributions
and payments with respect to any Investment Property held in any securities
account shall be held and retained in such securities account as part of the
Collateral.
3.7. Further Assurances. Borrower will perform any and all steps that TBCC
may reasonably request to perfect TBCC's security interests in the Collateral,
including, without limitation, executing and filing financing and continuation
statements in form and substance satisfactory to TBCC. TBCC is hereby authorized
by Borrower to sign Borrower's name or file any financing statements or similar
documents or instruments covering the Collateral whether or not Borrower's
signature appear thereon. Borrower agrees, from time to time, at TBCC's request,
to file notices of Liens, financing statements, similar documents or
instruments, and amendments, renewals and continuations thereof, and cooperate
with TBCC, in connection with the continued perfection and protection of the
Collateral. If any Collateral is in the possession or control of any Person
other than a public warehouseman where the warehouse receipt is in the name of
or held by TBCC, Borrower shall notify such Person of TBCC's security interest
therein and upon request*, instruct such Person or Persons to hold all such
Collateral for the account of TBCC and subject to TBCC's instructions. If so
requested by TBCC, Borrower will deliver to TBCC warehouse receipts covering any
Collateral located in warehouses showing TBCC as the beneficiary thereof and
will also cause the warehouseman to execute and deliver such agreements as TBCC
may request relating to waivers of liens by such warehouseman and the release of
the Inventory to TBCC on its demand. Borrower shall defend the Collateral
against all claims and demands of all Persons.
*OF TBCC.
3.8. Power of Attorney. Borrower hereby appoints and constitutes TBCC as
Borrower's attorney-in-fact (i) to request at any time from account debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the continuance of an Event of Default, to
convey any item of Collateral to any purchaser thereof, (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue the Lien on any Collateral granted hereunder, (iv) to execute and
delivery to any securities intermediary or other Person any entitlement order,
account control agreement or other notice, document or instrument with respect
to any Investment Property, and (v) to make any payment or take any act
necessary or desirable to protect or preserve any Collateral. TBCC's authority
hereunder shall include, without limitation, the authority to * execute and give
receipt for any certificate of ownership or any document, transfer title to any
item of Collateral. This power of attorney is coupled with an interest and is
irrevocable.
* TAKE ANY OTHER ACTIONS ARISING FROM OR INCIDENT TO THE POWERS GRANTED TO
TBCC UNDER THIS AGREEMENT, AND, UPON THE OCCURRENCE AND DURING THE CONTINUANCE
OF AN EVENT OF DEFAULT, THE AUTHORITY TO
4. Representations and Warranties of Borrower. Borrower represents and
warrants as follows:
4.1. Organization, Good Standing and Qualification. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State set forth above, (ii) has the corporate power and authority to own
its properties and assets and to transact the businesses in which it is engaged
and (iii) is duly qualified, authorized to do business and in good standing in
each jurisdiction where it is engaged in business, except to the extent that the
failure to so qualify or be in good standing would not have a Material Adverse
Effect.
4.2. Locations of Offices, Records and Collateral. The address of the
principal place of business and chief executive
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office of Borrower is, and the books and records of Borrower and all of its
chattel paper and records relating to Collateral are maintained exclusively in
the possession of Borrower at, the address of Borrower specified in the heading
of this Agreement. Borrower has places of business, and Collateral is located,
only at such address and at the addresses set forth in the Schedule and at any
additional locations reported to TBCC as provided in Section 5.8(c) as to which
TBCC has taken all necessary action to perfect and protect its security
interests in the Collateral at any such locations.
4.3. Authority. Borrower has the requisite corporate power and authority
to execute, deliver and perform its obligations under each of the Loan
documents. All corporate action necessary for the execution, delivery and
performance by Borrower of the Loan Documents has been taken.
4.4. Enforceability. This Agreement is, and, when executed and delivered,
each other Loan Document will be, the legal, valid and binding obligation of
Borrower enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and general principles of equity.
4.5. No Conflict. The execution, delivery and performance of each Loan
Document by Borrower does not and will not contravene (i) any of the Governing
Documents, (ii) any Requirement of Law or (iii) any Material Contract and will
not result in the imposition of any Liens other than in favor of TBCC.
4.6. Consents and Filings. No consent, authorization or approval of, or
filing with or other act by, any shareholders of Borrower or any Governmental
Authority or other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement or any
other Loan Document, the consummation of the transactions contemplated hereby or
thereby or the continuing operations of Borrower following such consummation,
except (i) those that have been obtained or made, (ii) the filing of financing
statements under the Uniform Commercial Code and (iii) any necessary filings
with the U.S. Copyright Office and the U.S. Patent and Trademark Office.
4.7. Solvency. Borrower is Solvent and will be Solvent upon the completion
of all transactions contemplated to occur on or before the date of this
Agreement (including, without limitation, the Loans to be made on the date of
this Agreement).
4.8. Financial Data. Borrower has provided to TBCC complete and accurate *
Financial Statements, which have been prepared in accordance with ▇▇▇▇ **
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the
periods covered, subject, in the case of any quarterly financial statements, to
normal year-end adjustments and the absence of notes. Borrower has no
Contingent Obligation or liability for taxes, unrealized losses, unusual forward
or long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto. Since the last date covered by
such Financial Statements, there has been no sale, transfer or other
disposition by Borrower of any material part of its business or property and no
purchase or other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the financial
condition of Borrower at said date. Since said date, (i) there has been no
change, occurrence, development or event which has had or could reasonably be
expected to have a Material Adverse Effect and (ii) none of the capital stock
of Borrower has been redeemed, retired, purchased or otherwise acquired for
value by Borrower.
* CONSOLIDATED
** (EXCEPT FOR THE ABSENCE OF FOOTNOTES AND SUBJECT TO NORMAL YEAR-END
ADJUSTMENTS WITH RESPECT TO UNAUDITED FINANCIAL STATEMENTS)
4.9. Accuracy and Completeness of Information. All data, reports and
information previously, now or hereafter furnished by or on behalf of Borrower
to TBCC or the Auditors are or will be true and accurate in all material
respects on the date as of which such data, reports and information are dated
or certified, and not incomplete by omitting to state any material fact
necessary to make such data, reports and information not materially misleading
at such time. There are no facts now known to Borrower which individually or in
the aggregate would reasonably be expected to have a Material Adverse Effect
and which have not been disclosed in writing to TBCC.
4.10. No Joint Ventures, Partnerships or Subsidiaries. Borrower is not
engaged in any joint venture or partnership with any other Person. Borrower has
no Subsidiaries.
4.11. Corporate and Trade Name. During the past five years, Borrower has
not been known by or used any other corporate, trade or fictitious name except
for its name as set forth on the signature page of this Agreement and the other
names specified in the Schedule.
4.12. No Actual or Pending Material Modification of Business. There exists
no actual or, to the best of Borrower's knowledge, threatened termination,
cancellation or limitation of, or any modification or change in the business
relationship of Borrower with any customer or group of customers whose
purchases individually or in the aggregate are material to the operation of
Borrower's business or with any material supplier.
4.13. No Broker's or Finder's Fees. No broker or finder brought about this
Agreement or the Loans. No broker's or finder's fees or commissions will be
payable by Borrower to any Person in connection with the transactions
contemplated by this Agreement.
4.14. Taxes and Tax Returns. Borrower has properly completed and timely
filed all income tax returns it is required to file. The information filed is
complete and accurate in all material respects. All deductions taken in such
income tax returns are appropriate and in accordance with applicable laws
and regulations, except deductions that may have been disallowed but are being
challenged in good faith
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and for which adequate reserves have been made in accordance with GAAP. All
taxes, assessments, fees and other governmental charges for periods beginning
prior to the date of this Agreement have been timely paid (or, if not yet due,
adequate reserves therefor have been established in accordance with GAAP)
and Borrower has no liability for taxes in excess of the amounts so paid or
reserves so established. No deficiencies for taxes have been claimed, proposed
or assessed by any taxing or other Governmental Authority against Borrower and
no notice of any tax Lien has been filed. There are no pending or threatened
audits, investigations or claims for or relating to any liability for taxes and
there are no matters under discussion with any Governmental Authority which
could result in an additional liability for taxes. No extension of a statute of
limitations relating to taxes, assessments, fees or other governmental charges
is in effect with respect to Borrower. Borrower is not a party to and does not
have any obligations under any written tax sharing agreement or agreement
regarding payments in lieu of taxes.
4.15. No Judgments or Litigation. Except as set forth in the Schedule, no
judgments, orders, writs or decrees are outstanding against Borrower, nor is
there now pending or, to the knowledge of Borrower, threatened litigation,
contested claim, investigation, arbitration, or governmental proceeding by or
against Borrower that (i) could individually or in the aggregate be likely in
the reasonable business judgment of TBCC to have a Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of this
Agreement, any other Loan Document or the consummation of the transactions
contemplated hereby or thereby.
4.16. Investments; Contracts. Borrower (i) has not committed to make any
Investment; (ii) is not a party to any indenture, agreement, contract,
instrument or lease or subject to any charter, by-law or other corporate
restriction or any injunction, order, restriction or decree, which would
materially and adversely affect its business, operations, assets or financial
condition; (iii) is not a party to any take or pay contract as to which it is
the purchaser; or (iv) has no material contingent or long-term liability,
including management contracts (excluding employment contracts of full-time
individual officers or employees), which could have a Material Adverse Effect.
4.17. No Defaults; Legal Compliance. Borrower is not in default under any
term of any Material Contract or in violation of any Requirement of Law *, nor
is Borrower subject to any investigation with respect to a claimed violation of
any Requirement of Law.
* , EXCEPT, IN EACH CASE, TO THE EXTENT THAT SUCH NON-COMPLIANCE COULD NOT
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.
4.18. Rights in Collateral; Priority of Liens. All Collateral is owned or
leased by Borrower, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid, enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.
4.19. Intellectual Property. Set forth in the written Representations and
Warranties of Borrower previously delivered to TBCC is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights
(registered and unregistered), and all applications therefor and licenses
thereof, of Borrower. Borrower owns or licenses all material patents,
trademarks, service-marks, logos, tradenames, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. To the best of its knowledge, Borrower
has not infringed any patent, trademark, service-▇▇▇▇, tradename, copyright,
license or other right owned by any other Person by the sale or use of any
product, process, method, substance, part or other material presently
contemplated to be sold or used, where such sale or use would reasonably be
expected to have a Material Adverse Effect and no claim or litigation is
pending, or to the best of Borrower's knowledge, threatened against or
affecting Borrower that contests its right to sell or use any such product,
process, method, substance, part or other material.
4.20. Labor Matters. There are no existing or threatened strikes, lockouts
or other disputes relating to any collective bargaining or similar agreement to
which Borrower is a party which would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect.
4.21. Licenses and Permits. Borrower has obtained and holds in full force
and effect, all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary or advisable for the operation of its business as
presently conducted and as proposed to be conducted, except where the failure
to possess any of the foregoing (individually or in the aggregate) would not
have a Material Adverse Effect.
4.22. Government Regulation. Borrower is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law that limits its ability to incur indebtedness or its ability
to consummate the transactions contemplated by this Agreement and the other
Loan Documents.
4.23. Business and Properties. The business of Borrower is not affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be
expected to have a Material Adverse Effect.
4.24. Affiliate Transactions. Borrower is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any Affiliate of
Borrower is a party except (i) in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and (ii) upon fair
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and reasonable terms no less favorable to Borrower than it could obtain in a
comparable arm's-length transaction with an unaffiliated Person.
4.25. Survival of Representations. All representations made by
Borrower in this Agreement and in any other Loan Document executed and
delivered by it in connection herewith shall survive the execution and delivery
hereof and thereof and the closing of the transactions contemplated hereby and
thereby.
5. AFFIRMATIVE COVENANTS OF THE BORROWER
Until termination of this Agreement and payment and satisfaction of all
Obligations:
5.1. Corporate Existence. Borrower shall (i) maintain its corporate
existence, (ii) maintain in full force and effect all material licenses, bonds,
franchises, leases, trademarks, qualifications and authorizations to do
business, and all material patents, contracts and other rights necessary or
advisable to the profitable conduct of its business, and (iii) continue in, and
limit its operations to, the same lines of business as presently conducted by
it.
5.2. Maintenance of Property. Borrower shall keep all property useful and
necessary to its business in good working order and condition (ordinary wear
and tear excepted) in accordance with its past operating practices.
5.3. Affiliate Transactions. Borrower shall conduct transactions with any
of its Affiliates on an arm's-length basis or other basis no less favorable to
Borrower and which are approved by the board of directors of Borrower.
5.4. Taxes. Borrower shall pay when due (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided, however, that, unless such tax assessment, charge, levy or
claim has become a Lien on any of the property of Borrower, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have
been made therefor as required in accordance with GAAP.
5.5. Requirements of Law. Borrower shall comply with all Requirements of
Law applicable to it, including, without limitation, all applicable Federal,
State, local or foreign laws and regulations, including, without limitation,
those relating to environmental matters, employee matters, the Employee
Retirement Income Security Act of 1974, and the collection, payment and deposit
of employees' income, unemployment and social security taxes, provided that
Borrower shall not be deemed in violation hereof if Borrower's failure to
comply with any of the foregoing would not require more than $50,000 to cure
the same.
5.6. Insurance. Borrower shall maintain public liability insurance,
business interruption insurance, third party property damage insurance and
replacement value insurance on its assets (including the Collateral) under such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to TBCC in its
commercially reasonable judgment, all of which policies covering the Collateral
shall name TBCC as an additional insured and lender loss payee in case of loss,
and contain other provisions as TBCC may reasonably require to protect fully
TBCC's interest in the Collateral and any payments to be made under such
policies.
5.7. Books and Records; Inspections. Borrower shall (i) maintain books and
records (including computer records) pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice and (ii)
provide TBCC and its agents access to the premises of Borrower at any time and
from time to time, during normal business hours and upon reasonable notice
under the circumstances, and at any time on and after the occurrence * of a
Event of Default, for the purposes of (A) inspecting and verifying the
Collateral, (B) inspecting and copying (at Borrower's expense) any and all
records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
the Auditors**. Borrower shall reimburse TBCC for the reasonable travel and
related expenses of TBCC's employees or, at TBCC's option, of such outside
accountants or examiners as may be retained by TBCC to verify or inspect
Collateral, records or documents of Borrower on a regular basis or for a
special inspection if TBCC deems the same appropriate. If TBCC's own employees
are used, Borrower shall also pay therefor $600 per person per day (or such
other amount as shall represent TBCC's then current standard charge for the
same), or, if outside examiners or accountants are used, Borrower shall also
pay TBCC such sum as TBCC may be obligated to pay as fees therefor.
* AND DURING THE CONTINUANCE OF AN
** PROVIDED THAT SUCH ON-PREMISES INSPECTIONS SHALL BE LIMITED TO TWO IN
ANY CONSECUTIVE 12-MONTH PERIOD, EXCEPT THAT (i) SUCH LIMITATION SHALL NOT APPLY
IF ANY EVENT OF DEFAULT OR EVENT WHICH, WITH NOTICE OR PASSAGE OF TIME OR BOTH,
WOULD CONSTITUTE AS EVENT OF DEFAULT, HAS OCCURRED AND IS CONTINUING, AND (ii)
SUCH LIMIT SHALL NOT APPLY TO ON PREMISES INSPECTIONS BY TBCC AT ITS OWN
EXPENSE. TBCC WILL COMPLY WITH REASONABLE SECURITY REQUIREMENTS OF BORROWER,
BUT THE SAME SHALL NOT IN ANY MANNER RESTRICT THE SCOPE OF TBCC'S INSPECTIONS.
5.8. Notification Requirements. Borrower shall give TBCC the following
notices and other documents:
(a) Notice of Defaults. Borrower shall give TBCC written notice of
any Default or Event of Default within two Business Days after becoming aware
of the same.
(b) Proceedings or Adverse Changes. Borrower shall give TBCC written
notice of any of the following, promptly, and in any event within five Business
Days after Borrower becomes aware of any of the following: (i) any proceeding
being instituted or threatened by or against it in any federal, state, local or
foreign court on or before any com-
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mission or other regulatory body involving a sum, together with the sum
involved in all other similar proceedings, in excess of $50,000 in the
aggregate, (ii) any order, judgment or decree being entered against Borrower or
any of its properties or assets involving a sum, together with the sum of all
other orders, judgments or decrees, in excess of $50,000 in the aggregate, and
(iii) any actual or prospective change, development or event which has had or
could reasonably be expected to have a Material Adverse Effect.
(c) Change of Name or Chief Executive Office; Opening Additional
Places of Business. Borrower shall give TBCC at least 30 days prior written
notice of any change of Borrower's corporate name or its chief executive office
or of the opening of any additional place of business.
(d) Casualty Loss. Borrower shall (i) provide written notice to
TBCC, within ten Business Days, of any material damage to, the destruction of or
any other material loss to any asset or property owned or used by Borrower other
than any such asset or property owned or used by Borrower other than any such
asset or property with a net book value (individually or in the aggregate) less
than $10,000 or any condemnation, confiscation or other taking, in whole or in
part, or any event that otherwise diminishes so as to render impracticable or
unreasonable the use of such asset or property owned or used by Borrower
together with the amount of the damage, destruction, loss or diminution in value
and (ii) diligently file and prosecute its claim or claims for any award or
payment in connection with any of the foregoing.
(e) Intellectual Property. Borrower shall promptly give TBCC
written notice of any copyright registration made by it, any rights Borrower may
obtain to any copyrightable works, new trademarks or any new patentable
inventions, and of any renewal or extension of any trademark registration, or if
it shall otherwise become entitled to the benefit of any patent or patent
application or trademark or trademark application.
(f) Deposit Accounts and Security Accounts. Borrower shall
promptly give TBCC written notice of the opening of any new bank account or
other deposit account, and any new securities account.
5.9 Qualify to Transact Business. Borrower shall qualify to transact
business as a foreign corporation in each jurisdiction where the nature or
extent of its business or the ownership of its property requires it to be so
qualified or authorized and where failure to qualify or be authorized would
have a Material Adverse Effect.
5.10 Financial Reporting. Borrower shall timely deliver to TBCC the
following financial information: the information set forth in the Schedule,
and, when requested by TBCC in its good-faith judgment, any further information
respecting Borrower or any Collateral. Borrower authorizes TBCC to communicate
directly with its officers, employees and Auditors and to examine and make
abstracts from its books and records. Borrower authorizes its Auditors to
disclose to TBCC any and all financial statements, work papers and other
information of any kind that they have with respect to Borrower and its
business and financial and other affairs. Borrower shall deliver a letter
addressed to the Auditors requesting them to comply with the provisions of this
paragraph when requested by TBCC.
5.11 Payment of Liabilities. Borrower shall pay and discharge, * in the
ordinary course of business, all Indebtedness, except where the same may be
contested in good faith by appropriate proceedings and adequate reserves with
respect thereto have been provided on the books and records of borrower in
accordance with GAAP.
* WHEN DUE
5.12 Patents, Trademarks, Etc. Borrower shall do and cause to be done
all things necessary to preserve, maintain and keep in full force and effect
all of its registrations of trademarks, service marks and other marks, trade
names and other trade rights, patents, copyrights and other intellectual
property in accordance with prudent business practices.
5.13 Proceeds of Collateral. Without limiting any of the other terms of
this Agreement, and without implying any consent to any sale or other transfer
of Collateral in violation of any provision of this Agreement, Borrower shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of
any Collateral, immediately upon receipt of the same and in the same form as
received, with any necessary endorsements, and Borrower will not commingle any
such proceeds with any of its other funds or property, but will segregate them
from the other assets of Borrower and hold them in trust and for the account
and as the property of TBCC.
5.14 Solvency. Borrower shall be Solvent at all times.
6. NEGATIVE COVENANTS. Until termination of this Agreement and payment and
satisfaction of all Obligations:
6.1 Contingent Obligations. Borrower will not, directly or indirectly,
incur, assume, or suffer to exist any Contingent Obligation, excluding
indemnities given in connection with this Agreement or the other Loan Documents
in favor of TBCC or in connection with the sale of Inventory or other asset
dispositions permitted hereunder *.
* EXCEPT CONTINGENT OBLIGATIONS AND OTHER SIMILAR THIRD PARTY CREDIT
SUPPORT RELATING TO OBLIGATIONS OF VENDORS AND SUPPLIERS OF BORROWER IN RESPECT
OF TRANSACTIONS ENTERED INTO IN THE NORMAL COURSE OF BUSINESS PROVIDED THAT THE
AGGREGATE AMOUNT OF ANY SUCH GUARANTEES AND OTHER SIMILAR THIRD PARTY CREDIT
SUPPORT SHALL NOT EXCEED $100,000 AT ANY TIME OUTSTANDING, PROVIDED THAT NO
DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER
GIVING EFFECT TO THE MAKING OF THE FOREGOING GUARANTEES OR THE ENTERING INTO
ANY THIRD PARTY CREDIT SUPPORT TRANSACTIONS.
6.2 Corporate Changes. *Borrower will not, directly or indirectly, merge
or consolidate with any Person, or liquidate or dissolve (or suffer any
liquidation or dissolution)**.
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* WITHOUT TBCC'S PRIOR WRITTEN CONSENT (WHICH SHALL NOT BE UNREASONABLY
WITHHELD),
** EXCEPT THAT A WHOLLY-OWNED SUBSIDIARY OF BORROWER MAY MERGE INTO
BORROWER OR ANOTHER WHOLLY-OWNED SUBSIDIARY OF BORROWER WITHOUT TBCC'S PRIOR
WRITTEN CONSENT (BUT BORROWER SHALL PROVIDE PRIOR WRITTEN NOTICE OF THE SAME
TO TBCC).
6.3. Change in Nature of Business. Borrower will not at any time make
any material change in the lines of its business as carried on at the date of
this Agreement or enter into any new line of business.
6.4. Sales of Assets. Borrower will not, directly or indirectly, in any
fiscal year, sell, transfer or otherwise dispose of any assets, or grant any
option or other right to purchase or otherwise acquire any assets other than
(i) Equipment with an aggregate value of less than $25,000 the proceeds of
which shall be paid to TBCC and applied to the Obligations, (ii) sales of
Inventory in the ordinary course of business and (iii) licenses or sublicenses
on a non-exclusive basis of intellectual property in the ordinary course of
Borrower's business.
6.5. Cancellation of Debt. Borrower will not cancel any claim or debt
owed to it, except in the ordinary course of business.
6.6 Loans to Other Persons. Borrower will not at any time make loans or
advance any credit (except to trade debtors in the ordinary course of business)
to any Person in excess of $25,000 in the aggregate at any time for all such
loans.
6.7. Liens. Borrower will not, directly or indirectly, at any time
create, incur, assume or suffer to exist any Lien on or with respect to any of
the Collateral, other than: Liens created hereunder and by any other Loan
Document; and Permitted Liens.
6.8. Dividends, Stock Redemptions. Borrower will not, directly or
indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or rights
to purchase any such capital stock, whether now or hereafter outstanding
(Stock), or make any payment on account of or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Borrower, except for dividends paid solely in stock of the
Borrower*.
* AND REPURCHASES OF STOCK OWNED BY EMPLOYEES, DIRECTORS AND CONSULTANTS
OF BORROWER PURSUANT TO TERMS OF EMPLOYMENT, CONSULTING OR OTHER STOCK
RESTRICTIONS AGREEMENTS AT SUCH TIME AS ANY SUCH EMPLOYEE, DIRECTOR OR
CONSULTANT TERMINATES HIS OR HER AFFILIATIONS WITH THE BORROWER, PROVIDED THAT
NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER IMMEDIATELY PRIOR TO OR AFTER
GIVING EFFECT TO SUCH REPURCHASE, AND PROVIDED THAT THE TOTAL AMOUNT PAID IN
CONNECTION THEREWITH BY BORROWER SHALL NOT EXCEED $50,000 IN ANY CONSECUTIVE
12-MONTH PERIOD.
6.9. Investments in Other Persons. Borrower will not, directly or
indirectly, at any time make or hold any Investment in any Person (whether in
cash, securities or other property of any kind) other than Investments in Cash
Equivalents.
6.10. Partnerships; Subsidiaries; Joint Ventures; Management Contracts.
Borrower will not at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement * or become a partner in any
general or limited partnership or enter into any management contract (other
than an employment contract for the employment of an officer or employee
entered into in the regular course of Borrower's business) permitted third party
management rights with respect to Borrower's business.
* (OTHER THAN JOINT VENTURES OR STRATEGIC PARTNERSHIPS CONSISTING OF
NON-EXCLUSIVE LICENSING OF TECHNOLOGY OR THE PROVIDING OF TECHNICAL SUPPORT)
6.11. Fiscal Year. Borrower will not change its fiscal year.
6.12. Accounting Changes. Borrower will not at any time make or permit
any change in accounting policies or reporting practices, except as required by
GAAP.
6.13. Broker's or Finder's Fees. Borrower will not pay or incur any
broker's or finder's fees in connection with this Agreement or the transactions
contemplated hereby.
6.14. Unusual Terms of Sale. Borrower will not sell goods or products on
extended terms, consignment terms, on a progress billing or ▇▇▇▇ and hold
basis, or on any other unusual terms*.
* EXCEPT IN THE ORDINARY COURSE OF BUSINESS IN CONNECTION WITH RESEARCH
AND DEVELOPMENT PROJECTS (AND IN THAT CASE RECEIVABLES RELATING THERETO WILL
NOT BE "ELIGIBLE RECEIVABLES")
6.15. Amendments of Material Contracts. Borrower will not amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, any Material Contract, if such amendment, modification,
cancellation or termination could have a Material Adverse Effect.
6.16. Sale and Leaseback Obligations. Borrower will not at any time
create, incur or assume any obligations as lessee for the rental of real or
personal property in connection with any sale and leaseback transaction.
6.17. Acquisition of Stock or Assets. Borrower will not acquire or commit
or agree to acquire all or any stock, securities or assets of any other Person
other than Inventory and Equipment acquired in the ordinary course of business.
7. EVENTS OF DEFAULT.
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7.1. Events of Default. The occurrence of any of the following events
shall constitute an Event of Default:
(a) Borrower shall fail to pay any principal, interest, fees, expenses or
other Obligations when payable, whether at stated maturity, by acceleration, or
otherwise; or
(b) Borrower shall default in the performance or observance of any
agreement, covenant, condition, provision or term contained in Section 1.1,
1.2, 1.4, 3.3, 5.7, 5.13, 6 (and its Sections and subsections), or 8.1 of this
Agreement, or Borrower shall fail to perform any non-monetary Obligation which
by its nature cannot be cured; or
(c) Borrower shall default in the performance or observance of any other
agreement, covenant, condition, provision or term of this Agreement (other than
those referred to in Section 7.1(a) above or Section 7.1(b) above) or any other
Loan Document, and such failure continues uncured for a period of five Business
Days after the date it occurs; or
(d) Borrower or any Guarantor shall dissolve, wind up or otherwise cease
to conduct its business; or
(e) Borrower or any Guarantor shall become the subject of (i) an
Insolvency Event except as set forth in clause (e) of the definition of
Insolvency Event or (ii) an Insolvency Event as set forth in clause (e) of the
definition of Insolvency Event that is not dismissed within sixty days; or
(f) any representation or warranty made by or on behalf of Borrower or
any Guarantor to TBCC, under this Agreement or otherwise, shall be incorrect or
misleading in any material respect when made or deemed made; or
(g) A change in the ownership or control of more than 20% of the voting
stock of the Borrower compared to such ownership on the date of this Agreement;
(h) any judgment or order for the payment of money shall be rendered
against Borrower and shall not be stayed, vacated, bonded or discharged within
thirty days; or
(i) any defined "Event of Default" shall occur under any other Loan
Document; or Borrower or any Guarantor shall deny or disaffirm its obligations
under any of the Loan Documents or any Liens granted in connection therewith or
shall otherwise challenge any of its obligations under any of the Loan
Documents; or any Liens granted in any of the Collateral shall be determined to
be void, voidable or invalid, are subordinated * or are not given the priority
contemplated by this Agreement; or
*(OTHER THAN TO PERMITTED LIENS)
(j) any Loan Document shall for any reason cease to create a valid and
perfected Lien on the Collateral purported to be covered thereby, of first
priority (except for Permitted Liens); or
(k) the Auditors for Borrower shall deliver a Qualified opinion on any
financial Statement; or
(l) Borrower or any Guarantor (i) shall fail to pay any Indebtedness
owing to TBCC under any other agreement with TBCC or note or instrument in favor
of TBCC, when due (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise)*, or (ii) shall otherwise be in breach of or
default in any of its obligations under any such agreement, note or instrument
with respect to any such Indebtedness*; or
*BUT TAKING INTO ACCOUNT ANY APPLICABLE CURE PERIOD OR WRITTEN WAIVER BY
TBCC
(m) Borrower or any Guarantor (i) shall fail to pay any Indebtedness in
excess of $50,000 owing to any Person other than TBCC or any interest or
premium thereon, when due (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise)*, or (ii) shall otherwise be in
breach or default in any of its obligations under any agreement with respect to
any such Indebtedness, if the effect of such breach, default or failure to pay
is to cause such Indebtedness to become due or redeemed or permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to declare such Indebtedness due or require such Indebtedness to be
redeemed prior to its stated maturity**; or
*AND SUCH FAILURE TO PAY WHEN DUE HAS NOT BEEN CURED WITHIN ANY APPLICABLE
GRACE PERIOD UNLESS SUCH FAILURE TO PAY HAS BEEN WAIVED BY SUCH PERSON
**AND SUCH BREACH OR DEFAULT HAS NOT BEEN CURED WITHIN ANY APPLICABLE
GRACE PERIOD UNLESS SUCH BREACH OR DEFAULT HAS BEEN WAIVED BY SUCH PERSON
(n) the occurrence of any event or condition that, in TBCC's judgment,
could reasonably be expected to have a Material Adverse Effect.
TBCC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.
7.2. Remedies. Upon the occurrence and during the continuance of an Event
of Default, TBCC shall have all rights and remedies under applicable law and
the Loan Documents, and TBCC may do any or all of the following:
(a) Declare all Obligations to be immediately due and payable (except with
respect to any Event of Default with respect to Borrower set froth in Section
7.1(e), in which case all Obligations shall automatically become immediately
due and payable) without presentment, demand, protest or any other action or
obligation of TBCC;
(b) Cease making any Loans or other extensions of credit to Borrower of
any kind;
(c) Take possession of all documents, instruments, files and records
(including the copying of any computer records) relating to the Receivables or
other Collateral and use (at the expense of Borrower) such supplies or space of
Borrower at Borrower's places of business necessary to administer and collect
the Receivables and other Collateral;
(d) Accelerate or extend the time of payment, compromise, issue credit, or
bring suit on the Receivables and
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other Collateral (in the name of Borrower or TBCC) and otherwise administer and
collect the Receivables and other Collateral;
(e) Collect, receive, dispose of and realize upon any Investment
Property, including withdrawal of any and all funds from any securities
accounts;
(f) Sell, assign and deliver the Receivables and other Collateral,
with or without advertisement, at public or private sale, for cash, on credit or
otherwise, subject to applicable law; and
(g) Foreclose on the security interests created pursuant to the Loan
Documents by any available procedure, take possession of any or all of the
Collateral, with or without judicial process and enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same.
(h) TBCC may bid or become a purchaser at any sale, free from any
right of redemption, which right is expressly waived by Borrower, if permitted
under applicable law. If notice of intended disposition of any Collateral is
required by law, it is agreed that ten days' notice shall constitute reasonable
notification. Borrower will assemble the Collateral and make it available at
such locations as TBCC may specify, whether at the premises of Borrower or
elsewhere, and will make available to TBCC the premises and facilities of
Borrower for the purpose of TBCC's taking possession of or removing the
Collateral or putting the Collateral in salable form.
(i) Borrower recognizes that TBCC may be unable to make a public sale
of any or all of the Investment Property, by reasons of prohibitions contained
in applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
7.3 Receivables. Upon the occurrence and during the continuance of an
Event of Default, or at any time that TBCC believes in good faith that fraud
has occurred or that Borrower has failed to deliver the proceeds of Receivables
or other Collateral to TBCC as required by this Agreement or any other Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with
account debtors for amounts and upon terms which it considers advisable, and
(ii) notify account debtors on the Receivables and other Collateral that the
Receivables and Collateral have been assigned to TBCC, and that payments in
respect thereof shall be made directly to TBCC. If an Event of Default has
occurred and is continuing or TBCC reasonably believes in good faith that fraud
has occurred, or that Borrower has failed to deliver the proceeds of
Receivables or other Collateral to TBCC as required by this Agreement or any
other Loan Document, Borrower hereby irrevocably authorizes and appoints TBCC,
or any Person TBCC may designate, as its attorney-in-fact, at Borrower's sole
cost and expense, to exercise, all of the following powers, which are coupled
with an interest and are irrevocable, until all of the Obligations have been
indefeasibly paid and satisfied in full in cash: (A) to receive, take, endorse,
sign, assign and deliver, all in the name of TBCC or Borrower, any and all
checks, notes, drafts, and other documents or instruments relating to the
Collateral; (B) to receive, open and dispose of all mail addressed to Borrower
and to notify postal authorities to change the address for delivery thereof to
such address as TBCC may designate; and (C) to take or bring, in the name of
TBCC or Borrower, all steps, actions, suits or proceedings deemed by TBCC
necessary or desirable to enforce or effect collection of Receivables and other
Collateral or file and sign Borrower's name on a proof of claim to bankruptcy or
similar document against any obligor of Borrower.
7.4 Right of Setoff. In addition to all rights of offset that TBCC may
have under applicable law, upon the occurrence and during the continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured, TBCC shall have the right to appropriate and apply to
the payment of the Obligations of Borrower all deposits and other obligations
then or thereafter owing by TBCC to or for the credit or the account of
Borrower. In the event that TBCC exercises any of its rights under this
Section, TBCC shall provide notice to Borrower of such exercise, provided that
the failure to give such notice shall not affect the validity of the exercise of
such rights.
7.5 License for Use of Software and Other Intellectual Property. After
the occurrence and during the continuance of an Event of Default, unless
expressly prohibited by any licensor thereof, TBCC is hereby granted a license
to use all computer software programs, data bases, processes, trademarks,
tradenames and materials used by Borrower in connection with its business or in
connection with the Collateral.
7.6 No Marshalling; Deficiencies; Remedies Cumulative. The net cash
proceeds resulting from TBCC's exercise of any of its rights with respect to
Collateral, including any and all Collections (after deducting all of TBCC's
reasonable expenses related thereto), shall be applied by TBCC to such of the
Obligations in such order as TBCC shall elect in its sole and absolute
discretion, whether due or to become due. Borrower shall remain liable to TBCC
for any deficiencies and TBCC shall remit to Borrower or its successor or
assign, any surplus resulting therefrom. The remedies specified in this
Agreement are cumulative, may be exercised in such order and with respect to
such Collateral as TBCC may deem desirable and are not intended to be exclusive,
and the full or partial exercise of any of them shall not preclude the full or
partial exercise of any other available remedy under this Agreement, under any
other Loan Document, at equity or at law.
7.7 Waivers. Borrower hereby waives any bonds, security or sureties
required by any statute, rule or any other law as an incident to any taking of
possession by TBCC of any Collateral. Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights
under this Agreement or any other Loan Document including the taking of
possession of any
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Collateral or the giving of notice to any account debtor or the collection of
any Receivable or other Collateral (other than damages that are the result of
acts or omissions constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the
other Loan Documents have been negotiated by the parties and Borrower
acknowledges that it has been represented by counsel of its own choice and has
consulted such counsel with respect to its rights hereunder.
7.8 Right to Make Payments. In the event that Borrower shall fail to
purchase or maintain insurance required hereunder, or to pay any tax,
assessment, government charge or levy, except as the same may be otherwise
permitted hereunder, or in the event that any Lien prohibited hereby shall not
be paid in full or discharged, or in the event that Borrower shall fail to
perform or comply with any other covenant, promise or obligation to TBCC
hereunder or under any other Loan Document . TBCC may (but shall not be required
to) perform, pay, satisfy, discharge or bond the same for the account of
Borrower, and all amounts so paid by TBCC shall be treated as a Loan hereunder
to Borrower and shall constitute part of the Obligations.
8. ASSIGNMENTS AND PARTICIPATIONS.
8.1. Assignments. Borrower shall not assign this Agreement or any right or
obligation hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of
its rights and obligations under this Agreement and the other Loan Documents*.
* (PROVIDED THAT SUCH PERSON SHALL NOT BE A DIRECT OR INDIRECT COMPETITOR
OF THE BORROWER)
8.2. Participations. TBCC may sell participations in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of the Loans); provided, however, that TBCC's
obligations under this Agreement shall remain unchanged.
8.3. Disclosure. *TBCC may, in connection with any permitted assignment or
participation or proposed assignment or participation pursuant to this
Agreement, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower furnished to TBCC by or on
behalf of Borrower.
* SUBJECT TO SECTION 10.13A HEREOF,
9. DEFINITIONS.
9.1. General Definitions. As used herein, the following terms shall have the
meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
(a) Affiliate means as to any Person, any other Person who directly or
indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or
cause the direction of management or policies (whether through ownership of
voting securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary
voting power for the election of the members of the board of directors or other
governing body of a corporation or twenty percent (20%) or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such
corporation, partnership or other Person.
(b) Agreement means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
(c) Auditors means *a nationally recognized firm of independent public
accountants selected by Borrower and reasonably satisfactory to TBCC.
*ERNST AND YOUNG LLP OR ANOTHER
(d) Bankruptcy Code means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
(e) Borrowing means a borrowing of Loans.
(f) Business Day means any day other than a Saturday, Sunday or any other
day on which commercial banks in Chicago, Illinois are required or permitted by
law to close.
(g) Cash Equivalents means (i) securities issued, guaranteed or insured by
the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of
not more than one year from the date acquired, issued by any U.S. federal or
state chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; and (iv) other
instruments, commercial paper or investments acceptable to TBCC in its sole
discretion.
(h) Collateral means Receivables, Investment Property, Inventory, Equipment,
and Other Property, and all additions and accessions thereto and substitutions
and replacements therefor and improvements thereon, and all proceeds (whether
cash or other property) and products thereof, including, without limitation,
all proceeds of insurance covering the same and all tort claims in connection
therewith, and all records, files, computer programs and files, data and
writings relating to the foregoing, and all equipment containing the foregoing.
(i) Collections means all cash, funds, checks, notes, instruments, any other
form of remittance tendered by account debtors in respect of payment of
Receivables and any other payments received by Borrower with respect to any
other Collateral.
(j) Compliance Certificate means a certificate as to compliance with the
Obligations, on TBCC's standard form (in effect from time to time).
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TBCC LOAN AND SECURITY AGREEMENT
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(k) Contingent Obligation means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
(l) Default means any of the events specified in Section 7.1, whether or
not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
(m) Eligible Inventory means Inventory of Borrower which TBCC in its sole
discretion deems eligible for borrowing, based on such considerations as TBCC in
its sole discretion may deem appropriate from time to time and less any such
reserves as TBCC, in its sole discretion, may require. Without limiting the fact
that the determination of which Inventory is eligible for borrowing is a matter
of TBCC's sole discretion, the following are the minimum requirements for
Inventory to be Eligible Inventory: (i) the Inventory must consist of finished
goods, in good, new and salable condition which is not perishable, not obsolete
or unmerchantable, and is not comprised of raw materials, work in process,
packaging materials or supplies; (ii) the Inventory must meet all applicable
governmental standards; (iii) the Inventory must have been manufactured in
compliance with the Fair Labor Standards Act; (iv) the Inventory must conform in
all respects to the warranties and representations set forth in this Agreement;
(v) the Inventory must at all times be subject to TBCC's duly perfected, first
priority security interests; and (vi) the Inventory must be in Borrower's
exclusive possession, separately identifiable from goods of others, and situated
at Borrower's chief executive office or at one of the other Borrower locations
set forth on the Schedule. The value of Eligible Inventory shall be computed at
the lower of cost (computed on a "first in, first out" basis) or wholesale
market value.
(n) Eligible Receivables means and includes only those Receivables which
TBCC in its sole discretion deems eligible for borrowing, based on such
considerations as TBCC in its sole discretion may deem appropriate from time to
time and less any such reserves as TBCC, in its sole discretion, may require.
Without limiting the fact that the determination of which Receivables are
eligible for borrowing is a matter of TBCC's sole discretion, the following (the
"Minimum Eligibility Requirements") are the minimum requirements for a
Receivable to be an Eligible Receivable; (i) the Receivable must not be
outstanding for more than 90 days from its invoice date, (ii) the Receivable
must not represent progress ▇▇▇▇▇▇▇▇, or be due under a fulfillment or
requirements contract with the account debtor, (iii) the Receivable must not be
subject to any contingencies (including Receivables arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
account debtor may be conditional), (iv) the Receivable must not be owing from
an account debtor with whom the Borrower has any dispute (whether or not
relating to the particular Receivable)*, (v) the Receivable must not be owing
from an Affiliate of Borrower, (vi) the Receivable must not be owing from an
account debtor which is subject to any insolvency or bankruptcy proceeding, or
whose financial condition is not acceptable to TBCC, or which, fails or goes out
of a material portion of its business, (vii) the Receivable must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to TBCC's satisfaction, with the United
States Assignment of Claims Act **), (viii) the Receivable must not be owing
from an account debtor located outside the United States or Canada (unless
pre-approved by TBCC in its discretion in writing, or backed by a letter of
credit satisfactory to TBCC, or FCIA insured satisfactory to TBCC), (ix) the
Receivable must not be owing from an account debtor to whom Borrower is or may
be liable for goods purchased from such account debtor or otherwise ***, (x) the
Receivable must not violate any representation or warranty set forth in this
Agreement, and (xi) the Receivable must not be one in which TBCC does not have a
first-priority, valid, perfected Lien. Without limiting the generality of the
foregoing, Borrower must be in compliance with all requirements of the Loan
Documents regarding registration with the U.S. Copyright Office of any
copyrightable software in order for any Receivable arising from any licensing of
such software to constitute an Eligible Receivable hereunder. Receivables owing
from one account debtor will not be deemed Eligible Receivables to the extent
they exceed 75% of the total eligible Receivables outstanding. In addition, if
more than 50% of the Receivables owing from an account debtor are outstanding
more than 90 days from their invoice date (without regard to unapplied credits)
or are otherwise not eligible Receivables, then all Receivables owing from that
account debtor will be deemed ineligible for borrowing. TBCC may, from time to
time, in its sole discretion, revise the Minimum Eligibility Requirements, upon
written notice to the Borrower.
* TO THE EXTENT OF THE DISPUTE
** PROVIDED THAT TBCC MAY WAIVE SUCH COMPLIANCE IN ITS DISCRETION
*** BUT ONLY TO THE EXTENT OF THE PRICE OF THE PURCHASED GOODS
(o) Equipment means all machinery, equipment, furniture, fixtures,
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central
processing units, terminals, drives, memory units, printers, keyboards,
screens, peripherals and input or output devices, molds, dies, stamps,
vehicles, and other equipment of every kind and nature and wherever situated
now or hereafter owned by Borrower or in which Borrower may have any interest
as lessee or otherwise (to the extent of such interest), together with all
additions and accessions thereto, all replacements and all accessories and
parts therefor, all manuals, blueprints, know-how, warranties and records in
connection therewith, all rights against suppliers, warrantors, manufacturers,
sellers or others in connection therewith, and together with all substitutes
for any of the foregoing.
(p) Event of Default means the occurrence of any of the events specified
in Section 7.1.
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(q) Financial Statements means the balance sheets, profit and loss
statements, and statements of changes in intercompany accounts, if any, for the
period specified, prepared in accordance with GAAP and consistent with prior
practices.
(r) GAAP means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination. Whenever any accounting term is
used herein which is not otherwise defined, it shall be interpreted in
accordance with GAAP.
(s) Good Faith means "good faith" as defined in the Uniform Commercial
Code, from time to time in effect in the State of Illinois.
(t) Governing Documents means the articles or certificate of incorporation
and by-laws of Borrower.
(u) Governmental Authority means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
(v) Guarantor means any present or future guarantor of any or all of the
Obligations.
(w) Indebtedness means, with respect to any Person, as of the date of
determination any indebtedness, liability or obligation of such Person
(including without limitation obligations under capital leases and Contingent
Obligations).
(x) Insolvency Event means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (b) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (c) such Person
shall make a general assignment for the benefit of its creditors or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (d) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law
or take any corporate or similar act in furtherance thereof, or (e) such
Person, or a substantial portion of its property, assets or business shall
become the subject of an involuntary proceeding or petition for its
dissolution, reorganization, and such proceeding is not dismissed or stayed
within sixty days, or the appointment of a receiver, trustee, custodian or
liquidator, and such receiver is not dismissed within sixty days.
(y) Inventory means all present and future goods intended for sale, lease
or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same.
(z) Investment in any Person means, as of the date of determination
thereof, any payment or contribution, or commitment to make a payment or
contribution, by any Person including, without limitation, property contributed
or committed to be contributed by any Person, on its account for or in
connection with its acquisition of any stock, bonds, notes, debentures,
partnership or other ownership interest or any other security of the Person in
whom such Investment is made or any evidence of indebtedness by reason of a
loan, advance, extension of credit, guaranty or other similar obligation for any
debt, liability or indebtedness of such Person in whom the Investment is made.
(aa) Investment Property means any and all investment property of
Borrower, including all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or otherwise,
wherever located, and whether now existing or hereafter acquired or arising.
(bb) Lien means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
(cc) Loan Account has the meaning specified in Section 1.3.
(dd) Loan Documents means this Agreement and all present and future
documents and instruments delivered or to be delivered by Borrower or any of its
Affiliates or any Guarantor under, in connection with or relating to this
Agreement, as each of the same may be amended, supplemented or otherwise
modified from time to time.
(ee) Loans means the loans and financial accommodations made by TBCC
hereunder.
(ff) Material Adverse Effect means (i) a material adverse effect on the
business, operations, results of operations, assets, liabilities or * condition
of Borrower, (ii) the impairment of Borrower's ability to perform its
obligations under the Loan Documents to which it is a party or of TBCC to
enforce the Obligations or realize upon the Collateral or (iii) a material
adverse effect on the value of the Collateral or the amount which TBCC would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of the Collateral.
* FINANCIAL
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(gg) Material Contract means any contract or other arrangement to which
Borrower is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation or failure to renew could have a Material Adverse
Effect.
(hh) Obligations means and includes all loans (including the Loans),
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to TBCC of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document or any other
agreement executed in connection herewith or therewith, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired. The term includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of credit fees, reasonable attorneys' fees, and any
other sum properly chargeable to Borrower under this Agreement, the other Loan
Documents or any other agreement executed in connection herewith or therewith.
(ii) Other Property means all present and future: instruments, documents,
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to receive proceeds of letters of
credit, deposit accounts, chattel paper, certificates, insurance policies,
insurance proceeds, leases, computer tapes, causes of action, judgments, claims
against third parties, leasehold rights in any personal property, books,
ledgers, files and records, general intangibles (including without limitation,
all contract rights, tax refunds, rights to receive tax refunds, patents, patent
applications, copyrights (registered and unregistered), royalties, licenses,
permits, franchise rights, authorizations, customer lists, rights of
indemnification, contribution and subrogation, computer programs, discs and
software, trade secrets, computer service contracts, trademarks, trade names,
service marks and names, logos, goodwill, deposits, choses in action, designs,
blueprints, plans, know-how, telephone numbers and rights thereto, credits,
reserves, and all forms of obligations whatsoever now or hereafter owing to
Borrower), all property at any time in the possession or under the control of
TBCC, and all security given by Borrower to TBCC pursuant to any other Loan
Document or agreement.
(jj) Permitted Liens means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing: (i) Liens for taxes, assessments and other
governmental charges or levies or the claims or demands of landlords, carriers,
wharehousemen, mechanics, laborers, materialmen and other like Persons arising
by operation of law in the ordinary course of business for sums which are not
yet due and payable, (ii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits or
obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business (but nothing in this clause (ii) shall permit the
creation of Liens on Receivables, Investment Property, Inventory or Other
Property), (iii) zoning restrictions, easements, encroachments, licenses,
restrictions or covenants on the use of property which do not materially impair
either the use of the property in the operation of the business of Borrower or
the value of the property, (iv) rights of general application reserved to or
vested in any municipality or other governmental, statutory or public authority
to control or regulate property, or to use property in a manner which does not
materially impair the use of the property for the purposes for which it is held
by Borrower, (v) state and municipal Liens for personal property taxes which are
not yet due and payable, and (vi) Purchase Money Liens.
* EITHER NOT DELINQUENT OR BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS
** (vii) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, IF THE JUDGMENT IS FULLY
COVERED BY INSURANCE OR HAS BEEN DISCHARGED OR EXECUTION THEREOF EFFECTIVELY
STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 30 DAYS OF THE ENTRY THEREOF,
PROVIDED THAT, IF THE JUDGMENT IS NOT FULLY COVERED BY INSURANCE OR EXECUTION
THEREOF HAS NOT BEEN SO STAYED OR BONDED, TBCC SHALL NOT BE REQUIRED TO MAKE ANY
LOANS OR OTHERWISE EXTEND CREDIT TO, OR FOR THE BENEFIT OF BORROWER, (viii)
LEASES OR SUBLEASES AND LICENSES OR SUBLICENSES GRANTED TO OTHERS NOT
INTERFERING IN ANY MATERIAL RESPECT WITH THE BUSINESS OF THE BORROWER, (ix)
LIENS INCURRED IN CONNECTION WITH THE EXTENSION, RENEWAL OR REFINANCING OF THE
INDEBTEDNESS SECURED BY LIENS OF THE TYPE DESCRIBED ABOVE IN CLAUSES (i), (iv),
(vii), and (viii) ABOVE, PROVIDED THAT ANY EXTENSION, RENEWAL OR REPLACEMENT
LIEN IS LIMITED TO THE PROPERTY ENCUMBERED BY THE EXISTING LIEN AND THE
PRINCIPAL AMOUNT OF THE INDEBTEDNESS BEING EXTENDED, RENEWED OR REFINANCED DOES
NOT INCREASE, AND (x) LIENS IN FAVOR OF CUSTOMS DUTIES IN CONNECTION WITH THE
IMPORTATION OF GOODS.
(kk) Person means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization, joint
stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
(ll) Plan means any employee benefit plan, program or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
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(mm) Purchase Money Lien means a Lien on any item of Equipment created
substantially simultaneously with the acquisition of such Equipment for the
purpose of financing such acquisition, provided that such Lien shall attach
only to the Equipment acquired.
(nn) Qualification or Qualified means, with respect to any report of
Auditors covering Financial Statements, a material qualification to such report
(i) resulting from a limitation on the scope of examination of such Financial
Statements or the underlying data, (ii) as to the capability of Borrower to
continue operations as a going concern or (iii) which could be eliminated by
changes in Financial Statements or notes thereto covered by such report (such
as by the creation of or increase in a reserve or a decrease in the carrying
value of assets) and which if so eliminated by the making of any such change
and after giving effect thereto would result in a Default or an Event of
Default.
(oo) Receivables means all present and future accounts and accounts
receivable, together with all security therefor and guarantees thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
(pp) Requirement of Law means (a) the Governing Documents, (b) any
law, treaty, rule, regulation, order or determination of an arbitrator, court
or other Governmental Authority or (c) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, right or
approval binding on Borrower or any of its property.
(qq) Schedule means the Schedule to this Agreement being signed
concurrently by Borrower and TBCC, as amended from time to time.
(rr) Solvent means when used with respect to any Person that as of the
date as to which such Person's solvency is to be measured: (a) the fair salable
value of its assets is in excess of the total amount of its liabilities
(including contingent liabilities as valued in accordance with applicable law)
as they become absolute and matured; (b) it has sufficient capital to conduct
its business; and (c) it is able to meet its debts as they mature.
(ss) Subsidiary means, as to any Person, a corporation or other entity
in which that Person directly or indirectly owns or controls shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or appoint other managers of such corporation or other
entity.
9.2 Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all material
respects with the Financial Statements delivered to TBCC on or before the date
of this Agreement. All accounting determinations for purposes of determining
compliance with this Agreement shall be made in accordance with GAAP as in
effect on the date of this Agreement and applied on a basis consistent in all
material respects with the audited Financial Statements delivered to TBCC on or
before the date of this Agreement. The Financial Statements required to be
delivered hereunder, and all financial records, shall be maintained in
accordance with GAAP. If GAAP shall change from the basis used in preparing the
audited Financial Statements delivered to TBCC on or before the date of this
Agreement, the Compliance Certificates required to be delivered pursuant to
this Agreement shall include calculations setting forth the adjustments
necessary to demonstrate how Borrower is in compliance with the Financial
Covenants (if any) based upon GAAP as in effect on the date of this Agreement.
9.3 Other Terms; Headings; Construction. Unless otherwise defined
herein, terms used herein that are defined in the Uniform Commercial Code, from
time to time in effect in the State of Illinois, shall have the meanings set
forth therein. Each of the words "hereof," "herein," and "hereunder" refer to
this Agreement as a whole. The term "including", whenever used in this
Agreement, shall mean "including (but not limited to)". An Event of Default
shall "continue" or be "continuing" unless and until such Event of Default has
been waived or cured within the grace period specified therefor under Section
7.1. References to Articles, Sections, Annexes, Schedules, and Exhibits are
internal references to this Agreement, and to its attachments, unless otherwise
specified. The headings and any Table of Contents are for convenience only and
shall not affect the meaning or construction of any provision of this
Agreement. This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against TBCC or Borrower under any rule
of construction or otherwise.
10. GENERAL PROVISIONS.
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE BORROWER
AND TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT TBCC
SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED
AGAINST THE BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY TBCC
IN GOOD FAITH TO ENABLE TBCC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF TBCC.
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THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
IN WHICH TBCC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
10.3. SERVICE OF PROCESS. THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT
CORPORATION SYSTEM, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, AS THE
DESIGNEE AND AGENT OF THE BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE
BORROWER, SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO THE BORROWER, BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10.4. LIMITATION OF LIABILITY. TBCC SHALL HAVE NO LIABILITY TO THE
BORROWER (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED
BY THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST
TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.5. Delays; Partial Exercise of Remedies. No delay or omission of TBCC
to exercise any right or remedy hereunder shall impair any such right or operate
as a waiver thereof. No single or partial exercise by TBCC of any right or
remedy shall preclude any other or further exercise thereof, or preclude any
other right or remedy.
10.6. Notices. Except as otherwise provided herein, all notices and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested, by overnight delivery service, with all charges
prepaid, or by telecopier followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by telecopier transmission, when receipt
of such transmission is acknowledged. Borrower's and TBCC's telecopier numbers
for purpose of notice hereunder are set forth in the Schedule; each party's
number may be changed by written notice to the other party.
10.7. Indemnification; Reimbursement of Expenses of Collection. Borrower
hereby indemnifies and agrees, whether or not any of the transactions
contemplated by this Agreement or the other Loan Documents are consummated, to
defend and hold harmless (on an after-tax basis) TBCC, its successors and
assigns and their respective directors, officers, agents, employees, advisors,
shareholders, attorneys and Affiliates (each, an "Indemnified Party") from and
against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or * expenses (including,
without limitation, reasonable fees and disbursements of counsel, experts,
consultants and other professionals) incurred by any of them (collectively,
"Claims") (except, in the case of each Indemnified Party, to the extent that any
Claim is determined in a final and non-appealable judgment by a court of
competent jurisdiction to have directly resulted from such Indemnified Party's
gross negligence or willful misconduct) arising out of or by reason of (i) any
litigation, investigation, claim or proceeding which arises out of or is related
to (A) Borrower, or this Agreement, any other Loan Document or the transactions
contemplated hereby or thereby, (B) any actual or proposed use by Borrower of
the proceeds of the Loans, or (C) TBCC's entering into this Agreement or any
other Loan Document or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and the
reasonable fees and disbursements of counsel incurred in connection with any
such litigation, investigation, claim or proceeding, (ii) any remedial or other
action taken by Borrower in connection with compliance by Borrower, or any of
its properties, with any federal, state or local environmental laws, rules or
regulations, and (iii) any pending, threatened or actual action, claim,
proceeding or suit by any shareholder or director of Borrower or any actual or
purported violation of Borrower's charter, by-laws or any other agreement or
instrument to which Borrower is a party or by which any of its properties is
bound. In addition and without limiting the generality of the foregoing,
Borrower shall, upon demand, pay to TBCC all reasonable costs and expenses
incurred by TBCC (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to
TBCC all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by TBCC in
order to enforce or defend any of its rights under or in
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TBCC Loan and Security Agreement
--------------------------------------------------------------------------------
respect of this Agreement, any other Loan Document or any other document or
instrument now or hereafter executed and delivered in connection herewith,
collect the Obligations or otherwise administer this Agreement, foreclose or
otherwise realize upon the Collateral or any part thereof, prosecute actions
against, or defend actions by, account debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim: examine, audit, copy, and inspect any
of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce TBCC's security
interest in, the Collateral; and otherwise represent TBCC in any litigation
relating to Borrower. Without limiting the generality of the foregoing, Borrower
shall pay TBCC a fee with respect to each wire transfer in the amount of $15
plus all bank charges and a fee of $15 for all returned checks plus all bank
charges. If either TBCC or Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its reasonable costs and attorneys' fees, including
(but not limited to) reasonable attorneys' fees and costs incurred in the
enforcement of, execution upon or defense of any order, decree, award or
judgment. If and to the extent that the Obligations of Borrower hereunder are
unenforceable for any reason, Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of the Obligations which is
permissible under applicable law. Borrower's obligations under Section 2.4 and
this Section shall survive any termination of this Agreement and the other Loan
Documents and the payment in full of the Obligations, and are in addition to,
and not in substitution of any of the other Obligations.
*reasonable
10.8. Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and signed by Borrower and TBCC and then any such
amendment or waiver shall be effective only to the extent set forth therein.
The failure of TBCC at any time or times to require Borrower to strictly comply
with any of the provisions of this Agreement or any other present or future
agreement between Borrower and TBCC shall not waive or diminish any right of
TBCC later to demand and receive strict compliance therewith. Any waiver of any
default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this
Agreement or any other agreement now or in the future executed by Borrower and
delivered to TBCC shall be deemed to have been waived by any act or knowledge
of TBCC or its agents or employees, but only by a specific written waiver
signed by an authorized officer of TBCC and delivered to Borrower.
10.9. Counterparts: Telecopied Signatures. This Agreement and any waiver
or amendment hereto may be executed in counterparts and by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
10.10. Severability. In case any provision in or obligation under this
Agreement or any other Loan Document shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or obligation in any
other jurisdiction, shall not in any way be affected or impaired thereby.
10.11. Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
10.12. Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly limited so that in no contingency or event whatsoever shall
the amount paid, or agreed to be paid, to TBCC for the use, forbearance, or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the performance or payment of any covenant or obligation contained herein or
therein, exceed the maximum non-usurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
on the Obligations, under the laws of the State of Illinois (or the laws of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and which
allow a higher maximum non-usurious interest rate than under the laws of the
State of Illinois (or such other jurisdiction), in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and the other Loan Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever, fulfillment
of any provisions of this Agreement or any of the other Loan Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance TBCC should ever receive anything of
value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then
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TBCC Loan and Security Agreement
--------------------------------------------------------------------------------
outstanding Obligations, such excess shall be refunded to Borrower. All sums
paid or agreed to be paid to TBCC for the use, forbearance, or detention of the
Obligations and other indebtedness of Borrower to TBCC shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such indebtedness.
The terms and provisions of this Section shall control every other provision of
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
10.13. Entire Agreement; Successors and Assigns. This Agreement and the
other Loan Documents constitute the entire agreement between the parties,
supersede any prior written and verbal agreements between them, and shall bind
and benefit the parties and their respective successors and permitted assigns.
There are no oral understandings, oral representations or oral agreements
between the parties which are not set forth in this Agreement or in other
written agreements signed by the parties in connection herewith. *
*10.13A Confidentiality. In handling any confidential information TBCC
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of TBCC in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a confidentiality
agreement with TBCC comparable to this Section, (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order, (iv) as
may be required in connection with the examination, audit or similar
investigation of TBCC, and (v) as TBCC may deem appropriate in connection with
the exercise of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of TBCC when disclosed to TBCC, or becomes part of the
public domain after disclosure to TBCC through no fault of TBCC; or (b) is
disclosed to TBCC by a third party, provided TBCC does not have actual knowledge
that such third party is prohibited from disclosing such information.
10.14. MUTUAL WAIVER OF JURY TRIAL. TBCC AND BORROWER EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN TBCC AND BORROWER; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF TBCC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH TBCC OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
BORROWER:
BACKWEB TECHNOLOGIES INC.
By: /s/ [Signature Illegible]
--------------------------
Title: President
----------------------
TBCC:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ [Signature Illegible]
--------------------------
Title: SVP
--------------------
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20
[TBCC LOGO]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: BACKWEB TECHNOLOGIES INC.
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: DECEMBER 24, 1998
This Schedule is an integral part of the Loan and Security Agreement between
TRANSAMERICA BUSINESS CREDIT CORPORATION (TBCC) and the above borrower
(Borrower) of even date.
1. CREDIT LIMIT. (Section 1.1):
An amount (the "Credit Limit") not to exceed the lesser of
$6,500,000 (the "Overall Dollar Limit") or the sum of (a), (b)
and (c) below:
(a) Loans (the "Formula Loans") in an amount not to exceed
the lesser of (i) $3,000,000 at any time outstanding,
or (ii) 85% of the amount of Borrower's Eligible
Receivables (as defined in Section 9.1(n) above); plus
(b) Loans (the "Non-Formula Loans") in a total unpaid
principal balance not to exceed $2,000,000 at any time
outstanding; plus
(c) Loans (the "Term Loans"), in an aggregate amount not
to exceed $1,500,000.
Term Loans. Term Loans shall be disbursed in disbursements
of no less than $250,000 each.
Each Term Loan shall be repaid by Borrower in 36 equal
monthly installments of principal and interest, beginning
on the first day of the first month following the
disbursement of such Term Loan, and continuing on the first
day of each succeeding month until paid in full. All unpaid
Term Loans and all sums due in connection therewith shall be
due in full on any termination of this Agreement for any
reason. The first disbursement of the Term Loan shall be in
the principal amount of $750,000, which shall be drawn by
the Borrower on or before JANUARY 31, 1999. No Term Loans
will be made after DECEMBER 31, 1999. The Term Loans, when
repaid, may not be reborrowed. Term Loans shall be subject
to the additional terms of the Equipment Loan Rider hereto.
2. INTEREST. (Section 2.1):
The interest rate in effect throughout each calendar month
during the term of this Agreement on the Formula Loans and
the Non-Formula Loans shall be the highest "Base Rate" in
effect during such month, plus:
21
TBCC Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
(a) In the case of the Formula Loans, 2% per annum, and
(b) In the case of the Non-Formula Loans, 4% per annum;
Provided that (i) in either case, the interest rate in
effect in each month shall not be less than 8% per annum,
and (ii) the total interest charged with respect to the
Formula Loans and the Non-Formula Loans for the first full
twelve months of the term of this Agreement and each
twelve-month period thereafter shall be $84,000 for each
such twelve-month period (prorated for any period of less
than twelve months upon termination of this Agreement). If
the total interest paid during any such twelve-month period
with respect to the Formula Loans and the Non-Formula Loans
is less than $84,000 (prorated for any period of less than
twelve months upon termination of this Agreement), the
Borrower shall pay TBCC the difference at the end of such
period, and TBCC may charge the same to Borrower's Loan
Account."
Interest shall be calculated on the basis of a 360-day year
for the actual number of days elapsed. "Base Rate" shall
mean the higher of (a) the highest prime, base or equivalent
rate of interest announced from time to time by Citibank,
N.A., First National Bank of Chicago and Bank of America
National Trust and Savings Association (which may not be the
lowest rate of interest charged by such bank) and (b) the
published annualized rate for 90-day dealer commercial paper
which appears in the "Money Rates" section of The Wall
Street Journal.
3. FEES (Section 2.2): Loan Fee: $67,500, payable concurrently herewith.
Termination Fee: An amount equal to $8,000 multiplied by each
month (or portion thereof) from the effective date of termination
to the Maturity Date, which Termination Fee shall be payable on
the date of termination.
4. MATURITY DATE (Section 1.6): DECEMBER 31, 1999 (the "Maturity Date"),
subject to automatic renewal and early
termination as provided in Section 1.6
above.
5. REPORTING (Section 5.10): Borrower shall provide TBCC with the
following reports:
(a). Monthly Financial Statements. Monthly unaudited financial
statements of the Borrower (unconsolidated and without
eliminating entries), as soon as available, and in any event
within 30 days after the end of each month.
(b). Monthly Receivable Agings. Monthly Receivable agings, aged
by invoice date, within 10 days after the end of each month.
(c). Monthly Payable Agings. Monthly accounts payable agings,
aged by invoice date, and outstanding or held check
registers within 10 days after the end of each month.
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22
TBCC Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
(d). Monthly Compliance Certificates. As soon as available,
but not later than thirty days after the end of
each month, a Compliance Certificate, with an attached
schedule of calculations demonstrating compliance or
indicating non-compliance with any Financial Covenants.
(e). Quarterly Financial Statements. Quarterly unaudited
financial statements, as soon as available, and in any
event within 30 days after the end of each fiscal
quarter of Borrower.
(f). Annual Financial Statements. As soon as available, but
not later than 90 days after the end of the Borrower's
fiscal year, (A) Borrower's annual audited Financial
Statements; (B) a comparison in reasonable detail to
the prior year's audited Financial Statements; (C) the
Auditors' opinion without Qualification, a Management
Letter and a statement indicating that the Auditors
have not obtained knowledge of the existence on any
Default or Event of Default during their audit; (D) a
narrative discussion of Borrower's financial condition
and results of operations and the liquidity and capital
resources for such fiscal year.
The quarterly financial statements and annual financial
statements provided pursuant to Section (e) and (f) above
may be prepared on a consolidated basis with Borrower's
parent, BACKWEB TECHNOLOGIES, LIMITED, an Israeli
corporation.
6. BORROWER INFORMATION:
(a) Prior Names of Borrower (Section 4.11): Interad
(b) Prior Trade Names of Borrower (Section 4.11): None
(c) Existing Trade Names of Borrower (Section 4.1): None
(d) Other Places of Business and Locations of Collateral
(Section 4.2): None
7. FACSIMILE NUMBERS:
Borrower: (▇▇▇) ▇▇▇-▇▇▇▇
TBCC: (▇▇▇) ▇▇▇-▇▇▇▇
8. CLOSING DEADLINE (Section 1.8): JANUARY 8, 1999
9. ADDITIONAL PROVISIONS:
(a) Guaranty. Borrower shall concurrently cause BACKWEB
TECHNOLOGIES, LIMITED, an Israeli corporation, (the
"Parent") to execute and deliver to TBCC a Continuing
Guaranty with respect to all of the Obligations and security
documents granting TBCC a first-priority security interest
in all of the Parent's assets of every kind, including
without limitation all patents, copyrights and other
intellectual property. Said Guaranty and security documents
shall
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23
TBCC Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------
be in such form as TBCC and its counsel shall specify.
Borrower shall cause said Guaranty and security
documents to continue in full force and effect
throughout the term of this Loan Agreement and so long
as any portion of the Obligations remains outstanding.
(b) Warrants. The Borrower shall provide TBCC Funding
Trust II, a Delaware business trust with five-year
warrants to purchase 385,000 shares of common stock of
the Parent, at $1.15 per share, on the terms and
conditions in the Warrant to Purchase Stock and
related documents being executed concurrently with
this Agreement.
(c) Sales Offices. Borrower's offices in the States of
Georgia, Illinois, Massachussetts, New York, Virginia
and Texas are only sales offices and the total value of
assets in each of said states does not exceed $10,000.
Before increasing the amount of assets in such states,
Borrower will provide twenty days advance written
notice thereof to TBCC and Borrower shall provide TBCC
with signed UCC-1 financing statements in appropriate
form for filing in such states.
Borrower: TBCC:
BACKWEB TECHNOLOGIES INC. TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ [Signature Illegible] By: /s/ [signature illegible]
--------------------------- ------------------------------
President or Vice President Title:
---------------------------
Senior Vice President/
General Manager
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24
TBCC
EQUIPMENT LOAN RIDER TO
LOAN AND SECURITY AGREEMENT
BORROWER: BACKWEB TECHNOLOGIES INC.
ADDRESS: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: DECEMBER 24, 1998
This Equipment Loan Rider is an integral part of the Loan and Security
Agreement between TRANSAMERICA BUSINESS CREDIT CORPORATION (TBCC) and the above
borrower (Borrower) of even date (the Loan Agreement). Nothing herein limits any
of the other terms or provisions of the Loan Agreement.
1. TERM LOANS.
(a) Each Term Loan shall be in an amount not less than $200,000 and at
least $750,000 of Term Loans shall be borrowed by DECEMBER 31, 1998.
No Term Loans will be made after DECEMBER 31, 1999. Term Loans will be
made separately to each Borrower, based on the Specified Equipment (as
defined below) of each Borrower.
(b) Each Term Loan shall be repaid in 36 equal monthly installments of
principal and interest, commencing on the first day of the first month
following the date of disbursement of the Term Loan; provided that (i)
the first and last monthly installments on each Term Loan shall be due
and payable on the date of disbursement of the Term Loan, (ii) an
additional interim payment, in an amount equal to the daily equivalent
of the monthly installment for each day from the date of disbursement
of the Term Loan to the first day of the first monthly following the
date of disbursement of the Term Loan, shall be payable on the date of
disbursement of the Term Loan, and (iii) at the maturity of each Term
Loan Borrower shall pay TBCC an additional payment in an amount equal
to 10% of the original principal amount of the Term Loan. Each monthly
payment shall be in an amount equal to 3.1066% (the Monthly Payment
Percentage) of the original principal amount of each Term Loan.
(c) TBCC shall have the right to increase the Monthly Payment Percentage
applicable to a Term Loan, as of the date such Term Loan is made,
proportionally to any change in the weekly average of the interest
rates of like-term U.S. Treasury Securities (as published in the Wall
St. Journal) from the week ending September 25, 1998 to the week
preceding the date of disbursement of such Term Loan.
(d) Notwithstanding anything herein to the contrary, all unpaid Term Loans
and all sums due in connection therewith shall be due in full on any
termination of the Loan Agreement for any reason.
(e) Prior to each disbursement of a Term Loan, Borrower shall (i) execute
and deliver a Note on TBCC's standard form, evidencing such Term Loan,
and (ii) provide TBCC with a Schedule of the Equipment related to such
Term Loan (the "Specified Equipment"), in form and substance
satisfactory to TBCC and its counsel, and TBCC's security interests in
the Specified Equipment shall have been duly perfected and shall
constitute a first priority Lien, and (iii) execute and deliver
25
TBCC Equipment Rider to Loan and Security Agreement
--------------------------------------------------------------------------------
to TBCC a UCC-1 Financing Statement with respect to the Specified Equipment
in form suitable for filing in the appropriate governmental office.
2. REPRESENTATIONS. Borrower represents and warrants to TBCC that (i) each
Schedule of Equipment shall set forth the true and correct location, model
number and serial number of each item of Specified Equipment referred to
therein, (ii) the cost of each item of Specified Equipment does not exceed
the fair and usual price for such type of equipment purchased in like
quantity and reflects all discounts, rebates and allowances for the
Specified Equipment (including, without limitation, discounts for
advertising, prompt payment, testing, or other services) given to the
Borrower by the manufacturer, supplier or any other person.
3. USE OF EQUIPMENT; LICENSES; REPAIR. All Equipment shall be operated by
competent, qualified personnel in connection with the Borrower's business
purposes, for the purpose for which the Equipment was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every reasonable precaution to
prevent loss or damage to the Equipment and other Collateral from fire and
other hazards. The Borrower shall procure and maintain in effect all
orders, licenses, certificates, permits, approvals, and consents required
by federal, state, or local laws or by any governmental body, agency, or
authority in connection with the delivery, installation, use, and
operation of the Equipment and other Collateral. The Borrower shall keep
all of the Equipment in a satisfactory state of repair and satisfactory
operating condition in accordance with industry standards, and will make
all repairs and replacements when and where necessary and practical. The
Borrower will not waste or destroy any of the Equipment or other
Collateral, and will not be negligent in the care or use thereof.
4. NO DISPOSITION OF SPECIFIED EQUIPMENT. The Borrower will not in any way
hypothecate or create or permit to exist any Lien on or other interest in
any of the Specified Equipment, except for the security interest of TBCC
and Permitted Liens which are junior to the security interest of TBCC.
Notwithstanding the foregoing, none of the Specified Equipment shall be
subject to any Purchase Money Lien in favor of any Person other than TBCC.
The Borrower will not sell, transfer, assign, pledge, collaterally assign,
exchange, or otherwise dispose of any of the Specified Equipment.
Borrower: TBCC
BACKWEB TECHNOLOGIES INC. TRANSAMERICA BUSINESS CREDIT CORPORATION
By /s/ [Signature Illegible] By /s/ [Signature Illegible]
-------------------------- --------------------------------------
President or Vice President Title Senior Vice President/
General Manager
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